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News Clips 11 June, 2013



[ Customs directed to resolve DTRE issues ]
[ Govt likely to target energy, exports in recovery ]
[ Legal eagles from Europe to fight for victims’ heirs ]
[ Bangladesh garment sales soar despite deadly incidents ]

Customs directed to resolve DTRE issues   [ top ]

THE NEWS, Shahnawaz Akhter, June 11, 2013
KARACHI: The Federal Board of Revenue (FBR) has directed the customs authorities to resolve the problems of exporters pertaining to duty and tax remission for export (DTRE) as duty and taxes had been imposed on a large number of consignments of raw materials that was imported by the export sector, sources said on Monday.

Sources in trade and industry said that member customs, FBR, issued directives to the collectors of various Model Customs Collectorates (MCCs) to resolve the issues under DTRE.

The customs authorities had refused to allow DTRE facilities to several importers of raw materials in the value-added textile sector on the argument that such importers have failed in 100 percent manufacturing activities at their premises. The refusal of the customs authorities forced the importers to opt out for zero rated scheme, where huge amounts have been stuck up, an industrialist said on the condition of anonymity.

The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) and the Trade Development Authority of Pakistan (TDAP) had strongly taken up the issue with Muhammad Riaz, member customs, FBR, and urged him to clarify the mode of the DTRE scheme. The member has been informed that the scope of DTRE facility under SRO 450/2002 envisaged: “The persons who make value-addition in the manufacture and export of goods in accordance with the prevalent value addition of the relevant industry but shall not be less than 15 percent.”

The FPCCI said that the FBR should clarify the approval of the DTRE facility because several units in the value-added sectors had been rejected as those units had not 100 percent facility of manufacturing.

The apex trade body of the country also asked the revenue body to clarify whether the DTRE was only for the unit having multiple stage facilities from manufacturing of yarn to the finished fabric / garments manufacturing as it was difficult for a single unit or small and medium size unit to have such a vast facility under one roof.

The FPCCI said that its members made more than 20 to 60 percent value addition to the raw material and very negligible amount of input was outsourced, whereas the minimum required value addition for having DTRE facility was 15 percent.

The FPCCI also apprised the member customs that the reduction in raw materials import would result in fall in exports.

Govt likely to target energy, exports in recovery   [ top ]

THE NEWS, Mansoor Ahmad, June 11, 2013
LAHORE: Finance Minister Ishaq Dar is likely to target recoveries from the energy sector and an increase in exports as he sets out to boost the country's beleaguered economy, experts say.

Dar– having a reputation of taking harsh economic steps – is keeping several budgetary measures close to his chest, including the manner in which the circular debt would be addressed in one go.

Economists sympathise with Dar who has few options since high debt servicing cost and security related expenses would eat up about the entire government revenue. “We cannot expect more than 20 percent increase in tax revenue next fiscal year,” said an economic expert, adding that the budget deficit is about Rs1.5 trillion. He said if he could save Rs100 billion through austerity measures and Rs50 billion through better management, it would be a great achievement.

Dar will have to take steps for revival of growth and investment that will help in breaking the export’s stagnation and improving the external sector of the economy.

His steps for facilitating investment will determine the extent of private sector participation in infrastructure projects, believed economists.

Another expert recalled that after the imposition of sanctions that put assistance program in abeyance by the international financial institutions following the events of May 28, 1998, Dar took emergent measures to maintain stability and safeguard the balance of payments and foreign exchange positions.

He said these steps included restrictions on foreign currency accounts and facility to convert them into special dollar bonds; depreciation of rupee; imposition of 30 percent letter of credit margin on imports; introduction of multiple exchange rate system; restrictions on foreign exchange payments and reduction in budget expenditure. While presenting his last budget in 1999-2000, Dar said, “It was ensured that these measures had minimum effect on common person”. He withdrew some of the steps taken within few months as the economy stabilised.

Experts pointed out that getting rid of circular debt immediately, though a difficult measure, would improve power generation significantly. However, they said that the circular debt would again start accumulating if the difference between the cost of power production and power tariff was not plugged.

They said government has indicated that it will keep providing subsidy to the lifeline consumers of up to 100 units and withdraw it from all other domestic consumers.

This measure will save government around Rs27 billion only.

If the government succeeds in reducing the distribution losses by five percent in the first year, which is a tall order, the saving will come around Rs36 billion. And, if the 100 percent bill collection from now onward is ensured, it will add Rs100 billion to national exchequers.

This will cover Rs163 billion of Rs365 billion annual circular debt.

It has to be seen whether the government will increase the tariff to overcome this deficit or provide subsidy in the budget. The economic agenda of PML-N states that the total power subsidy would be booked in the federal budget. Dar has inherited a highly bruised economy. In 1998, the value of foreign debt was 230 percent of the exports of the country. In 2013, the foreign debt of $63 billion is over 250 percent of the $25 billion exports of the country. Economists said that the safe limit was 150 percent. Moreover, in 1998 the tax to gross domestic product ratio was around 13 percent, which in 2013 dwindled below 10 percent. In 1999-2000, the public sector enterprises were expected to spend over Rs58 billion from their own resources. Today, many of these entities are looking towards government to stay afloat widening the budget deficit.

