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News Clips 12 September, 2015

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[ PM courts industry with package to boost exports ]
[ Increasing exports only way out for heavily indebted Pakistan: PM ]
[ Protesters slam German brand in factory fire payout row ]
[ Textile manufacturing sector still has huge potential ]
[ Cargo agents: FBR approached for withdrawal of 8 percent minimum tax ]
[ Boosting textile export: Senate panel calls for taking required measures ]
[ Customs computerised system: Collectors empowered to modify provisions ]

PM courts industry with package to boost exports   [ top ]

DAWN, September 12, 2015
ISLAMABAD: Prime Minister Nawaz Sharif will soon announce a package to boost the country’s exports, Commerce Minister Khurram Dastagir Khan told Dawn on Friday. 

However, Dastagir did not disclose an exact date for the announcement as the prime minister doesn’t make key decisions without consulting Finance Minister Ishaq Dar who is on a visit to the United States. 

Chairing a meeting at the Prime Minister Office with the heads of chambers of commerce and industries and exporters, Sharif said a strategy would be chalked out in light of the recommendations of the businessmen and exporters. 

Dastagir said the two-day meetings of exporters associations with economy ministers and later with the prime minister signalled a “paradigm shift in government’s approach towards exports”. 

He said the five-hour-long meeting with the premier on Friday would form the basis of a “whole-of-government” exports promotion package as well as the Strategic Trade Policy Framework (STPF) 2015-18 due to be announced shortly by the Ministry of Commerce. 

Exporters have asked the government to clear their refunds, devise a mechanism to avoid their delayed payments and allow the rupee to come to a realistic market value. Other countries in the region have considerably devalued currencies, they argued. 

The textile sector, among other things, is seeking removal of extra taxes, competitive energy prices as compared to the region, electricity at nine US cents per unit and imposition of duties on semi-finished textile products, especially from India and China. 

The light engineering segment and the agricultural sector asked the government to support them in seeking international certifications and subsidy for entering into new markets. 

“A rise in exports will help the government boost its revenues and invest in the development of the country,” the prime minister said. Pakistan’s exports are stagnant whereas other regional countries have moved far ahead, he added. 

The premier elaborated that the government was aware of a global economic slowdown and falling commodity prices. But even in this challenging environment, the government and business houses must adopt innovative strategies to increase exports, he added. 

“Providing subsidy to different sectors of the economy needs resources, and resources are generated by robust economic activity,” he said, adding that subsidy or relief packages, if opted as a policy measure, must produce economic returns to boost investment and business activity. 

He advised the business community to conceive forward planning in view of the prospects arising out of the mega regional development initiatives like China-Pakistan Economic Corridor and Turk­men­istan-Afghanistan-Pakistan-India Pipeline. 

These mega projects, coupled with development of infrastructure in the form of motorways and upgradation of Gwadar port, would open new avenues of economic activities which can be capitalised by Pakistan’s business community, he added. 

Speaking on behalf of the business community, Federation of Pakistan Chambers of Commerce and Industry President Mian Adrees assured the prime minister of full cooperation from the industrial and trade houses. 

The business representatives gave suggestions and identified various factors which are hindering business ventures and proposed measures for raising investors’ confidence, he added. 

Increasing exports only way out for heavily indebted Pakistan: PM   [ top ]

DAWN, September 12, 2015
ISLAMABAD: Prime Minister Nawaz Sharif on Friday stressed upon the need for enhancing Pakistan’s exports to bring it at par with other countries of the region and world in the field in order to overcome the ever increasing financial woes of the country.

Speaking at a high-level meeting, attended by heads of chambers of commerce, representatives of All Pakistan Textile Mills Association (Aptma) and exporter groups, the premier said that increasing exports is the only way traders can bring revenue to the ' heavily indebted' country.

He assured the business community that the government is ready to help it in whatever way possible to increase the exports and can even subsidise some export commodities.

“But we cannot provide subsidy until and unless we do not get equal returns. Providing subsidies is no permanent cure for increasing exports and it sometimes causes heavy losses to the national kitty,” maintained Nawaz.

Federal Finance Minister Ishaq Dar, Federal Commerce Minister Khurram Dastgir Khan and Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi are attending the meeting.

Traders viewpoint

While apprising the prime minister about their problem, traders cited the increasing production cost as the biggest hurdle in the increase of country's exports.

The community leaders stated that impositions of a number of surcharges on electricity prices is the biggest factor in ever increasing production cost thereby leaving the country’s industrial products noncompetitive in the global market. They added that the continuous shortfall and resulting loadshedding has made the matter worse.

The Industrialist community was of the view that if their grievances are not addressed timely, more and more production houses will move to neighbouring Bangladesh and China, who offer more favourable work conditions.

