Strategic Trade Policy Framework 2012-15 Speech
Makhdoom Muhammad Amin Fahim, Senior Federal Minister for Commerce
Ladies & gentlemen,
It is a matter of privilege for me to present the second strategic trade policy framework (STPF) for next three-year period, 2012-15. Present democratic government took the initiative to launch a three year strategic trade policy framework in 2009 instead of annual trade policies to address the concerns of our business community as well as our trading partners on frequent policy shifts – termed as S.R.O. culture. This initiative has served the purpose of giving a medium term outlook to our policy regime.
Carrying this initiative forward, we are now launching the second Strategic Trade Policy Framework, for the period 2012-15.
During past three years, business climate of the country has unfortunately been affected by the security situation prevalent in the region. Energy deficit, law and order situation and devastating floods in 2010 and 2011 have also added to the problems being faced by our industry. However, our economy has shown strength in the face of these challenges and has continued to grow at a steady rate.
Despite various challenges faced by economy, our trade has shown consistent improvement. Our exports increased by 27 percent in the year 2010-11 and touched a record level of us $ 24.8 billion. There was a slight fall of 4.7 percent in exports during 2011-12, due to the global financial crisis and lower prices of cotton in the international market.
Textile still remains the mainstay of our exports. However, focused efforts by the Ministry of Commerce for diversification of our export basket and markets have yielded positive results and the share of non-textile sector has risen from 36.5 percent of our total exports in 2006-07 to 48 percent in 2011-12. Similarly, we have also been successful to a reasonable degree in diversification of our export markets with a gradually increasing quantum of our exports now going to markets in Asia and Africa. Importantly Afghanistan has emerged as a major trading partner and has become our third largest export market.
Ladies & gentlemen,
Given the in-elasticity of our import basket, only viable option available with the government to address the issue of trade deficit is to put a higher level of effort for increasing our exports. It is in this perspective that we have formulated the strategic trade policy framework for 2012-15.
The strategic trade policy framework sets out policy guidelines and identifies principal areas of action to strengthen different aspects of Pakistan’s export competitiveness directly or indirectly.
The major elements of STPF 2012-2015 are:
• i. Focus on regional trade
• ii. Strengthening of the institutional framework for promotion of exports
• iii. Creation of regulatory efficiencies
• iv. Export development initiatives
• v. Increase exports from less developed regions of Pakistan
• vi. Promotion of domestic commerce
• vii. Strengthen the monitoring and evaluation mechanism
I would now proceed to highlight the salient features of this policy framework.
DOMESTIC COMMERCE REFORM AND DEVELOPMENT
Recognizing linkages between domestic commerce and our competitiveness in the international markets, it has been decided to mandate Ministry of Commerce to promote domestic commerce. A domestic commerce wing is being created in the Ministry of Commerce comprising of two units i.e., domestic commerce unit and trade in services unit.
The new set up will establish necessary institutional and legal mechanism and business processes to facilitate domestic commerce regulations. Besides this, it would establish a framework for interface with business community and provincial governments.
RATIONALIZING TARIFF PROTECTION POLICY (TPP):
High tariff protection maintained over a period of time tends to erode competitiveness and affects consumer welfare. Ministry of Commerce will adopt following guiding principles to create a competitive environment:-
• i. Promote competitive markets in Pakistan.
• ii. Ensure conformity to international agreements and practices.
• iii. Promote domestic and foreign investment.
• iv. Create level playing field for Pakistani firms in international as well as domestic markets.
• v. Due consideration to consumer welfare.
• vi. Cater to the changing needs of Pakistan’s economy.
• vii. Create an enabling environment to pursue the legitimate goal of industrialization in Pakistan.
ESTABLISHMENT OF PAKISTAN LAND PORT AUTHORITY (PLPA) TO STRENGTHEN REGIONAL TRADE
Trade integration with south Asia, china and the ECO countries is likely to increase the volume of trade flows across our land borders. However, our borders at land ports lack world class trade facilities. In order to transform our land ports into efficient facilitators of trade while simultaneously being responsive to security issues and smuggling, human. It is proposed to establish a Pakistan land port authority as a statutory body, under the administrative control of the ministry of interior with representation from relevant federal entities as well as from the respective provincial governments.
