One of the key economic challenges being an increasingly negative balance of payments, the Federal government's Economic Monitoring Committee (EMC) has been deliberating on ways to bring down the import bill. As per a news report, imports for the month of July stood at $3.54 billion while exports were valued at around $1.95 billion. The overall estimated deficit for the sector is in the vicinity of $19.25 billion.
This should be a cause of worry for any government having an economy with the size and status similar to ours, all the more so considering the plethora of economic problems that we have to address. Hence, realising that something needed to be done about the situation at a time when the oil import bill alone has touched the $11 billion mark, the EMC asked the Ministry of Petroleum, earlier this month, to prepare proposals for curtailing oil consumption.
Which indeed is a good move, though in view of the rising demand for oil it has a limited potential to bring about the desired results. Other possibilities too need to be pursued. Finance Minister Naveed Qamar, presided over an EMC meeting on Monday, where it was decided to direct the Ministry of Commerce as well as the Federal Board of Revenue to come up with recommendations for imposing new taxes on import of non-essential and luxury goods.
That, of course, is a tried and tested method of rationalising balance of payments. Yet, it will not be enough to slap higher tariff on whatever is deemed as a 'non-essential' item. That may encourage smuggling, making the exercise counter-productive. Any import restrictions, therefore, have to be formulated carefully taking into account the smuggling factor. So far as luxury goods are concerned, there should be no hesitation in levying heavy import duty on them, especially on luxury vehicles.
The 2008-09 budget contained only a nominal increase in customs levy on luxury cars. It is a fit case for a sizeable upward revision. But any such move will be useless unless the FBR puts its act together and ensures that the customs collectorates perform at higher levels of honesty and efficiency than has been the case so far.
The government must also pay urgent attention to the oft-repeated objective of enhancing non-traditional exports and as well as introducing branded goods in foreign markets. In the recent years, notable advancement has been made in introducing newer items like gems and jewellery, furniture and marble products. There is a lot more that needs to be done to improve the marketability prospects of these items.
Then there is the case of several products, especially surgical instruments made in Sialkot, which are exported to certain European markets to be polished and sold under European brand names. The concerned government departments must help manufacturers/ exporters to develop their own brand names for markets abroad. This may be a time consuming task, but it is of utmost importance to help our export sector to get the real value for its products. Meanwhile, the present drive to restrict imports deserves to be pursued earnestly.