November 3, 2003	Monday	Ramazan 7, 1424

The quota regime which is coming to an end next year will leave behind a trail of untold stories of scams running into billions. These relate to distribution, allocation and auction of textile quotas, and many a times at the cost of exports.

The textile quota regime was introduced about 30 years back under the Multi Fibre Agreement (MFA) and later extended through the Agreement on Textile and Clothing (ATT). The primary objective of this arrangement was to restrict unbridled exports of textiles to the markets of developed countries — the United State, the European Union (EU) and Canada.

During the 30-year long period the government kept changing textile quota policy in order to minimize corruption, and to save exports from mismanagement and corrupt practices of both exporters and officials responsible for allocation and auction of textile quotas.

But now when this regime is close to its phasing out — barely 14 months away from its deadline of December 31, 2004 — one finds hardly any change in the working and the textile quota management (TQM) which continues to allocate and auction,as previously, quotas worth billions of rupees in the open market.

Allegedly the degree of corruption was so high in the distribution and management of quota that it gave birth to large groups of quota holders. Besides, many brokers having sufficient holding capacity easily manipulated the quota market in their favour. However, these activities always had the official patronage through the use of inside information.

Despite the fact that the successive governments tried hard to check the menace but no positive results could be achieved. A major reason for the failure of these policies had been counter-steps taken by quota brokers with the connivance of the official machinery.

Late Dr Mahbubul Haq, during his tenure as the commerce minister, started auctioning of quota to check corruption and mismanagement. But this too, failed.

For a long time there had been a tug of war between two vested groups of exporters over the mode of distribution of growth quota. There were those who favoured the allocation of this quota on the basis of performance and others who wished allocation on the basis of value. Those who were in favour of value normally misdeclared their currency of transaction. And others inflated their export figures to capture maximum quota.

In yet another change in policy new industrial units were allocated growth quota to meet their export commitments, if any. But this scheme too became a victim of corruption because most of the quotas landed in the hands of those who never set up an industry except on paper.

Though it was never ascertained that what caused a fire in the offices of the EPB in the 80s when they were housed in the Press Trust Building, now Army Welfare Trust (AWT), on the I.I. Chundrigar Road, but for many years there was a general rumour that the manipulators of textile quotas succeeded in destroying the records which were turned into ashes.

The moves taken by policy makers to check corruption in textile quota management always ran short of remedy.

Although services of an auditors had been hired to check the individual exporter’s visa or quota book, no method was ever developed to check the quota allocation and distribution at the national level. As a result of the loose end at the national level reconciliation of accounts could never take place thus providing an opportunity to the people at the helm of affairs to manipulate allocation. It is a known fact that, till today, the TQM of the Export Promotion Bureau only releases provisional figures of allocation and utilization but had never issued reconciled quota statement.

Like individual exporters, the government also has its annual ceiling to which growth quota is added to reach to a base ceiling. However, thereafter the government has flexibility provisions which include swing, shift, carryover and carry forward. From this ceiling the TQM allocates various categories of quotas to exporters as per their entitlement.

Consequently, there is a flood of information and figures available with the TQM regarding the availability and the non-availability of quotas at any given time and this has a direct impact on quota prices in the open market. In case there is a shortage of quota its premium price goes high and many a time soar to such an extent that it gets out of reach of exporters and many export commitments are not met.

In the absence of reconciliated accounts of quotas the government of Pakistan many times failed to claim substantial chunks of quotas from importing countries — the US, the EU and Canada. Some times it also resulted in overshipment of many quota categories and importing country had to impose embargo. The EPB has no method to monitor the quantity of shipments, as well as the arrival of shipments in an importing country.The lack of proper audit and accountability have given birth to many scams, some of them had surfaced in public while many more remain buried under the heap of files.