Commercial Section

Consulate General of Pakistan

CIMA
CIMA Motor
Motor 2009
2009
Chongqing,
Chongqing, China
China
Ecnomy Overview of Pakistan

Motorcycle Industry in Pakistan

Production Factors Cost

Logistics

Encouraging Policies for Investment in

Motorcycle Industry
Ecnomy Overview of Pakistan
 Ecnomy Overview of Pakistan
 Pakistan is a country located in South
Asia at a strategic and important
location at the cross-roads of South
Asia, the Middle East and Central
Asia
 It has 1,046 km coastline along the
Arabian Sea and Gulf of Oman in the
South, and is bordered by
Afghanistan and Iran in the West,
India in the East and China in the
far northeast
 Ecnomy Overview of Pakistan
 Pakistan is the sixth most populous
country in the world having population
of 170 million
 The Demographic Profile of Pakistan is
such that 54% of population is below
19 years of age, 27% between 20-39
years of age, 13% between 40-59
years of age and 6% are 60 years and
above
 Thus, Pakistan is relatively a young
country with vibrant people
 Ecnomy Overview of Pakistan
 Pakistan is one of the fastest growing
economies of the world having touched a record
GDP growth rate of 8.4% in 2005
 Average growth rate during last four years has
been 6.4%
 Pakistan has over 170 million consumers with an
ever growing middle class
 Foreign Direct Investment (FDI) has risen
sharply from a mere US$ 300 million in the
1990s to over US$ 5.15 billion in 2007-2008
 The leading sectors for FDI are communication,
financial businesses, oil and gas exploration,
power, trade and real estate and the main
sources are China, USA, UK, Netherlands,
UAE and others
 Ecnomy Overview of Pakistan
 Pakistan’s GDP (Nominal) has reached
to US$ 167 billion in the year 2008
with per capita GDP of US$ 1,044
 The components of GDP during 2007-
2008 were agriculture sector 21%,
manufacturing sector 22% and services
sector 57%
 Indicate shift in the structure of
Pakistan’s economy from mainly
agriculture base to manufacturing and
services
 Ecnomy Overview of Pakistan
Following are the important Economic
Indicators of Rising
Pakistan for the year 2007-2008:-
 5.8% GDP growth
 US$ 13 million increase in FDI during 2007-
2008 touching total FDI of US$ 5.15 billion
 12% increase in exports during 2007-2008
(US$ 19.22 billion)
 16.3% increase Net Revenue during 2007-
2008(Rs. 763.6 billion)
 Ecnomy Overview of Pakistan
 1.8% increase in Worker’s Remittances
during 2007-2008 (US$ 6.5 billion)
 1.5% growth in agriculture sector
 Forex Reserves at US$ 15.2 billion
 4.8% growth in large scale manufacturing
sector
 9.4% growth in service sector
 5.4% growth in manufacturing sector
 15.2% growth in construction sector
 Stable exchange rate for the last 8 years
 Ecnomy Overview of Pakistan
 The wide-ranging reforms in Pakistan have resulted
in a stronger economic outlook and accelerated
growth specially in the manufacturing and financial
services sectors
 According to Doing Business Report 2008 of World
Bank, Pakistan was amongst the top ten reformers
in the world in 2006
 Pakistan ranks 76th globally on the ease of doing
business and is the 2nd best performer in South
Asia after Maldives
 Pakistan scores well on the indicators related to
starting a business (59th out of 178) and protecting
investors (19th out of 178)
 For Chinese investors Pakistan offers best
opportunities for investment including motorcycle
giants
Motorcycle Industry in Pakistan

Market Capacity & Outlook

Market Competition Situation
 Motorcycle Industry in Pakistan
 Market Capacity & Outlook
 The motorcycle industry worldwide witnessed tremendous
growth in the last few years led by People’s Republic of
China
 This global surge in demand was also felt in Pakistan
where the industry manufactured 877,377 units by end
2008
 Pakistan is occupying the 7th position in production of
motorcycles globally and its share in global market of
motorcycles is 2%
 The motorcycle industry of Pakistan is 45 years old
when the local Atlas Group started assembling
motorcycles in Karachi in 1964
 Later on, Yamaha and Suzuki brands were introduced in
Pakistan
 Motorcycle Industry in Pakistan
 The market was almost dominated by
Japanese brands till 2002

