Driving Backwards: PIDE Unveils Essential Book on Pakistan’s Auto Industry

on 16/10/2024
  • The prevalent “On Money” culture compels consumers to pay black-market premiums due to limited vehicle availability, costing them an estimated PKR 30 – 34 billion annually.
  • Transitioning to electric vehicles (EVs) not only promises to lower Pakistan’s fuel import expenses but also addresses the country’s deteriorating air quality, asserts VC PIDE.

Islamabad, October 10, 2024 – The Pakistan Institute of Development Economics (PIDE) launched its eagerly awaited book, “Driving Backwards: What is Wrong with Pakistan’s Automobile Industry?” at a gathering held at the National University of Modern Languages (NUML) in Islamabad. This publication offers an in-depth examination of Pakistan’s underperforming automobile sector and outlines a roadmap for its revitalization and transition into the future.

Dr. Usman Qadir, Senior Research Economist at PIDE, presented the book’s key findings and discussed the persistent challenges confronting the industry. He highlighted the necessity for Pakistan to abandon protectionist policies and instead focus on integrating its automobile sector into global value chains to enhance competitiveness and foster innovation.

The current state of Pakistan’s automobile industry mirrors the challenges it faced decades ago, characterized by poor-quality, overpriced, and technologically outdated vehicles produced in low volumes. To stimulate growth in a sector that has seen little advancement over the last fifty years, PIDE suggests imposing higher taxes on automobile manufacturers that do not meet export targets. This approach would incentivize companies to explore global markets.

In his keynote address, Dr. Nadeem Ul Haque, Vice Chancellor of PIDE, emphasized that transitioning to electric vehicles (EVs) could significantly reduce Pakistan’s fuel import bills while improving the country’s worsening air quality. He also pointed out that research and development (R&D) is the backbone of the global automobile industry but is severely lacking in Pakistan. He encouraged students to aspire to leadership roles in the global market through innovation, entrepreneurship, and research.

“Driving Backwards” is the culmination of over three years of extensive research and consultations with industry stakeholders at PIDE. The book underscores the considerable potential of Pakistan’s automobile sector, which has been hampered by excessive regulation, insufficient competition, and an overemphasis on localization that has not produced the intended outcomes. The 1987 Localization Policy (Deletion Program) aimed to reduce imports of car components by promoting local production but primarily focused on low-tech components, failing to achieve meaningful technology transfer or skill enhancement. Additionally, the transition to a Tariff Based System (TBS) for protecting locally produced components has constrained the growth of the automobile and parts manufacturing industry, leaving it disconnected from global value chains.

The publication also addresses the significant issue of the “On Money” culture, which compels consumers to pay black-market premiums due to limited vehicle availability, costing them an estimated PKR 30 – 34 billion annually, according to PIDE research. The book stresses that these inefficiencies stem from flawed policies and underscores the need for reforms aimed at enhancing consumer welfare and providing access to affordable, high-quality vehicles.

Furthermore, the book includes three chapters dedicated to Pakistan’s transition to electric vehicles. While the shift to EVs is crucial for both economic and environmental reasons, several challenges must be addressed before large-scale adoption can occur. PIDE asserts that the government should provide equal opportunities for the sale of EVs in Pakistan, allowing consumers to choose their preferred vehicles.

Dr. Manoor Ahmed, Pakistan’s former ambassador to the WTO, commended PIDE’s research on reforming the automobile industry during the book launch. He described “Driving Backwards” as a timely resource for policymakers navigating recent economic challenges and the conditionalities of the IMF program. He further emphasized the need to enhance resource allocation efficiency in the country to fully harness the manufacturing sector’s economic potential, which requires a comprehensive shift and modernization of Pakistan’s policy approach.

The event concluded with an engaging Q&A session, where attendees inquired about the future of Pakistan’s automobile industry, particularly concerning electric vehicle adoption and the global shift toward sustainable mobility. The authors reiterated that although Pakistan is lagging in EV adoption, the country has a unique opportunity to leap into the future by embracing forward-looking policies that foster innovation and sustainability.

PIDE urges industry leaders, policymakers, and entrepreneurs to reevaluate the current trajectory of the automobile sector. The book’s recommendations advocate for a transition to electric vehicles, fostering competitiveness through joint ventures, and integrating the industry into global value chains—essential steps for realizing the long-term potential of Pakistan’s auto industry.

