KARACHI: Pakistan’s government is developing a pilot project to import, refurbish and re-export used vehicles and their auto parts in the country based on a similar model adopted by the UAE, an official said on Thursday, stressing the move would boost the country’s exports and create jobs.
The UAE imports used vehicles into a free zone in its Jebel Ali city, where they are refurbished to meet international standards and then re-exported, bypassing local registration. This has enabled the Gulf country to earn valuable foreign exchange and establish itself as a global automotive hub.
Pakistani officials say the pilot project is backed by the Special Investment Facilitation Council (SIFC), a hybrid civil-military government body formed in 2023 to attract international investment in key economic sectors.
“The SIFC has been working on this project since October 2023 and this year facilitated the alignment of regulatory frameworks under Pakistan’s Import Policy Order (IPO) 2022 and Export Facilitation Scheme (EFS) 2021 during the first quarter,” an official of the industries ministry told Arab News.
The official sought anonymity as he was not authorized to speak to the media.
He said the project remained stalled for years because of what he described as “multi-agency regulatory misalignment.” He said this misalignment involved the ministries of industries and production and commerce, as well as the Federal Board of Revenue (FBR) and the Engineering Development Board (EDB).
“The aligned regulatory frameworks are aimed at establishing Pakistan’s first Import-Refurbishment-Export (IRE) model for used vehicles and auto parts,” he said.
The development comes as Prime Minister Shehbaz Sharf attempts to increase Pakistan’s exports to ensure sustainable economic growth. The government’s efforts have not yet yielded fruit, as exports have declined by more than 6 percent to $25.2 billion during the current fiscal year till April. Pakistan recorded exports of $26.9 billion in the same period during the last fiscal year, according to the Pakistan Bureau of Statistics.
The IRE venture is expected to draw an initial investment of as much as $30 million, which the official said could scale to about $300 million and lead to a significant increase in the country’s exports as well as create jobs, without elaborating whether the government or private sector will contribute in this investment.
“The authorities have incorporated the IRE initiative in the draft Auto Policy 2026-31, thus positioning Pakistan for integration into the global automotive refurbishment and re-export value chain,” he said.
Shahzad Ali, a spokesperson to the prime minister’s aide on industries and production Haroon Akhtar Khan, said the new auto policy is being finalized in consultations with industry stakeholders such as the Pakistan Automotive Manufacturers’ Association (PAMA) and the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM).
“I cannot say anything about it now,” Ali said, when asked if the IRE has become part of the new auto policy.
NO SUPPLY FOR DOMESTIC MARKET
Pakistan’s commerce ministry last week secured the Economic Coordination Committee’s (ECC) approval to amend the Import-Cum-Export Scheme of IPO 2022 and EFS 2021.
The ECC approved changes to the relevant laws “to allow temporary import of used vehicles and auto parts for repair, refurbishment and subsequent re-export under a pilot project, with directions for (a) review after one year,” a statement by the Finance Division said last week.
ECC’s nod would enable government to execute the pilot project through company operators that are duly certified by the EDB under a regulated export-oriented framework, the official said.
“The proposed framework draws upon international best practices, including the Dubai’s Jebel Ali refurbishment-export model,” he added.
The used vehicles that Pakistan would import will have a mandate to be re-exported within a prescribed time, the official said. He added that the government would not allow the imported cars to be resold in the domestic market.
“Some (additional) provisions have been introduced to prevent misuse [of the IRE],” the auto parts manufacturer told Arab News. “The scheme requires that 100 percent of the vehicles will be exported, and no quantity can be supplied in the domestic market.”
Auto manufacturers, assemblers and part makers in Pakistan like Toyota, Honda, Suzuki, Hyundai, Kia Motors and Changan Automobile have in the past voiced fears that the move to allow the import of used cars in Pakistan would inflict heavy losses on their businesses and ultimately lead to the closure of their manufacturing plants.
