KARACHI, May 27: Industrialists expect an export and industry oriented budget for 2006-07, as they think the government has acknowledged that there is a need to curtail cost of doing business in the country in order make local products competitive in the global markets. They also see some cut in taxes and duties at local and import stages.

However, consumer related bodies think the government will come out with some package to address the issue of rising prices of essential commodities during the last one year.

These market players say the government appears concerned this time over the artificial increase in property prices and rising speculative trading in stock markets and it may come out with some measures to discourage these trends.

However, many market people say the government will announce some relief package to win support of masses for the next year’s elections. Others say the relief for consumers and industry, which the government may be planning, has nothing to do with the upcoming elections because these will be held in September 2007 after the budget for 2007-08.

Site Association of Industry Chairman Ameen Bandukda said the next budget would be people-friendly loaded with package and incentives aimed at controlling the inflationary trend in prices.

“The government has finally realised that inflation is too high for the end users,” he said, adding that the industry would also get relief. He said there had been an average economic growth and high mark-up rates during the last year. The government also looks determined in opening new job opportunities by facilitating new industries and expansions in the existing ones.

“I see no new taxes in the upcoming budget. The government is likely to bring down the rate of existing taxes and duties,” Mr Bandukda said, adding that the rate of general sales tax is likely to be cut to 10 from 15 per cent, besides a reduction in income tax rate on corporate and banking sectors.

To cover up the shortfall in case of tax cuts, he said, the government might come out with a policy to bring wholesalers and retailers into the tax net. Besides, there is also very low tax on the transportation sector.

He said the government may impose some taxes on real estate and stock trading in order to curb speculative trading. He pointed out that the textile sector was facing problems due to rising input cost and the government should come to their rescue.

Mr Bandukda ruled out that the government would provide any incentive in view of the next year’s elections. “High inflation and rising cost of doing business are the areas of concern for the government rather than the elections, as there is one more budget to be announced before the September 2007 elections,” the Site chief said.

All Pakistan Textile Mills Association Vice-Chairman Mushtaq Vohra said the government would provide incentives to the garment and textile sector, as it realised that the rising business cost had a negative impact on export and trade. The government has also realised that the interest rate on borrowing is the highest (13.5 per cent) in Pakistan as compared to India (6.5 per cent) and Bangladesh (six per cent). The export refinance rate also ranges between nine and 9.5 per cent.

Electricity tariff is also high in Pakistan by 25 per cent than Bangladesh. India offers 5-7 per cent rebate on power to export-oriented industries. “I hope the government will announce some relief in power tariff,” Mr Vohra said, adding that the textile sector expected the new budget would be export-friendly.

He said banks had reserved a handsome amount of capital for consumer financing loans that was also a main reason for rising inflation.

Korangi Association of Trade and Industry Chairman Gulzar Firoz expects the government is under severe pressure because of rising prices of essential items. “It will come up with effective measures in the new budget to control prices of essential items in future,” he added.

“Keeping in view the 2007 elections scenario I think the new budget will be more balanced and industry-friendly,” he said, adding the 2007-08 budget would be announced before the elections but the government would start the process of providing relief to common people from this year’s budget.

Mr Gulzar said there was a possibility that salaried class might get some benefit, but the real benefit to the people, which seemed to be a daunting task for the government, was to provide cheaper oil products and lower tariff on electricity.

“The government should reduce taxes on petrol and electricity bill so that a large number of people could benefit from it.” He said the exporters of goods were demanding withdrawal of withholding tax of 0.25 per cent imposed in the last budget.

The KATI chief said the government was planning to check speculative trading in stocks and real estate and might impose some taxes to curb artificial increase in prices.

Al Karam Textile Mills director Rafeeq Ibrahim said the budget should be industry and export friendly, as the rising input cost had made locally manufactured products uncompetitive in the foreign markets. Interest, export refinance rates and utility charges are very expensive.

He said the governments of Bangladesh, China and India were providing incentives and packages to their industries, thus creating problems for the Pakistani goods to compete in the world markets.

“We are gradually getting out of the world markets and heading for closure of big industrial base in the country because of rising input cost,” he said.

Mr Ibrahim said the hosiery sector had collapsed and the apparel industry was closing near to the disaster. “We have talked to the prime minister and the CBR chairman to come up with a package for textile and apparel sectors so that they could survive,” he said.

“Rising inflation is another hot issue that needs to be controlled,” he said, adding that there was also a need for increasing wages of workers. “When the government can provide power subsidy to cement and fertiliser sectors, then why the most job-oriented sectors like textile and apparel are ignored.”

Mr Ibrahim said the government should announce a cut in taxes on POL products so that general public could take a sigh of relief. “The non-performing sectors like stocks and real estate should be taxed.”

Bonanza Garments director Hanif Bilwani said the next budget should be people and export friendly, hoping that the government would reduce import duties on fabric and clothes.

TRADERS: Advisor to Karachi Wholesale Grocers Association Anis Majeed said the government would announce subsidy on pulses and sugar imports to bring down prices of these essential commodities.