Case being made for getting concessions: Overall exports falling
By Sabihuddin Ghausi
KARACHI, Nov 17: Not only the textiles, but almost all major key items of Pakistan’s export have been hit hard by the extreme slump in the current fiscal year and exporters are trying to make a case for getting a wholesome fiscal concession and relief package that should bail out the export trade from the present crisis.
“It is an almost across-the-board slump,” argued a top business leader who is now under pressure of his members to make a case for the export trade rather than for the pampered segment like textiles. “It is not only the textiles, but other items like leather, sport goods, carpet and rugs, surgical instruments, petroleum products, fish, cutlery, gems and jewellery, fruits and vegetables, cement, chemicals, furniture, tobacco, handicrafts and a variety of other key exportable items are on decline,” he pointed out.
Exporters complain that textile business enjoy a clout and influence in the government and in assemblies and has managed to get one concession after the other. After getting rebate on export of virtually on all textile products, reduction of interest rates on export refinance, swapping of high interest loans with relatively low interest rate bank loans, the textile lobby recently won another major concession on sales tax exemption on energy.
“Why other business sectors are being overlooked,” is a question that is now being discussed and debated in all the business meetings as leaders of leather industry, sport goods, surgical instruments, chemicals and others argue that they have equally been hit by the high cost of doing business.
The rising financial and mounting energy and transport costs, according to them, have pushed the cost of their goods up rendering them uncompetitive in the international export market.
Exporters have noticed that the government is now releasing, with an inordinate delay, the international trade statistics every month and that too in two instalments. In the first release, last on Wednesday, the government informed the public of aggregate exports in July-October at $5.55 billion and imports at $9.4 billion, showing an imbalance of more than four $4 billion.
The detailed and item wise import-export figures are expected to be released by end of this month but exporters say that the declining trend of more than two dozen key items that constitute the core and development categories has become more pronounced in October.
In the first quarter (July-September) 2006-07 all the 10 key textile products including raw cotton have shown declining trend as compared to their performance in the same period last year. Export of knitwear during first quarter of 2006-07 stood at $472.88 million which is 10pc lower compared to $525.90m the same period last year.
Bedwear export was down by more than 19 per cent to $449 million, cotton cloth export declined by about 15 per cent to $464 million. The knitted and crocheted fabrics export came down by more than 29 per cent. The art silk and synthetic fabric export lost 25 per cent as it could realise only $48.67 million. Export of towels was down by about 5 per cent to $147.68 million and raw cotton export came down by more than 56 per cent.
The slump in textile sector has come after getting export rebates and announcement of fiscal package that may cost government anywhere from Rs25 to Rs30 billion this year.
But the other key items of core category and development category also beg for same treatment as these are equally hard-pressed as amply manifested in the official trade statistics.
In first quarter of this fiscal, the export of carpets fell by about 42 per cent to $38 million, surgical instruments declined by more than 37 per cent to $39 million, surgical instruments also by 37 per cent to $255.59 million, petroleum products by 17 per cent to $152.69 million, leather garments by more than 42 per cent to over $109 million, leather by 17.50 per cent to $561.76 million, footwear by more than 33 per cent to $23.65 million.
The export of gems and jewellery was also under tremendous pressure and fell by 69 per cent to only $2 million. The export of chemicals showed about 16 per cent decline, fish about one per cent, engineering goods more than 27 per cent, fruits by about 45 per cent, vegetables by about 53 per cent, cutlery by about 33 per cent, poultry by about 99 per cent, cement 22 per cent, spices 34 per cent, furniture 31 per cent and tobacco by 43 per cent.
“Majority of these export industries are labour-intensive and a slump can cause unemployment at a time when elections are round the corner,” the business leader warned.
With inflation hovering near double digits for the second consecutive year, the government is showing no inclination to bring down oil prices in domestic market and there is a determination to increase revenue collection to Rs1 trillion next fiscal from Rs835 billion this year.
The business is trying to make a case for direct 10 to 12pc decline in rupee-dollar exchange value. The inflation rate in most of our trading partner countries is less than 5 per cent while Pakistan has an average 9 per cent for the second consecutive year and hence businessmen plead for a realistic parity.
But a devaluation of 10 to 12pc in one go has its own perils. Whether a rupee devaluation will make Pakistan’s export competitive is a doubtful proposition but it certainly will push up debt burden and debt servicing, import bill and cost of invisibles in the foreign exchange budget.
