June 16, 2008	Monday	Jamadi-us-Sani 11, 1429

The business and trade is unhappy over the two years’ exemption from capital gains tax on shares as “it gives a signal that nobody should suffer pains of industrialisation or take business risks’’, says a document issued by the apex trade body, the Federation of Pakistan Chambers of Commerce and Industry (PFCCI).

‘’If attractive returns are available on stock market’s non-productive portfolio investment, why should anyone take the trouble for setting up an industry and get involved in all sorts of hassles,’’? a senior business leader remarked on Thursday last at the FCCI meeting held to assess the impact of budgetary proposals.

The FPCCI leader, Mr Tanveer Hussain Sheikh ruled out any improvement in investment or in exports or, boosting of production as there is no incentive for setting up industry, production cost is touching sky high which is pushing Pakistan out from export markets. He was asked about his assessment of 2008-09 budget impact on investment, production and export.

While the FPCCI leaders were unhappy, textile industry leaders managed to put up a brave face in a socio-economic environment certainly not enviable, and after the budget that offered hardly any incentive. However, Chairman of All Pakistan Textile Mills Association (APTMA), Mr Iqbal Ibrahim expressed confidence about pushing up textile exports up to $20 billion in the next five years and up to $40 billion, almost five per cent of global textile export by the year 2010.

‘’Even in the current fiscal year, when conditions were pretty difficult for almost last 12 months, textile products were in demand in international market and we remained closed to our export target of about $10 billion,’’ he said. ‘’Eight categories of Pakistan’s textile are world’s best’’, he claimed. Zubair Motiwala, a former President of Karachi Chamber of Commerce and Industry has made some investment proposals that would give a boost to textile processing, generate at least 200 megawatt electric power for KESC system and will contribute in the overall development of textile sector.

‘’Processing is the weakest link in textile industry because not much investment has come in this sub-sector’’ he said. He suggests installation of steam turbine generators for which he said ‘’more than 50 textile mills in and around Karachi’’ have already shown interest. The idea is to replace existing gas and fuel run generators with steam turbines. The steam will generate electric power and consumed in the processing industry.

Textile mills will use only a small part of five megawatt electricity that is intended to be generated from turbine while surplus power can be transmitted to grid for supply in the KESC system. The cost of installation of these steam turbines in 50 mills would be hardly $55-60 million for which the industry seeks some concessions and incentives. The cost of electricity to be given to KESC will be less than Rs1.50 a unit. Recovery of investment, as he claims, is certain within two to three years.

‘’Textile mills will save on the gas or fuel bill, the KESC will get electricity on cheap rate and after two or three years on payment of investment, the mill will add to its assets’’ he said.

APTMA was happy over the shifting of government focus to agriculture in the budget. He expects textile to gain a lot from improvement in agriculture as prices of cotton have shot up beyond Rs4,000 a bale this week. Demand for cotton is bound to pick up in future.

But then many textile leaders including Zubair Motiwala and others who were involved in pre-budget consultation at various levels feel disappointed as the budget does not incorporate many of their proposals.

There is issue of rationalisation of sales tax and excise on more than seven categories of chemical dyes which have adjusted in a manner that is not acceptable to the industry.

A levy of one per cent on export proceeds--roughly Rs6 billion plus on about Rs650 billion textile export proceeds--is obviously an unpleasant tax for the exporters who complain of cash flow problems because of 35 per cent cash margin on import of many inputs. However, APTMA leader skipped over the issue. Privately, many APTMA leaders intend to raise this issue with government and hope that it will be addressed either in textile or trade policy.

‘’The budgetary measures do not recommend any mechanism or incentives for the investment in industrialisation,’’ said a paper circulated by the FPCCI at the media briefing. The FPPCI is also aware that no measures to boost export have been taken. Instead the FPCCI found an attempt has been made to curb import growth by pushing up tariffs.‘’Such a strategy, will further push up inflation in the economy and isolate the country from globalisation’’ the FPCCI observed.