GPCCI refutes LC's being established for German Automotive Brands on absurd estimates

February 10, 2023 (MLN): The German Pakistan Chamber of Commerce & Industry (GPCCI) has rebuked false reports claiming that banks in Pakistan are setting up Letters of Credit (LCs) with absurd amounts for German automobile brands operating in the country.

GPCCI stated that these false reports are part of a deliberate campaign aimed at maligning German brands and damaging the strong relationship between Germany and Pakistan.

According to GPCCI, the reports have led to commercial banks in Pakistan humiliating official importers of Audi, BMW, and Mercedes-Benz.

The chamber revealed that data for the first six months of the current fiscal year shows that 64.80% of internal combustion engine vehicles were imported by the grey market and 35% of electric vehicles were imported by official distributors, with only 0.2% of internal combustion engine vehicles imported by companies.

The chamber wrote a letter to the State Bank of Pakistan (SBP) governor, highlighting that banks in Pakistan were being instructed not to grant LCs (regardless of the amount) for any vehicle or spare part imports.

GPCCI stated that this restriction appeared to be targeted toward German companies. The chamber also warned that they may launch a protest with the foreign office, European Union, and WTO if the situation remains unchanged.

The total value of vehicles imported into Pakistan from Germany (by authorized representatives) during the last fiscal year was less than €70 million, which is a fraction of the total import bill of $80 billion.

The LCs figure for the current fiscal year is less than €8mn, according to GPCCI. The letter noted that 85% of these figures and orders in hand with German partners are for electric vehicles.

Germany and Pakistan have been working on development cooperation since 1961 and over 40 German companies have established themselves in the Pakistani market.

Germany is one of the few countries with which Pakistan has a positive trade balance, with exports to Germany at $2.5bn and imports from Germany at $1.3bn.

German exports to Pakistan mainly comprise of machinery, chemicals, and pharmaceutical products.

As the current GSP+ scheme of the EU is set to expire in 2023, Pakistan is required to reapply for the new GSP+ scheme. Germany has been a strong supporter of Pakistan's application in the past.

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