Promotion of manufacturing sector ‘Govt devises doable strategy to overcome rising production cost issue’

LAHORE: Federal Minister for Commerce, Jam Kamal Khan, has said that the present government has devised a well-tailored, well thought out and doable strategy to overcome rising production cost issue for the sake of promotion of manufacturing sector in the country.

“A conducive business environment would be ensured to cut unemployment and promote SMEs.”

The minister spent almost two hours at LCCI, spoke at length on the problems raised by LCCI members. A soft spoken jam Kamal, who has grip on economic issues being faced by the business community, assured his full support to LCCI members.

He stated that it is the responsibility of the Ministry of Commerce to maintain contact with the business community to understand and resolve their issues.

He emphasized that the government's top priority is addressing challenges related to trade, export, import, manufacturing, and tariff competitiveness. Additionally, issues like circular debt, IMF conditions, and the inefficiency of various institutions, which burden consumers, need to be tackled. He assured that Prime Minister Shehbaz Sharif has guaranteed the involvement of relevant stakeholders in addressing economic issues.

Jam Kamal Khan was speaking at an event at the Lahore Chamber of Commerce and Industry. LCCI President, Kashif Anwar, welcomed the minister and highlighted the challenges faced by the business community, including inflation, depreciating currency, rising costs of electricity, gas, fuel, high-interest rates, MDI charges, axle load laws, and increased cargo delivery charges. He pointed out that recent SROs (457, 350, 1842) have added to the tax burden on registered individuals, causing further distress.

LCCI Senior Vice President Zafer Mahmood Chaudhry, former presidents Mian Misbah-ur-Rehman, Muhammad Ali Mian, Shahid Hassan Sheikh, Abdul Basit, and Tariq Misbah also addressed the occasion. Director General TDAP Fouzia Chaudhry, executive committee members of the Lahore Chamber, and representatives of the business community were also present on the occasion.

Kashif Anwar said that the use of import tariffs primarily for revenue generation negatively impacts industrial performance and export capabilities. He urged for changes in the tariff structure to support local industries and reduce smuggling. While acknowledging reduced duties on some raw materials, he advocated for further reductions and the gradual elimination of duties on non-locally produced raw materials to ease industrial operations and improve competitiveness.

LCCI’s position includes prioritizing import reduction over export enhancement, encouraging localization and import substitution to foster industrialization.

Kashif Anwar suggested a revised tariff structure with 0% duty on basic materials, 5-10% on intermediate goods, and higher slabs for semi-finished and consumer goods to simplify the complex duty system. He also recommended reducing duties on machinery and intermediate goods to facilitate technological advancements and equalizing duty rates for commercial importers and manufacturers to support SMEs.

He emphasized the importance of accessing untapped markets such as Africa, Central Asia, and ASEAN countries to boost exports. Besides textiles, rice, and leather, he highlighted the potential of sectors like Halal food, pharmaceuticals, IT, and engineering to enhance exports. He called for resolving payment issues in the IT sector to increase its export potential and suggested creating a mechanism to ensure all remittances are brought to Pakistan rather than held in foreign banks.

The LCCI president noted that the Ministry of Commerce is leveraging existing PTAs and FTAs with other countries. He suggested reassessing trade agreements with countries where Pakistan faces trade deficits despite these agreements. He mentioned the potential signing of an FTA between Pakistan and the GCC within the next three to four months and noted existing trade agreements with Tajikistan and Uzbekistan. He also discussed the implementation of a barter trade mechanism with Iran, Afghanistan, and Russia through SRO-642 in the coming months, expressing hope for improved trade with neighboring countries.

Addressing sector-specific issues, he pointed out the restriction on jewelers to bring back 50% gold and 50% foreign exchange from their exports under SRO-760. He urged that jewelers be allowed to bring back 100% gold or receive gold through the State Bank. He also mentioned high duties and taxes on food and dietary supplements, suggesting they be included in Chapter-99, and cited the need to revise duties on steel sector raw materials that are not produced locally but are subject to various duties.

The carpet industry, he said, has long demanded inclusion in existing and future FTAs and PTAs, along with support for participating in international fairs. He called for the removal of penalties on delayed export proceedings, which range from 3% to 9%, citing significant losses due to the longer shelf life of carpet products.

The President praised TDAP's work but urged accommodating smaller exporters, including women and SMEs, in international trade fairs. He mentioned expected increases in TDAP funding and hoped for broader participation in upcoming international trade events. He also addressed the issue of timely visa processing for members wanting to participate in international trade fairs and called for the Ministry of Commerce to establish a framework with embassies to facilitate this.

Finally, he suggested that the Lahore Chamber, which operates various Help Desks in collaboration with federal and provincial departments, should have a nominated focal person from the Ministry of Commerce to swiftly address import and export challenges faced by its members.

Jam Kamal Khan highlighted that economic instability and foreign exchange issues cause investors to withdraw their capital, making it difficult to attract new investments. The Prime Minister has tasked the ministries of finance, commerce, and industry with listening to and resolving industry problems. Rising production costs are a major issue affecting competitiveness, and both quality and price are crucial in the global market.

He noted that the business community contributes heavily of the government's revenue through taxes. Overburdening this group could reduce business activity and government revenue. He stressed that operating with a 22% interest rate is challenging as it leads to capital being parked in banks, which is not a favorable situation. He pointed out that Pakistan once had an advantage in the textile sector, which has declined. Reducing energy costs is essential for industrial growth, as problems will persist post-budget if not addressed.

The minister called for the tariff board to be business-oriented rather than tax-oriented, as focusing solely on numbers harms the industry. He mentioned that the Ministry of Commerce will participate in the anomaly committee to ensure the business community is onboard since export-related queries often involve the commerce ministry.

Jam Kamal Khan mentioned a committee established by the Prime Minister, including Awais Leghari, Muhammad Aurangzeb, Muhammad Ali, and Musaddiq Malik, working on a tier structure to achieve economic stability and benefit all sectors. He stressed the need for restructuring TDAP to address the industry's northward shift and focus on both northern and southern regions.

Discussing SROs, the minister noted the formation of a committee with members from the State Bank, FBR, finance, ports, and shipping. This committee has been holding meetings over the past two months, addressing issues like energy prices, the State Bank, currency valuation, repatriation, exports, and the EDF. The report, incorporating all issues and demands, will be presented to the prime minister this week.

He mentioned holding the first meeting of the commerce council for the IT sector in three years, recognizing the potential of e-commerce and the need to address digital payment and sharing issues. He emphasized the important role of SMEs, which have expanded significantly through e-commerce, allowing small enterprises to collaborate on large orders.

He also leads the anti-smuggling committee, addressing issues in border areas and Afghan transit trade, aiming to balance local market production and prevent smuggling. He acknowledged the Lahore Chamber's request for Commerce Ministry representation and proposed establishing a dedicated desk to resolve chamber-related matters. The Ministry of Commerce will act as an advocate for the business community, actively addressing their issues on all forums and not merely functioning as a post office. He also mentioned the introduction of plug-and-play facilities in all trade zones.

Copyright Business Recorder, 2024