Commerce Ministry has reportedly submitted a revised Strategic Trade Policy Framework (STPF) 2015-18 to Prime Minister Nawaz Sharif with a new format, shifting responsibility for the decline in exports to other Ministries and international business environment, well informed sources told Business Recorder. Earlier Prime Minister, Nawaz Sharif had rejected Finance Minister Ishaq Dar's approved STPF 2015-18 terming it 'unconvincing' and directed the Commerce Ministry to revisit the draft STPF and include measures designed to give a quantum jump to declining exports.
Secretary Commerce, Shahzad Arbab, at a briefing to the Senate Standing Committee on Commerce headed by Senator Shibli Faraz gave different reasons for the decline in exports. He also confirmed that the Prime Minister has raised objections on STPF 2015-18. However, later the Commerce Ministry retracted the admission that the PM rejected the STPF.
Commerce Ministry's officials argue that the Ministry would be unable to achieve the export target of $35 billion by 2018 until other public sector stakeholders, particularly Ministry of Finance, extend all possible co-operations. The causes of local industry's crisis and decline in exports were identified as follows: (i) high cost of doing business ;(ii) energy insecurity and affordability; (iii) benefits of reduced oil prices not being passed on to industry; (iv) zero incentive/ support to exports; (v) policy and implementation divide; (vi) multiple innovative taxes and levies on exports; (vii) overvalued local currency; (viii) pending refunds of exporting industry; and (ix) duties and taxes on import of 'short raw materials'.
The International Monetary Fund (IMF) has also stated that Pakistan's exports have under-performed during the last two years and may have serious implications on foreign exchange reserves. Insiders claim that Commerce Ministry's top brass is concerned with the continuous decline in exports but argue that nothing is in their control. Commerce Ministry has identified reasons for the decline in exports which include an analysis for the decline in Pakistani exports by academics including Dr Ishrat Hussain, Shahid Kardar, Dr Ashfaque Hasan Khan and stakeholders (exporters).
One reason is the production cost of two major crops like cotton and rice which has increased manifold in the country whereas its price in the international market is not attractive. MoC, sources said, will request the allocation of Rs 20 billion for a period of three years ie 2015-18. The government has already earmarked Rs 6 billion for export promotion in the federal budget 2015-16. Pillars of STPF 2015-18 will be product sophistication and diversification, R&D, branding and value addition, reducing cost of doing business and standardisation. New trade policy will put a special focus on pharmaceutical, leather, surgical, sports goods, cutlery, fans and home appliances. The Commerce Ministry further stated that potential of sports goods during 2015-18 is $7.763 billion, surgical items' $7.4 billion, cutlery's $1.9 billion and home appliances' $7.75 billion, fisheries' $1.3 billion, rice's $6.6 billion, meat's $843 million and fruits' and vegetables' $3.3 billion.
According to sources in Prime Minister House, Commerce Ministry has submitted the following recommendations with respect to STPF 2015-18: (i) a reduction in energy charges for the industry including Karachi as KE has not passed on impact of furnace oil prices; (ii) prioritization of industrial sector in gas and electricity distribution policy and removal of ban on all new connections to industry; (iii) zero rating for exports; (iv) expediting tax refunds; (v) implementation Textile Policy 2014-19; and (vi) quarterly review meeting of Federal Exports Development and Promotion Board under the chairmanship of the Prime Minister.
Pakistan's textile sector is also concerned at the state of affairs of the textile industry whose share in exports is 57 per cent. Natural gas is not being supplied to the Punjab-based textile industry. The STPF envisages providing RLNG to industry at a competitive price on priority. All Pakistan Textile Mills Association (APTMA) also gave a detailed presentation to the National Assembly's Standing Committee on Commerce a couple of days ago in which the Association numbered reasons for a decline in textile exports which are as follows: (i) capacity closure; (ii) declining exports; (iii) losing market share;(iv) no investment/ no growth;(v) no job creation; and (vi) investors confidence shattered.
APTMA has proposed the following immediate measures to bring the textile industry out of current crisis: ( i) withdraw Rs 3/KWh surcharges to bring electricity tariff for industry at par with region; (ii) RLNG be supplied to the industry on 24/7 basis at regionally competitive price;(iii) zero rate exports by providing DLTL @ 5% against export of yarns, fabrics, made-ups and garments; (iv) liquidate pending refunds of industry on a/c of sales tax, income tax, customs & textile policy initiatives; (v) due to a record shortfall in domestic cotton production, all taxes/duties on import of raw materials including cotton and fiber be granted duty free import. Presently, a 3 per cent customs duty and 5% Sales Tax on cotton and upto 6% on PSF and VSF; (vi) 5 % export incentive be announced to capture non-traditional markets through focus market scheme; (vii) export re-finance facility be also extended on yarn and fabric exports; and (viii) FTAs/RTAs be based on comparative advantages to enhance bilateral/multilateral trade.
According to the Association, the Textile Policy 2009-14 with an outlay of Rs 188 billion ($2.3 billion) was implemented only 15 percent. Textile Policy 2014-19 was allocated an outlay of only Rs 64 billion ($640 million) however no notification is issued yet.
The Association further informed the standing committee that zero per cent growth was recorded in textile exports for the last five years and one million spindles added only. 1300 shuttless/ airjet looms added but no new direct jobs were created. Its share in world market has dropped from 2.2 per cent to 1.6 per cent. India's 11th Five Year Plan 2007-12, envisaged textile outlay of Rs 140 billion ($3.5 billion). The plan was implemented 115 per cent. In India's Five-Year Plan 2012-17, total outlay for textile sector was of Rs 260 billion($5 billion) and India's textile exports increased by 79 per cent to $16 billion after implementation of the plan. 14 million spindles add and 36,000 shuttless/airjet looms were added. 16 million direct jobs were created and India's share in world market increased from 3.5 per cent to 5 per cent.
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