Regional competitors, from 2005 onwards induced investment to develop sizable capacity and as a result the textile exports of our principal competitor increased from $ 12 billion to $ 30 billion. The instrument used was the Technology Up-gradation Fund Scheme (TUFS) that provided for a remission of interest rate up to 50% for investment. Similar schemes visualised here did not materialise because of the characteristic gap between policy and implementation.
Better market access is important for the export oriented textile industry. The mind-set of our western trading partners has to be changed. They view market access to Pakistan as a kind of charity or concession extended unilaterally and gratuitously. These countries are not sensitized to the burden that industry in Pakistan bore and is bearing in terms of disarrayed infrastructure, strained economy, dislocation of normal working conditions, lost exports and ironically uncharitable travel advisories, on account of Pakistan undertaking the war on terror. Developed countries should see widening of market access to Pakistan as a reciprocal measure for what has already been borne by the country and its industry for a cause that is dear to all right-thinking humanity and is as much international as it is national. We do not accept that market access to Pakistan is a unilateral gesture. We ask for the due, the consideration for which has already been made.
REFORMED GENERAL SALES TAX
We do not hold any opinion against the levy of Reformed General Sales Tax (RGST). Rather we feel that this levy will bring on board other sectors to share the responsibility of contributing to the exchequer, hitherto being borne by industry. Our concern is with respect to the over Rs. 517 billion of the textile industry funds that will remain stuck as non-productive asset awaiting refund as 85% of the textile industry’s produce is exported. It is oppressive that for collection of Rs. 25 billion tax on domestic consumption, the industry be saddled with a burden of Rs. 517 billion.
For this reason the zero-rate tax regime for sectors from ginning to garmenting should be continued for Pakistani textiles to remain competitive in the international market.
Previous imposition of 15 percent sales tax on industry proved a failure and the government zero rated the export-oriented industry after realizing that refunds were far in excess of collection of the sales tax.
Unprecedented increase in cotton prices has already impacted the textile industry. Therefore, it cannot sustain additional liquidity requirement of 15 percent under the RGST. Banks are reluctant to finance textile industry to procure swelling cotton prices and the SBP regulations do not allow financing of sales tax part.
There were difficulties in obtaining adjustments/refunds against sales, as the spinning industry procures cotton in three months and consumes it during twelve months to manufacture and sell yarn to the weaving and knitting industry.
PAK CHINA INVESTMENT INITIATIVE
China’s current progress in textiles and the continuing shift of its focus on downstream sectors gives an opportunity to Pakistan to fill up the area in spinning and weaving being vacated by China. This is an opportunity that should not be missed. We must take benefit of the rapid economic progress of China and enable synergies of operation to be achieved.
We are committed to the progress and prosperity of Pakistan and will continue to exert ourselves for making Pakistan a vibrant and self-reliant economy.