Mind-boggling doesn't begin to describe the government's move to relax the import policy on used automobiles to allow domestic buyers to source second-hand cars driven up to 2,000 km from abroad. Perchance, have the Japanese used car dealers agreed to accept the Pakistani rupee in return for their merchandise? Surely, there can be no other way, because the last we heard, Pakistan’s external account deficit was weighing heavily on the country’s economy. We had barely turned the page from where there was a real fear that Pakistan could default on its external debt service obligations because of dwindling foreign exchange reserves, and importers and traders were being forced to shutter their businesses right left and centre because of the government’s tight-fisted forex policy. Have all the commercial establishments that went under because of that policy somehow returned to full health? Have the people who lost their jobs because of those closures returned to work? All of this seems unlikely, and yet here we are, ready to splash what little precious foreign exchange reserves we have on, of all things, imports of used automobiles, just because the IMF has agreed to fork out another billion odd dollars next month.
Then, too, this announcement comes at a time when the new government has barely taken the reins of power. A career banker, Finance Minister Muhammad Aurangzeb should have known better. Does he need to be told that Pakistan’s road to recovery leads through the revival of the domestic economy rather than splurging hard currency reserves on flashy toys? Does he need to be edified that used car imports will inevitably cannibalize domestic car sales, dealing a blow to an industry already under the weather because of years of bad economy? This policy could perhaps be justified if it was limited to EVs, serving to force greater focus by the domestic industry on environment-friendly technology, but that is clearly not the case. It is difficult to see how else the authorities can rationalize this policy. If the finance minister is not oblivious to any of this, he is likely a victim of bad counsel. He must realize that the business of being the economy czar does not lend itself well to making ill-informed or arbitrary decisions, especially when the state of the country’s economy leaves little margin for error. Right now, Prime Minister Shehbaz Sharif is probably eager to find out who has the ear of his finance minister.
None of the foregoing is to say that our domestic auto industry is not a scam. For one thing, they have pretty much limited themselves to assembling units from imported CKD kits rather than manufacturing cars in Pakistan. For another, they have deliberately kept the domestic market a few iterations behind the international market in terms of designs and features -- so that even the previous year’s models imported from abroad seem ahead of our market. On top of it all is a distribution system that smacks every bit of a Ponzi scheme, requiring buyers to fork out their money months in advance of delivery. All in all, there is little doubt that the domestic auto industry is one of the sectors crying out for reform and that the government should turn to it with a scalpel sooner rather than later. But if this is how the government intends to approach the task, it will soon discover that the remedy it administered to the patient was worse than the disease. Here’s hoping the authorities think better of this misplaced policy before that moment arrives.