A useful suggestion

The President of the Karachi Chamber of Commerce and Industry (KCCI), Siraj Kassam Teli, who led a trade delegation to India recently, has demanded of the government in a statement to constitute a commission with a view to examining and identifying factors adding to high cost of production in local industries, particularly the export-oriented industries.
He rightly contended that the industries in Pakistan were placed in a disadvantageous position vis-à-vis similar industries in the neighbouring countries in so far as the competition in the export market was concerned.
He cited the comparatively high cost of power, high rate of taxes, chronic problem of sales tax refund, cumbersome labour laws etc, as the major hurdles in the way of Pakistan's export-oriented industries.
In this situation, he suggested, an early identification of the problems faced by the local industries would make it possible for the government to incorporate remedial measures in the next budget and trade policy.
There can be no two opinions that in view of the fast moving changes in the pattern of international trade due partly to the implementation of the WTO rules by 2005 and partly to rapidly growing trend of regional trade groupings, Pakistan must keep pace by removing the brakes on the capability of local industries thereby enabling them to make their operations cost effective and increasingly efficient.
Moreover, the last SAARC summit has approved SAFTA as a framework to promote movement of free trade between the member countries by removing non-tariff barriers or lowering the tariffs for the mutual benefit of the countries of the region with a preferential treatment as opposed to trade with countries outside the regional arrangement.
In this context, Pakistan will have to streamline its tariff structure in addition to ensuring that the cost of production in local industries remains at the level of the unit cost in the member countries of the SAARC.
This exercise would undeniably underscore the need for removing distortions in the cost structure of local export industries.
Since the implementation of SAFTA will be put through from 2006, a deeper examination of Pakistan's capability to face open competition from the identical industries of the SAARC countries should be taken up in right earnest preferably in the coming fiscal year.
The KCCI's suggestion that the representatives of the private sector should also be included in a commission to identify the various aspects of cost-push inflation in the industrial sector, should be given due consideration by the government.
It may be pointed out here that the government has already set up a National Productivity Organisation (NPO) under the Ministry of Industries.
The organisation is designed to make a probe in different groups of industries with a view to judging the productivity of both labour and machines.
This exercise is undoubtedly a welcome development which is likely to contribute significantly to the objective of improving the level of productivity in our industrial sector.
However, this alone is not supposed to produce the desired results unless the various factors which affect the cost of production in industries from time to time, are also identified and remedial measures are undertaken.
A comprehensive study may prove to be a useful approach to enable the government frame policies aimed at facilitating industries to compete successfully on the export front.
The KCCI delegation which held meetings with the representatives of different chambers of commerce and industries during its visit to India recently, appears to have come across with data and other information about the cost structure of industries in the neighbouring country.
It may be assumed that on the basis of this first hand knowledge the KCCI delegation has come to realise the need for a commission to review the causes of high level of cost of production in local industries.