Home / Interviews / Budget 2017-18 lacks support for business community; Govt must revise policies to allow level playing field

Budget 2017-18 lacks support for business community; Govt must revise policies to allow level playing field

Interview with Muhammad Jawed Bilwani – Chairman, Pakistan Apparel Forum & spokesman of seven Industrial Associations of Karachi

Profile

Muhammad Jawed Bilwani is the proprietor of M/s. J.B. Industries, one of the leading and prominent manufacturers and exporters of knitted garments and dyed fabric specializing in high quality knitting, stitching and dyeing with latest hi-tech machines. He is Chairman of Pakistan Apparel Forum; former Central Chairman & presently Chief Coordinator of Pakistan Hosiery Manufacturers & Exporters Association; Board Member of SITE Ltd; President Haji Abdullah Haroon Muslim Gymkhana; former President Pakistan-Afghanistan Joint Chamber of Commerce and Industry and former President SITE Association of Industry. He is Member Managing Committee since 2000 and former Chairman PHMA-Institute of Knitwear Technology, Karachi and former Chairman & Member PHMA-Police Liaison Committee since 2002. Realizing his business acumen and dedication, he has also been included as Member Steering Committee and former Director for Karachi Garment City constituted by the Government of Pakistan. He is also Member Executive Committee of Agro Export Processing Zone Units Association; Member Executive Committee of FPCCI; former Chairman and presently Chief Coordinator of Value Added Textile Forum, Chief Coordinator Council of All Pakistan Textile Associations and spokesman of Seven Industrial Associations of Karachi. Being a workaholic and a perfectionist, he most actively participates in the meeting with the government officials at all forums to highlight the issues and problems faced by the industries with his most pragmatic proposals for implementation by the government to overcome these issues and problems.

ABOUT PHMA:
Pakistan Hosiery Manufacturers & Exporters Association is the premier trade organization representing the hosiery and knitwear industry of Pakistan accelerating and providing growth in all sectors of the economy generating immense employment and promoting national self- reliance. Founding: Its history dates back to the year 1960 when Pakistan Hosiery Manufacturers Association (PHMA) was established by a few dedicated industrialists and leading manufacturers of hosiery and knitwear in Karachi. PHMA was registered with the ministry of commerce under section 26 of the Companies Act 1913 on the 7th day of July 1960 and incorporated under the Companies Act 1913 on the 31stday of August 1960. Objective: “To promote, develop, protect, stimulate and encourage the hosiery, knitwear and all made-ups, fabrics, home textile products of cotton, wool, silk or man-made fibers and to raise the standard of their production and enhance exports” among other aims & objects. Setting up of North Zone: Shortly, thereafter North Zone Office was opened in Lahore followed by offices in Faisalabad and Sialkot to facilitate the members there and to provide prompt and better services to the members and exporters of Faisalabad, Sialkot and Multan.

MEMBERSHIP/AFFILIATION:
– Affiliated with The Federation of Pakistan Chambers of Commerce & Industry.
– Member of International Chamber of Commerce, Pakistan (ICC Pakistan).

PAGE: WHAT IS THE STANCE OF PHMA ON THE BUDGET 2017-18?

MUHAMMAD JAWED BILWANI: The PHMA is of the view that the budget should focus to facilitate the business community for more industrialization and enhancement of export. Cost of manufacturing should be reduced for increase in industrial production and export efficiency. The industries are already burdened with multiplicity of taxes. Hence taxes on industries should be minimized to provide level playing field and enabling business environment for expansion and to create more employment opportunities, increase exports and generate more revenue for the national exchequer.

For Federal Budget 2017-18, PHMA submitted its proposals to federal government:

Sales Tax & Income Tax and Custom Related Proposals:

– Continue zero rating on sales tax for five export oriented sectors
– No payment no refund” system for exports to save futile exercise wasting precious time of fbr as well as exporters.
– Release of all outstanding sales tax refund claims.
– Manufacturers-cum-exporters who do not have composite units be allowed facilitation under dtre scheme.
– In case of duty on import of cotton yarn, duty should also be imposed on export of cotton yarn.
– Import of effluent treatment plants (etp); wastewater / recycle treatment plants and their parts be allowed duty free.

