Former chairman, Korangi Association of Trade and Industry (Kati) Shaikh Manzar Alam has suggested that custom duty on import of textile-related machinery, spare parts, generators for captive power plants and their spare parts and other such equipment for textile industry should be made zero rated in the upcoming budget.
In a communication with to Federal Finance Ministry, he further suggested that the government should reduce mark-up rate for investment and industrialisation and sign Free Trade Agreement (FTA) and Regional Trade Agreement (RTA) with USA and other countries for duty free entry of Pakistani products into their countries.
Although Pakistan is frontline ally of USA on combating terrorism, FTA has not been signed whereas countries like Morocco, Kenya, Bahrain and Oman enjoy this facility, he observed.
Mr Alam pointed out that private sector is the main engine of GDP growth. If it is hampered by reducing its access to credit slowing down GDP growth and decreasing the surpluses of goods available for export. Reduced exports are likely to further widen the trade gap that is already running at an alarming high level of 11 billion dollars during 10 months of fiscal year.
High prices and higher rate of inflation are likely to result in a further erosion in domestic saving rate and consequently in the levels domestic investment, making Pakistan even more dependent on foreign investment flows to maintain its current level of GDP growth.
The former chairman of Kati noted that Pakistan's textile industry is passing through serious crisis. In this context the National Assembly Standing Committee on textile industry has come down hard on the Ministries of Finance, Food, Agriculture and Livestock and Petroleum and Natural Resources for their extremely negative internal policies that have resulted in the present crisis in the industry. The committee has observed that the rise in the cost of doing business was major cause of closure of nearly 500,000 spindles and mills.
Rise in utility tariff, increase rates and cost of finance affecting the investment as well as the liquidity, lack of value addition to keep pace with competitors, stagnant or decrease unit values, capacity and productivity issues, greater support and incentive to close competitors by their countries along with great preferential market access etc were some of the reasons which had badly hit the textile industry.
He added the national assembly standing committee had also noted delay on the part of Central Board of Revenue (CBR) in refunding sales tax on exports of approximately Rs 100 billion for the last two years causing liquidity crisis in large units in Karachi and Faisalabad.
The committee pointed out that India and Bangladesh were subsidising their industry in cost factors and their industry was in a position to lower its prices. It is reported that there was 15 percent price difference in Pakistani products with its close competitors.
External trade and tariff barriers such as higher import duties by the USA and dumping duties by the European Union were also identified as major reason for decreasing exports of Pakistan's textile. He emphasised the need to improve bilateral relations with USA for a greater market access.
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