Automark magazine june 2014

CONTENTS

Monthly AutoMark International June-2014 China investments greatly increase in Pakistan M. Yousuf Shaikh

12-13

Encouraging vehicles' export EDB proposes amendments to SRO

14

Government favors IMC Fortuner Exclusive Article by Owais Khan

16-17

Budget 2014-2015 silent on bike industry Exclusive Article by Ali Hassan

18-19

Motorcycle assembling , marketing and aftermarket business in Pakistan Exclusive Review by Mohammad Sabir Shaikh

20-21

Motorcycle Market Price List

22

Car/Vehicles Market Price List

23

Prime Minister inaugurates 1320 MW power projects with Chinese cooperation - Update

25

D.S. Motors Launches Unique 70cc motorcycle Model-2014

26

The rise and fall of Dewans The dream and journey begin

by Saad Hasan

32-37

Record edition of Automechanika Dubai signs off on high note

38

Crown Group took an initiative and arranged Pakistan’s 1st Intellectual Property Seminar

39

Run of the River Projects-Long Way to Go Exclusive article on Energy Crisis

by Asif Masood

40-41-43

visit: www.automark.pk

June-2014 edition Volume 07, Issue 6

Pakistan’s premier magazine on automotive, engineering & energy sector

Monthly

AUTOMARK International Editor-in-chief Muhammed Hanif Memon Technical Editor

Advisors

Muhammad Shahzad

Advertising Manager Tahir Siddiqui

Circulation Manager

Imtiaz Rastgar CEO, Rastgar Group & CBI External Expert, Ex-chairman EDB Islamabad

Engineering sector likely to lose local market Experts warned that with a contribution of less than three percent in exports, local engineering sector – mainly comprising small and medium enterprises – is likely to surrender the domestic market to the foreigners as the economy further opens up.

Abdul Khaliq

Graphic Designer Salman Hanif

Web Master Murtaza Hanif

CONTRIBUTING IN THIS ISSUE M. Yousuf Shaikh Ali Hassan M. Owais Khan Asif Masood

Engr. IHT Farooqui GM Plant P.M. Auto Industries Hyderabad Muhammad Yousuf Shaikh Founder & Chairman Pakistan China Motorcycle Industry Council Karachi Syed Mansoor Rizvi Principal Officer M/s. CNH Services (Pvt) Ltd. Karachi Mr. Ashfaq Memon Senior Manager Marketing Memon Motors (Pvt) Ltd. Maker of Super Star Motorcycles Hyderabad

Postal Address Active Communications D-68, Block-9, Clifton,Karachi Tel : 021-32218526 Mobile: 0321-2203815 E-mail: automarkpk@gmail.com website: www.automark.pk

AutoMark Canada Office Managing Editor Mohammad Shahzad S.A.E. D.M.P. 41 Jordana Drive Markham (Toronto) Canada L3S 3N8 Phone: 905-472-8282 Email: automarkcanada@gmail.com

“In fact, the engineering goods exports have yet to touch a billion dollar in a fiscal year,”.

There is a need for better understanding between private sector entrepreneurs and government planners. The government should facilitate local engineering industry by lowering its cost of doing business, providing increased access to funds, building their capacity to connect g lo ba lly and i m pr ov ing thei r international marketing.

The exports of engineering goods have not increased with rise in total exports during the past one decade.

Its share in total exports is still less than three percent. The emerging markets accelerated exports on the strength of engineering sector that accounts for over 60 percent of total global trade.

Exports from Pakistan’s engineering sector are limited to electrical mechanical industry only.

Engineering and construction design services, energy and telecom are also part of the engineering sector. Besides, light engineering (for example fans), home appliances and auto parts should lead the export-led growth. The engineering sector, needs more focused engineering facilitation policies from the government than the textiles. “The government should think beyond textiles to ensure sust ainab le and accel erated expor ts.”

AutoMark REGD: MC-1330 Published every month by M. Hanif Memon

“We consider high interest rates as a small component in the cost of doing business in Pakistan,”. The cost of engineering goods escalates because of the wastages that occur due to unscheduled and frequent electricity breakdowns and unstable energy supplies.

The views expressed by contributing writers and comments do not necessarily reflect the views and policies of the Monthly AutoMark magazine's management

The closure of industries for long periods due to official holidays adds up to the cost, citing an example of four straight holidays announced on the occasion of Eidul Fitre every year.

By Muhammed Yousuf shaikh - Chairman PCMIC

China investments greatly increase in Pakistan however auto sector of Pakistan seeking investments by branded Chinese motorcycle & small Car Manufactures.

The Pakistan China Motorcycle Industry Council encourage the organizers of China International Motorcycle Trade Exhibition (CIMA-Motor), to organise event in Pakistan to promote Chinese auto enterprise.

Auto sector of Pakistan seeking Chinese Direct investment in Manufacturing sector for New design, new tech & Large-Displacement Chinese Motorcycles and small cars and for this government should removed the unnecessary departmental hurdle and amend the new entrant policy as new product policy to allow manufacturing of new products under new entrant policy to the all existing manufacturers which bring about revolution in Pakistan’s exports.

The Chinese government is making all-out efforts to take its economic relations with Pakistan to a new height by aggressively exploring opportunities for investment and joint ventures in various sectors of the economy. Many Chinese investors investing in mining, marble, and energy, chemical and many other industrial sectors but motorcycle manufacturing sector still ig nored by Chinese investors as Yamaha, a Japanese auto company, would invest $ 150 million to establish manufacturing plant of motorcycles in Pakistan.

The Pakistan China Motorcycle Industry Council invite the chief organizer of China International Motorcycle Trade Exhibition (hereafter refers as CIMAMotor), the largest motorcycle ex hi bit ion in As ia t o o rg a n ize

events in the Pakistan in a bid to build skills of entrepreneurs, seek investment, ex c h a n g e t ec h n o lo g i es a n d to display newly developed products in such a big market of Chin ese motorcycle. The Pa kis tan China Motorcycle Industry Council would help strengthen economic relations between businessmen of the two countries. It will also help to add international expo in the portfolio of CIMAmotor as EICMA Italy organize exhibition in many countries.

The Pakistan China Motorcycle Industry Council w ould connect Pakistani entrepreneurs with leading Chinese entrepreneurs and investors through CIMAmotor in Pakistan, who would be able to exchange experiences and discuss business trends, leading to investment in both countries. The promotion of commercial activities was of supreme

importance for achieving economic stability in any country.

Chinese automobile manufacturers avail themselves of investment opportunities in Motorcycle Sector of Pakistan’s auto industry. PCMIC is decided to take an initiative proceeding and PCMIC intends to meet government official to speak about the possibility of Chinese motorcycle manufacturers to exploring the Pakistan Auto industry and taking forward the long term strategic agenda in press reports that highlighted Pakistan must raise its game to compete for Chinese investment in automotive R&D and manufacturing.

In order to make this happen, the Pakistan China Motorcycle Industry Council need an ever more strategic, collaborative relationship with the Government to work with supply chain and other stakeholders to achieve long

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Monthly AutoMark International

term goals. We want the Council to help make that happen.

The Motorcycle Industry Council will be an opportunity for the Government and industry to work together on the long term strategic development of the sector as Pakistan government offer to Chinese automobile manufacturers to a va il t he ms elves o f inv est men t opportunities in Pakistan auto industrial sector.

In recent years, we have witnessed that the industrialization of many Asian countries greatly depen d on the development of their automotive industry consecutively motorcycle industry. Similarly, automotive industry acted as a catalyst in the overall growth of the industry in China, India, Pakistan

a nd K oreas and the cons equent wellbeing of their citizens.

It is indeed heartening th at the motorcycle industry has smiled at Pakistan. Fortunately the last few years have witnessed phenomenal growth in the industry in terms of production and sale. Today the customers have choice to pick from a wide range of motorcycle brands at very competitive prices.

The Pakistan automotive industry has been around for more than 50 years, and today is considered an industry that is highly important to the Pakistan economy. The motorcycle industry employs an estimated 100,000 people.

The motorcycle sector of Pakistan’s auto industry produced over 2 million motorcycles annually, with 10,000 being exported.

Pakistan is a large producer of smalldisplacement motorcycles. The majority of the motorcycles being manufactured in Pakistan are the 70CC motorcycles.

Most of the parts used in the frame, s uspe ns ion , e ngin e e tc are interchangeable, or can be used with minor adjustments.

Pakistan China Motorcycle Industry Co un cil in viting globa l Ch ines e motorcycle manufacturer to produce n ew tech no lo gy mot orcycle a nd a ls o in vi te Ch in es e a u to p art s manufacturers to produce new tech engine all parts, carburetor and Drive Chain in Pakistan which are currently imported.

The engine is a core part of the motorcycle, and the demands for motorcycle engines are highly related to the demands for motorcycles.

Motorcycle engine market has great potential in Pakistan as a result of the b o o m in g m o t o rc y cl e d em a n d s .

Meanwhile, although the auto industry may be a big earner at present Pakistan s till don ’t h ave n ew techn ology motorcycles. This makes it difficult to m o r e in c r ea s e t h e d em a n d o f motorcycle.

Chinese purchase of Pakistan also increased many fold in key areas such as slot growth, streets, railways, mobile phones communication technology,

hydro and heat energy, exploration, electronics, and nuclear energy. A lot of China organizations are working in Pakistan in oil and gas , IT and telecommunications, energy creation, technological innovation, vehicles, facilities and exploration market but the investment by Chinese motorcycle manufactures is negligible due to lack o f in tera ction betw een Chin es e motorcycle and parts manufacturers and Pakistani motorcycle assemblers. Both nations have free business contracts which should be effectively researched for common benefits of both helpful nations. Community as well personal market Pak-China combined tasks are need of time due to immense investment prospective in Pakistan.

T oday a utomot ive techn ology is changing quickly due to environmental concerns and the rising prices of fossil fuels. This has led auto-makers around the world to develop vehicles that have improved fuel economy and emis sion levels. M any have also introduced hybrid and electric vehicles, while developing fuel-cell vehicles for the future that would emit nothing but water vapour.

For the Chinese automobile industrial development in Pakistan there are two ideas, working on which can bring prosperity. One, that when Japan was moving from intermediate technology to high-tech, Japan relocated their old industry moved it to South Korea, to Malaysia and other countries. That stage has now been reached for China. China can focus on high-tech industries and relocate the intermediate level industry to Pakistan and it will bring coprosperity. Secondly, if there are some new industrial units which China wants to set up, these can set up these in Pakistan, as joint ventures and w ith a buy-back co ndition . Th e details can be worked out between the parties concerned. The other idea w hich is writ ten in t he already agreed documents is to build China specific Special Development Zones.

Pakistan can allocate certain land and Chinese can establish industrial units there.......

Muhammad Yousuf Shaikh, An Auto Industry of the motorcycle trade & industry trends from Consultant, Motorcycle Industry Expert, Pakistan & China.

Motorcycle Designer, China Sourcing Expert, The Chairman PCMIC working with motorcycle Serial Entrepreneur and the Founder & trade & industry for over two decades, Yousuf Chairman of Pakistan China Motorcycle believe that new projects could help motorcycle Industry Council (PCMIC), offers his analysis industry www.automark.pk | June-2014 | Page 13

Automotive Sector - Update

Monthly AutoMark International

Encouraging vehicles' export EDB proposes amendments to SRO Engineering Development Board (EDB) has proposed comprehensive amendments in the SRO 655(I)/2006 issued by the Federal Board of Revenue (FBR) to encourage export of vehicles in 2014-15. Sources said on last month that the EDB and FBR have discussed different proposals related to auto sector. According to the EDB budget proposals, export of vehicles is facilitated under SRO 656(1)/2006, (Sr. No. 13 of the Table) with certain conditions.

Auto-parts manufacturers (vendors), operating in the concessionary regime under SRO 655(1)/2006 have also been exporting parts manufactured locally to different countries. However, SRO 655(1)/2006 did not specifically provide for ex port o f a ut om otiv e p art s manufactured by the vendors operating under the said SRO, as highlighted by Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM).

It is proposed that on the same analogy as provided under SRO 656(1)/2006, a s im ilar en t ry m ay be cr eat ed / incorporated in the Table under SRO 655(1)/2006 to encourage/facilitate export of locally made automotive parts, subject to similar conditions/limitations, as specified under SRO 656(1)/2006.

Zero-percent duty has been proposed on the import of raw materials, subcom pon en ts, c ompo nen ts &s ubassemblies for the manufacture of parts for which IOR has duly been approved

by EDB. Debiting of quota of inputs would be allowed to the extent of number of their exported units subject to the following conditions. No duty drawback was claimed at the time of export. The imported inputs related to the same unit as was exported and the importer made a declaration in the bill of entry or goods declaration at the time of import that he intended to avail this

facility in lieu of exported units and produced the following evidence of export, including a copy of the bill of export or goods declaration bearing examination report of customs; bill of l a d i n g , a n d fo re i g n e x c h a n g e repatriation certificate.

In 2006, deletion programme for the auto manufacturers and vendors was replaced by Tariff Based System (TBS).

More than 3 50 tariff lines were introduced in Pakistan Customs Tariff.

To replace deletion programme, three SROs were introduced which included SRO 655(1)/2006 for vendors, SRO 656(1)/2006 for OEMs and SRO 693(1)/2006 (Additional Custom Duty on auto parts. The FBR has calculated a loss of customs duty due to exemptions in 2012-13 was Rs12 billion due to SRO 655 and Rs22 billion loss as a result of SRO 656.

The FBR said that the recommendation of Committee on Auto Development Policy, headed by Minister for Water & Power, to be considered and special tariff rates to be applied. The EDB recommended that the n ew Auto Development Policy was in fin al stages and w ould be n otified in the Budget 2014-15. Tariffs to be decided, under the new policy, will accordingly be incorporated in the aforesaid SROs. EDB said that during Budget 2013-14, minimum in-house facilities, specified at Annexure-A to SRO 656(1)/2006 required for assembly/manufacture of automotive vehicles were amended vide SRO 496(1)/2013 to make these vehicle specific which earlier were generalised and common to all type of vehicles.

