Thread by @FahdSheikh3

Is there no one in this government who can forecast trade deficit & CAD correctly even for the next 3 months?

I mean how can forecasting be so out that it leads to these kind of alarming surprises & doesn’t help MoF & SBP take pre-emptive measures before time? @MuzzammilAslam3

https://twitter.com/KhaleeqKiani/status/1466238979980894218

Spending $ billions a year on imported CBU’s & CKD’s for fossil fuel cars for a country that is heavily dependent on imported energy is a highly unintelligent strategy.

Those who were pushing for reducing duties on imported vehicles must be asked as to what they were thinking.

Secondly, for a net energy importer that should look to reduce its dependence on oil, an auto policy propagating the import of legacy vehicles instead of electric vehicles is completely flawed. The auto & auto parts lobby had sold the idea of auto sector exports to @PTIofficial.

I remember top executives of the auto & auto parts manufacturing sector pushing for a new auto policy in which overall volumes of vehicles sold in #Pakistan p.a. would reach an optimal level that would allow manufacturers to reach economies of scale for them to become exporters.

This lobby included #PAMA (auto manufacturers) and #PAAPAM (auto parts manufacturers). Their reps lobbied @PTIofficial & @ImranKhanPTI aggressively, promising #GOP that within a few years they would start exporting parts & vehicles to developing economies in Africa & elsewhere.

What they managed to achieve instead was skyrocketing fossil-fuel based auto imports (CBU & CKD), & negligible exports, if any.

I’m not an auto expert, but I don’t see any substantial exports from this sector in the near future either. What #’s did they commit to @razak_dawood?

In the money-printing melee of the last 2 years, they have directly contributed in playing havoc with #Pakistan’s trade deficit & CAD.

What has 🇵🇰 gained in the process?

1) A wider array of car models to choose from

2) Higher oil marketing company sales (huge demand for fuel)

3) Higher fossil fuel vehicle sales —> huge piles of cash 💰 sitting on balance sheets to fund future expansions to manufacture fossil fuel vehicles 🤦🏻‍♂️

4) Higher auto parts sales —> negligible exports so far & nothing substantial on the cards either (unless I am proven wrong)

5) Pollution & smog levels in major cities of #Pakistan increasing beyond control due to the sale of fossil fuel vehicles

6) Health issues for millions of Pakistanis due to the emissions that these legacy vehicles cause

@aminattock @fslsltn @zartajgulwazir @naveed_rukhsana

7) Large, recurring trade deficit (likely $5bn in Nov-21) & a high current account deficit (likely $2.0-2.4bn in Nov-2021) due to investments in fossil fuel vehicle manufacturing plants and the import of CBU’s (Completely Built-Up Units) & CKD’s (Completely Knocked-Down Units)

8) Negligible investment in Electric Vehicle (EV) manufacturing capabilities, charging infrastructure, & other EV equipment manufacturing

9) A very small number of actual EV’s imported

10) Of EV’s imported, most were Audi e-Trons (1,500+ @ Rs. 17mn each = a total of ~$150mn+)

The world had started moving to #EV’s more than a decade ago. Exactly a decade later, we are nowhere close to moving in any direction towards having a significant fleet of EV’s plying #Pakistan’s roads & saving this country a substantial amount of $’s from reduced oil imports.

We imported > 10,000 vehicles last year as compared to < 2,000 the previous year. The lower SBP policy rate spurred the high demand for imported vehicles, as incumbent local auto manufacturers never created enough capacity to service local demand on a sustainable & timely basis.

The total import bill for automobiles was $2 billion during FY2021, 80% of which was for CKD’s / SKD’s and the remaining 20% for CBU’s.

For the first quarter of FY2022, the automobile import numbers most likely will exceed a staggering $700 million.

By end Dec-21, this number will easily cross $1.2bn. That’s equal to 67% of the $1.8bn #Saudi oil facility that #GOP recently negotiated.

The numbers like I said are mind-boggling & which could’ve been easily avoided if a more prudent & forward-looking approach had been adopted.

Example: Who allowed MG Motors to import approx. 8,000 CBU units without a single CKD unit being produced from their under-construction manufacturing plant in Lahore? MG is owned by SAIC in partnership with the Senator who recently vacated his seat for the Advisor to PM, Finance.

To provide an idea of the numbers, 8,000 imported MG units x Rs. 5.6 million per unit = Rs. 45 billion sale value (or $270 million) without a single indigenously assembled unit.

A little rich for a country that struggles to achieve a 3-month import cover on the FX reserves side.

The government has no policy to nudge the incumbent #Japanese auto manufacturers in #Pakistan to use 🇵🇰 as an export base for their other markets or localise 80-100%.

The rhetoric & focys is purely on so-called “import substitution”.

Despite enjoying a monopoly for 40 years, they’ve still not been able to create enough capacity to meet local demand, achieve 100% localisation incl. parts / engines etc. to save $’s for #Pakistan, or even express a firm interest or come up with a solid plan to produce EV’s here.

Real import substitution will be when the incumbents & new entrants start producing EV’s & save $2 billion a year in oil imports for 🇵🇰.

Till then, one can assume that the objective is to grow the $1 billion cash & short-term investments line items in their balance sheets.

If banks can be penalised by @StateBank_Pak for maintaining low Advances-to-Deposits Ratios, auto co’s should also be penalised for not being able to achieve significantly high (80%+) or complete (100%) localisation despite being present in #Pakistan since the past 30-40 years.

But it’s not easy to implement such measures if Senate standing committees are misguided or lobbied by the auto sector. They ask for lower car prices whilst ignoring the impact on the demand for cars that will eventually lead to a large trade deficit:

tribune.com.pk/story/2305827/…

The auto & auto parts manufacturers lobby has the Federal Industries Minister @KhusroMakhdum fully convinced that #Pakistan will not be able to become an auto-exporting country until local sales hit 500,000 units per annum.

tribune.com.pk/story/2309342/…

There is a lack of understanding in the Cabinet as to how modern transportation is to be managed in an efficient, low-cost, & sustainable manner without burdening 🇵🇰’s external account & environment.

The focus is on fossil-fuel car production as a means of economic growth.

Certain business lobbies & policymakers who are interested in short-term gains are damaging the long-term economic outlook of the country.

PM @ImranKhanPTI is encouraged to take a deeper interest in structural & out-of-the-box solutions to get 🇵🇰’s economy out of this mess.

Until & unless PM-IK involves himself in the day-to-day and minute details / numbers of policy-making — that frequently results in #Pakistan’s economic boom-and-bust cycle — business lobbies, politicians, & bureaucrats will continue to dupe him into believing their lofty stories.

Here you go:

https://twitter.com/INFANTRY28/status/1465887296876683266