Proposal Relating to broadening of Tax Base:

Imposition of sales tax on retail stage

Proposals to Reduce Cost of Doing Business:

– Workers welfare fund (wwf) be reduce from 2% to 1% for exporters.
– EDF surcharge of 0.25% from export proceeds of exporters be abolished and instead levied on imported luxury items.
– 80% cost of all certifications in foreign lab testing be reimbursed by the government as per past practice.
– Export incentives, duty drawback claims, dltl claims be released within one week of submission of claims.
– Policy of “power distribution” should be open without permission and license.
– Separate tariffs for utility for the export sector be introduced and brought at par with regional competing countries and uninterrupted supply of utility be ensured.
– Water tariff should be same all over Pakistan.
– To end the weekly holiday on Saturday of the federal government
– Gazette holidays for export industries should be fixed by the federal government and worker should not be entitled to provincial holidays and fix gazette holidays.
– Establishment of combined effluent treatment plants in all industrial zones of Karachi for compliance of international regulations.
– Delays in export shipments and export productions due to ban on movement of heavy vehicles to enter into the city and industrial zones of Karachi.

PAGE: DO YOU THINK THE FEDERAL BUDGET FOR THE NEXT FISCAL WOULD BRING PROSPERITY AND IS PRO-BUSINESS?

MUHAMMAD JAWED BILWANI: The exporters are not satisfied with the budget. Their proposals have not been accorded deserving considerations. The budget was disappointing and did not have any attraction for us. Every year the stakeholders are invited in pre-budget meetings, their proposals are sought and appreciated, assurances are given to incorporate proposals in budget but to no avail. Despite assurances in budget meetings held with ministers and officials from the government, the Zero-Rating currently regulated under SRO taxation system has not been transformed to an Act. Pakistan Apparel Forum & PHMA, in joint budget proposals, to inculcate new confidence to exporters, gave recommendations to continue Zero-Rating and transform it into an Act from currently SRO taxation system whereby the meeting on budget chaired by Finance Minister gave assurances but not implemented. Government is urged to convert the Zero-Rating under SRO 1125 to an Act as assured.

Government in annual budgets from year 2014 to 2017 allocated funds for refunds but payments were not made. Under Prime Minister’s export package of Rs180 billion, in this budget under duty drawback on taxes, only Rs4 billion were allocated which shows that textile is less-priority area for the government whereas, as per annual export estimate and careful observation, the said allocation should be worth about Rs35 billion. For textile industry, the budget was disappointing. To enhance exports, the government must accord importance to the recommendations of exporters. It is the responsibility of the government to provide level playing field and create enabling business environment. Due to inordinate delays in payment of refunds, the problems of exporters have multiplied. The government itself is not adhering to the Sales Tax Rules 2006 under which after approval of claims, payments cannot be delayed. Refunds approved last year have not been paid till date. How could the newly allocated funds for refunds shall be released on given dates? No practical steps and measures have been taken to decrease the cost of manufacturing. Higher cost of manufacturing, delays in refunds, higher tariffs of power and gas, lack of business friendly environment are the main causes of decline in exports.

The Finance Minister in budget speech 2014-15 had announced all sales tax refunds claims of exporters shall be released by 30th September 2014 and promised that in future all admissible refund claims of exporters shall be disposed of within 03 months.

In budget speech 2015-16 Finance Minister stated that the refunds due to the export oriented sectors relating to tax periods till 31st May 2015 shall be issued by 31st August 2015.

Finance Minister in budget speech 2016-17 stated that all sales tax refunds till 30th April whose RPOs have been approved, will be paid by 31st August 2016.

In his last budget speech 2017-18, Finance Minister, spoke that all the pending sales tax refunds whose RPOs have been sanctioned by 30th April 2017 shall be paid in two parts. RPOs upto the value of Rs 1 million will be paid till 15th July and the remaining RPOs will be paid till 14th August 2017. In spite of announcement in budget speeches, the refunds have not been made till date. Rule 26A of Sales Tax Rules 2006 refers to expeditious processing and payment of refunds. To process said claims FBR IT Risk Management System (RMS) within 02 days of refund submission will automatically process said claim amount under no objection and will generate RPO of cleared amount. Subsequently, concerned RTO will arrange issuance of cheques for cleared amount in 07 working days. Contrary to Law, the Government has caused inordinate delays in payment of refunds.

Funds allocated during the last four budgets was not released, how can we expect that funds allocated in budget 2017-18 shall be released to exporters? He was of the view that the Government should inform the public as to where those allocated funds were spent and why not released to textile sector?