While amending SRO, only in case of HCVs, "ED Paint Facility for Cabins" has been made mandatory. This has disturbed the HCVs manufacturers operating on low volumes and have requested for revising this condition.

Other leading players have opposed such revision. It was decided in the AIDC meeting to revise the condition as under

an d make the ED Paint Facility mandatory for all assemblers after 5yea rs , E DB ad ded . Un d er SRO 656(1)/2006 rate of duty on import of tyres for the vehicles falling under heading 87.01 (other than Agricultural Tractors) is 20% whereas under first schedule these tyres are importable @ five per cent under PCT heading 4011.2090.

With a view to removing an anomalous situation it has been proposed to amend SRO 656(1)/2006 to correct the duty on vehicles (other than Agricultural tractors) to five from existing 20 per cent. During Budget 2013-14, on the recommendations of EDB New PCT headings for certain vehicles were created under Cus toms Tariff to enc ourage local assem bly / manufacturing of these vehicles.

However, entries related to local components of these vehicles were not incorporated under Customs Tariff as well as SRO 693(I)/2006, which have created anomalous situation for the a ss em blers a s well a s p art s manufacturers. The vehicles included HS Code 8703.2195 - - -Mini Vans (CBU); HS Code 8703.2240 - - Mini Vans (CBU); HS Code 8703.2323 - - - Sports utility vehicles (SUVs 4x4); HS Code 8704.3130 - - - Mini Cargo Van s (CBU) and HS Code 8704.

3150 - - - 3-Wheeler Cargo Loader (CBU).

Due to n on-availability of these components under SRO 693(1)/2006 (components carrying additional duty), OEMs of the said vehicles could import these components at concessionary rate of duty and would not only result in revenue losses, but would also be d etrim ental t o parts make rs manufacturing these components locally for similar vehicles. EDB recommended incorporating localised components in respect of aforesaid vehicles under the Pakistan Customs Tariff as well as in Appendix-I of SRO 693(1)/2006.

Courtesy: Bussiness Recorder

www.automark.pk | June-2014 | Page 14

The Brand Foundation of Pakistan has recognized Crown Group for Brand of the year award-2013 Crown Group has won the Brand of the year and Star Brand award-2013 for its achievements in Pakistan’s automotive industry and auto parts manufacturing category. It is an incredible achievement because among the 1,000 popular and trusted brands of Pakistan, only Crown Group has selected for these prestigious aw ards . The aw ard d is tribution ceremony has been arranged by Brands Foundation of Pakistan at Marriott Hotel, Karachi.

In ceremony, on behalf of Mr. Farhan Hanif, CEO of Crown Group, Chief Guest Mr. Chaudhry Muhammad Sarwar, Governor Punjab has presented his award to Mr. Kashif Qaseem, Director Crown Group. Moreover, Mr. Kashif Qaseem, has also received the Star

Brand award with Certificate of Achievements Star Brands of Pakistan, in the category of Motorcycle Spare p a rt s w h i le o n behalf of Mr. Kashif Qaseem , Mr. Nadeem Siddiqui (Co or din a to r t o CEO - Crown Group). The Crown Group has selected for these categories f o r t h e representation of its qua lit y br an d “CRLF” globally as well a s builds a distinct brand identity of Pakistan.

Production of India's Ambassador car suspended Hindustan Motors said it had suspended work at its plant outside the city of Kolkata, blaming weak demand and financing problems.

Modelled on the Morris Oxford, the design of the Ambassador has changed little since it first went into production in 1957.

It was once the only car driven by politicians and government officials.

But the company only sold 2,200 Ambassadors in the financial year which ended in March 2014.

In a statement on Saturday, Hindustan M otors blamed the shutdown on "worsening conditions at its Uttarpara p l a n t w h ic h i n c lu d e v er y lo w productivity, growing indiscipline, critical shortage of funds, lack of demand for its core product the Ambassador and large accumulation of liabilities".

"The suspension of work will enable the company in restricting mounting l ia bi li t i es a n d r es t ru c t u r e i t s

organisation and finances and bring in a situation conducive to reopening of the plant," the company said in its statement.

Analysts are not optimistic about the car's future.

"In the present shape I don't think the Ambassador has got any chances of

revival," said Deepesh Rathore from res earch firm Emergin g Markets Automotive Advisors.

"It doesn't make any business sense," he said.

There are 33,000 Ambassador taxis in Kolkata alone, but the car is being superseded by more modern vehicles....

www.automark.pk | June-2014 | Page 15

Exclusive Article by Owais Khan

Budget 2014-2015

Government favors IMC Fortuner, DISCOURAGES USED CAR IMPORTS

The

Budget 2014-2015 announced

by Finance Minister Mohammad Ishaq Dar on June 3 has brought a number of relief for the powerful lobby of car assemblers. Some five decisions favoring the local auto industry in the Budget was warmly welcomed by the Pakistan Automotive Manufacturers Association (PAMA).

PAMA’s proposal to abolish 10 per cent Federal Excise Duty (FED) on vehicles exceeding 1,800cc above was accepted thus benefiting only Toyota Fortuner, being assembled by Indus Motor Company (IMC). This was one of the most surprising decisions taken on the s tron g reques t of PAM A by the government thus showing full support to the manufacturer of Toyota Fortuner and leaving consumers to continue paying high prices for 800-1,300cc cars.

Taking this decision gives an impression that Toyota Fortuner will only prove a revenue driver of the national kitty as its depressed sales since its launch in February 2013 had badly hit the revenue targets of the government. The decision also wrongly suggests that it has been one of the most sought after and high demanding vehicles of the country whose sale fell to a critical level owing

to its high price because of FED imposition.

O n one hand the government is undertaking austerity measures to cut expenditure, lavish expending and discouraging imports of luxurious items.

On the other hand, the decision to shower blessing on one assembler and its costly Fortuner is contrary to the g o v er n m en t’ s a bo v e m ea s u r es .

Market people smell some kind of extra fav or g iven to t he I MC by the government. Prior to the Budget some officials and the ministers of the government without quoting their names and with the help of print media people ran a syndicate story regarding drop in import duties on used car vehicles aimed at facilitating low income group buyers. The story about import duty fall was the main lead story of many newspapers.

The pre-budget breaking story, however, failed to become a practical reality thus causing disappointment among the used car dealers and many people who love quality imported cars.

These types of targeted decisions for one assembler suggest that the government is least bothered about the low and middle income group buyers and instead the PML-N government supports the

powerful rich and elite class who can afford over Rs five million Fortuner.

Time will tell how much revenue Fortuner will be able to yield for the government in view of improvement in sales. This is certainly not a popular decision to be praised which has ignored 900-1,300cc buyers of locally assembled cars.

Other measures taken in the Budget are: fixed amount of duty and taxes on used vehicles revised upward by 10 per cent approximately thus adding salt on the wounds of used car dealers. Advance motor vehicle tax has been increased to 50 from 33 per cent for tax filers and to 300 per cent from 33 per cent on non tax filers.

Th e governm en t ha s an no unced imposition of advance income tax on transfer of private motor vehicle for a five year period, which will be reduced by 10 per cent in each of subsequent years.

Hybrid Electric Vehicle (HEV) up to 1,800cc granted 50 per cent exemption of duty and taxes and above 1,800cc granted 25 per cent exemption of duty and taxes. Earlier HEV up to 1,200cc were 100 per cent exempted.

An analyst at Topline Securities believes that upward revision of fixed amounts of duty and taxes on used vehicles by 10 per cent may increase volumetric sales of local assemblers.

The decision regarding removal of 10 per cent FED on vehicles exceeding 1,800cc may prove positive for Indus Motor Company’s Fortuner resulting in increase in sales of the SUV. He said rationalisation of duties and taxes on imported hybrid electric vehicles will have no major impact on the auto sector while increase in advance motor vehicles tax will put extra burden on the buyers which may slightly hit

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Monthly AutoMark International

It was most surprising that 10 per cent FED on above 1,800cc vehicles which was imposed on both local assembled and imported vehicles simultaneously has been withdrawn on local assembled vehicles only. For the sake of level playing field it should be withdrawn from the both categories i.e. local assembled and imported vehicles. volumes.

The budgetary measures draw mixed reaction from the auto sector stakeholders as PAMA hails the decisions while used car dealers have shown their strong criticism regarding all out favor to an assembler of Toyota Fortuner.

PAMA complimented Mohammad Ishaq Dar for presenting a fair and equitable national budget 2014-15 despite the many challenges facing the economy.

The Association commended the efforts of Finance Minister and the Chairman FBR for enlarging the tax base and providing a level playing field as these initiatives are likely to spur economic growth.

PAMA welcomed the Finance Minister’s decision of abolishing the FED on vehicles above 1800cc.

Both these decisions will boost sales and help increase the revenue on account of higher volume.

The Association appreciated recognition on part of the government to revise the amount of duties on imported used cars fixed in 2005, though in our view the extent of this hike is nominal as compared to the increase in price of cars on account of changes in US Dollar and Japanese Yen exchange rate parity.

While this measure will help boost production volume of local cars and capacity utilization of the plants, PAMA urged that this duty structure on used imported cars is reviewed again and duties increased equitably.

Our other concern point is the sales tax paid on services and indirect material or supplies not being allowed against taxable goods. PAMA hoped this anomaly is addressed so as not to increase the cost of doing business of our members w ho are all honest taxpayers.

PAMA was of the view that the positive taxation measures proposed in the budget will result in overall enhance in volume of domestic production in the a utom otive ind ustry, lea din g to increased employment, additional

revenue to the government and in general lift the economic activity in the country.

On the contrary, Chairman All Pakistan Motor Dealers Association (APMDA), H.M. Shahzad said people from all walks of life awaited the budget to hear in which direction their business was going to be affected and then plan for the year.

When we attended the meeting called

by Finance Minister on May 24, used car dealers were given to understand that there would be something favorable on import of used car in the budget.

However, it was a big disappointment for the o verseas Pakist anis a nd people in the business of used cars import that they were not given any relief.

It was most surprising that 10 per cent FED on above 1,800cc vehicles which was imposed on both local assembled and imported vehicles simultaneously has been withdrawn on local assembled vehicles only. For the sake of level playing field it should be withdrawn from the both categories i.e. local assembled and imported vehicles.

Shahzad said the reduction of duty from 30 to 25 per cent will also benefit only the local assemblers. Moreover, as per news report duty on used cars up to 1,800cc has been proposed for increase by 10 per cent.

He said the Association has also intimated in its proposals that the taxes are on higher side due to increase on exchange rates.

He requested the Finance Minister to give time to hear our case and give your favorable decision in the light of justice and fair play.

He said the government had literally catered to the rich and elite class vehicle lovers by reducing the 10 per cent FED

o n on ly on e SUV vehicle bein g assembled by the IMC. Fortuner, however, proved unfortunate as its sales continued to slide due to its very high prices. It was launched at the price of Rs 5.2 million in February 2013 and since then its price was swelled to Rs 5.742 million despite 11 per cent rupee’s appreciation against the dollar from December 2013 till May 2014.

In 2012-2013 production of Fortuner stood at 847 and 812 units while in JulyApril 2013-2014, production and sales registered only 352 and 358 units respectively.

PAMA in its pre-budget proposal 20142015 presented a strong case of Fortuner saying that FED levy had put the country’s first SUV manufacturing project in danger as FED has hit the sales.

M a n y p eo p le bel iev e t h a t t h e government is least concerned to take any measures on small cars that could bring down prices of decades old Suzuki Mehran and Suzuki Cultus.

Tractors: Contrary to Toyota Fortuner episode, the government made a very good decision by reversing the GST on tractors to 10 from 17 per cent in the Budget 2014-2015 which bodes well for farmers, growers, agriculture sector, assemblers and vendors. The government had raised the GST to 17 from 10 from January 2014 that played havoc with the sales of farm machinery besides resulting in suspension and slowdown of production, pile up of unsold stocks at plant and countrywide dealership networks and workers’ lay off at assembling and vending units.

The cut in GST to 10 per cent has injected a new life in the tractor and vending industries as assemblers anticipateincrease in sales by 30-40 per cent in new fiscal year besides opening new job avenues at assemblers and vendors units.

This decision has brought affordability for the farmers and growers to purchase tractors at low price as assemblers plan to cut prices by up to Rs 90,000.

www.automark.pk | June-2014 | Page 17

Exclusive Article by Ali Hassan

Budget 2014-2015 silent on bike industry Maintaining the past tradition, the EDB took the pre-budget proposals this year but after budget announcement, the budget came out with a different direction which means that the pre-budget meetings by the EDB, FPCCI and Chambers were just a routine exercise.

L

ike past practice, the new Budget 2014-2015 remained silent on the two wheeler industry relating to any changes in duties and taxes.

H o we ver , t he fin a n c e m in is t er Mohammad Ishaq Dar announced elimination of SROs in the next three years which caused anxiety among the two wheeler industry.

After the approval of finance bill 2014-2015 by the national assembly, the new shape of SROs 656/2006, SRO 693/2006 and SRO 656/2006 will arrive by first week of July 2014.

Chairman Association of Pakistan M oto rcycle Ass emblers (APM A) Mohammad Sabir Shaikh said the bike industry was highly hopeful from th e P ML -N g overn m ent t ha t it w ould brin g dow n the c ust oms duty besides in troducing unified customs duty coupled with reduction in sales tax by one to two per cent.

However, nothing has been done in the new budget.

He hoped that finance minister would take steps for the bike industry on the above issues.

H e ex press ed co ncern ov er t he persistent delay in Auto Industry Policy

(AIP) whose exercise to finalize the policy between the industry and the government got underway from October 2013 and ended in May 2014. But the budgetary speech of finance minister had not touched the AIP. He urged the government to settle the dust by announcing the AIP either in the Trade Policy or separately so that the industries could make further investment, which they put on hold due to absence of any future guidelines and policy.

