The issue of declining exports has become so serious that all the relevant stakeholders are now offering their suggestions to arrest the deteriorating trend.
Advancing the cause of his members, Chairman, Towel Manufacturers’ Association of Pakistan, Pervaiz Sheikh said that home textile-makers had sought the federal government help over the absence of any procedure for refund of provincial sales tax on services.
Provincial revenue authorities had been active and demanding provincial sales tax on services which were not refunded by the FBR as no procedure had been outlined and this was increasing the cost of doing business.
It has been revealed that the refundable amount of sales tax, customs rebate and provincial sales tax is now over Rs 350 billion.
Sharing dissatisfaction over the PM’s support package of Rs 180 billion, the Chairman said that even this programme was not implemented in letter and spirit and claims submitted under this scheme were long overdue. Multiple laws have been enforced by various government agencies.
These laws, numbering almost 150, have been found to be cumbersome and impractical, triggering cost of doing business to shoot up, besides tormenting manufacturers and promoting corruption in government departments.
The rates of gas, electricity and water are not only different within the country but are also higher than those paid in other countries against whom Pakistan is competing in the international market.
The industry should be provided with electricity at Rs 8 a unit inclusive of all taxes while gas for Rs 600 MMBTU inclusive of GIDC. SBP is not finalizing decisions to solve problems of sick industries while the industry in Punjab is faced with gas shortage while manufacturing units in Sindh are facing water shortage.
Responding to these demands, Akram Ansari, State Minister for Commerce and Textile, has assured the textile manufacturers of his complete support to solve their problems and to raise voice for their demands at the highest forum of economic policymaking Economic Coordination Committee (ECC) of the Cabinet.
He asked the Association to submit their proposals for the perusal of PM at the earliest so that decisions on rejuvenating the industry could be taken without delay.
We feel that most of the issues raised by the Towel Manufacturers Association (TMA) are genuine and relevant to the prevailing situation.
Home textile-makers, particularly the towel manufacturers, need to be commended for their efforts towards introducing Pakistani products in the global market and earning the much-needed foreign exchange to meet import requirements besides creating employment and reducing poverty in the country.
However, while the textile industry did fairly well in the initial stages, it has lost its competitive edge in the global market with the result that exports have suffered in recent years and domestic market is also dominated by foreign products. In this kind of situation, there is no other alternative but to provide the necessary incentives to the export sector to regain its competitive edge and listen to its grievances very carefully in order to overcome them.
The tax authorities, for instance, continue to pile up refunds of billions of rupees of cash-starved sectors unreasonably and deprive them of the much-needed liquidity to get the industry going.
It is surprising to note that no proper mechanism is yet in place to transfer the provincial sales tax on services to the FBR to be passed on to the industry and over Rs 350 billion are stuck in the FBR outbox. Even the PM’s support package is not being utilized properly to achieve the desired objective of export expansion.
On top of that, there are numerous laws that different government departments execute but these laws are routinely employed towards extracting bribes and other favours.
These cumbersome laws need to be revisited in order to facilitate industrial expansion rather than harass industrialists. It is also about time the relevant authorities notified rules to be applicable to EPZs to be established along the China Pakistan Economic Corridor (CPEC).
However, the demand of reducing the cost of electricity and recovering GIDC on gas needs a more in-depth analysis because of its fiscal implications and added burden on the rest of consumers of these services. Some of the financial problems of exporters could be overcome if the rupee is adequately adjusted against other currencies to wipe out the disadvantage being faced by the Pakistani exporters.
Akram Ansari has promised to put up the case before the ECC. Hopefully, the relevant ministries will realize the gravity of declining exports. It is, therefore, widely expected that they will not oppose the suggestions which are reasonable and in the larger economic interest of the country.
However, it also needs to be realized that the textile industry itself has to adopt innovative techniques and spend more money on R&D to improve the quality of their products strictly in accordance with global standards.