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New Trade Policy

  1. New trade policy
  2. The fishing ban
  3. Budget: Mixed reactions
  4. Water crisis in Pakistan agriculture

The blue-print of the guidelines to make local manufacturers more competitive

Jul 03 - 09, 2000

The Trade Policy for the year 2000-2001 announced by the Federal Minister for Commerce, Razzak Dawood, sets forth an export target of US$ 10 billion. The strategy to achieve the target include: measures to diversify the export base, emphasis on export of higher value-added goods, efforts to increase the exports of non-traditional items as well as offering incentives to boost Pakistan's share of top ten textile and non-textile items in the world trade.

The GoP has set an ambitious target which reflects a 17 per cent growth from the current year's expected export proceeds of $8.50 billion against the target of $9.2 billion for the year 1999-2000. Pakistan's exports have been more or less stagnant around US$ 8.5 billion for last few years. The increase in export receipts is mandatory to contain trade deficit arising due to higher international price of crude oil.

In order to boost exports of value-added goods, under textiles and clothing head, there is a major shift in GoP policy. It has been decided to withdraw export re-finance facility on export of cotton yarn and grey cloth. However, this should have not been a shock to Pakistan's textile manufacturers. Ever since the commerce minister has assumed the office he has been indicating about the shift in policy. However, like usual All Pakistan Textile Mills Association, a clout of spinners has expressed its displeasure.

This shift in policy was necessary as the GoP plans to boost Pakistan's exports proceeds mainly depending on the existing textile manufacturing infrastructure. The GoP is also expected to announce its Textile Vision 2005 programme shortly which envisages heavy investment in textile industry. To ensure investment in right type of plant and machinery, it was necessary to eliminate certain sections from the list of concessional financing — yarn and grey cloth being on the top.

At the same time availability of superior quality raw cotton is proposed to be ensured through not only improvement in the quality of cotton being ginned locally ginning factories but also by abolishing excise duty on imported cotton. Sawgins would now be imported duty free.

Another important decision is shift of policy towards principles of market mechanism, withdrawal of policies obstructing export growth, removal of uncalled-for restrictions on imports in most cases and maximum possible export-friendly bias. In this context, the GoP has also assured that exchange and interest rate policies would be made responsive to the changing demands of accelerated growth in exports. Pakistan's major problem has been the high cost of capital which in turn make its exports uncompetitive in the global markets.

The GoP has realized the need for close interaction between State Bank of Pakistan and the business community for ensuring substantially increased financing facility including export re-finance facility. A special committee constituted to review the existing export re-finance rules has already submitted its recommendations to broaden the scope and usefulness of the scheme. At the same time a new export credit guarantee framework is being introduced under the management of the private sector with equity participation from the IFC and ADB. This would indeed prove to be a highly helpful institutional framework for the expansion of export credit facility.

For the fisheries sector various incentives were announced to encourage the efforts of fish catchers. They have been declared as indirect exporters which entitles them for duty free import of several items required in their trade. At the same time ten grades of fish would be developed for exports. Another bold step for boosting export of non-traditional goods is allowing exports of vegetables and fruits without any minimum export price checks and no requirement for registration with the EPB.

To increase the export of rice of better quality the steps proposed are: improvement in the quality of rice through distribution of improved Irri seeds, ensuring better rice milling practices and permission to import parboiling rice plant from India. Exports through land routes to Central Asian Republics besides Afghanistan have been allowed with facility to claim duty drawbacks and refunds on specific items.

Imports have been largely liberalized. L/C margin restrictions have been done away with while the condition to establish L/C before shipment of goods has been waived. The GoP seems to have realized, though very late, that restrictions on imports indirectly exert an unfavourable impact on export growth. While the maximum duty slabs has been slashed, efforts are being made to protect the local industries from dumping. Legislation to impose countervailing duties is almost ready for promulgation. It is hoped that such legislation will provide adequate protection to domestic industry.