June 18, 2007	Monday	Jumadi-us-Sani 02, 1428

THE federal budgetary proposals for the financial year 2007-08 are unlikely to mitigate the deep-rooted poverty in NWFP. Rather, it is feared that the new taxation measures would adversely affect its weak industrial base.

The budget imposes one per cent surcharge on imports, excluding vegetables, pulses, edible oils, ghee, crude petroleum, furnace oil, HSD, medicines, fertilisers, imports under chapter 99, temporary imports etc., besides increasing the ratio of sales tax.

The government is publicising the exemption as a step towards reducing the impact of new tax arrangements on the common man, who already feels strangled by higher utility charges and kitchen expenses.

Many believe that the levy of one per cent import surcharge and upward revision of sales tax ratio will make business a difficult task for the manufacturing sector of the country in general and of the NWFP in particular.

Mr Numan Wazir, president of the Industrial Association, Peshawar, says: “Being away from seaport, the industries in NWFP are economically not feasible as they have to bear additional cost of transportation of raw material and value-added products compared with the industries of Sindh and Punjab.”

He explains: “The industrialists having units in the NWFP have to pay 23 per cent more than the owners of industries in Sindh and Punjab. This affects industrialisation, which subsequently contributes to unemployment in the province. The rate of unemployment in the province is 12.9 per cent which is the highest in Pakistan, and due to lack of a proactive manufacturing sector, this ratio will increase further."

The industrial scenario in the NWFP presents a bleak picture as out of 1964 industrial units only 1227 are operational, while the rest 737 are either closed or inoperative mainly because they cannot compete with industries operating in the down country.

The NWFP, owing to its strategic location, has served as the frontline province during the two-decade-long Afghan conflict, which has deteriorated its infrastructure and service delivery system after the influx of more than three million Afghan refugees.

Apart from the Afghan conflict, NWFP is still bearing the brunt of post 9/11 US-led war on terror, which has badly shaken the very foundations of the province. The executive member of the Sarhad Chamber of Commerce and Industry (SCCI), Mr Zahid Khan Shinwari, says: “The NWFP is a fit case for claiming special package to counter poverty and backwardness. This is why we sought a special package for the province in our budget proposals as the provincial government alone cannot make the NWFP attractive for investment.

“It is unfortunate that the government not only ignored our proposals but also tried to suffocate the environment for industries here through new tax arrangements.

“Official statistics suggest that the province has 46 per cent of its population well below the poverty line, which cannot be put at par with the rest of the country without active external support.

“The federal government acknowledging the poor socio-economic conditions of NWFP and Balochistan had been lending budgetary support in shape of subventions to the provincial governments until recent past.

“However, under the interim National Finance Commission (NFC) Award announced by President Pervez Musharraf, the two provinces have been deprived of their preferential status by making Sindh and Punjab shareholders of such grants”.

"Subvention grants were meant to help the provincial governments in keeping the social service delivery system in running condition which received colossal pressure owing to influx of Afghan refugees, but now the four federating units are wrongly given the same status," says Anwar Kamal Marwat, MPA of PML-N.

He advocated that the federal government should have announced a special package for the Frontier province, which had greatly suffered during last three-decade-long unrest in the region.

There is no denying the fact that the NWFP suffers from a natural disadvantage of being away from seaport, but its location has also some great advantage. This advantage can not only be exploited for the economic benefit of the local people, but can also go a long way in the economic development of the country.

Being located at the doorstep of Afghanistan and the Central Asian Republics (CARs), NWFP can easily become a hub of trade and business activities for such huge and potential consumer markets. However, this dream cannot materialise without federal government’s support.

Trade and industry in the NWFP is mostly focused on consumer markets in Afghanistan, while having access to the huge CARs markets investment opportunities can further be stimulated.

Moreover, owing to abundant natural energy resources and raw material in CARs it has a unique position in so far as international trade and business is concerned.

Ghulam Sarwar Mohamand, former SCCI president says: “ NWFP can facilitate export of CARs’ oil and gas to South Asia, Southeast Asia and beyond. NWFP can be the first to benefit form this cheap energy option. CARs also possess valuable raw material which can be utilised in our local industry and re-exported to these countries.

“Similarly, Afghanistan is relying on NWFP markets because of unavailability of basic infrastructure required for reconstruction purposes and for the development of trade and industry.

“Keeping in view the industrial and trade scenario of NWFP, a special package should have been designed for promotion of industrial sector focusing trade with Afghanistan and beyond."

“The NWFP is rich in mineral potentials, including marble, granite and gemstone. In addition to industries based on these raw materials, there are a number of region specific industries like match industry, furniture, cement, pharmaceuticals, food products which have vast potential for exports. However, these potential areas can only be exploited through sustainable policy measures,” says Mr Mohmand.

He suggests: "The government should pay attention on these region specific industries and give freight subsidy, exemption from import duties on raw materials and machinery and tax holiday so that these industries could flourish.

“Cost of utilities need to be reduced which can be made possible if the federal government develops the NWFP potential for hydropower generation and captive power mechanism.

“The NWFP can generate cheap electricity through hydropower generation, for which attracting FDI to this sector can enable the local industry to have cheap resources for export related activities."