Emphasis on Self-Reliance
After monitoring consecutive trade policies over the years one comes to the conclusion that every year brings an improvement over the previous annual period but sometimes the targets set are too ambitious. This year a more pragmatic course is followed, realistic goals have been set. The Trade Policy for 1993-94 sets an export target of US$ 8 billion against an estimated import bill of US$ 10 billion, leaving a gap of US $ 2 billion to be made over from other resources, mostly repatriated foreign exchange through workers’ remittances.
Pakistan’s is an agri-based economy with maximum reliance on the exports of raw cotton, textiles, garments and other downstream cotton products. Most of our working population is employed producing cotton or working on its derivatives, it stands to reason that the export priority of any government has to be cotton. In announcing the new Trade Policy, Malik Mohammad Naeem, the Federal Commerce Minister, gave maximum emphasis to this sector at the very core of his proposals. Including new incentives for exports based on the expectations of a good cotton crop and anticipated buoyancy in the prices of critical commodities like cotton and yarn, the package has been designed to achieve the export target of US$ 8 billion. At the same time, he has exhorted our entrepreneurs to face trade challenges boldly in the atmosphere of a free market economy instead of adopting a dualized policy of seeking concessions from the government while demanding a free economy environment. At the present time there is a cacophony of pressure on the government for devaluation of the Pakistan Rupee or exemptions in mark-up or soft loans. As if on cue, on 15 July 93 the Rupee registered its sharpest fall of Rs.0.89 per US Dollar in a single day. This will almost certainly be followed by other similar devaluations till we reach the unofficial price of Rs. 33 to the US dollar. Instead of relying on such relief to be internationally competitive, the entrepreneurs have been advised by the Federal Commerce Minister to carry out self-evaluation, to look into their own weaknesses, the inefficiencies of their operations and wastages thereof, and then try and improve the quality of their products. He has very correctly stated that soft loans lead to sick industries, this has been exploited by the unscrupulous to become rich at the expense of the public exchequer while bankrupting industries established by them, one particular captain of industry with a blue-chip family name has made it an art. Vibrant economies never resort to devaluation to increase their exports. While cyclical re-adjustments are necessary to achieve true values, the increase of exports is mostly achieved by achieving quality competitiveness of their products in the international market. A Corporate culture vital to the present international business environment has to be cultivated instead of persisting with the out-dated modes of small business practices, in particular they have to adapt modern management techniques to compete in the world market.
The Federal Minister announced his first priority to be maximised assistance and support to the textile and clothing sector, particularly the ancillary industries in order to improve their productivity, quality and product range. They would also be provided encouragement to go into higher value addition. In this respect, the Trade Policy envisages a much greater access to a large variety of raw materials and liberal import of machinery in this sector. Some textile machinery and raw materials have been allowed to be imported without payment of customs duties, some items have been given permission without customs duties and sales tax while others do not have customs duties, sales tax and Iqra surcharge imposed on them. The respective Associations have been given greater responsibility in certifying Indemnity Bonds for import of raw materials and accessories by their members without payment of duties. One hopes that this facility will not be misused. Further, instead of Bank Guarantees for goods processed outside the bond, goods can be shifted against manufacturers guarantees. One must note here that these are indeed most far-reaching incentives and concessions, if our entrepreneurs cannot respond with vastly increased exports then we are unfit to compete in the international export market. As it is, we have been unable to stop fraudulent activity by some of our esteemed manufacturers/exporters who have resorted to customs rebate scams that are denuding the national exchequer at will. It is a well-known fact that some of our major textile exporters have opened up offices abroad from where they have to open Letters of Credit on their ownselves in Pakistan. Against these Letters of Credit, the manufacturers/exporters pack inferior goods or goods in lesser quantity, claiming a generous rebate on the inflated invoice. In this and other TEXTILE SCAMS a number of government agencies collaborate. What is the difference between a bank robber and the person who robs the treasury thus? People have been caught but money has ensured that the persons who did the enquiries suffered while the criminals