- Commerce adviser says Temporary Economic Refinance Facility of the SBP, which expired in March, will be restored for SMEs and other targeted sectors
LAHORE: Advisor to Prime Minister on Commerce and Investment Abdul Razak Dawood on Saturday said that the International Monetary Fund (IMF) is the major hurdle to sales tax reduction.
He was responding to a question during a briefing at the Lahore Chamber of Commerce and Industry. “IMF is the major hurdle for sales tax rate reduction,” said Razak.
He also said it is the demand of IMF that Regulatory Duty should be imposed on everything.
LCCI President Mian Nauman Kabir gave the opening remarks while Senior Vice President Mian Rehman Aziz Chan and Vice President Haris Ateeq also presented their point of view.
President FPCCI Nasir Hayat Maggo, former FPCCI President Mian Anjum Nisar, former LCCI Presidents Sheikh Muhammad Asif, Shahzad Ali Malik, Irfan Iqbal Sheikh and Executive Committee Members also spoke.
Abdul Razak Dawood said that the Temporary Economic Refinance Facility (TERF) of the State Bank of Pakistan, which expired in March, will be restored for SMEs and other targeted sectors.
He said that the engineering and iron & steel sectors will be the next area of focus for tariff rationalisation.
He further said that the government is going to introduce a DL-TL policy in which extra incentives will be given on the exports of non-traditional products.
The government is also going to sign TIR convention with Afghanistan for free movement of trucks to the Central Asian States and other parts of this region.
The government is targeting the Central Asian Region to boost national exports. The government is also going to implement ‘Look Africa Policy’ and in this regard an official delegation will visit Nigeria next month.
He was of the view that Pakistan’s export diversification has improved considerably during the last three years, which is the only way to increase exports.
“As far as GSP-Plus Status and Basmati Rice are concerned, things are well under control,” he said, adding that though there are challenges, they are far less severe than those of the past three years.
He said that import cost has increased due to inflation at the international level. Oil imports have increased in terms of value. He said that the Lahore Chamber will be given representation at the Export Development Fund (EDF) Board.
Speaking on the occasion, FPCCI President Nasir Hayat Maggo said that the State Bank of Pakistan should control the exchange rate, which is affecting the businesses.
On the occasion, former FPCCI President Mian Anjum Nisar drew the attention of PM’s advisor towards the long delay in the movement of goods at the Pak-Afghan border.
He said that there are long queues of trucks that are hampering trade between the two countries. He also called for a reduction in freight charges for Pak-Afghan trade.
While giving a briefing to the Dawood, LCCI President Mian Nauman Kabir said that the Lahore Chamber has always advocated for the effective utilisation of EDF in consultation with important stakeholders of the economy.
However, the LCCI has not been given representation in the EDF Board. Considering the paramount importance of LCCI as an important stakeholder in our economy, it should be given adequate representation.
He said that the issue of a steep rise in trade deficit needs the urgent attention of the government. In the first quarter of the current financial year (July-September 2021), the trade deficit stood at $11.66 billion - that is 100.6% higher as compared to the trade deficit in the same period last year.
This recent increase in trade deficit has played a strong part in the devaluation of the rupee. In the short term, we would urge the government to immediately implement a currency swap with China from where our imports amount to around $13 billion, he said.
Mian Nauman Kabir said that to curtail the trade deficit, customs duties and regulatory duties on luxury and non-essential items should be increased so that we can manage our import bill. It is worth mentioning that our imports in the first quarter of this financial year have crossed $18 billion.
He said Pakistan’s export products are heavily concentrated in a few products lines as textiles, rice and leather account for almost 70% of our exports. There is a need to diversify our exports, especially focusing on potential sectors like pharmaceuticals, engineering industry and Halal food, etc.
He recommended that these potential export sectors of the economy should be completely zero-rated so that their export competitiveness can be increased.
The LCCI President said that there is a need of collective actions for exploring new export markets as about 65% of Pakistan’s exports go to just 10 countries. For enhancing our exports to untapped potential markets like Africa, Russia and Central Asia, etc., formal banking channels should be established on a priority basis. This issue has already been raised before with the SBP and the Ministry of Commerce.
“We appreciate the government for reducing duties on many raw material lines in the last couple of years,” Mian Nauman Kabir said.
"We recommend that the process of tariff rationalisation should continue and import duties (Customs Duties & Regulatory Duties) on all the raw materials not produced locally should be slashed."
The LCCI President said that the Temporary Economic Refinance Facility of the State Bank, which expired this year in March, will be revived again for targeted sectors. This scheme was really beneficial for setting up new industrial units as concessionary refinance was being provided.
He said that access to finance for SMEs remains a persistent challenge. SMEs only get 6% of private sector credit in Pakistan while the number of SME borrowers is just 180,000. In this connection, the government should devise a concrete strategy in collaboration with the private banks.
The LCCI President said that the rate of 17% Sales tax on the inputs of various export-oriented industries is extremely high and needs to be brought down as it takes a long time for the businesses to get their refunds.
Mian Nauman Kabir said that the facility of duty drawback on local taxes and levies (DL/TL) for the exporters will not be curtailed but will be further enhanced in the value-added sectors.
LCCI Senior Vice President Mian Rehman Aziz Chan and Vice President Haris Ateeq said that it should be ensured that electricity tariff for the export-oriented industries remains competitive, as any tariff increase results in increasing the cost of doing business. The continuous availability of gas, particularly for the export-oriented industries in the winters, should be ensured, they said.
Copyright Business Recorder, 2021