Pakistani industry seems to
express a mixed reaction about the ultimate zero-tariff
By Syed M. Aslam
Sep 20 - 27, 1999
With the implementation of General Agreement of Trade and Tariff (GATT)
system of valuation for imports, less than three-and-a-half months away, the Pakistani
industry seems to express a mixed reaction about the ultimate zero-tariff that the new
system would ultimately usher.
PAGE talked to a number of chairmen of various industrial areas in
Karachi asking them what implications would the implementation of GATT mean to Pakistan
and what they feel would the implications of the ultimate zero tariff on the industry of
The Chairman of F.B Industrial Area, Farooq Bakaly, said that a highly
smuggling prone economy and the drastic reduction in the overall productivity in the
industrial sector plus the tremendous increase in the production costs due to substantial
increase in the prices of petroleum, power and gas would not be able to compete with
foreign goods if they were allowed to get imported duty free.
In addition to the substantial increase in other outputs pushing up the
production costs, high rates of local duties which are coming thick and fast, would mean a
death blow to the local industry particularly as the national psyche prefers everything
foreign, he said. Who would like to purchase a locally made product when a similar foreign
made product is available at slightly higher or even at the same price, he asked.
As is, Farooq lamented, some 3,720 industrial units have been closed
alone in the Sindh province during the last three years of which 95 per cent were located
in Karachi. As all of these units were located in the organized sector it would be safe to
assume that many more were closed in the unorganized sector, he said.
He claimed that there has been an overall 40 per cent reduction in the
productivity at various industrial areas in Karachi during the same period not only due to
the closure of the units mentioned above but also due to the reduction in number of
working shifts. Many units in the F.B. Industrial Area which were running three shifts
have reduced their activity to just two shifts while many others which were running two
shifts previously have now cut down their production to just one shift, he said.
He said in theory he welcomes the implementation of GATT system as a
more universal and harmonized valuation for import purposes unlike the present ITP (Import
Trade Price) system which differs for same goods for different sources. "However, in
practice I prefer to oppose the implementation of the GATT system of valuation for the
specific reasons mentioned above," he added.
Talking to PAGE the Chairman of SITE association of Industry, Majyd
Aziz welcomed the implementation of the GATT system of valuation as it would check the
much rampant abuse of the ITP system as there were many importers who were able to make it
help translated by the Customs as they liked.
He said that the GATT system of valuation is not only more
comprehensive but also much more transparent to make it much likely to get abused like the
ITP system. He, however, said that he has to study the GATT system to know what it has to
say about the dumping of foreign goods into Pakistan particularly as it would not allow
any protection to the signatories including Pakistan which was previously available under
However, he said, absence of a level playing field to an already
troubled local industry due to rising cost in utilities, labour and overall overhead
expenses plus a declining productivity and the failure to produce competitive quality
products would leave it high incompetitive to imports if and when a zero import tariff is
Industries in India and Bangladesh, the main competitors of Pakistan,
pay not only much less for such basic utilities as power, gas, water, but also the
interest rates in these countries are also much lower than in Pakistan. In addition, the
productivity ratio of labour in Pakistan is also much lower than these two major
competitors, he added.
He, however, expressed optimism that while, in the time to come, only
the fittest would survive the resultant do-or-die challenge would help the local
industries to improve not only the productivity but also quantity provided measures are
taken by the government on top priority basis to amend its priorities to address the
problems of the manufacturing industry. In the long run, the GATT system of valuation
would be in the overall interest of the country provided the local industry was allowed a
level playing field and the bureaucracy is made to develop an export culture to abolish
the bottlenecks at every stage of export, he added.
S.M. Naseer, the Chairman of Council of Karachi Industrial Areas
(CKIA), said that without improving the productivity and improving the quality the
Pakistani exports would not remain competitive in the international markets. It is
imperative to increase the pace of the ISO 9000 and other related international quality
codes to meet the new challenges as without them we would not be able to export anything
in the time to come, he added.
Masood Hashmi, President of the Marketing Association of Pakistan, of
top level marketing people, said that with a closure of one multinational company each day
Pakistan looks like it is not ready to meet the GATT challenge.
He claimed that Pakistan lost $ 1 billion in exports last year alone
due to rejection, late supply or bad quality. He also quoted a World Bank report which
said that 97 per cent of the global trade by the year 2003 would be intra-regional which
would leave a negligible 3 per cent of it between country-to-country. GATT or not, it
seems we are going to be in big trouble if we fail to realize that how important is the
intra-regional trade would be for Pakistan, he added.