Volkswagen’s Pakistan car project stalls amid import curbs: German envoy

KARACHI: Volkswagen AG's plans to make cars in Pakistan have hit a roadblock due to import restrictions, Germany's envoy to the country said on Friday.

German Consul General in Karachi Dr. Ruediger Lotz said the automaker was unable to bring in the necessary machinery for its plant due to curbs on imports imposed by the government about 18 months ago.

"The vehicle manufacturing company was not allowed to bring the necessary machinery, which stalled the project," Lotz told a meeting at the Karachi Chamber of Commerce and Industry (KCCI),

“Even if Volkswagen is allowed to bring the machinery now, it would take at least one and a half years more to start production. At the moment, it is unclear whether Volkswagen would pursue the project further or not, which would be a pity, but it is one of the negative results of the economic problems of Pakistan," he said.

"I am regularly in contact with the person responsible for international affairs in Volkswagen, but I think at the moment, they are yet to decide how to pursue this project.”

Pakistan Premier Motors Limited in 2018 signed a legal agreement with the Volkswagen (VW) AG, for manufacturing of commercial vehicles. The agreement was signed for manufacturing of commercial vehicles under the licensing contract of a completely knocked down (CKD) assembly in Karachi.

However, Pakistan banned the import of all non-essential luxury goods in 2022 when the current account deficit spiralled out of control and its foreign exchange reserves tumbled while the Pakistani rupee plummeted to historic lows against the U.S. dollar.

Lotz said Pakistan should expand its trade with Germany beyond textiles, which make up 85 percent of its exports to the European nation

He praised the quality and professionalism of Pakistan’s textile sector, but said there was potential to increase trade in other areas.

"The exports need to be diversified to further improve the existing trade volume," the envoy said.

Commenting on concerns expressed over delays in the issuance of visas, the German envoy said that he was aware of the problem, which was due to an increased number of visa applications.

“We have about twice as many applications as we had some five years ago before Covid, but the number of staff is the same, who can only process a certain amount of visa applications per day. I ask my staff to give preference to students and businessmen seeking visa appointments.”

President KCCI Iftikhar Ahmed Sheikh, while welcoming the German CG, noted that Pakistan and Germany have been enjoying warm and friendly bilateral diplomatic ties since 1951 and it was heartening to see that Germany was keen to strengthen social, political and economic bilateral relations with Pakistan, besides having great interest in regional stability for the sustainable economic development.

He informed that Pakistan’s exports to Germany stood at $1.60 billion in FY23 compared to $1.75 billion in FY22, which represents a drop of 8.62 percent on a year-on-year basis.

“Both countries need to reduce trade barriers, diversify the range of products, simplify customs procedures, promote SMEs, and foster business collaboration to give a much-needed trade boost for economic integration," Sheikh said.

“The technology transfer from German investors for setting up joint ventures and shifting towards high-value-added exports will boost the productivity and the competitiveness of the country,” he opined, adding that the China Pakistan Economic Corridor (CPEC) was a lifeline project for Pakistan’s economy, which could offer tremendous opportunities to German investors who can invest in Special Economic Zones (SEZs) to easily penetrate in this entire region, whereas considerable potential for German investment exists in varying sectors like dairy, agriculture, textiles, IT, pharmaceuticals, electrical machinery, power generation, infrastructure, oil & gas sectors, etc.

He also requested the envoy to invite German companies to participate in the next My Karachi-Oasis of Harmony International Exhibition to be held next year in August, which was expected to attract immense participation from international and national exhibitors.

Senior Vice President KCCI Altaf A. Ghaffar, Vice President Tanveer Ahmed Barry, Former President Majyd Aziz and KCCI Managing Committee Members were also present on the occasion.