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The soap industry potential
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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 year.

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.

Discrimination

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.

Foreign exchange

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.