January 4, 2006	Wednesday	Zilhaj 3, 1426

KARACHI, Jan 3: Exporters have urged new State Bank Governor Dr Shamshad Akhtar to immediately reduce interest and mark-up rates, particularly export refinance rates, to lower the cost of exportable goods which are facing tough competition under the WTO quota-free regime.

“The first and foremost task of the new governor should be to bring down the export refinance rates which have risen to nine per cent from three per cent in a short period of one year,” business leaders from export trade bodies asserted while talking to Dawn.

Dr Shamshad, who assumed as the 14th and first woman governor of the SBP on Monday, was urged to focus on mark-up rates which are making all sorts of investments, including post-shipment credits, costlier.

Pakistan Bedwear Exporters Association chairman Shabir Ahmed said that in a short span of one year, the export refinance rates had jumped from three per cent to nine per cent which made “our exports uncompetitive in the world market”.

He said there was a need to reduce interest and mark-up rates in order to make the availability of capital to the exporters at cheaper rates. At present, he said, the general mark-up rates were at around 12 to 14 per cent which made investments very costly.

In an era of tough competition, he continued, the exporters had to allow 60 to 120 days credit to their foreign buyers and the burden had to be born by them, particularly when per unit price in the world quota-free market had also come down drastically.

Mr Shabir urged the new SPB governor to focus on lowering the interest rates and equally try to monitor that such cheaper capital did not find its way into non-productive sectors as was witnessed in the past. He suggested that other methods could be adopted for curtailing inflation and not only by enhancing the interest rates.

He was of the view that such a monetary policy should be adopted wherein the cheaper capital required by productive sectors of the economy was not choked off on the pretext of curtailing inflation, as this would make country’s exports uncompetitive in the world market.

Aptma vice-chairman Mushtaq Vohra said the rapidly increasing input costs on account of expensive capital as well as cost of energy, such as electricity, gas, etc., were such negative factors which were rendering exports costlier and uncompetitive.

He said that the exporters to European markets were suffering on two accounts: 1) due to higher capital cost because of high export refinance rates; and 2) due to a fall in parity of the euro which has declined by 12 per cent in one year.

Mr Vohra appeals to the SBP governor to study interest rates of other countries where the rates hover around two to four per cent. He says Pakistan is one of the few countries where mark-up rates are in double digit.

Consequently, he said, the export-oriented industry was faced with a double-edged sward. On one hand, it has to pay high cost for import of capital goods, on the other it has to get export refinance on a high rate.

“While drafting monetary policy it should be ensured that the cost of capital remains low. Equally, all efforts should be made to the effect that the cheaper capital does not find its way into non-productive sectors, such as real estate and paper profits of the capital market,” he asserted.

Pakistan Hosiery Manufacturers Association chairman Javed Bilwani said that higher costs had resulted in shutdown of a number of hosiery units in the country and this trend was continuing, as no solution was coming forth from the government or even from the central bank which also had the responsibility to ensure that the industry remains viable, particularly in getting cheaper capital to meet all sorts of funds needed for import of capital goods and financing of export shipments.