February 22, 2007	Thursday	Safar 4, 1428

KARACHI, Feb 21: A well-known Swiss consultant, Gherzi is being commissioned by the government to assess the impact and quantum of the financial support being extended by India, Bangladesh and China to their textile exporters by way of cash rebate, subsidies, cut in utilities cost and concessions in interest rates on bank loans for investment as well as for running the business.

The exercise is being commissioned after Pakistan’s textile industry has come out with a fresh demand of more concessions and incentives for export. The domestic textile industry has already been given a concessions’ package last August that is estimated to cost about Rs25 to Rs30 billion.

The impact of the fresh concessions package sought by the textile industry is expected to be assessed by the textile industry leaders and officials at a meeting scheduled for next Monday.

The Pakistan government started offering rebate support to the textile exporters in the year 2005-06 when a 6 per cent cash rebate was offered to readymade garments and knitwear exporters following reports of closure of a large number of units in the country because of their inability to withstand the competition in the world market.

This rebate is being administered and monitored by the State Bank. The State Bank governor is on record to have stated in Faisalabad that 3,000 cases of fraud claims were detected. However, there was no further elaboration. The 2006-07 budget retained this rebate support and extended it to other textile products in a separate package.

While the 6 per cent cash rebate is being administered and monitored by the State Bank, the 3 to 5 per cent cash rebate on fabrics and home textiles is being managed and monitored by the federal textile ministry. The commerce ministry monitors and looks after the export trade.

None of the three agencies, has come out so far with the cost of all these concessions and rebates on the budget and informed the people of the results in terms of improvement in export of products and countries for which these incentives are being offered.

For textile business, a litigation with the World Trade Organisation (WTO) against India and Bangladesh to invoke anti-dumping rules for extending cash rebate and subsidy assistance to their respective textile exporters appears to be a far-fetched idea right now, but sources in textile business as well as in the government do not rule out the possibility of making some initial exercise to prepare the ground for the same.

Business leaders give two reasons for avoiding litigation with the WTO on dumping issue in export market. First, there is no lawyers’ company in Pakistan that is competent to take up this brief and secondly there is a fear that the legal process will involve a long period for resolution, which the industry can ill afford.

“We need immediate relief for survival,” remarked a top leader who said that Pakistan’s textile industry is faced with the problem of survival. For this, the industry leaders are pleading for the financial support that should match, what they perceive, as the assistance being given by India, Bangladesh and China to their exporters.

A comparison of financial help being given by the governments of India, Bangladesh and China to the textile exporters and its results in terms of export with that of Pakistan will help the textile industry to justify their demands.

The industry now also wants exemption virtually from all the federal, provincial and local governments’ taxes for next two years besides a straight 25 per cent cut in gas tariff, provision of duty free import of inputs, accessories, machinery, equipment, electric power generators and in fact an unending list of demands that may envy the trade union leaders of textile mills.

Not only this, the textile industry has asked the government, for enlarging the list of textile products on which the original government notifications issued on August 4, 2006, August 25, 2006 and finally on November 10, 2006, to give cash rebate support on export.

The textile leaders also want to extend this cash rebate support facility on export to more countries than those prescribed in the three notifications.

“There is a pressure to bring names of the UAE and Saudi Arabia in the list of countries for eligibility of research and rebate support on textile export,” confided a well-placed source in the textile business. Saudi Arab, the UAE and South Africa are the countries where Pakistani exporters literally dump their trash with their close business partners to make a false claim for rebate.

Market analysts look at all this government business of cash rebate support for the textile exporters with suspicion and doubts. Initially, the idea of government support for textile export business in Pakistan was to confine it to only high value-added products and only to a few developed countries like USA, EU and Canada. But when it came to implementation stage, the textile lobby managed to enlarge the list of textile products for the government support and now in fact want financial help for yarn where the value-addition is hardly 11 per cent.

The countries, which are now included for export support include Bangladesh, Turkey, India, Sri Lanka, the CIS states where Pakistan exports yarn and fabrics, which are processed and re-exported with further value-addition to push out Pakistan’s products from developed markets.

Moreover, quite many countries are notorious for providing bogus documents to the exporters, including those from Pakistan to help them making fake rebate claims.

Market analysts wonder as to why the members of National Assembly and Senate have not bothered to discuss the cost of government support to the textile sector and to find out the results in terms of improvement if there have been any.