Overdue export proceeds from bankrupt importers: exporters getting jittery due to SBP pressure

Exporters are getting jittery over the pressure being exercised on them to bring back their overdue export proceeds from bankrupt and other buyers.
According to Towel Manufacturers Association of Pakistan (TMA), which is one of the leading export sector, genuine exporters "are facing immense issues, ie, blockade of huge amount of their working capital under the following heads:" R & D, DLTL, Sales tax, Custom drawback, Non issuance of circular by State Bank of Pakistan (SBP) regarding rebate on interest on export finance, Stoppage of export refinance on non-repatriation of export proceeds, besides other issues they are confronted with as a result of electricity and gas load shedding, worsening law and order situation, and reluctance of foreign buyers to visit Pakistan for business deals.
TMA Chairman Usman Ali said that SBP is not realising at all the existing economic scenario in the importing countries and remittances which continued to be delayed beyond exporters' control. SBP is not ready to accommodate exporters but, in one way or the other, it is compelling exporters, through notices, to bring back their overdue export proceeds from importers, including bankrupt importers.
"SBP adjudication courts are causing a nuisance for the exporters which should immediately be wound up as exporters are respectable citizens of the country who do not only earn foreign exchange but also give taxes to the national kitty."
On the issue of overdue export proceeds from the bankrupt and other buyers, TMA had written a letter to the Governor of State Bank of Pakistan back in March this year informing him about the relocation and reorganisation the US textile industry has gone through. The effect of this process on Pakistani exporters had been unfavourable mainly due to the bankruptcy of some otherwise reputable buyers. As a result, a fraction of export proceeds had become overdue and its repatriation is still uncertain.
On the other hand, SBP allows export refinance only if all previous export proceeds are repatriated, and this throws up the problem. As a solution to the problem, TMA had proposed that in case the exporters do not avail the 10 percent of their export proceeds allowed for payment of commission, etc, the same may be used to adjust their bad debts. "It is a workable solution for adjustment of smaller amounts of bad debts", TMA had said and desired a sympathetic consideration to the proposal so that a roadblock in getting export refinance may be removed.
Responding to the exporters' concerns, the Infra-structure, Housing and SME Finance Department (SMEFD) of SBP advised the TMA that for availing EFS facility it has already given waiver to exporters having overdue export proceeds. "Therefore, we understand the issue stands resolved."
As regards TMA's proposal regarding settlement of overdue bills, SMEFD clarified that in terms of relevant regulations full export value of goods exported from Pakistan should be received. Every E-Form has to be settled separately through repatriation of export proceeds as per payment terms. The facility of 10 percent retention of export proceeds has primarily been given to meet expenses relating to promotion/publicity, market study, collection of commercial intelligence, purchase of design/patterns, bona fide export claims, and shortfall in export proceeds, etc. "It is the commercial decision of the exporter whether to retain certain export proceeds or not. Further, sometimes the exporter has already availed different facilities from banks against such export proceeds." In such cases the exporter is not in a position/entitled to avail the retention option. There is, as such, no provision/regulation to allow writing off/waiver of repatriation of export proceeds on any ground.
Therefore, it is not feasible to allow adjustment of non-receipt of export proceeds on any ground as suggested by TMA. However, in view of the difficulties being faced by exporters due to bankruptcy of foreign buyers, Exchange Policy Department has already been allowing extension in repatriation of export proceeds on such grounds, which may also be considered in future as well.
SMEFD circular of June 30, 2010 had allowed waiver for 180 days, up to December 31, 2010 for the purpose of availing financing under EFS to those exporters whose export proceeds were overdue. SMEFD had informed that it was decided to extend the period of waiver up to June 30, 2011, and other instructions on the subject shall remain unchanged. Not satisfied with the SMEFD clarification, TMA still insists that SBP "should advise that if any importer goes bankrupt, how export proceeds of the exporter would be repatriated".