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News Clips 05 November, 2014


[ Textile policy delayed ]
[ Increased business cost bites exporters’ profit ]
[ Tax returns filing date extended ]
[ Export of eight items likely to grow ]
[ GSP Plus status: German envoy urges private sector to take full advantage of facility ]
[ Textile exports worth $2.5 billion at risk under uncertain energy supply ]
[ To avoid diversion of consignments to 'Red Channel': customs asks exporters to submit scanned documents along with GDs ]

Textile policy delayed   [ top ]

Dawn, November 03, 2014
The industry is expecting priority energy supply, tax-free import of machinery and duty drawbacks of up to 3pc on incremental export basis and value-addition, among others, in the upcoming textile policy THE Economic Coordination Committee’s decision to delay the approval of the second five-year textile policy 2014-19 for another couple of weeks has disappointed exporters, who were eagerly awaiting cash incentives for their future exports and investments.

“The textile policy was originally due in September. I don’t know why its announcement is being delayed,” said Sheikh Ilyas Mahmood, a major home textile exporter from Faisalabad and a former chairman of the Pakistan Textile Exporters Association.

“The sooner the policy is finalised, the better for the industry and textile exports, as the Heimtextil fair [in Germany] is fast approaching.” According to reports, the ECC had discussed the draft policy in its meeting on Thursday, but Finance Minister Ishaq Dar formed a committee to review it and suggest changes in it by the middle of this month. Now the package will be put before the ECC after November 15 for approval.

The exact details of the incentive package proposed in the policy are not known so far. However, it is expected to target a doubling of textile exports from the current $13bn to $26bn in five years. Various cash incentives, credit subsidies and tax exemptions will set the government back by over $1.25bn.

Around one-third of this amount will be allocated for the outstanding claims filed by manufacturers and exporters for refunds under the previous textile policy for 2009-14, and the remaining amount will be available for initiatives to be undertaken under the new policy.

The industry is expecting priority energy supply, tax-free import of machinery and other equipment, establishment of textile parks to encourage value-addition, creation of an investment support fund and duty drawbacks of up to 3pc on incremental export basis and value-addition. The draft incentive package isn’t much different from that in the preceding textile policy, which was implemented only partially because of unavailability of promised funds.

People like Ijaz Khokhar, chairman of the Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA), are of the view that Pakistan has failed to take advantage of the trade concessions given by the European Union under the GSP Plus scheme because of lack of support from the government.

“Our policymakers do not realise that government investments in the value-added textile industry are investments in the country’s future,” he noted.

“Textile is the backbone of our economy and will always continue to dominate it. The government must invest heavily in textile infrastructure, human resource training and research for boosting exports of value-added textiles and developing products. Without government help, the country cannot take full advantage of the EU trade concessions.”

Arshad Aziz, a former Prgmea chairman from Karachi, argued that the country could not raise its exports despite the increased access to the EU market because most value-added textile producers were in ‘ICU (intensive care unit)’ on account of liquidity crunch, energy shortages, lack of access to cheaper credit and uncertain conditions in the country.

In fact, textile exports have declined by almost 4pc to $3.42bn in the first quarter of this financial year, from $3.56bn a year ago.

An All Pakistan Textile Mills Association estimate says Pakistan lost $1.2bn in textile export revenue between April and September, mainly on account of energy shortages in Punjab, where three quarters of the industry is located. It points out that export revenue losses could shoot up to $2.2bn during the current fiscal if uninterrupted gas and electricity are not provided to factories for the rest of the year.

“So far, the decline in exports is in single digits, but it will widen soon if the government doesn’t help the industry with its problems,” warned M.I. Khurram, a leading knitwear exporter and former chairman of the Pakistan Hosiery Manufacturers Association.

He said the textile policy was being awaited because the different incentives could help exporters. Still, he said, the announcement of the package alone would not do the trick.

“The government will be required to implement the incentives it plans to give us. The previous policy couldn’t achieve its targets because once it was announced, the government forgot about it. Exporters got billions of rupees stuck in refund claims, causing liquidity problems for many,” he added.

Khokhar said Pakistan’s rivals are already capturing its share in the world market. “If we had prepared well for GSP Plus, we would have raised our exports. 

But the government didn’t heed our cries for help to prepare and reap the benefits of the trade concessions. We can still recover lost ground, provided the government is ready to do what it must to help the industry,” he concluded. 

Increased business cost bites exporters’ profit   [ top ]

The News, November 02, 2014
LAHORE: Value-added textile exporters are struggling to breakeven with prices near the cost of production amid their inability to ripe full benefits from some duty concessions under the European Union’s generalised scheme of preference (GSP) plus regime, said a leading knitwear exporter on Saturday.