He asked the government to make the valuation ruling as a part of the AIP because valuation ruling is just like the SRO. Engineering Development Board (EDB), in continuation to previous practice, has initiated competitiveness and efficiency improvement exercise for the Fiscal Year 2014-15, as per prescribed terms of references (TORs) / guiding principles to redress the tariff and other related issu es, w h ic h ar e h ind ering competitiveness of the industry and their entry into global market.

APMA chief was of the view that perhaps the EDB was unaware that any PTA or

FTA exist in the auto sector with any other countries. The EDB should stop misguiding the government on PTAs and FTAs on auto sector as APMA believes that PTAs and FTAs would not boost the local industry.

The EDB in its letter issued before the Budget 2014-2015 announcement to auto sector said in addition, it is also to highlight that Federal Board of Revenue (FBR) has under-taken an extensive exercise for simplification / revision/ phasing out of concessionary SROs including SRO related to automotive sector with a view to analyze the impact of concessionary regime on industrial growth, export competitiveness, import substitution, further localization of parts and more importantly passing on the benefit of concessions to the end consumers.

Sabir said FBR must understand that the government has to phase out auto sector SROs in the next two three months. Otherwise, two to three more years would again go in waste in understanding the issue.

The government wants direct impact of taxation measures to reach the

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Monthly AutoMark International

The government has to give its due attention to the two wheeler segment especially and efforts should be made to pressurize the leading assemblers to bring a change in the decades old 70cc models. Policy hurdles, if removed, would encourage assemblers to introduce new models in the country. end users. However, it is only possible when the g overnment introduces a uniform policy for both large scale and SMEs. There is a need to remove hurdles of IORC besides bringing un iform ity in valuat io n sys tem, removing the hurdles like production certificates and importable lists by the EDB etc. This will help the industries to introduce new models at affordable prices, he said.

Maintaining the past tradition, the EDB took the pre-budget proposals this year but after budget an nouncement, the budget came out with a different direction w hich m ea ns that the pre-budget meetings by the EDB, FPCCI and Chambers were just a routine exercise.

are their members is not enough as there is a need to induct more experts of their field including motorcycle industry.

The government has to give its due attention to the two wheeler segment especially and efforts should be made to pressurize the leading assemblers to bring a change in the decades old 70cc models. Policy hurdles, if removed, would encourage assemblers to introduce new models in the country.

Like past practice, Customs issued valuation ruling again loaded with confusion on same parts imported from China by the commercial importers and bike assemblers (OEMs). APMA chief said Chinese parts are of same quality

He said all the policies and SROs made in the last 15 years were not in the interest of the country, not revenueoriented and were basically following an anti localization policy and also again st the in dustrialization and employment.

The governmen t should focus on two types of duties – duty on spare p a r t s ( f o r O E M s , c o m m e r c ia l market, assemblies, sub assemblies, components and sub components) and secondly on completely built up units (CBU’s).

APMA chief strongly demanded that issuance of various permissions through the EDB such as importable lists, production certificates and IORC should be done away in coming auto industry policy.

All over the country the dealers of auto sector and parts should be registered in the sales tax net.

He said the committees formed by the finance minister under FBR in which FPCCI and some other chambers

either imported by the commercial importers or by the OEMs. But Suzuki and Honda are Japanese branded bikes and if these assemblers import parts from Chin a then it mean s they import genuine parts. Around 104 other approved assemblers also import parts from China (almost same as being imported by the commercial importers).

The Valuation Department should clearly mention that the commercial importers, Chinese domestic brands and Pakistani local brands are same quality and standards. But Honda, Suzuki and upcoming Yamaha are genuine brands even their parts are imported from China, he said.

Valuation is purely the issue of bike assemblers who are domestically produced by the local assemblers and all of them are APMA active members.

The original purchase price of the

importers from China is much lower than prices mentioned in the ruling of 42 items. The valuation ruling issued on March 31 is on very higher side. If the government does not lower the values of these items then the smuggling will continue to thrive.

The government should realize that the main stakeholders are motorcycle assemblers of Pakistani and Chinese domestic brands who are producing more than one million units of two wheelers annually for the last many years.

The 104 approved units of two wheelers are prod ucing Pakis tan i bra nd s in co l la b or a t io n w it h C h in es e assemblers.

Sabir said smells the rate in delay in announcement of auto industry policy as it seems that the policy is being made to facilitate only three Japanese car and bike assemblers.

Does the new auto policy really care about country’s revenue, industries, job opportunities, genuine localization etc., questioned Sabir.

www.automark.pk | Jun-2014 | Page 19

Exclusive Review by Mohammad Sabir Shaikh

Motorcycle assembling , marketing and aftermarket business in Pakistan License: What is motorcycle manufacturing license in Pakistan?

Establishment of factory for motorcycle assembly, engine assembly, painting and testing of final product in one designated place.

A) Approval from Ministry of Industries and Production through its related department – Engineering Development Board (EDB) -- for starting production activities. (http://www.engineeringpakistan.com/) B) Getting a license from Pakistan Standards and Quality Control Authority (PSQCA) for the use of the Pakistan Standard Mark. (http://www.psqca.com.pk/) C) Registration of trade mark/brand name of the products with the IPO/trade market registry, government of Pakistan. (http://www.ipo.gov.pk/) D) Before getting licenses A, B, and C, one needs to get registration with Federal Board of Revenue (FBR) for sales tax and income tax as a manufacturer, importer and distributor/retailer. And if the manufacturer is interested to export, registration is also required for exporter. (http://www.fbr.gov.pk/)

M. Sabir Shaikh

After meeting all the above formalities, the manufacturer has to approach the pr ov in c ia l ex c is e a n d t a xa t io n departments for registration of their manufactured products.

Imports: For importing bike in CBU condition, any importer or trader or individual can import by paying 65 per cent customs duty and other levies.

If an assembler wants to imports parts for bike assembling then he has to follow some SROs like SRO 656/ 2006 and SRO 693/ 2006.

If the same assembler tries to import parts on highly discounted rates of duty then he has to follow SRO 655/2006.

Any importer/assembler has to make direct imports fo r the ass embly /manufacture of the said vehicle in compliance to the conditions of the SRO 656/2006. Regarding this, the EDB is responsible for monitoring the imports and production of the assemblers on regular basis. If assembler violates the conditions of SRO the EDB can cancel or suspend the production certificate and importable quota lists.

Marketing:

Pakistan has been producing around 1.6 million bikes per annum for the last five years in which 80 per cent are 70cc bike like Honda CDI 70cc.

The remaining 20 per cent is 100cc, 125cc and 150cc.

Because of the fact that 70cc bikes hold the m ajo r ma rk et s ha re a s tiff co m p e ti t io n ex i s t s a m o n g t h e assemblers. Due to intense competition the profit margin of assemblers has almost become negligible. To get profit people try to cover up high cost of production and impact of exchange rate parity by indulging themselves in under inv oicin g , m is d eclara tio n u sin g commercial channels of imports, etc. In some cases even they evade sales tax.

To improve the marketing and profit of assemblers, they have to make efforts country wide to register their parts and bike sale dealers into the sales tax net.

A brand new concept has to be introduced in Pakistan to educate bike dealers for sales, service, spare parts, aftermarket and guideline to the consumers for getting bike through financing schemes at one shop.

If we implement the organized system at the dealership network nationwide – it will improve the quality of the product and profit will also increase.

Currently, dealers all over the country have become bankrupt followed by circular debt between assemblers, vendors and dealers. As a result, they are doing their business in deep crisis and rising competition.

A decade back, countrywide bike dealers used to belong from business families but in the last few years a mushroom growth of bike mechanics and people retired from public and private sector organizations have become authorized bike dealers. Due to their lack of experience and market expertise, the marketing system of bike selling has collapsed.

Japanese excel in marketing techniques especially Pak Suzuki Motor Company Limited which can be of great help for the new authorized dealers of Chinese bike assemblers.

Chinese assemblers must realize that instead of boosting their production they must improve their quality of bikes and

www.automark.pk | June-2014 | Page 20

Monthly AutoMark International

It has been in practice for many years that Chinese bike dealers leave the customers on their own instead of ensuring frequent service and maintenance of bikes. Chinese bike dealers should introduce the culture of 3S and 5S showrooms by providing sales, service and spare parts facility at one place.

ensure after market facilities to the bike buyers. By doing this, their profit bus in es s will impro ve a n d w ill revenues through low production volumes instead of higher volumes.

It has been in practice for many years that Chinese bike dealers leave the customers on their own instead of en s u ri n g fr equ e n t s er vi ce a n d maintenance of bikes. Chinese bike dealers should introduce the culture of 3S and 5S showrooms by providing sales, service and spare parts facility at one place.

Heavy Bikes: In all over Pakistan, rich and elite class have become fond of heavy bikes and after every five to 10 years n ew generations make their entry in this category.

Import of used bikes have shown tremendous growth in the last two to three years in which 250-1,300cc bikes are bein g im ported of bra nd ed companies like Honda, Yamaha, Suzuki, Kawasaki and some European and American brands.

Rising interest of young generations towards heavy used bikes propelled imports thus pushing the two leading bike assemblers to introduce brand new bikes to cash the situation.

Figures released by Pakistan Bureau of Statistics (PBS) showed 374 per cent jump in bike imports to $4.6 million in July-April 2013-2014 as compared to $971,000 in same period last fiscal year.

The trend of imports of heavy bikes has been showing positive growth as imports in 2012-2013 jumped by 90 per cent o $1.5 million as compared to $785,000 in 2011-2012.

Atlas Honda introduced brand new imported 150cc and 500cc bikes at Rs660,000 and Rs1.25m respectively.

In total imports the share of used bikes is higher than the brand new heavy bikes. A Japanese bike assembler had sold over 60 un its of heavy bikes in the country in the last eight months. good revenue from the import of heavy bikes and even in some cases cumulative taxes and duties cross Rs one million per bike.

As s e m ble rs a re n o t im po r t in g these heavy bikes for any future local assembly in Pakistan due to their limited customers and exorbitant prices.

Pak Suzuki Motor Company’s imported Inazuma 250cc, Intruder 800cc and Hayabusa 1,300cc bikes, which were priced Rs675,000, Rs1.5m and Rs2.4m respectively in four to five months back, now carry price tags of Rs 725,000, Rs 1.6 million and Rs 2.5 million. Out of t wo lead in g a ss emblers , on e of them h ad also ra ised prices despite rupee appreciation against the dollar.

The heavy bikes are more popular in some big cities of Punjab as compared to Karachi where sale volume is slow.

There is no harm in cutting import duties on heavy bikes as these are not currently being assembled and there is remote possibility of assembling of these in short and long term due to their very heavy prices. The government should consider reducing import duties on heavy bikes.

Due to rising number of imports, many people have opened service outlets in Punjab and in Karachi dealing only in heavy bikes.

Arriving under various government’s schemes, the prices of bikes of two to three years old start from Rs 500,000 to Rs 2.5 to Rs three million which is certainly not a problem for young lot of elite class of the country.

www.automark.pk | June-2014 | Page 21

MADE IN PAKISTAN MOTORCYCLES RETAIL PRICE LIST

70cc Motorcycle Sr./ No. 1.

2.

3.

4.

5.

6.

7.

8.

Product & Model Name Hero RF-70 Hero RF-70 Plus Honda CD-70 Honda CD Dream Hi-Speed SR-70 Ravi Premium R1 Road Prince bullet Road Prince 70cc

Retail Price Rs. 46,000/= Rs. 47,000/= Rs. 68,500/= Rs. 72,500/= Rs. 43,000/= Rs. 46,950/= Rs. 45,000/= Rs. 39,000/=

125cc Motorcycle No. Brand & Model Name 1. Super Star SS-125 2. Super Star SS-125 DLX 3. Honda CG-125 std Euro II 4. Honda CG-125 DX 5. Ravi Piaggio Storm 125 6. YD Sports 125cc

Retail Price Rs. 59,000/= Rs. 67,000/= Rs. 99,000/= Rs. 119,000/= Rs. 112,000/= Rs. 10,6000/=

Suzuki Motorcycle (Heavy Bikes) Sr./ No. 1.

2.

3.

4.

Product & Model Name Inazuma GW 250 Intruder M800 Hayasuba GSX1300R Bandit GSF650SA

Retail Price Rs. 725,000/= Rs. 1,600,000/= Rs. 2,500,000/= Rs. 1,500,000/=

Sr./ No. 9.

10.

11.

12.

13.

14.

15.

Product & Model Name Ravi Hamsafar-70 Sitara GT-70 Super Star SS-70 Super Power SP-70 Super Power Delux Unique UD-70 Bionic AS-70

Retail Price Rs. 45,450/= Rs. 40,000/= Rs. 44,000/= Rs. 44,700/= Rs. 48,200/= Rs. 44,000/= Rs. 44,500/=

100cc Motorcycle No. 1.

2.

3.

4.

5.

