IAC maps path to $100 billion exports

Recommends changes in energy policies, addressing tax refund delays, capital shortages

ISLAMABAD:

The Industrial Advisory Council (IAC) on Thursday discussed a roadmap focusing on removing cross-subsidies from power tariffs for industrial consumers, duty cuts, and gas price rationalisation aimed at achieving an ambitious target of $100 billion in exports. The roadmap also stresses expediting bureaucratic processes and reducing red tape to boost Pakistan’s exports. It urges simplifying judicial procedures, eliminating prolonged delays where cases linger for 10-20 years, and calls for establishing Commercial Courts to decide business and economy-related cases, providing swift and efficient legal action to create stability, encourage reform, attract investment, and promote industrialisation.

The first meeting of the IAC was held on Thursday to kickstart “Vision Pakistan: Road to $100 billion Exports.”

The inaugural meeting of the IAC was held under the visionary leadership of Dr Gohar Ejaz, the Federal Minister for Industries and Production. This meeting is a crucial step towards realising Ejaz’s ambitious “Vision Pakistan: Road to $100 billion Exports.”

The gathering symbolised a collaborative effort to harness the vast potential of Pakistan’s industrial landscape and aligns with the national objective of achieving $100 billion in exports.

design: mohsin alam

According to the roadmap discussed during the meeting, it was noted that cross-subsidies in electricity and gas tariffs are used to finance the power sector’s inefficiencies and the government’s own social obligations.

The roadmap stresses removing the cross-subsidy from power tariffs for industrial consumers.

With the operationalisation of CBAM in the EU starting in 2026, products with high emissions content will no longer be exportable to the EU; other Western markets will also follow suit. Power sector reforms must focus on fostering clean and competitive energy markets, reveals the roadmap, stressing on allowing wheeling of clean energy through B2B contracts with a wheeling charge of 1-1.5 cents/kWh.

It also focuses on increasing the cap on solar net-metering for industrial consumers from 1MW up to 5MW.

Following gas price rationalisation, significant investment must be made in gas exploration to reduce growing reliance on imported LNG and supplement depleting supplies of indigenous gas, reveals a roadmap, adding that a fast-track gas exploration programme must be launched immediately.

There is an abundance of policies and frameworks in Pakistan; a lack of implementation and continuity is the main barrier to industrial and economic growth.

Fiscal Policy and Tax Reforms

The roadmap stresses fair distribution of the tax burden across all sectors of the economy and separation between policy making and tax administration. It further said that tax profits instead of turnover; the tax structure should incentivise growth, foster business success, and tax rates should be regionally competitive to attract investment.

During the meeting, it was emphasised to rationalise import duties for export-led growth, reverse anti-diversification biases in export incentives and incentivise exports of broader range goods and services.

Read: Industrialists call for cost controls, policy reforms

Despite comprising almost 50% of Pakistan’s population, female labour force participation is only 23%, concentrated in certain sectors and roles which means Pakistan starts off with a 50% economic handicap compared to other countries.

Countries with higher levels of industrialisation have a much higher female labour force participation (Bangladesh – 43%, India—49%, Vietnam—62%).

Regulatory and Business Environment

PIDE estimates the overall cost of regulatory sludge at 1.5% of GDP.

The roadmap further stresses reducing costs associated with liquidating non-viable firms and strengthening insolvency procedures and streamlining business licensing & other procedures for entrepreneurs.

It also focuses on digital Connectivity & Skill Development and invests in infrastructure to enhance digital connectivity—5G, P2P, P2M, M2M, M2B digital payments, etc. It stressed on aligning skills and capacity-building programmes aligned with modern industry requirements and simplifying and expediting bureaucratic processes and reduce red tape.

It also urges to facilitate firm growth through fiscal/tax incentives and access to credit and significant investment in R&D, innovation and invention.

It has urged to incentivise production of exportable surpluses across all sectors of the economy. International companies making FDI should be incentivised towards export-oriented activities through policies such as regressive taxation based on higher shares of products exported.

It suggests that the Planning Commission should be replaced by a Policy and Reforms Commission. Policy decisions across ministries should be coordinated at the Policy and Reforms Commission to prevent isolated policy decisions with contradictory objectives and adverse unintended consequences across the economy.

In violation of Rule 39F of the Sales Tax Rules 2006 regarding the issuance of FASTER sales tax refunds within 72 hours, FBR only issues partial refunds once a month after prolonged and persistent delays. It defers 30% of claims for manual processing that takes up to 3 years.

Published in The Express Tribune, December 8^th, 2023.

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