Exports take dip by $61m to $1.973 bn in January 2020

ISLAMABAD: Abdul Razak Dawood, Adviser to PM on Commerce, Textile, Industries & Production and Investment, will be meeting Prime Minister Imran Khan to apprise him as to how decisions of some divisions and ministries taken without consultations have hurt the exports of the country.

Razak will also submit a written note to Prime Minister Imran Khan who is also the commerce minister narrating the reasons for not picking up the exports and more specifically why the exports in the month of January 2020 have tumbled by $61 million to $1.973 billion, if compared with the corresponding month of 2019.

According to one of the top officials at the Commerce Ministry, Dawood is too much agitated and upset because of the decision of Communication Ministry that triggered to an affectivetransport strikes and more importantly the imposition of taxes and surcharges in the electricity tariff by Power Division in the electricity tariff of experts oriented sectors which was notified at 7.5 cents per unit, have emerged as impediments in the way of smooth exports.

The Adviser will seek in the meeting Prime Minister’s intervention and request him to pass clear cut instruction to all the ministries and departments that no decisions affecting exports shall be undertaken without prior consultations with the ministry of commerce.

‘The written note of Commerce Ministry to this effect will also be circulated to all ministries and divisions concerned,’ the official said adding that Prime Minister had held a meeting on January 13, 2020 on performance evaluation of Commerce Ministry and during the discussion Commerce Ministry submitted that Pakistan exports are affected by number of factors all of which are not in the control of the Ministry of Commerce.

He went on to say that in both 2019 and 2020 there were strikes by the goods transporters as a result of policy interventions made by the Ministry of Communication.

He said the first strike (2019) was against the axle load control regime, which took place in June and October 2019.

These strikes came to end only after the Prime Minister intervened and deferred the implementation of the Axle Load Regime for a year. And the second strike took place in January 2020, against the new regulations and fines, again put in place by the Ministry of Communications. The strike continued for 9 days owing to which the movement of export containers stayed stalled.

He argued saying that these strikes badly affected the transport of export containers from all over the country to Karachi, and had a cost which was reflected in the exports figures. For example, the exports of Pakistan or the month of January 2020 stood at US $1.973 billion (US $61 million less than January 2019).

‘If we factor these for 22 days, he said, during which there was no strike, the average export per day comes to US $89 million. If even calculated with the most conservative estimates, it is quite evident that exports could have been much higher than last year had the strike not taken place.’

In both the instances, the official built his arguments saying that the strikes were avoidable and the loss in exports could have been avoided if the ministry of commerce had been consulted before announcing and implementing such drastic measures.

Mentioning about the sales tax refund issue, he said that in the budget of the year 2019-20, the federal board of revenue (FBR) withdrew the zero rating regime from five important export sectors such as textile, leather, carpets, surgical and sports goods. ‘The FBR had assured that it would put in place a system whereby the refunds would be cleared within 72 hours which has still not taken place so far.’

He said the Ministry of Commerce had opposed this move as it is of the view that the withdrawal of zero rated status would create liquidity crunch for the exporters and subsequently affect the exports adversely. As of January 21, 2020, the textile sector alone has stuck up claims of approximately Rs23 billion. This has gradually and incrementally started adversely affecting the exports and the situation is likely to worsen even more in the coming months.

Highlighting the issue of electricity tariff, the official said that the economic coordination committee (ECC) of the cabinet in October 2018 had approved a rationalized electricity tariff of 7.5 cents per unit (Rs11.65 per unit) for the export oriented sectors.

‘These export oriented sectors have been factoring this tariff in their cost for the past 12 months. On January 13, 2020 the Power Division announced that these sectors would also have to pay all other taxes and surcharges for the past 12 months, in addition to 7.5 cents per unit (Rs11.65 per unit). This would, the official said, render Pakistan’ exports uncompetitive vis-à-vis its competitors and is expected to decrease them. ‘The Ministry of Commerce was not consulted before taking this decision by Power Division’.

It is pertinent to mention that the S No. 8 (1) of the part b of rules of business 1973 (pertaining to consultations among divisions) states: ‘When the subject of a case concerns more than one division, the division in-charge shall be responsible for consulting the other divisions concerned and no order shall issue, nor shall the case be submitted to the cabinet or the Prime Minister, until it has been considered by all the divisions concerned, and the views obtained. Such consultations shall take place as early as may be practicable.’

Unfortunately, he said that in all the instances he mentioned, no consultation has been done with the Ministry of Commerce which is a crystal clear violation of the rules of business. This has created a situation where the decisions taken by other ministries as departments of the federal government have now seriously begun to hamper the exports.