To enhance Pakistan's export competitiveness all raw materials for export oriented industries must be zero or low Custom Duties. Government must eliminate Regulatory Duties (RD) and Additional Custom Duty (AD) on Raw materials, so that local industry is able to make itself more export competitive.
While talking to a group of exporters, President of the Lahore Chamber of Commerce & Industry Irfan Iqbal Sheikh said that exports bring in foreign exchange, enhance revenues of the government and generate employment opportunity therefore government should control those factors that are hampering the growth of exports-led growth.
The LCCI President said that Custom Duties (CD) on intermediary products for export oriented industries should be reduced so that our industry is able to import quality materials, components and machinery from the rest of the world at the same duty rate at which it imports through different FTAs. The Sales Tax Rate of 17 percent is exorbitantly high and must be reduced to make our industry more competitive.
"Overall, there is a need for overhauling of Taxation System with competitive Tariff Regime that promotes Industrialization, Tax Holidays for new Entrepreneurs, Tax exemptions for BMR, reduction in frequency & number of Taxes and Broadening of Tax Base where all incomes are treated and taxed equally", the LCCI President added.
Irfan Iqbal Sheikh said that the commercial sections of the embassies need to work more efficiently; prepare fresh market research reports in their concerned country and send those reports to all the Chambers of Commerce in Pakistan. They should also play a pivotal role in developing liaison between Pakistani manufacturers and importer of that country. In the case of any conflicts, the commercial section needs to become a bridge between the two parties in order to resolve the conflict swiftly.
He said that our industry has not remained competitive in the international market because of the high cost of doing business. This is reflected by the stagnation in the exports of the country which is hovering around US$24 billion despite the GSP plus status. The industry in Pakistan is hampered by relatively higher energy tariff as compared to our regional competitors (Bangladesh, India and Vietnam) which needs to be reduced in order to increase the competitiveness.
The LCCI President said that electricity tariff for Industry (apart from a few selected industries like Textile) is 13 cents/kwh, which is more than India (8 cents/kwh), China (8 cents/kwh), Bangladesh (9 cents/kwh) and Vietnam (8 cents/kwh). This tariff for entire industry should be brought down to 9 cents/kwh to make our industry competitive with the regional economies.
He said that current gas tariff for industry ($6.5/mmbtu) is higher than India ($3.4/mmbtu), Bangladesh ($5.2/mmbtu) and Vietnam ($4.2/mmbtu). This tariff should be brought down to $4/mmbtu to enhance competitiveness of our Industry.
Irfan Iqbal Sheikh said that aquifer charges of Rs100,000/month for 1 Cusec for Industries extracting water through tube wells is on the higher side and should be rationalized.
He said that minimum wage rate in Pakistan (US$112/month) is higher than India (US$72.67/month) and Bangladesh (US$63.26). The Government should design and implement a Productivity Linked Wage System on the model of Malaysia to ensure that increase in wages for commensuration with higher productivity, thus enhancing competitiveness within the enterprise.
The LCCI President further stated Pakistan's ranking in Ease of Doing Business is 108 which has improved considerably in recent times but still on the lower side as compared to the other export oriented economies in the region and reflects business climate challenges (e.g. difficulties in registering a company, getting electricity connection, construction permits, resolving insolvency and registering property etc.).
He said that as the countries around the world are moving swiftly towards smart regulations, electronic portals, one window approvals; Pakistan would have to adopt a similar course. This would not only facilitate the export oriented industries but create a better perception of the country as an investment destination through improvement in Doing Business Ranking.
"The implementation on the LCCI Ease of Doing Business Reform Agenda should be expedited. There is a need to get our Doing Business ranking below 50 in next three years through smart regulations and online portals (as proposed by LCCI) to get Pakistan recognized internationally as a business destination. Special focus should be given to the area of Paying Taxes where we stand at 161st but can improve considerably by reducing the number of Taxes and frequency of Tax Payments", Irfan Iqbal Sheikh added.
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