TEXT: In today’s world, most defining factor of a country fate is trade and commerce, betterment and advancement of which is totally dependent on positive and proactive role of Customs service. Trade is basically exchange of goods for value for good of importing / buying and exporting / selling party. This trade off, if balanced in nature and quantity, is beneficial for both of the countries, as necessities and requirements of both are complemented.
However, amidst neo-liberal economic system and its free market, there is always a danger of recurring dearth of foreign reserves when imbalance in trade occurs. This imbalance is not only caused by weak domestic industry, but is also result of under-utilization, non-incentivization and poor approach towards potential and growing industrial sectors. Moreover, unwanted and redundant monetary controls and barriers merely add more to the misery of trade imbalance, which results only in increase of cost of doing business and augmenting more financial burden in shape of demurrage and detention on traders / industry. However, this grave situation can only be addressed by taking positive steps in right directions and role of Pakistan Customs in administering affairs, clearing goods, setting new standards and offering effective guidelines to money regulators is indispensable.
Every country on the earth is uniquely gifted by nature and has its own diverse and redundant resources. Bartering of these resources begets the international trade. The trade expands markets of a country at domestic and international level. It also open vistas for new and fresh economic activities and revitalization of existing economic sectors. It enriches a country in multiple ways and adds to its importance globally. Competitive markets, resulting from this openness, make things / products cheap and curb inflation and market monopolies, thus raising living standard of general populace. But the other side of sticks brings the perils of defaults and deficits due to incompetence and inefficiency of performance in free market competition. In financial year 2021-22, our imports were a whooping 70 billion dollars versus an export of about 25 billion dollars; the situation eases out when one thinks of 31 billion dollars foreign remittances dispatched by overseas Pakistanis, but this might be an unhealthy reliance in these times of competitive trade. It may also not be out of question to think that this foreign remittance is basically cost of huge brain drain occurring in Pakistan. Comparatively, these trade statistics in India and Bangladesh are also not perfect / sufficient. During financial year 2021-22, the Indian imports were 496 billion US dollars versus an export of nearly 360 billion dollars; whereas, Bangladesh traded 71 billion dollars in imports versus 51 billion dollars in exports. This trend denotes exports both of these countries amounts to about two-third of their imports. However, in case of Pakistan, the exports are, on average, 30 percent of the imports, thus creating huge trade imbalance. Main reason for legging behind these countries is that Pakistan has remained a victim of weak domestic industry and poor utilization of natural resources, coupled with political infirmity, ad-hoc policies / decision and popular stunts etc. Despite all this, the country has shown potential of growth in certain industrial fields.
Metal recycling industry in Pakistan has flourished in recent years and has exceedingly contributed to the exports. Among these metals, copper tops the list, followed by aluminum and lead. Used / scraped / worn out articles are purchased from developed countries, which are gone through process of melting and molding into semi-finished products, before being export to China or European countries at a substantially higher cost. This phenomenon is material deviation from previous practice of importing iron and steel scrap for re-melting and re-rolling purpose and is in field for more than a decade now. Apart from it, plastic / PVC and paper recycling industry has also been economic catalyst. Together, recycling sector has also brought reputation of circular economy to the country and during financial year 2021-22 exports of products of these sector brought about 4 billion dollars in foreign exchange reserves. However, current foreign exchange crisis coupled with imports transaction guidance of regulator in Foreign Exchange Manual has only created misery for these sectors.
It is interesting to note that plastic / PVC scrap, paper scrap and metal scrap importers have adopted a way of wanderers to “search, point and purchase the lot mechanism.” In this way, an employee or expert does job of searching suitable goods in developed countries and then sends it to Pakistan for trading, recycling and re-exporting, after import clearance from the port. This creates a fake / imaginary transaction for some purposes, since the goods are sold by him to his own firm / company, but were actually bought from an unknown warehouse of Europe, US, Japan or UAE etc. Sources of money exchange / transaction used for actual purchase of scrap have remained an unfortunate misery / secret, while the foreign exchange policy of central bank pertaining to imports creates a beautiful castle in the air, though worst migraine for scrap importers / recyclers in the face of Electronic Import Form (EIF). On one hand, the instant policy has served efficiently to prevent flight of dollars from the country; but on the other hand, it has also prevented dollars from coming into country by stopping clearance of goods of recycling industry meant for re-exporting after re-melting and molding. Additionally, this embargo, which should have been meant for import of luxury goods or of type of goods also made-in-Pakistan, has served to increase millions of dollars in demurrage / storage charges of terminal operators and detention / rent charges of shipping lines by indifferently lingering stay of all sorts of goods on ports. Needless to mention, most of these operators and lines are foreign investments and payment of any increased charges would travel back to western countries in form of dollars. This flight of dollars has, to some extent, been restricted by Pakistan Customs by adopting proactive approach to the crisis.
Apart from quick clearance of approved EIFs, Pakistan Customs entertained importers’ major request which was to shift consignments to cheaper locations / off-dock terminals so that demurrage and detention charges are saved and further flight of dollars is prevented. In this way, closure of many industries has been prevented amidst this time turmoil. Moreover, Customs’ proactive role in intelligently handling and managing importers requests to prevent goods, on bank hold, from being auctioned electronically through WeBOC system, due to non-clearance on time, is also commendable. This offered reassurance to the importers with resolution that Pakistan Customs stand by the country. Optimum utility of WeBOC has considerably helped Pakistan Customs in effective crisis management, innovation and creativity. Furthermore, Pakistan Customs has issued repeatedly issued guidelines to terminal operators, shipping lines and public bonds to reduce the applicable charges and demurrages, considering economic situation of the country. Standing at the economic frontiers and safeguarding national interest of Pakistan, Customs facilitated trade and eased out traders by directing operators to rationalize their tariff according to the prevailing situation.
The country is passing through very difficult time and huge scarcity of foreign exchange reserves. This has created instability, uncertainty and insecurity. Chaos in trade is ripe and traders are living worst phase of their career. Besides, the country is also legging behind other comparable regional countries. Many reasons could be assigned to this situation. Weak domestic industry and poor approach towards recycling sectors are apparently main grounds of trade imbalance. Tough monetary decisions / policies have always played their part. However, the situation is redressable and proactive role being played by Pakistan Customs is pivotal for early recovery and rehabilitation. Positive attitude and certainty of action / decision is need of the hour, since a nation’s fate is linked with commerce and trade!
Aadarsh Jawahery
Deputy Collector of Customs
Copyright Business Recorder, 2023
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