Prime Minister Imran Khan Thursday gave go-ahead for Strategic Trade Policy Framework (STPF) and textile policy, in principle, which will be submitted to the Economic Coordination Committee (ECC) and then the Cabinet for approval.
The Commerce Ministry's Advisor Syed Ali Habib, who prepared the STPF gave presentation to the high-level meeting attended by all the concerned public sector stakeholders. The representatives of Finance Ministry, Federal Board of Revenue (FBR) and State Bank of Pakistan raised a number of questions on the draft STPF and Textile Policy.
Briefing to a group of journalists, Prime Minister's Advisor on Commerce, Industries and Production and Investment, Abdul Razak Dawood said that another meeting will be held on Friday (March 13) in Finance Division, to be attended by Finance Advisor, Dr. Abdul Hafeez Shaikh, Government State Bank of Pakistan and top man of FBR to finalise implementation mechanism of measures which are part of both policies.
Dawood, however, was not clear about the duration of STPF, saying that it should be three years despite the fact that in the past Commerce Division wanted a five years policy.
The STFP envisages incentivising 26 non-traditional sectors to boost exports by shifting powers of clearing claims of duty drawbacks, and local Taxes and Levies (DLTL) refunds to State Bank of Pakistan (SBP) so that exporters get their claims as they submit their GDs.
Talking to group of journalists, advisor to Prime Minister on Commerce Razak Dawood said that duty draw back, DLTL and would be shifted to State Bank of Pakistan under new strategic trade policy framework. At present, FBR deals with duty drawback and sales tax refunds whereas Ministry of Commerce deals DLTL.
Abdul Razak Dawood said that Pakistan's lacks export culture and the government wants to change this mind set. "Now Prime Minister Imran Khan has taken the responsibility to change mind set about exports," he added.
Abdul Razak Dawood said that now trade policy will not be the responsibility of only Commerce Ministry but other Ministries and provinces and even local governments.
He further stated that in Pakistan there was export bias due to which exporters did not approach FBR for claims. However, there will be no element of duty/ taxes on export. The taxes and duties will now be fixed by the NTC and FBR.
"The FBR is a ghost which swallows (funds) but nothing can be received from it," he maintained.
Dawood said that he has also heard flying invoices are also in the field.
At present, average duty drawback is 3 per cent. This will be modified for some not traditional sectors which include engineering, pharmaceutical, auto parts, processing food and beverages, footwear, Gems and jewelry, chemicals, meat and poultry, fruits and vegetables, seafood and marble.
Federal Board of Revenue is a body that deals with tax refunds and sometimes exporters are unable to receive it.
The present government had also cleared backlog of tax refunds that was pending since 2009. He said that there was big issue of 17 per cent sales tax refunds. Finance Minister Dr Hafeez Sheikh, Governor State Bank, Chairman FBR and Commerce Advisor will meet on Friday to chalk out a mechanism to transfer sales tax refund subject to the State Bank of Pakistan. He said that this would enable speedy payment of refunds to exporters.
He said that there is anti-export bias in the country and added that there was no culture of taxes, levies and surcharges where export culture exists. He said that there is issue of drawback and there has been no revision in it for last eight years.
He said three SROs, ie, 209, 210, 211 and 212 which were promulgated in 2009 will be revised so that the percentage of refunds should be updated.
He said that exports targets had been set at US$26 billion in 2021, $31 billion in 2022, $35 billion in 2023, $40 billion in 2024 and $46 billion in 2025.
He said that trade policy framework covers 26 sectors and incentives would be available to only value added sector. The incentives on duty drawback will not be available for textile sector. He said that there was no more growth in textile sector. We will have to move away from textile sector, he said.
"I want to get out of textile mindset, he said, adding that global textile volume amounts to $837 billion whereas engineering and chemicals had $2 trillion volume each, he said, adding that he had heard about issue of flying invoice. I am thinking hard about it how to control, he added. He said that textile sector has no more capacity to increase exports.
He clarified that DLTL will be only for value addition.
He said that there were some fundamental issues which need to be changed. 'We need to change export culture, he said adding that Prime Minister Imran Khan has agreed to do this.
The textile exports target is $ 14.5 billion for 2019-20. The export target for 2020-21 $ 15.5 billion, 2021-22 $ 18.5 billion, 2022-23 $ 20.5 billion, 2023-24 $ 24.5 billion and 2024-25 $ 28.5 billion. He said these targets are very ambitious.
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