 43 Original Equipment Manufacturers (OEMs)

operate in the motorcycle industry of Pakistan

 These OEMs are supported by nearly 2,000

parts and component manufacturers employing
50,000 employees

 Critical mass has been reached in Pakistan’s

motorcycle industry and the prices of
motorcycles in Pakistan have on the average
come down by more than 30% in past 8 years
 Motorcycle Industry in Pakistan
 Since the entry of non-Japanese OEMs in
Pakistan’s motorcycle market the production and
sale of motorcycles has increased tremendously as
depicted in the table below:-
Production/Sale of Motorcycles in Pakistan
Year Production/Sale in % Growth
Units
2001-2002 120,627 11%
2002-2003 175,169 45%
2003-2004 371,007 112%
2004-2005 570,085 54%
2005-2006 751,669 32%
2006-2007 839,224 11.6%
2007-2008 877,377 4.5%
Source: Engineering Development Board/PAMA
 Motorcycle Industry in Pakistan
 Prices of motorcycles have come down to the
extent of 30% after the introduction of
motorcycles made from imported Chinese parts
& components
 Market is likely to expand further if this
declining trend in prices continues
 Per capita income in Pakistan since last 8 years
is increasing steadily at annual rate of 14%
(From 492 US$ in 2001-2002 to 1085 US$
2008) which is enhancing purchasing power of
common man hence more sale of motorcycles in
Pakistan
 Industry experts in Pakistan are forecasting
the demand for new motorcycles in the coming
few years to increase to the extent of 1.7
million
 Motorcycle Industry in Pakistan
 Market Competition Situation
(a) Major Motorcycle Enterprises &
Locations
 Currently there are 43 OEMs operating in
Pakistan’s motorcycle industry
 These include 3 Japanese OEMs and 40
other OEMs who manufacture motorcycles
from mainly Chinese parts and components
 The total installed capacity of all the
OEMs is approximately 1.7 million units
per year
 Motorcycle Industry in Pakistan
 Major Motorcycle Enterprises are as under:-
1) Atlas Honda
2) Dawood Yahmaha
3) Hero
4) Star
5) Pak Hero
6) Pak Suzuki
7) Sohrab
8) Metro
9) Others
 Most of the motorcycle assemblers/OEMs are
located in and around the cities of Karachi(Karachi,
Hyderabad & Hub) and Lahore (Lahore, Gujrat &
Gujranwala)
 Motorcycle Industry in Pakistan
(b) Current Supplying Capability/Market Share(2008)
Atlas Honda 56%
Dawood Yahmaha 9%
Hero 5%
Star 3%
Pak Hero 5%
Pak Suzuki 3%
Sohrab 2%
Metro 1%
Others 16%
Source: Provincial Excise & Taxation Departments of
Sindh & Punjab
 Motorcycle Industry in Pakistan
 Despite rapid and significant entry of
motorcycles made from parts and
components imported from China the market
is dominated by Japanese brand motorcycles
to the extent of 68%
 Besides, there is no Chinese brand as such
popularized in Pakistan market of
motorcycles
 Local brands made from parts and
components imported from China are gaining
ground
 Installed capacity of 1.7 million comprises of
45% units by Japanese origin OEMs and 55%
units by Chinese origin OEMs
 Motorcycle Industry in Pakistan
 In both cases, 72% capacity is for 70CC
models, 24% for 100CC models and 4% for
125CC models
 In terms of sale, the 70CC motorcycle has
almost 85% of the market. This is on
account of fuel economy and trouble free
maintenance
 The Japanese brands though bit expensive
yet their main strength is superior resale
value and stronger after sales and service
 Major strength of motorcycles made from
parts and components imported from China is
price as these are cheaper to the extent of
Rs. 15,000 to 20,000 than Japanese brand
 Motorcycle Industry in Pakistan
(c) Current Foreign Investment:
 The current foreign investment in motorcycle
industry of Pakistan is negligible
 Honda, Yamaha and Suzuki have joint ventures
in Pakistan
 China is lagging behind with almost no
investment in this industry
 Chinese motorcycle giant companies need to
focus on the immense opportunity of investment
in Pakistan’s motorcycle industry specially in
new motorbikes driven by rechargeable
batteries
Production Factors Cost

