Fourteen percent high mark-up rate on bank credit would retard industrial activity and textile exports from the country. Coupled with high inflation rate of 20 percent, the cost of doing business would become prohibitive, and the country's goods would be rendered uncompetitive in international markets.
These views were expressed by the chairman of Pakistan Textile Exporters Association, Wasim Latif, and vice chairman Adil Manzoor Ellahi while talking to newsmen here on Tuesday. They said that commercial credit plays an important role in balancing modernisation and replenishment of industry. This is a constant process and the industrialist is essentially required to keep himself updated with latest machinery and productivity modes for sheer survival in this age of tough international competition, they stated.
Most countries in the world provide cheaper bank credit to their industry, helping to improve quality, productivity and reduction in cost of doing business thus making their industry competitive. In Pakistan, however, the contrary situation prevails. The commercial credit is very costly and the businessman does not find it viable to conduct business at this high cost of credit, they argued.
The industrial activities in the country are already at the lowest ebb and need a shot in the arm by way of cheaper cost of inputs, overheads and raw material, they said and added that unfortunately cotton yarn, the raw material for textile industry was exorbitantly high priced while the alternative raw material was subject to high import tariff. Thus the major component of industrial products was comparatively costlier than India, China, Bangladesh, Pakistan's regional rivals.
Similarly, the cost of inputs like electricity, gas and petroleum products were increasing intermittently, contributing towards costly end product, they contended. Finally, the overheads like transport and freight had also registered increase making it difficult for the industry to be competitive. The industrial output has been crippled due to heavy load shedding of gas and electricity and law and order situation, they lamented. In this background high rate of bank credit became more pinching and added burden to overall cost of production.
The PTEA chairman exhorted the government to create industry-conducive and investment-friendly environment to promote industrialisation and exports of the country by containing the inflationary trends and reducing bank credit mark-up. They said that it was high time that the government revised interest rate to turn Pakistan into a production economy. They said that "our future lies in strengthening the production sectors, but that would require the government to make a decision and cut the cost of credit as there was no justification to keep interest rates that high particularly when this policy was unlikely to produce the desired results in the wake of cost-pushed inflation".