Adil Butt said that Pakistani apparel exporters were forced to sell products at lowest rates in the world because they had to compete with low-cost Bangladesh and others enjoying duty free status in European Union.

As the EU importers had to pay 14 percent duty on Pakistani apparel, they demanded lower prices from Pakistani suppliers. In order to stay in the market, Pakistani clothing exporters supplied their products at very thin margins.

Bangladeshi apparel was five to eight percent more expensive than Pakistan. Its end cost to the EU importer was lower than the landed cost of Pakistani exports.

After the GSP plus, EU importers refused to share the duty concession with the Pakistani apparel exporters. Their contention is the duty concession is meant for them and not the exporters. This is a strange strategy as whenever rupee depreciates, the EU importers always insisted on sharing the benefit of that devaluation. Therefore, after an initial increase in devaluation, the exports from Pakistan have never registered an appreciable increase, said Butt.

Economist Amina Usman said in view of the tendency of Pakistani exporters to accede to importer’s pressure, the government should have fixed a minimum export price of different apparel categories to ensure better margins for exporters.

Just when the GSP plus status was awarded to Pakistan, the power rates in the country climbed by 67 percent and minimum wages by 20 percent, which eroded the thin margins of the apparel exporters. Consequently, the value-added exports tapered off gradually and posted a negative growth in September.

The quality of a few Pakistan’s apparel categories is better than its competitors.

By exporting at low margins, the Pakistani apparel sellers have stalled upgrading processes and completely stopped innovation and research and development.

The economic expert said besides passing on benefits of weak currency, the local entrepreneurs have the tendency to share most of the benefits they get from the state to foreign buyers.

During the textile quota regime, the exporters did not even factor in the quota price fully and lowered their rates to edge out their compatriots or force them to lower their rates.

The exporters faced problems when after the elimination of quota, the foreign buyers asked them to discount the full quota price. The buyers were not ready to listen to Pakistani exporters’ plea they had even factored in some quota price when the quota regime was in vogue. When research and development fund on apparel exports was announced during Musharraf’s regime, the benefit was passed on to foreign buyers. The exporters had to face music as the Federal Board of Revenue withheld the release of R&D.

Regarding currency fluctuation, market analyst Benish Toor said exports increased at a very rapid pace between 2001 and 2003 because the rupee remained stable; the government cut the duty drawback rates to realistic levels, which were very low compared with rebate the exporters used to get before 2001.

All subsidies were withdrawn. Policy to allow export of cotton right after harvesting ensured that the local industry procuring this basic raw material at global rates did not impede exports growth.

Toor said the reason was simple. After liberalisation of economy, the exporters realised they would have to work efficiently and very hard for survival as they depended mostly on global markets. They had to compete with manufacturers from other countries. The exports grew as the government stopped all kinds of subsidies. The industries achieved better efficiency. Now, duty free concession is a subsidy again squandered by the exporters, she opined. 

Tax returns filing date extended   [ top ]

The News, November 01, 2014
ISLAMABAD: The government has further extended the deadline for filing tax returns up to November 21, a statement said on Friday. Earlier, the date was extended up to October 31 from September 30, it said.

According to the statement issued by the Federal Board of Revenue (FBR), Finance Minister Ishaq Dar and the Federal Board of Revenue have received a number of requests for extension in date for filing income tax returns for the tax year 2014, from the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), provincial chambers of commerce and industry, All Pakistan Tax Bar Association, Pakistan Tax Advisors Association, All Pakistan Anjuman-e-Tajiran and various other trade bodies and business associations seeking extension in the deadline for filing tax returns.

They have argued that due to the advent of Muharram-ul-Haram, a number of taxpayers will be busy in observing their religious rites starting from the last week of October.

Moreover, several taxpayers remained outside Pakistan for performing Hajj and many of them have still not returned.

Considering the requests of the taxpayers and on the directives of the finance minister, the Federal Board of Revenue has decided to extend the deadline for filing tax returns till November 21.

However, the taxpayers have been advised to file their returns as early as possible without waiting for the last date because when everybody approaches the Federal Board of Revenue’s web-portal during the last dates, there is a possibility of overload on the system, which may cause difficulties for the taxpayers. 

Export of eight items likely to grow   [ top ]

Dawn, October 31, 2014
ISLAMABAD: Federal Commerce Minister Khurram Dastagir Khan informed the Senate here on Thursday that Pakistan’s exports of eight products will witness a substantial increase in the current calendar year owing to zero-duty access to the European markets.

These eight products are: ethyl alcohol, carpets, plastics, footwear, leather, non-value added textile, home textiles and textile garments.

