Textile exporters seek 6 to 8pc rebate to halt export slide

Pakistan’s textile and clothing exporters have asked the government for structural reforms and temporary financial support to stop the sector’s decline and protect the country’s share of international markets.

The proposals were presented on Tuesday at a high-level meeting chaired by Commerce Secretary Jawad Paul, which reviewed the industry’s problems and possible policy steps to restore export competitiveness, Dawn reported.

The sector is facing mounting global competition, the exporters said. Issue-based subcommittees have been formed to examine the industry’s concerns and submit recommendations within 15 days, a source told the newspaper.

The main demand

Exporters asked for immediate relief through a drawback of local taxes and levies (DLTL) of six to eight percent on total export sales, conditional on achieving 10 percent export growth. They said the incentive would help keep factories running, encourage higher exports and stop further erosion of Pakistan’s market share.

What is hurting exporters

• Electricity: the industrial power tariff, especially the burden of cross-subsidies, which exporters said undermines their competitiveness. They pointed to a Rs56 billion discrepancy in tariff calculations, of which the Power Planning and Monitoring Company acknowledged Rs26 billion
• Gas: exporters questioned how gas tariffs are calculated, particularly the treatment of unaccounted-for gas losses
• Export finance: anomalies in the Export Finance Scheme, including differing rates, too little money for the corporate sector, and some banks not applying the fixed rate of 4.5 percent
• Tax refunds: delays in refunds from the Federal Board of Revenue, which have squeezed liquidity and made it harder to finance export orders
• Labour: overall human resource costs have reached $270 per worker

Next steps

The power tariff discrepancy will be taken up with the Power Division at a meeting on Friday, October 16, and the commerce ministry has been asked to send recommendations to the prime minister for a final decision.

Officials from the ministries of finance, power, petroleum and mines and minerals, the FBR, the State Bank and the Punjab Industries Department attended the meeting.

Industry representatives included Pakistan Textile Exporters Association patron Khurram Mukhtar and chairman Reehan Naseem, Pakistan Hosiery Manufacturers and Exporters Association chairman Syed Zia Alamdar, Pakistan Textile Council chairman Fawad Anwar, and All Pakistan Textile Mills Association representatives.

Exporters said export financing needed to stay available at competitive rates at a time of rising production costs and weakening demand overseas.

A wider concern over competitiveness

The meeting came as concerns grow over Pakistan’s export competitiveness. The rupee’s real effective exchange rate has crossed 107, The Express Tribune reported this week, raising questions about whether a stronger currency is hurting exporters, while authorities argue that the exchange rate alone cannot fix structural weaknesses in exports.

Why it matters

The textile industry says high energy costs, slow refunds and costly financing are pricing it out of world markets. What the government decides on power tariffs and refunds in the coming weeks will show how seriously it takes the warning. Read our report on the IMF’s new forecast for Pakistan’s economy.

This article draws on reporting by Dawn and The Express Tribune.