WITH the next budget coming up, hosiery and garments exporters have asked for the prime minister’s support on different tax policy issues concerning their trade. On top of their wish list is the restoration of the zero-rating facility for their local supplies and reinstatement of the previous tax regime. They argue that the shift from FTR to MTR, or minimum tax regime, and the removal of zero-rating on local supplies is disrupting their supply chains, which play a key role in maintaining over $9bn in value-added exports. According to the exporters, these measures have, in addition to increasing administrative challenges and compliance costs, impacted the finances of small and medium-sized exporters. In short, they want the government to subsidise their exports with taxpayers’ money, and at the risk of encouraging informality and tax evasion on their local sales. Though the exporters may be facing certain teething issues due to these steps introduced in the current budget, the government’s measures can in no way be blamed for their eroding international competitiveness and failure to comply with the requirement of buyers.

Nonetheless, two other demands made by the apparel exporters — pertaining to delays in tax refund claims and regressively high tariffs on the import of raw materials — need to be addressed quickly and judiciously to help them overcome issues of cash flow and diversify their product range. Nearly 80pc of the global apparel trade has moved into synthetic, high-performance and functional textiles, compared to the cotton-based products comprising the remaining 20pc. The ratio in Pakistan is quite the opposite of the global trend, because the exporters’ access to essential raw materials is hindered by higher duties on imports. The dream of boosting textile exports through product diversification will not materialise unless our value-added textile industry gets access to cheaper, manmade synthetic fibres. It is high time Pakistan’s policymakers understood the extent to which tariff restrictions are limiting the textile industry’s access to new fibres. This, in turn, is holding back the government’s plan to move towards export-oriented growth. Countries such as Bangladesh and Vietnam have progressed by adopting new fibres. Resolving legitimate issues will not just make our exporters internationally competitive but also unlock Pakistan’s fashion export potential.

Published in Dawn, June 3rd, 2025