Reinstating zero-rated regime for five major export-oriented sectors, including textiles, will contribute little to growth in exports as long as other impediments remain including security concerns, business climate, competitiveness losses related to real exchange rate as well as high utilities prices, said manufacturers and exporters.
Talking to Business Recorder representatives of different manufacturing and exports associations said that zero-rated facility was one of their major demands which would help all the five sectors especially textile sector to overcome liquidity crunch. They said that it is a positive step towards the restoration of viability of the ailing textile sector which is a must for the economic growth of the country.
However, they said that exports are under pressure both in quantity and value terms, and the high cost of doing business and an unrealistic value of the local currency has played a major negative role in this regard. Fulfilling a major demand of leading export sectors, the government restored sales tax at the rate of zero-percent on five export oriented sectors ie textile, leather, carpets, surgical and sports goods from 2016-17. However, the concerns of the industry about the pending sales tax refunds, withdrawal of various surcharges on electricity like tariff rationalization surcharge, gas and power availability at competitive prices with other regional countries, withdrawal of Gas Infrastructure Development Cess (GIDC) are still pending, which are regarded as major impediments to working at full potential.
Chairman Council of All Pakistan Textile Associations, Muhammad Zubair Motiwala said that after the zero-rating facility, industry would not face liquidity crunch and would be in a better position to meet orders/demands. However, he said that India's currency appreciated from Rs 46 to Rs 68 during last two years which is around 50 percent, but Pakistan local currency remains firm, and it is not difficult for exporters to compete with other regional countries. Motiwala said that there is around 18-20 percent difference in gas and electricity prices between India and Pakistan. Unless and until the cost of doing business is not reduced, desired results of increasing exports would be a challenge.
The major factor behind the declining exports trend is the erosion of textile industry's competitiveness, particularly against the huge incentives being provided by the competing countries to their export sectors, All Pakistan Textile Mills Association officials added.
The country's textile industry has a potential to double its export from $13 billion to $26 billion, if cost of doing business is reduced, which will further provide 3.5 million additional employment opportunities, they added. Pakistan Apparel Forum Chairman Javed Bilwani said the government needs to focus on incentives on product addition, product development, and marketing the products by organising country exhibitions. The commercial counsellors need to play a proactive role in exploring markets in their countries of posting, while regional task forces need to be established and monthly meetings with stakeholders be held to monitor the situation.
The stakeholders urged the government to focus on skill development and restart the programme or skill development of machine operators in the garment industry (SMOT) scheme.
Further textile sector, which accounts for 55 percent of total exports, is being run on an ad hoc basis as there has been no textile minister for the last 18 months. The officials at the ministry of textile industry told Business Recorder that the ministry's performance lacks co-ordination after Senator Abbas Khan Afridi left as Minister on completion of his tenure in March 2015 as senator and no new appointment has so far been made to fill the slot.