Textile Export already on verge of collapse, anti-export unwise budgetary and policy measures suggested by Consultants will put final nails in the coffin of ailing textile industry, Whenever export takes-off, any adversity happens to stop its pace: Jawed Bilwani.
The Value-Added Textile Exporters have rejected the Reforms & Revenue Mobilization Commission’s report submitted to Finance Minister by its Chairman Ashfaq Tola terming it “anti-export drive” and “unwise budgetary recommendations and policy measures” which will ruin the hard efforts of exporters to enhance exports and to earn valuable foreign exchange. RRMC has recommended to change the existing Final Tax Regime of Exporters to Minimum Tax Regime and impose additional tax on foreign exchange income of exporters which are imprudent and harsh being recommended without consultation of exporters and real stakeholders. Export is a 100 percent documented business and its dealings/ transactions are done in real-time. FTR regime was introduced and implemented in the past to support exports to address trade balance which is yet to be achieved. In absence of trade balance applying normal tax regime to exporters will discourage exports and will be futile exercise. RRMC Chairman is a consultant, who wore various hats in successive Government, know nothing about the export. He holds a complaisant personality whose recommendations to the Government are always anti-export and to benefit some particular business circles only. In these most difficult times, should the Government depend upon consultants/advisors or the real stakeholders? Whether present alarming economic state of affairs allows the Government to experiment and adventure with exports on the advice of Consultants/Advisors? Should not the Government take on board the real stakeholders respecting their fundamental rights? What service the so-called Tax Consultants have done to the Nation to whom the Government accord preference over the exporters and real stakeholders business persons? While the date of Budget has been announced, why the Prime Minister, Finance Minister and other concerned in the Government have not invited Value-Added Textile Exporters to hear their grievances and sought suggestion in the upcoming budget and what are the motives behind such neglect?
Exporters have also noted with deep concern that there are few persons who are big businessmen regularly meet the Government who advise and suggest about promotion and business development of SMEs. Surprisingly, the national export is not increasing, its revenue is not increasing but debts and liabilities are increasing, nonetheless, the businesses and exports of those few blue-eyed businessmen have greatly flourished, however, the SMEs are struggling for their survival having no representation and no say to the Government. This broad discrimination and bigotry has shaken the confidence of small and medium textile exporters. During the period, 918 business entities engaged in export have closed and shutdown their export activities.
Textile Exporters are of the view that whenever the Government has accorded importance to the Textile Exports and started implementation on the Textile Policy, the textile exports have enhanced. Unfortunately, from the announcement of first Textile Policy in 2014-2019 till the existing Textile Policy 2020-2025, not a single policy was implement completely. Provided, 100 percent implementation was ensure, the textile export would have enhanced from 25 to 40 percent in a year. The Government should also take notice that why, despite of availing GSP plus status in EU, Pakistani Textile Export has not achieved milestone increase. The main reason is that the Cost of Manufacturing/export production has never been controlled in real sense and remained upward fluctuated making exporters unviable and uncompetitive to compete with regional competitors. Exporters advise the Government not to experiment with exports on unfair advisory of consultants/advisors.
Exporters have expressed their deep concern that whenever the Export Industry comes in full pace of progress and takes-off to achieve horizons of export enhancement surpassing previous highest benchmarks, something highly adverse happens and all the hard efforts of exporters to earn valuable foreign exchange for Pakistan are confronted and sabotaged. The Nation must seriously realize whether this phenomenon is by design? Why Pakistani export is not flourishing and increasing while the regional countries have been achieve new milestones in export enhancement every coming year?
The Textile-Export Industry is already ailing and on ventilator owing to harsh and step-motherly treatment towards export by the sitting coalition Government. Exporters caution the Government that any further unwise and harsh budgetary measures or policy change will put final nails in the coffins of the Textile Export Industry which is combating for its survival while encountering fatal challenges confronting to its competitive and viability emerged during last one year in the hands of the sitting Government.
The Textile & Apparel Policy 2020-2025 has been held in abeyance and all its facilitation measures have been suspended. It is also an irony that the textile export industry has already been deprived of level-playing field with discontinuation of Regionally Competitive Energy Tariff (RCET), imprudent regulations and unnecessary restriction of State Bank of Pakistan with regards to export-proceeds realization, excessive delays in Refunds of Sales Tax, exorbitant increase in cost of export-production due to very costly inputs in the wake of unbridled Dollar-Rupee parity and overall extreme economic instability and intense uncertainty due to vindictive political wrangling in the country. Textile Export has almost ruined during the last ten months period of this Government and it appears that the export is heading towards complete collapse and sabotage, ultimately resulting to national loss of foreign exchange earnings worth USD 3 billion, revenue generation and massive unemployment. This was stated by Muhammad Jawed Bilwani, Chairman, Pakistan Apparel Forum & Chief Coordinator, Value-Added Textile Associations Forum, in statement to press and media.
Bilwani voiced that the Export has always remained a low-priority of the Governments. Fate of exporter investors is hanging in balance as they have invested Billions of Rupees in Textile Industry. The Value-Added Textile Exporters are highly perturbed over ignorant behaviour of the Government that has completely ignored the textile exporters who are struggling hard, in these most difficult economic times of the history in Pakistan, to earn direly needed precious foreign exchange for the Pakistan. Instead of calling on genuine and real stakeholders, the Prime Minister, Finance Minister and their Economic Team are calling their favourite business persons and consultants for consultation on Budget 2023-24.