Inordinate delays in refunds of exporters in respect to their Sales Tax refunds, Customs Rebates, DLTL claims, income tax refunds, problems of exporters increased to manifold and exports have also declined.

Under Textile Policy Rs5 billion were allocated while under Duty Drawback on taxes Rs4 billion were allocated. In PML-N government the textile remained a low priority area. In budget 2014-15 Rs 6 billion were allocated under textile policy but released only Rs4.84 billion. Likewise, in 2015-16 budget Rs6 billion were allocated and in 2016-17 another Rs6 billion were allocated but were never released. They were not sure whether the government shall release the funds allocated in budget 2017-18 or not?

During tenure of PML-N government from 2015-2017 total Rs18 billion has been allocated but release only Rs 4.84 billion for payments. In PPP last government tenure, Rs188 billion were allocated for textiles. In annual budgets from 2009 till 2014, Rs17 billion were allocated and Rs28.25 billion were released. Under Textile Policy 2014-19, Rs80 billion were allocated. We have expressed concern over lip-service of the government to control the power crises rather practical steps to ensure uninterrupted power and gas supplies to the industries. There is an announced load-shedding of gas on Sundays while power outages in various industrial areas have also been reported. More than 200,000 power looms were scraped amid higher tariffs if power and un-viability to operate.

To decrease cost of manufacturing, the government was also given proposals to decrease existing higher tariffs of utilities and introduce separate power, gas and water tariffs for five-zero rated export oriented sectors.

Similarly, it was also advised to bring the labor charges at par with the competing countries in the region. The industry was already burdened with multiple taxes, therefore, the government should focus to bring more persons into the tax-net and broaden tax-to-GDP ratio. Comparison of textile exports of Pakistan with regional countries and articulated that textile exports of Bangladesh in 2012-13 was $23.69 billion which increased with 27.81% growth rate to the tune of $30.28 in 2015-16, India had textile exports worth $33.17 billion in 2012-13 which increased with growth rate of 10.70% to an amount of $36.72 billion.

Similarly, textile exports of Vietnam in 2012-13 was $19.30 billion, which enhanced with a growth rate of 31.29% to the tune of $25.34 billion. Nonetheless, Pakistan textile exports in 2012-13 were $13.06 billion, faced negative growth of 4.67% and drastically declined to $12.45 billion in 2015-16. In this manner the exports have overall declined to 15 percent and textile exports declined to 3 percent. Allocation of only Rs4 billion to textile out of Prime Minister’s Rs180 billion export package reflects non-seriousness of the Government towards the sector. Whereas, as per annual Export estimate and careful observation, the allocation should be worth about Rs35 billion. Textile sector contributes to 8 percent of national GDP remained a low priority area for the government and the sector has not been given deserving importance.

No practical steps and measures have been taken to decrease the cost of manufacturing.

PAGE: HOW WOULD YOU COMMENT ON THE GDP GROWTH, FISCAL DEFICIT, TRADE DEFICIT, EXPORTS AND IMPORTS IN THE NEXT FISCAL YEAR?

MUHAMMAD JAWED BILWANI: Textile sector which contributes to 8 percent of national GDP has not been given deserving importance. As compared to last year, there is a negative growth of 0.92 percent from July to April which reflects non-seriousness of the government towards the sector. The contribution of industries in GDPs of Pakistan, Bangladesh and India is near about same, however, the share of export in the GDP of India is 10.73 percent, in Bangladesh 13.92 percent and in Pakistan it is 6.34 percent only. The export policies Pakistan towards enhancement of export are not realistic and balanced.

To overcome fiscal and trade deficit, it is crucial that the government must incentivize the industries to enhance exports. The share of industry in the national GDP of Pakistan is 20.90%. GDP of Pakistan has been recorded at $328 billion with a growth rate of 5.20%. GDP per capita is $1629. The percentage of exports in GDP is 6.34% as compared to the export share in GDPs of regional countries viz Bangladesh, India, Vietnam and Sri Lanka. It is amazing to note that the share of industry as sector in national GDPs of Pakistan and regional countries is almost same but the exports of said regional countries as compared to Pakistan is higher. This is because of export-friendly policies of those countries. For a major breakthrough to increase export and to reduce trade deficit, the government has to revisit relevant policies in consultation with all stakeholders taking them into confidence and on board in all matters of national interest.

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