Autos,General News

Completely Built-Up Units (CBUs) Banned till June 2022: A Wrong Move

The government has temporarily banned the import of foreign cars from January 2022 to June 2022. 

Governments in Pakistan have always played to the gallery for a variety of reasons. Sometimes they’ve taken populist decisions either to appease the people, foreign lenders (IMF and World Bank, etc) or local pressure groups. However, the government’s latest decision to stop the import of foreign built cars for the next six months, leaves one head-scratching.

Why Ban the Import of CBUs?

The official reason being given for this sudden, knee-jerk move is that the government is spending too much on such imports. The breakdown of such imports given by the government is as follows:

Fiscal Year (FY)No. of Units Imported
20187,424
20193,716
20201,680
202110,513

As can be seen, from FY 2020 to FY 2021, Pakistan imported 525% more CBU, which is giving government officials sleepless nights as it has further widened the Current Account Deficit (CAD). 

What is the Current Account Deficit?

This “fancy” term is often thrown around in the media but not everyone knows what it actually means. In layman’s terms, the Current Account Deficit is the situation where a country imports more than what it exports. CAD is a cause of concern for any government, including the rich countries.

Reasons behind exponential increase in CBU Imports

One of the biggest reasons behind this exponential increase is the apparent misuse of the Automotive Development Policy (2016-2021). 

The government, in order to encourage foreign investment, allowed new car manufacturers to import 100 CBU units per variant for the sake of testing and marketing in the local market. The understanding was that the manufacturers would then manufacture/assemble the remaining units in Pakistan, also known as Completely Knocked Down (CKD). The same facility was extended to the existing auto manufacturers as well. 

What has apparently happened is that some of the auto manufacturers got such a resounding response to some of their models that they sold the CBUs as is and imported more, in violation of the auto policy. Furthermore, this also hindered the intended beneficial effects of the policy like building of the infrastructure, transfer of technical knowhow, job creation, etc. 

This increase in CBU imports has obviously resulted in the further widening of CAD, which was capped at $2.3 billion for the entire FY 2021-22. However, CAD has already crossed the $5 billion mark in the first four months of the current fiscal year. 

The numbers don’t add up: Why this ban can still not be supported

Widening of CAD aside, this is a knee jerk reaction, resulting in a short-term, shortsighted policy that would not narrow the current account deficit for a variety of reasons:

  1. Auto manufacturers and importers will simply wait out this ban and start importing CBUs again when the ban is lifted.
  2. CBU imports aren’t the biggest cause of the present and surging current account deficit since they amount to only 2.5% of total imports.  
  3. CBU imports were $255 million in FY 2021 and around $124 million in 4MFY22. This is like a drop in the ocean. 

In short, it seems the government has once again shot from the hip. It is fashionable to curtail and even completely ban the import of foreign products, since they are almost always the usual suspects. The government’s import bill for CBUs isn’t big enough to entertain a complete ban to stop and correct the imbalance between our imports and exports. 

Let us know if you agree with us that this is a wrong move by the government. 

13 responses to “Completely Built-Up Units (CBUs) Banned till June 2022: A Wrong Move”

  1. Yupp… It’s seems kind of wrong move to restrain the import but kn the other hand not only curtail deficit, even a drop in ocean but also keep it in mind that they went beyond the agreement and just for sake of their bites did not let country’s economy nourish and promote technical support and jobs as well….

  2. Pak is spending billions of dollars for import of non essentials resulting into reduction of supply of dollars, increasing demand & increase of dollar rate. Imports shd only be allowed in yen, rupee or riyals to reduce pressure on dollar reserves

  3. Well done Govt. It should have done earlier. Mg cars imported lot of imported items why govt didn’t notice wat they did

  4. 1 to waisay he Pakistan may gaariyan itni mehngi hain aur itna km haye car culture ab ye bhe ban krdo pata nai kia he chati haye government

  5. Infact Pakistan should impose this ban for good. We need to develop locally produced cars and buses. R&D should be top priority of industry.

  6. Govt is under pressure of auto manufacturers of pakistan , these companies including Honda, Toyota and Suzuki r just making money without quality products. Low quality cars in higher prices. So bad 😞

  7. Governments in Pakistan have always played to the gallery for a variety of reasons. Sometimes they’ve taken populist decisions either to appease the people, foreign lenders (IMF and World Bank, etc) or local pressure groups. However, the government’s latest decision to stop the import of foreign built cars for the next six months, leaves one head-scratching.

  8. This is a Good move to Ban CBU imports as the Auto Manufactures didnt develop their production facilities as promised despite tax relief but instead made it a custome to deliver units to their clients by importing CBUs instead making them inland. Thus no benefits to job market , no investmnets in manufacturing and hence No benefit to Economy.

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