Land
Energy
Human Resources
 Production Factors Cost
 (i) Land:
 Availability of land (public or private) for
establishment of manufacturing units in Pakistan
is easy
 According to World Bank – Doing Business Group
study/research Pakistan’s ranking in South Asia
regarding construction permission and
registering of property for starting business is
2nd only, 1st being Maldives
 Leasing of land for manufacturing purpose is
not only cheaper but easy also
 Besides, there are Special Economic Zones in
various parts of the country including specific
Pakistan -China Economic Zone also. For these
Zones following is the policy package:-
 Production Factors Cost
Exemption of Custom duties and Taxes strictly
on import of capital equipment (plant, machinery,
equipment and accessories) for Zone development
and projects in the Zone and not for raw
materials
Corporate Income Tax holiday for a period of
five (5) years for Projects in the Zone from the
date of starting commercial operations
The normal incentives for exports as available to
projects established any where in the country
shall be applicable to exports from the projects
in the Zone
Free facilitation service, one window facility and
guidance to investors by the Board of
Investment
 Production Factors Cost
Establishment of Workers Training Centers in the
Zone
Dry port facility in the Zone to facilitate imports
and exports
Federal Government/agencies to provide gas,
electricity and other utilities at the zero point of
the Zones
The facility for obtaining foreign private loans by
all foreign investors, for financing the cost of
imported plant and machinery required for setting
up the project
Foreign controlled manufacturing concerns treated
at par with other local companies for obtaining
financial facilities for their working capital
requirements
Foreign controller companies are allowed domestic
borrowing to meet their working capital
requirements
 Production Factors Cost
 (ii) Energy
 At present Pakistan is facing shortage of
electricity
 By the end of December, 2009 this problem
would be completely resolved as work on power
plants including hydro-electric power generation
is going on with full speed
 This would ensure getting electricity connections
quickly, reliable supply with no frequent outages
and supply of electricity on cheaper rates
 There is no problem as far as supply of gas is
concerned. Supply of POL products is also
available uninterrupted
 Production Factors Cost
 (ii) Human Resources:
 Pakistan is low wage, labour surplus economy
 Wages are low by international standards and
they are almost equal as compared to prevalent
wages in India and Bangladesh and even China
 Skill level of Pakistan’s workers is adequate and
availability is ensured
 Productivity of Pakistan labour is as good as
that of regional countries
 Pakistan’s human development, basic education
and worker skills indicators are tremendously
good
Logistics
 Logistics
 A developed infrastructure is vital to the economic
progress of country
 The substantial investment in the development of
physical infrastructure of Pakistan gives it a
competitive edge and plays a key role in
transforming the country into trade, economic and
energy hub of Asia
 The Government of Pakistan has planned 50 mega
projects for provision of better quality highways,
expressways & motorways throughout the country
