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March 22, 2020

Export orders fall as virus lockdowns batter global demand

Business

March 22, 2020

KARACHI: Pakistan’s export sector is feared to face the history’s adverse liquidity crisis at least for two months as foreign buyers have so far cancelled an estimated 90 percent of textile export orders in a socially distanced world, industry officials said on Saturday, seeking moratorium on tax and other payments to weather the crisis.

Salamat Ali, central chairman of Pakistan Hosiery Manufacturers and Exporters Association (PHMA) international textile buyers from US, European Union and other countries have cancelled 90 percent of orders and also refused to collect the shipments that reached to export destinations.

Ali demanded of the government for an immediate intervention to rescue the export-oriented industries, which have reached on the brink of closure in the wake of global corona pandemic that, besides endangering human lives, deals a lethal blow to Pakistani exports.

PHMA chairman said several small and medium exporters complained that they would run out of cash to pay wages to workers, make payment of utilities and operate industries.

“Such an alarming situation is leading towards bankruptcy, closure of industries and massive layoffs,” he said in a statement. “It is the responsibility of the government to save the export industry.”

Ali said exporters have been facing host of problems and the emerging situations like delayed payments of export proceeds and halt of shipments to Europe and US aggravate their liquidity crunch.

“The critical situation demands immediate relief and rescue by the government with instant relief measure.”

The value-added sector demanded immediate payments of sales tax refunds and rebate, waiver of mark-up in export refinancing and relaxation in loan repayments, deferment of payment of utility bills and waiver of surcharges for at least next three months, interest rate cut to single digit, restoration of zero-rated sales tax regime and exemption from welfare fund contributions.

“We don’t want to lay off workers as it will create havoc. Exporters demand the government to pay the wages / salaries of industrial workforce till situation normalises,” Ali said.

Seven industrial town zones across the city unanimously agreed that they would only pay electricity bills without industrial support package adjustment (ISPA) charges.

K-Electric must advice banks to accept electricity bill payments without ISPA, they said addressing a joint press conference.

Siraj Kassam Teli, chairman of Businessmen Group, agreed with a demand of relief in utility bills’ payments. He urged the government to order K-Electric to immediately stop and defer ISPA and urged the government to let industries pay half of their electricity bills for the time being to help them improve cash flow situation.

“Failure to accept payments without ISPA would leave no other option for the industrialists but not to pay the entire bill,” Teli, who was the past present of Karachi Chamber of Commerce and Industry, said. “The federal government must stop injustices and have some mercy on the citizens and the business and industrial community of Karachi, which contributes more than 70 percent revenue to the national exchequer.”

Teli said people are tired and losing their patience now, “but we still are calm otherwise whoever sits in this auditorium today would have gone out on the streets along with thousands of labours to protest against the policies of the government.”

“We are silent only because of the outbreak of coronavirus otherwise we would have been out on the streets,” he said. “If K-Electric resorts to arm twisting by disconnecting the electricity, the industrialists will shut down their industries.”

Zubair Motiwala, patron of the Site Association of Industry said ISPA charges for July to December 2019 are illegal for being closed and related to past transactions. He expected severe liquidity crisis in the coming days and months

“Interest payment on loans including profits sharing on Islamic instruments may be frozen. All long- and short-term maturities should be pushed back by 3 months,” Motiwala said in a separate meeting, calling for prompt release of income and sales tax refunds and other pending claims. “All banks should give one-year extension on repayment of all dues.”

SAI President Suleman Chawla said Europe is almost locked down and USA is going in that direction. They are two major markets for Pakistani exports.

“Flow of money has almost come to a halt and severe liquidity crisis situation has been created.

Therefore, it would not be possible for the industrialists to discharge their liabilities towards paying gas, electricity and water bills as well as payment of sales and income taxes, welfare fund contribution and many other federal taxes and levies,” Chawla said, calling for freeze on the collection of all federal levies for at least three months.

Meanwhile, Lahore Chamber of Commerce and Industry (LCCI) urged the government to relax condition of disclosing computerised national identity card of sellers till June-end.

LCCI President Irfan Iqbal Sheikh said business activities have come to grinding halt and businesses are suffering due to coronavirus threat. Markets are deserted due to partial lockdown. “Disallowance of input tax relating to supplies made to an unregistered person without disclosing his CNIC is a hefty task.”