The government has opened the doors for European car brands such as Fiat, Audi and Volkswagen to establish manufacturing units in the country. The ambitious five-year automobile policy offersa host of tax incentives for new entrants as well as it will enhance consumers’ trust in the locally manufactured units and will ensure availability of state of the art brands at a competitive rates. The policy will not offer any big change in the incentives for the old manufacturing units operating in the country, but will encourage local parts manufacturers to establish liaison and supply chain with the new entrants. However, the government is likely to allow import of up to five-year-old used cars compared to the current three-year ceiling. One fails to understand why the government is reluctant to announce incentives for the existing players in the auto sector and singled them out in the process.
If the purpose of the new auto policy is to stimulate growth and investment in the auto sector of the country, the conflicting rules for the old and new manufacturers will not bring the desired results. The policy-makers in this country always put all their weight on one end of the scale and leave the other unbalanced. The policy should have covered all aspects of the auto sector, but half of the manufacturing units with incentives and half of the others without incentives will ultimately mar the whole exercise for which the policy has been devised. The emerging middle class in the country needs cars at competitive rates for which the government has allowed the import of used car, but the most important factor which is being ignored is the number and volume of taxes and duties already enforced in the country. The government must understand that lowest are the rates of taxes and duties, the highest are the chances of economic growth. Unfortunately, imposition of disproportional rates of taxes and duties is one of the biggest hurdles in the way of economic growth.
The world is changing at a fast rate and Pakistan can earn billions of rupees in the form taxes and duties once the industry establishes its firm roots in the country. Pakistan has the potential even to export automobiles to Afghanistan and beyond to the central Asian states once it decides to lower taxes and duties. Involving the regional countries in the economic policies will prove to be a catalyst for growth and investment in the country and the government must stay away from using old methods in new situations.
