Asleep at the wheel

Huma Khan
August 26, 2019

Pakistan envisions becoming an Asian Tiger of the region by the year 2025 under the aspirations of China-Pakistan Economic Corridor (CPEC).

Share Next Story >>>

Pakistan envisions becoming an Asian Tiger of the region by the year 2025 under the aspirations of China-Pakistan Economic Corridor (CPEC).

To make the CPEC a success, it was pertinent to agree to infrastructural development from Kashgar to Gwadar by laying a state-of-the-art network of roads, sustainable for heavy commercial vehicles and essential for creating a web of trade activity for connecting the north and central Asia with the warm waters of the Arabian Sea.

Under these objectives, it becomes obvious the demand for heavy commercial vehicles would boom, yet the auto policy failed to design comprehensive plans on how to increase the capacity of local manufacturing, encourage investors through incentives, and emphasise upon the significance of investments on this untapped and much-needed sector.

Was this intentional or unintentional, that is another question altogether, but in the end, that gap is incurring a double incident of debt burden on Pakistan’s national chequer. Firstly, the import costs have surged due to weak rupee and strong dollar. Secondly, the imports of these commercial vehicles have become unreasonably high, putting further pressure on our reserves.

In addition to this, the aspiration to develop public transit systems in the major cities of Pakistan heavily relies on the import of buses, and the demand will continue to increase as more cities adopt for public transportation development plans. The entire public and commercial transportation has revolutionised in Pakistan, whereas the automotive industry has marked a significant contribution of approximately 4 percent to the gross domestic product (GDP) on annual basis.

For the very first time, the country has introduced trucks with air-conditioned cabins which seemed far from reality for the transporters who have been in the business for the last forty years and have to travel under extreme temperatures. The current situation represents a clear indication that Pakistan’s transportation industry is expanding and transforming; however, the narrow-sightedness of our policymakers restrained the country from turning the incoming opportunity into a substance of growth.

Now the international manufacturers from China and Europe have expressed interest in establishing manufacturing units of commercial vehicles in the country where previously Hino and Daewoo, along with eight other assemblers of commercial vehicles dominated the roads of Pakistan for decades; not to forget that most of the parts were still being imported and the production remained significantly lower than the demand.

Pakistan’s Auto Policy for 2016-21 is a very naive document primarily focused on promoting the investments and manufacturing of four-wheelers after which Fiat, Volkswagen, and Hyundai expressed interest in entering the Pakistani market. However, as the document acknowledges the growing demand for commercial vehicles under the CPEC, it does little to address the commercial needs of the country in the near future.

The metro bus projects of Islamabad, Lahore, and Peshawar are a clear indication of our incompetency as the buses were manufactured and imported from China. According to Pakistan Automotive Manufacturers Association (PAMA), a total of 803 buses and 10,129 trucks were assembled in Pakistan in the financial year of 2017-18 as compared to the projected need of 100,000 commercial vehicles required for effective implementation of CPEC.

What the country lacks is research and development, innovative thinking and practices, and presence of risk aversion approach. We have become used to of being the ‘middle person’ in trade and other deals rather than opting for vertical integration for becoming self-sufficient, and the policies failed to incentivise the local investors in taking a leap forward through initiatives that encourage investments in bringing a ‘Pakistan-made’ product at the forefront. Our exports in the automobile sector are also negligible, while the local demand for commercial vehicles has increased manifolds.

The limited vision of our policymakers in this sector also restricted policies for introducing hybrid and electric technology in car manufacturing. Henceforth, the current times call the planners to revisit the policies drafted under the auto policy of 2016-21 and announce policies which can compete with the demands of the time rather than beating about the bush.

There are a number of possibilities which can be tapped to bring in improvements in the existing Auto Policy of Pakistan. The government can introduce specialised courses focused on building and enhancing human and technical capacities in automobile engineering and maintenance of commercial vehicles.

Institutions such as the Technical Education & Vocational Training Authority (TEVTA) can be taken on board so that accessibility of locals to such institutions can be ensured. Further to it, the PIA and Boeing model can also be adopted through an exchange program for on-the-job-training at the manufacturing units of commercial vehicle giants. This will create a multiplier effect as the trained engineers will be able to impart same knowledge and skills learned amongst their fellows through train-the-trainer programs upon their return.

Moreover, there is a dire need for technology transfer in this sector. So far Pakistan has been an assembling hub for many of the commercial vehicle manufacturers but it is time to bring in the required technology through incentivised programs such as special duty exemptions and tax incentives. Apart from that, policymakers also need to investigate possibilities to enhance exports of commercial vehicles to the regional and extra-regional markets, which will boost the reserves.

If right policies and strategies are adopted in line with the existing Auto Policy of Pakistan, this industry has the potential to address numerous other existing challenges. The expansion of commercial vehicle industry in Pakistan will create direct and indirect employment opportunities ranging from automobile engineers to maintenance workers and commercial vehicle drivers. Apart from that, many affiliated industries will also experience a boom in sales which will help improve the economic condition of the country. The commercial vehicle industry is an untapped sector in Pakistan which has the potential to grow and yield multiple advantages at micro as well as macro-economic level.

—The writer is Director, Center for Global & Strategic Studies (CGSS), Islamabad

More From Money Matters