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News Clips 10 February, 2015

[ Textile Policy 2014-19 offers Rs64.15bn cash subsidy ]
[ Exports to EU increased by $1bn under GSP-plus status: minister ]
[ Indian yarn triggers considerable controversy ]
[ Blended yarn under Indian threat ]

Textile Policy 2014-19 offers Rs64.15bn cash subsidy   [ top ]

DAWN, February 10
ISLAMABAD: The Textile Policy 2014-19 offers about Rs64.15 billion cash subsidy to the textile and clothing sector to boost exports to $26bn by 2019 from $13bn.

The policy, approved by the Economic Coordination Committee (ECC), was announced by the Textile Minister, Abbas Khan Afridi on Monday. The package carries special duty-drawback rates, duty exemption on plants and machinery, subsidy on long-term loans and development subsidies.

The Finance Division will provide Rs40.6bn over the five years for duty drawback, technology up-gradation, brand development and drawback on deemed imports, etc., while another Rs23.5bn will be provided for skill development, dedicated textile exhibitions, establishment of world textile centre, weaving city, incubators, apparel house, and mega textile awards.

Committees set up

Two high-level committees were constituted by the ECC to look into the issue of export development surcharge and drawback on deemed import basis for polyester value chain.

The committee, headed by the planning minister, will propose amendments to Export Development Fund Act.

The other committee, headed by Finance Secretary Dr Waqar Masood with Textile Industry Secretary Amir Marwat and FBR Chairman Tariq Bajwa, will devise a proper mechanism for drawback on deemed import basis for polyester value chain. The committee is advised to report back in a month.

In order to resolve the energy issues of the textile sector, the ECC also approved establishment of a joint committee, comprising water, petroleum and textile industry secretaries. This committee was tasked to ensure availability of energy to fully utilise GSP plus status.

Textile Industry Secretary Amir Marwat said that the textile policy aims to double value-addition from $1bn per million bales to $2bn per million bales in next five years, facilitate investment of additional $5bn in machinery and technology, impr­ove fibre mix in favour of non-cotton, i.e. from 14pc to 30pc, improve product mix, especially in garments sector, from 28pc to 45pc, development and strengthening of clusters.

The finance measures included in the policy were already announced in the 2014-15 budget. However, for garments sector, the duty-drawback rate was edged up to 4pc from 3pc in the policy. The duty drawback rates for made-ups will remain at 2pc and processed fabric at 1pc, respectively.

The drawback incentives will be provided to exports made in 2013-14 compared to exports made in 2012-13.

The support will continue for the rest of policy period. However, eligibility criteria for the above support will be properly aligned with all policy goals from budget period 2015-16 onwards.

EFS rate being reduced

The mark-up rate for Export Refinance Scheme (EFS) of State Bank of Pakistan is being reduced from 9.4pc to 7.5pc from July 1, 2014.

Textiles industry units in the value-added sector would be provided Long-Term Financing Facility (LTFF) for up-gradation of technology from State Bank of Pakistan at the rate of 9pc for three to 10 years duration.

In case of fall in the policy rates, EFS and LTFF rates would be revised accordingly.

The textile minister said that an expeditious refund system is being introduced and a fast track channel for manufacturers-cum-exporters is being created, whereby the FBR would dispose of all their pending sales tax refund claims within three months, if not earlier.

He further stated that the textiles sector enjoyed duty-free import of machinery under the previous policy. This facility (SRO 809) has been extended for another two years.

The minister said that 120,000 people will be trained for the sector.

He said 50 small companies from the sector will be picked each year for the next three years for government support.

He claimed that the proposed measures will promote value-addition and generate employment for more than 5 million people.

Exports to EU increased by $1bn under GSP-plus status: minister   [ top ]

Dawn, February 9th, 2015
ISLAMABAD: Pakistani exports to the European Union increased by more than a billion dollars after a landmark trade deal last year which made its products more competitive, the minister for commerce said.

The EU signed a law in late 2013 granting Pakistan the `GSP-plus’ status, which means firms pay no tax on certain categories of goods exported to the 27-nation bloc for 10 years.

The EU makes GSP-plus conditional on implementing international conventions on human and labour rights, and there have been fears Pakistan’s decision to end a moratorium on executions could affect the deal.