Brand &Model Name Honda Pridor Super Star SS-100 Super Power SP-100 Road Price Jackpot 110cc Yamaha Junoon 100cc

Retail Price Rs. 84,000/= Rs. 57,000/= Rs. 60,000/= Rs. 44,000/= Rs. 79,300/=

Suzuki Motorcycle Sr./ Product & No. Model Name 1. SD110 Sprinter ECO 2. SD110 Sprinter ECO Del 3. SD110 Raider 4. GS-150 Euro-II 5. GD 110 Euro-II

Retail Price Rs. 88,400/= Rs. 83,400/= Rs. 96,000/= Rs. 119,500/= Rs. 109,900/=

www.automark.pk Price update: June-2014 www.automark.pk | June-2014 | Page 22

Car / Light Vehicle Price List www.automark.pk SUZUKI Model Model WAGON-R VX 1000cc Euro II WAGON-R VXR 1000cc Euro II WAGON-R VXL 1000cc Euro II MEHRAN VX 800cc Euro II MEHRAN VXR 800cc Euro II SUZUKI SWIFT 1.3L DX SUZUKI SWIFT 1.3L DLX SUZUKI SWIFT 1.3L Automatic CULTUS EFI VXR Euro II LIANA 1.3L RXI MT PETROL LIANA 1.3L RXI MT (CNG) BOLAN VAN VX 800cc E2 BOLAN VAN VX 800ccm (M)E2 SUZUKI VAN CARGO Euro II RAVI PICK-UP STD 800cc E2 RAVI PICK-UP STD 800cc (M) E2 APV 1.5L GLX MT (Petrol)

HONDA Price Price Rs. 899,000 Rs. 1049,000 Rs. 1089,000 Rs. 620,000 Rs. 678,000 Rs. 1,221,000 Rs. 1,282,000 Rs. 1,418,000 Rs. 1,034,000 Rs. 1,365,000 Rs. 1,444,000 Rs. 695,000 Rs. 7000,000 Rs. 666,000 Rs. 637,000 Rs. 642,000 Rs. 2,418,000

Model Honda Aspire Manual Honda Aspire Prosmatec Honda City Manual 1300cc Honda City Prosmatec 1300cc HYUNDAI Honda Civic VTI Manual 1800cc Honda Civic VTI Manual SR (Oriel) Honda Civic VTI Prosmatec 1800cc Honda Civic VTI Prosmatec SR (Oriel) Honda CR-Z Sports Hybird Manual Honda CR-Z Sports Hybird Automatic

TOYOTA COROLLA Model XLI VVT-i 1.3 M/T 1299cc Petrol XLI VVT-i LE 1.3 M/T 1299cc Petrol GLI VVT-i 1.3 M/T 1299cc Petrol GLI VVT-i 1299cc LE 2.OD STD 2000cc ALTIS 1.6L Dual VVT-i M/T ALTIS 1.6L Dual VVT-i MT SUNROOF ALTIS 1.6L Dual VVT-i AT ALTIS 1.6L Dual VVT-i AT SUNROOF Toyota Avanza (Up Specfication) Hiace Commuter STD 3.0L Diesel Hiace Commuter STD 2.7L - GASLOLINE Sportivo, 1600cc M/T Sportivo, 1600cc A/T Fortuner 2700cc petrol

PM Auto Industries (Pvt) Ltd. Model Faw Truck Super 3 Ton (3200cc) Faw Truck Prime 2 Ton (2600cc)

Price Rs. 1,260,000 Rs. 1,034,000

Sokon - Mini Truck (1050cc) DFSK - Mini Truck 2700MM Deck DFSK - Mini Truck 2500MM Deck DFSK - Mini Truck (Double Cabin-AC) 1400MM Deck Introductory Price DFSK - Mini Truck (Double Cabin Non-AC) 1400MM Deck Introductory Price

Rs. 763,000 Rs. 731,000 Rs. 950,000 Rs. 900,000

Sokon - MPV 11 Seater (1300cc) DFSK - MPV 11 Seater (Without AC) Rs. 1,034,000 Rs. 1,084,000 11 Seater (Dual AC)

DAIHATSU

11 Seater (Dual AC-Power Steering) 11 Seater (Dual AC - Power Price Model Steering +Power Window)

Dual AC - Power Steering+ Power Window Sokon - Cargo Van 1050cc DFSK

Rs. 938,000 Rs. 840,000 Rs. 977,000 Rs. 740,000 Rs. 685,000

Tractor Euro Ford 85 HP Tractor Euro Ford 60 HP Tractor Euro Ford 50 HP Price List - Ex Factory (Hyderabad)

Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Price 1,542,500 1,557,500 1,682,500 1,712,500 1,855,800 1,912,500 2,007,500 2,012,500 2,102,500 2,575,000 3,433,000 3,433,500 2,109,000 2,217,500 5,748,500

Hilux Pickup 4x2 sc Model

Price

Brand New Toyota Hilux Pickup, 4x2, 2500cc Single Cabin, White only, Hilux STD

Rs. 1,134,000 Rs. 1,145,000

Sokon - MPV 07 Seater (1050cc) DFSK Without AC Rs. 817,000 Rs. 887,000 With Dual AC Dual AC - Power Steering Rs. 928,000

Price Rs. 1,672,000 Rs. 1,814,000 Rs. 1,522,000 Rs. 1,663,000 Rs. 2,035,000 Rs. 2,267,000 Rs. 2,156,000 Rs. 2,388,000 Rs. 3,286,000 Rs. 3,366,000

Rs. 1,859,500

Hilux Pickup 4x4 E Model

Price

Toyota HILUX 2494cc, Diesel Turbo Charger Common Rail Engine, 4x4 Double Cabin - Standard Model

TOYOTA VIGO DAIHATSU

Model Model

Price Price

Rs. 3,109,500

AL-HAJ FAW MOTORS Model

Vigo Champ M/T Rs. 3,423,500 FAW Carrier (WHITE ,BLACK,STRONG BLUE & SILVER) FAW X-PV Std Vigo Champ A/T Rs. 3,623,500 FAW X-PV A/c Sirius S80 (WHITE ,BLACK,STRONG BLUE & SILVER)

Monthly AutoMark Magazine - International

Price Rs. Rs. Rs. Rs.

699,000 799,000 844,000 1699,000

Price updated May- 2014

Monthly AutoMark International

Sad Demise of Mr. Pereira

Mr. Johnson Pereira Entire Pakistani automotive industry will remember him for a long time Mr. Johnson Pereira studied at St. Patrick's High School in Karachi. He did his Matriculation from St. Patrick's Technical School in the Automotive Trade.

He later did his Diploma of Associate Engineering (DAE) in Automobile and Diesel Technology from the Government College of Technology, Karachi where he secured First Position in the province of Sindh.

On this achievement the Provincial Minister for Education, Culture, Law and Sports, Justice (Retd.) Syed Ghous Ali Shah presented him the Gold Medal of Excellence on behalf of the Sindh Board of Technical Education. He was also presented the VIBTA Award (Volunteers in Business and Technical Assistance) by Rt. Rev. Anthony Lobo, Auxiliary Bishop of the Archdiocese of Karachi. The Catholic Association of Karachi (CAK) also presented him the CAK Award on this achievement. He further pursued his studies for his Bachelor of Technology (B.Tech-Hons) degree in Mechanical Engineering from the NED University of Engineering and Technology, Karachi.

He is a Chartered Member of the

Institute of Logistics and Transport (CMILT) from UK. He acquired his professional qualifications (AFSAE) from th e Society of Auto motive Engineers International from USA and (MJSAE) from Japan, including his (AMIMI) from the Institute of the Motors Industry and (AMIRTE) from th e In stitute of R oad Trans po rt Engineers both from UK. He completed his In-Service Technical Teachers Training from the Government College of Technology, Karachi. He started his earlier career in the teaching profession as an Automotive Instructor at St. Patrick's Technical School. He also completed his studies in International Trade from the Business Management Association (BMA) in London. He did his PCCM (Programme for Cross Cultural Management) from the AOTS (The Association for Overseas Technical Sch ola rships ), in Tok yo, Japa n.

H e w o rk ed fo r th e a ut om o bile distributors of global brands in Pakistan namely, Mercedes-Benz, Detroit Diesel Allison and AC Delco, Divisions of General Motors Corporation of USA. He was also engaged in the logistics and fleet management of the bulk transport

Official Condolence With deep sorrow we inform you all, the sad demise of Mr. Pereira, who passed away last month.

We would like to convey our deepest condolence on the death of Mr. Johnson Pereira, He was our colleague and presented honorary advisor with us since 2006. He was our team member, he was very

effective and hard working member of our team. He was such a special person that no words are really adequate. All of our friends that I have spoken to have their own treasured memories of Mr. Pereira. He is a complete professional in Pakistan's automotive industry.

Entire Pakistani automotive industry will remember him for a long time We wil l really miss him.

c a r r ie r f le e t a t Cosmopolitan Development Company Limited, Karachi.

He had worked at Motors Limited for about 26 years. He is one of the founder members who established the Central Calibration Authority (CCA) which was set up at Hinopak Motors Limited in compliance with the requirements of SO-9001.

He is the Founder Member of the CSR (Corporate Social Responsibilities) Association of Pakistan. He is an active member of ARUP (Association of Road Users of Pakistan) planning to establish a Commercial Drivers Training Institute to facilitate the Sindh Police with regards to the issue of LTV and HTV (Light and Heavy Duty) Driving Licenses. The funding for this project would be arranged from the World Bank / Asian Development Bank.

He owns the permanent publishing rights to reprint and sell ten "How-To" books entitled "How to Start and Operate Your Own Profitable Business at Home" and over 80 Business Reports and Manuals through the Asia-Pacific Publications. He has a passion for Feng Shui, which is a Chinese science and art related to creating harmony with the environment for Health, Wealth and Prosperi... He is a certified Feng Shui practitioner and qualified for his Feng Shui practice from the Geomancy University in Singapore. During the latter part of this year (2007) he plans to conduct regular one day short courses during the weekends in Feng Shui which will be open to all.

He were advisor for leading monthly a uto mo tive ma ga zine Au toM ark (w ww .au toma rk.pk) sin ce 2006.

He was working at Al-Haj Faw Motors (Pvt) Limited., as General Manager C u s t o m er S u p po rt D iv i s i o n . . . .

www.automark.pk | June-2014 | Page 24

Monthly AutoMark International

Automotive Sector - Update

Prime Minister inaugurates 1320 MW power projects with Chinese cooperation Prime Minister inaugurated the two 660 MW coal fired projects launched with Chinese cooperation, having total capacity of 1320 mega watts, at Sahiwal on last week.

Sahiwal will contribute in the production of cheap electricity in Pakistan. The project will ensue a huge share of Sahiwal in the country’s GDP and generate enormous job opportunities for the local people. PM said during his speech after performing groundbreaking of the project.

Prime Minister announced that the project will be completed by 2016 and completion of the project in such less time is not less than a miracle. “We chalked out the plan for this project just two months back and the Punjab government and the Chinese companies have undertaken the development work at such a fast pace. Keeping in view this pace of work, I am sure the project will be materialized in two years.” PM said.

He appreciated the efforts of CM Punjab and his team. This is third coal based power project which my government has started in last few months while I am going to inaugurate the Nandipur project tomorrow, PM said.

The Prime Minister also highlighted the im p o r ta n c e o f K a r a c h i -L a h o r e Motorway which will also pass through

Sahiwal and apprised the audience that it will bear fruit for the city of Sahiwal as a whole. Prime Minister also told that Rs 55 billion has been allocated for the acquisition of the land for Karachi to Lahore Motorway.

Prime Minister called the power shortage problem as the biggest malady for the country. He threw light on the steps taken by the Government to tame this malady that has hampered the development in Pakistan.

Prime Minister showed his gratitude to the Government of China’s role in assisting infrastructural and energy projects. “China-Pak corridor will be a game changer in the region. The corridor is a 2700 Km highway that stretches from Kashghar to Gawadar through Khunjrab. We are also mulling over building Special Economic Zone along the trade corridor that will lead to the industrial development in whole country. The corridor also includes the up gradation of Railways system of Pakistan. ” The economic trade corridor comprises of 10 coal power projects in Gaddani, 10 coal power projects in Thar and 06 Power Projects in Punjab.

“I dreamt to transform Gawadar into a port on the lines of Dubai, Singapore and Hong Kong.” PM further added. An

Airport is also being built at Gawadar, PM added. Prime Minister also cited the recent energy projects initiated by the Government like Dasu and Diamer Bhasha dams each having capacity of 4500MW project, 1320 MW Power plant at Jamshoro and told that 21000 MW electricity will be added in the national grid in the next 8 to10 years. Pm added that we have allocated Rs. 35 billion for land acquisition of Diamer-Bhasha dam.

I have given directions to complete the Neelum-Jehlum Power project by 2015, PM told.

Prime Minister also highlighted the positive economic indicators as the 4.1% growth of GDP, 5.5. % increase in the manufacturing sector and the surge in foreign reserves and stock exchange.

Citing the strong mandate given by the people of Sahiwal in the general election, PM said that the warmth and emotional sentiments of the people of Sahiwal are still fresh in my mind.

CM Punjab Mr. Shahbaz Sharif, Minister for Water and Power Khawaja Asif, Economic and Commercial Counsellor of Chinese Embassy, Senior officials of the Chinese companies and other high dignitaries and officials attended the event....

www.automark.pk | Jun-2014 | Page 25

10Automotive years of Sector excellence - Update for Quality & Services

D.S. Motors Launches Unique 70cc motorcycle Model-2014 OF EXCLLENCE QUALITY

Cooperate Event - Update

Super Star Motorcycle Secure Brand of the Year award-2013 Memon Motors (Pvt) Ltd., assembler cum manufacturer of the leading two wheeler brand 'Super Star' secure the first ever Brand of the Year 2013 Award in the bike assembling category.

Aaward distribution ceremony held in Karachi last month, amoung 1000 popular and trusted brands of Pakistan.

Super Star motorcycle selected for the award. In Ceremony Mr. Javed Memon, Director Sales and Marketing, Memon Motors (Pvt) Ltd., has received the award with Certificate of Achievements.

www.automark.pk | June-2014 | Page 31

by Saad Hasan

The rise and fall of Dewans - Report

The rise and fall of Dewans The dream and journey begin

In June 2006, Dewan Mushtaq Group’s (DMG) sales were over $665 million. It was under a long term debt of $175 million on the books and posted a net profit of $5.8 million.

A year later it announced its first net loss ever recorded. And a year later it was Pakistan’s largest bank defaulter.

The scale of DMG was unprecedented.

It was the largest manufacturer of polyester, produced cotton yarn, ran the biggest sugar mill, assembled Kia Classic, Hyundai Santro cars and Star bikes. It owned a cement company that had plants in south and north and its Dewan Petroleum was sitting on 235 billion cubic feet of gas reserves. The group was a distributor of BMWs and Rolls Royce and ran multiple businesses on the sideline including DMART shops.

Sixteen thousand employees were on its payroll.

Dewan had never before defaulted on any loans. Its flagship Dewan Salman Fibre was the best rated private company in the country throughout the 1990s. In terms of industrial diversity, few Pakistani groups came close to matching them. They had nine listed companies.

