ISLAMABAD: Ministry of Commerce (MoC) has drafted Strategic Trade Policy Framework 2020-25, on the basis of guiding principle of no element of any duties and taxes on exports, sources close to Prime Minister Advisor on Commerce and Investment told Business Recorder.
On the basis of consultative process involving private stakeholders, Ministry of Commerce has projected $ 26 billions exports in 2020-21, $ 31 billion in 2021-22, $ 35 billion in 2022-23, $ 40 billion in 2023-24 and $ 46 billion in 2024-25, the sources added.
The policy document will be a living document with option to review the proposed policy interventions and introduce new initiatives. In order to achieve a sustainable rapid export growth a comprehensive strategy has been devised to (a) optimize the growth of existing sectors in the short term, (b) diversify into the new sectors with an ease of diversification in the medium term, and (c) structurally develop the innovation-driven export sectors in the long term.
The 18% decline in Pakistan’s share in global market during the last decade means that Pakistan’s export competitiveness in the global market has been eroding. The regaining of the global market share vitally depends on the restoration of Pakistan’s export competitiveness.
This Strategic Trade Policy Framework is based on the following pillars: (i) to make the exports a driver of economic growth as the only sustainable source of earning foreign exchange; (ii) enhancement of exports is a national effort and not just the responsibility of Ministry of Commerce;(iii) to introduce strategic interventions in priority sectors under Make in Pakistan initiative; and (iv) to align with macro-economic framework and other national policies such as Textiles Policy, Industrial Policy etc.
Ministry of Commerce has identified following priority sectors which have been bifurcated into traditional and non-traditional/developmental categories: Traditional sectors- (i) textile & apparel;(ii) leather;(iii) surgical instruments;(iv) sports goods;(v) carpets;(vi) rice and ;(vii) cutlery. Non-traditional/ developmental sectors- (i) engineering goods;(ii) pharmaceutical;(iii) auto parts ;(iv) processed food & beverages ;(v) footwear;(vi) gems & jewellery;(vii) chemicals;(viii) meat & poultry;(ix) fruits & vegetables;(x) sea food and (xi) marble & granite.
Implementation of the policy initiatives is of critical importance to the success of STPF 2020-25. In order to monitor and evaluate the implementation of STPF 2020-25, it has been decided to constitute a cross functional committee comprising of: (i) Prime Minister of Pakistan (Chairman); (ii) Advisor to PM Commerce and Investment; (iii) Advisor to PM Finance and Revenue; (iv) Minister for Energy/Power Division; (v) Minister for National Food Security and Research; (vi) Governor State Bank of Pakistan; (vii) Secretary Commerce; (viii) Secretary Finance; (ix) Secretary Industries; (x) Chairman Board of Investment and; (xi) Chairman Federal Board of Revenue. Other departments or private sector can be co-opted on need basis by the committee. Monthly meeting of the subject committee will be held in order to ensure accountability for the implementation of various policy measures.
The cost of doing business especially those related to trading across borders impacts on competitiveness. Besides, the tariffs, the inefficient logistics, cumbersome administrative procedures, documentary requirements and dwell time at ports add to the transactions costs and in turn affect competitiveness. Furthermore, the areas of exports support incentives mechanism such as duty drawback schemes, sales tax refunds and low-cost financing facility etc., will require review to make it reliable, consistent and automated. There would be continuous regionally competitive energy prices for export-oriented sectors. There would be competitive wages for the workers benchmarked with regional peers and participation of women workforce with equal opportunities.
Commerce Ministry is of the view that the excessive import tariffs, especially on raw materials, intermediate goods and machinery, have affected the competitiveness of manufacturing by increasing the cost of inputs and capital goods. Effectively employed, the tariffs play an important role in allocation of resources, protection of the domestic industry against foreign competition, improving competitiveness of the domestic industry, generating employment opportunities, attracting and protecting investments, improving balance of payments, serving as a source of revenue and income distribution by levying higher import duties on luxury goods and lowering tariffs on raw materials and intermediate goods.
In order to leverage the tariffs as an instrument of trade policy, Ministry of Commerce will implement Tariff Policy with following major objectives: (i) to make the tariff structure a true reflection of trade policy priorities; (ii) to improve competitiveness of manufacturing especially the export sector through duty free access to imported raw materials; (iii) rationalize the tariff structure for enhancing the efficiency of the existing domestic activities, especially in the manufacturing sector and for improving the resource allocation; (iv) to reduce the relative disincentive for the exporting activities; (v) to improve the growth potential of the country and increase employment opportunities by attracting investment into efficient industries; (vi) to encourage value addition through the principle of cascading of tariffs; (vii) To remove anomalies in the tariff structure which is causing distortions between sectors and in the value chain of the same sectors.
In order to incentivize the technology adoption and upgradation by the enterprises a Technology Up-gradation Scheme, was announced in STPF 2015-18 for certain sectors. The sources said, in order to make the investment in new technologies more attractive, an improved scheme will be introduced.
To integrate and upgrade into the global value chain, firms require participating in the production processes in the entire value chain. Ideally firms should participate in a higher value-added process to fetch higher value in the end. Countries with advance R&D infrastructure, technology and skilled work force participate at the downstream value-added component of the value chain. To facilitate firms to upgrade their processes, Ministry of Commerce will offer support incentives.
The market access is an important determinant of competitiveness of a country’s products and services in a foreign market. Ministry of Commerce will focus on best utilization of current regional and bilateral trading arrangements through detailed review and negotiation. New trading arrangements will be pursued with utmost care to protect local industry and focus on market access for value added goods and not only commodities. For optimizing utilization of enhanced market access under FTAs, PTAs and GSP Plus, a market communication strategy will be implemented to disseminate the information on opportunities available for Pakistani enterprises under the preferential market access arrangements. The communication strategy will include seminars and advertisements through electronic, digital and print media.
Pakistan’s exports are concentrated in few products exported by few firms to few markets. Textiles sector accounts for around 61% of total exports of the country. The share of non-textiles in exports is less than 40%. Policy interventions will be made by Ministry of Commerce for following diversifications: (i) the horizontal diversification which entails adjustment in the national export mix by adding new products to the existing export baskets within the same sector will be pursued ;(ii) the vertical diversification into processing of domestically manufactured goods through a shift from the primary to the secondary or tertiary sector by means of increased value-added activities such as processing, marketing and other services, is essential to increase the export earnings.
A special focus will be given by the Ministry of Commerce for supporting firms in development and acquiring of brands. Country branding strategy of Ministry of Commerce will also be enhanced.
Export Development Surcharge to Export Development Fund (Prospective). Currently, only around 20% of the total annual receipts from Export Development Surcharge are being transferred each year by Ministry of Finance to Export Development Fund (EDF). Beginning from FY2020-21 and henceforward, the entire amount of Export Development Surcharge (EDS) will be transferred to the EDF.