PAAPAM warns IMF trade push could trigger deindustrialisation

LAHORE: The Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) has expressed strong reservations over recent recommendations by the International Monetary Fund (IMF) advocating trade liberalisation, particularly proposals to reduce tariff protections and allow the commercial import of used vehicles.

PAAPAM Chairperson Usman Aslam Malik said on Wednesday that while the association supports Pakistan’s broader goals of economic efficiency and environmental sustainability, the proposed measures risk undermining the domestic automotive industry, threatening jobs and eroding investor confidence.

“We urge policymakers to avoid reforms that inadvertently weaken Pakistan’s industrial backbone,” he said, adding: “Trade liberalisation must be pursued with strategic safeguards — not at the cost of deindustrialisation and fiscal leakage.”

The association noted that large-scale imports of used vehicles — many of which do not meet modern emissions or safety standards — could derail Pakistan’s efforts to localise new energy vehicle (NEV) production. PAAPAM called for clarity on how such imports align with Pakistan’s environmental and industrial objectives, especially at a time when major investments are being made in NEV technologies.

“We support the shift to sustainable mobility,” Malik added. “But importing outdated vehicles will only delay our transition and discourage local innovation.”PAAPAM further questioned whether the liberalisation of used vehicle imports was part of a wider policy shift extending to other second-hand goods such as electronics, appliances and construction materials. If limited only to the automotive sector, the association urged policymakers to explain the rationale and outline measures to prevent market distortions and reduced local production.

The association also raised serious concerns about vulnerabilities in existing import schemes, which are often exploited for illicit financial activities. Vehicles imported under the names of low-wage overseas Pakistanis are frequently sold domestically, bypassing tax and regulatory oversight. Informal payment channels such as hundi facilitate capital flight and erode fiscal transparency.

“We cannot afford to expand mechanisms that facilitate tax evasion and capital flight,” said PAAPAM Senior Vice Chairperson Shehryar Qadir. “Fiscal integrity must be a cornerstone of any reform agenda.”

PAAPAM warned that reduced tariff revenues and pressures on local manufacturers could result in significant job losses across the supply chain. It emphasised the urgent need for workforce reskilling programmes, incentives for domestic manufacturing and alternative revenue strategies to preserve employment and sectoral stability. The association also cautioned that premature liberalisation could erode investor trust at a critical moment, as Pakistan seeks to advance its automotive and NEV sectors. It urged policymakers to present evidence from comparable economies demonstrating how trade liberalisation can be balanced with industrial growth.

Citing historical examples, PAAPAM stressed that abrupt liberalisation has destabilised nascent industries in the past. It argued that any reforms should follow a phased approach, backed by safeguards, performance metrics, and case studies from similar economies.

PAAPAM called on policymakers and the IMF to provide sector-specific guidance on how used vehicle liberalisation will support NEV localisation and environmental goals, while simultaneously introducing measures to safeguard employment through retraining programmes and incentives for domestic manufacturing. The association also urged stronger enforcement against tax evasion and illicit financial channels, insisting that fiscal transparency must accompany any reform agenda. Furthermore, it pressed for evidence-based case studies from peer economies that have successfully harmonised trade liberalisation with industrial growth, and demanded a transparent, phased implementation plan backed by risk controls and performance benchmarks.