Impediments to export growth - I

Increasing exporting is not as simple as pressing the accelerator of a car. There should be a willingness of our exporters to offer their products on competitive prices to attract the foreign importers to buy. The foreign importers are sated with supply offers from all over the world. They plan their buying well in advance to the actual requirements that are very well organised. Most finished goods' importers have buying cycles which depend upon seasons and fashions. Product ranges, styles and colours are all carefully designed and coordinated and the seasonal programmes are made four to six months in advance. So it is not simply a matter of our offering favourable terms today and the foreign importers obliging us with their demands the next month. There is a lag of six months at least. With the sort of uncertain reputation we have as a country and as exporters, it takes time to convince them that their demands and orders will be fulfilled with earnest. So a concerted effort has to be made to boost exports for a year or two before it makes a significant impact in the value-added sector. Commodities will respond sooner; witness the exports of wheat, rice and sugar.

The initial devaluation was followed by an imposition of sales tax on all items in July. This sales tax of 17 percent on all inputs has a detrimental effect of 14 percent to 15 percent on value-added exports. About 14 percent to 15 percent of the value of the export is tied up in sales tax paid to the government by the industry on a monthly basis. As per rules, this has to be processed "within 72 hours" after an application is received by the FBR and refund affected within "four to five working days" thereafter. A new miracle of the computer age!

Alas that was only in theory. In practice, it took four months and a lot of begging and pleadings for the first applications to be processed. Then it was discovered that the computer programme had a few shortcomings and these hapless applications for July were rejected by the computer. That is where they are today, firmly rejected. Why? Nobody knows - definitely not the applicant. Then the computer was to be reprogrammed and this took time and in November, the refunds for August started arriving and everyone has a sigh of relief. Meanwhile the smaller and financially weaker firms were in such a cash crunch position that many had to curtail or suspend operations. So one can witness that export figures for December started declining.