The commerce ministry estimates additional exports worth $1.117 billion of these eight products in the current calendar year. The minister stated this in reply to a question by Senator Syed Muzafar Hussain Shah here on Thursday.

Export of these products stood at $4.57bn during 2012, and it amounted to 82 per cent of Pakistan’s total exports to European Union in 2012. The minister said that total exports to EU stood at $5.6bn during 2012.

The break-up given by the minister about increase shows that maximum increase will be in export of textile garments by $408 million, followed by $307.5m in home textiles; $221.25m in non-value added textiles and $127.25m in leather products to the EU countries in the year 2014.

The minister said that 82pc of Pakistan exports to EU earlier faced stiff competition from countries, like China, India, Brazil, Bangladesh. But these would now be duty-free due to GSP-Plus status granted to Pakistan.

These items, rice, sports goods including football, surgical instruments, meat products and fruits, were already attracting zero-duty to EU markets.

Total exports of these products to the EU stood at $458.50 million in 2012.

The minister, however, did not inform the Senate about the decline in exports of textile products to the EU countries during the last eight months despite having zero market access.

With the decline, it is unlikely that the projected target may be achieved by the end of the current calendar year.

However, the minister stated that the increase in exports to EU will create 100,000 jobs in the textile garment sector alone. The creation of these jobs was calculated on the basis of an assumption that an increase of $4000 in exports will create one job.

The minister claimed that these jobs will be created on the assumption because Pakistan’s 90pc exports to the EU were now duty-free.

GSP Plus status: German envoy urges private sector to take full advantage of facility   [ top ]

Business Recorder, October 31, 2014
German Ambassador to Pakistan Dr Cyrill Jean Nunn has urged the private sector of Pakistan to take full advantage of the GSP Plus status granted by the European Union. He stated this while talking to the LCCI President Ijaz A Mumtaz here at the chamber on Thursday. Former chairman Wapda Tariq Hameed and LCCI former president Farooq Iftikhar were also present on the occasion. 

He said that being world leader in energy sector, Germany could extend co-operation to Pakistan to resolve challenges of soaring energy needs. 

He said that tourism sector of Pakistan should be promoted through joint ventures. 

He said the German government is fully committed to the rapid expansion of renewable energies and has created enabling environment for investment in renewable energy sector. He further said that concerted efforts are being made to take the two-way trade volume to new heights and in coming days the situation would take a positive turn.

Speaking on the occasion, LCCI President Ijaz A Mumtaz said that Pakistan is a huge market of more than 180 million people. He said that Pakistani business community appreciates German advocacy for Pakistan's case within the European Union, which has given us Pakistan-specific Autonomous Trade Preferences (ATPs). He said that over the past five decades, Germany has carried out a multitude of projects in Pakistan with a volume of more than 21 billion euros. He said that this includes investing in economic projects, alternate energy solutions, opportunities for students and public-private partnership under GIZ (German Technical Co-operation) for vocational trainings. 

He said that with presence of some leading German companies in Pakistan, there is increasing scope for small and medium-sized enterprises to invest in Pakistan's promising areas such as power, renewable energy, IT, textiles, agriculture, and service sectors. 

LCCI president said that Germany is famous for hosting one of the most popular trade fairs in the world. Pakistani industrialist can avail this opportunity to increase their trade and bilateral relations with Germany with the help of trade fairs in your country. He said that Pakistan is an agricultural country. Its agricultural contribution in GDP is 21 percent whereas that of Germany is only 0.8 percent. Increasing the exports of agricultural products to Germany from Pakistan can be definitely considered, he added. 

He said, "Trade between both the countries need to improve. Pakistan's exports to Germany in 2013 were US 1080.984 million dollars. Pakistan's imports from Germany in 2013 were US 1433.631 million dollars and our percentage in total exports of Germany in 2013 was four percent. Pakistan's percentage in total imports of Germany in 2013 was 3.5 percent. There is definitely larger potential than this for trade between both the friendly countries." 

He said that Pakistan has earned world class reputation in manufacturing surgical instruments, sports goods, carpets and chemicals; therefore we lay strong emphasis on exports of these items. He appreciated the setting up of the Pakistan German Renewable Energy Forum for combating the energy deficit in Pakistan. Lahore Chamber would always like to play a positive and supportive role in this regard. 

He said German expertise and investment could bring in valuable results in medical field. He said that development in this field with German expertise can be helpful. Exchange of doctors and medical experts will be beneficial. Investment in the surgical instruments and pharmaceutical industry will be appreciated. He also stressed the need for exchange of trade delegations on regular basis to promote trade and business.

