Prime Minister Nawaz Sharif will announce a relief package for industry however it is unlikely to meet traders' three major demands: withdrawal of GIDC to maintain gas tariff, zero rating regime and currency depreciation, a senior government official told Business Recorder. "It is not possible to withdraw GIDC as the government is facing serious revenue shortfall," said the official, adding that Finance Minister Ishaq Dar explicitly told the industrialists that currency would not be depreciated.
When contacted, Dr Miftah Ismail, Chairman Board of Investment (BoI) said the Prime Minister would announce a comprehensive policy for industry with the objective of reducing the cost of doing business. The government would consider proposals to provide gas at a tariff comparable with exporters' regional competitors.
The government straightaway rejected the proposal to depreciate the rupee however a final decision on exporters' other proposals namely to withdraw GIDC, abandon the expected increase in gas tariff and zero rating facility would be taken up next week, said Muhammad Zubair Motiwala, Chairman All Pakistan Textile Association (APTA). Motiwala, representing 12 textile associations gave a presentation to Prime Minister and Cabinet members during the meeting held on Friday.
Some industry representatives would be called within the next 5-6 days to further deliberate on industry's proposals, after which Prime Minister is likely to announce a relief package, he added. Talking to Business Recorder, Motiwala said the Prime Minister and Cabinet members and bureaucrats were informed in no uncertain terms that without reducing the cost of doing business a rise in exports is not possible. "We requested the Prime Minister to reduce the cost of doing business by 8 percent through withdrawal of GIDC, not raising gas tariff, restoring zero rating facility, and depreciating the currency; the industry would not require any subsidy or rebate if these proposals are implemented," he added. Pakistan's gas tariff is $6.27 per MMBTU against $4.66 in India and $1.86 MMBTU in Bangladesh. Pakistan's currency is overvalued in market contrast to our regional competitions including India and Bangladesh - a fact which works against Pakistani exporters, Motiwala added.
Due to intermittent rise in the price of raw material, production inputs and utility tariffs, appreciation in currency, cost of doing business in Pakistan has escalated enormously rendering our exports uncompetitive in international market, he added. The textile industry has pledged a raise in exports of 50 percent or $4.5 billion within three years if the government supports it which would translate into a surplus current account and trade account.
For ease of doing business, the textile ministry is in the process of formulating a single Act to replace various cess/surcharges applicable on the textile industry, chairman BoI told Business Recorder. In a recent meeting with Ministry of Finance, representatives of textile associations said the high cost of doing business was rendering Pakistani textile producers uncompetitive in the international textile market.
The Board has prepared a business improvement plan in consultation with key stakeholders and provincial governments with the objective of creating a conducive business environment. The plan will be implemented in two phases. In the short-run, as a pilot project, specific attention would be given to the improvement of various procedures involved in improvement of the city of Karachi, which is the country's business hub and also serves as a representative of the economy of Pakistan in the World Bank Doing Business Report.
In the long-run, a regular review will be undertaken by considering interdepartmental integration and removal of redundant processes, if any. The plan's Phase-I is focused on the five business indicators mentioned in the 'Ease of Doing Business Report' of the World Bank. The focus of the plan is on starting a business, dealing with construction permits, paying taxes, trading across borders and enforcing contracts. A senior official of BoI told Business Recorder that the Board is also involved in addressing the problems being faced by local investors.
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