Pakistan Petroleum Limited (PPL) Commences Oil and Gas Production in Punjab, Marking a Major Advancement in Domestic Energy Exploration.

on 16/10/2024

Pakistan Petroleum Limited (PPL) Commences Oil and Gas Production in Punjab, Marking a Major Advancement in Domestic Energy Exploration

Pakistan Petroleum Limited (PPL), one of the country’s leading state-owned energy enterprises, has achieved a significant breakthrough by initiating commercial oil and gas production from a newly discovered field in Punjab. This development signals an important stride in the nation’s ongoing efforts to enhance indigenous energy exploration and production capacities, with the goal of strengthening energy security and reducing dependence on imported fuels.

In an official announcement, PPL confirmed that extraction operations have begun at the newly tapped field, contributing to the national energy grid through the supply of both crude oil and natural gas. The commencement of production from this field is a noteworthy accomplishment for the company, particularly in light of the increasing energy demands in Pakistan, driven by rapid industrialization, urbanization, and population growth. The successful operationalization of this field is expected to play a pivotal role in addressing the country’s persistent energy shortfall.

The production from this new field is anticipated to make a considerable impact by increasing the domestic output of hydrocarbons, thus helping to mitigate the need for costly energy imports. By bolstering the national energy mix, PPL’s latest endeavor is aligned with the government’s broader vision of achieving energy self-sufficiency and long-term sustainability.

As Pakistan continues to navigate the complex dynamics of energy production and consumption, this milestone underscores PPL’s enduring commitment to expanding its exploration and production footprint. The company remains steadfast in its mission to identify and develop new reserves, harnessing the country’s untapped hydrocarbon potential. In the future, PPL plans to pursue further exploratory initiatives and technological advancements to maximize the efficiency and yield of its operations.

With this latest development, Pakistan Petroleum Limited has reaffirmed its leadership position in the domestic energy sector, contributing not only to the economic growth of the country but also to its strategic goal of reducing external reliance on energy imports. This is an important step forward in ensuring a more secure, sustainable, and self-reliant energy future for Pakistan.

CPPA-G Seeks Extension of IFRS-9 Exemption Over Power Sector Receivables Concerns

on 16/10/2024

The Central Power Purchasing Agency (CPPA-G) has requested an extension for exemption from IFRS-9 accounting standards, citing growing concerns over potential credit losses due to unpaid power sector receivables. This exemption, set to expire soon, is critical for the CPPA-G to avoid the financial hit that would arise from the inability to clear massive receivables in the power sector.

The agency is grappling with large-scale receivables owed by various distribution companies and government entities. The CPPA-G fears that implementing the IFRS-9 standards—aimed at providing for expected credit losses—would severely impact its financial position. In its petition, the agency emphasized the risk of default and the urgent need for the government to address the ongoing circular debt crisis that continues to plague the power sector. Without resolution, the CPPA-G argues that meeting financial stability requirements could become increasingly difficult.

The CPPA-G has urged the government to take immediate action to clear the outstanding dues and provide much-needed financial relief to prevent long-term credit loss and financial instability in the sector.

Faraz-ur-Rehman Cautions Against Potential Policy Rate Hike Amid Inflation Worries

on 15/10/2024

Faraz-ur-Rehman Cautions Against Potential Policy Rate Hike Amid Inflation Worries

Faraz-ur-Rehman, former Chairman of the Korangi Association of Trade and Industry (KATI), has raised concerns regarding the government’s potential move to increase the State Bank of Pakistan’s (SBP) policy rate. This action would be in line with commitments made to the International Monetary Fund (IMF), should the country face renewed inflationary pressures or external financial challenges.

Referring to the IMF’s recent report, titled “2024 Article IV Consultation and Request for an Extended Arrangement under the Extended Fund Facility,” Faraz-ur-Rehman emphasized that the global lender advised Pakistan to remain cautious about reducing the policy rate unless there is clear evidence that core inflation is slowing and inflation expectations have stabilized.

Faraz-ur-Rehman warned that any rise in the SBP’s policy rate would have serious consequences for businesses and the economy, potentially slowing growth. He urged the government to prioritize inflation stabilization and the promotion of economic activity, warning that stringent measures could adversely affect both industries and consumers.

