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Steel melting industry opposes tax break for Chinese company

Pakistan Steel Melters Association (PSMA) has fiercely opposed the grant of duty and tax exemptions to China State Construction Engineering Corporation Limited (CSCEC), saying the concession will cost the national exchequer about Rs11 billion.

Under SRO 47(I) 2018, CSCEC, which is working on the Sukkur-Multan section of motorway, has been allowed duty-free import of construction material and machinery into Pakistan.

To record its reservations at the highest level, the PSMA has drawn attention of Prime Minister Shahid Khaqan Abbasi to this issue through a letter, requesting the premier to withdraw the disputed duty and tax exemptions offered to a foreign company at the expense of domestic steel sector.

In 2017, steel melting in Pakistan was coined as the fastest growing steel industry in the world as large-scale manufacturing data, published by the State Bank of Pakistan (SBP), showed that billet/ingot production had grown 62% year-on-year in the first four months of fiscal year 2017-18.

PSMA Senior Vice-Chairman Hussain Agha noted that the steel industry of Pakistan was gearing up for a massive $300-million capacity expansion in the next 24 months, which would lead to a manifold increase in the country’s revenue receipts.

Businessmen suggested to do homework before exploring China

Consul General of Pakistan in Chengdu Muddassar Tipu has said that Pakistani businessmen need to conduct studies and research before they come to China in search of business or trade opportunities.

“We always welcome Pakistani businessmen in Chengdu, and are ready to help them, but I have learned that local businessmen lack the homework. They do not know what exactly they are looking to avail there,” Tipu said while speaking at the inaugural ceremony of the Pak-China Inter-Industrial Mobility programme on Wednesday.

The programme has been initiated by the Pak-China Joint Chamber of Commerce and Industry (PCJCCI) to mobilise potential industries of both countries through a series of trade fairs, exhibitions, conferences, and symposiums.

Tipu further said that this is the age of globalisation and local businessmen should strengthen their research and development work. “You have to talk to textile workers in China if you are looking for some venture rather than talking to the whole Chinese government,” he added.

He further said that the China-Pakistan Economic Corridor (CPEC) is going to connect the region, which could bring prosperity in regional countries. “The world has been divided in different blocks, and they are doing business in a competitive world,” he said, adding that Pakistan’s learning curve has significantly improved after CPEC.

PCJCCI President SM Naveed said the government has addressed a few concerns of local investors by giving a level playing field. “Foreign and local investors can now enjoy a tax break of ten years, and duty exemption on machinery imports, however some other points are under negotiations”, he said.

Naveed further said that it is not easy for Chinese manufacturers to relocate in Pakistan. “Currently, the first phase of CPEC, which is an infrastructure development, is under way. The second phase will include establishment of special economic zones by the time some rules and regulation could be finalised, as currently no rules exist,” he said, adding that till date there is no duty exemption on import of raw materials.

“This can give a level playing field to already established manufacturers,” Naveed added.

The other speakers spoke of inter-industrial mobilisation as a systematic approach through which the participants are provided an opportunity to visit, see and learn about the market trends, potentials, operations and challenges of each other’s industries.

According to them, industrial mobilisation provides a good understanding of key issues, available opportunities, prospects, and remedial measures during the mobilisation process.

Moreover, they correlated the significance of such mobilisation with the upcoming and ongoing CPEC projects. The mobility programme encompasses a four-pronged strategy ie to expand market linkages, promote industrial relocation, technology transfer and ultimately to bring massive employment opportunities in Pakistan.

IRKED: MCCI wants business-friendly strategies

The Multan Chamber of Commerce and Industry (MCCI) has expressed concern over the monetary policy announced by the State Bank of Pakistan (SBP) for the next two months.

The central bank raised the key policy rate by 25 basis points to 6%, keeping in mind the increasing pace of inflation following rupee depreciation.

However, MCCI President Malik Asrar Ahmed Awan said industry and business-friendly policies should be introduced. “The SBP should adopt long-term policies instead of depending on a short-term policy.” He said that the SBP should focus on regulating government spending and unabated borrowing instead of increasing interest rates, which will pressurize the industrial sector and its production.

Australian govt, Fauji Foods ink partnership agreement

The Australian government-funded Market Development Facility (MDF) and Fauji Foods Limited signed a partnership agreement to establish 20 milk collection centres in rural Layyah and Muzaffargarh districts of southern Punjab.

Australia’s High Commissioner to Pakistan Margaret Adamson joined Fauji Foods MD and CEO Javaid Iqbal at a signing ceremony at the Fauji Foods factory in Bhalwal. High Commissioner Adamson welcomed the joint investment by Australia and Fauji Foods which, she said, will expand Pakistan’s formal milk procurement network and increase incomes for smallholders.

“Extending the commercial network for milk procurement will help in addressing Pakistan’s annual milk supply-demand gap of 3.5 billion litres. The milk collection centers will also deliver critical information to farmers on best practice in milking, vaccination and animal husbandry,” Adamson added.

