Exports target set at $35 billion

Trade policy 2015-18 to focus on improving export competitiveness; ‘status quo’ with India lingers on owing to strained diplomatic relations

ISLAMABAD: To achieve the exports target of $35 billion, the Strategic Trade Policy Framework (STPF-2015-18) unveiled on Tuesday shifted the focus to promoting regional trade, particularly with Afghanistan, Iran and China, while maintaining the ‘status quo’ with nuclear rival India owing to strained diplomatic relations.

“There is a standstill in trade relations with India because of strained diplomatic ties as comprehensive dialogue could not resume till now. Until the relations are normalised, the trade talks cannot be done. Now the focus of trade is shifted towards the western borders including Afghanistan, Central Asian Republics as well as Iran and China,” Federal Minister for Commerce Khurram Dastgir Khan said while announcing the much-awaited STPF for 2015-18   approval of Rs 6 billion for providing incentives to export oriented industries.

Accompanied by Commerce Secretary Azmat Ranjha and Trade DG Raheela Tajwar, the minister for commerce said the utility prices, stuck up refunds and providing incentive for specified textile was not in the direct domain of the Ministry of Commerce, so they were contributing for the role of coordination to boost trade and exports. For removing energy bottlenecks, he said the second ship of RNLG was coming.

To a query regarding protecting consumers in the context of new auto policy under which the government rightly provided more tax incentives to new entrants to promote competition, the minister said their ministry’s focus was to facilitate auto makers to export their manufactured cars in Pakistan. One auto makers exported their made-ups to Sri Lanka in the past so their efforts will be ensuring quality standards to boost auto exports from Pakistan, he added.

To protect consumers, the minister said they were encouraging new entrants for making 600 to 1000cc cars and some of them had shown their interest in establishing their units in the country.

The procedural and budgetary bottlenecks, he said, were removed in STPF 2015-18 by learning from the previous two medium-term frameworks i.e. 2009-12 and 2012-15. All business processes have simultaneously been formulated. A budgetary allocation of Rs 6 billion has been approved to implement the trade policy initiatives for year 2015-16.

The STPF 2015-18 aims to achieve enhancement of annual exports to $35 billion, improve export competitiveness, transition from ‘factor-driven’ economy to ‘efficiency-driven’ and ‘innovation-driven’ economy and increase share in regional trade by June 2018.

To develop the export sector, the minister said that some key enablers were vital to increase productivity and competitiveness and resultantly enhance exports. The key enablers are categorized into four groupings i.e. competitiveness, compliance to standards, policy environment and market access.

On the basis of key enablers, the STPF 2015-18 identifies four pillars including product sophistication and diversification, market access, institutional development and strengthening and trade facilitation.

On the basis of research and consultations with stakeholders, it has been identified that the use of inefficient technologies is the principal constraint in exports of selected sectors i.e. fans, home appliances, rice, cutlery and sports goods. To increase the sophistication level and realize true potential of these sectors, an incentive for technology up-gradation will be provided in the shape of investment support of 20% or mark-up support of 50% up to a maximum of Rs 1 million per annum per company will be available for import of new plant and machinery.

Leather, pharmaceutical, fisheries and surgical instruments are sectors with higher export potential. These sectors can lead to a quantum jump in total exports. To boost export in these sectors, matching grant will be provided up to a maximum of Rs 5 million for specified plant and machinery or specified items to improve product design and encourage innovation in SMEs and export sectors of leather, pharmaceutical and fisheries. Moreover, a Common Facility Centre for surgical sector will be established.

The manufacturing in surgical instruments, sports and cutlery sectors in Pakistan is largely done under the brands of foreign companies, resulting in lower prices for manufacturers in these sectors. Brand development needs special attention. A matching grant will be provided to facilitate the branding and certification for faster growth of the SME and export sector in Pakistan’s economy through Intellectual Property Registration (including trade and service marks), Certification and Accreditation.

To reduce the cost of doing business and increase the competitiveness of the value-added non-textile selected sectors, draw-back for local taxes and levies will be given to exporters on free on board (FOB) values of their enhanced exports if increased by 10% and beyond (over last year’s exports) at the rate of 4% on the increase.

Raw and semi-processed agricultural produce being currently exported can get higher values if exported as processed food. Lack of necessary processing facilities results in the wastage of large quantities, restricting the income of farmers. To reduce the wastage of produce, increase income of the farmers and foreign exchange earnings, 50% support on the cost of imported new plant and machinery for specified under-developed regions or 100% mark-up support on the cost of imported new plant and machinery on all Pakistan basis will be provided. 

The minister said Pakistan’s exports had sustained despite all the challenges due to the market access in EU countries after the grant of GSP Plus. Pakistan is complying with the mandatory 27 conventions relating to environment, narcotics control, drugs, human rights and labour to retain this market access. In the wake of review of the GSP Plus, the Ministry of Commerce will launch a robust public information campaign to disseminate and sensitize stakeholders and the public on compliance issues.

To diversify our export markets, an outreach strategy for Africa, Commonwealth of Independent States (CIS) and Latin America is being adopted. As part of the market penetration/outreach strategy, these new markets will be explored through market research, opening of new trade missions, exhibitions and delegations, linkages through Export Import Bank [EXIM Bank].

The Ministry of Commerce will continue working on its three-pronged strategy of trade diplomacy in the multilateral, regional and bilateral arenas for increasing market access.

