KARACHI, July 23: Local auto makers and vendors fear arrivals of Indian cars and other vehicles through Sri Lanka. They expressed their apprehension after scrutinizing lists of items under the free trade agreement (FTA) singed between Pakistan and Sri Lanka and between Sri Lanka and India.

They had sent a list of items to President Pervez Musharraf, Prime Minister Shaukat Aziz and other ministries on July 21, showing exportable items to Sri Lanka (not in the negative list of Sri Lanka) and exportable items from Sri Lanka (not in the negative list of Pakistan). The car makers and vendors have tried to convince the higher authorities that import from India to Sri Lanka is duty-free and import from Sri Lanka to Pakistan will be duty-free in near future. In other words the stakeholders of the auto sector have summed up by simply saying Indian vehicles and parts will find their way into Pakistan through Sri Lanka free of duty.

Pakistan Automotive Manufacturers Association Chairman Kunwar Idris and Pakistan Association of Automotive Parts and Accessories Chairman Mehdi Ali Rizvi in a letter, signed jointly by them, have enclosed a comparison list of the items not included in negative lists of both Pakistan and Sri Lanka, which are subject to a gradual reduction in customs duty down to zero in the third year for Sri Lanka and fifth year for Pakistan exports.

Giving an example, they say that Pakistan gets preferential treatment on tractors, dumpers, special purpose vehicles, some auto parts, bikes and parts of motorcycles and bicycles, whereas Sri Lanka gets preferences on cars in completely built up (CBU) and completely knocked down (CKD) kits exceeding 1,500cc to 2,500cc, CKD of commercial vehicles exceeding five tons, special purpose vehicles, chassis fitted with engine for tractors, cars, buses and trucks, entire range of auto parts for tractors, commercial vehicles, cars, buses, trucks, bikes and bicycles, fork lifters, motorcycles not exceeding 50cc and exceeding 500cc to 800cc, bicycles and trailers.

They said that preferential items for Sri Lanka would be at zero per cent rate of duty by the year 2007-08 when the same items for local manufacturers will be at 35 per cent for CKD, 35 per cent for auto parts, 75 per cent for CBU of cars, and from five to 25 per cent on raw materials for vendor parts.

Under exportable items to Sri Lanka (not included in the negative list of Sri Lanka), Pakistan under the FTA can also export items like tractors, dumpers, bikes, body parts of trailers, dumper designs, body parts of trailers and vehicles for disabled persons, but it cannot export any type of cars, trucks, buses and vans to Sri Lanka. However, India can export everything related to the auto sector to Sri Lanka under the preferential tariff/treatment as per the India-Sri Lanka free trade agreement.

The entire auto sector of India is out of the negative list of Sri Lanka.

But Sri Lanka cannot export anything related to the auto sector to India under the same treatment as per India-Sri Lanka FTA.

This situation raises many questions about the future investment of car makers and transfer of technology by the principals and vendors who have made huge investments in the expansion and BMR and created many jobs, both the leaders said.

They urged the government to take cognizance of the matter that had created a sense of uncertainty among the members. They asked the government to reconsider and include all the preferential items of the auto sector in the negative list of Pakistan and exclude all such items from the negative list of Sri Lanka.

Executives in the auto sector said that economic managers had not taken into confidence representatives of the auto sector before signing the FTA with Sri Lanka.

“They did not even imagine that India will be the ultimate beneficiary of this agreement.”