For a very long time Pakistan was considered a favorable place for business by foreign companies because of its booming market and favorable policies by the government. Many big companies set up offices and manufacturing units in the country and enjoyed the competitive advantage they got by operating in Pakistan. However, it seems that all this has changed as the government pursues its stringent policies against the manufacturing sector.

In the 2013-14 budget, GOP introduced 10% FED on locally manufactured vehicles ranging between 1300cc t0 1800cc. At the time, the statement from the GOP was that the target consumer in this segment has substantial purchasing power and the impact of this exorbitant rate of FED will have negligible impact. However, we soon saw the 10% FED takes its toll and the sales of locally manufactured vehicles plummet. Local manufacturers had no choice other than to pass on the cost to the consumers and this in turn diverted them to import vehicles. The imported vehicles are now more competitive and a preferred choice of consumers; facilitated by the fact that the GOP has allowed quite generous custom duty relaxations. Honda and Indus Motor Company who are the market leaders in the segment of 1300cc to 1800 cc cars have been hit the worse.

Unfriendly policies by the GOP that discourage local manufacturers will have far and wide repercussions. Not only will it alienate foreign firms from setting up in Pakistan, it will also give rise to unemployment in the country. Pakistan already has a very high unemployment rate and if local manufacturers do not operate at full capacity, further unemployment will be created. This will eventually lead to increase in crime rate in the country and add to instability in the country.

It is my request to the GOP to reconsider its stance towards imposing of the 10% FED on automobiles. The automobile sector has high potential for growth and instead of adding to the burdens of the industry, it should support it. The policies should be consistent and long-term so that local auto industry can operate with confidence. This will result in foreign investment coming in the country and help create employment.


Karachi, November 12.