In his last budget speech for fiscal 1999-00, Dar said that tax payers were agitating against multiplicity of taxes and levies. People, businessman and industrialists had to pay multiple federal, provincial and local taxes and levies and they were being harassed at every step. At that time, he had to abolish octroi.

Since then, a decade and half has gone by but the situation on multiplicity of taxes remains the same.

Legal eagles from Europe to fight for victims’ heirs   [ top ]

THE NEWS, Anil Datta, June 09, 2013
A group of Italian, Spanish, and French lawyers has arrived in Karachi to investigate the facts and liabilities of the foreign and local companies implicated in the Baldia factory fire disaster of last September.

The lawyers will, in association with Advocate Faisal Siddiqui, represent the next-of-kin of the victims in a group proceeding before courts in the European jurisdiction in case the liabilities are confirmed.

The group of legal eagles – Stefano Bertone, Marco Bona, Carlos Villacorta and Jean-Pierre Bellacave – are taking up the Baldia factory fire case on a totally voluntary basis free of charge. The case will be contested in a court in Torino, Italy. The aim of the litigation is to get compensation for the heirs of the victims under the same standards as applicable to European victims of industrial tragedies; to obtain punishments for the negligent authorities; to prevent such disasters in the future; and to promote safety at the workplace.

The case will be undertaken in collaboration with trade unions, not-for-profit organisations like the National Trades Union Federation (NTUF), Pakistan Institute of Labour Education and Research (Piler) as well as some European agencies. The lawyers addressed the media at the Karachi Press Club on Saturday afternoon, vowing to get compensation for the victims’ next-of-kin from RINA, which issued the SA8000 to the garments factory. SA8000 is an auditable certification standard that encourages firms to develop and apply socially acceptable practices at the workplace.

The group is already involved in litigation in Italian courts against the Italian company, Rina, as they are working for the benefit of 800 Egyptian plaintiffs, who lost their dear ones when the Al-Salam Boccaccio 98 sank in the Red Sea in 2006, claiming 1,000 lives.

Marco Bona claimed that Rina had issued the safety certificate to Ali Enterprises on August 21 and the disaster took place just 20 days after. “While studying the pictures of the interior of the plant, it is clear that the prescribed safety standards were nowhere in place,” he noted.

The lawyers have successfully fought the cases 40 aviation disasters across the globe and got compensation for the victims’ heirs. The group also procured compensation for the families of the PIA air crash victims in Kathmandu of September 1992 and the Thai Airbus crash at the same point two months earlier.

Carlos Villacorte said investigations showed that the workers had not been briefed about the steps to be followed in case of emergency.

The lawyers alleged that agents got certification for the local factories at a cost of Rs500,000 each.

Piler Director Karamat Ali told the media that efforts to identify the bodies through DNA sampling could not bear fruit. After four months of the industrial disaster, the laboratory in Islamabad had expressed its inability to identify the victims through DNA samples.

He rued the fact that Karachi, a city of 20 million people, still did not have any DNA testing facilities, which in the modern world were being frequently applied.

The International Labour Organisation (ILO) had stipulated annual safety inspections at industrial plants but in Pakistan, the inspections did not take place for years at a stretch because the capitalists either created hurdles for the bureaucracy or bought off the bureaucrats and evaded inspection, Ali alleged.

On September 11, 2012, more than 250 people had died when a massive blaze swept through Ali Enterprises, a garment factory in Karachi’s Baldia Town. The tragedy has been termed the worst industrial disaster in the country’s history.

Bangladesh garment sales soar despite deadly incidents   [ top ]

REUTERS, Mike Blake, June 9, 2013
DHAKA (Reuters) - Bangladesh's exports rose 15.43 percent in May to $2.54 billion from a year earlier thanks to stronger clothing sales, the Export Promotion Bureau said on Sunday, even as the country reviews safety standards at factories after two deadly incidents.

Garment exports totaled $19.3 billion for the 11 months that ended in May, nearly 12 percent more than a year earlier. The sharp increase comes as the government weighs industry reform after the collapse in April of the Rana Plaza factory complex killed 1,129 people. A fire at another factory last year killed 112.

The incidents have put the government, industrialists and the global brands that use the factories under pressure to reform an industry that employs four million and generates 80 percent of Bangladesh's export earnings.

Total exports in the first 11 months of Bangladesh's July-June financial year were $24.32 billion, compared with $21.97 billion over the same period the previous year.

Monthly exports had fallen year-on-year from March through June as the global economic slowdown weighed on demand. But exports have since picked up, with a 10.67 percent rise in the July-May period.

Duty-free access offered by Western countries and low wages have helped make Bangladesh the world's second-largest apparel exporter after China, with 60 percent of clothes going to Europe and 23 percent to the United States.

The European Union and the United States had threatened punitive measures in order to press Dhaka to improve worker safety standards after the collapse in April of the illegally built factory.