during the next few years
 Some of the planned initiatives include; construction
of major new motorways, modernization of trucking
fleet with newer, more efficient, and environment
friendly vehicles; promotion of industrial clusters
along highways/motorways, establishment of
warehouses by the private sector along the network
 Logistics
 (i) Road Transport
 Road transport is a backbone of Pakistan’s
transport system, accounting for 90 percent of
national passenger traffic and 96 percent of
freight movement
 Over the past ten years, road traffic – both
passenger and freight – has grown much faster
than the country’s economic growth
 North South Trade corridor is a major initiative
with approximate cost of US$ 6 billion to
reduce transportation time of good from ports
to factories and vice-versa
 Logistics
 (ii) Road Network
 10,849 km long National Highway
and Motorway network contributes
4.2% of the total road network and
carries 90% of Pakistan’s commercial
traffic
 The Road density of Pakistan is
0.32 km/sq. with the target to
double it in the next ten years road
network grew at average rate of
3.3%
 Logistics
 (iii) Railways
 Pakistan Railways has shown its good
performance since 2000-01 in respect of
passenger as well as freight traffic
 During the last eight years (2000-2008),
Pakistan Railways has been showing an
increasing trend in both passenger and freight
traffic, registering an average increase of 5.6
percent and 7.9 percent per annum,
respectively
 A positive growth of 6.7 percent and 7.0
percent has been recorded in passenger traffic
and freight traffic respectively during 2007-
2008
 Logistics
 (iv) Airlines
 The government has adopted a selective
open skies policy with a number of
countries on the principle of reciprocity
and bilateralism
 The progress of the airline sector could
be mapped through momentous
performance of PIA
 Pakistan International Airlines carried a
total number of 4.245 million passengers
during July 2006 – March 2007 achieving
11.63 million RKRs revenues
 Logistics
 (v) Ports & Shipping
 (a) Karachi Port Trust:
 Karachi port handles more than 65% of the
entire national trade
 Deep natural port provides safe navigation to
75,000 DWT tankers and modern container
vessels
 In July-March 2006-07, the port handled a
cargo volume of 22.4 million tones volumes
marking 12.5% increase
 Besides, most modern terminal operators like
KICT/PICT are operating
 Logistics
 (b) Port Qasim
 High private sector involvement in
Container terminals, Commercial terminals
and even Oil terminals
 23.6 million tones of cargo marking an
increase of 10.8% was handled in 2005-
2006
 In July-March 2006-07, the cargo
handled was 19.7 million tones
 Besides, new terminal operator QICT is
busy in handling cargo
 Logistics
 (c) Gwadar
 Gwadar deep-sea port emerges as a place of
great strategic value enabling high-volume cargo
 The construction of the port has spurred other
major infrastructure projects in the area
 The 700 km. Makran Coastal Highway reduced
travel time to Karachi from 48 hours to only 7
hours
 Other road projects include the Gwadar-
Quetta-Chaman road and a road link to the
town of Khuzdar in eastern Balochistan
 The port will now be in competition with the
likes of Chabahar, a port in Iran, as well as
Dubai in the United Arab Emirates
 Logistics
 Here are some of the projects already underway or in place:

