The blue-print of the guidelines to make
local manufacturers more competitive
By SHABBIER H. KAZMI
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
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.