KARACHI, Feb 12: Senior textile industry leaders offer different but interesting explanations when they are asked as to why they do not approach World Trade Organisation (WTO) to invoke anti- dumping rules against India, Bangladesh and China for giving generous subsidies and cash rebates to promote their textile export rather than moving with a begging bowl in Islamabad to seek rebates and concessions.

These explanations are being offered in the wake of reports that the government is now about to offer the second package of generous rebates, utility rate cuts, slashed bank interest rates and many other incentives to the textile industry.

About four months ago, the government offered a package of Rs22 billion to Rs25 billion concessions from the public money to the textile industry, which led to an outcry from other segments of industry and businesses who complained that the textile was being pampered at their cost.

The question is that why should Pakistan and for that matter India, Bangladesh and China should tax their respective citizens to enrich textile tycoons of their respective countries instead of encouraging an open and a level-playing field for them to compete.

It is further asked as why are the local textile industry and the government not moving the WTO to invoke anti-dumping rules against India, Bangladesh and China instead of squeezing national budget, which is already under pressure of mounting defence expenditure, pensions of defence personnel and debt servicing that are neither discussed nor scrutinised by any House Committee.

“To be honest with you, we were not aware till March-April 2006 that India, Bangladesh and China were offering such generous assistance to their textile production, which has rendered us uncompetitive in the world export market,” a top leader of textile industry from Lahore explained that a litigation with WTO is a highly technical issue and is bound to linger on for years.

“For us in Pakistan, the issue is survival of textile industry for which we need immediate help,” he said. Nonetheless, he disclosed that leaders of All Pakistan Textile Mills Association (Aptma) were in touch with the commerce ministry to go for a legal dispute resolution with the WTO.

In many words, textile leaders admit that there are no lawyers in Pakistan, who have skills and qualifications to handle such cases for seeking resolution of international trade disputes with organisations like WTO.

But a senior leader of Karachi textile industry is of the view that there is no case against India and Bangladesh to be moved with WTO for invoking anti-dumping rules. “India and Bangladesh offer concessions and incentives on investment and not on production and trade,” the chief executive of a local textile company explained.

For last several months, Pakistan’s textile industry is seeking devaluation of Pakistani currency from 10 to 15 per cent, cash rebates, concessions on utility tariffs, abolition of levies like EOBI, social security, export development surcharge and a cut in interest rates on bank loans.

He said that India and Bangladesh were offering all these incentives to their textile exports, which have badly hurt Pakistan’s exports leading to the closure of local textile units one after the other.

“Bank loan defaults are imminent, large scale closures are on the card that may cause unemployment on a massive scale as exports are declining and new investment is not coming in textiles,” is the nutshell of latest Aptma presentation to the government.

1. How the Indian government is helping its textile industry is substantiated by Aptma by quoting relevant circulars and notifications apparently obtained from the website, which reveals that Delhi initially offered 5 per cent interest (subsidy) for capital subsidy on textile sector and supplemented it with another circular in May 2005 that offered a further 10 per cent subsidy to processing industry.

In the current fiscal year, the Indian government offered a straight 2.5 per cent reduction on benchmark prime lending rates for the working capital sought by the entire chain of textile. Another official Indian circular provides 25 to 50 per cent equity participation of the government in Indian ventures abroad.

At the same time there are notifications to offer 4 to 10 per cent drawback on export of yarn, fabrics and made-ups. All taxes and levies—education, cess and fuel—are zero rated while import of machinery for textile and garments export oriented units is duty free.

The export import policy for 2006-07 stipulates government support for infrastructure and cotton productivity, training and development.

The Aptma informs the government that China offers 11 per cent subsidy on textile exports. Yuan is under valued by 20 to 30 per cent and income tax rate for export units is 12 per cent on profit.

The Aptma quotes from a letter of Chinese Consul General according to which machinery and raw material import in China is duty free. The state subsidises fuel and electricity as well as it gives free land and utilities to the state-owned enterprises and companies. Industry clusters provide complete infrastructure to export units.

Bangladesh offers the lowest gas tariff in the region. The labour wages are three times lower than Pakistan. A five per cent cash grant is given to export industries and yarn exporters are given export refinance on seven per cent. The currency has been devalued from 64 taka a dollar to 73 taka a dollar.

There is also a provision of duty drawback on the services used by export-oriented units like water, electricity, telephone, cost and freight agents, insurance and duty free import of machinery and raw material.

“Focussing entirely on revenue generation and collection, the Pakistan government prefers to take piecemeal measures to satisfy one industry and other segments of business,” a business leader remarked.

He said all countries of the region are offering duty free import of machinery and raw material for their industries. Tax is being collected on the income and profit rather than at level of import and export. Land is being offered either free of cost or at a low rate.

“Why can’t we have same system in Pakistan and make entire budget transparent and subject to scrutiny by the elected representatives of the people,” he asked.