Export sectors: SBP asked to review limits under EFS facilities

ISLAMABAD: The Export-Advisory Council on Textiles has directed the State Bank of Pakistan (SBP) to review limits under the Rupee based discounting facilities of the Export Finance Scheme (EFS) for maximum facilitation to export sectors after a few members of the Council raised this issue.

During the maiden meeting of Council presided over by caretaker Minister for Commerce and Industries, Gohar Ijaz, the members of the Council noted that Commerce Ministry formulated Textiles and Apparel Policy 2020-25 after thorough consultation with the public and private stakeholders and it encompasses a detailed action plan to double exports of textiles and apparel products within five years.

However, disruptions in implementation of policy interventions/ support measures by the Federal Government and relevant Ministries/ Departments are making the sector uncompetitive vis-à-vis high energy costs, liquidity issues, skyrocketing policy rate, high mark-up and limited credits under financing schemes, import restrictions, exchange rate volatility etc.

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The members emphasiwed that export oriented sector requires at least medium-term predictability on key indicators such as energy costs, exchange rates and borrowing costs to hedge against different sources of risk for accurate costing while future orders.

The members highlighted that Pakistan’s textiles and apparel sector is majorly dependent upon cotton based exports irrespective of the fact that global fibre mix has been shifted from the cotton to non-cotton (i.e. 60 % MMF - Man Made Fibre, 10 % recycled).

However, higher import and anti-dumping duties on imports of MMF (PSF, PFY) allows the domestic producers to keep the prices high, making MMF domestic supply financially unavailable for the export sector. It was further identified that industry also needs to strengthen the expertise and enhance capacities to export MMF based products.

It was decided to review customs and anti-dumping duties on MMF materials in consultation with textiles and apparel associations and the local MMF producers.

On market access, trade promotion and marketing, the Council members stressed upon the need to gain preferential market access from USA, Japan and Canada etc. so that textile and apparel sector would be enabled to have a level playing field same as that of regional players and boost exports.

Being cognizant of the significance of the matter, Commerce Ministry shared that it is in regular discussions with the counterparts at the level of G2G negotiations to explore the possibility of gaining the market access of USA, Japan and Canada.

One of the major issues faced by exporters in international markets is a sharp deterioration of Pakistan’s image over the past few years.

The private members, therefore, stressed the need to engage international consultants for effective trade diplomacy (particularly in USA and EU) and focus on more image building through Branding Pakistan and meeting the key international brands and retailers. Secretary Commerce advised the private sector to submit a comprehensive proposal and nominate 3-4 individuals for this purpose.

Caretaker Minister for Commerce and Industries, Gohar Ijaz informed the members of the Council that Commerce Ministry will soon be organizing “Brad Pakistan Conference” in Pakistan wherein the international brands and retailers would be invited.

Further, he underlined the need to establish “Export Display Centres” in Islamabad and the major industrial clusters to showcase manufacturing capabilities of Pakistan’s industry to the international community visiting Pakistan.

The private sector members suggested to do the needful through Trade Missions abroad and Foreign Office to convince international buyers to establish their sourcing offices in Pakistan.

The meeting decided to organize buyer-supplier meets and participate in international networking events. It was also decided to encourage international brands and retailers to open their offices in Pakistan.

The members highlighted that international buyers face numerous issues when traveling to Pakistan which is the major hindrance in export promotion/ marketing. Key export destinations have active travel advisories against Pakistan that often prevent the buyers from visiting Pakistan. Moreover, the buyers frequently face visa related issues due to various administrative reasons.

Ministry of Commerce assured the private sector members that the dedicated facilitation officers will be nominated to facilitate exporters in quick visa processing of their buyers through MoFA.

It was decided that visa processing of international buyers would be within 24 hours and requirement of invitation letters from the Chambers for visa processing would be waived. MoFA will also develop Pakistan Travel Advisory at par with the peer countries and global benchmarks.

The private members of the Council expressed their concerns regarding stuck-up refunds of Sales Tax (regular, deferred, provincial), Income Tax and Customs rebates and unpaid claims under Government Support Scheme i.e. DLTL, TUF, SSCO.

The meeting asked FBR to clear Sales Tax refunds (within 72 hours as per Sales Tax Act) and Income Tax refunds and Customs rebates. Finance Ministry has been directed to release the budget allocation for clearance of ready for payment claims of DLTL, Technology Upgradation Fund (TUF) and Social Security Contribution Order (SSCO) of Punjab and Sindh.

Secretary Commerce shared that EDF is now housed at MoC and emphasized that a framework needs to be developed for effective utilization of EDF proceeds in terms of export enhancement and trade promotional activities.

The members of the Council shared that the various regulations have either been introduced or are undergoing legislative process by economic blocs and countries to ensure transparency in textiles and apparel supply chain, which require efficient mapping to track down various modes in the chain for developing a reliable industry in which social and environmental standards are protected.

They further indicated that traceability of entire chain is needed to give traceability evidence to the buyers in USA, EU and UK which would require complete mapping from farm to finished product.

Director General (Textile) shared that MoC had already requested FBR to deploy track and trace system with a unique bale identification number initially in ginning factories in Pakistan and further extend it to all the tiers for coverage of entire supply chain.

Further, National Textile University (NTU) in collaboration with trade Associations and industry had submitted a proposal to EDF to establish DNA testing laboratory for traceability of cotton origin, which will be placed before the EDF Board for consideration in upcoming meeting.

The members noted that international buyers are getting increasingly stringent about compliance with international social, labour, environmental, OSH standards. The National Compliance Centre (NCC) must therefore be activated with the utmost urgency to facilitate firms especially MSMEs in meeting international compliance standards.

Secretary Commerce shared that four thematic specialists related to human rights, labour rights, climate change/ environment and governance have already been hired and deployed in NCC and they have already done the mapping of existing national laws.

The MoC has allocated a dedicated space for NCC and EDF Board has approved initial seed funding of Rs 300 million for NCC. He further shared that PSAC will further be notified by MoC and NCC is expected to be operational by the end of next fiscal year.

Members highlighted that there is a need to significantly improve inland transport infrastructure to reduce logistics costs.

Additionally, the outbound shipping times from Pakistan are very high as mother ships do not come to Pakistani ports and shipping through feeder vessels is time-consuming due to loading/ unloading and other related issues.

The Council directed SBP to review limits under the Rupee based discounting facilities of EFS for maximum facilitation to export sectors as the few members of the Council talked about issues related to rupee discounting facility introduced by SBP under EFS.

SBP, is however of the view that the facility is available through commercial banks at a very low interest rate but there might be issues of limits with banks.

Wrapping the meeting caretaker Commerce Minister announced that the exporter that will cross the benchmark $1 billion exports till June 2025 will be conferred with highest civil award.

Copyright Business Recorder, 2024