Pakistan

Playing the Indian card to get incentives, protection

Govt may impose tariff and non-tariff restrictions on Indian imports

Shahbaz Rana September 10, 2015

The industry claimed that growing Indian imports were causing several fine count yarn production facilities in the country to shut down. PHOTO: APP

ISLAMABAD:

As attempts to increase exports fall flat on their face and the local industry cries foul over several reasons, the country may impose tariff and non-tariff restrictions to discourage Indian imports. Pakistan may also look towards giving incentives to its exporters, aimed at enabling them to compete with Indians in the global markets.

The move comes at a time when India and Pakistan, neighbours and archrivals over one reason or another, are not enjoying the best of times in their love-hate relationship. While border tension keeps the defence personnel occupied, Pakistan’s exporters and market players took this as an opportunity to have the government consider placing restrictions on Indian imports.

With Pakistan struggling to increase exports amid slowdown in the global economy and competitiveness issues, tariff and non-tariff restrictions are the cards being played by industry players to further their cause.

Read: Local group remains positive sporting the local industry

A high-level huddle, comprising almost all the key government ministers, top bureaucrats and representatives of industrialists, gathered in the federal capital on Thursday to review various options to revive the sinking industry.

They worked out details of an industrial revival package, which will be presented to Prime Minister Nawaz Sharif for his approval. The government has moved to address the industry’s woes at a time when textile exports have virtually sunk.

The authorities reviewed the proposal of introducing regulatory duties to discourage cheap imports from India and giving incentives on exports to compete with regional peers in the international market, said officials privy to the discussions.

Fawad Hasan Fawad, the additional secretary to Prime Minister, represented the premier during Thursday’s daylong meetings.

Highlighting reasons

The industrialists played up the Indian factor, which according to them, has become a nuisance in their bid to increase the country’s exports. A final decision on whether to impose regulatory duties and introduce non-tariff barriers will be taken during a meeting, which will be held today (Friday) in the Prime Minister’s Office, said officials.

There is also a proposal to impose additional regulatory duties on import of yarn, fabric and garments, according to sources. The rate could be between 3% to 5%, they added. Additonally, the government may also introduce a few non-tariff barriers aimed at discouraging Indian imports.

According to All Pakistan Textiles Mills Association (Aptma), cotton imports from India into Pakistan are increasing at the rate of 30% annually. The body said, in 2011-12, Indian cotton yarn imports were 4,927 tons, which increased to roughly 23,000 tons by the end of last fiscal year. The industry claimed that growing Indian imports were causing several fine count yarn production facilities in the country to shut down.

The cheap imports and smuggled clothes are said to be a threat to domestic commerce. The industrialists have also blamed the government for its inaction on many fronts that, according to them, has brought them to knees. The trade policy initiatives remain unimplemented due to lack of fiscal resources.

Government’s shortcomings

Even if the government decides to raise tariff and non-tariff barriers, the industry’s woes would not end until the government takes other corrective measures.

The exporters cannot survive without an effective zero rating regime. The government has slapped 5% tax on the textile supply chain and the exporters’ refunds remains stuck for years, forcing them to borrow money from banks to meet their capital requirements, according to the APTMA officials.

Finance Minister Ishaq Dar could not live up to his promise of paying all the outstanding textile industry refunds by August 31. The FBR is using taxpayers’ refunds as a source to inflate revenues.

The high cost of electricity and gas tariffs was also rendering exporters uncompetitive in the global market. As against 9 cents per unit electricity tariff in India, Pakistani industries are paying 14.25 cents per unit price.

The officials are working on a proposal to either reduce tariffs for the export-oriented industries or give them rebates through State Bank of Pakistan on the quantum of exports. The government may also extend long-term financing scheme to ginning and spinning industry aimed at encouraging new investment initiatives.

Read: Ground shaking for local cement industry

The officials said that the premier may also announce 3% to 5% export incentive to capture non-traditional markets by focusing on product schemes like India.