Textile holds the major share of more than 60 percent in the national exports. Pakistan’s total Exports has been declined by 11.61 percent year-on-year basis during the period from July 2022 to April 2023 as compared to same period in 2022 to the tune of USD 23.1 billion with shortfall of USD 3 Billion precious foreign exchange. Whereas, the textile exports has been declined by 14.2 percent year-on-year basis during the period from July 2022 to April 2023 as compared to same period in 2022 to the tune of USD 13.7 billion with shortfall of USD 2.27 Billion foreign exchange. It appears that the Government is unwilling to control the situation and wants to deliberately sabotage the industry and export and foreign exchange earnings for Pakistan. If RCET is discontinued it will impact in further decline in export of five big export sectors. Continuation of RCET is inevitable in the national interest as in the face of ongoing economic debacle in Pakistan and political wrangling the industrialists and traders are confronting despondency with a major halt and uncertainty in business activities.
In order to save the national exports and its sustainability, continuation of Regionally Competitive Energy Tariff (RCET) is compulsory. Exporters have also expressed dismay over the word ‘subsidy’ stating that Government was providing budgetary allocations for concessional tariffs to export-industries to ensure level-playing field to export industries for the purpose of regional competitiveness and export enhancement. It is not the “subsidy”. Fact of the matter is that the industries are actually burdened and cross-subsidized for gas tariffs to give subsidy to fertilizer & domestic sector. Surprisingly, worldwide, priority is given to export & industry for utilities whereas in Pakistan it is opposite and domestic as well as commercial consumers are given first priority for political mileage. The domestic and commercial consumers should be shifted to LPG like the Government in regional countries have done to enhance their exports. In regional countries gas is not provided to domestic consumers through pipelines but LPG through cylinders.
The State Bank of Pakistan has also made harsh regulations on the dictates of Government to squeeze export and exporters have been penalized due to reducing export realization time limit from previous 180 days to revised 120 days, it should be restored back to 180-days. While, on other hand the importers are given complete liberty to import on deferred payment of 365 days. Opening of LCs has been discouraged and other payment terms like DP & DA has been promoted due to which export-proceeds realization is delayed. SBP aside LCs also allowed DP/DA. Foreign Buyers have become habitual of DA/DP and they demand same instead of LCs, hence, their payments are delayed. Business dealing under DP & DA is also risky. The Government should consider to discontinue DP & DA and make regulations to work on LCs only so that the foreign buyers should deal with exporters on solely LC business and their payments will not be late. This will encourage and support exporters to safeguard their export business. With such regulations the demands of foreign buyers to deal in DP/DA will also end. In Bangladesh, export business is done only on LCs basis.
The Government must restore the Textile & Apparel Policy in its true spirit to facilitate exporters with export-enhancement measures like continuation of DLTL, Technology Up-Gradation Schemes for further industrialization, DLTL scheme proved to be a lifeline for the value-added textile industry, resulting in a high growth in knitwear exports in the past. DLTL is actually the Duty Drawback on Local Taxes and Levies and it is also a level-playing field facilitation. The DLTL amount comes to around 9 percent, however, the exporters get a lesser amount against it. DLTL is, at times, also wrongly termed as “subsidy”, it is actually level-playing field. The previous Government had committed to continuing the scheme but could not fulfill its promise and similarly the present government failed to re-launch the fruitful scheme as well. Restoration of this policy in real sense will have a great impact in enhancement of textile exports which may increase upto 40 percent every coming year.
The Government, instead of considering the recommendation of RRMC, should accord genuine consideration to Exporters’ demand and keep them under Final Tax Regime and reduce the rate of withholding tax from 1 percent to 0.5 percent or 0.25 percent in the wake of cost manufacturing meant for export. Similarly, Govt. should suspend/ abolish collection of Export Development Surcharge contributed in EDF for next five years till the huge unutilized amount of EDF is exhausted in promotion and development of exports only.
The Textile Exporters have also demanded that the Government must ensure smooth functioning of FBR’s FASTER system for swift and prompt payments of claims against their Sales Tax Refunds within the specified timeframe. No delays must be caused at all to increase exporters liquidity problems. Sales Tax Refunds are excessively delayed increasing liquidity crunch. FBR’s FASTER system of Sales Tax Refunds has become dysfunctional and refund claims worth billions of rupees are stuck. The Government should also consider reduction in rate of Sales Tax from current 18% to 5% to facilitate the exports ensuring availability of required / adequate liquidity. Otherwise, it is imperative to revive SRO 1125 in its true spirit and reintroduce system of No Payment and No Refund of Sales Tax for the Five Export Oriented Sectors. The Textile Exporters are also facing hardship as they file single Sales Tax Return but their Sales Tax on Services Claims in the hands of Provincial Revenue Authorities like SRB & PRA are not processed and released due to lack of integration between FBR & SRB/PRA. Since 2011 Not a single rupee against refund claims of Sales Tax on Services have been given to exporters till date. FBR & SRB/PRA have signed agreement/MOU which has not been implemented.
The anti-economy statements of political elements and default hue and cry have also shaken the confidence of exporters. The print and electronic media is projecting a very dark picture that Pakistan has reached to the verge of default which has created a very negative impression in the eyes of foreign buyers to deal with Pakistani exporters.
The country is facing most disastrous economic turmoil in the history of Pakistan and all the political and non-political elements are equally responsible for this financial fiasco and they cannot deviate from their responsibility to revive the economy in the national interest. Lack of seriousness of the sitting Government – Prime Minister, Finance Minister and its economic team shall tantamount to complete economic sabotage.
The Value-Added Textile Exporters request the Prime Minister and Finance Minister to set a right direction to support and enhance exports by according it first priority for utilities: gas, power & water, ensure them level-playing field by making them viable to compete with regional competitors by reducing their cost of export manufacturing. The PM and FM is also requested for immediate meeting appointment to learn the genuine grievances of textile exporters and accord affirmative considerations to their suggestions to enhance the exports.