KARACHI: The lifting of the ban on executions has perturbed textile exporters, especially those who have major exports to the European Union (EU), as they fear Pakistan may lose duty benefits that it enjoys under the Generalised System of Preferences (GSP) Plus scheme.
However, some economic analysts are of the view that the country will successfully convince the EU not to suspend its GSP scheme.
The EU approved the GSP Plus scheme in January this year for a period of 10 years as an incentive for ensuring good governance and sustainable development.
To a question, Federal Minister for Commerce, Khurram Dastgir on Thursday said that in 27 conventions of the UN, there is no undertaking on death penalty moratorium and the government’s decision to hang terrorists will not have any adverse implications for the GSP Plus scheme.
Some exporters believe that the government can convince the European Union that Pakistan has no other option but to hang the
“Yes, there is a lot of uncertainty in the market. The textile exporters are worried as they fear that Pakistan may lose trade concessions under the GSP Plus Scheme,” a readymade garment exporter from Karachi said.
However, the exporter maintained that the government of Pakistan has taken a right decision to lift the moratorium on death penalty in the current circumstances.
“Although it is still unclear whether Pakistan will eventually lose the GSP Plus scheme over the lifting of the ban, the government must move on and take strict action against terrorists who have taken the lives of over 140 innocents in Peshawar,” he added.
However, some exporters believe that since the GSP Plus scheme was granted with conditions, the country has to comply with the 27 international conventions, including the clauses on human rights that disallow the signatory country to abolish death penalty. And since Pakistan has now lifted the self-imposed ban on the death penalty, it may lose the GSP Plus scheme in the EU.
The uncertainty at KSE-100 hurt the textile sector which reacted negatively on Wednesday and most of the textile companies closed at their lower circuit break.
However, the trend was mixed on Thursday and major companies like Gul Ahmed and textile mills of Nishat group recovered some of their losses and ended in green.
“If the EU parliament does not agree with the government’s decision of lifting the moratorium on execution, the probability of losing the GSP Plus status will be very high,” an InvestCap Research report said on Thursday
“However, we do not envision that after such a hideous incident the EU will act against Pakistan’s GSP Plus status,” it added.
Some textile companies’ exports are highly sensitive to GSP Plus status. In the sample of some textile companies on the basis of market capitalisation, Gul Ahmed is very sensitive to GSP status as it exports around 55% of its products to the EU countries therefore any revision will damage the company’s profitability.
Similarly, Kohinoor Textile, Nishat Mills and Nishat Chunian export 36%, 34% and 18% respectively so their profitability will be less affected if the EU does not decide in favour of Pakistan, the report added.
Published in The Express Tribune, December 19th, 2014.