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KARACHI, July 26: Money changers say they have sold around 25 million dirham in the last three days as the demand for the UAE currency shot up after the government allowed licence-free import of gold this week.
They say the decision to liberalize gold import has also led to increased buying of US dollars from the open currency market. The trade policy for fiscal year July/June 2002-03 has done away with the condition of seeking a licence from the government to import gold. The policy announced this week allows the import of the yellow metal by anyone who pays the duty at the rate of $1 per tola and arranges foreign exchange for this purpose through his own resources.
“There is a big demand for Chamak (currency dealers’ slang for Dirham),” said Muhammad Ali Motiwala of currency brokerage Galaxy International. “The buyers are mostly bullion dealers. They are buying chamak and US dollars to finance import of gold,” he said.
Sources close to the Forex Association of Pakistan said money changers all over Karachi have sold about 25 million dirham in the last three days mostly to bullion dealers. They said bullion dealers and jewellers have also increased dollar buying for gold import from Dubai.
Former secretary general of Karachi Sarafa & Jewellers Group Haji M. Farooq confirms this statement: “It is true that people have started buying dirham and dollars to finance gold imports from Dubai,” he said but hastened to add: “gold import is not at all feasible now as the international price is still very high —$317 per pound.
Leading bullion dealer and jeweller Iqbal Motiwala also said most bullion dealers are waiting for the announcement of the new procedure of gold import. But he said he would not rule out the possibility of some people buying dirham and dollars in advance for gold imports.
MONOPOLY VS SMUGGLING: Whereas Haji Farooq and Iqbal Motiwala say liberalization of gold import would end the monopoly of half a dozen parties without reducing revenue, licensed gold importers say it would give rise to gold smuggling and thereby stop revenue generation.
Chairman of All Pakistan Gem Merchants & Jewellers Association Kamran Khan says licensed importers have not imported a single tola of gold since the announcement of the trade policy. Khan, who is one of the six licensed importers of gold, said he would stop gold import if the government was stick to its liberal import policy.
“The liberalization of gold import would simply stop revenue generation as smugglers would find it easy to operate under the garb of liberal import policy,” he remarked. Khan claimed that all half a dozen licensed gold importers were paying $5 million annually as import duty. He said since the licensed importers were paying this duty in advance to their banks concerned there was no question of duty evasion. “But now the liberalization would open the doors of corruption...and people would give a few thousand rupees to the customs officials rather than paying import duty.”
Pakistan allowed import of gold by licensed importers in mid- 1990s. “Before then the government was earning very nominal rather no revenue on gold import that was almost entirely under smuggling regime,” said Kamran Khan who heads Tessori group that earns roughly $45 million through jewellry exports every year.
Khan said if the liberalization of gold import was meant for creating healthy competition then the government should have invited more applications for this purpose. “I do not know of anyone willing to get such a licence which clearly shows that the liberalization would simply provide a cover to gold smugglers.”
But Haji Farooq says since neighbouring India had liberalized gold import two years ago thereby stopping gold smuggling from Pakistan the question of bringing in duty-evaded gold to smuggle it out is out of question. “Liberalization of gold import will help generate more revenue,” he says. “Most ordinary people who used to bring in small quantities of gold concealed in their baggage and got the same cleared by the customs officials will now bring it in the open and will pay the duty,” he says. But he admits that some people may use a liberal import policy as a cover against smuggling. “But then that is true everywhere. Some people always tend to evade duty and they get away with it,” he remarks.
