The cost of doing business in Pakistan is as high as 10 percent as compared to other regional competitors which has put exports sector at a disadvantaged position in the international market, it is learnt on Saturday. About 20 percent production capacity of industry in the country is impaired due to high cost of doing business, revealed exports sector's experts while recently sharing a presentation with the government.
According to the presentation, electricity tariff in Pakistan is 11 cents/kWh against 9 cents/kWh in India, 8.5 cents/kWh in China, 7.3 cents/kWh in Bangladesh, 9 cents/kWh in Sri Lanka while 7 cents/kWh in Vietnam. Gas tariff is $8/MMBTU in Pakistan against $4.2/MMBTU in India, less than $6/MMBTU in China, $3/MMBTU in Bangladesh and $4.5/MMBTU in Vietnam.
Further duties/taxes/surcharges on exports in Pakistan are more than 5 percent, however these are less than one percent in China, Bangladesh, Sri Lanka, Vietnam and zero percent in India. According to the presentation, Pakistan share in global textile trade dropped from 2.23 percent to 1.5 percent during 2005-2015 as the sector remains uncompetitive in the region with low power supply, high cost of doing business and desired relief in taxes. However, India share increased from 3.5 percent to 5 percent, China from 30 percent to 38 percent, Bangladesh from 1.6 percent to 3.7 percent and Vietnam from 1.12 percent 3.7 percent during this period.
Pakistan is offering technology up gradation to 25 percent of looms while all other competitors are providing 100 percent. Minimum wage rate in Pakistan is $135/month against $90 in India, $200 in China, $68 in Bangladesh, $66 in Sri Lanka and $90 in Vietnam. The office bearers of exporters associations said that the reinstating of zero-rated regime for the five major exports-oriented sectors will contribute little to growth in exports as long as problems with respect to security situations, business climate as well as competitiveness losses related to real exchange rate and utilities prices are not addressed.
Fulfilling a major demand of leading export sectors, the government restored sales tax at the rate of zero-percent on five export oriented sectors ie textile, leather, carpets, surgical and sports goods from 2016-17. However, the concerns of the industry about the pending sales tax refunds, withdrawal of various surcharges on electricity like tariff rationalization surcharge, gas and power availability at competitive prices with other regional countries, withdrawal of Gas Infrastructure Development Cess (GIDC) are still pending, which they consider as big hindrances to work with full potential. The International Monetary Fund (IMF) in its 11th review has also stated that the Pakistan's exports fell by 9.2 percent (y-o-y) during the first three quarters of fiscal year 2015-16, owing to lower international prices of cotton and rice, ongoing security issues, a poor business climate, and competitiveness losses related to real exchange rate appreciation (1.3 percent y-o-y in March 2016 and cumulatively 19 percent over the past two years).
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