PIAF chief sees huge taxes, unnecessary intervention, blackmailing, unaffordable power tariff and outages are the main factors behind the exports decline
Govt should increase its exports and remittances for paying back rising debt obligations, says Fehmida Jamali
The country’s exports witnessed a declining trend. The exporters are concerned over declining exports and termed unfriendly-exports policies, least priority of the incumbent government, low investment and delay in refunds as key reasons for the current downward trend in exports.
On the other hand, official sources have identified high cost of doing business, energy shortage, increasing gap between real effective exchange rate and nominal effective exchange rate, falling global commodity prices, heavy taxation including regulatory duties, liquidity crunch and inordinate delays in refunds, and declining private sector credit as the key reasons for the decline in exports in the country.
Exporters believe that the government current policies do not seem to be export friendly nor does it seem that exports are the priority of the government. It is correct to some extent that commodities prices declined in International market, which has also affected exports.
One of the related factors for decline in exports is non-inflow of investment in the country. Even the local investors are not ready to invest in the country, analysts said.
In 1990, Pakistan exports were around $4.9 billion against India $6.6 billion while Bangladesh $1.6 billion; however in 2015 Pakistan exports reached $24 billion, Bangladesh $27 billion while India $310 billion.
Pakistan has witnessed significant development in the last couple of years, Chinese investment through the China-Pakistan Economic Corridor (CPEC) project, formation of Pakistan Stock Exchange, proliferation of mobile based financial services, inclusion of PSX on emerging market index, progress on corporate laws, focus on public financial management, formation of audit oversight boards are few to mention. Financial discipline, governance and compliance environment is gradually improving.
The country’s economic indicators are presenting a positive outlook and we are observing great positivity amongst international investors towards Pakistan. The GDP mix is expected to change towards value added services sector whether it be professional services, transportation, IT services, logistical support and emergence of small and medium enterprises. In today’s world our markets are not limited to our physical access, an SME can sell in the US or Europe using internet and the same is valid for other countries in terms of accessing our customer base in Pakistan hence an opportunity and a threat at the same time.
Dependency on oil is gradually reducing with the introduction of alternatives, which will help countries like Pakistan to improve the balance of payment in future. Sustainability of environment must not be optional but a prime agenda for corporates going forward.
Ministry of Commerce has identified soaring cost of doing business, energy shortage, increasing gap between real effective exchange rate and nominal effective exchange rate, falling global commodity prices, heavy taxation including regulatory duties, liquidity crunch, and inordinate delays in refunds, and declining private sector credit as the key reasons for the decline in exports.
The country’s exports have declined by 14.4 per cent during the first seven months of current fiscal year and Commerce Ministry has time and again argued that the reasons for the decline do not fall within its jurisdiction.
Experts have divided export performance into four categories: (i) commodities reflecting price and quantity; (ii) commodities which show increase in price but decrease in quantity; (iii) quantity increased but price decreased; and (iv) decline in quantity and price. Pakistan’s major export products fall in category four i.e., decline in both quantity and price. This does not substantiate the government’s claim that the global economic downturn is responsible for the decline in exports.
Imports declined by 5 per cent during the first seven months. It was observed that as petroleum prices declined massively, non petroleum products have not shown negative growth. For instance, if the price of palm oil dropped, its import increased implying that its consumption increased. The import of machinery, food items and cotton has also increased.
Textile and allied is one of major sectors and the All Pakistan Textile Mills Association (APTMA) maintain that the cost of their major inputs particularly electricity and labour are more expensive compared to their regional competitors.
PIAF DEMANDS FOR RELIEF PACKAGE
The Pakistan Industrial and Traders Association Front (PIAF) Chairman Irfan Iqbal Sheikh has accounted the non-payment of sales tax refund for persistent decline in the country’s exports and demanded of the government to take up this issue on priority basis.
Irfan Iqbal Sheikh urged the government to announce a relief package for the export industry so that trade deficit could be curtailed. “Our exports are on the declining trend for last three years and it will continue if corrective measures are not taken,” he said.
He stressed the need for taking the industry representatives on board for evolving an effective and prudent policy to make the country’s products competitive in the international market. The government should provide special incentives to the exporters and the industry. The governments of the competitive countries are extending subsidies and discounted tariffs to their export sectors.
“Pakistan is losing its share in the international market to India, Bangladesh, Sri Lanka, and other countries of the region,” he added. He was of the view that huge taxes, unnecessary intervention of the government departments, blackmailing of the government officials, unaffordable electricity tariff and power outages are the main factors behind the exports decline.
It may be noted that Pakistan’s textile and clothing exports fell 1.30 per cent to $1.064 billion in January on a year-on-year basis.
The fall in exports was mainly driven by value-added products.
Last year, the government announced a textile policy that gave a 4 percent rebate on the exports of readymade garments on a 10 percent incremental increase over the preceding year. The rebate was 2 percent and 1 percent on the incremental increase in the exports of home textiles and fabric, respectively.
No support was announced on raw material or yarn exports. Product-wise details show that the exports of readymade garments fell 3.60 percent while those of knitwear dropped 3.44 percent in January. Exports of bedwear went up 2.17 percent, but those of towels fell 1.36 percent. In primary commodities, exports of cotton yarn witnessed a year-on-year increase of 4.37 percent while those of cotton cloth fell 3.10 percent, cotton carded 100 percent and yarn other than cotton yarn 35.15 percent.
Exports of made-up articles, excluding towels, witnessed negative growth of 13.36 percent while those of tents, canvas and tarpaulin grew 39.37 percent. Exports of raw cotton also recorded a year-on-year decline of 49.77 percent. Art, silk and synthetic textile exports declined 14.11 percent.
President PTI Women Wing, Fehmida Jamali said TDAP should increase exports in order to repay the loan of $11 billion by the government next year easily, she said and added the production cost, which was expected to be reduced by the government through subsidy, would stay unchanged as electricity charges for the industry had been fixed at 11 cents per units compared to seven cents in other countries of the region, which is aimed at boosting their exports by making products’ prices compatible.
According to her, the government should have to increase its exports and remittances for paying back rising debt obligations. External debt on Pakistan was mounting massively and Pakistan had to repay $11 billion in 2017-18; as Pakistan’s external inflow situation was not very rosy and it would create shock waves for the economy.
It is imperative that Pakistan should increase its exports and the volume of remittances so that repayment of loans could be easily made. The importance of exports in a developing country’s development path is obvious. The fact that this question has to be posed and answered is a sad reflection on our policymakers’ priorities and a lack of comprehension, she added.