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November 21, 2019

PBC hails national tariff policy

Business

November 21, 2019

KARACHI: The Pakistan Business Council (PBC) on Wednesday hailed approval of National Tariff Policy (NTP) by the federal cabinet.

“The PBC, as part of its “Make-in-Pakistan” thrust, has been advocating the use of tariffs as a means for promoting industrialization, value added exports and job creation in the country,” it said in a statement.

The statement said a distorted tariff regime whose primary objective is short term revenue maximization at the expense of domestic manufacturing has no doubt been a big contributor to the loss of competitiveness of Pakistan’s manufacturing sector.

“The PBC’s … initiative views tariffs from the paradigm of global and domestic competitiveness.” The cabinet on Tuesday approved the first-ever NTP that seeks to shift focus of tariff setting towards promotion of trade, particularly exports, rather than revenue generation.

PBC said tariffs need to be cascading with the lowest on raw materials not available in the country and highest on the finished products.

Pakistan, unfortunately has followed a regime in which tariffs have not adequately differentiated between raw materials, intermediary products and finished items. “This policy failure has gradually turned Pakistan into a nation of importers with no corresponding increase in exports to counterbalance the current account.” Regretfully, the PBC said, it also made the Federal Board of Revenue (FBR) reliant on tariffs for a large part of its tax revenue.

Global trade is about participation in Global Value Chains (GVC). Pakistan has on account of the flawed import tariffs policy, not been able to leverage its human capital to convert raw materials and intermediate products into value-added merchandise. Vietnam and Bangladesh have lifted large numbers of their people out of poverty by becoming assembly hubs. In the ten years to 2018, Vietnam’s exports grew more than four times from $57 billion to $243 billion but this was accompanied by an over three-fold increase in imports from $70 billion to $167 billion.

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