SETTING UP OF EXIMBANK
Pakistan’s exporters need legitimate trade financing support in the wake of challenges of high interest rates and limited availability of financing for export and investment. It has therefore been decided to establish an Export Import bank. The EXIM bank, with the help of provincial governments, would not only provide export credit, it would also provide supplier’s credit and export credit guarantees.
PROMOTION OF SERVICES SECTOR EXPORTS
Services sector contributes 55 percent to the GDP but export of services from Pakistan has not been reflective of its true potential. Our services exports stood at US $5 billion in 2011-12 whereas the global trade in services was $18.2 trillion. To tap the enormous potential of export of services, especially to Asia, it has been decided to establish a Services Trade Development Council in collaboration with the relevant sectors. A special task force is also proposed to be constituted for facilitating the development of e-commerce
CREATING REGULATORY EFFICIENCIES
A framework of lesser but smarter regulations is necessary for promotion of international trade therefore; it has been decided to strengthen the National Tariff Commission. A ResourceManagement unit in the Ministry of Commerce and an International Trade Dispute Arbitration Council will be established. We will also revamp the existing Commercial Courts to give the country a more efficient, time saving, relatively inexpensive mechanism for trade dispute resolution.
STRENGTHENING OF TRAINING AND PRODUCT DEVELOPMENT INSTITUTES
The training and product development institutes, running under Ministry of Commerce and TDAP will be strengthened after carrying out a detailed ‘entity improvement diagnostic and audit’. This would help these institutions produce better quality human resource and designs for our industry.
REVAMPING EXPORT PROMOTION AGENCIES &TRADE MONITORING COMMITTEE
Export promotion needs strong support by a country’s Export Promotion Agencies [EPAs]. EPAsin Pakistan are under-resourced and not tuned to modern challenges of export promotion. It has been decided to:-
• i. Overhaul trade offices abroad by providing both financial and improved human resource after carrying out a performance analysis
• ii. Constitute a high level ‘Trade Committee’ to evaluate our trade performance on a quarterly basis and to address specific issues hampering Pakistan’s foreign trade and competitiveness.
Ladies and gentlemen,
On basis of the principal elements of the policy framework we are introducing many sector specific export development initiatives. Due to paucity of time, I would only give a brief overview of these initiatives. The details would be made available to the media and displayed on the website of the ministry .
MARK-UP SUPPORT OF 2 PERCENT ON PREVAILING LTFF FOR FUTURE IMPORT/PURCHASE OF MACHINERY
In order to encourage fresh investments in export oriented industries in a challenging economic environment, it has been decided to provide mark up support of 2 percent on existing LTFF to leather, engineering goods including auto parts, horticulture, processed food, marble & granite, sports goods and computer related services sectors.
MARK-UP RATE SUPPORT OF 1.5 PERCENT ON EXPORT FINANCE SCHEME (EFS) TO SELECTED EXPORT SECTORS
To ease constraints on availability of capital, it has been decided to provide a further markup reduction of 1.5 points from the prevailing rates to the following focus sectors: f ish and fish preparation, processed foods, meat and meat preparations, sports goods, footwear, leather products, surgical goods, cutlery, onyx products, pharmaceuticals, electric fans, auto parts, transport equipment and electrical machinery.
ESTABLISHMENT OF SERVICES EXPORT DEVELOPMENT COUNCIL
To promote the export of services, it has been decided to establish a Services Export Development Council in collaboration with the private sector. This council shall work as a nucleus body for promoting services exports from Pakistan.
AD-HOC RELIEF @ 3 PERCENT OF FOB TO OFFSET THE IMPACT OF HIGHER COST OF UTILITIES FOR PAKISTANI EXPORTERS IN SELECTED SECTORS
Small exporters in Pakistan have to face challenges of energy crisis which reduces their competitiveness. To offset the increasing cost of utilities, it has been decided that selected non-textile exporting sectors may be provided ad-hoc relief of 3 percent of fob on the selected sectors.
Export promotion campaigns for agro-processed products
In order to help our farmers align themselves better with the international market, it has been decided to launch export promotion campaigns with the help of graduates of agriculture universities of Faisalabad, Rawalpindi, Peshawar and Tando Jam. Selected students will be trained to reach out to the farmer community and train them in best agricultural practices needed to bring their produce in conformity with the international standards.
