The leather industry has called for immediate measures to save this vital sector that has been facing pressure for the last 18-months in the backdrop of persist decline in leather and leather exports mainly because of the affects of war on terrorism which restricted the foreign buyers from Pakistan.
To highlight the serious impact of war on terrorism on the national economy, the Pakistan Tanners Association former central chairman Aga Saiddain gave a detailed presentation to the Pakistan Institute of Trade and Development a day earlier, which is a think-tank of the Ministry of Commerce.
The presentation was aimed at enabling the Institute to incorporate the tanners' proposals in the Strategic Trade Policy Framework 2009-12. Aga Saiddain told Business Recorder that the national economy was suffering badly due to multiple reasons. War on terrorism, inconsistency in the government policies, continuously rising utilities tariffs and law and order situation are the main factors that had crippled the economy. The electricity cost in Pakistan is 40 percent to 60 percent higher than in Indian, Bangladesh, China and Turkey.
He was of the view that that so called ROZs have been suggested by USA in the war-affected areas of Fata is nothing but a lip service. If the US is sincere to Pakistan, it should declare the whole country ROZ to boost industrialisation in the country, he maintained. He said that the exports of leather, leather garments, footwear, gloves and leather goods have shown continuous decline since last 18 months.
According to the data revealed by the Bureau of Statistics, the leather exports have been declined by 28.83 percent, leather apparel and clothing by 25.49 percent, leather gloves by 9.42 percent and leather footwear by 2.49 percent. However, other leather goods showed upward trend by 8.41 percent but total decline during the year was 22.24 percent from $1220.121 million of 2007-08 to $948.800 million during the financial year 2008-09.
Similarly, the declining trend has continued in the current financial year during first five months of the current fiscal (July-November 2009) the exports of leather sector have further dropped by 25.53 percent. The leather exports have been declined by 23.93 percent to $111.129 million, as compared to $146.09 million of the corresponding period of 2008.
The leather apparel and clothing recorded a loss of 15.88 percent to $165.146 million as compared to $196.315 million, leather gloves by 59.03 percent from last year $76.070 million to $31.167 million, leather footwear by 13.57 percent from $42.120 million to 36.403 million during July-November 2009 as compared to corresponding period of last year.
Contrary to the last year, the exports of other leather products were also declined by 40.50 percent to $3.276 million as compared to last year exports of $5.506 million. As such, during July-November 2009, the total exports were declined from $466.102 million dollar of 2008 to $347.121 million during July-November 2009. Since first two quarters of current financial year have already passed and no initiative has been taken by the Ministry of Commerce.
The leather sector was badly hit mainly because of war on terrorism and world-wide economic recession, he said. In last eight year, Pakistan has lost $36 billion on war on terror besides precious lives of thousands of people. The country, which had got rid of IMF, was forced to beg again and we are once again strangulated by their conditionalities.
Pakistan is a front line country sacrificing our economy, human lives, and our future but we have not been compensated for this by so called rich and developed nations, which have taken us for granted. "We are fighting against terrorism but we are being treated like a top terrorist country. Hypocrisy among our coalition partners is visible, as they want us to do more but without proper support.
Pakistan businessmen are reluctant to visit countries, who are our coalition partners in war against terror due to insulting behaviour of these countries at immigration counters" he maintained. To save leather industry from disaster of war on terror we need to announce immediate relief package with more incentives than allowed in India, China and Bangladesh.
In India, exporters are entitled to duty free import of five percent of the FOB export values. Machinery for treatment plants is exempted from customs duty and other taxes. Pre-shipment and post-shipment credit at 7 percent is available to export industry. Duty credit facility at 2.5 percent of the FOB values of exports is allowed. Duty-free import authorisation for minimum 20 percent of value addition.
For establishment of design centre at individual units, 25 percent of financial cost of such design centre is provide by the Ministry of Commerce, he said. Aga said that it would be advisable to pay cost of borrowed dollar to exporters and generate foreign exchange by creating employment in the country and earn foreign currency which is not be returned. Leather industry may be allowed 25 percent subsidy on electricity and gas bills as allowed in Turkey.
The leather industry may be exempted from payment of social security, EOBI, and other charges for two years. The leather industry may be exempted from withholding tax and export development surcharge for two years. The leather sector may be allowed export refinance at five percent, he added.
He said the government might take all travelling and other charges of international fairs with at least 75 percent subsidy. Like in India, the government may announce investment grant from Rs 5 million to 25 million for technology upgradation, expansion and capacity building.
The government may ask coalition partners to facilitate training of trainers for various leather technical institutes of Pakistan. The government may announce various industrial parks as announced by the Indian government for leather, leather footwear, leather garments and leather goods. These parks may be equipped with all facilities and infrastructure and handed over to the SME and large size exporters on easy terms, he added.
He urged the government to allow duty free import of all types of tanning machinery and parts and to remove 16 percent sales tax on import of tanning machinery and parts. He also asked for providing landfill sites near tanning industry for waste disposal. To exempt tanning industry from load shedding being continuous process industry. He also stressed the need for including leather in FTA list of China.