Emerging as second largest export earner

May 29 - June 06, 2004

Cotton and textile products mainly dominate Pakistan's exports regime, which contributes around 68 percent of the total exports of the country.

After the textile products, the other prominent contributors are Rice, Leather and Leather garments. At present, Leather and Leather products, however, have assumed the role second largest contributors by fetching $735 million during the current financial year.

With this situation, Rice comes to the position of third largest export earner around $600 million in the current financial year ending on June 30, 2004.

Textiles, the mainstay of Pakistan's economy, however, not only retains the top slot but is likely to make history by hitting the mark of $9-10 billion exports which is unprecedented in the economic history of this country.

Economic analysts were of the view that though the export target set for the current year seems well within the reach and the exports may go even beyond the target, yet the situation calls for serious endeavors for diversification in the export base which heavily relies on cotton textiles.

Identifying the large-scale engineering sector as the potential area for diversification in the export base, the analysts were of the view that the growing automobile sector can help developing a strong engineering base, which would ultimately help effective diversification in our export base.

Any further agreement for establishing a new automobile project should have a condition either to buyback at least 30 percent of the products or permission for exports, especially the vendor industry. Such sort of agreements have been struck in neighboring India which the auto sector established in collaboration with foreign investors has to export 30 percent of the products. Growth in auto sector can also help developing a strong vendor industry, as there was a tremendous demand for auto parts all around the world.

The expansion in the European Union with the inclusion of ten more countries has also arouse interest among the exporting circles in Pakistan and most of the export-oriented industries or trade bodies have chalked out plans to visit and hold single country exhibitions in the new E.U member countries.

In this connection, Pakistan Leather Garments Manufacturers and Exporters Association has taken a lead as they are visiting Poland and Moscow on June 9 where they have planned to organize a single country exhibition.

Meanwhile, Fawad Ijaz Khan, Chairman Pakistan Leather Garments Manufacturers & Exporters Association has said that leather industry needs for cost reduction measures to enable the exporters to complete in the international markets.

He pointed out that excise duty of 16.3 percent has been imposed on imported chemicals in the federal budget 2002-03. Currently there is no mechanism of refund of this duty to exporters. He suggested that either this excise duty is abolished or some mechanism is devised for its refund. Furthermore he stressed that all types of imported leather should be exempted from sales tax or customs duty to facilitate availability of good quality leather for value addition. For example shearing leather, which is double-faced leather, has 5 percent import duty. There is considerable scope in international markets for garments made from this type of leather. Similarly raw skins and wet blue leather from local sources should also be exempted from sales tax like cotton and phutti to encourage development of value added sectors of the leather industry.

He strongly recommended for reduction in the rate of utilities for export industries to enable them to compete especially in the coming days under WTO regime. At present, GST on telephone is not refundable. It should be made claimable like GST on other utilities. Exporters are confronting multiple agencies collecting labor levies, which calls for multitude of reporting and audits. He said that one window operation to deal with various labor levies was a long stand demand of the industries. He expressed the hope that a helping out culture has to be developed in this country if we have to develop our industries on sound footings.

Meanwhile, the government is taking steps to encourage exports of other sectors as well especially selected textile products, by enhancing duty drawback rates on exports in the forthcoming federal budget.

The Ministry of Industries and Production has recommended to the Central Board of Revenue to that Ghulam Khan Check post be declared as authorized land route for exports to Afghanistan, in additional to Torkham and Chaman.

Currently, the central board of revenue is examining the possibilities of facilitation and simplification of law to encourage exports and increase the scope of Duty and Tax Remission for Exports (DTRE) registration from next fiscal year.

In order to boost export of cement to Afghanistan, amendments have been proposed for zero rated exports and claim of duty drawback. Presently, the export rebate of Rs54 per ton on cement and no drawback for export of cement has led the export of cement by sea to a grinding half.

The CBR also working out a mechanism to make the export of cement viable and increase the capacity utilization of the industry, rebate on cement be increased from Rs54 per ton to Rs100 per ton and rebate on clinker be allowed at the rate of Rs46 per ton as proposed by the Ministry of Production.

Cement sector, which had become almost a liability for the government has taken a turnaround not only within the country but significantly contributing in the export regime. However, the export of cement is so far restricted to Afghanistan where re-construction process is being carried out.