Good and well thought policies help develop systems that lead societies towards general economic well being. Unfortunately, the Apparel and Clothing industry is still waiting for consistent policies that could help it contribute to the general economic well being of the people of Pakistan. Out of frustration some industrialists have even gone to the extent to ask for consistent policies whether good or bad. However, with the advent of the quota-free era characterised by the cut throat competition being faced - we can no longer afford bad policies.
In the yesteryears the Government would normally send our Association an officially worded letter soliciting advice on the next trade policy. They would expect an answer ASAP. A few times the members did sit down and make recommendations only to be disappointed on the day the trade policy was announced.
With this bad taste the members then abandoned the habit of making any recommendations at all resigned to the notion that the trade policies are made abroad. From 1st January 2005 onwards we all have to change our attitudes to avoid further damage. The Government must listen to the people involved in this business who are dealing with problems on a daily basis.
There are two fundamental differences between the clothing industry and other industries. First, the size of factories range from very small to very large. While 60% of the problems are similar for all but there are many problems that vary with the size of a factory.
The bulk of the business is being done by small to medium sized industries. While the policies have been made keeping only the large factories in mind. For example, the district council tax for some one with 10 machines is the same as for someone with a 1000 machines. Strange.
The second fundamental difference is that the products that our factories make have achieved maximum value addition at the time of shipment. Many different type of material, large and small need to be used in making the final product. Even if a single article of material is missed the product is rejected.
The policies that we get do not address the whole ambit of materials used. For example while we may have a great policy on fabric import we have a very poor policy on Garment imports etc. The whole year is then wasted trying to reconcile the gap created by these policies.
It is important that policy makers must be aware of all the aspects involved in the making of a garment.
FOLLOWING ARE THE MAJOR ASPECTS:
1. Recently the Government is actively promoting new industrial areas or as the new jargon has it "cities". It seems that policy makers have simply abandoned the existing sites and industrial areas. The existing units are now dependent on the whims of the district governments and the laws that they choose to make. Which to say the least are quite confusing. One year the town nazim collect taxes the next year we learn that this was the right of the city nazim and the town nazim should now refund the money to the factory etc. Building laws and the squarefoot taxes change on the hour. Whenever we talk about infrastructure development the convenient 80/20 formula is laid in front of us.
First there is a need to develop the existing infrastructure and where there are exporting units the 20 percent needed by the local government should be funded from the EDF PSOP. The building laws must encourage factories to expand rather than abandon capacity building plans. All local taxes must be rationalised with input from the trade Associations.
2. It is interesting to note that over the years businessmen have not pushed the government to find buyers for their product. What they have asked is to help provide good service and allow them to maintain good relations with their buyers. The three important aspects that help maintain a fruitful relation are:
A) To be able to visit the buyer on short notice to solve problems or discuss new business prospects.
B) To be able to send and receive samples.
C) Be able to do research and development for future business.
Unfortunately we are weak in all of the above. With regards to point B, the smaller factories are finding the burden of the Custom duties levied on samples too big to bear.
The time it takes to get visas for exporters must be reduced. There should be no custom duties on samples weighing up to 15kg. At least 5% R&D incentive should be added to the current package being offered by the Government.
3. ON TAXATION:
(a) Income Tax, Sales Tax collection, The Income Tax collection from the exporting industry of Pakistan is functioning very satisfactorily, Sales Tax imposition has become a serious headache. Its refund after exports takes months and months. Cases as back as of July, 2004 are still awaiting.
(b) The snag even in SRO 410 is that indemnity bonds / bank guarantees filed with Customs are returned at "Convenience" after exports have reached its destination long age.
4. UTILITIES PRICES: There is hardly a month that prices of utilities service remain undisturbed. None of the industrial unit is in a position to forecast future years compatibility of production costs / sales earnings due to increases in utilities rates etc. on one excuse or the other.
5. REGULATORY AUTHORITIES: The attitude of the regulatory staff is far from satisfactory. Refunds from any agencies is considered as if some special favour is to be done. Visit any law & order agency offices, law courts, civic amenities offices, District offices and some offices take months and months to take a decision.
6. RAW MATERIALS SUPPLY AT COMPETITIVE RATES: The demand for zero-rated import of raw materials genuine and it was observed that since DTRE (No duty no drawback) Scheme is still at the draft stage. SRO 410 should run simultaneously parallel to any new import scheme; as 410 allows facility to small exporters of import current SROs do not address our problems completely and should be implemented.
7. MONITORING COTTON PRODUCTION / EXPORTS: The meeting participants suggested that instead of exporting raw cotton, spinned thread and yarn and fabric; there should be proper monitoring of cotton accurate production, actual use by the value added industry much in advance and only surplus should be exported.
8. EXCESS FREIGHT CHARGES FOR UP-COUNTRY EXPORTERS: The cost of freight charges of export consignments going to Karachi for onward shipments is on the increase. Railways Facilities are not prompt; private trucking of goods is also expensive. The demand was to request Railways to start container carrier train from Sialkot / Lahore on daily basis.
9. HIGHER INTEREST RATES: Interest rates have started going up. It will adversely effect exports. Rules under Part-I & II of foreign exchange refinance scheme also need revision; a third part has to be created for SMEs who are short of Collaterals.
The Secretary was in favour of provision of assistance in guided investment and focus lending in a Industry - through Banking Institutions. He offered one-to-one meeting with Punjab Bank to look into specific problems.
To achieve the target of weaving good policies, it is essential to strengthen and maintain a good private public relationship.
Comments
Comments are closed.