FBR urged to act against EFS misuse instead of ‘penalising’ SMEs

LAHORE: The Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) has strongly opposed the recent amendments to the Export Facilitation Scheme (EFS), warning this will harm the apparel sector, particularly small and medium enterprises (SMEs).

Former PRGMEA chairman Ijaz Khokhar urged the Federal Board of Revenue (FBR) to take strict action against companies that misused the EFS facility instead of penalising the entire export sector. He emphasised that SME exporters were already struggling and that delaying implementation on these amendments would help prevent further damage.

“A major concern is the reduced utilisation period for imported raw materials, now capped at nine months, with extensions requiring board committee approval,” Khokhar stated.

The PRGMEA leader argued that apparel production involves multiple steps, including designing, sourcing, manufacturing, and shipping, adding such a restrictive time frame will make it difficult for exporters to meet commitments. “Another issue is the requirement of a bank guarantee for enhanced face value, which disproportionately affects SMEs. Many lack the financial resources to secure such guarantees, potentially barring them from essential export facilitation benefits,” he said.

“This policy limits their ability to expand into international markets. The amendments introduced through SRO 301(I)/2025 will weaken the country’s competitiveness in apparel exports,” he added.

Khokhar highlighted that the industry was already struggling with rising production costs, energy shortages, and logistical challenges and added that additional regulatory burdens will only worsen these issues, threatening jobs and reducing export potential.

He noted that global buyers were highly sensitive to delivery timelines, and bureaucratic delays could result in lost orders. “The new amendments impose unrealistic restrictions on raw material utilisation and require bank guarantees that SMEs cannot afford. These policies will negatively impact the country’s export growth and textile sector,” Khokhar stated.

He also expressed concerns over increased compliance burdens and policy uncertainty, which could weaken Pakistan’s position against regional competitors like Bangladesh and Vietnam. He stressed that exporters need a streamlined, transparent system to facilitate trade rather than complex regulations that create delays and additional costs.

The PRGMEA leader warned that the amendments may lead to cuts in duty drawbacks and sales tax exemptions, which were essential for maintaining profitability. “Delays in refund processing already strain garment manufacturers, and further disruptions could impact their cash flow,” he added.

He said small exporters rely heavily on timely refunds to reinvest in production and fulfil new orders. “The narrowing of eligibility criteria for accessing EFS benefits is another challenge. Restricting these benefits will disproportionately affect SME exporters, who already face difficulties in securing financing and expanding operations,” he added.

Khokhar also stressed the need for consistency in export policies. “Frequent and unclear policy changes create confusion and increase operational risks, particularly for SMEs with limited resources to adapt. Exporters require clear, stable regulations to plan their operations effectively.”

He called for including PRGMEA and the Pakistan Hosiery Manufacturers and Exporters Association (PHMA) in the Committee for the Review of the Export Facilitation Scheme. “As these two organisations jointly contribute $8.69 billion in exports, their participation is crucial to ensuring that policies align with industry realities.”

Khokhar urged the government to reconsider the amendments to the EFS, ensuring they support rather than hinder exporters. He called on policymakers to collaborate with industry representatives to develop a facilitation framework that fosters growth and strengthens Pakistan’s position in the global market.