-Fiber optic network has reached Gwadar

-Gas supply plant and network partially in place
-20 more bank branches have been opened
-Construction of a degree college and a cultural complex
-East Bay expressway and railway line alignment has been
finalized
-Construction of new international airport
-450 + modern houses added in the city
-Construction of theme parks
-32 complimentary plots arrange from private schemes for
various health/educational activities.
-Split sewerage system with recycling and disposal in nearby
green
 Logistics
Selected Major Planned Projects for the Next Five Year
Project Length (KM)
1 Improvement/Widening of KKH (Khunjerab- 335
2 Realignment of KKH(Railkot-Sazin Section) 120
3 Improvement/Widening of KKH(Sazin Manshera Section) 258
4 Manshera-Abbottabad-Hasanabdal Expressway 97
5 Peshawar –Torkhum 51
6 Peshawar Notherrn Bypass 34
7 Underpass at Wah Gate No.1 Taxile-Hasanabdal Section -
8 Wazirabad-Pindi Bhattian Expressway(E-3) 100
9 Hiran Minar Interchange (M-2) with link road -
10 Faisalabad-Khanewal Expressway(E-4) 184
11 Khanewal-Lodhran Expressway 100
12 Lodhran-Sukkur Expressway 385
13 Ratodera-Sehwan(N-55), ACW 200
14 Karachi-Hub-Dureji-Dadu Motorway(M-7) 270
15 Karachi-Hyderabad Motorway(M-9) 136
16 Jand-Kohat National Highway(N-80) 46
17 Noshki-Dalbadin Section(N-40), Balochistan 165
18 Gujranwala-Dina Expressway 100
19 Chakdara-Dir, Kalkatak-Chitral (N-45) 120
20 Bridges over River Indus in Punjab & Sindh -
Encouraging Policies for Investment
in Motorcycle Industry
 Encouraging Policies for Investment in
Motorcycle Industry:
 (i) Salient Features of Pakistan’s Investment Policy
Pakistan is having liberal investment policy in general
with following salient features:-
 Almost all economic sectors are open to foreign
investors
 Government permission for investment in
manufacturing sector is not required except for
specified industries such as arms & ammunitions,
high explosives radioactive substances , security
printing and currency and
 Foreign equity upto 100% is allowed.
 0-5% customs duty is chargeable on plant,
machinery and equipment.
 Remittance of capital, profits, royalty, technical
and franchise fee are allowed.
 There is no sales tax on the import of machinery.
Encouraging Policies for Investment in
Motorcycle Industry:
 Tax relief: First year allowance or Initial Depreciation
Allowance @ 50% of plant, machinery and equipment is
allowed for the investors in the manufacturing sector.
 No duty, no drawback and DTRE Scheme is in place for
export-oriented industries.
 Long term finance for export oriented industries is available
 Equal treatment of local and foreign investors is hallmark of
policy/national treatment principle as defined in WTO is
fully guaranteed.
 WTO compatible Intellectual Property Rights regime is
introduced.
 There is strong network of Export Processing
Zones/Industrial Estates.
 China specific industrial zone is also available.
 Foreign Investment is fully protected by following Acts:
 Foreign Private Investment (Promotion and Protection)
Act, 1976.
 Protection of Economic Reforms Act, 1992.
 There are Investment Protection agreements with 47
countries and Avoidance of Double Taxation agreements
with 52 countries.
 Encouraging Policies for Investment in
Motorcycle Industry:
 (ii) Present Tariff Structure:
The industry in Pakistan operated under the Deletion Policy
formulated and implemented by the Ministry of Industries and
Production from 1996 till 2005. This
deletion/localization/indigenization policy stipulated the
mandatory progressive use of a certain percentage of locally
manufactured parts & components. The table below shows the
deletion/indigenization targets for the various motorcycle
models:
Deletion/Localization Targets for Motorcycle OEMs

S.No. Model Deletion/Localization Target

June June June June June
2001 % 2002 % 2003 % 2004 % 2005 %
1 Upto 83.00 85.00 86.50 88.00 90.00
70CC
2 B/W 70- 82.00 83.00 85.00 85.50 86.00
100 CC
3 B/W 100- 74.00 81.00 82.00 83.00 84.00
175 CC

Source: Engineering Development Board, Pakistan

 Encouraging Policies for Investment in
Motorcycle Industry:
With the signing of the WTO, Pakistan moved from the
Deletion Policy to the Tariff Based System (TBS) in July
2005. Under the new system of
TBS protection is provided to the local parts and component
manufacturing industry through tariff measures. The below
table shows tariff rates currently applicable to the motorcycle
industry:

Tariff Rates Applicable to the Motorcycle Industry

Sr.No. Product Applicable Customs

Duty
1. CBU 90.0 %

2. CKD Kit Non 30.0%

Localized Parts
3. CKD Localized 50.0%
Parts

Source: Federal Board of Revenue

 Encouraging Policies for Investment in
Motorcycle Industry:
 (iii) Auto Industry Development Plan
 Since 2007 Government of Pakistan has initiated a
5 year project known as Auto Industry Development
Plan (AIDP)
 This envisages an increase in the industry’s annual
output
 The plan is intended to improve the domestic
automotive industry, through the development of
local capacity and “auto clusters”
 This plan/programme covers all types of automotive
vehicles including two wheelers & three wheelers.
Since this is a five year plan therefore there is
predictability and transparency for the tariff
schedules as the change in tariff structure for full
five years till 2011 is specified
 Encouraging Policies for Investment in
Motorcycle Industry:

 This programme has been appreciated by the

auto industry of Pakistan as a step in the right
direction
 At the end of five year, if it is found
successful, Government of Pakistan may
consider to extend it till the achievement of
set targets

45
Thank you!

谢谢！