ISLAMABAD, July 22: Pakistan’s new trade policy unveiled on Monday seeks to achieve an export target of $10.4 billion and projects imports to be valued at $11.1 billion which, in tandem, would slash the trade deficit to $700 million during the fiscal year 2002-03.

The policy, announced on radio and television by Commerce Minister Abdul Razak Dawood, offers incentives for special zones and rewards to exporters for introducing new products and capturing new markets.

The import target has been nudged up by $100 million, and that of export, by $300 million, from last year’s targets. This means that imports are seen to grow by 7.4 per cent, and exports by 13.4 per cent, over the targets set for the recently-ended fiscal year.

The government has fixed this target on positive assumptions like greater market access, spin-off from investments in textile sector, and a continued inventory build-up in Europe and the USA. The government also presupposes greater access to export finance, stable prices of raw cotton in the international market and a stable to favourable exchange rate. Implicit in the government’s estimation is its confidence that the trade environment will not be faced with any unforeseen challenges.

The minister said that prices of Pakistani products will remain under pressure and further squeeze exporters’ profit margins due to inadequate physical infrastructure, high price of utilities, and uncompetitive interest rates.

To face this challenge, Duty and Taxes Remission for Export (DTRE) Rules, 2001, would be revised to make them more user-friendly in consultation with the CBR to find a way to allow duty drawback and sales tax refund on domestically-procured, tax-paid inputs in sectors where there is an unavoidable reliance on substantial domestic procurement.

A cabinet committee has been set up to bring about reasonable parity in the concessions available to the Export Processing Zones and export-oriented units, defined as enterprizes that have exported, on an average, 60 per cent of their production during the last three years.

The policy envisaged diversification of products and regions through freight subsidy of 25 per cent for ‘new products’ — the ones whose annual export has not been more than $5 million in any one of the last three years.

Similar freight subsidy will be provided for new markets — Latin America, Africa, East Europe and Oceania — or for any country where Pakistan’s total exports have averaged less than $10 million over the last three years.

The lowest rate of presumptive income tax (0.75 per cent) would be applied in respect of these new products and markets. The Agricultural Produce Cess, that was being charged at the rate of 0.5 per cent ad valorem on export of a number of agricultural products under the Agriculture Produce Cess Act, 1940, has been done away with.

To compete with special export zones of other countries, the cabinet has allowed trading activity in Karachi Export Processing Zone (KEPZ), with the exception of a negative list being notified separately. An inter-ministerial committee has also been set up to examine the tax regime available to the KEPZ, as also restricting customs duty to imported inputs only.

The cabinet has also approved, in principle, to make Gwadar a Free Trade Zone and necessary instruments in this regard are being prepared.

The compulsory requirement for an exporter or importer to register himself with the EPB before he can undertake trading activities has been done away with.

Certain laws and amendments have been placed before the cabinet, including Intellectual Property Rights and Pakistan Penal Code, for modification.

A Pakistan Intellectual Property Rights Organization (PIPRO) is being set up to facilitate servicing of all the intellectual property rights requirements by one organization.

It has been decided to enhance the monetary limit on export of samples to $10,000, from the existing $5,000, and to declare petroleum products freely exportable.

The minister said that current restriction of a minimum export price for rice as recommended by the Rice Exporters Association has been removed but pre-shipment quality check for basmati rice shall continue, to safeguard its image in the international markets.

The policy has removed the licencing requirement to allow import of gold/silver in bulk so long as the importer manages his own foreign exchange without any change in normal duties and taxes.

Import of essential spares, when airlifted/couriered, by industrial users against foreign currency demand draft, has a limit of $15,000 per annum. This limit is being increased to $30,000. Exporters may import spares etc. beyond this limit subject to a cap of 5 per cent of their last year’s exports.

The policy also allowed free import of mobile phones against the current practice of these imports by the companies having agreement with the government agencies concerned for the supply of mobile phone facility, recognized manufacturers and their authorized agents.

Conforming to the obligations under the Basel Convention, that imposes restrictions on clinical and hospital waste, import of all plastic scrap will henceforth be subject to certification from the exporting country that “the scrap does not include hazardous waste.”

On the other hand, light oils and preparations, mineral oils and lube base oil, which are currently importable only by industrial consumers/approved blending plants, would be allowed to all without any restriction.

The policy also banned the import of CFS gas-based refrigerators and deep freezers in line with the Montreal Convention that requires, inter alia, a phased elimination of the use of ozone depleting substances (ODS) of which CFC gas is a part (used in air-conditioning and refrigeration), whose use is required to be eliminated by 2010.

The minister also announced to put in place a law for standardization of cotton to help improve the image of Pakistan cotton in the world markets and bring about a more sound basis for cotton trading in Pakistan.

In order to assist the exporters, an inter-ministerial committee to examine the feasibility of putting the input-output co-efficient organization under the administrative control of the EPB instead of the CBR.

The CBR has been directed to collect Export Development Surcharge through the banks upon remittance of export proceeds, as is done in the case of export income tax.