“The question is if the drastic decrease in the group’s turnover 2007 onwards, which triggered the defaults, resulted from its failure to sell the produce or its inability to buy raw material,” remarked the ex CEO of a bank.

The answer to this question lies in a

fateful meeting in 1992 that was held behind closed doors in Islamabad.

From Patiala to Haripur Almost every successful Pakistani business has had ties with some prepartition trading community. Memons, Bhoras, Khoja Ismailis and Isnasheris, Chiniotis and Punjabi Sheikhs. The Dewans belonged to none. They came from India’s east Punjab region of Patiala.

The family’s oldest registered company, Sh Dew an M uhammad Mus htaq, dates back to 1912. It was established by group founder Dewan M Mushtaq Farooque who traded in used garments.

He would buy clothes in Karachi and sell in Delhi.

The family migrated to Karachi soon after partition and, in 1948, established Dewan Mushtaq Sons, housed in a s mall shop at the North Napier Road.

It is believed that “some curse” followed them from Patiala as every achievement was preceded by a family tragedy.

Dewan Khalid, the eldest son, died after a brief illness in 1958. Dewan Mushtaq

Dewan Yousuf signing a technical agreement with Hyundai Motors in 1999. PHOTO: FILE

himself did not live to see the family’s first factory and passed away in 1968.

On August 7, 1970, the foundation stone ceremony of Dewan Textile Mills, their first cotton spinning unit, was being held in Kotri. That was a big day for the family. Dewan Mushtaq’s wife, their second youngest son Noman, 30 and a daughter were on their way with some other family members when the car crashed on the highway. The three of them were killed.

The entire responsibility to look after the family and its interests fell on the shoulders of 36-year-old Dewan Umar Farooque, the second eldest son. After matriculation, he could not pursue education and helped run the shop.

H e s howed business a cum en by becoming a major importer of secondhand clothes and tea within a few years.

Eventually, he rose to the top of the Pakistan Secondhand Cloth Merchant Group and Tea Traders Association of Pakistan.

Between 1970 and 1978, Dewan Umar along with his younger brother Dewan Salman set up two more textile spinning u n its in K o tri a nd H ydera ba d.

They also set up Pakistan’s largest sugar mills with a production capacity of 5,000 tons in Thatta.

By December 1988, the DMG’s four listed companies had a combined revenue of Rs1.5 billion. Dewan Textile’s share price was at Rs62. There was zero debt on the three textile units, which

Dewan Zia and Dewan Yousuf with their father at DSF’s inauguration in 1992. PHOTO: FILE

www.automark.pk | June-2014 | Page 32

The rise and fall of Dewans - Report continued

Monthly AutoMark International

DMG wooed Japan’s Mitsubishi Corporation and Sam Yang Company of Korea to be equity partners in a polyester fibre plant with an annual capacity of 52,500 tons. Mitsubishi provided most of the financing.

Work on the project was completed in a record 19 months and production started on January 1, 1992. together were among the five largest spinning companies in the country.

It was time for DMG to embark on the most ambitious project — the largest polyester stable fiber (PSF) plant.

The use of man-made fibre h ad grown in Pakistan as price of cotton shot up due to shortages. Between 1981 and 1988, demand rose on a compound annual growth rate of 23% to 78,000 tons. Half was met through imports.

DMG woo ed Japan ’s Mits ubis hi Corporation and Sam Yang Company of Korea to be equity partners in a polyester fibre plant with an annual capacity of 52,500 tons. Mitsubishi provided most of the financing.

Work on the project was completed in a record 19 months and production started on January 1, 1992. The PSF was branded Salsabil, which in Arabic meant the lake of paradise.

It was an industrial undertaking never seen in the private sector before. Initially christened as Salamese Fibre, it was spread over 140 acres. It had a staff and executive housing colony including a guest house and bachelors’ hotel. There was a labour colony that included a sports centre.

The project was located in an isolated place called Hattar, in district Haripur of North West Frontier Province because of tax exemptions on investments made in the area.

Just when work on Dewan Salman Fibre was being completed, DMG started to

feel the heat from other PSF makers who were not in the incentive area and did not enjoy tax benefits.

Little over three months after production commenced, PSF producers called a meeting to discuss the issue. Dewan Umar Farooque was already suffering from heart complications.

On April 8, 1992, he flew to Islamabad where executives of another Lahorebased polyester company met him at the airport and assured him that they wouldn’t protest ag ain st the tax exemptions.

But later that day, the entire industry ganged up against him. He suffered a cardiac arrest during the meeting, succumbing a few hours later, not living to see even the first financial statement of his most cherished achievement.

Dewan’s decade of war

The fateful day was a watershed event for the businesses as president Ghulam Ishaq Khan promulgated the Protection of Economic Reforms Ordinance 1992.

Naw az Sharif took over in 1990.

Privatisation programme was in full swing. MCB Bank, Millat Tractors and Maple Leaf Cement had already been handed over to private investors. More selloffs were in the pipeline an d investors sought protection.

The ordinance guaranteed private ownership and stopped the government fro m tak ing o ve r p riv atise d organizations. Another provision, which was particularly important for industrial ventures, was protection of fiscal incentives given to e n c o u r a g e investment.

The two key ingredi ents fo r making PSF – pure terephthelic acid (PT A) and mon o ethylene glyc ol (MEG) – had enjoyed sales tax ex emp ti on si n ce 1981. Both of them were imported. On May 14, 1992, sales Dewan Umar with his sons and nephews in tax of 12.5% was

imposed on them.

Dewan Salman Fibre was located in Hattar Industrial Estate where the imported raw material reached after zigzagging 1,435 kilometers. The nearest c u s t o m er s w er e 4 0 0 k m a w a y .

The incentive package for Hattar included sales tax exemption till 1997 and income tax holiday for nine years from the start of production. But sales tax benefit was on the sale of PSF and not the raw material.

Its imposition diluted the incentive for locating the plant far away from spinning companies in Karachi and Faisalabad. DSF’s competitors had won the first battle since they could offset the tax on polyester fibre against what they paid on raw material under the tax refund regime.

Despite the setback, the DMG under the leadership of Dewan Umar’s eldest son Dewan Ziaur Rehman was on its way to make history.

To regain the DSF’s cost advantage over competitors, it was decided that another unit would be added with a capacity of 56,000 tons. Unit II needed an investment of over Rs2.5 billion. There was no way local banks could fund that, especially as the government had limited the role of state-backed development financial institutions.

Something unprecedented tried T o r a is e f u n d s , D SF w en t t o international capital markets with Pa ki st an ’ s firs t an d o n ly E ur o Convertible Bond issue by a private company to date.

Citicorp International and Hong Kong’s Crosby Securities came forward as underwriter and managers. Barclays, Bears Stearns, Baring Brothers, Nomura International, Societe General and others were part of the consortium. Road shows and meetings were held in Hong Kong, New York, Boston, Geneva, Zurich and London.

The convertible bonds were floated on May 5, 1994 with an overwhelming response from international investors.

The company easily raised $45 million.

This feat propelled Dewans to the world

early 1990s. PHOTO: FILE www.automark.pk | June-2014 | Page 33

The rise and fall of Dewans - Report continued

By December 1996, import of PSF was taking toll on local producers yet new players Dhan Fibre and Ibrahim Fibre were entering the market. ICI had also expanded capacity to take country’s total output to 400,000 tons, at least 100,000 tons more than the demand. stage. DSF had the second highest capitalisation at the Karachi Stock Exchange, literally deciding the fate of the daily index.

A few months later, DMG organised Pakistan’s first Euro money Conference in Karachi. It took Dewan’s reputation even higher. Delegates from around the world participated, including the best private equity firms, which stood ready to do business.

Production at the new unit began on June 15, 1995 following completion of work in a record 12 months. This took DSF’s overall capacity to 108,500 tons, making it the largest PSF producer in Asia — even ahead of India’s Reliance.

The unit also enjoyed tax exemption including the income tax holiday till 2004.

Walls closing in on DMG The noose around DMG’s fibre project was getting tighter.

One after another such policies were introduced by successive governments of Pakistan Peoples Party and Pakistan Muslim League-Nawaz that sales tax concession was diluted.

Sales tax of 12.5%, which was imposed in 1992 on raw material, was increased to 15% in 1994. When production from Unit II began another blow came in the shape of a change in official policy.

The sales tax on the PSF was reduced to 10% and excise duty of 5% was levied instead. The move was specifically aimed at DSF as it eroded company’s profit.

Hardest fiscal hit came in the 1996-97 budget as sales tax was imposed on the textile industry. DSF customers were now asking for a tax invoice. The company grudgingly relinquished its right to sales tax exemption.

“Your company has been methodically p e rs e cu t e d a n d p la c ed i n t o a tremendous disadvantage compared to other PSF players,” the company told shareholders in financial statements of 1995-96.

“All this is being done at the behest of competitors under the lead of a so-called

multinational origin company which is famous in portraying itself as the most fair, ethical and professional player,” it wrote in another.

Entire feasibility of the DSF was based on the premise that it won’t have to pay tax on raw material or PSF. Everything from its financial close, interest rate, operational costs including the pricing was based on it.

By December 1996, import of PSF was taking toll on local producers yet new players – Dhan Fibre and Ibrahim Fibre – were entering the market. ICI had also expanded capacity to take country’s total output to 400,000 tons, at least 100,000 tons more than the demand.

Dhan, which means wealth, was also located in Hattar. From the start, this venture of Lahore-based Chakwal Group remained under attack from predatory investors who aimed for a hostile takeover.

The company approached DMG with a buyout proposal. After protracted negotiations, which went on for a couple of years, Dewan Zia finally decided to buy Dhan in 2000.

When DMG bought Dhan Fibres after paying Rs4.2 billion for a 67% stake, it was the largest takeover in Pakistan’s corporate history.

The combined capacity of the merged entity was close to 200,000 tons a year.

More money was spent to take it up to 245,000 tons the same year.

In the same year, the company had also spent substantial money on building a 25,000-ton per year acrylic fibre and tow plant to make premium synthetic products. “This was a blunder. The plant was old and the market was not big enough for acrylic,” said a former DSF official.

Even as far back as 1999, internal finance managers at DMG were raising red flags. “There were people who resisted the expansion,” recalled a finance director.

“They were hoping to undercut the competition in polyester fibre business

by having economies of scale. But money was being spent in many other non-core businesses.”

By June 2001, Dewan Salman Fibre had sales of Rs17.9 billion with net profit of Rs630 million. It had a long-term debt of Rs5.4 billion. The same year it settled entire foreign debt taken to finance the Unit II. Three years later Dewan Zia set up Dewan Petroleum, 30% of which was owned by DSF.

The ‘Arabian stallion’ If Dewan Zia was a strategist then his younger brother Dewan Yousuf was a master executioner.

Dewan Umar’s second eldest son, Yousuf, was confused and frail as a kid.

He would fall sick in his father’s absence.

This became such a worry for the family that he was moved to Hyderabad where he would be close to his father.

He completed his matriculation from Hyderabad’s St Bonaventure’s High School and B.Com from Government Commerce College, Karachi. He might not have spent time with the Japanese like Dewan Zia but his raw energy would prove to be enough.

“This son of mine is an Arabian stallion,” Dewan Umar once told a gathering of family friends. “He runs so fast that he can win any race. But who will control him?”

While Dewan Zia called the shots at Dewan Salman Fibre, Dewan Yousuf managed the sugar mills. Similarly, the other brothers and cousins had varying degree of involvement with other sister concerns.

By 1998, Dewan Yousuf had come of age and wanted to play his part in adding to the group’s prestige. He infused new life into DMG. A staunch believer that the auto industry propels real economic growth, he incorporated Dewan Farooque Motors Company Limited (DFML) in December 1998.

“In Europe it’s like every other person is associated with the auto industry,” he

By 1998, Dewan Yousuf had come of age and wanted to play his part in adding to the group’s prestige.

He infused new life into DMG. A staunch believer that the auto industry propels real economic growth, he incorporated Dewan Farooque Motors Company Limited (DFML) in December 1998. ww.automark.pk | June-2014 | Page 34

Monthly AutoMark International

When it comes to cars, Pakistanis have had limited options. Experiencing other manufacturers, particularly Korea’s Kia, had been unpleasant.

Naya Daur Motors was the first to introduce Kia in 1994. According to court filings, the company took over Rs800 million as booking fees from 16,000 people. Only a few hundred vehicles were delivered before the company went bankrupt. says.

When it comes to cars, Pakistanis have had limited options. Experiencing other manufacturers, particularly Korea’s Kia, had been unpleasant.

Naya Daur Motors was the first to introduce Kia in 1994. According to court filings, the company took over Rs800 million as booking fees from 16,000 people. Only a few hundred vehicles were delivered before the company went bankrupt.

But Yousuf entered the market on a strong footing. Named after his father, the Dewan Farooque Motors had agreements with Hyundai and Kia to assemble and sell their vehicles in Pakistan.

The plant built in rural Sindh’s Sujawal area at a cost of Rs1.8 billion was completed in seven months. It was the first automaker in the country to have robotic paint machines.

After a tumultuous decade, Pakistan entered a period of economic growth in 2001. Low interest rate and proliferation of consumer finance shot up demand for cars.

With the capacity to make 10,000 vehicles a year, DFML produced 95,429 vehicles between 2000 and 2011 which included Kia Spectra, Sportage and Hyundai’s Santro. It also sold 50,000 Shehzore trucks, which still dominate the one ton-truck category.

The sales revenue of Rs3.3 billion in 2001 would go up to Rs10.6 billion in 2006. It will post a net profit of Rs840 million for six-year period.

“Historically, Pakistan’s per capita usage of cars has remained low,” Dewan Yousuf says. “From 1993 onwards, car sales remained stagnant at 30,000 units a year. It goes to our credit that we helped revive an industry.”

DFML was the first to introduce car leasin g th rough Askari Leas in g.

Industry people say this was the time for DMG to slow down and consolidate.

But there was no stopping Dewan Yousuf. He had big plans. He wanted to set up Dewan City at Sujawal where vendors would eventually localise every auto component.

