Lahore: Ministry of Commerce in its recent report to the parliament has finally accepted that conflict between Pakistan’s monetary and trade policies is one of the prime reasons for massive decline in national exports.
- The report also indicates that around 45 export products have lost their competitiveness in the international markets since 2013. However, business leaders believe that small and medium enterprises (SMEs), which constitute 90 percent of all enterprises in the country, can easily turnaround this crisis with merely small interventions by economic managers of the country.
- A customs and tax law expert, Saad Mukhtar Siddiqui, has indicated that limited resources and non-availability of quality raw materials in domestic market are the biggest challenges for small manufacturing and exporting units.
- He said big export houses have capacity to hold huge raw material inventories for their export orders as it requires investments in millions of dollars. These big exporters also have very high overhead, like financial charges, warehousing cost and hefty payroll bills, which make their products uncompetitive in the international markets. On the other hand, he said, “SMEs are efficient and competitive owing to their manageable size and controlled procedures.”
- He added that Pakistan’s tax laws have provision to facilitate these small but relatively efficient manufacturing cum exporting units. But neither do they know about these provisions nor revenue managers try to offer them such facilities, like DTRE, public bonded warehousing, common bonded warehousing, etc.
- “As a result, most of these units are not capable to tap their full potential,” he said. Siddiqui underscored that if these facilities were offered to small enterprises they could easily have access to imported raw material and produce quality finished products for export markets. “The China-Pakistan Economic Corridor (CPEC) is believed to be a game changer for Pakistan but most critics argue that China is and will be the main beneficiary of the project as Pakistani enterprises are marred by domestic challenges,” the customs and tax law expert added.
- Neighbouring countries in the region, like India, Bangladesh and Sri Lanka, have already offering such facilities to theirs SMEs to compete with global players and contribute in economic and export growth of their countries.
- Despite the fact that such facilities can boost the SME sector and the country’s exports, Pakistan has not offered these facilities to a large number of SMEs in almost two decades.
- The red tape in tax bureaucracy has made the procedure of issuance of these licenses so cumbersome that no one dares to apply for any such facility. Recently, a textile giant from Sri Lanka expressed its interest in warehousing its raw materials for Pakistani export-oriented SMEs, with a view that this would reduce input delivery time for local export industries, and ultimately reduce their capital requirement for maintaining huge inventories and boost exports. But it lost the battle after struggle for almost two years.
- He said on one hand the government is trying for rapid industrialisation in the country, and opening the borders for enhancing regional trade through CPEC. But on the other hand red tape and lethargic attitude of the civil bureaucracy are creating hurdles in boosting exports and investment.
- The economic managers of the country, especially the Federal Board of Revenue (FBR), should look into the matter and find out a workable solution before it is too late and Chinese investors with their deep pocket permanently close local SMEs.
{Ref: The News Newspaper}
