Planners must focus on broadening export base

LAHORE: The debacle that Pakistan is facing in exports is not only due to the use of obsolete technology by our main exporting sector, but also due to lack of efforts on part of planners in broadening the export product base.

All export incentives are for five major exporting sectors, none of which command any significant share in the global market. Numerous other sectors that have the potential to make a mark internationally are either ignored or only lip service is provided to them.

The five major exporting sectors have access to the export package, whereas the rest of the sectors cannot even get back refunds on taxes they paid on their inputs. The main facilitation for exporters is zero rating. The duty structure in Pakistan is so cumbersome that it is impossible to get refunds for the duty paid on input.

The Federal Board of Revenue (FBR) has its own system of calculating the duty impact on each input on each item. It is so time consuming that the revenue authority has allowed the five main exporting sectors to buy inputs at no duty and hence no refunds. This was done despite the fact that the regulators’ had access to necessary calculations to evaluate the duty on each item.

For the exporters other than the five designated sectors, the refund scheme still operates but it is next to impossible to get the refunds. There is a dispute between the exporters and the regulators about the exact refund based on the use of duty paid inputs.

The FBR officials do not take pain to calculate the exact refund. The Ministry of Commerce and its concerned department the Trade Development Authority of Pakistan also do not have any idea of the refund that should be given on many exported items. The result is that only those exports are made that are feasible even after accounting for local duties. This is economically criminal negligence, because if an item can be exported even after paying all local duties, then its export potential is very high. An exporter can fetch more orders if his exports are zero-rated. We have lost reasonable chunk of motorcycle exports after the FBR changed documentation procedures for exports to Afghanistan. Still thousands of international brand motorcycles are exported to that country without claiming any refund.

In the same way, most of the pharmaceutical exports are made without claiming refunds of inputs paid domestically. In the same way thousands of tons of poultry meat is being exported to Qatar without any refunds.

These sectors are rich avenues for exports and should be facilitated to become more competitive. Ideally, the FBR should ask each exporter outside the five designated sectors to provide them with the details of the input duties that they paid on exports and have not claimed refunds on. It can then scrutinise their data through third party creditable audit and make changes where required so that the exports of non-traditional items can be accelerated.

Unfortunately, the revenue authority is not doing that and is not even reacting to the demands made by some sectors which have requested for refunds on local inputs. The Pakistan Poultry Association for instance had provided the FBR with details of the locally paid taxes and demanded required refunds on export of raw meat, eggs and processed poultry. The letter was written in July 2017 and there is no response from FBR even after two months.