Automotive Development Policy (2016-2021)

AUTOMOTIVE DEVELOPMENT POLICY (2016-2021)

The new AUTOMOTIVE DEVELOPMENT POLICY (2016-2021) has been approved by the ECC in its meeting held on March 18, 2016.

MAIN OBJECTIVES OF ADP-2016-21

• Facilitate higher volume, more investment, enhanced completion and better quality with latest technology
• Creating a balance between Industrial Growth and Tariffs to ensure sustainability of all stakeholders
• Ensuring consumer welfare
• Providing Policy Consistency and Predictability for investors and mid-term review to cater for emerging developments

POLICY DIRECTIONS

Lower the entry threshold for New Investment (Two categories namely Greenfield Investment i-e. the installation of new and independent automotive assembly and manufacturing facilities by an investor for the production of vehicles of a make not already being assembled / manufactured in Pakistan and Brownfield Investment i-e. revival of an existing assembly and / or manufacturing facilities, that is non-operational or closed on or before July 1, 2013 and the make is not in production in Pakistan since that date and that the revival is undertaken either independently by original owners or new investors or under joint venture agreement with foreign principal or by foreign principal independently through purchase of plant).

• Create enabling tariff structure o Rationalizing Automobile Import Policy
• Provide regulatory and enforcement mechanism for Quality, Safety and Environmental Standards
• Establishment of Pakistan Automotive Institute
• Ensure Consumer welfare through provision of quality, safety, choice and value for money
• Truck Financing by Commercial Banks and Incentivized Fleet Operations

NEW INVESTMENT POLICY

A new manufacturer under Automotive Development Policy (2016-2021), establishing maiden assembly facility will invariably need separate treatment and greater incentives in the early years to enable it to introduce its brand, develop a market niche and share, create a distribution and after-sales service networks, and develop a part-manufacturer base.

• Investment Categories ADP (2016-21) envisages two categories of New Investment with different incentives:

4.1.1 Category-A

Greenfield Investment is defined as the installation of new and independent automotive assembly and manufacturing facilities by an investor for the production of vehicles of a make not already being assembled / manufactured in Pakistan. [Note: “Make” is defined as any vehicle of whatever variant produced by the same manufacturer]

4.1.2 Category-B

Brownfield Investment is defined as revival of an existing assembly and/or manufacturing facilities, that is non-operational or closed on or before July 01, 2013 and the make is not in production in Pakistan since that date and that the revival is undertaken either independently by original owners or new investors or under joint venture agreement with foreign principal or by foreign principal independently through purchase of plant. b. Investment Incentives

4.2.1 Category-A

Investor shall be entitled to the following incentives:

• Duty-free import of plant and machinery for setting up the assembly and/or manufacturing facility on a one-time basis
• Import of 100 vehicle of the same variant in CBU form at 50 percent of the prevailing duty for test marketing after ground breaking of the project
• Concessional rate of custom duty @ 10 percent on non- localised parts and @ 25 percent on localised parts for a period of five years for the manufacturing of Cars and LCVs
• Import of all parts (both localised and non-localised) at prevailing customs duty applicable to non-localised parts for manufacturing of trucks, buses and prime-movers for a period of three years
• The existing policy for Motorcycle industry as approved by the government and notified by FBR vide SRO 939(I)/2013 and SRO 940(I)/2013 shall continue.

4.2.2 Category-B

Investor shall be entitled to:

• Import of non-localised parts at 10 percent rate of customs duty and localised parts at 25 percent duty for a period of three years for the manufacturing of Cars and LCVs
• Import of all parts (both localised and non-localised) at prevailing customs duty applicable to non-localised parts for manufacturing of trucks, buses and prime-movers for a period of three years

4.3 Eligibility Criteria

The Board of Investment shall be the single point of contact for the investor with the government. Any new investor shall be required to submit a detailed business plan and relevant documents for manufacturing of vehicles to the Board of Investment. The Board of Investment shall have the Business Plan assessed by the Engineering Development Board, which shall verify the investor’s in-house assembly/manufacturing facilities for the manufacture of road worthy vehicles. The Engineering Development Board shall determine eligibility of the applicant under the defined criteria to be declared as Category A or Category B Investor. The Ministry of Industries and Production, on recommendation of the Engineering Development Board, shall approve a new investor under the relevant category. The Auto Industry Development Committee (AIDC) and Engineering Development Board shall review results of the new investor policy once every two years and shall recommend modifications, if any.

Documents Required

Following documents are required by a new investor to submit BOI alongwith an application:-

• Registration with SECP
• Registration with FBR
• Detailed Business Plan on EDB format alongwith documentary evidences, wherever applicable, of the following:
  
  
  • Land and Building
  • Plant and Machinery
  • IPO receipt of brand name and logo/li>
• Verified / authenticated copies of Contract Agreement (Technical Transfer / Assistance) from the following organizations:
  
  
  • Foreign Office in the country of Foreign principal
  • Chamber of Commerce & Industries in the country of Foreign principal
  • Pakistan Embassy in the country of Foreign principal
  • Federation of Pakistan Chamber of Commerce & Industry (FPCCI), Pakistan

For Information