Pakistan’s textile industry in particular welcomed the agreement, which came into force in January 2014, and in an interview Commerce Minister Khurram Dastgir Khan hailed its impact.

“As a result of GSP-plus, Pakistan’s exports to the EU have increased by $1.08 billion during the period January to October 2014 as compared to the same period in 2013,” Mr Khan said.

Exports to the EU in Jan-Oct 2014 totalled $6.38bn, up by just over 20 per cent from the $5.3bn recorded in the corresponding period in 2013, he said.

Before GSP-plus, textile exports faced customs tariffs of between 6.4 and 12pc and leather goods and footwear up to 6pc, he said.

The textile industry makes up more than 50pc of the country’s total overseas shipments. “Now these exports have duty-free access in EU and it has helped Pakistani products to become more competitive vis-a-vis its competitors, including Bangladesh, India and Vietnam,” he said.

Rights concerns

Mr Khan played down the possibility that resuming executions could threaten the GSP-plus status.

“There is no legal obligation to EU regarding death penalty, though they have expressed concern over it,” he said. “They understand our situation that GSP-plus would help us create jobs and when we create jobs, it keeps young men and women away from terrorism.”

Twenty-two convicts have been executed in the country since Prime Minister Nawaz Sharif lifted a six-year death penalty moratorium in the wake of the Dec 16 Taliban massacre at a Peshawar school in which at least 150 people, including 134 children, lost their lives.

Opposition to the death penalty is a key EU policy and the bloc’s mission in Islamabad condemned the resumption of executions in December.

But EU diplomats in Islamabad have said that while they are concerned about the return to hangings, the development was unlikely to affect the GSP-plus arrangement immediately.

Improving the economy after years of drift and sluggish growth under the last PPP government was a key pledge in Nawaz Sharif’s election campaign in 2013.

The International Monetary Fund said this week the government’s reform programme – tied to a $6.6bn loan from the Washington-based lender — was on track.

“Economic activity and the external position continue to improve, driven by prudent monetary and fiscal policies and helped by lower oil prices and robust remittances,” IMF mission chief Jeffrey Franks said.

Growth for 2014-15 is expected to hit 4.3pc and the budget deficit for end-December was below the target, the IMF said.

But the government has so far struggled to improve a long-running energy crisis, with hours-long electricity blackouts still a near-daily reality.

Power and gas shortages have hampered industry and held back GDP growth, which experts say needs to hit 7pc in order to provide enough jobs for new entrants to the workforce.

Indian yarn triggers considerable controversy   [ top ]

Business Recorder, February 09, 2015
The value-added and spinning textile sectors have locked horn on the withdrawal/imposition of a Regulatory Duty (RD) on the import of Indian yarn and started lobbying at different forums to achieve the objective, it is learnt.

Official sources revealed to Business Recorder that spinning sector is lobbying to impose a 15 percent RD on Indian yarn on the plea to save domestic market while value-added textile sector is vying for a free market mechanism.

All Pakistan Textile Mills Association (APTMA) has approached the Ministry of Textile Industry and Ministry of Finance for imposing safeguards on the import of Indian yarn into Pakistan. The Association has urged the government to take corresponding and reciprocal measures by providing a level playing field to compete in the international market and immediately impose safeguard measures on the import of Indian yarn into Pakistani commerce, which registered about 100 percent growth in the current season as compared to the last season.

India is the biggest competitor of Pakistan in the international textile arena and it is a matter of grave concern that Pakistani export market is being slowly taken over by an aggressive Indian marketing; during the last one year, the Pakistani Rupee has appreciated and the differential between Pak and Indian Rupee has dropped from Rs 44.92 to the current value of Rs 36.89 thus appreciating by Rs 8.03 (18%).

The impact of appreciation has further aggravated by massive subsidies that the Indian government gives to its export industry in the form of export subsidy @ 3% of export value, 5% relief in interest payment on capital expenditure, subsidy on electricity tariff and numerous other incentives.

