Auto firms fail to comply with technology transfer obligation

TOKYO: Automobile companies failed to comply with an obligation to transfer manufacturing technology to Pakistan within five years of investment with an estimated 70 percent of auto parts still imported into the country, a top official said.

“Only 30 percent of spare parts are manufactured in Pakistan, while 70 percent are imported and used in assembling,” said Rana Abid Hussain, president of Pak-Japan Business Council. “Millions of jobs could not be created in Pakistan while foreign companies are gaining huge profits from the government of Pakistan in the name of manufacturing.”

Pakistan offered a score of tax incentives to automotive businesses under the Automobile Development Policy 2016-21 to lure investment in manufacturing units in the country, dominated by three carmakers – Suzuki, Honda and Toyota – from Japan since the early 90s.

“Had foreign car manufacturing companies abided by the agreement of transfer of 100 percent of their manufacturing technology to Pakistan within five years of their investment, thousands of new factories would have opened and millions of people would have been employed,” Hussain said. “However, foreign companies are hurting national interests by preferring personal interests.”

After the introduction of the auto policy in 2016, various local and foreign auto players sought permissions from the government to set up plants to meet growing demand of cars in the 200,000 to 250,000 auto market. At least 15 companies have expressed interest to avail the benefits in the policy and to manufacture trucks, cars, and sports utility vehicles.

Of them, 13 have been given Greenfield status — the new investment with new technology and products – while two were awarded Brownfield status as they want to expand their existing plants. The new entrants are from France, Germany, Korea, Japan, China and UAE with aggregate investment plan of $1.3 billion.

Hyundai, KIA and some others started production to avail the policy’s incentives, but the auto sector slipped into the mess due to fiscal policies later.

Pakistan’s automobile industry has been going through worst crisis since last year amid rising prices due to imposition of new, higher taxes and steep currency devaluation. Auto industry was the highest taxpaying industry during the last government’s tenure.

The government planned to introduce a new five-year auto industry development policy from next year. Hussain requested the government to provide an easy and one-window operation for overseas Pakistanis to invest. “Huge investments can be transferred to Pakistan which requires special attention of Prime Minister Imran Khan.”