In 2003, DMG invested in Dewan Farooque Spinning Mills — till then the most advanced spinning mill with 28,800 spindles to be set up in Kasur, Punjab.

The expansion binge had started. He bought Allied Motors Limited, a troubled tractor company. He would use its plant to launch Star bikes in a few years.

Sugar mills were expanded by adding polypropylene plant with the capacity to produce 2.5 million bags a year. A 125,000 litre-a-day industrial alcohol plant was built at a cost of Rs500 million to utilise leftover molasses.

The sugar company also imported fertiliser, wrapped it up in its own polypropylene bags and sold it to farmers under the brand “Salsabil.”

He also bought three more sugar mills – Khoski, Al Asif and Bawany.

But in 2004, Dewan Yousuf took a step which would pit him against many businessmen, including his own brother – Dewan Zia. Tariq Mohsin Siddiqui, chairman and CEO of Pakland Cement, was in a desperate situation. His company owned cement plants in Karachi and Hattar with a combined capacity of 1 million tons. The once prolific corporate leader was also a victim of the government with regards to tax exemptions.

He had taken too much debt to complete cement production lines and was stuck in a quagmire of financial difficulties.

Bankers were calling for liquidation.

Dewan Yousuf bought the company in 2004 for Rs1.1 billion in cash. He did that against his brother’s advice.

“Everyone had something bad to say about Tariq. They said that there are technical problems with Pakland,” Dewan Yousuf says. “But I saw things differently. It was a good investment.”

There were businessmen who wanted to pick up the pieces after the fall of Pa klan d. Dewan Yous uf did th e honourable thing — he paid a fair price

for the asset.

What many people don’t know is that after taking over Pakland, he had placed an order for Loesche’s cement mill in 2006. The powerful vertical mill, which is far more efficient than any existing plant in the country, would have made it unbeatable in Karachi. By 2008, the plant was ready to be installed. But by then it was too late.

To have is to owe For the first time since its inception, Dewan Salman Fibre announced a loss in fiscal 2005. Just a yea r earlier, it had netted Rs327 million in profit.

The loss was a result of multiple factors.

In th e last few years, DSF’s tax concessions had expired and it was paying more in logistical cost because of its plant location in Hattar. Global PTA and MEG prices had also shot up, squeezing the margins of PSF makers.

But the loss should have been a one-off even t considering the size of the company and the rising demand for polyester fibre. Instead it would cascade into problems for the entire group in just 24 months.

DSF incurred a further loss of Rs119 million in 2006. Its sales also took a hit, dropping to Rs16.7 billion from Rs21 billion just two years earlier as it faced difficulty in convincing banks to lend money to buy raw material.

Bankers had started to express their uneasiness over all the other companies.

By the end of next fiscal year in June 2007, DSF’s loss jumped to Rs808 million, machinery was running at only 20% capacity as other PSF producers ate into DSF’s market share.

Contrary to what is generally believed, the long-term debt of the nine listed firms was still Rs12.47 billion, a major chunk of which – Rs7.5 billion – stemmed from the acquisition of Pakland Cement, while group’s total sales were Rs38 billion.

This was also a tumultuous year for Pakistan. President Pervez Musharraf had sacked Chief Justice of Pakistan Ifthikhar Muhammad Chaudhry in March and lawyers were clashing with

www.automark.pk | June-2014 | Page 35

The rise and fall of Dewans - Report continued

With the capacity to make 10,000 vehicles a year, DFML produced 95,429 vehicles between 2000 and 2011 which included Kia Spectra, Sportage and Hyundai’s Santro. It also sold 50,000 Shehzore trucks, which still dominate the one ton-truck category. police in different cities.

All this coincided with differences between Dewan brothers that now came out in the open.

A few years back, Dewan Zia had moved to Islamabad from where he was running DSF and Dewan Petroleum, distancing himself from all the other firms.

“It was their mother who held the brothers together,” said a family friend. She passed away in 2007. The same year Dewan Zia handed over the group’s chairmanship to Dewan Yousuf and disappeared from public life.

Immediately after taking charge, Dewan Yousuf set upon re-profiling liabilities of the group companies. He faced two immediate challenges of negotiating a plan to defer current liabilities of DSF and refinancing the debt of Pakland Cement.

Dewan Yousuf was feeling the vibes of what would happen if time was wasted.

In the last few months, banks had refused to fund Pakland’s second production line despite commitments.

There was no choice but to divert w orking cap ita l to complet e its construction.

After consultations with the bankers, the mandate for restructuring DSF’s debt was awarded to Global Securities on July 2. Banks had initially agreed to convert short-term debt of Rs7.5 billion into long-term finance.

At the same time, bridge financing of Rs2 billion for the working capital was to be arranged. This money was supposed to come from five banks by November 2007.

DSF even collateralised its most valuable asset –30% shares in Dewan Petroleum

The expansion binge had started. He bought Allied Motors Limited, a troubled tractor company.

He would use its plant to launch Star bikes in a few years. worth around $100 million – against the bridge financing facility. Only Rs1.1 billion were released and that too after a delay of four months.

The delay resulted in all the money being consumed by cash losses. With no new credit lines, there was no raw material.

All the fix ed cost mean t losses.

“A humongous amount of money is needed to run the PSF operation. For instance, if the company was consuming Rs100 worth of raw material, it needed credit lines for Rs500 to keep the supply chain intact,” said a company official.

But because of financial loss of Dewan Salman Fibre, working capital lines to all the other businesses including automobiles, cement and textile were squeezed. Dewan Yousuf was trapped.

Seeing how things were taking shape, DMG had started negotiations with Goldman Sachs and Merrill Lynch to refinance Pakland Cement’s debt.

By la te 2007, the $120 m illio n refinancing agreement was ready to be signed.

“Deal was called off at the last minute after the CEOs of a few banks persuaded Dewan Yousuf against it. They assured him that local banks would re-profile the entire debt of the cement business,” said a DMG official.

“He shouldn’t have trusted them. Or at least he should have made them put that commitment in writing.”

But the refinancing could not be closed as one bank, having little exposure, pulled out right before a potential default in early 2008.

The Express Tribune interviewed four CEOs of different banks. None wanted to come on record.

Some of th em sa y ban kers lo st confidence in Dewan’s ability to run the business. Some say Dewan Yousuf shouldn’t have cruised around in a Rolls Royce Phantom when so much money was stuck.

“There is always a risk with consortium lending,” said a former president of one of the top three banks. “There was no need for the Dewans to strike a deal with 20 banks. Seven or eight are enough.

Otherwise banks start to manage business.”

He also insisted that a conglomerate like DM G s h o u ld h av e hi red m o re professionals. “Dewans thought they could manage everything themselves.”

This reasoning is far from reality. Even as far back as 2006, DMG has 16 chartered accountants and some of the best professionals on key positions.

Some industry people point to shift in ownership structure of the banking industry as a reason behind group’s trouble as well. Up till late 1990s, the state-run banks were dominant lenders but by 2007 local private banks had 72% of the banking assets.

“There is no denying that some owners of large banks are carnivorous. They methodically create problems for their competitors in other industries,” said the banker. “But I am not sure if that happened in Dewans’ case.”

Dewan Yousuf’s faith in bankers was not without a good reason. He had grown up seeing many of them spending hours with Dewan Zia. Some were like family.

Another banker suggested Dewan Yousuf should have parted with some of the assets to settle part of the debt and come out of the crisis.

DM G earn in g s (R s in m illion s)

Historically, Pakistan’s per capita usage of cars has remained low, Dewan Yousuf says.

From 1993 onwards, car sales remained stagnant at 30,000 units a year. It goes to our credit that we helped revive an industry.

DFML was the first to introduce car leasing through Askari Leasing. Industry people say this was the time for DMG to slow down and consolidate. www.automark.pk | June-2014 | Page 36

Monthly AutoMark International

Yousuf entered the market on a strong footing. Named after his father, the Dewan Farooque Motors had agreements with Hyundai and Kia to assemble and sell their vehicles in Pakistan.

The plant built in rural Sindh’s Sujawal area at a cost of Rs1.8 billion was completed in seven months. It was the first automaker in the country to have robotic paint machines.

Holding the ground But there was another option which w o u l d h a v e e n d ed t h e c ri s i s immediately. Instead of being forced to sell the units cheap, Dewan Yousuf approached a leading private equity firm to bail out the group in mid-2008.

Under the agreement, a copy of which The Express Tribune had seen, DMG was to transfer its shareholding in a holding company to be jointly owned by the two parties. The private equity firm was to hire people to run the companies while injecting $150 million.

The weekend before the agreement was to be signed, DMG pulled out. This time political compulsion was involved. An influential politician in Sindh had asked Dewan Yousuf to handover the cement company and sugar mills – excluding the debt.

Under these circumstances it was not possible for the deal to go through. It’s not like Dewans didn’t have connections.

The group has deep ties with the military. Salman Farooque, a long time PPP stalwart, is a relative. But that wasn’t enough.

In July 2008, Dewan Yousuf wrote a lengthy letter to bank presidents Ali Raza, Khawaja Iqbal Hasan and Zakir Mehmod detailing everything that had happened over the previous year. He w an t ed a ns w ers . N on e replied .

Dewan Mushtaq Group defaulted.

Dozens of recovery suits were filed against the group in a matter of days.

The awe and shock worked. Dewans would eventually be declared the defau lters of over R s40 billion .

The Dewans have vanished from mainstream news. Dewan Salman Fibre is shut. Stock analysts no longer follow the group companies. But Dewan Yousuf has held his ground.

He didn’t run away in desperation.

Under him, DMG is contesting all cases.

Settlements have been reached with some banks and working capital lines are open to few firms.

The group still employs over 7,000 people. Even when all the units were shut, no one was fired. Even today Dewan’s charitable hospital in Sujawal is the only place other than Karachi

where people from Sindh can have dialysis procedures.

“Bankers had a problem with my lifestyle. They wanted to see me in slippers. Why should it bother them if I owned properties?” asked Dewan Yousuf in between sipping Perrier water during a recent interview. Having to see the companies, which made billions, come to a grinding halt, should have devastated him but he is still in control.

It was the mention of Dewan Zia, which cracked his voice.

“I would have fought everyone and overcome every difficultly with any institution only if Zia bhai would have been there,” he said.

Dewan Zia lives in Dubai and could not be reached for his version.

Dewan Yousuf didn’t share much about what transpired during the two years from June 2006 onwards but spoke in a matter-of-fact way on the rise of the conglomerate and its existing potential. It has been five years since banks have not renewed the working capital lines.

“We only need new lines for working capital. Dewan Salman Fibre still has potential. It’s located in a province from where all the gas is coming. So it has a cost advantage over others,” he said.

“I am also in talks with a leading automobile maker. We will soon have the franchise to assemble the vehicles here.”

After going through such a see-saw ride, one would feel that the Dewan would crack. But, as they say, hope is a man’s biggest gift and Dewan Yousuf still seemed to have lots.

Timeline 1970 Dewan’s first factory inaugurated 1974 Takes over a sick textile unit 1977

Another textile mill set up 1990 DMG, Mitsubishi Corporation sign agreement for Dewan Salman Fibre 1992 Polyester fibre production starts.

De w a n Um a r di es h o u rs a ft er participating in industry meeting. 12.5% sales tax imposed on PTA and MEG 1994 DMG undertakes Pakistan’s first Euro Convertible Bond issue for Unit II. Sales tax on PTA, MEG increased to 15% 1995 Unit II starts production 1996 DSF grudgingly forfeits sales tax concession 1998 Dewan Farooque Motor’s foundation stone ceremony 2000 First Kia Clas sic c ar ro lls ou t.

DMG takes over Dhan Fibre in Pakistan’s biggest buy out till then 2003 Work on Dewan Farooque Textile Mills starts 2004 DMG a cqu ires Pa kla nd Cemen t.

Takes over Khoski, Bawany and Al Asif sugar mills.

DSF invests in Dewan Petroleum 2006 First attempt to restructure DSF’s debt fails 2007 Banks start to choke working capital lines.

Dewan Zia hands over chairmanship to Dewan Yousuf.

DMG books first net loss mainly because of DSF 2008 All the companies post loss. DMG defaults.

Courtesy: The Express Tribune Published in ‘The Express Tribune’, May 12th, 2014.

Initially Published in The Express Tribune, May 12th, 2014.

Courtesy: The Express Tribune

www.automark.pk | June-2014 | Page 37

Automechanika Dubai-2014

Record edition of Automechanika Dubai signs off on high note “The 12th edition of the Middle East’s largest automotive aftermarket event in Dubai is 19 per cent larger than previous year and 17 times bigger than first show held 12 years ago,” Ahmed Pauwels, CEO of Epoc Messe Frankfurt, the organiser of the event, told press media after the opening.

Pauwels mentioned that UAE pavilion leads in terms of year-on-year growth in exhibitors. “UAE-based companies have increased by 41 per cent to 205 exhibitors compared to 145 last year,” he explained. This is quite significant jump, he added. The exhibition has also recorded an 11 per cent surge in international exhibitors taking part, with 1,490 on board compared to 1,336 in 2013.

Exhibitors upbeat at deals signed, business leads generated and strong response from regional trade visitors The curtains came down on the 12th edition of Automechanika Dubai, at the Dubai International Convention and Exhibition Centre on June 5th 2014, with exhibitors, trade visitors and the organiser, all expressing positive sentiments at the outcome.

The three days of the Middle East's largest trade and business networking gathering of the automotive aftermarket, saw a larger than expected turnout of trade buyers from across the region. Exhibitors were upbeat about the large number of trade enquiries and b u s i n es s le a d s g e n e r a t e d , a s international players pulled out the stops to interest visitors in their latest innovative product lines.

There were brands making their debut appearance in the region, country

pavilions packed with a cornucopia of w ares v yin g for attent io n a s well as product launches galore over the three days of the greatest aftermarket exhibition in the Middle East.

"Going by early reports, Automechanika Dubai 2014 looks to have completed a standout run, with exhibitors positive at their results and trade visitors turning out in great number," said Ahmed Pauwels, CEO of organiser, Epoc Messe Frankfurt.

