Pakistan plans subsidy boost for its exports M. Aftab

Pakistan is planning to hugely increase its subsidy to boost its export world-wide. The plan under consideration in the Ministry of Commerce is likely to increase the subsidy for a number of exportable items through package-2 worth Rs525 billion. The subsidy package-1 had envisaged spending of Rs18 billion and it was announced by the outgoing Prime minister Nawaz Sharif in December, 2016 and is to cover the period from January 2017 to February 2018. The subsidy plan is part of the Strategic Trade Policy Framework-2051-18 (STPF).

Pervaiz Malik, minister for Commerce and Textiles, said: “Pakistani products could not get proper market share in the past, due to high input cost of our goods.” The export package of Rs180 billion, has played an important role in boosting the country’s exports in fiscal year of 2017. He said so in his address at the day Textile Asia Exhibition jointly organised by Pakistan Readymade Garment Manufacturers & Exporters Association (PREGMA) and E-Commerce Gateway Pakistan, at Lahore.

Ajaz Khokhar, PREGMA chairman, speaking at the event said, the cooperation between PREGMA and E-Commerce is excellent and “We are closely working together. We have together, organised this Pakistan textile machinery fair at Lahore to increase our industries’ productivity and for better competitiveness,” Khokhar said. Malik said: “The cabi- net, this week, reviewed the Strategic Trade Policy Framework and the export package 2015-18, in order to boost exports. The cabinet also considered steps to expand the scope of other export items, and to include other export sectors into its fold. Several concrete steps are now being taken to increase the volume of our exports.” The low exports have stayed in the range of around $20 billion a year, in the wake of a decline in international oil and commodity prices that hit oil producing countries.

The key objective of the new subsidy plans is to substantially raise our exports to the booming markets of the UAE, Saudi Arabia, Middle East and Africa which are also projected to shortly return to their good financial health,” a senior official of the ministry of commerce, dealing with exports told the Khaleej Times. The ministry had launched its Strategic Trade Policy Framework (STPF) 201518, in December, 2016 which is now likely to be extended. The government had agreed to provide help through Package-1 of December, 2016 on the back f protests by the Pakistani industry and the exporters, for help, as their business has been declining rapidly.

What have been the woes of exporters? “Exports were down from $25 billion in fiscal year-2013 to $19 billion in fiscal year-2016,” says State Bank of Pakistan (SBP), the central bank. But, fiscal year 2017 faired somewhat better.

Why did exports decline? The exports were down because the output of various key items was hit due to power and gas natural shortages, leading to reduced exportable surplus. But the major external cause was the international oil and commodity price crash that reduced the foreign demand for Pakistani products. With the expansion of the domestic electricity generation, larger gas supplies and increased LNG imports, the energy supply to the industries, particularly the worst-hit textiles, has improved substantially, creating larger exportable surplus.

The original package-I included export subsidy for five products including textiles, which alone earn 60 per cent of forex for Pakistan. The other items are: carpets, leather and leather products, sports goods and medical instruments, as well as marble. The package laid down that the sale tax being paid by the manufacturers on the purchase of inputs for their products will be refunded to the industrialists in the case of five products.

Prime Minister Shahid Khaqan Abbasi has asked Malik to form a committee to undertake a detailed analysis of the impact of the Export Package and to suggest any changes in its scope and coverage. Under the Package-1, four categories of export items — fine grade “basmati” fragrant rice, horticultural products, ‘halal’ meat and meat products, and jewellery —were highlighted for exports, especially to Iran, Afghanistan, China, and the European Union. The government was to spend an additional Rs 6 billion to help exporters, as provided under the Textile Policy 2014. The government says that in order to help increase the industrial output, especially, textiles output, uninterrupted power supply has been assured since October 2015. Uninterrupted natural gas supply has been assured to the industry since March 2016 this year. AS part of the plan to reduce the cost of doing business, and bring down the cost of production, the electricity tariff for the industry, has been slashed by Rs3 per unit for industries. Additional charges on fuel consumption have been shifted from the industries o the consumers of their products.

The National Tariff Commission Act has been revamped to stop smuggling-in of foreign textiles. Cheaper Indian and Chinese textiles, as well as those from South Asian countries are the main source of this smuggling into Pakistan. Pakistan has also upgraded its trade promotion organisations like, the much-criticised Trade Development Authority of Pakistan, Pakistan Horticulture Development and Export Company is being revitalised. The volume and cost of export finance, the key element in funding this business, has been improved to make Pakistani exports competitive in the global market place. The State Bank of Pakistan, has reduced the discount rate down to 5.75 per cent — the lowest in 43 years.

The bank has introduced special low rate Export Finance Facility (EFF) to 3.0 per cent to lower the export price of Pakistani products. These new concessions, and still more underway, will help enlarge exports. The cheaper prices of all Pakistani products, ranging from fashion and textiles, to fresh fruits and vegetables will be welcomed by consumers, including those living in the Dubai, UAE, Saudi Arabia and Middle East to EU. The writer is based in Islamabad. Views expressed are his own and do not reflect the newspaper’s policy.