The Sialkot Chamber of Commerce and Industry (SCCI) has submitted its proposals and suggestions for the upcoming trade policy for 2009-10 to accelerate the pace of export activities. It said that under SRO 437(I)/2005 the research and development support is being provided to textile garments units, which are manufacturing and exporting textile garments, at the rate of 6 percent of FOB value of exports.
In the current severe competitive industrial scenario, all Sialkot-based industries must enhance their R&D activities to incorporate sophisticated techniques in their manufacturing processes, which is almost impossible for the small and medium enterprises due to their limited resources.
It is also worth mentioning that our competitors like China and India are providing subsidies to their leather and other export sectors under various names at the rate of 17 percent and 11 percent respectively enabling them to be competitive in international markets.
It is proposed that the government should provide R&D support across the board to all export-oriented industrial sectors including sports goods, surgical instruments, leather garments, martial arts goods, musical instruments, cutlery & crockery, kitchen ware, military uniform badges & accessories, etc, by following the example of textile garments units.
The Minister for Commerce, while announcing Trade Policy 2008- 2009 had said that the duty drawback rates would be increased for 14 products including sports goods, surgical instruments, cutlery, footwear, etc. But its implementation has not been carried out yet. It is proposed that the duty drawback rates should be increased to a certain level where the small enterprises could also get some benefit.
The leather and surgical industries of Pakistan are facing problems due to costly raw materials. The split leather/raw hides (wet blue) and surgical forgings are being exported from Pakistan causing its shortage locally. Although 20 percent export duty is imposed vide SRO 1011(I)/2005 dated 27th September 2005 on the export of raw and wet blue hides and skins to discourage its export but even then it is being exported under similar HS codes.
The leather and surgical industries of Pakistan can add a considerable value to our local raw materials and consequently, the value of exports from Pakistan can be increased. It is proposed that the export of split leather/raw hides (wet blue) and surgical forgings from Pakistan may be completely banned. This measure will safeguard the important industries of the country.
Under Trade Policy 2008-2009, the Sialkot Chamber of Commerce & Industry, in collaboration with Unido and TDAP had initiated Cluster Development Program by hiring nine Cluster Development Agents (CDAs). Unido and TDAP provided classroom and field training to hired CDAs for six months from August 2008 to January 2009 at Sialkot Chamber.
The CDAs prepared diagnostic studies on five selected industries of Sialkot-- sports goods, surgical instruments, gloves and personal protective equipments, sportswear, and leather products. Currently, nine CDAs have been trained for their services for five industries of Sialkot but they have not been regularised by TDAP, which is affecting their work badly. It is proposed that a policy may be formulated to regularise the CDAs for making the Cluster Development Program result-oriented.
Currently, the exporters have to deal with many government departments like Punjab Employees Social Security Institution, Employees Old Age Benefit Institution, Labour Department, etc, which is a troublesome task for the exporters and most of their precious time is wasted in completing paper work for these departments.
It is proposed that one-window operation system may be constituted for facilitating exporters. The government may deduct a certain amount from the export proceeds of exporters and distribute it to the Federal and Provincial Governments in respect of all applicable federal and provincial taxes. It will help the government minimise its administrative cost, increase revenue in one way and facilitate the exporters in another way.
The share of Pakistan's trade in non-traditional markets of the world is too less as most Pakistani products are being exported to traditional markets of EU and USA only. The non-traditional markets have great potential for our products, which can only be explored by formulating special policy for this purpose. It is proposed that TDAP may form task force / advisory council including representatives from chambers of commerce & Industry and trade bodies for formulating such policy.
The exports of Pakistani products to the Middle East, Africa, Central & South America, Far East, East Europe, Scandinavian countries, etc, could be increased tremendously after signing preferential trade agreements with their governments. If PTA (Preferential Trade Agreement) can not be materialised with some of the aforementioned countries, the Ministry of Commerce should at least negotiate with their governments lower tariff rates for Pakistani products.
The Pakistan trade missions may be given tasks of working on tariff rates in the country of their posting and advised to send proposals to the Ministry of Commerce for negotiating with the respective authorities to lower down tariff rates. It has been noticed that some commercial secretaries/counsellors of Pakistan do not belong to trade group, so they cannot provide the required results due to lack of knowledge and training.
In order to explore new markets and penetrate existing markets, it is imperative to work on the trade statistics of the respective country and other business opportunities for Pakistani businessmen. Only the trained professionals can perform this task and the government of Pakistan must take this factor into account while appointing commercial counsellors abroad. It is proposed that commercial counsellors be appointed either from trade and commerce group of CSP officers or from private sector (business community) of Pakistan.
Assistance for opening retail sales outlets abroad was announced in Trade Policy 2005-2006 and its level was again enhanced in Trade Policy 2007-2008. The eligibility condition "companies/exporters either having exports in excess of $1.0 million in last year or running at least 3 outlets in major cities in Pakistan" is hardly fulfilled by 3.2 million small and medium sized industries of Pakistan which are the backbone of Pakistan's economy.
It is proposed that the procedure for opening business offices abroad should be simplified in order to facilitate SMEs in true letter and spirit. The approval of assistance for opening foreign sales offices, it is suggested that the applicant (Pakistani company that wishes to establish a foreign office) should have sufficient set-up in Pakistan having experience of 5 years in the relevant field. Trade Development Authority (TDAP) local office and SCCI respective may verify the company credentials.
