The Pakistan Automotive Manufacturers Association (PAMA) is calling on the finance ministry to abolish the cash margin requirement for letters of credit (L/Cs) opened for imports of completely knocked down (CKD) vehicles.

Currently, L/Cs for the imported CKD vehicles - from which roadworthy vehicles are assembled in Pakistan - are subject to a 100 per cent cash margin.

Recent requirement

At the end of February, the State Bank of Pakistan imposed a 100 per cent cash margin on certain imported consumer items, including both CKD and fully built motor vehicles.

According to PAMA's director, General Abdul Waheed Khan, the association is supportive of the cash margin requirement for imports of non-essential items mainly in finished form, including fully built vehicles.

Waiver calls

But the imposition of the 100 per cent cash margin on imported CKD vehicles has "shaken the confidence of foreign investors and will also increase the cost of doing business," Khan said to the finance ministry in a letter.

It added that the measure would disadvantage local assemblers who would lose business to sales of imported used cars.

"We therefore, humbly request for waiver of the condition of [the] 100 per cent cash margin on import of CKD vehicles," the letter concluded.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.