have prospered because of the spread of their largesse. One known exponent of this type of fraud and deceit even tried to buy a bank with less money than what they already owed that particular bank, it is an even bet whether they would have used the money loaned by the bank or the black money they had accumulated. The textile quota system has been so subverted by third country operations by some of our major manufacturers/ exporters that the US had to clamp down on genuine textile exports. With the connivance of some of our banks, shipping companies, customs and the officials of the Bangladesh Export Processing Zone for the past two years, the textile scam has been prospering. Needless to say the entrepreneur who “sends” the goods to Bangladesh actually despatches the goods from Karachi directly to the US with the collaboration of cooperating agencies. A well-known exporting firm was caught red-handed in the US and the resultant enquiries revealed the whole scam, its trail and connections but the Bedwear Association moved to protect its “esteemed member” despite their rhetoric otherwise for public-consumption, the result is that many of their other members have suffered when the US has clamped down on further exports from Pakistan. In the face of such fraud and chicanery, the Trade Policy should have spelled out future legislation for exemplary punishment to offenders, including mandatory life imprisonment and total confiscation of all their movable and immovable assets while blacklisting them for the future from all export activity and financing from recognized financial institutions. This should also apply to all those who collaborate in the fraudulent activity. Unless such draconian measures are resorted to, malpractices will multiply and we will be left with exports on paper only.
Very rightly, Malik Naeem has identified the second priority as correcting the structural weaknesses of our exports in its almost total dependence on the cotton group. A decisive move has therefore been taken for diversification to boost engineering goods and encouraging import substitution. At present the export of engineering goods is stagnating at US$15-20 million while imports are in excess of US$2 billion, an unacceptable difference. To tackle this anomaly an institutional initiative is being taken by constituting an autonomous Export Promotion Council for Engineering Industry to undertake the full range of promotional activities to boost engineering exports. Certain items not manufactured locally as well as machinery for quality control have been allowed to be imported duty free.
The third priority spelt out is in the agriculture sector, the concept of Agri-export farms is being introduced with the objective of maximising agricultural exports. Farm export sector will be treated at par with export industry being entitled to all facilities, services and incentives given to manufactured goods. An Agri Export Council is being established and various other measures taken like allowing registered agri-export farms to import agri-machinery and equipment not locally manufactured.
In the fourth priority for attention, a new scheme is being initiated for setting up Service Centres for various small industries which have high export potential. Initially a Service Centre for the cutlery industry is being established, this would include a bonded warehouse to be run by the Pakistan Cutlery Stainless Utensil Manufacturers and Exporters Association under an agreement with CBR. Duty free imports of raw material with waiver of sales tax, Iqra surcharge and licence fee as well as other concessions for import of spare parts has been allowed through this conduit.
Various other incentives have been given, viz the concession to the fishing industry including the duty free imports of factory ships and fishing vessels for processing and preserving fish products, the operation of duty drawback scheme is being streamlined, the capital base of Export Credit Guarantee Scheme is being increased from Rs. 60 million to Rs. 130 million covering exports upto Rs. 2900 million, monetary or quantitative ceiling on export of samples in mutilated form is being removed, etc. These incentives go a long way to liberating our economy and making it more export-oriented.
We have to achieve the goal of self-reliance through increasing our exports by innovation and quality control. Macro-economic changes, as stated by Malik Naeem, demand cyclical adjustments and re-allocation of resources for better and new products. The business community must respond to the sustained incentives and liberalisation drive by facing upto the compulsions of a free market economy and invigorating their business operations in the changed economic environment. Without doubt, the newly announced Trade Policy has been really innovative and far-reaching in its concept. If some of our entrepreneurs can curb their instincts for fraud and deceit, the new Trade Policy gives tremendous boost to increasing and diversification of exports. The only conduit to a national target for self-reliance is a diversification of our exports so that we balance our trade.
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