"The show's success underlines the tremendous business potential that exists in the regional automobile aftermarket and indicates an extremely bright future going forward."

Extremely satisfied with their outing were exhibitors of the German pavilion.

Peter Rehberg, Managing Director of asanetwork, the automotive association representing the German pavilion at A ut o m ec hanik a Du bai, said : "Automechanika Dubai has grown remarkably within the last few years and we now have the largest German participation worldwide here, with 83 exhibitors participating.

"The exhibition is one of the few trade shows where people can establish very s t r o n g bu s in e s s re la t i o n s h i p s , particularly in markets that are hard to reach, such as those in Ira q, Iran, North Africa, Pakistan. Our exhibitors are certainly very satisfied and are looking foreward to extending their involvement in the event for many years Mar c B or li ngha us , Bu si ne ss Development Manager at Arwani Trading Company, added: "Arwani

Trading is one of the oldest companies in the UAE, and we have been at Automechanika Dubai since the very first show 12 years ago. The event is very important for us to access markets outside of the UAE. Just two weeks ago we completed a project with Volkswagen of Nigeria which came about directly through Automechanika Dubai. These types of contracts and business deals are done as a result of exhibiting at the show."

Automechanika Dubai featured the following key focus areas: parts, systems, tuning, workshop equipment, bodywork & pa i n t w o r k, c a r w a s h , I T & management, tyres & batteries, and the latest automobile services.

The two-day Automechanika Academy - a series of seminars and workshops given by leading experts and prominent industry figures., continued to be extremely popular, with a large number of trade visitors, industry professionals an d govern ment represen tatives attending the informative sessions....

www.automark.pk | June-2014 | Page 38

1st Intellectual Property Seminar - PR

Monthly AutoMark International

Crown Group took an initiative and arranged Pakistan’s 1st Intellectual Property Seminar & Award Ceremony at Governor House.

For enforcement of Intellectual Property laws in Pakistan, the eminent auto spare parts and motorcycle manufacturer Crown Motors Company (Pvt.) limited in collaboration with Pakistan State Times n ew spap er ha s org anized Pakistan’s first Intellectual Property (IP) seminar an d Awards distribution ceremony at Governor House, Karachi.

The Governor Sindh, Dr.Ishrat ul Ebad Khan, Prominent personalities from Fed era l an d Sin dh g overn ment , Dignitaries from Business community have attended the ceremony.

In the welcome address, Crown Group CEO Mr. Farhan Hanif said that our aim is to create awareness of Intellectual property amo ng mass es beca use Pakistan is the land of opportunities having an array of indigenous products available in plenty. There is demand of Pakistani products of diversified sectors across the world but most of the products are exported without any branding.

In his address, he highlighted that due to lack of IP subjects in our Curriculum people are unaware of this fact that involvement in counterfeiting/imitation is crime. Unfortunately, cheating and imitation has been penetrated into our culture and become an integral part and practice.

He further added, without resolving Intellectual Property Rights (IPR) issues, it is tough to attract local as well as

foreign investors to invest. As long as base work is not done for new business development, creation of employment is even impossible. Our vision is to create concept of Intellectual Property value assessment which will be done strictly only on merit basis and then we would be able to g a th er wo rld’s bes t multinationals on board to build a completely I ntellectua l Property protected Pakistan.

Governor Sindh, Dr Ishrat ul Ebad expressed his views as, complete enforcement of Intellectual Property (IP) laws in the country is necessary for attracting foreign investors as well as there is a dire need to develop a strong mechanism to stop counterfeiting and implementation of IP laws.

He said many countries of the world are spending millions of dollars to promote their domestic brands and strengthening their enterprises to compete with others.

Therefore, we must ensure that our people benefit from their innovations and creative work, and prevent others from copying or unfairly gaining from ou r cr ea tiv it y an d in ve st m en t .

On the occasion, Federal Minister for Ports and Shipping, Kamran Michael appreciated the efforts of organizers and said this was not only a seminar but a start of an awareness campaign about IP laws and its benefits and losses.

Senator Farogh Naseem share his views as, in other countries there were strong

IP laws and IP tribunals and courts but Pakistan has faced lack of all these.

Addressing to the ceremony, Senator Abdul Haseeb Khan said that nonenforcement of IP laws in the country is like an attack on the economy. He pointed that only in pharmaceutical industry, due to counterfeiting genuine medicine producers have lost billions of rupees and that causes discouragement of businessmen.

Minister for Commerce & Industries Sindh, Rauf Siddiqui said that those involved in IPR violations had preferred their own interest a nd by on ly implementing exemplary punishments we can overcome these violations.

In the concluding address, Khwaja Izhar-ul-Hassan, Deputy Parliamentary Leader of MQM in Sindh Assembly, Editor-in-chief & Publisher Pakistan State Time and the Co-organizer said through this event we give the message across the globe that Pakistan is a respon sible coun try an d respect Intellectual Property R ig hts. He announced that IP awards ceremony would be organized every year on the “International IP day”.

In t he en d, Dr. Is hra t-u l- Eba d distributed IP awards among the O w n e rs , D i re c t o rs , C E O s a n d representatives of local companies working in various sectors....

Issued by: Crown Group of Companies

www.automark.pk | June-2014 | Page 39

Pakistan’s energy crisis

Run of the River ProjectsLong Way to Go

Exclusive article by Asif Masood

P

akistan is a water rich country but, unfortunately, Pakistan’s energy market investment in hydel power generation has been caught up in confusion and paradoxes for more than a decade, and no significant progress has been achieved so far. On the other hand, the Government is trying to facilitate private investors to promote hydel power generation in the country.

Hydropower is a primary domestic source of energy. Pakistan is endowed with a hydel potential of approximately 41722 MW, most of which lies in the North West Frontier Province, Northern Areas, Azad Jammu and Kashmir and Punjab.

Energy is the lifeline of an economy and is a vital input to sustain industrial, commercial and domestic activities.

Energy disruptions and energy shortages not only result in loss of economic growth and employment but adversely affect social cohesion in the society.

Energy crisis in Pakistan had been brewing since 2007 and deepened in 2013, which hugely negatively affected the economic growth and employment.

Absence of effective planning, an economically and financially viable strategy and incapacitated regulator resulted in supply-demand gap. The situation has been further compounded d u e t o h ig h t r an sm i s s io n a n d distribution losses, development of

black-market for power and declining revenue collection. This led to persistent a cc u mu la tio n o f c irc u lar d ebt .

Consequently, the federal budget had to absorb huge quantum of subsidies to bridge the financial gaps in power sector threatening the fiscal stability on the one hand, and increasing the public debt. A synopsis of the government’s economic performance in its first year in power sharply contrasted with Finance Minister Ishaq Dar’s claims that the economy was on a path of revival as almost all key economic targets fell short highlighting the consequences of delays in introducing tough structural reforms.

Though the gross domestic product (GDP) rate crawled up to 4.1% for the first time in the last six years, it fell short of the targeted rate of 4.4% for the fiscal year 2013-14. The country’s per capita income grew at a dismal 1.4% to $1,386 per person.

Run-of-the-river hydroelectricity (ROR)

Run-of-the-river hydroelectricity (ROR) is a type of hydroelectric generation whereby a considerably smaller water storage called poundage or none is used to supply a power station. Run-of-theriver power plants are classified as with or without poundage. A plant without poun dage has no storage and is, therefore, subjected to seasonal river flows and serves as a peaking power

plant while a plant with poundage can regulate water flow and serve either as a peaking or base load power plant.

Pakistan could have been rid of crippling circular debt and heavy load shedding if the Ministry of Water and Power had completed 18 hydropower projects in time, 15 in 2007 and three in June last year. But the government is still not interested in utilizing the cheap hydroelectricity, which is only 37 paisa/Kwh. Ministry of Water & Power prepared a plan to build 15 run-of-river projects with a capacity of 1,258MW, scheduled to be commissioned by June 2007, but still they are not getting any attention from the government led by Prime Minister Nawaz Sharif. The whole emphasis is over thermal power generation. If still not given priority the energy crisis could rise to 10,000MW over a couple of years.

The delay in the completion of 1,848MW Neelam-Jhelum and Chakothi-Hattian projects in Pakistan-administered Kashmir and Kohala project on the Jhelum, which were scheduled to be commissioned in June 2010, spoke volumes about the government’s lack of interest in pursuing hydropower plans.

In spite of the targets set in 2002, o n ly t h e 86 M W M a la k a n d - I I I project has been completed during the past eight years, increasing the installed capacity of hydropower projects to 3,226MW. Had all the 18 projects been

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Monthly AutoMark International

Hydroelectricity, which is a clean and renewable form of energy, costs only 37 paisa per kWh and is by far the cheapest source of energy for the country

implemented, Pakistan would have had 4,210MW of cheap hydroelectricity to keep the wheel of economic growth turning. The country has hydropower potential of over 120,000MW, of which 56,773MW is exploitable. However, it has only been able to tap 6,703MW. This is about six per cent of the potential and 32.8 per cent of the en ergy mix.

“Hydroelectric power is the most reliable energy source, even more than wind and solar which have capacity factors of only 12 per cent and 25 per cent, respectively.

In comparison, the hydroelectric plants have factors of 45 to 50 per cent,” The ministry’s latest initiative of building small dams to bring about a revolution.

“This assertion is propaganda, since the country will gain only 7MW and 300,000 acre-feet of water after spending Rs31 billion.” The argument that hydropower projects took too long to execute was weak in light of modern project management practices in the sector. It is strongly recommended that the national policy should shift from high-cost power generation to low-cost hydroelectricity. “Bad governance and intuitional weakness have reduced the hydro-thermal mix from 67 to 32 per cent at a huge cost.”

On the other hand our India completed the Salal and Dulhasti hydropower projects at an average cost of $3.28 million and $2.12 million per megawatt, while Kishanganga, Chutak and Nimmo-

Bazgo projects are under construction at $2.57 million, $3.18 million and $3.28 million per MW respectively. Despite an abnormal inflation, the average capital cost in Pakistan is $1.5 million per megawatt, much cheaper than in India.

Hydroelectricity, which is a clean and renewable form of energy, costs only 37 paisa per kWh and is by far the cheapest source of energy for the country, On the contrary, the ministry of water and power had made abortive attempts to import electricity at a much higher cost.

An attempt was made to import electricity from Tajikistan through a 650km transmission line, but attention was not paid to three multipurpose hydropower projects in the Federally Administered Tribal Areas which were 30km from the national grid and could add 1,315MW to the grid, the 740MW Munda project in Mohmand Agency, 400MW Kalangi project and 175MW Khazana project.

Run-of-the-River Hydroelectricity Concept

Run-of-the-river hydroelectricity is ideal for streams or rivers with a minimum dry weather flow or those regulated by a much larger dam and reservoir upstream. A dam, smaller than that used for traditional hydro, is required to ensure that there is enough water to

enter the "penstock" pipes that lead to the lower-elevation turbines. Projects with poundage, as opposed to those without poundage, can store water for peak load demand or continuously for base load, especially during wet seasons.

In general, projects divert some or most of a river’s flow (up to 95% of mean annual discharge) through a pipe and/or tunnel leading to electricity-generating turbines, then return the water back to the river downstream.

ROR projects are dramatically different in des ig n a nd ap pea ran ce from conventional hydroelectric projects.

Traditional hydro dams store enormous quantities of water in reservoirs, necessitating the flooding of large tracts of land. In contrast, most run-of-river projects do no t require a large impoundment of water, which is a key reason why such projects are often referred to as environmentally-friendly, or "green power."

The use of the term "run-of-the-river" for power projects varies around the world and is dependent on different definitions. Some may consider a project ROR if power is produced with no storage while a limited storage is considered by others. Developers may mislabel a project ROR to sooth public image about its environmental or social effects. A power station utilizing the run of the river flows for generation of power with sufficient poundage for supplying

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Monthly AutoMark International

Automotive Sector - Update

PAAPAM Skill Development Centers Partner With CBI Export Skills in Costing, Pricing & Negotiation Workshops Held at Karachi & Lahore

PAAPAM, the Association of Pakistan Automotive Vendors has started imparting a very useful service to its members as w ell as the g en eral manufacturing community to lead them to export led growth by providing sorely needed training in various skills needed in the export process.

A Workshop on “Costing, Pricing and Defending Your Price” was held in Karachi at the Ramada Inn and at Lahore at the Pearl Continental last week. CBI Trainers Martin Bitter, Jan Elferink and Local Expert Imtiaz Rastgar conducted the workshops.

The PAAPAM leadership has been quick to grasp the opportunity provided by The Netherlands government through CBI, The Dutch Centre for Promotion of Exports From Developing Countries.

Two well equipped Skill Development Centers have been established at Karachi and Lahore and already five workshops have been conducted together with assistance from CBI. In this way, PAAPAM is becomin g a lea din g Pa kistani Bus iness Support Organization, with the maturity to create its own Sector Development Plan and lead its members to becoming global exporters of auto parts.

The CBI is simultaneously running a B u s in es s S up po rt O r g an i zat io n Development Program (BSOD) for Pakistani BSOs. The objective of this program is to build the capacity of Pakistani BSOs to work together and create the skill base and coordination necessary to meet Pakistan’s goal of export led growth. CBI is mentoring EDB, TDAP, NPO, SMEDA, PFA and

PAAPAM under this program, which is executed by DART under supervision of CBI External Expert, Mr. Zaheeruddin Dar. A large number of PAAPAM members are part of the current CBI Export Coaching Program 2012-16 and are being systematically led through subjects like market focus, market research, buildin g data bases of potential d is tribution cha nn els , cus tom er relationship management, selling and negotiation skills, costing & pricing and trade fair participation. Most companies, who have participated whole-heartedly in the CBI ECP, have become sustainable exporters and are gradually experiencing export led growth.

Most leaders of PAAPAM have already realized the importance of diversifying away from Pakistani OEMS. It has become evident to a lot of vendor en terp rises t ha t w ith t he OE M customers, loyalty is only a one way street. Most OEMs lead vendors to make substantial investments to set up parts production lines for them and very soon the customers use the learning process to create a few more vendors, in an effort to drive down prices in an already low volume market.