Industrialists further complained that an enabling business environment was missing in Pakistan and India was taking advantage of the situation. Without corrective measures, they do not see any change in the situation and predicted 1.5% annual growth in exports as compared to 15% growth in Indian textile exports.

Published in The Express Tribune, September 11^th, 2015.

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COMMENTS (23)

hari | 8 years ago | Reply @Guest: "God Willing”, I don't.

numbersnumbers | 8 years ago | Reply Once again the feeble Tax-to-GDP rate that Pakistan "enjoys" has hurt the country since the government resorts to countless revenue schemes that cripple business and trade with indirect nuisance taxes, all to shield those huge agricultural Feudals and other very rich Pakistani Elites from paying ANY taxes! FYI, Prime minister Nawaz Sharif paid Rs 2.646 million ($26,464 US!) in taxes on holding rated at $1.6 BILLION U.S. ! (Wikipedia, "List of Pakistanis by net worth").

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Guest | 8 years ago | Reply Why worry so much about exporting low cost, low margin and non technical goods. Very soon our fighter aircraft will be selling all over the world as we have the best engineers and environment to achieve this. Then we have the nuclear capability, which some how or the other can be cashed. We just need to be patient and trust in our investment in high tech ventures, which will not only ensure our safety against the aggressive and jealous neighbor, but also bring unparalleled prosperity to our masses. Oh yes, I must add, God Willing" as a disclaimer.

Talking Point | 8 years ago | Reply @Bewildered: Including Bollywood movies and IPL?

Pnpuri | 8 years ago | Reply India Pakistan trade is in range of 3 billion, i e about 3% of Pakistan total international trade. One wonders who will benefit by proposed levy, but it may mean less contacts between people of two countries.there is lot of demand of Pakistan textile in India. All you have to do is to have Pakistan centric exhibition in Indian citieS. Some food stalls serving Pakistani cuisine can be additional attraction. It will also give an opportunity to understand each other, what two countries need is trust and it can only be developed by meeting each other. We also think of having sporting events as an additional attraction.

Davinder singh | 8 years ago | Reply Any proposed action on imports n exports between India n pakistan, will have a bitter and bad impact in fact for Pakistan. as there's a free trade going on between the two kashmirs for the lst few years. and control over the genuine trade will/shall influx the flow of goods thru kashmir , further ruining the trade n revenue to the govt. in stead running in a hurry, the authorities should look into the genuine difficulties of the people n industry in pakistan.

hzr | 8 years ago | Reply India is a huge and one of the fastest growing markets in this slowing econ my If Pakistan wants t impose tariffs on India made products that is fine because the trade is minuscule and will not make a dent.However what Pakistan needs to look into is the china factor and how it is shutting down local industry with cheap shoddy goods.

rk | 8 years ago | Reply Dear Friends, Pakistan has produced worid class economists and I remember a book Poverty Curtain by Haque .Each country has to work on its natural endowments.Please send your Trade Associations to visit India in November 2015 for Trade Fair,You will be surprised to see Indian Response to your Lawn Stalls/Food Stalls ,where everything gets sold much before the last day.Please take advantage of a huge Market next Door, where you know the tastes, trends and fashion. instead of running after a mirage in far off places.Allaha Hafij.

Amandeep singh virk | 8 years ago | Reply @Bewildered…India doesn't need any relationship with Pakistan, India has progressed well without pak, and continue to progress well without pak

Kushal | 8 years ago | Reply @Bewildered: Fools paradise mein gul khil rahein hain... have you visited any of the SAARC countries? Even one? I have visited all except Pakistan (no intention till now) and saw how India is respected in all of them.

Vectra | 8 years ago | Reply @ajeet: no need for that despite getting tariff exemptions and so much incentives from US and EU they were still not able to increase their export.If this cant help them then nothing can help them.

