Mian Iqbal Hassan, Convenor of the Sub-committee of MCCI on Environment and President of Board of Management of Industrial estate Multan, said that Pakistan had introduced import-oriented policies and crushed the manufacturers of exportable items, causing continuous budgetary deficits, which badly shattered our economy.
Talking to newsmen here on Wednesday, Mian Iqbal Hassan said that the cost of production had increased considerably due to the high cost of raw materials for the engineering industries, obtained under new policies from the exporting countries. They had imposed anti-dumping export duties on the raw materials and export incentives on value addition items.
Moreover, the devaluation of the Pak Rupee had resulted in a 40-50 percent increase in raw material prices, electricity load shedding had badly affected production, resulting in high cost of production. The highly exorbitant increase in gas and electricity prices as well as the high rate of POL had increased the cost of production and transportation costs.
Plus highly exorbitant interest rates were offered by commercial banks. The State Bank had loosened the check and balances on the banking policy to promote forceful lending to the GOP. The government was fetching money from the commercial banks for their day-to-day operations.
The commercial banks are hesitant to provide capital finance to industries even at higher rate. The State Bank has refused the government to provide money and print more currency and also refused to provide foreign exchange to commercial banks to import POL, which is a major component of our import bill. This is why the government is not interested to reduce the bank interest rate.
The government has increased the sale tax on import of raw materials to 18.5 percent and local to 16 percent. The government has imposed 1 percent SED and increase with holding tax from 2 to 3 percent on imported raw materials.
Last year Pakistan Imports were 34.5 billion dollars and exports 17.7 billion dollars having trade deficit of 17 billion dollars. The foreign and local debt has mounted to 120 billion dollars. It is 72.75 percent of our GDP. The cost of debt servicing reflected in the budget is Rs 660 billion equal to about 50 percent of our total revenue receipt.
He said the budget for the year 2009/2010 shows total revenue receipt of Rs 1380 billion against total volume of Rs 2480 billion. The balance was to be met by the unreliable Friends of Pakistan. It needs drastic cuts under the prevailing situation when the foreign debt is alarmingly increasing and indigenous production shrinking.
He further said that the deletion programme was abolished for local assemblers and Tariff Based System (TBS) was introduced to protect the local industry. The assemblers were reluctant for no farther addition in TBS list. The TBS has not been exercised in real letter and in sprit. It is based on locally manufactured items list of 1998 with addition of only 9 items in 11 years. There are thousands of items produced during this period but has not been included in TBS list.
The indigenous vendors are at the mercy of auto assemblers. The concession to OEM assemblers, ie 0 percent duty and sales tax for import of agricultural tractors their implements and parts. Also 0 to 35 percent to other vehicle assemblers of chapter 87 has badly affected the vending industries. CNG engines and their parts are importable at 0 percent duty and sales tax even produced locally.
The CNG engine part and other body parts are inter changeable with other vehicles importable at higher tariff. Agri single cylinder engine parts, stationary engines, agri implements, milk chillers, harvesters, cotton pickers etc produced locally are importable at concessionary rate of duty and taxes.
Illegal imports of factory left over, job lots, stock lots or rejects at a very low rates that are below the cost of raw materials by weight. The Government should have imposition of 35 -50 percent LC margin for import of luxury items, certain class of food items, imported beverages, confectionery goods, cell phone, vehicles and their parts to reduce burden of huge import deficit.
The high cost of production in Pakistani merchandise, uncompetitive in local /Global market would result in to loss of exports and increase in trade deficit. If the corrective measures are not taken in time it would multiply the economic problem and causing massive un-employment and this may force the industrial workers to streets, he warned.
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