Where are billions of dollars collected as EDS?

Let me explain what constitutes EDS. It stands for “Export Development Surcharge.” This is a deduction of a quarter of one percent of all export proceeds that we earn which are put into a separate account called the EDF or Export Development Fund. This fund was created to build vocational schools and colleges to upgrade the skills of workers and managers of the export-oriented industry. The fund is administered by the Ministry of Commerce solely for the purpose of export promotion. The surcharge was agreed to mutually by the value-added exporting community and the then Government of Pakistan in the early 1990s.

The purpose was to set up training and vocational institutes for the upgradation of skills of workers and managers working in the value-added export sector. We all happily agreed to a 0.125 of one percent deduction from our export earnings. We thought that over the years we will collect enough money to set up training institutes and universities for our workers and their children. This will not only benefit the workers and their families but will lead to a better trained workforce, and thereby, better the quality of our products. The amount of the deduction was later increased to 0.25 of one percent. The usage was changed from setting up vocational and educational institutions to general export development and the Trade Development Authority of Pakistan (TDAP) was made the master of the fund along with the ministry.

Then the fun began. Junkets to foreign lands, participation in “trade fairs.” Stays in fancy hotels, gourmet meals, all in the name of trade promotion. In the first few years some money was spent on educational institutions. The All Pakistan Textile Mills Association (APTMA) set up a university in Karachi, our association set up the towel institute, now known as the SMART institute, the Pakistan hosiery and garments associations set up their institutes and then alas the money or what was left of it was transferred to the Ministry of Finance for its budgetary needs.

Even if we calculate an annual export of ten billion dollars per annum of the value-added sector the amount tots up to 250 million dollars a year. Over the last twenty plus years we should have accumulated well over five billion dollars in this fund. Where has it gone? We the export associations have certainly not received it. I am told that to mollify the business community the Karachi and Islamabad Chambers of Commerce were given some money to construct their fancy new buildings. For sure the original purpose of this exercise is completely lost.

Where has this five billion dollars gone? We the contributors to this fund demand that a complete audit of the funds be carried out and the figures circulated to the exporting trade bodies with details as to how much was spent on educational/vocational institutions, how much on travel and how much on other projects. What is left over? Or has it gone to finance the budgetary deficits?

Pakistan has never established itself as a reliable supplier of quality products to the world markets. Japan has that distinction. But I remember that in my childhood, Japanese goods were considered cheap and substandard; now they are known for their quality. The Chinese are now travelling the same route as the Japanese. Although the market perception is that Chinese products are inferior, I know personally that in some lines the Chinese are as good as any in quality and reliability and yet at a fraction of the cost.

Pakistan has a particularly poor image. The suppliers are often new to their field and inexperienced and therefore do not understand the quality expected in the world markets. The importance of punctual deliveries is seldom understood by our exporters. Most of our exporters are themselves not well educated and lack knowledge of their product. For sure there are no educational or vocational schools where they can be taught such skills.

On top of these inabilities, our country has suffered waves of terrorist violence, bomb blasts, executions and kidnappings by organised gangs. The foreign buyers do not want to visit Pakistan and have taken their permanent representatives away from Pakistan. The offices of the big retail chains controlling our exports are now located in Dubai. The representative of the biggest retail chain in the world declared ten years ago that they cannot do business in Pakistan. They declared that as they can “neither post their quality controllers, nor send their designers,” how can we develop supply chains? Selling a Pakistani product is not easy. If it sells, it sells despite being a Pakistani product! Sad, but true. This is the major reason why Pakistani value-added products fetch such poor prices in the world market.

We cannot change our national image alone. What we can do is to try to improve our skills and our ability to provide good products at reasonable prices consistently and so earn a good name as a supplier. The buyers may not like to visit Pakistan but they may buy our products. The western consumers still buy Chinese products despite the fact that they do not like the Chinese politically.

If the government will allow us to use our own EDF and set up institutions to upgrade our skills both of the workers and the managers we may start on the long and difficult path of genuine export growth and acceptability.

Copyright Business Recorder, 2021