ISLAMABAD: The government on Wednesday said its Strategic Trade Policy Framework (STPF) and new Textile and Apparel Policy (TAP) 2021-25 envisaged diversification of export markets and products but did not suggest measures beyond guaranteeing competitive energy rates to sectors other than textiles or offer any alternative plan in case exports suffer in key destinations of the European Union and the United States due to Ukraine standoff.

Speaking at a news conference, Adviser to the Prime Minister on Commerce & Textiles Abdul Razak Dawood said the main commitment of the TAP approved by the Cabinet on Tuesday was to “give textile industry in writing to ensure the internationally and regionally competitive gas and power rates throughout the policy period”.

He said he had written in the draft policy that current rates of gas and electricity at the rate of $6.5 per million British Thermal Unit (mmBtu) and 9 cents per unit all exclusive respectively to the sector should be fixed for the entire policy period but it was changed to ‘internationally and regionally competitive rates’ in consultation with the ministries of finance and energy in view of increasing energy price trends and limited budget.

These ‘competitive energy rates’ would be determined by the ministries of finance, commerce and energy at the time of budget-making every year to book its costs or subsidies in budget. “This is our commitment in writing to the industry to provide competitive energy prices”, he said.

Also, the government would maintain tariff rationalised in the last budget on import of raw material and intermediaries and continue with DLTL (Drawback on local taxes and levies) to textiles besides financing for both long-term needs and working capital is currently being provided by the State Bank of Pakistan.

He said the major challenge facing the sector was that the industry was exporting 75pc of all products to just 10 countries and hence failed to achieve diversification. Secondly, just 15pc of tariff lines contribute to 50pc of exports. Therefore, the industry needs to diversify markets and product lines increasingly in value-added.

He said the SBP’s Temporary Economic Refinance Facility (TERF) had been successful and about $200 million worth of machinery imports had been made that would help enhance production capacity. But the actual challenge, he said, was to sustain the export growth and therefore all economic ministries’ challenge, as well as the focus, would be to ensure sustainability.

Responding to a question as to how the government planned to continue with financing to the textile sector given limitations on SBP’s such operations under the IMF programme and the amended SBP law, Secretary Commerce Saleh Ahmad Farooqui said the policy approved by the cabinet envisaged providing financing and subsidies for which separate arrangement could be put in place.

The adviser sidestepped questions relating to government estimates of export loss in case of the Ukraine crisis and the alternate options to bridge the gap.

He also did not directly respond to a question how the industries other than textile could compete with textiles at home and secure markets abroad when the entire incentive regime including energy, tax exemptions, subsidies and financing facilitation focused on textiles and if such incentives could generate better or worse output from other sectors.

He, however, said he wished all industries are provided internationally and regionally competitive rates but perhaps the government had limited resources.

Published in Dawn, February 17th, 2022