Pakistan’s pharma sector warns 2pc Cess in KP threatens exports to Afghanistan
KARACHI: The recent imposition of 2% cess on exports by the Khyber Pakhtunkhwa (KP) government is raising alarm bells within Pakistan’s pharmaceutical industry.
The sector says that this additional levy will negatively impact the competitiveness of Pakistan’s products, particularly in the crucial Afghanistan market.
Industry insiders warn that this move threatens to exacerbate the already fragile state of Pakistan’s exports to Afghanistan, which is a vital destination for the country’s pharmaceutical goods.
According to a former chairman of the Pakistan Pharmaceutical Manufacturers Association (PPMA), the cess effectively acts as a tariff, making Pakistani goods more expensive compared to competing goods from India and China.
“This levy creates an additional financial burden on traders, making Pakistani products less attractive to Afghan buyers. It is highly likely that they will turn to other countries for cheaper alternatives,” the official said, emphasising that this could result in significant losses for Pakistan’s already dwindling export numbers.
Pakistan has historically maintained a robust trade relationship with Afghanistan, exporting goods such as rice, medicaments, and vegetable oils.
However, exports have faced a dramatic decline in recent years, dropping from $2 billion in 2017 to just $969 million in 2023.
Several factors have contributed to this reduction, including political instability, economic challenges, and increasing competition from neighboring countries.
Pharmaceuticals have been a key component of Pakistan’s exports to Afghanistan, contributing $112.8 million in 2023 alone.
Afghanistan, which lacks substantial domestic pharmaceutical production, relies heavily on imported medicines.
Over the past five years, the country has been the largest market for Pakistan’s pharmaceutical exports, constituting over 30% of its total export revenues in this sector.
Despite Pakistan’s proximity and historical trade ties, the competitive threat from India and China, both of which offer lower-cost alternatives, remains significant.
Industry experts argue that removing the 2% cess is crucial to maintaining Pakistan’s foothold in the Afghan pharmaceutical market. They also recommend enhancing trade facilitation efforts, such as improving cross-border logistics, reducing bureaucratic hurdles, and strengthening trade agreements.
By addressing these challenges, Pakistan could not only safeguard its pharmaceutical exports but also reinforce its economic ties with Afghanistan, which remains a critical market for Pakistani goods.
Copyright Business Recorder, 2024
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