“By connecting smallholders with commercial markets, the milk collection centres will attract better quality milk and provide a better rate for farmers for their product,” she said.

The high commissioner further said that Australia’s development cooperation partnership with Pakistan is focused on reducing poverty through economic growth and human development, adding that investment in the private sector, nutrition and gender equality are key priorities, and are linked to this catalytic new initiative.

Fauji Foods CEO Javaid Iqbal, highlighting the importance of the partnership, said that farmers can significantly benefit from an extension service which will educate them about the best husbandry practices and benefits of pro-active vaccination and de-worming.

MDF is Australian government’s private sector development programme in Pakistan. Since 2013, MDF has partnered with 46 Pakistani businesses in the dairy, meat, leather and horticulture sectors and is now expanding into new sectors in support of business services and sustainable technologies.

 

SHC removes regulatory duty from over 350 goods

The Sindh High Court (SHC) on Wednesday declared a legal amendment, which had given the finance minister powers of imposing regulatory duty, unconstitutional and scrapped the duty levied on more than 356 items, putting the federal government in a tight spot.

The decision carries far-reaching implications for the federal government and reinforces the principle of ‘trichotomy of power’ that the Supreme Court of Pakistan had enshrined in its historic August 2016 judgment.

The SHC made the Supreme Court’s judgment the base for declaring the amendment to the Customs Act 1969 through the Finance Act 2017 unconstitutional.

In the August 2016 judgment, the Supreme Court had defined the federal government as the federal cabinet plus the prime minister and barred the premier or any minister from unilaterally taking decisions in fiscal matters.

“Section 18(3) of the Customs Act 1969 as to the extent as amended by the Finance Act 2017 is declared to be ultra vires the Constitution and of no legal effect,” read the SHC judgment.

In order to defeat the Supreme Court ruling, then finance minister Ishaq Dar had obtained these powers by inserting a clause in all the four fiscal laws. The clause stated that the board (Federal Board of Revenue), with approval of the federal minister in charge, may by notification make changes in the tax rates.

However, the SHC struck down the amendment to the Customs Act that had been challenged by the affected parties after the FBR imposed regulatory duty on more than 356 goods in order to curb growing imports.

The ruling also declared SRO 1,035 of 2017, issued in October 2017 in exercise of powers conferred by the amended Section 18(3) of the Customs Act, “ultra vires, of no legal effect and is hereby quashed”.

The decision will cause a dent in the FBR’s revenues for this fiscal year as it had estimated receipt of a minimum Rs25 billion from the regulatory duty. However, the decision will help ease inflationary expectations as the government had even targeted essential and food items to raise additional revenues.

Imported food items, tyres, vehicles, garments, etc will get cheaper as a result of the court ruling.

The SHC directed the FBR to refund the duty that the petitioners paid after the issuance of the SRO.

But the court suspended its judgment for 30 days in order to enable any aggrieved person or party to appeal against the verdict.

Work on $8.2bn CPEC rail line unlikely to begin soon

Pakistan has been raising false hopes of early start of work on the $8.2-billion Mainline-I (ML-I) rail track under the China-Pakistan Economic Corridor (CPEC) as it has not yet finalised the mode of financing because of its huge implications for the country’s external debt.

An internal agreement on the exact financing modalities was essential before making a request to China for processing a loan, said sources in the Ministry of Planning, Development and Reform.

The project had already faced a delay of at least two years and there was still disagreement between the Ministry of Railways and other ministries, they said.

The Ministry of Finance and a financing group, set up to firm up funding modalities for the ML-I project, are in favour of acquiring the loan with sovereign guarantees, show documents.

In the case of sovereign guarantees, the $8.2-billion loan will not become part of Pakistan’s ballooning external debt of $85 billion. The responsibility of loan repayment will lie on the Ministry of Railways.

Under the May 2017 framework agreement, the project will be solely funded by China.

However, Pakistan Railways wants the central government to acquire the loan, which will not only make it part of the external debt, but will also shift the loan-servicing responsibility on to the centre.

The ML-I project is aimed at upgrading the existing 1,872-kilometre mainline of Pakistan Railways from Karachi to Peshawar. The project was planned to be completed in two phases between 2016 and 2020.

Now revised timelines suggest that the project cannot be completed before 2022 provided the government is able to start work this year.

For the past one and a half year, the government officials concerned have been giving false deadlines for signing the financing agreement with China.

Worrisome: FCCI concerned over hike in petroleum rates

The Faisalabad Chamber of Commerce and Industry (FCCI) has expressed concern over the repeated increase in petroleum prices, fearing that it will trigger a new wave of price hike in the country.

FCCI President Shabbir Hussain Chawla said the price hike will have an adverse impact on trade and industry, in addition to having a negative effect on the already dwindling exports.

“The trickledown effect of this hike will also hit a large number of our population who are forced to live below the poverty line,” he added.

The president was of the view that as soon as the economy gained some stability, the government took retrogressive steps to spoil its achievement, discouraging the business community in the process.

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