Dec 23, 2019: Pakistan is considering offering tax breaks to various industries with export potential as the country looks beyond textiles to boost outbound trade, Abdul Razak Dawood, the prime minister's adviser for commerce and investment, has said.
In this regard, he told Bloomberg News, an international financial news service, that an export policy will be announced next month.
Growing exports from the current over $20 billion a year is Pakistan’s plan to increase foreign exchange earnings and end a chronic boom-and-bust cycle, it was pointed out.
“I am in favour of limited time-bound incentives,” Dawood was quoted as saying in the Bloomberg interview, indicating a three- to four-year period for tax breaks. He opposed concessions for the textile industry, saying “they have gone to the point that it is a drug.”
Textiles currently account for about 60% of Pakistan’s total exports. The new plan complements the State Bank’s aim to offer cheap credit to export-oriented industries to diversify that basket.
“If we want to go to $100 billion or $200 billion exports like Malaysia or Thailand, you ain’t gonna do it on textile,” said Dawood, who was previously chairman of Lahore-based Descon Engineering Ltd.
Pakistan’s exports, particularly textiles, became competitive after the rupee’s devaluation and duty cuts, Dawood said, citing a 36% jump in quantity of garments shipments. “It means that we are getting market share, we are taking somebody’s market share.”
Pakistan’s trade deficit narrowed 33% to $9.7 billion in the five months to November, as imports dropped by 18% and exports rose 5% in the same period.
Dawood said he sees outbound shipments growing to $24.5-$25 billion this fiscal year ending June from $23 billion last year.
Pakistan is pinning hopes on a new free-trade agreement with China to grow overseas shipments by at least $500 million annually, the report said.
The agreement, which takes effect next month, will help Islamabad reduce its trade gap with Beijing from the current $12 billion, according to data compiled by Bloomberg News.
Dawood said he is seeing interest from Chinese companies that want to set up factories in Pakistan and use them as a hub for exports. For low value added engineering products “we are much cheaper than China now,” Dawood said, adding that the plan for the next China international import exhibition is to have only an engineering pavilion.
“We got to get out of the textiles syndrome,” he added.