Export potential being marred by
public sector organizations
By AMANULLAH BASHAR
May 08 - 21, 2000
Procter & Gamble, one of the members of Pakistan Soap Manufacturers
Association (PSMA) has exported 500 tonnes of laundry soap from Pakistan to Africa this
This precedence set by Procter & Gamble is enough to prove that
Pakistan Soap Industry has potential and a place for itself in the export, provided for
which an aggressive marketing approach supported by the required incentives are made
available to this industry.
Yaqub Karim, Chairman PSMA, made these observations while talking to PAGE.
He has strongly recommended to the government in the budget proposals for the next
financial year to rationalize the duty structure to facilitate the soap manufacturers to
fetch a lucrative share out of the export market for Pakistan.
Yaqub Karim pointed out that Pakistan Standard Institution is a great
hurdle in the way of enhancing export business. The manufacturers have to obtain quality
certification for every brand, which not only time consuming but causes uncalled for
hassles for the industry. Many times, a buyer wants his own logo, brand name, shape,
fragrance and color of soap. We will have to comply with the demand of the buyers. However
contrary to that marketing requirement, the manufacturers are required to obtain quality
certification for each brand from Pakistan Standard Institution, which consequently causes
problems for the exporters for meeting the export commitment within the stipulated time
frame. PSI certification takes months and the export orders are generally lost. This is a
funny example of our organizations, which are mean to facilitate the economy but only
theoretically. But for the practical purposes they are nothing but to make a mess of
things, Yaqub said. The soap industry generally avoids entertaining export inquiries due
to difficulties faced by them on the part of Pakistan Standard Institution. Good luck to
Fan Manufacturing Industry, which has been exempted from this restrictions to get
certification from the PSI.
Highlighting the potential of the soap industry, Yaqub Karim said that
there are approximately 500 units in organized and un-organized sectors. Being an
employment-oriented industry it provides jobs to over 100,000 workers all over the
country. The total production capacity of this industry is 250,000-300,000 tonnes of soap
annually. Its contribution to the national exchequer in the forms of various taxes is
running in billions of rupees.
The government has issued specific SRO No.733 (1) 99 amending the basic
policy order. This amendment has created an illogical and undue differentiation between
Soap Industry and Oleo Chemical Industry using the same raw material i.e. Palm Stearin
imported from Malaysia but for different End Products.
Oleo Chemical Industry: Palm Stearin is the basic raw material to
produce stearic Acid used in Cosmetic and other Industries. Through Special SROs No 555(1)
99 and 733(1) 99 unjust concession is awarded to this industry. By virtue of that SRO Oleo
Chemical industry enjoys the 15 per cent ad: vol concessionaire rate of the customs duty.
Soap Industry: The Palm Stearin (HS Code 1511-9010) is directly used
for producing quality soap and its customs duty is Rs10,000 PMT. Contrary to that rate in
the World Market is $244 PMT these days. Consequently in percentage it comes to 74 per
cent ad: vol as against 15 per cent for Oleo Industry. Should not we call it a dual
standard of our policies. It is mandatory for Soap Industry to import Palm Stearin in
colour to avoid any misuse.
Yaqub Karim strongly urged the government to rectify this undue favour
without any loss of time to enable the industry to be competitive in the exports as well
provide this basic commodity at affordable price to the working class already hard pressed
to price hike in general. Both the industries should be treated at par by allowing them
the customs duty at the rate of 15 per cent ad: vol.
There are two basic raw materials required in soap manufacturing. i.e.
Tallow and Palm By-Products. Either can be used for making quality Soap. But duty on
Tallow is 15 per cent and on Palm By-Products is 35 per cent. Palm Products are imported
from brotherly countries Malaysia and Indonesia at $100 cheaper than Tallow from Australia
and USA. If the duty on both the raw materials is brought at par i.e. 15 per cent ad:vol
then our industries will prefer to import cheap priced raw material i.e. Palm By-Product.
This proposal if accepted the country can save huge amount of foreign exchange. A
calculation based on last year's imports indicates that country can save more than $20
million which will also offset the loss of revenue in shape of custom duty, he suggested.
Yaqub Karim also said that the custom duties on Detergent raw material
have been reduced recently. The step has been taken to enable them reduce their cost of
production to survive against the imported finished products. While soap industry
continues to face the similar problem but it is ignored though end use of both the
products is the same.