In Naya Pakistan you have to thank those who sit on your money and return it, in dribs and drabs, as and when it suits them. But lest you should forget, when you get your money back you have to make a public announcement of your gratitude by taking out an ad, at your own cost, blazoning the pictures of the leadership!
In Naya Pakistan export refunds can come in the form of promises, bonds, redeemed bonds, and partial payments. The last only when the Prime Minister intervenes. All forms come with the resounding declaration that the "government has no interest in sitting on your money". FBR is live - and kicking - with its collections up 16% over last year, thank you. Take your refunds and go - but remember to take out the thank you ad!
If you owe the government money you should be prepared to get fined, have your accounts frozen, get your utilities disconnected, or get that scary call from NAB. The law provides for a stint in the sarkari mehmankhana as well.
If the government owes you money you just keep beseeching and begging. Maybe take out that ad bemoaning your plight. Finally, the PM, very graciously, gets into the act and there is some redemption and more hope. Strikingly, though, no action is suggested against those responsible for creating the mess they did and having the PM to issue an edict when he is inundated with weightier matters of State.
If the government is not interested in sitting on exporters' money, as the Adviser Finance is reported to have said, then the least it can do is come out with authentic figures of refunds due, along with an aging analysis.
This is what the government had to do when the energy sector's circular debt hit the fan. Exporters' refunds have the same potential - to become the pandemic that infects the entire supply chain. Today, the liquidity crunch is largely restricted to the exporters; tomorrow it could trigger a chain of defaults that will hurt the 'indirect exporter' the most. It could be the swan song for the already struggling textile-related SMEs.
And let's not forget Banks. They may be 'too big to fail' but their already growing non-performing loans will get worse when exporters default.
Even today, after months of back and forth, there is no accepted figure of exactly how much the government owes to the exporters and whether the outstanding amount is going up or down.
A senior official of the Ministry is reported to have informed the meeting that the Adviser had with certain exporters (3rd December)that 300 billion rupees was outstanding. It was decided to promptly release Rs 32 billion. At this rate, the arrears will keep growing making one think that the glitches in the system are deliberate - so that the government gets to 'sit on' exporters' dues.
Zero-rating of exports is a universally held principle. You add to your exporting woes when the export price has to include duties on imported inputs and sales and excise taxes on the locally procured ones. We have tried all kinds of schemes to save the exporters this price uncompetitiveness. None worked to the mutual satisfaction of the exporter and the tax man.
The most ambitious was the DTRE (duty and tax remission for exports) scheme. There were few takers and nobody asked why. The government then resorted to the five 'exempt' export sectors. This didn't last long as the tax man was not happy and got the IMF to support him.
We now have the FASTER system that all for intents and purposes is a euphemism for CATCH-ME-IF-YOU-CAN. It promises quick refunds but custom-designed to discourage exporters from claiming refunds. Thank God the Adviser Finance has taken cognizance of it and it is planned to simplify it. We can't promise if the new version will be glitch-free, but in hope we live.
The government is gloating over the steady increase in exports, both volume and value. We join them in celebrating the uptick. But to test its sustainability it will be helpful to identify the drivers of this growth.
First, there was the devaluation factor that undoubtedly gave a fillip to our price competitiveness. But this advantage has now been factored in by the buyers. Simultaneously, competition has somewhat neutralized this edge, either through exchange rate adjustments or government subsidies.
Next, there is the seasonal factor. The 9% plus growth last month is encouraging, but let's not get carried away. This is when we start supplying for Christmas; and Christmas comes only once a year.
Finally, even with an end year ten percent growth our export numbers will be considerably short of what they were like eight or nine years ago. There is a lot of catching up to do.
The real issue is what specific policy measures the government has taken to help exports? Devaluation of course helped, but was it really done to give exports a leg-up? Most would agree it was a measure to check the runaway current account deficit; to contain imports rather than push exports.
Devaluation has run its course. Given the precarity of government's finances it will be unrealistic to expect any export incentives. If anything, the vaunted 'level playing field' seems to have become a battle field between A and Q blocks over issues like tariff policy and usurpation of export development surcharge. The least the government can do is remove the obstacles to export growth.
If the government means what it says, if it is serious about transparency, if it really wants to make refunds FASTER, how about having a dedicated account to which all refund claims can be credited so that the dues are clearly identifiable and cannot be used for any other purpose? Not even to dress up the fiscal deficit.
If even something as straight forward as a dedicated account is too much to expect, how about a periodic statement (weekly or monthly) showing the amounts collected as refundable duties and taxes and the actual disbursements made during the period?
Exporters can't do much if Tehrik-e-Insaaf denies them insaaf, except implore. But the government should realize 'refund denied is exports jeopardized'. It can leave the exporters kicking and screaming, but shouldn't kick itself in the mouth by hurting exports.
Copyright Business Recorder, 2019
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