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Trends in foreign trade.

It is indeed reassuring that the export targets fixed at US $ 5.6 billion were surpassed, touching a $ 6 billion mark by the close of the year. This can mainly be attributed to the notable growth in the export of yarn which reached a level of $ one billion, besides other textile products and rice. In a global scenario, characterized by the Gulf crisis and consequent recessionary trends in the world economy and some of the internal constraints experienced during the last fiscal year, the accomplishment of higher exports in terms of value than targeted is a pointer to the untiring efforts of our exporters for which they deserve our full appreciation.

As against this, by the end of financial year, just passed, over-all import bill will be US $7.5 to 8 billion, which would reflect an increase of 9.5 per cent as compared to last year. The major imports which registered an increase in value term, were machinery, crude petroleum, fertilizers and commercial vehicles. The import-export gap will now be reduced to US $ 1.6 billion and our exports would now finance 80 per cent of imports as compared to 70 per cent in 1989-90. The current trend in our import trade suggests that there is very little scope for further curtailing the imports. Consequently, the major thrust of our trade policy has been rightly placed on export promotion, not only to close the trade gap, but also to exert a positive impact on our balance of payments position.

Viewed against this perspective, the objective of the new trade policy to touch an export level of $ 10 billion within two years is certainly a realistic target and within the reach. We have noted with satisfaction that the imports have been further liberalized by removing the 14 items from the negative list and 6 items from the restricted list. Similarly, the increase in the ceiling for import of machinery by 25 per cent, requirement of only one application for registration as an importer and exporter instead of two, opening a joint. Letter of Credit without permission from the Chief Controller of Imports and Exports, etc. are such measures which would further facilitate the import trade. Likewise, income-tax exemption to hand-knotted carpets and the leather and textile garments industry, duty free import of machinery and spare parts for leather and textiles industries, increase in overall credit ceiling against export refinancing and similar other measures, would be greatly instrumental in broadening the export-base, which continues to be thin over a long time and in promoting the export of value-added items.

The most redeeming feature of the new trade policy is exemption from all duties, taxes, surcharge on imports of machinery for textiles and leather industries which would be be a big support for an accelerated investment, leading to larger production and export surpluses. In this connection, it would be a most helpful, if this process of granting duty exemption to machinery continues and similar incentives to other industries, showing export potential, be allowed which would serve as a tremendous boost to investment and export.

We appreciate the increase in the credit ceiling for export finance to the extent of 75 per cent of incremental export. We would, however, stress that the process of granting enhanced credit must be automatic, without inviting applications from the exporter concerned and the State Bank should reimburse the increased amount to the bank so that the exporter could avail this facility without facing any difficulty.

The induction of a representative of the Ministry of Commerce on the board of directors, PIA, National Shipping Corporation and Karachi Port Trust, to highlight the exporters problems concerning cargo is a welcome move. It would be in the fitness of things, if the representatives of the private sector are also given representation on the Board of PIA, National Shipping Corporation etc. so that they could assist them through their experience and expertise. This Chamber has already its representation on the Board of Trustees of KPT.

The formation of Advisory Service in the office of the CCI&E for the guidance of our importers deserves our appreciation. It must, however, be ensured that this advisory service must be active, functional and without any extra-burden to the importers. Meanwhile, its operational system must be spelled out.

Budgetary Measures

We have a feeling that some of the provisions of the Federal Budget do not conform to over-all objectives of our export policy. In the recent budget, a provision of charging 1/2 per cent turnover tax on the companies, not paying income tax has been added. This tax would also be applicable to export-oriented industries. The industries located in the tax-holiday areas have not been spared either. Our submission is that 1/2 per cent turn-over tax must not be applicable to export-oriented industries, because such measures are bound to offset the benefit of export incentives. Similarly, the export-based industries must not be made liable to withholding tax deduction against their purchases.

I would also like to reiterate our earlier recommendations that the Factory Act be amended in order to cover only those organisations which have more than 100 workers. Similarly, the labour laws currently enforced in EPZ, be made applicable to exporting units, having export of more than 60 per cent of their products. At the same time, some mechanism must be evolved for granting rebate on industrial fuel to the export-oriented industries, because with the ever-increasing rates of electricity, gas etc. fuel now forms significant component of the total cost of production.

There has been a condition of opening pre-shipment L/Cs, in the Import Policy. However, in case, a foreign exporter replaces the consignee because of the refusal of the original consiqnee due to some reasons, the alternate consignee cannot get the clearance of such goods unless this condition is conducted by the Ministry of Commerce. However, in a recent case, the request for the condonation of opening pre-shipment L/C was turned out. The Chamber has been pleading that like many other countries an automatic procedure be set out in the import policy, whereby in the event of change of consignee by the supplier, the alternate consignee faces no difficulty in getting the goods released. In the meantime, favourable consideration be given to the applications already made to the Ministry in this regard.

I would also like to draw your kind attention to a long-pending issue regarding the refund of amount of licence fee or conversion of those licenses into cash licenses, earlier issued under Barter/STAs. It will be recalled that prior to placing tea under free list, it was importable under Barter of STA. Fee was paid for the licenses to import Tea under Barter/STA, but subsequently, due to the change in the policy, the L/Cs in many cases could not be opened and hence such licence fee which runs into millions continues to be unpaid and blocked and despite assurances, the refund has not yet been made to the importers. Expeditious decision for the refund of licence fee is earnestly requested.

External Environment

The export promotion is conditioned both by internal and external environment. On the external-front, some far-reaching changes are taking place. The West Europe would be integrated into a single market by 1992, the unification of East and West Germany had already been materialized, the economies of USSR and Eastern Europe are undergoing transformation from planned economy to market economy, the imprints of the Gulf War have yet to be erased and the efforts for reconstruction and rehabilitation are afoot in the area. Meanwhile, the policies of protectionism and quotas in some of the developed countries are being further tightened. The threat of curbing textile imports from Pakistan by some countries is also imminent. It is, therefore, imperative that along with the domestic measures for stepping up the pace of investment and exports, matching-efforts should be made to turn the external environment to our advantage as much as possible. This would indeed call for the re-orientation of our foreign policy and re-activation of our Embassies abroad.
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Author:Tata, Riaz Ahmed
Publication:Economic Review
Date:Oct 1, 1991
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