KARACHI: The government must allow importers to avail Long-Term Financing Facility (LTFF) given by the State Bank of Pakistan (SBP) in order to increase the pace of industrialisation in the country.

The demand was raised by industry leaders who feel that if the government wants to see rapid industrialisation, it should extend the SBP’s subsided scheme of funding of LTFF to the import substitution industry.

The Korangi Association of Trade and Industry President Danish Khan told Dawn that among many reasons as to why Pakistani products are uncompetitive in the international market the import of raw material for value-addition and exports tops the list.

However, once import substitution industries are allowed LTFF given by the SBP, it would increase the pace of industrialisation and investors will take keen interest in setting up industries for raw material production.

The Sindh Industrial and Trading Estate Chairman Saleem Parekh stated that lately the pace of industrialisation has slowed down due to high cost of doing business and flow of investment towards the service industry.

Compared to neighboring countries, Pakistan heavily depends on imported raw materials resulting in costlier exports and once the government allows the concessionary scheme of LTFF to import substitution industry, it would attract significant investment, he added.

Parekh further said that for value-addition of goods, the industry depends heavily on imported chemicals and dyes, accessories so much so that units engaged in production of sportswear in Sialkot imports fabrics to meet with the international standards.

Former president of Lasbela Chamber of Commerce and Industry Ismail Suttar also reiterated the need to extend LTFF to import substitute industries in order to help industrialisation of the country.

The SBP under LTFF scheme gives funds to commercial banks at 3 per cent and allow banks to negotiate their spread with borrower having upper limit of 6pc which is much cheaper than the Karachi Inter-bank Offer Rate (Kibor) – which presently ranges between 10.26pc to 11.1pc, he maintained.

He further explained that, under LTFF, the investors are only allowed to import capital goods such as plant and machinery whereas the remaining funds required for running industry are either arranged by investors themselves or borrowed at Kibor.

“Once import substitute industry is set-up and most of the raw materials are locally produced, it would help to save foreign exchange on such imports and dollar saved is dollar earned,” Suttar asserted.

India is currently better placed as far as input cost of export goods is concerned and this is only because most of the raw materials are locally produced which was made possible by the Indian government’s efforts on developing and setting up import substitute industry, he maintained.

Suttar further said that since export industries are zero-rated, the government gets no revenue but import substitute industry would not only generate revenue like income tax, sales tax etc but would also help save foreign exchange and ease the pressure on country’s reserves.

Chairman Pakistan Apparel Forum Jawed Bilwani said that according to SBP statistics, up to 33pc of our exports constitute imported components but private sector strongly believes that these components run up to 50pc.

Published in Dawn, January 5th, 2019