PBC advocates long term policies to boost exports

A group of Pakistan Business Council met Prime Minister Shahid Khaqqan Abbasi asking for long-term policies and restructuring of export package to promote value-added exports over a 10-year horizon.
“Short-term measures are not sustainable,” Pakistan Business Council (PBC) said in a letter to the Prime Minister Shahid Khaqan Abassi.

“Countries like Vietnam and Bangladesh have achieved exports (of present levels) under long-term policies.” Meanwhile, a PBC delegation, led by Ehsan Malik, the council’s chief executive officer, also met the prime minister on Wednesday.

PBC, which represents at least 60 business groups, said the country’s exports of $20 billion don’t reflect the capability of the country’s resources. “Whilst global recession is partly to blame, input cost disparities particularly in energy cost, slow refund of taxes, delayed settlement of incentives and the structure of the export package, which going forward will reward incremental achievement with a significant time lag, are also factors impeding growth,” it said. Government announced Rs180 billion export incentives package in January to boost exports.

The council sought a gradual adjustment in rupee value to counter loss of competitiveness of local industries in the international markets. It said there is a significant opportunity for Pakistan to become a key value chain partner of the Chinese textile companies and other labour-intensive industries withrising labour cost in China.

“Pakistan should target to obtain at least three million of 20 million jobs, (which) are likely to be displaced in China,” it added. PBC said poorly-negotiated trade agreements, smuggling, under-invoicing and misdeclaration of imports have severely undermined domestic industry. “As we renegotiate the FTA (free trade agreement) with China we must approach fresh agreements with caution,” it added. On China-Pakistan Economic Corridor, the council said it will be a game changer for Pakistan and beneficial to China. “We must ensure that arrangements are configured in a way to maximise indigenous participation, promote jobs by strengthening local industry and protect tax revenues,” it added. “We have an unfortunate history of gross misuse of transit facilities. As debt is a material component of financing power projects, notwithstanding Nepra (National Electric Power Regulatory Authority) tariffs, there is a scope to reduce financing cost to make energy available at a more competitive rate.”

The pan-industry advocacy group said there is a significant potential to tap overseas Pakistanis to invest in infrastructure projects on a non-repatriable basis. “The country needs to find ways to encourage return of wealth of resident Pakistanis from abroad,” it added. “Our tax regime needs to promote capital formation, accumulation and consolidation.” PBC said change in the group tax relief rules, imposition of cascading tax on intercompany dividends, taxes on retained reserves and bonus shares and the continuation of super tax into the third year discourage investment, impede scale, penalise success and thwart the broadening of the capital markets. “Shareholders in listed holding companies… suffer an effective tax rate of 55 percent,” it added.

The council, in the letter to the prime minister, said local companies are subject to higher tax rates than the global average. It, however, advocates a higher differential between taxes on filers and non-filers. It urged the government “to make withholding tax a penalty for non-filing as opposed to a revenue collection tool.”