Government should come up with a bailout package for auto industry to save employment and exports

  • February 23, 2009

The global recession has hit hard the auto industry of many countries due to which car manufacturers in the world’s two biggest and strongest economies, USA & Japan are cutting down their production and Pakistan is not immune to this phenomenon. This is evident from the fact that the automobile industry in Pakistan has started the New Year in extreme gloom as production of cars, motorcycles and tractors are expected to drop substantially. Therefore, government should come up with a bailout package for our auto industry because this sector of the economy not only pays sufficient chunk of taxes to the national exchequer, it also provides financial support to about 1.5 families. This was stated by Mian Shaukat Masud, President, Islamabad Chamber of Commerce and Industry. He said further slump in auto industry will render thousands of people jobless while government will also lose sufficient tax collection from this sector. He said most of the small to medium auto parts vendors, who invested heavily to increase their production capacities and upgrade technology on the back of a robust annual growth of above 20 per cent in car sales during the six years to the fiscal 2007, now find themselves in deep waters as the domestic car industry faces slowdown in sales. He said most factories running three shifts until a few months back have been forced to lay off labor and slash the number of shifts to two due to reduction in demand for cars

ICCI President said the country produced 120,000 cars in 2008 compared to 165,000 cars in 2007 showing a decline of 45,000 while production is projected to fall further in 2009 to 70,000 units. He said auto part manufacturers in Pakistan are facing many problems in smooth promotion of this sector like much high gas and electricity costs, increased labor costs, long outstanding refunds from the tax department, rising financial costs on loans from commercial banks and called upon the government to look into these issues to provide relief to auto industry. He said USA and many European governments have offered bailout packages to their auto industries to cope with the phenomenon of global recession and it is necessary that Government of Pakistan should also announce a similar package to boost up the sinking morale of local auto industry so that this sector could continue its growth momentum. He said the package should cover soft term loans, easing of lease financing on local made vehicles, allowing ZTBL to extend loans/leases to rural areas for utility vehicles like pick ups and small trucks.

Mian Shaukat Masud said government should ensure continued growth of this sector by encouraging local production of cars, trucks & buses with special emphasis on CNG versions, promote the development of key auto technologies inside Pakistan to take Pakistan’s auto industry to a new technological level, give incentives to Pakistan’s auto parts makers to enhance their share in the international auto parts markets. He said promotion of auto industry will produce many beneficial results for the economy like making it one of the top tax paying sectors in Pakistan, increasing employment opportunities, providing cheap and affordable transport facility to the Pakistani people etc. Government should implement Automotive Industry Development Program in letter and spirit to develop this sector on modern lines, he concluded.