Pakistan will be entering into multilateral arrangements for better market access such as Trade Facilitation Agreement (TFA), Information Technology Agreement (ITA), Government Procurement Agreement (GPA). Under regional trade, they will be enhancing access to regional markets such as GCC, ASEAN, SAARC, Afghanistan and CARs. For bilateral trade, Islamabad will be negotiating bilateral preferential access with Thailand, South Korea, Turkey, Iran, China, Malaysia, Indonesia, Nigeria and Jordan

Despite immense potential, the regions of South and Central Asia are amongst the least integrated regions of the world with intra-regional trade less than 5% primarily caused by high costs due to infrastructure, missing links and lack of transit agreements. Opportunities are, therefore, immense for greater regional connectivity and enhanced cooperation through transit trade agreements. 

The Ministry of Commerce is working on achieving shared prosperity through better connectivity and transit trade through initiatives such as resolution of outstanding issues in Afghanistan Pakistan Transit Trade Agreement (APTTA), negotiation and early conclusion of Afghanistan, Pakistan and Tajikistan Transit Trade Agreement (APTTTA), effective implementation of Transports Internationaux  Routiers (TIR) Convention, reactivation of Quadrilateral Transit Trade Agreement (QTTA) among Pakistan, China, Kyrgyz Republic and Kazakhstan, taking institutional lead on formulation of a Pakistan-Afghanistan-Central Asia regional economic integration framework through a Regional Trade Office, established at the Ministry of Commerce.

The ministry will establish Export Promotion Council for Pharmaceuticals & Cosmetics and Rice. A taskforce to conduct expeditious work on improving railway services for exporters will be established. The cost of transport through roads is twice as uncompetitive as compared to rail and 148 times uncompetitive as compared to inland navigation. Accordingly, a task force will be established with its secretariat in the Ministry of Water and Power.

A short-term export enhancement strategy has also been made part of the STPF 2015-18, wherein, following four products will be focused in the four chosen markets with focused products including Basmati rice, horticulture, meat and meat products and jewellery. The focused markets will include Iran, China, Afghanistan and European Union.

The STPF 2015-18 approved regulatory amendments to the import and export policy order 2013 which would further facilitate Pakistan’s trade and contribute to the ease of doing business. 

The trade policy allowed units importing plastic scrap for the first time, import of air pistols and slugs, import of aerial vehicles and Night Vision Goggles, subject to NOC from Ministry of Defence, import of 3D printers with prior information of Ministry of Interior, import of mobile phones, import of security papers for Pakistan Security Printing Corporation for exempting from taking NOC from Security Paper Limited. 

The STPF approved that imports of inputs in the restricted list also allowed to be imported by manufacturer- cum-exporter under DTRE, temporary importation, Bonded Warehouses, Common Bonded Warehouse and Export Oriented Unit Schemes, subject to conditions mentioned therein.

The trade policy approved that import of second hand/used specialized vehicles mentioned in Import Policy was allowed, subject to pre-shipment inspection in the exporting country from any of the internationally recognised companies listed in the said order to the effect that such vehicles are (a) Euro-II compliant (b) manufactured such as by the original equipment manufacturers (OEM) not older than five years.

It proposed import of pesticides, subject to prior pre-shipment inspection certification issued by recognized PSI agencies to be specified by the Department of Plant Protection.

The policy envisages banning import of digital enhanced cordless telecommunication (DECT) 6.0 phones. The trade policy proposed lifting of ban on import of poultry and poultry products from South Korea, Russia, Kazakhstan, Mongolia, Turkey, Greece, Croatia, Italy, Azerbaijan, Ukraine, Iraq, Bulgaria, Slovenia, Austria, Bosnia and Herzegovina, subject to certification from respective veterinary authority of the exporting country that birds are only from such flocks where no incidence of Bird Flu has been reported for the last 11 years.

The policy proposed import of plug wrap paper to manufacturers of cigarette filter rods duly registered with the FBR.

At present two or three wheeler vehicles are allowed, subject to one-time certification of each model by Pakistan Standard and Quality Control Authority (PSQCA) that the vehicles conforms to the prescribed Pakistan standards. It is proposed that the condition of Euro-II compliance may be put in place for import of used vehicles.

The policy proposed that obtaining authorisation for import of ozone depleting substances from Ministry of Commerce might be placed with the Ministry of Climate Change.

It is proposed that the word duty-free may be replaced with the words exempt from customs duty provided in the disabled scheme for import of cars. It further proposed that new three wheeler motorcycles may also be allowed under the scheme.

Fireworks proposed to be placed on the restricted list with the condition of compulsory physical examination by explosives experts and that Department of Explosives of Ministry of Industries shall be allowed only to applicants having valid licenses under Explosive Rules 2010.

It proposed that the export of gift parcels may not include items borne on the banned list of exporters. It also envisages to allow humanitarian relief organisations to export goods (excluding banned/restricted) to Afghanistan without form E, subject to the provision of encashment certificate foreign exchange from authorized dealers.

The STPF envisages placement of Intellectual Property Organisation (IPO) Pakistan under the administrative control of the Ministry of Commerce which was now running under the Cabinet Division. It also asks for transferring of Export Development Surcharge into the Export Development Fund (EDF) at the beginning of the financial year. The STPF also approved separate taskforces for Railways and inland water navigation exports to bring improvements. It also envisages repayment of all tax refunds in expeditious manner.