ISLAMABAD, July 8: The Chairman, National Tariff Commission, Dr Faizullah Khilji here on Tuesday advised the local footwear industry to modernise their production techniques in order to face the imminent competition from multinational brands.

He was speaking at a public hearing held at the commission on the request of the sole distributors of Nike products in Pakistan for drastic reduction in taxes from 25 per cent to 10 per cent on the finished sportswear including sports footwear.

The request was opposed by the representatives of local industries - Servis Industries and Borjan - arguing that such reduction would jeopardize the local industry, further worsening the already bad unemployment situation prevailing in the country.

At present the rate of taxes on imported raw materials and finished product was the same, that is, 25pc. It should be reduced so that they may compete with the finished footwear from abroad, they suggested.

Dr Khilji pointed out that the tariffs were being brought down all over the world. The commission would certainly consider their request for removal of anomaly of taxes on raw materials and finished products if a proper application were sent to it by the local industry.

He, however, pointed out that even if the government did provide protection through tax concessions against competition from overseas, it was only a matter of time before — say, only two to three years — the forces of consumer demand for foreign brands, buoyed by media publicity, pushing them in a serious crisis.

The local industry should, therefore, pay an urgent attention to developing their own brands that might catch the imagination of consumers, particularly the youth, or join up with popular foreign brands, NTC Chairman suggested.

There was also the trend elsewhere in the world towards horizontal integration in which the owners of popular brands got components produced by other companies and then assembled and marketed these under their brand. The local industry, Dr Khilji suggested, might also consider developing their manufacturing along these lines.

He also drew the participants’ attention to an aspect of the trade the benefits of which had favoured consumers elsewhere in the world but not those of Pakistan. New designs of shoes, etc., often entered the market frequently, which forced the companies to dispose of their older products at a heavy discount.

Some traders purchase these in bulk from UAE, etc., and sell these in Pakistan at rates much lower rates. In reply to a question, Mr Adil Matcheswalla, Chief Executive of Speed (Pvt.) Limited said at present the Nike products including shoes, apparel and accessories were only being imported in finished form and marketed through 11 outlets in Pakistan.

It was also planned to re-export these from Pakistan to Nepal and Bangladesh shortly - a process that will be facilitated by “monetary value-addition”. But that was one of the carrots held out by him in case of reduction in taxes on their imports into Pakistan.

As regards local manufacturing, he said Nike would consider this only after their sale was, say, one lakh pairs of their shoes.

His argument was that the sole distributors of Nike products found themselves at a disadvantage against the retailers who, it was alleged, indulged in misdeclaration and under-invoicing and cheated the government of tax revenue.

The NTC staff, however, pointed out that if the duty on finished product was reduced as requested by Speed, it would benefit those retailers too. The only effect would be further reduction in tax revenue to the government. Moreover, the Central Board of Revenue had already devised a mechanism to curb under- invoicing.