Why not commercial import of new Chinese cars under currency swap agreements?

KARACHI: Commercial import of new or used cars is not allowed in Pakistan. Used cars, not more than three years old, can be imported under gift and baggage schemes; however government imposed severe restrictions to discourage such imports and support foreign exchange reserves.[the_ad id=”31605″]The facility was also being grossly misused. Since the imposition of restrictions such as payment of duty/tax in foreign exchange, the legal import has declined significantly while smuggling has surged.

Despite being used, Japanese assembled vehicles are quite popular in the country as these are much cheaper as compared to the locally assembled cars and far superior in terms of quality and safety.

New cars can be imported but the incidence of duty and taxes is too much.

Some dealers of used cars are of the view the government should allow commercial import of new Chinese cars strictly under a currency swap agreement with China.

Chinese assembled vehicles are already present in the market and these are quality products. Commercial import of new Chinese cars under a currency swap agreement i.e. payment in Chinese Yuan against these imports could solve a lot of problems as well break the monopoly of local assemblers, who are still unduly protected.

Chinese original equipment manufacturers (OEM) will eventually move to Pakistan under China Pakistan Economic Corridor (CPEC); FAW has already stepped in to be followed by more. To recall, FAW began with selling imported completely built units (CBUs) and them opted for assembly.

Such a business model is workable. Moreover, it would not burden the country’s dwindling forex reserves and would not impact USD’s value, as the payments would be in Yuan.

According to Customs officials, import of used cars was a big source of revenue collection that has been reduced as import is almost zero. Vehicles, however, are being smuggled into the country.

Dealers believe that Chinese cars will be welcomed by the consumers as these are still better than the locally assembled ones. It is long overdue that the local assemblers face some competition, as this would benefit the consumers as well the industry.

Most of the car manufacturers of the world including Japanese have their manufacturing/assembly facilities in China, which can also be imported into Pakistan under the currency swap agreement. The arrangement may also be extended to other neighboring countries.

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