Interview of M. Dennis Knight | President | ASHRAE | by Manzoor Sheikh.

on 11/10/2024

Manzoor Sheikh:

Assalamualaikum welcome to Engineering Review. We have with us. Dennis Knight, he’s president of ASHRAE. Thank you so much. Mr. Knight, you took time to talk to us. I would like to start that. How do you feel be in Pakistan You are for the first time you have been visiting Pakistan.

Dennis Knight:

This is the second or third time I’ve been to Pakistan. This is the second time I’ve been the HVAC and our trends. I visited chapters in Karachi, Lahore, Islamabad and made a little trip up to Muree one time. So pakistan’s not new to me. I enjoy coming. I enjoy visiting with my friends in the HVAC. Our industry.

Manzoor Sheikh:

So you are the person who can tell us what the change is coming in this sector in Pakistan.

Dennis Knight:

Oh, the change is coming. Not only here, it’s coming all over the world but especially in Pakistan. I mean your po is to grow. Your population growth over the next 20 years is going to be tremendous. You’re going to triple the number of tons of HVAC system as more and more people begin to well as we feel the effects of climate change and as more and more people get access to HVAC, you’re going to triple the size of this business. So it’s more important than ever that we get manufacturing brought to Pakistan. We get young people involved and we get to build a very large HVAC in our workforce in Pakistan.

Manzoor Sheikh:

This sector is huge. You know millions of companies are doing business, millions of engineers, millions of tacticians. I mean a lot of people are involved. You know the more huge is in sector, the more other challenges in the background of climate change. Yes, what do you think? Are we on the right direction?

Dennis Knight:

We are on the right direction, but we’ve got to change the way we talk about our industry. If we’re going to bring enough young people, you say there’s millions of people. If there’s millions.

Triple that make that three times that in just 26 years and we don’t have a lot of young people coming into the industry right. So we got to change the way we talk about our industry. We’ve got to talk about our industry, not about the technology and how to put things in. But we’ve got to talk to young people about the impact of our industry on climate change, on sustainability, on human health and well-being and why this is an important career and why a young person should should consider it as a career. You can do no matter what degree you have. No matter what discipline you’ve studied in there’s a place for you in HVAC&R and an ASHRAE In this industry, we need experts from every discipline.

Manzoor Sheikh:

Why is it so young people are not coming? What? What are the bottlenes?

Dennis Knight:

Well,Population is not growing as fast as our middle class, so our population, the number of people that we’re growing is not growing as fast as our industry and we’re all IT. Industry, the manufacturing industry, the engineering industry.

The private sector they’re all pulling from the same pool of people that graduate every year. And if we do not have a compelling message as to why some young person should choose this career, why they can come into this career, have passion, have purpose, have a family sustaining and upwardly mobile career path. We want at track them and they’ll go to other industries. So it’s very important that we talk about our industry and what we’re doing now and having an impact and how we since we consume 40 percent of or we our systems produce 40 percent of the world’s carbon emissions. How we are a vital player in reducing that.

Manzoor Sheikh:

Then I’ve been talking to just 5 ten minutes before you. I was talking to Sarah, you know, ask that whatever we are doing, you, there are many things that we have to do. But the thing is, is it enough that we are doing in the context of climate change so that mitigate the impacts of climate change?

Dennis Knight:

Well, we have to step up our game. We have to begin talking to our clients, convincing them that it’s important to convert from fossil fuels or by-materials that have low embedded carbon. And we’ve got to do that faster than we’re doing it now if we’re going to meet the targets we’ve set and and as we said last year you hit the challenges we’ve accepted, we have got to move forward faster if we’re going to eliminate carbon emissions by 2050.

Manzoor Sheikh:

Business is you know, from one respect is about profits, profit earning. You think it’s a greed of profits that is hindering and maybe one of the reason.

Dennis Knight:

Well, maybe I mean, maybe pushing for more and more profits and focusing on the bottom line is’t necessarily always the best solution for the environment. Best solution for the employees, best solution for the communities I think we’re going to see as the world of finance, the world of insurance and the consumers become more and more aware of how important having a low impact on the environment is in the decisions they made. The products they buy, the systems they buy, the more and more you see that i think you’ll see that profit. The bottom line for profit to be less important, maybe be than environmental and social justice.

Manzoor Sheikh

Thank thank you.