Local auto assemblers have expressed serious concerns over a new mechanism introduced by the State Bank of Pakistan (SBP) for import of goods and termed it a huge risk for the auto industry that may lead to shutdown of production of all major original equipment manufacturers (OEM).
In a letter to Murtaza Syed, the Acting Governor of SBP, Abdul Waheed Khan Director General Pakistan Automotive Manufacturers Association (PAMA) requested the SBP for timely approval of CKD imports to ensure the continued production. In should be noted that State Bank has recently introduced a mechanism for prior approval from SBP, for import of a number of goods for issuance/ enhancement/ amendment for letter of credit, registration/ amendment of contract, making advance payment, and authorizing transactions on open account or collections basis.
The condition of prior approval from SBP is also applicable for all import transactions under HS Code 8703 (category CKD of motor vehicles). The SBP’s new directives have created unrest among the local auto industry, which has approached SBP to inform how the new mechanism can damage the local auto industry. According to the PAMA, this abrupt procedural requirement has created hurdles in the import of CKDs and all major auto sector imports have been disrupted. Abdul Waheed Khan warned:
“The delay in processing approvals for CKD import transactions will lead to production shutdown for all major OEMs in the next week, which will disrupt the entire supply chain including local vendors, dealers, support entities and consequently lead to unemployment of daily wage staff and contract staff of the entire industry.”
He went on to add that the delay in foreign payments gives an adverse impression to foreign suppliers and creates a huge business risk for beneficiaries for exporting goods to Pakistan, which will adversely impact the auto sector in the long term.
PAMA pointed out that the weekly foreign payments for import of 8703 CKD are insignificant in relation to Pakistan’s overall weekly foreign payments. This measure apparently seems to have delayed weekly foreign payment of maximum $25 million; however, any further delay may result in loss to the economy of approximately maximum $80 million and loss to national exchequer of around $30 million on a weekly basis along with creating unemployment.
The automotive manufacturers have requested SBP for timely approval of CKD imports for the auto industry so that they can avoid the impending plant shutdowns to protect the employment of the industry and restore the foreign investors’ confidence in Pakistan.
Source: Business Recorder
A 3d animation professional with over 20 years of industry experience having served in leading organizations & production facilities of Pakistan, an avid car enthusiast and petrolhead with an affection to deliver writings to help shape opinions. Formerly written for PakWheels as well as major publications including Dawn. Founder of CarSpiritPK.com