The approval may be granted on the result-oriented commitment of SME rather than its previous export performance. That is, the applicant (Pakistani company that wishes to establish a foreign office) may be required to submit a bond/collateral to TDAP that it will export goods, having value 3 times more that the value of the claimed subsidy, to its foreign office in the first three years. Failure to do so will result in return of the received subsidy to TDAP along with penalty charges.
The subsidy amount may be restricted to a maximum of $50,000 and released in three equal yearly instalments. The small industries of Sialkot export almost all their products to the international markets and hold substantial share in the total exports of Pakistan. There are thousands of small vendors and manufacturers, scattered in far off places around the city, who cannot afford buying a small piece of land for their manufacturing units and do not have access to civic amenities.
It is vital to uplift these small vendors, so that they could provide quality products and services to the established exporters. Since there is only one small industrial estate in Sialkot, it is proposed that another Small Industrial Estate may be established in Sialkot where provision should be made to accommodate industrial vendors, suppliers, service providers, etc, by allocating small plots of 3 to 10 marlas.
The Revenue Division of Ministry of Finance, under the above-noted SRO, notified goods on which sales tax would be charged at the rate of zero percent on the supply and import thereof. Serial Number 5 of the respective table describes Surgical Goods with respective headings as zero-rated commodity.
Since the word Surgical Goods covers a lot of products associated with the surgical industry, including manicure, pedicure & beauty care instruments (Nail/Cuticle Nipper, Tweezers, Nail/Cuticle Scissors, Foot Files, Nail Files, etc), and is usually misunderstood by most sales tax officers, it is proposed that the text "HS Codes 8211.1000, 8214.9000, 8213.0000, 8214.2000, 9018.9030, 9018.9040, 9018.9090 and the respective headings" may be replaced with "Respective headings" in column 3 of serial number 5 of the respective table.
It is worth mentioning here that all products related to the aforementioned HS Codes are already considered export products and the government has extended customs duty drawback facility on the export thereof under SRO No 930(I)/2007, dated September 11, 2007. Last year, the airfreight and sea freight charges were increased due to a substantial hike in oil prices in the international markets.
As a result, the exporters had to bear additional charges. Although the international oil prices have been decreased substantially, the freight charges have not yet been lowered down. Thus, the input cost of exportable goods is still on higher side.
The Government provided inland freight subsidy on exports of certain engineering goods in Trade Policy 2007-2008 for the same fiscal year, which should be continued by enhancing its scope. It is proposed that 25 percent subsidy on inland / airfreight/sea freight charges should be given to all exportable products including surgical instruments, sports goods, sportswear, gloves, leather garments, martial arts uniforms, etc.
It's a matter of fact that every government, no matters how big or small it is, offers huge subsidies on electricity, gas, telephone, etc charges to its industries especially export-oriented manufacturing units. A relief package for the local industries pertaining to utility charges is an integral part of every Industrial or Trade Policy.
Hence, it is proposed that a special tariff for electricity and gas should be introduced for the export-oriented cottage industries like Surgical, Leather, Hosiery, Gloves, Cutlery, Sports, Musical Instruments, etc. It is pertinent to uplift SME culture and reduce cost of doing business in Pakistan.
TDAP provides subsidy to the Pakistani trade delegates for overseas accommodation at the rate of $100 per day, which was calculated years ago keeping in view the accommodation charges of that time. However, the boarding and lodging charges have been increased tremendously making the existing subsidy of US $100 per day a peanut rather than a true financial assistance.
Almost all trade bodies and chambers of commerce & industry have been raising voice on this issue. A few months back, Naveed Arif, then Secretary TDAP, had a joint meeting with the Sialkot Chamber of Commerce & Industry and other Sialkot-based trade associations at TDAP Lahore office and promised to revise TDAP guidelines by substituting $300 per day for $100 per day.
It is again proposed that subsidy for accommodation to the Pakistani trade delegates visiting abroad to explore new markets may be increased to US $300 per day. TDAP provides subsidy to those exhibitors only who participate in TDAP-managed and TDAP-allocated trade fairs for export promotion purposes.
If the basic theme behind giving subsidy on the participation cost of a trade fair, is to increase exports from Pakistan by exploring new markets and penetrating existing markets then why is TDAP limiting its scope to 40-50 TDAP-managed /TDAP-allocated fairs only. Why it should not add some more trade fairs in its calendar of exhibitions under the category of Free Choice Fairs.
It will open a new window for the exhibitors and they would be entitled to participate in a particular trade fair approved by the TDAP but not under the umbrella of TDAP or any trade body.
This is not a completely new proposition. TDAP has already worked on it but could not launch it yet and the reasons better known to it. It is, therefore, proposed that a clear policy may be formulated by TDAP pertaining to Free Choice Fairs. Jordan is a central market in the Middle East countries.
A large number of businessmen from neighbouring countries visit there for getting their supplies. In order to promote Pakistani products in the Middle East, a warehouse, operated & subsidised by TDAP, in Jordan might provide positive results. It is proposed that a warehouse may be set up in Jordan to showcase and promote Pakistani products in the Middle East countries.