LAHORE: The government is not facilitating traders by delaying the export package, not honouring its commitment of four percent discount on yearly increase of 10 percent exports, withholding refunds, and strangulating DTRE regime beyond global norms.
At a time when the exports are declining there are selected exporters in the apparel sector that have been able to post more than 12 percent growth in exports. “We achieved this despite losing almost all the US market, as Pakistan is not a priority for US importers,” said Ashar Khurram, the chief executive of Comfort Knitwear.
He said bureaucratic hurdles created for exporters not only increased the cost but in some cases made the export consignment unviable. “Our exports increased by over 12 percent last year when the country’s exports declined by same margin,” he said, adding that the company was entitled to the additional rebate promised by the government.
In competing economies like Bangladesh and India, the rebates announced by the state are automatically transferred in the accounts of the exporters after the exports are executed and payment realised.
In Pakistan, every exporter has to apply for rebate which puts him at the mercy of the bureaucrats. They demand many more documents and continue delaying it. Even then the rebates are given through an institutionalised process of speed money.
Exporters wonder why the rebates cannot be transferred directly through a bank in a transparent system in Pakistan. They ask the government to introduce such a system, so they don’t have to face the bureaucratic hurdles.
It was found that the government announced research and development rebate on exports of apparel in 2010. That rebate ranging from four-six percent was never made.
When governments in competing economies announce discounts or rebates, the exporters compete confidently in the global markets, knowing they will get the promised rebates. The international buyers keep an eye on the policies of each country from which they import goods.
So when Pakistani government announces any facilitation, the importers ask for their share as well and in return they increase their orders. The finances of exporters suffer if the promised facilitations are not honoured.
Duty and Tax Remission on Exports (DTRE) regime is in vogue in all regional countries. Under this regime, the exporters are allowed duty-free import of inputs in export products. In case of failure to use these inputs within a specified time (six months in case of Pakistan) the regular custom duty is charged.
The tax authorities carry out a detailed exercise to find the quantity of each input, after accounting for wastages. In case of textiles, there is a calculation for each knitted or weaved garment.
While obtaining the DRTE license, the exporter has to inform FBR the number of each type of garment they expect to export. They have to mention the harmonised (code HS code) of each garment to the FBR. This is practiced in all other countries as well.
Exporters say that sometimes the importers ask them to reduce the quantity of certain categories of garments and increase the quantity of the other. This disturbs the quantity of duty-free inputs they gave to the FBR for each HS code.
However, the quantity of duty-free inputs imported for exports is fully utilised. This happens in all countries like India and Bangladesh as the importers do make changes in quantity of garments on the basis of demand in their market.
The regulators in other countries are merely interested in the full use of inputs in export items because that is the main purpose of granting DTRE license. In Pakistan, the authorities raise objections if the inputs are used in any other HS code, and ask the exporters to pay the taxes for wrong use.
This attitude is against the spirit of facilitation. When regulators in other economies simply ensure that the duty-free imports are used for export purposes only; this should be the stance of our regulators as well.
Exporters are also dismayed that the government is delaying a meaningful export package agreed by the Prime Minister in September 2015, and reconfirmed in early October 2016.
The economy must not become hostage to ongoing political turmoil and all economic decisions need to be expedited to stop the 24 months regulardecline in exports.