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AUTO INDUSTRY - PAKISTAN

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    Slide 1:AUTO INDUSTRY - PAKISTAN

    Engineering Development Board Ministry of Industries, Production & Special Initiatives 23-11-2007 By ZAHID J. YAQUB General Manager (Policy Dev.)

    3 Cs Connect Consultation Consistency

    Slide 2:Engineering Development Board

    MISSION STATEMENT Strengthen the Engineering sector and integrate it with the world market to make it the driving force for economic growth.

    1985-2005 2012-Onwards Deletion Programmes leading to Progressive localization Protection through high tariffs Penalties for defaults Positive Impact Vendor Development Localization Import substitution Switching over to TBS Capacity expansion and competitive production Encouraging further localization Incentivizing technology acquisition Human Resource Development Cluster Development Encourage FDI Global Integration Pakistan to have a global positioning 2005-12 To become a Regional hub By enhancing high value added production Tier 1 And Tier 2 vending industry in place Global Era Development Phase 5 Years Period of Preparation Auto Industry A Perspective Vehicle Production * Aggregate Compound Growth Rate (ACGR) Projections Auto Industry 160,000 Cars Rs 98 Billion 839,224 Motorcycles Rs 63 Billion 2.8% Capacity 5.6% Rs 190 Billion 1.7 Million Motorcycles Rs 225 Billion 500,000 Cars Investment Capacity Contribution to indirect taxes Contribution to GDP Gross Sales Turnover Rs 214 Billion 16% Rs 600 Billion Contribution to Manufacturing 25% 192,000 Nos 250,000 Nos Direct Employment 2006-07 2011-12

    Slide 6:Regulatory Environment

    From Compulsory Local Content to Tariff Based System (TBS) SRO 655 (i) / 2006; Duty rates on raw material 0%, sub-components 5%, components 10%, Sub-Assemblies 15%. SRO 656 (I) / 2006 Compulsory minimum in-house facilities. EDB to certify lists for import of components. Maintenance of records. SRO 693 (I) / 2006 To implement TBS through levy of additional customs duty.

    Slide 7:Auto Industry World Overview

    Slide 8:Challenges

    Quality & customer service issues. Under valuation and misdeclaration of imports. Development of critical components & low local content level. Vendor support and development. Capacity expansion. Innovation and Technology Up-gradation. Human Resource Development. Standards, certification & emission controls. Exports Auto industry import dependent.

    Slide 9:Investment Opportunities - Auto Sector

    Investment Opportunities in Component Manufacturing Details

    Slide 10:To provide Policy framework for Auto Industry to facilitate : Long term investment,, Encourage growth, Domestic competition, Enhance competitiveness, Stimulate innovation.

    Objectives of AIDP Ensure sustainability of local manufacturing: Used vehicles import policy will be regulated to sustain growth of local industry while protecting consumer interest. Encourage further indigenization. Facilitate Auto Industrys integration into Global Supply Chain.

    Five Year Tariff Plan. Auto Cluster Development Technology Acquisition Support. Human Resource Development. Incentive for higher value indigenization. Penalty for not achieving further indigenization. Institutional Mechanism including industry representatives for regular assessment and review of progress under Policy. Pillars of AIDP Five Year Tariff Plan For Cars/LCVs - Approved

    Slide 13:Five Year Tariff Plan For HCVs - Approved

    Five Year Tariff Plan For Agriculture Tractors & Motorcycles - Approved Components and Assemblies to Be Localized in Five Years

    Slide 15:JICA report (towards a vision 2030), supports that foreign investments in vending sector would come when volumes approach million cars.JICA report (towards a vision 2030), supports that foreign investments in vending sector would come when volumes approach million cars.

    Slide 16:Technology Acquisition Support Scheme

    Objective To further indigenize components and improve quality. To improve innovation and processes. Eligible Entities Auto part manufacturers must be supplying or contracted to supply to vehicle assemblers or export market. Must be registered with SECP. Should have suitable in-house facilities to manufacture auto parts. Incentive in the form of matching grants.

    Slide 17:Productive Asset Investment Incentive

    Objectives Expand and modernize capacities in auto parts manufacturing. Encourage further localization of auto parts. Promote interdependence between assemblers and auto parts manufacturers. Incentive Duty credits as percentage of value of productive assets installed by eligible auto parts manufacturers spreading equally over a period of 5 years to offset duty on eligible imports. Duty credit will be transferable to vehicle assemblers and will remain non-tradeable in open market.

    Slide 18:Mission Statement To set-up a system to develop on a sustainable basis, competent and multi-skilled personnel to meet the growing needs of Auto Industry .

    Human Resource Development Need of Industry Focused and specialized effort through dedicated institutions for the training of manpower and management of the Auto Sector. Close collaboration with established institutions such as HEC, NAVTEC, VTCs, Polytechnics, TUSDEC, TEVTAs etc.

    Slide 19:Steer initiative on HRD on sustainable basis through Centres of Excellence. The Company will be managed by a Board with representatives from government, industry, HEC, NAVTEC, management schools etc.

    Faculty Both foreign and local experts with extensive working experience and academic qualifications. Auto Industry Skill Development Company

    Slide 20:Auto Industry Investment Policy (AIIP) HCVs & Agriculture Tractors

    Companies producing at least 25,000 units of trucks and buses separately , 40,000 units of LCVs, 500,000 units of cars and at least 50,000 units of agriculture tractors annually in countries other than Pakistan will be eligible for new entrant benefit. Benefit: 100% CKD kit at customs duty applicable to the import of components not manufactured locally, for a period of three years from the start of assembly. New entrant will submit a business plan, delineating the yearly localization plan with substantive evidence, subjected to yearly scrutiny. AIDC will determine the eligibility of new entrant.

    Slide 21:Auto Cluster Development

    Two Auto Clusters Proposed; Near Steel Mills, Port Qasim, Karachi. Near Motorway on Sheikhupura Road, Lahore. Area; Karachi: 200 Acres. Lahore: 140 Acres. Need for Auto Clusters; To address fragmented location of vendors and lack of mutual support, learning and sharing certain common, otherwise under utilized capacities through Cluster Development.

    Slide 22:Auto Industry Development Committee

    AIDC having public private partnership being notified shortly to coordinate implementation of AIDP. AIDC will have continuous deliberations on competitive development of auto industry . Deliberate on emerging global trends and issues of quality, standards, environment and consumer satisfaction. AIDC will conduct an annual assessment and a comprehensive review on the implementation on the AIDP after 5 years.

    THANK YOU NEXT Investment Opportunities - Auto Sector NEXT BACK