After listening to the traders' viewpoint, Nawaz Sharif announced that he has already directed the National Electric Power Regulatory Authority (Nepra) to reduce power tariff by 2.19 rupees adding that a number of energy projects are under construction to overcome the energy crisis.

About the security situation in the economic hub, Karachi, the PM maintained that the ongoing operation against terrorists in the city has improved the situation bringing traders and industrialist back to the city.

"We Know the terrorists' might has decreased and they are attacking journalists as their last efforts to survive," he said.

The meeting was called to consult the trading community for measures to increase exports. The meeting will also consider various initiatives to improve quality and competitiveness of Pakistani exports and the issues exporters are facing including the energy crisis.

The problems and demands of the industrial sector are also being discussed.

According to an earlier report published in Dawn Newspaper, the PM was also expected to announce a bailout-cum-incentive package to support country’s falling exports.

A five-member ministerial committee on Thursday concluded talks with textile exporters on the package that would be taken up for approval by the prime minister.

The prime minister will also spend five hours with Aptma today to resolve problems relating to textile exports, Aptma leader Ejaz Gohar told Dawn after the ministerial committee meeting.

This comes at a time when Pakistan’s merchandise exports fell 3.5 per cent last fiscal year and 17pc in July 2015 on a year-on-year basis. 

Protesters slam German brand in factory fire payout row   [ top ]

Business Recorder, September 12, 2015
German textile brand KiK was in the line of fire at protests by trade unions in Pakistan on Friday for refusing to pay promised compensation to the relatives of 259 workers killed in a factory fire three years ago. Thousands of workers rallied in major cities across Sindh with banners and placards criticising the low-cost clothing retailer and the government. 

The demonstrations took place exactly three years after the blaze, which was the deadliest industrial disaster in the country's history. The flames gutted the huge compound of Ali Enterprises, textile manufacturers located at the edge of Karachi which supplied products to KiK. The brand agreed to pay compensation in three instalments but backed out on its promise after a one-time disbursement of one million US dollars, union leader Nisar Mansoor said. 

Mansoor described the rallies as a "commemoration as well as protest against the government to provide workers a safe working environment and against KiK to fulfil its commitment." Families of the victims filed a case against KiK in the German city of Dortmund this year. KiK reiterated in a court statement last week that it is not obligated to pay any more compensation. 

"This is unfair," said Obaidullah Ansari, who lost two relatives in the fire. "KiK must live up to its promise." Mansoor said the company was legally bound to pay long-term compensation under International Labour Organisation (ILO) conventions. Calls to boycott KiK products have gained traction in recent years with the retailer linked to two similar disasters in Bangladesh: the Tazreen factory fire in 2012 which killed 112 workers and the Rana Plaza factory building collapse a year later which claimed 42 lives. 

Textile manufacturing sector still has huge potential   [ top ]

Business Recorder, September 12, 2015
Textile manufacturing sector still has huge potential which could be best utilised through business excellence, said Nadeem Allahwala Senior Vice President Faisalabad Chamber of Commerce and Industry (FCCI). He was addressing a seminar organised by the business administration department of National Textile University (NTU) here in FCCI auditorium. 

He said that Pakistan is 5th largest cotton producing country but in value addition our performance is dismally poor. He said that Bangladesh like countries is earning much more than Pakistan by importing our cotton and re exporting after its value addition. He said that NTU graduates have played a major role in bringing the qualitative improvement in textile sector and we must encourage them by offering more job opportunities to these graduates. He also lauded the efforts of NTU towards industry-academia linkages and assured full support in organisation of informative and academic sittings in FCCI. 

Earlier Pro Dr Hayat Muhammad Awan of Air University (Multan Campus) presented a thought provoking research paper on business excellence model in textile manufacturing sector. Vice Chancellor Government College University Faisalabad Pro Dr Muhammad Ali also attended this function while Nadeem Allahwala distributed shields among the guests and participants. 

Cargo agents: FBR approached for withdrawal of 8 percent minimum tax   [ top ]

Business Recorder, September 12, 2015
Air Cargo Agents Association of Pakistan (ACAAP) has approached the Federal Board of Revenue (FBR) for withdrawal of 8 percent minimum tax on cargo agents, as it (minimum tax) has been considered as a penalty on loss making and low margin service providers. 

In a communication to the FBR here on Friday, the ACAAP has requested the FBR to exclude the services sector and cargo agents from the ambit of the minimum tax at the rate of 8 percent. This tax is not warranted in the case of limited companies and other taxpayers and profit margins in the services sector do not merit such a high rate of minimum tax. If such a tax is imposed, it would lead to increase in costs and consequently increase in the prices for services fuelling further inflation in the country and possible job losses in various sectors. 