ENCOURAGING THE OPENING OF RETAIL OUTLETS
International presence of Pakistani firms at present is very low as compared to our competitors. Opening retail sale outlets in major importing countries is the best tool for introducing and exporting high quality and branded exports of Pakistan.
To support the initiative and to motivate exporters to introduce their finished products, it has been decided to provide subsidy on these outlets up to 75 percent, 50 percent, 25 percent per annum of the rental cost of retail outlets or ware houses in the first, second and third year respectively in the export markets in Asia, Africa and Australia.
SUBSIDIZING 50 PERCENT COST OF PLANT AND MACHINERY FOR ESTABLISHING PROCESSING PLANTS FOR MEAT, FRUITS, VEGETABLES, DATES AND OLIVES IN BALUCHISTAN, GILGIT BALTISTAN (GB), FATA AND KHYBER PAKHTUN KHWA
A big quantity of fruits and vegetables produced in GilgitBaltistanis wasted due to lack of processing plants and facilities and long distance from major urban centers. This wastage causes reduced income for the farmers of this region.
To promote food processing and encourage investment and value addition in this region, the government has decided to provide 50% subsidy on cost of processing-plants and machinery for fruits and vegetables .
DATES AND OLIVES:
Pakistan is the 4 th largest producer of dates with excellent quality of dates being grown in the areas of Khairpur, Dhakki, D.I.Khan, D.G. Khan, Turbat, Pungorand Washak. But only 13 percent of the total produce is exported and that also as a low quality product. Similarly growing and processing of olives in Khyber PakhtunKhwa, FATA and Baluchistan have great potential. However, lack of necessary processing facilities results in the wastage of large quantities thus reducing the income of farmers and contributing to rural poverty.
To promote processing of these agricultural products and encourage investment and value addition in these areas, the government has decided to provide 50 percent subsidy on the cost of processing-plants and machinery for adding value to these products in above select regions.
MEAT AND MEAT PREPARATIONS:
Livestock farming has emerged as a major contributor to GDP. Meat and meat preparations exports have grown significantly in the last few years and stood at $175 million in 2011-12. However we have not been able to make any headway in establishing meat processing facilities in Khyber PakhtunKhwa, FATA a nd Baluchistan, though a significant percent of people in these provinces depend on livestock for their livelihoods and there is potential of export of meat to adjoining countries.
In order to bridge this deficit, it has been decided to provide 50 percent subsidy on the cost of plants and machinery for processing of meat. This initiative will go long way in encouraging exports of meat preparations from the under developed regions of Pakistan.
UP-GRADATION OF RICE INSPECTION LABS
Rice is one of the major export items of Pakistan. Yet many of our shipments are rejected due to inferior quality of rice. There is a need to up-grade these labs and get them accredited with international bodies. It will ensure that only quality rice is exported and brand of Pakistan as a quality rice supplier remains intact.
100 PERCENT MARK-UP SUBSIDY AND 50 PERCENT SUBSIDY FOR WIRE SAW CUTTING MACHINERY TO REDUCE WASTAGES FOR ESTABLISHING MINING AND PROCESSING IN KPK, GB AND BALUCHISTAN
To control un-scientific and explosive based conventional mining, it has been decided to provide a mark-up subsidy at the rate of 100 percent on the prevailing mark-up rate for the installation of wire saw cutting machines in Khyber Pakhtunkhwa, FATA, GilgitBaltistanand Baluchistan and a 50 percent subsidy on the cost of wire saw cutting machinery.
STRENGTHENING WOMEN CHAMBER OF COMMERCE
Support would be provided to strengthen the research and outreach capabilities of women chambers of commerce to encourage the women entrepreneurs.
ESTABLISHMENT OF LEATHER EXPORT PROMOTION COUNCIL
It is proposed to establish a model project in leather sector to combine public and private sector in the management of sector specific trade organization to promote export of leather sector, which is the third largest export sector of Pakistan. In future, its success can be replicated in other sectors.
REGULATORY AMENDMENTS IN TRADE REGULATIONS
To demonstrate our resolve to reduce the cost of doing business in Pakistan significantly, we are introducing a few specific measures and amendments would further facilitate Pakistan’s trade and contribute to the ease of doing business by simplifying the procedures and strengthening the regulatory processes.
