Liberalising automotive parts trade with India to hit industry

KARACHI- Liberalising the automotive parts trade with India will have negative impacts on the vending industry of Pakistan, according to a position paper released by Pakistan Business Council. The protective environment currently enjoyed by the Pakistani automotive parts industry will be removed and this will lead to a major industry shake up. There will, inevitably, be losers and this needs to be thought through in calculating the benefits of opening up to India, wrote Almas Hyder, CEO of Spelgroup in PBCs paper while analyzing the consequences of trade liberalisation for the local auto parts industry. The position paper stated that Pakistans automotive parts industry has seen remarkable growth in the last ten years under the present trade policy and local market conditions. However, the liberalisation of broad economic relations with India will present new opportunities but also some challenges. OPPORTUNITIES The biggest opportunity, of course, will be access to the much larger Indian market for automotive parts that will allow us to overcome the problems of small scale, and thus may help us become more competitive globally, the PBC said. The industry could be competitive due to currency advantage. This will also help the vending industry to acquiring Indian technology and raw material in the diverse fields of plastics, rubber and metals that are needed in automotive parts. Joint ventures would facilitate such access even more, it added. Pakistan can also look to hiring Indian industry specialists as consultants to improve our engineering and business practices. Also, many global companies now have service centers in India and a more open economic relationship will allow access to the technical know-how of such advanced global companies. Importantly, land routes through India will provide greater access to other SAARC countries where the country already enjoys competitive advantage. CHALLENGES Tariff/administrative barriers in India are perceived to be rampant and would negate the benefits mentioned above, the PBC feared. Furthermore, there is the perceived risk that Indias strong technology base may create one-way trade and may harm local industry, especially the small and medium manufacturers who are just finding their feet. The process for remedying such potential harm needs to be put in place and staffed up with the best expertise in order to avoid delays in providing remedy.