The Federal Textile Minister Afridi has repeatedly urged the federal government to ensure that the Export Development Fund (EDF) be distributed according to the contributions made by each sector/subsector. The textile sector contributes around 55 percent to the EDF, which translates into more than 6 billion rupee collections; however, the sector received less than one million rupees.
A brief history of the EDF, its objectives as well as current disbursement process is in order. EDF was levied in 1999 at the rate of 0.25 percent of total exports and the money was to be banked in a dedicated fund that was to be used specifically for promoting exports. Federal Finance Minister Ishaq Dar has persistently displayed a penchant for using dedicated funds for budget support. An example is the appropriation for budget support of the Universal Service Fund, established by the Ministry of Information Technology to disseminate the benefits of the telecom revolution to all corners of Pakistan amounting to between 63 and 65 billion rupees. Thus it would come as no surprise that the Finance Minister has appropriated around 5 billion rupees under the EDF and released only one billion rupees to the Commerce Ministry, the designated recipient of this fund. It is the Commerce Ministry that, in turn, is responsible for determining how much to allocate to which sector/subsector. The textile sector, the largest single export earner for the country, received only one tenth or 100 million rupees of the amount released to the Commerce Ministry and an appalling 1.6 percent of what was collected under the EDF.
The Commerce Ministry, under the chairmanship of Federal Minister Khurram Dastgir, has constituted a committee to appraise the proposed projects under the EDF to ensure a judicious disbursement of the money received from the EDF which would then be forwarded to the Board for final approval. In this context two concerns are evident. First and foremost the suggestion by the Ministry of Textiles as well as all the stakeholders continues to be ignored namely that fairness dictates that the money collected under EDF be distributed according to the contributions made. The textile sector is currently operating under challenging conditions that range from the government's inability to meet its energy requirements to the law and order problems that prohibit our foreign buyers from visiting the country and placing their orders. In addition, the Finance Minister's decision to intervene in the market to keep the value of the rupee within 100 rupee to a dollar range (with the objective of reducing the country's foreign indebtedness as a component of the budget) has also had a negative impact on our exports given that a strong rupee makes our exports uncompetitive. And the final straw on the camel's back is inordinate delays in tax refunds which account for severe liquidity problems for the sector. In other words, the textile sector needs support to realise its export potential and one would hope that the government succumbs to the long-standing demand of the Ministry for Textiles to allocate funds as per contributions.
What is also a source of concern is that ministers of commerce have been periodically accused of misusing the EDF on foreign tours by arguing that a tour to expand markets is a legitimate expense under the EDF - tours that did not lead to any appreciable rise in exports. At present an Aalishaan Pakistan exhibition is being planned for London at a cost of 360 million rupees with reportedly officials of TDAP fighting to be part of the delegation, according to a Business Recorder exclusive. This is indeed unfortunate and one would hope that the EDF not be used for budget support or funding foreign tours of the executive and senior members of the bureaucracy in future.