The local cost of production is high on account of soaring energy tariffs, expansive fuel, constant rupee depreciation, high markup rate along with rising import duties on inputs, making the local production uncompetitive. Pakistan should enter into Free Trade Agreements (FTAs) and Preferential Trade Agreements with only those countries where it has a clear and mutual competitive advantage.
These views were expressed by the Pakistan Industrial and Traders Association Front senior leader Sheikh Sajjad Afzal. He said that Free Trade Agreements signed with different countries including China, without taking the real stakeholders onboard, are damaging the local industry, as imports of several products under FTA with these countries are subject to very low or zero import duty.
On the other hand, local processors are unable to export their products to these countries as they are absolutely uncompetitive owing to hosts of reasons, he said. Sheikh Sajjad Afzal, who is also the elected member of LCCI executive committee, warned that if smuggling is not checked immediately, the entire industry in general and the emerging industrial sectors in particular will suffer a serious setback. If this policy continues billions of rupees investment in domestic industry will be shattered, he added.
He said that bilateral Trade Agreements such as FTAs and MFNs with countries which have different regulations and protocols, defeat the principle of bilateral trade, as such, our capacity utilization decreases, increasing our cost of production.
He asked the government that all impediments which increase the cost such as lower capacity utilization, import duties on inputs and lack of protection against imports need to be addressed for making exports feasible. “FTAs particularly with China have given great setback to the local business, especially the industry. The local industry is not competitive in the global market as compared to its regional competitors of India, China and Bangladesh.”
He said that Pakistan is passing through the most crucial times and present regime should not be blamed for everything. “What I have experienced, is that the wrong path that has been adopted for decades cannot be changed at once.
However, amendments can be made and system can be improved by making changes slowly and gradually. He said that the tax-to-GDP ratio is very low and our successive governments are mainly responsible for this, as its tax machinery create harassment among businessmen, discouraging only those who are already registered.
The registered sector is discouraged by all means through audits, notices and preparation of tax manuals. Moreover, high tariff rates are also imposed on those who import their goods legally and through proper channels. In this situation how unregistered businessmen will take a risk to get themselves registered, as they are earning more in this way. There is cost difference of around 50 percent between smuggled and legally imported goods.