If it is not enough, the import of Indian Yarn into Pakistan is increasing day by day and during the last three years the import of Indian Yarn has increased from 4,927 tons to 25,839 tons. Now 3000 tons of yarn is being imported per month and it is a matter of serious concern that India has erected an impregnable wall particularly against yarn imports, as a result of which there are no meaningful yarn imports into India.

At the same time value-added textile sector seeks an immediate withdrawal of 5% duty on import of cotton yarn.

Chairman Pakistan Apparel Forum Jawed Bilwani said that globally import of raw material is allowed duty free while exports of raw material is restricted to benefit value added sector to earn more foreign exchange.

Moreover, majority of manufacturers-cum-exporters cannot import yarn under DTRE Scheme just because Federal Board of Revenue (FBR) clarification that "the facility of import of yarn by the stitching units for manufacturing of garments meant for export is currently not available under the DTRE scheme".

Value-Added Textile Sector''s share in exports is 83.64% and it employs 18 million people while the spinning sector''s share is only 16.36; and it employs 0.28 million workers, he said.

He said the spinning sector seeks a 15% duty on import of cotton yarn from India. This demand is for the benefit of just 30 industries while, the Value-Added Textile Sector''s demand is for thousands of industries all over Pakistan which are greatly burdened due to the current 5% duty on import of cotton yarn and are on the verge of collapse.

He revealed that previously duty exemption on import of cotton yarn was implemented vide SRO 15(1) 2010 on the recommendations of the Ministry of Textile Industry in the light of the free market mechanism that there should be no duty either on import or export of cotton yarn but most unfortunately this exemption was withdrawn by the Economic Co-ordination Committee on April, 2014 which was "most unethical and unjustified".

Blended yarn under Indian threat   [ top ]

Business Recorder, February 08, 2015
Tariq Saud, Chairman - Sindh Balochistan Region of All Pakistan Textile Mills Association has said that Pakistan faces a grave threat of losing its market for its blended yarn at concessional rate from India and Far East. In a statement issued to the press, Tariq Saud said Pakistan's competitors like India and China had huge industrial base and they were producing all products in the chain, "whereas we in Pakistan have the disadvantage of procuring most of our raw materials thru imports.

This not only reduces our capacity to compete but also long shipping times and other import duties and incidentals make us uncompetitive." Tariq Saud said pure man-made fibre yarn, Indian and Chinese manufacturers enjoyed huge advantage as the polyester fibre prices and the prices in those countries were very low because they were the world's largest producers of man-made fibres and enjoyed competitive advantage over Pakistan due to economies of scale. Pakistani spinners are subject to non-refundable six percent duty on import of polyester fibre - the raw material for man-made yarn.

He further said it was a huge anomaly that had been pointed out frequently to the authorities in Pakistan. Polyester is the dominant material in the textile chain as cotton growth has almost hit its ceiling and it is expected that 70 percent of the incremental growth in textiles will be due to Polyester.

The current duty structure on PSF is six percent (HS Code 5503.2010); in addition import expenses of about five percent and anti-dumping duties on fibre originating from certain countries are also applicable. Pakistan has no operating viscose fibre plant and still the import duty on Viscose Staple Fibre is five percent whereas under SRO 567(I) 2006 the import duty on yarn of Viscose Rayon, untwisted or with a twist not exceeding 120 turns per meter (HS Code 5403.3100) is five percent, which is a clear anomaly. A type of yarn made on Murata Jet Spinning (MJS) or Murata Vortex Spinning (MVS) is imported in huge quantities from Indonesia, India, China and Thailand as it falls under this definition. APTMA also fears that under this heading Polyester Yarn made with MJS or MVS is also being imported and sold in domestic market.

Tariq Saud urged the government that in view of the above facts, 15 percent Regulatory Duty should be imposed on the import of man-made fibre yarns, however import under DTRE or manufacturing bond should be exempted from regulatory duty as APTMA believes in free market mechanism and the regulatory duty should be exclusively meant for domestic industry on domestic use of fine count cotton yarn.

He further demanded the government that in order to improve the value-addition, fibres of other types (HS Code 5503.9000, 5506.9000, 5505.2000) like bamboo fibre etc, as they were not being produced in Pakistan but were occupying niche places in the garment industry be allowed duty-free imports to help Pakistan to move up in the chain of value-addition.-PR