Automobile Industry and WTO

By Iqbal, Anwar | Economic Review, August 2002 | Go to article overview

Automobile Industry and WTO


Iqbal, Anwar, Economic Review


Deregulation and liberalization is a key word on today's world economic scenario. Unfortunately Pakistani entrepreneur/industrialist is very much frightened with the world liberalization and always like to enjoy monopolistic favours and does not believe in healthy competition. They use to manipulate the situation to their own advantage in automobile sector, specially in collaboration will? their Japanese partners, without keeping in view the rapid change in the world economic scenario or overall long-term benefits to the industry.

Pakistan automobile, engineering and vendors industries are worried of the post - WTO scenario specially with the provisions of Trade Related Intellectual Property Rights (TRIPS) and Trade Related Investment Measures (TRIMS). In the context of deletion they would be seeking exemption up to 2005, in present condition it is very difficult to obtain such exemption. Resultantly government of Pakistan may have to remove concessionary import duty structure being enjoyed by local engineering industries, which are operating under deletion regime. Thus the engineering sector shall have to take immediate corrective measures particularly to improve efficiency and management practices/policies.

The automobile and automobile vendor industry is said to enjoy the status of most protected industry in Pakistan where the Effective Protection Ratio (EPR) is comparatively very high. This EPR made local industry dull and uncompetitive. Regarding profitability only one example is enough that Pak Suzuki Motor Company made a profit of Rs.148.716 million in 2002 as against Rs.52.97 million in 2001. The surge in demand, coupled with a delayed response in supply on the manufacturer's parts has created a black market with customers reported by paying as much as rupees 150,000 to rupees 300,000 extra for early supply. It is surprising that having so much favourable situation automobile industry could not produce more than 40,000 cars in recent year although national demand for cars are 100,000 per annum. The automobile sector OEMS and vendors both needs deregulation. The protection to the auto industry shall not remain at the same level due to WTO factor. Pakistan auto engineering needs adjustments to coup up the i nternational situation.

Deregulation and liberalization is a key word on today's world economic scenario. Unfortunately Pakistani entrepreneur/industrialist is very much frightened with the world liberalization and always like to enjoy monopolistic favours and does not believe in healthy competition. They use to manipulate the situation to their own advantage in automobile sector, specially in collaboration with their Japanese partners, without keeping in view the rapid change in the world economic scenario or overall long-term benefits to the industry. Unfortunately we have to quote Indian situation for comparison in every segment of life and business. Indian government has already adopted liberalization policy as a result the price of Maruti 800 cc card Own to Rs. 125,000 as compared to Rs. 132,000 in 1995. On the other hand, in Pakistan, Suzuki Mehran a compatible model of Indian Maruti is available on Rs. 299,000. Now Indian auto industry is operating without any subsidy. Maruti vehicles made in India had achieved more than 90% deletion whereas in Pakistan still we could not achieve deletion more than 64% although car industry is enjoying around 175% subsidy from government. Furthermore we started local assembly of same segment vehicles far before India. progressive deletion of local manufacture of high-tech components was the ultimate aim of allowing these plants here in Pakistan. Still our automobile industry is doing welding and painting and getting parts from local vendors like tires, batteries, seats, roof linings, door hinges etc. These item can hardly be termed as high-tech components. …

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