The federal government has reportedly prepared billions of rupees incentive package for the export-oriented industries aimed at helping them compete with countries like India, Bangladesh and Vietnam, well-informed sources in the Finance Ministry told Business Recorder. Board of Investment (BoI) Chairman Dr Miftah Ismail and the Chairman of the Federal Board of Revenue (FBR) have been given the task to finalise the package in consultation with Finance Minister Ishaq Dar and present it to Prime Minister Nawaz Sharif for final approval.
Commerce Minister Engineer Khurram Dastgir was not taken on board during consultations with exporters. The package is expected to be announced shortly. Initially, Chairman BoI and Commerce Minister presented a few suggestions to the Prime Minister Nawaz Sharif before Eid. After that major exporters also made a presentation to the Prime Minister in Karachi. The Prime Minister then constituted a committee comprising, Dr Miftah Ismail, Haroon Akhtar Khan and a few top exporters to tailor suggestions and present them to the Finance Minister. Both the government office holders met with the exporters prior to meeting with Finance Minister, where the exporters presented their suggestions.
According to the initial draft, prepared by the two member panel, it has been proposed that 50 per cent rebate should be granted to exporters to be paid by the State Bank of Pakistan (SBP) at the time the foreign currency is received. It has also been recommended that 50 percent rebate on voucher should be given to exporters, valid only when Letter of Credit (LC) for machinery is opened. The sources said, the committee has also proposed that the government should honour its pledge date of October 15, 2016 and clear pending tax refunds of exporters, without any delay, even if it is as a bank-negotiable instrument.
Keeping in view the hardships of textile sector, the government is expected to announce 3 percent rebate to yarn/grey fabric, 4 percent to processed fabrics, 6 percent for home textile/knitwear and 8 percent for garments sector. The sources, the proposed rebate for raw and semi-raw exports would be around 4 per cent and value added sectors at 8 percent, respectively.
The committee has also proposed the removal of Regulatory Duty (RD) on key export-oriented industrial inputs including raw material and bring down custom duties to zero. "Removal of import duty and sales tax on industrial machinery is also on the cards,' the sources said, adding that duty drawback, bond and export refinance schemes will be simplified to facilitate SME exporters. The sources said, government is also expected to remove moratorium on industrial gas connections on RLNG and increase gas load for the industry.
The Commerce Ministry, sources said, was urging the Prime Ministers to approve full accrual of Export Development Surcharge (EDS) to Export Development Fund (EDF) but the Q-Block (where the Finance Ministry is situated) was unwilling to give EDS to Commerce. Miftah Ismail, sources said, maintains that Pakistan's exports peaked during the first year of PML (N) government but have been declining since then. Last year, total exports were $20.8 billion down from around $25 billion in 2013-14. One of the key reasons for the decline was crashing commodities prices, the ministry maintains, though Bangladesh's exports increased from $31 billion to $34 billion during this period.
"Not only have textile exports from Pakistan suffered, losing about a billion dollars just last year but other goods have fared even worse. And most worryingly it is not just the fall in value due to a reduction in international prices, but in fact a reduction in quantity of many items as well as growth in other items," a source quoted, Dr Miftah as saying at a meeting with the Finance Minister. Cotton yarn which is main staple of Pakistan's exports lost over 31 per cent in quantity last year. The export performance of first three months of current fiscal year was in the range of 8-9 decline which presents a big challenge for the economic managers especially post-IMF program scenario.
The government has recently granted zero-rated status on sales tax to five export sectors which was appreciated by the exporters' community. However, the industry was still making hue and cry on overvaluing of Pak rupee versus the US dollar and higher wages announced for the last couple of years.
"We have been massively hit by the overvalued rupee, energy issues, and exorbitant increase in minimum wages. We cannot compete with our neighbouring countries," said Kaleem Iftikhar, one of the exporters of surgical instruments. He added that the problems of exporters have increased manifold during the current government of Prime Minister Nawaz Sharif. Dr Miftah Ismail has also acknowledged that the facilities given to the exporters have failed to increase the country's exports.
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