Home Business Pakistan Steel Mills playing dirty as Renault struggles to enter Pakistan

Pakistan Steel Mills playing dirty as Renault struggles to enter Pakistan

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French automaker Renault’s big plans for launching itself to a thriving Pakistani customer-base is in the doldrums; Pakistan Steel Mills, which had earlier come to an understanding with Renault, has now backed out and refused to provide land for the manufacturing facility, a local publication reported, quoting an official of the Ministry of Industries and Production. The official said that Renault had approached the ministry with a complaint that the National Industrial Parks Development and Management Company (NIP) had been coercing the automaker to sign an open-ended undertaking for bearing any increase in the cost of land being provided for setting up the vehicle manufacturing plant in Karachi.

Renault, which has joined hands with local partner Al-Futtaim Automotive Pakistan (Private) Limited, had been earlier allocated 50 acres of land for Rs1.3 billion (Rs26 million per acre) for its assembly line. The price was to be paid in three equal installments. In a rather unethical practice, the PSM board of directors has come to the abrupt decision that it would carry out a fresh price assessment of the allotted piece of land and seek the revised price from the buyers.

According to the deal, Renault will bring its latest products and technology while Al-Futtaim will establish a new manufacturing and assembly plant and distribute the cars. It is expected that the Renault SUV Duster will be the first vehicle to be co-launched by Renault and Al-Futtaim.

Almost eleven years ago, the Economic Coordination Committee (ECC), in its meeting held on January 10, 2007, had approved the establishment of an industrial park on the PSM land. It had also set the price of land at Rs7 million per acre and determined the share of both sides. Accordingly, an agreement was signed between PSM and NIP on July 13, 2007 in accordance with the directives of the Ministry of Industries that outlined modalities for establishing the park, responsibilities of both sides and the mode of payment for the sub-lease.

Now, the Ministry of Industries, which is upset about the decision of the PSM board on conducting a fresh price assessment, has sought intervention of the cabinet for resolution of the issue.

Read more: Exploiting Pakistan’s steel mills

The cabinet, in its meeting held in February 2018, was informed that since 2013, PSM being the owner of the land had been changing the price for one reason or the other, prompting several investors, who had deposited their first installments for the land, to withdraw their bids. The cabinet was requested to resolve the land lease issue, specifically with reference to the amount to be paid by Renault and Al-Futtaim Automotive Pakistan.

During discussions, the cabinet members noted that Pakistan had received such a large foreign investment after a long time and it was totally inappropriate to treat investors unfairly by inflating the agreed price of allotted land.

The French company Renault is considered to be among the more prominent of the new entrants. It is reported that Renault has entered into a definitive agreement with Al-Futtaim to gain access to the Pakistani market.

Investment by a French company would be good for the image of the country and open doors to further capital inflows; they emphasized and expressed their displeasure over the PSM board’s move to treat an industrial estate like real estate that discouraged industrialization. The cabinet constituted a committee under the chairmanship of Privatization Minister Daniyal Aziz that would look into the issue and give its recommendations for addressing the challenge.

Read more: Pakistan Breakfast at Davos 2018

Both international players, as well as local manufacturers, are prepared to introduce new models in the car market. The new entrants range from French automaker Renault to Korean carmakers such as KIA and Hyundai as well as Chinese firms, GVS had earlier reported.

The French company Renault is considered to be among the more prominent of the new entrants. It is reported that Renault has entered into a definitive agreement with Al-Futtaim to gain access to the Pakistani market. According to the deal, Renault will bring its latest products and technology while Al-Futtaim will establish a new manufacturing and assembly plant and distribute the cars. It is expected that the Renault SUV Duster will be the first vehicle to be co-launched by Renault and Al-Futtaim.


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