Keeping this in view, commercial and legal perspective, it is expected that the FBR will look into the matter sympathetically in the interest more than 200 Air Cargo Agencies (serving Pakistan's trade & industry); which are in and incubation stage in Pakistan and decision will certainly assists this industry grow and establish in Pakistan. 

ACAAP's members who are IATA approved Air Cargo Agents are effectively facilitating the trade and commerce in Pakistan, contributing to federal revenues in the form of direct and indirect taxes and providing employment opportunities to public at large. There have been certain changes made to the existing taxation of the services providers in Pakistan and Air Cargo Agents being part of the services sector shall be seriously hampered. 

In the Finance Act, 2015, the income tax deducted under section 153 of the Income Tax Ordinance, 2001, on the income of companies on account of rendering of services by them shall be minimum tax effective July 1, 2015. This implies that tax deduction under section 153 on services sector, would increase from 1% of turnover to 8% of turnover as minimum tax as against present tax at the rate of 32% of net income. This proposal and other changes will result in serious repercussions for the services sector: 

Firstly, the tax would increase in income tax liability of member agencies to 8 times of existing tax liability. Secondly, the withholding tax rate of 8% on rendering of services was based on the premise that the profit before tax of all service providers would be around 25%. However, in reality Air Cargo Agents & similar service providers profits before tax of around 3-4% which is much lower than 25%. At such narrow profitability levels and even in certain cases taxable losses, the levy of minimum tax of 8% on all service providers would further burden the service sector to an alarming extent. 

Additionally, the effective tax rate on the profits of services sector would be 200% of profits considering the profitability of the sector at 3-4% of turnover. Fourthly, the absorption of such a high effective tax rate of tax at the rate of 200% of profits is totally impossible and contrary to other sectors which are being taxed at the rate of 32% of profits. 

Fifthly, the service providers having losses would be required to pay tax out of capital reserves and/or injection of fresh capital from the owners. This levy would tantamount to a penalty for loss making and low margin service providers which would lead to closure of businesses, create unemployment and disincentives further investment in the services sector. 

Sixthly, a similar anomaly was created when the Finance Bill, 2009 was passed, however, similar provisions were excluded from the Finance Act, 2009. In this connection Circular 6 of 2009 was issued by FBR wherein it was clarified that the services provided by the corporate sector remained outside the scope of final tax regime. 

Moreover, such a minimum tax has been made applicable retrospectively from 2009 which again has created the problem manifold for the service providers. The above minimum tax on the services sector would increase the input costs and consequently increase the rates of services, thereby fuelling further inflation in the country. It may be noted here that the entire range of transactions of Freight industry is compulsorily transparent 100% through banking channels, it added. 

Boosting textile export: Senate panel calls for taking required measures   [ top ]

Business Recorder, September 10, 2015
Recommending power tariff at par with regional competitors, withdrawal of duty on coal, and zero-rating regime for textile industry, a parliamentary panel Wednesday called for taking tangible measures to boost the textile export. The Senate standing committee on textile industry which met here with Senator Mohsin Aziz, a textile tycoon, seemed perturbed over the deteriorating condition of the industry. 

The panel recommended giving priority in gas availability and immediate refund of all outstanding claims of sales tax, DLTL and customs rebate to reduce the cost of doing business and make the industry compatible in the region. The industry pledged against the anticipated support by the government a minimum of 50 percent, ie, $4.5 billion rise in exports within the next three years which means a surplus current account and trade account of the country. 

The committee met with Mohsin Aziz in the chair where serious concerns were shown over the dismal situations of textile industry in terms of continues decline in export despite getting the GSP plus status, decline in investment, shortage of gas and high power tariff and increasing cost of doing business. It was revealed that country textile exports declined by 17 percent in July 2015 as compared to the same period of last year. The committee recommended the government to liquidate the pending refunds to the textile exporters as early as possible. It further asked Federal Board of Revenue to release the sales tax and customs refunds which are pending for the last three years and account to more than a hundred billion rupees. 

Chief Export FBR said that over Rs 11 billion are pending against different schemes. However by August 31, RPO has been issued against genuine claims. FBR official admitted shortage of funds and allocation of grants for clearing pending claims. The members were told that due to intermittent raise in the prices of raw materials, production inputs and utility tariffs, cost of doing business in Pakistan has escalated enormously rendering our exports uncompetitive in international market. 

The committee said that cotton crop sales are about to begin and government should address the textile exporters' concerns immediately, otherwise the farmer of Pakistan would suffer terribly. Chairman All Pakistan Textile Mills Association (APTMA) S M Tanveer urged that government should provide direct subsidy to the growers instead of procurement one million bales. Otherwise middlemen would get benefits instead of growers, he added. 