Textile exports worth $2.5 billion at risk under uncertain energy supply   [ top ]

Business Recorder, October 31, 2014
Central Chairman APTMA S M Tanveer has warned that the textile industry exports worth 2.5 billion dollar would be at risk if energy supply remains uncertain. Furthermore, he apprehended that the industry would be reluctant from undertaking further investment if energy supply was not ensured timely by the government. 

He was addressing a press conference at the APTMA Punjab office on Thursday evening. Chairman APTMA Punjab Seth Muhammad Akbar, Central Vice Chairman APTMA Wisal A Monnoo and Senior Vice Chairman APTMA Punjab Syed Ali Ahsan were also present on the occasion. 

Chairman APTMA expressed his wonders that the government had held an investment conference to allure investment on the one hand and was not tapping the one billion dollar per annum investment decisions penned by the textile industry on the other. 

He said textile industry had started performing impressively in 2013 when the government ensured energy supply on priority. However, the upside has come down in 2014 with energy shortage, particularly for the Punjab-based textile industry. 

Already, he said, Pakistan's textile industry was lagging behind in the region due to energy constraints. 

According to him, the terrible state of affairs could be judged from the fact that Pakistan has invested far low in basic textile against the regional competitors from 2006 to 2013. 

He said Pakistan's textile industry could only add 2.7 million new spindles during those six years, mainly by way of replacement of already installed machinery. Meanwhile, he said, Bangladesh with no cotton production installed additional capacity of three million spindles and India added 18.5 million new spindles during the same period. 

He said during the same period, Pakistan could hardly add 5,544 shuttle less looms as against 30,204 looms by Bangladesh and 46,881 by India. 

S M Tanveer said the stagnation in Pakistan's textile industry was mainly attributed to the non-availability of energy.

Besides, he added, unprecedented increase in energy tariff had proven last straw on industry's back. 

Also, he said, the crisis of dollar-rupee parity had further eroded the viability of the export-oriented industry, particularly in Punjab where 70 percent of the total industry was located. 

According to him, the present uncertainty is triggering further due to delay in the announcement of textile policy and decision on uninterrupted energy supply to the Punjab-based textile industry during this winter. 

Chairman APTMA has urged the government to guarantee gas and electricity supply to the Punjab-based textile industry at regionally competitive rates to utilise capacities fully and to encourage new investment to achieve the target of $26 billion in next five years. 

He has further appealed to the Prime Ministerial Committee on Textile Industry with Federal Finance Minister Ishaq Dar in the chair to prioritise the textile industry in gas and electricity supplies to stabilise the exports, employment and investments otherwise 40 percent impaired capacity would aggravate further with possibility of shutting of the textile industry. He said that immediate corrective steps could save both the industry and the cotton crop. 

To avoid diversion of consignments to 'Red Channel': customs asks exporters to submit scanned documents along with GDs   [ top ]

Business Recorder, October 31, 2014
The Customs department has asked exporters to submit scanned documents along with Goods Declarations (GDs) to avoid diversion of consignments to 'Red Channel', instead of pressurising terminal operators to train its staff to fulfil the mandatory requirement of documents collection for customs before proceeding exports consignments. 

According to sources, as per paragraph 3 of SRO 192 for Export Policy Order 2013, all exports from Pakistan are subjected to submission of certain documents/certificates at the time of filing of GDs. 

They said that a list of the required documents/certificates was fed in customs clearance system 'WeBOC' against respective PCTs and terminal operators were responsible to collect the copies of required documents from exporters and handed over to the concerned customs officials. 

However, this arrangement for collection of documents/certificates is not working properly as the said list is not exhaustive, besides the persons receiving the documents at terminals' counter is not trained to ascertain the authenticity and relevance of the documents with respective consignments. 

Therefore, the condition of Export Policy Order of submission of documents to Customs at the time of exports is defeated. 

Sources said that the customs department in order to resolve the issue asked responsible to submit scanned copies of relevant documents at the time of exports, instead of pressurising terminal operators to train its staff to fulfil the mandatory requirement that led to excessive workload on them. 

Moreover, sources said that customs department had also warned the exporters that GDs having no scanned documents, if required, will not be allowed through green channel and shipment would also be stopped till the submission of documents. 

They said that exporters had also been threatened that all consignments having no submission of scanned documents would be diverted to Red Channel from the Green Channel. 

When contacted, officials in Customs department said that customs department had earlier allowed terminals to collect documents from exporters on its behalf as under Export Policy Order it was not the responsibility of customs department. 

Therefore, they added, the customs department could not pressurise terminals to train its staff for the said purpose; adding that earlier exporters always tried to shift their responsibilities to the terminals, if any discrepancy in documents was found. 

But, after the said development, they are solely responsible of what they have submitted to the department. They further said that customs department in order to avoid any untoward situation was also conducting random scrutiny of submitted documents to verify its veracity.