"We do not want any subsidy we want only level playing field," said Pakistan Textile Exporters Association (PTEA) Chairman Arif Tauseef here on Monday while briefing newsmen on problems confronting textile exporters.
He said that Pakistan's textiles were overly burdened with duties, high cost inputs and inflationary credit finance. "Research and development support extended recently by the government to home textiles and made-ups sector is basically intended to boost exports of the country. But this is not the real solution to the problem. The real problem is that exporters are facing tough competition in international market from rival countries' exporters. Pakistan's exports are comparatively costlier due to high cost of production in the country," he said.
He said that the cost of inputs like gas, electricity and credit finance were comparatively higher in Pakistan and hence Pakistan's exports were incompetitive in international market. It was for this reason that the country's exports did not fare well in the quota phase-out regime and a declining trend started when fabrics' exports in July 2006 plummeted to $154 million from $207 million of November 2005.
In the context of heavy investment of $4 billion in machinery and 2.5 times investment in infrastructure (land, building, labour, raw material, electricity, gas) the exports should have reflected an increase of 40 percent in quota phase-out period but the performance was rather negative, he added.
He said that the real reason of this reverse trend was exorbitant escalation in the cost of inputs like electricity, gas and petroleum products, he said.
The PTEA chairman said that in the new world trade regime, financial support and subsidies on exports were of no real avail as the benefit was either passed on to the foreign buyers or was wiped out by other factors. He cited the example of reduction in export refinance rate of 1.5 percent announced recently in the textile package in July 2006, which has been offset by proportionate KIBOR rate in August 2006. The facility has been eroded even before the exporters could avail of it, he said. Subsidies and support are no solution to boost exports, he said. The real solution is to reduce cost of inputs like gas and electricity to provide level playing field to Pakistani exporters visa-a-vis their rival countries' exporters and thus make them competitive in international market, he said.
He said that liquidity crunch was also hampering the turnover of exporters. He said that exporters felt relieved when sales tax was made zero-rated and this positive measure was welcomed, but billions of rupees were still stuck up in deferred sales tax refund cases withheld due to minor objections and verifications even 450 days after zero-rating. Had this amount of exporters been released, their liquidity position would have eased, he said.
Protective duties on polyester, dyes and chemicals charged to exporters are another burden on exports making them incompetitive, he said. Impact of these duties in cost-push is about 8 percent, he said. He urged the government to return this levy on exports.
Duty drawback rates have again been slashed without taking the exporters into confidence. Resultantly, huge stocks with duties paid on them would adversely affect the cost of exportable goods rendering exports incompetitive, he said.
The PTEA chairman said that last year an investment of Rs 180 billion in textile machinery and infrastructure facilities was made by exporters with the aim of value-addition and providing employment opportunities to people. This investment was intended to give quantum jump of 40 percent to textile exports but surprisingly the exports for July 2006 went down by 4 percent, which means that actual decrease in exports was around 44 percent. The exporters are wondering what the future of huge investment on machinery and value-addition would be. The exporters apprehend that if this trend continued there would be large-scale unemployment and the workers would come on the road and create law and order situation.
Arif urged the government to take a realistic view of the matter and facilitate the exporters by actually zero-rating the exports through reduction in cost of inputs removing burden of protective duties, easing liquidity through pending sales tax refund and reducing cost of gas and electricity to make exports competitive in real terms.
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