Muhammad Zubair Motiwala, Chairman Pakistan Apparel Forum (PAF) informed the committee that the World Bank expects global apparel market to reach $1.18 trillion by 2020 and $2.11 trillion by 2025. It also declares that Pakistan stands at highly disadvantages position in the International market. There is something terribly wrong in the policy and approach and prognosis by World Bank has proven this contention when competitors were enhancing their exports on a supersonic speed. Pakistan's share in the world market has dropped in last five years from 2.2 percent to 1.8 percent, he added. He said that an enabling environment and competitive structure needs to be provided to the textile industry of Pakistan to cater the dying industry which is at least growth level in the region. He said that textile industries of other countries in the region are growing fast because their governments support. 

He said Pakistan compound growth rate textile and apparel export from 2005 to 2013 stands at 3.6 percent against 11.3 percent in India and 16.2 percent in Bangladesh. Further in Pakistan, value addition for every one million bale is $1.17 billion against $179 billion in India and $6 billion in Bangladesh. Pakistan electricity tariff is $0.15 kWh (highest among the 3) against $0.13 kWh in India and $0.09 kWh in Bangladesh. Pakistan's gas tariff is $6.27 per mmbtu (highest among the 3) against $4.66 in India and $1.86 mmbtu in Bangladesh. Pakistan's installed capacity utilization is less than 70 percent due to non-availability of energy on 24/7 basis against over 90 per both in India and Bangladesh. Pakistan's corporate tax rate is the highest at 34 percent against 25 percent in India and 27.5 percent in Bangladesh. Pakistan is the only country whose currency appreciated to the tune of 5 percent during 2013-2015 against 2.7 percent depreciated in India and 0.7 percent in Bangladesh, Motiwala added. 

He said textile, which is a vital sector faces immense problems and hurdles which must be removed to pave the way for smooth and efficacious working of units in this sector and for enhancing boosting its exports in the best interests of the nation. Motiwala recommended that as a short term measure, "no payment no refund" system for exports to save futile exercise wasting precious time of FBR as well as exporters to declare textile sector zero rated at the manufacturing stage. Sales tax be collected at retail stage only that will ensure revenue on the goods arrived in the country through afghan transit trade, smuggling and under invoicing. Textile sector must be declared as separate head of account in gas tariff structure and imposition of GIDC must be stopped forthwith as we are already higher in tariff (as given above in the chart) compared to our competing countries. Tariff of power should be brought down at par with regional competitors declaring as separate head of account in tariff structure. The committee also expressed serious concerns over non-appointment of full-time minister for textile industry while saying that it seems that this sector is at the least priority of the government. 

Usman Saifullah proposed that there should be an apex body of all textile association to plead its case more effectively before the government. Pakistan Textile Export Association Chairman Sohail Pasha demanded the withdrawal of 5 percent on coal import as it needs for the industry to run boiler and heater and it adds to their input cost. The committee unanimously agreed to bring back the zero rate mechanism and tax on local consumption. 

Customs computerised system: Collectors empowered to modify provisions   [ top ]

Business Recorder, September 12, 2015
The Federal Board of Revenue (FBR) has empowered the Collectors of Customs to modify provisions of the customs computerised system for importers and exporters where Land Customs Station does not possess complete infrastructure facilities or any required components for clearance of goods at Border Customs Stations. The FBR has amended the Customs Rules 2001 through an SRO.840(I)/2015 here on Friday to issue new procedure on the import and export of goods through Border Customs Station to facilitate business community. 

According to the new rules, on the arrival of import goods into Pakistan, the gate-in-officer shall obtain the documents relating to the cargo and conveyance from the person-in-charge of the conveyance and enter the data of the vehicle number, bilty number, name and address of the importer against the system generated Conveyance Intimation Report (CIR) number. The gate-in-officer means the officer of customs responsible for receiving the bilty and other documents at the time of arrival of conveyance. 

For filing of cargo manifest, the rules said that after the completion of the gate-in-event, the cargo information shall be electronically filed by the person-in-charge of the conveyance or his authorised agent. Provided that in case the manifest in delivered manually, the manifest officer shall enter its data into the Customs Computerised System. 

In order to file export information, the new rules have specified that the cross border officer shall record confirmation of export in the Customs Computerised System, after physically verifying export cargo at the exit gate before permitting the conveyance to leave. 

The procedure of import, export and customs processes shall also apply on import and export of cargo. Provided that in case any Land Customs Station does not possess complete infrastructure, facilities or any required components for implementing all provisions relating to the Customs Computerised System, the Collector may order such modification in any provision as may be deemed necessary, till such time all required facilities and components become available, rules added.