Pakistan’s trade deficit increases as exports decline

Published in The Nation on December 21, 2017

Due to lack of protection of local industry, increasing cost of energy and undue duties, Pakistan’s exports have been losing international market very fast and import bill of the country has been increasing.

Representatives of different chambers of commerce and industry of the country on Wednesday informed the Senate Standing Committee of Commerce about the gloomy picture of the trade of the country and demanded the government to take immediate steps to save the trade of the country and make it compatible at the international level to earn foreign exchange and reduce the trade deficit .

The meeting, presided over by Senater Syed Shibli Faraz, was informed by President FPCCI Zubair F. Tufail that government has not been taking care of the local industry, therefore, many local industries are being closed down creating unemployment in the country and increasing the import bill.

He said Pakistan’s export presently is around US dollars 21 billion and imports are over US dollar 45 billion while Bangladesh has crossed the figure of 35 billion this year.

Referring to the projects of China Pakistan Economic Corridor (CPEC), he said due to many concessions in taxes and duties to these projects, the local industry will be suffered a lot and Pakistan’s import bill will be further increased. He criticised to give zero duty regime to CPEC and industries being set up by the Chinese in the Economic Zones along CPEC route saying that it will destroy Pakistan’s local industry.

Commenting on Free Trade Agreement (FTA) between Pakistan and China, the President of FPCCI said it is also in favour of China as there is only US dollars 2 billion export from Pakistan to China while Pakistan’s import from China is over US dollars 17 billion due to concessions given to China in FTA.

Zubair Tufail said same is the situation for other two FTAs signed between Pakistan with Malaysia and Indonesia and in both these agreements Pakistan’s exports have been reduced following the entering into FTA with these countries.

Referring to Pakistan’s foreign exchange, he said presently contribution of US dollars 19 billion annually from expatriates working in Middle East is the major source which will decline in near future due to change in the policy of the Middle East countries as their economy is also suffering losses.

Talking about cotton crop, which was the main source of foreign exchange earning, he said, this industry is also suffering huge losses and over 140 textile units have been closed down in the last couple of years, due to lack of interest by the present government for not taking any step for their protection. He said cotton production was 15 million bales which was equal to India, but due to heavy cost of input, undue taxes and power shortage, the cotton crop has been reduced to 5 million bales and Pakistan has to import cotton to run its factories.

The regulatory duty imposed by the government on a number of items especially on the raw material has also damaged the local manufacturing units and there has been de-industrialisation in the country as most of the local products are being imported from China as cost of production of these things has increased.

He said negative policies of Ministry of Commerce and Federal Board of Revenue are the major bottlenecks in damaging the local industries with lack of proper industrial policy and burden of undue taxes by CBR. The Committee was informed that the FBR is collecting Rs. 356 billion only from the cards being loaded for mobile telephones.

Chief Executive Officer of Pakistan Business Council Ehsan Malik, giving details of national economy to the members of the Committee, said there are 47 different taxes in Pakistan and industry cannot make progress in the presence of these undue taxes burden.

He said there is a need to improve trade and fiscal policies to make them for the benefit of the local industries. He said to reduce cost of input, maximum investment should be on the production of hydel power instead of other sources. He suggested that the industrial and trade policies should be for long term and all the political parties should be agreed to this.

President of Lahore Chamber of Commerce and Industry Tahir Javed, presenting the state of the industry in Pakistan, said due to undue burden of taxes, many Pakistani industries are suffering.

He said due to imposition of Regulatory Duty by the FBR, the auto-industry is on the verge of collapse as it has become non-profitable. He said the government should take immediate measures and interfere to ensure further decreasing of exchange rate of rupee against dollar.

He said Pakistan has to face loss of over six billion US dollars in export due to lack of interest of the government to improve exports and protect the local industry.

Senior Vice President Sarhad Chamber of Commerce and Industry Zahid Ullah Shinwari informed the Committee that the trade between Pakistan and Afghanistan has been reducing due to undue and strict measures being taken by the FBR. He said due to trade agreement between Pakistan and Afghanistan and wrongly using this agreement by the FBR, the trade between these two countries have been reduced from over three billion US dollars to just 450 million US dollars.