EASING IMPORT OF MOTORIZED WHEEL CHAIRS
In order to facilitate disabled persons, it has been decided to allow import of second hand motorized wheel chairs freely by anyone for use by disabled persons.
IMPORT OF AMBULANCES
In order to facilitate much needed import of second hand/used ambulances for hospitals, charitable institutions or other large organizations such as universities etc., it has been decided to allow import of second hand / used ambulances.
IMPLEMENTING EMISSION STANDARDS
At present, only euro-ii compatible fuel is available in the market. It has therefore been decided that the condition of euro-ii may be made applicable on import of all types of specialized vehicles.
PROTECTING PUBLIC HEALTH
In order to safeguard health of the general public, it has been decided that only the industrial units registered with relevant public health agency may be allowed to import non-sterilized surgical needles and syringes.
PROTECTION TO LOCAL INDUSTRY AND USE OF TYRE SCRAP AS ALTERNATE FUEL
In order to save the local tyre industry and to encourage the use of tyre scrap as alternate fuel, it has been decided that import of waste and second hand tyres shall be allowed only in the shape of at least two inch pieces detached from each other to industrial consumers only subject to fulfillment of environmental requirements.
REGULATE IMPORT OF NON – HAZARDOUS PLASTIC SCRAP
In order to regulate import of plastic scrap more efficiently it has been decided that plastic scrap/ waste, other than hospital waste of all kind, used sewerage pipes and used chemical containers, will be allowed to be imported by the industrial consumers as raw material for their industry subject to condition that the imported consignment does not contain any hazardous waste, as defined in the basel convention.
In order to facilitate exporters and to encourage value addition, it is proposed to allow export of vegetable ghee & cooking oil in packaging of upto 25 kg or liters, respectively, as compared to the previous requirement of 16kg or liters.
ENSURING QUALITY & STANDARDS
It has been decided that all domestic standards formulated by PakistanStandard Quality Control Authority (PSQCA) will be made part of import policy order to ensure that imported goods conform to notified domestic standards.
SAFEGUARDING NATIONAL SECURITY
In order to regulate import and to avoid misuse of auto pilot kits, it has been decided to restrict its import and will be allowed only to authorized agencies/ departments, subject to NOC from Ministry of Defense.
FACILITATING PAKISTANI CONSTRUCTION COMPANIES WORKING ABROAD
In order to improve ease of doing business and to save freight cost in bringing the machinery used abroad back into Pakistan and then take it again out of the country, it has been decided that local construction, engineering and electrical companies may be allowed to retain the exported machinery abroad to carry out work on export cum import basis, for using the same machinery in some other project, subject to submission of a fresh indemnity bond to the concerned Customs Authority and issuance of NOC from the State Bank of Pakistan.
REGISTRATION AS EDIBLE PRODUCT EXPORTER
With the objective of monitoring the possibility of abuse, such as drug trafficking, and for record purpose, it has been decided that all exporters of food products such as fresh fruits and vegetables, rice etc. will be registered with their respective associations and in case of non-existence of such an association, mandatory registration of such exporters be made with TDAP.
IMPORT OF ACCESSORIES FOR LEATHER GARMENTS INDUSTRY
To improve the quality of the leather garments and encourage value addition, it has been decided to allow 2 percent of the export proceeds to manufacturers-cum-exporters for duty free import of accessories.
Ladies and gentlemen,
The ministry believes that the country’s exports can become an engine of growth and prosperity in Pakistan, if the relevant institutions, both in public and private sector implement adopt a holistic strategy to enhance competitiveness of exports. I am confident that successful implementation of this policy framework would contribute significantly to increase our exports. It is estimated that as compared to exports of $ 67 billion during 2009-12, we would be able to achieve a target of $ 95 billion exports during the three year period of 2012-15.
In conclusion let me say that despite all the challenges we face as a nation, we should be willing and prepared, at all times, to transform challenges into opportunities. I am confident that all the relevant ministries and sectoral bodies/associations/organizations, chambers and other stakeholders would join hands with the Ministry of Commerce to enhance our trade performance thus laying a solid foundation for sustainable economic growth for a prosperous Pakistan.
Thank you and Pakistan Paindabad