20000419

Pak-Iran co-operation

in autoparts trade on

joint venture under study

RECORDER REPORT

KARACHI: The Ministry of Commerce (MoC), considering Iran an excellent market for a broad range of Pakistani products, is planning a definitive strategy to be developed to accelerate bilateral cooperation in joint ventures and trade in autoparts and related activities.

According to an official communication sent to the Ministry of Industries and Production by the MoC, it is desired that action is initiated by the relevant agencies in areas identified in the meeting the Federal Minister for Commerce, Industries & Production had with the Iranian ministers during his visit to Iran last month.

Shariq Suhail, member of the managing committee of Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM), who was a member of the delegation has prepared a report on the visit. The idea of participation by the automotive sector was to evaluate the possibilities of export of autoparts to Iran, gather statistical data of the Iranian automotive market, check the possibilities of bilateral trade with Iran, and look at the possibilities of joint ventures between the two countries.

Shariq Suhail who was accompanied by another member of PAAPAM's managing committee, Azhar Ali observed that the deletion levels portray the development level of Iranian automotive industry. In the next six months, Iran plans to launch a passenger van which is designed by them and will have 100 percent local content: Pecan (Hillman) 98 percent, MF tractor 95 percent, Kia car which started production in 1995 90 percent, Nissan pickup 90%, Mercedes truck 75 percent, and Peugeot 405, 68 percent.

The government of Iran has played a major role in achieving these targets by framing a suitable legislation and strictly implementing it. The salient features of their policy are: In Iran the import of autoparts is only allowed against a permit issued by the government. All autoparts manufactured locally, when imported, have an additional import duty of upto 200 percent over and above the existing 20 percent. Import of a part not manufactured locally is allowed only after a detailed scrutiny and after exhausting all possibilities of its localisation.

Conversely, in Pakistan autopart assemblers enjoy high tariff protection whereas part manufacturers have a negative protection. The import tariff for CKD and commercial imports is the same (35 percent). Imposition of 20 percent RD on import of commercial spare parts into Pakistan is very important and holds top priority for implementation.

In Iran, any sort of rollback in the deletion level is not possible. This maintains the momentum for the vendor industry. In Pakistan for a new entrant or for a model change a rollback incentive of 25 percent is available. This policy has created a serious vacuum of work in the vending industry. It is also a source of unnecessary foreign exchange loss for the government.

According to Shariq Suhail and Azhar Ali, Iran has a highly protected automotive sector. The import permit system, high tariff walls and high local contents make it very difficult for anyone to export into Iran. With these realities in perspective and after detailed discussions, they have made the following observations : Iran has a fairly well developed vendor base, most of the major vendors had initial joint ventures/technology transfer agreements with Germans/Japanese companies. We both have import restrictive laws and the type of vehicles produced in both countries are different.

This indicates a strong potential for joint ventures/technology transfer agreements. The Iranian side was also comfortable with this idea and wanted to proceed in this direction. Shariq and Azhar have already contacted Sazeh Gostar Co. and requested them for information on certain areas where Pakistan needs technical assistance.

During meetings held in Iran, Iran's Minister of Industries had highlighted the importance of automotive sector in Iran and was of the opinion that potential of bilateral trade in this area should be explored.

He also had a visionary approach towards the development of a car for the Islamic world. His idea was to design and assemble the car in Iran and countries such as Pakistan, Egypt and Jordan can participate in this project by supplying certain percentage of components. This car would be sold throughout the Islamic world.