Vicky | 8 years ago | Reply @Bewildered....you purchase indian goods because it saves 100 m rupees for you,,,,and India doesn't depend on your peanut size trade, we have huge billions of dollars trade with other countries, plus we have huge 500 million middle class, which is lucrative for whole world and our own population is sufficient to generate huge profits for us

Vectra | 8 years ago | Reply Hilarious you are blaming a country with whom you do minuscule trade but not blaming whom you have given much much huge space in your country in almost evrything.

Vectra | 8 years ago | Reply If you want to pass your own inefficiency then at least pass it to Chinese product because Indian import is too minuscule to even hurt pakistan industry.The reality is allowing too much chinese product is the secondary reason for your downfall with the core and primary reason is pakistans own inefficiency but then again you will not say a word to China.Business are not conducted with too much emotions.

ajeet | 8 years ago | Reply India should oppose special tax exemption to Pakistan from EU when it comes up for renewal next year.

Bewildered | 8 years ago | Reply @Nav: "Pakistan has been isolated in SAARC by India" Quite to the contrary, Pakistan has good political, economic, and strategic relations with all the SAARC countries, except India of course, while it is India who is hated most by the people of all her neighboring countries.

Bewildered | 8 years ago | Reply All imports including movies and travel and sports relations with India should be strictly banned until India resolves people of Pakistan has nothing to deal with India. Indians here will pretend to be happy with that, but the current figures of exports between the two -- $8 billion India vs. $0.3 billion Pakistan -- show how much they would lose by this ban. There is nothing India makes that we cannot get from China.

raw is war | 8 years ago | Reply Power seems to be name of Pakistan. Energy consumption of Pakistan is 30% less than Gujarat state. Means most economic indicators from Pakistan are false or it is the most energy efficient country in the world.

manzoor ahmad | 8 years ago | Reply Government should realize that its overall trade is shrinking because of regulatory duties and raising of other tariffs during the last two budgets. If government imposes more duties on yarns and other such raw materials, it would have to give more rebates. Since FBR is already having problems in refunding rebates, this problem will accentuate. What we should realize is that yarn is being imported to use in making finer quality fabrics and made-ups being manufactured for exports. If we do not import yarn and do no have energy or expertise to manufacture our own, we will be shutting down our value-added industries. Imposing duties without due process i.e., looking at anti-dumping etc, is illegal. Pakistan is already isolated from the rest of the world and it will become more so.

Haha | 8 years ago | Reply Where there is almost zero formal trade between 2 countries, how can you discourage it ? Fools..

majid udhi | 8 years ago | Reply sir what to talk of indina cards, first we get rid off fianacial , economic corruptions, fin & eco Terrorisam, then we stop exporting to neighbouring countries all sorts of meat, permission given to influential parlamentarians, stop live stock smuggling daily smuggling is 500 ANIMALS TO AFGHAISTAN IRAN, NO DOUBT YOU GIVE INCENTIVES, AS 50% OF TEX IND CLOSED , AGRI ON TATTERS, FERTLISRS IND CLOSING, OF LESS PRODUCTION, BASMATI RICE IS FALLING APART, WHEAT AND COTTON AND SUGAR CANE (all 3 commodities owners producing are big landlords, lording parliaments, get incentives by escaltign with govt collabortion as govt belong to them, see wheat fm Rs.900 to rs.1350 cotton & sugr ind is owned by majority rulers, out 48 mills 47 owned except 3 who are private coowners , but iron rods or rerolling mills get benefit bec top rulers is NS 25% RD imposed on imports.

Nav | 8 years ago | Reply Ideally Chinese goods should be charged high taxes.. Chinese goods have killed the local industry....Shifted the jobs to the china from the country.

Nav | 8 years ago | Reply Pakistan has been isolated in SAARC by India and other countries by signing the free movement of the Goods and Passengers movement agreements which was opposed by Pakistan in last SAARC summit. Now, these restrictions will further consolidate India's leadership position in SAARC as India will maintain SAFTA agreements, where as Pakistan has failed to keep it's words..

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