Vendors like Mannan Shahid, SPEL, T h er mo s o le, K o ret ech , R as t g a r Engineering, Infinity, Meralastik, Darsons Rubber, GMS Forgin gs, MECAS have taken seriously to exports and are fairly well insulated to problems created by the local market situation or the Pakistani OEMs. Realizing the importance diversifying away and saving themselves from the

vagaries of the local market, PAAPAM leaders like Munir Bana, Aslam Rayaz, Mashood Ali Khan, Ali Allahwala, Iftekhar Ahmad, Amjad Wazir, S.M. Farooq are some of the leading PAAPAM m em bers , w ho se co mpan ies a re participating in the current ECP of the CBI. A shift into exports by these companies will also give better scope for sales of those components where OEMs have created multiple vendors to run down prices, while using PAAPAM to lobby the GOP to gain cost advantages.

It is sad commentary that while SMEs in the Vending Sector of Pakistan are stepping out on their own into exports, the captains of Pakistan’s Auto Sector are quite content to live a life behind SROs, and corner the local market to maximize profits. The Automobile manufacturers of Korea and Turkey have propelled the export led growth of their respective economies, and created successful global brands. Pakistan, however, lacked businessmen with such vision. But it is still not too late and close cooperation between local stake holders can still deliver to us our export led growth.

PAM A an d PAAPAM may fin d it rewarding to sit with the Federal Ministry of Commerce and TDAP and present a joint Sector Export Marketing Plan which may bring much needed sympathy to the Pakistani OEMs, as well a diversification away from the home market.

Energy Crisis - Article continued from Page no. 42

In November 2013, Prime Minister Nawaz Sharif had announced that his administration has envisioned that nuclear energy will add 40,000MW to the national grid by the year 2050 at an affordable cost. Presently, 21 thermal power stations are in service and powered by either by Furnace oil or with gas, 26 power plants are under construction and will be powered by coal, gas or furnace oil. water for meeting diurnal or weekly fluctuations of demand. In such stations, the normal course of the river is not materially altered.

The Technology: Hydroelectric power, or hydro power, is electricity generated from the energy of moving water. There are several types of hydroelectric facility, including impoun dments, run-of-river an d pumped storage. Impoundments and run-of-river projects are both powered by the kinetic energy of flowing water.

However impoundments use large reservoirs to restrict the flow of water while run-of-river projects use the natural flow of waterways. A pumped storage hydro facility produces electricity by moving water between reservoirs at different elevations during peak times.

In all three cases, water is usually fed either from a reservoir or the natural flow of a river into a turbine which is installed at the bottom of the dam. When water is released from a height onto the turbines, pressure causes the turbine blades to rotate. This in turn moves a shaft which is connected to an electrical generator which converts the kinetic energy of water into electrical energy.

The energy produced primarily depends on the volume of water and the height difference between the water source and the turbines.

Pakistan had a total installed power generation capacity of almost 23 GW in 2013. However, dependable or de-rated capacity is in the range of 16 to 18 GW during the year, due to variety of factors, whereas demand for electricity is increasing at an average annual rate of eight per cent. And according to World Energy Statistics 2011, published by IEA, Pakis tan ’s per capita electricity consumption is one-sixth of the World Average. World average per capita electricit y con su mption is 273 0 kWh compared to Pakistan’s per capita electricity consumption of 451 kWh. International Energy Agency has forecast that total electricity demand of the country will be 49,078 MW in 2025.

Pakistan has an installed electricity

Government is still not interested in utilizing the cheap hydroelectricity, which is only 37 paisa/Kwh. Ministry of Water & Power prepared a plan to build 15 run-of-river projects with a capacity of 1,258MW, scheduled to be commissioned by June 2007, but still they are not getting any attention from the government led

by Prime Minister Nawaz Sharif.

The whole emphasis is over thermal power generation generation capacity of 22,797MW. The average demand is 17,000MW and the sh ortfall is betw een 4, 000 an d 5,000MW. Oil (35.2 per cent), hydel (29.9 per cent), gas (29 per cent), and nuclear and imported (5.8 per cent) are the principal sources. In the next 10 years, peak electricity demand is expected to rise by four to five per cent, which is roughly 1,500MW. This dismal forecast is due to a lopsided energy mix, diminishing indigenous fuel reserves, inc re as in g circul a r d e b t a n d transmission hold ups. Pakistan has almost exhausted its gas reserves.

Imported oil’s price hikes affect the budget and its constant supply cannot be guaranteed. Pakistan has the pot en tial t o meet thes e en erg y challenges through hydel power but there are political and environmental issues in building dams. Rationality demands reducing reliance on oil an d goin g for a ltern atives. T he development of alternatives does not happen overnight. Pakistan will have to rely on imported fuels for the interim period at a huge cost. LNG is difficult to import, using coal has environmental is sues , using shale gas als o has

environmental issues attached with it, and wind power has transmission network challenges.

In November 2013, Prime Minister Nawaz Sharif had announced that his administration has envisioned that nuclear energy will add 40,000MW to the national grid by the year 2050 at an affordable cost. Presently, 21 thermal power stations are in service and powered by either by Furnace oil or with gas , 26 power plants a re under construction and will be powered by coal, gas or furnace oil.

Ministry of Water and Power has proposed five of Run of River hydro projects with installed capacity of 8678 MW. The detail of the projects are: • Suki Kinari Hydro Power project Kaghan valley, Kunhar River- 840 MW • Kotli Hydro Power project on Poonch River AJK- 100 MW • Bunji Hydro Power project Astor Distt Gilgit Baltistan- 7100 MW • Mahi Hydro Power project Jhelum River, AJK-590 MW • Jagran – II Neelum Hydro Power project Jagran River AJK-48 MW Cost effective renewable energy will definitely improve Pakistan’s economic performance. Energy efficiency along with conservation measures can result in profitable business units. Thus, exploitation of these sources of energy can lead to poverty alleviation. Use of indigenous renewable resources can help Pakistan in diversifying its energy mix. This will reduce the country’s dependence on any single source, particularly imported fossil fuel. Local environmental and health hazards introduced by fossil fuel powered electricity generation plants can be largely circumvented through clean re n ew a ble en erg y a lt er n a ti ve s .

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International Automotive Industry - Update

Yamaha eyes 10 per cent share in domestic scooter market

Japanese two-wheeler maker Yamaha is eying around 10 per cent share in the fast growing scooter market in India this year riding on its three models.

The company, which is present in the country through a wh olly-own ed subsidiary, currently has over 7 per cent market share in the scooter segment, which is pegged at around 3 lakh units per month.

"Currently, we are doing around 23,000 units of scooters a month. In the next few months we are aiming to get around 10 per cent market share in the vertical as our products are now well established in the market," Yamaha Motor India Sales vice president (sales and marketing) Roy Kurian told PTI.

Shell signs 20-year LNG supply deal with Japan’s Chubu Electric

A Singapore-based subsidiary of oil major Shell has signed a 20-year liquefied natural gas (LNG) deal with Japan's Chubu Electric, Shell said on last month.

Under the agreement, Shell Eastern Trading will supply up to 12 cargoes of LNG per year to Chubu Electric.

"Shell has a long history of supplying natural gas to Japan, and this agreement d em o nst r a te s ou r c o nt in ue d commitment to the country," said Maarten Wetselaar, vice president at Shell Integrated Gas. The deal, which will start in October, is th e first lo ng -term LNG supp ly agreement between Shell and Chubu Electric.

Goodyear Plans $500M American Tire Plant

Goodyear says it will spend $500 million to build a new tire plant that will produce about 6 million tires a year for Goodyear's North American and Latin America customers.

The company expects to decide on a location for the plant in early 2015 and said production should start in early 2017.

The Akron, Ohio, company also said it will reallocate $1.1 billion out of its cash flows from 2014 to 2016. It is raising its quarterly cash dividend to 6 cents from 5, and will add $350 million to its stock repurchase program.

That means the company has approved the repurchase of as much as $450 million in stock through the end of 2016.

Goodyear Tire & Rubber Co. says it could further expand the buyback program based on its financial performance. The company also plans to spend another $400 million on debt reduction.

Early this year, Goodyear announced it had fully funded its hourly pension fund with a $1.15 billion cash payment, ending more than a decade of dealing with the issue. The company said it was able to do so because of its strong cash flow in 2013.

Shares of Goodyear fell 13 cents to $ 26.0 3 in a ftern o on tra din g .. ..

Japanese motorcycle production up slightly in April Production of motorcycles by Japan’s Big Four increased 1.3 percent yearover-year in April, according to the Japanese Automobile Manufacturer’s Association.

A total of 40,713 motorcycles were produced in Japan in April. Suzuki was the only OEM to report a decrease, down 26.1 percent to 10,880 motorcycles.

Yamaha increased production 13.8 percent to 12,899 motorcycles, and Honda’s production grew 4.1 percent to 9,879 units.

Production in three of the four classes

General Motors announced it was recalling 2.4 million more vehicles in the United States as the giant automaker continues to address safety concerns in the wake of criticism.

GM announced four separate recall actions for various models dating as early as 2005 and as recent as the 2015 model year. GM said there have been no fatalities associated with Tuesday's recalls.

GM has undertaken 29 safety and noncompliance recalls in the US thus far this year. It said Tuesday's round of recalls will increase the financial charge for recalls in the second quarter to $400 million from the previous estimate of $200 million.

The biggest recalls covers 1.4 million crossover vehicles, the Buick Enclave, the Chevrolet Traverse and the GMC Acadia for the 2009-14 model years and the Saturn Outlooks from 2009-2010.

The issue is with safety lap belt cables, which can separate and increase the risk of injury, the company said.

The compan y recalled 1.1 million Chevrolet Malibus from 2004-8 and Pontiac G6 from 2005 because a shift cable could wear out, resulting in mismatches of the gear position... of bikes increased, with 51-125cc motorcycles seeing the largest hike, up 43.9 percent to 2,852 units. The 50cc or under group grew 9.2 percent to 5,409 units, and the over 250cc class increased 2.0 percen t to 26,296 motorcycles. The 126-250cc group decreased production 17.6 percent to 6,156 bikes.....

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Monthly AutoMark International

FUSO unveils ‘ Super Great V’

The ‘Super Great’ heavy-duty truck is bringing economic efficiency to the next level. Mitsubishi Fuso Truck and Bus Corporation (MFTBC), one of Asia’s l e adin g com me rcia l ve hicl e manufacturers, unveiled specifics of its new ‘Super Great V’ heavy-duty truck line. Proven by internal testing, the truck achieves 10% less fuel consumption (diesel + AdBlue®) compared to trucks currently running in the market, the Super Great V brings a major step forward for the long-distant transport in Japan delivering ‘more mileage with less fuel.’ In addition, the new Super Great V is the only truck with all models over-fulfilling the 2015 Fuel Efficiency Standard (FES) in Japan by 5%, which is subject to significant tax-exemption for the customers. The new Super Great V is now available for ordering at M itsubishi Fuso dealerships and regional sales centers across Japan.

Japanese car giants team up on green engines

A Toyota Fuel Cell Hybrid Vehicle. Despite growing demand for electric vehicles, internal combustion engines are expected to remain the main source of power for cars for the time being. Two of Japan's leading universities will join Toyota, Honda, Nissan, Suzuki, Mazda, Mitsubishi, Daihatsu and Fuji Heavy in developing environmentally friendly engines to stave off fierce competition from foreign rivals. -- FILE PHOTO

Japan's eight carmakers have joined forces to develop environmentally friendly engines to stave off fierce competition from foreign rivals, a press report said Sunday.

Two of Japan's leading universities will join Toyota, Honda, Nissan, Suzuki, Mazda, Mitsubishi, Daihatsu and Fuji Heavy in the project, which is mainly aimed at slashing engine emissions to meet tougher environmental standards, the business daily Nikkei reported.

By 2020 the group, which includes the

Tata Motors launches next-generation Tata PRIMA heavy trucks in Qatar Tata Motors, India’s largest automobile manufacturer, today launched three new next-generation heavy trucks from its PRIMA range of commercial vehicles in Qatar, along with its partners, Al-Hamad Automobiles. Having been extensively tested to confirm with standards of the Gulf region in terms of power, durability, payload, emissions and safety, these next-generation world-class trucks from Tata Motors, will continue to offer the Tata Motors advantage of lowest total cost of ownership to cus tomers.

Tata Motors conceived the Tata Prima in 2008. A combination of power, worldclass performance, fuel efficiency,

superior technology and safety, the Tata Prima has been built with technical inputs from across the world – an Italian cab design, engine technology from the USA and Europe, gearbox expertise from Germany, chassis frame know-how from Mexico, sheet metal dies from Japan and Korea, combined with Swedish precision on a robotic weld line, hence is also referred to as the ‘World’ truck.

Meeting varied end-user requirements the Tata Prima boasts outstanding material and build quality, comfort, driving dynamics and economy, as well as the lowest overall costs...

Un iversity of Tokyo and Waseda University, plans to develop technology which can cut diesel engine carbondioxide emissions by 30 per cent from 2010 levels.

The manufacturers plan to adapt the technology for commercial use in both diesel and gasoline-powered vehicles, the Nikkei said, hoping to gain a leg up over European carmakers as well as helping to meet tightening environmental regulations around the world....

India's Mahindra To Build Electric Two-Wheeler In Michigan A little slice of India will soon be moving into Michigan, with the announcement that Mahindra will produce an electric two-wheeler at a factory in Ann Arbor .

India's Mahindra Group is investing in a 37,000 square-foot facility to produce the GenZe electric scooter.

A small step-through scooter with a large storage box above the rear wheel, GenZe is designed as alight-weight , affordable way of getting around the city.

Its battery unit is removable, allowing riders to lift it off the bike and charge at any outlet.

When fitted, it delivers a modest range of 30 miles, depending on riding habits-but with a 30 mph top speed you won't be traveling too far anyway...

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