Fostering trade development in Pakistan
Recently, a high level public meeting was held in Islamabad in which the traders presented their recommendations to uplift the performance of Pakistan’s trade sector. The exports declined during last year after Pakistani products are rendered uncompetitive at global level due to rising cost of production and unfavorable environment for businesses. Pakistan’s declining ranking for Ease of Doing Business is a worrisome sign.
The traders pointed out that rising cost of production is mainly because of energy prices which have increased considerably during last few years. Energy, being the main component of production process, increased the cost of production for the traders. There is no policy to look into the energy prices which have increased without any check. The other problems of business community are related to tax compliance and labor.
The trader proposed that for growth of manufacturing and industrial exports, informal trade should be curtailed in order to protect the local competitiveness. There is need to improve logistic performance including port processing time and cost, efficient custom clearance procedure and transport infrastructure. The preferential trade agreements must be done by keeping in mind the greater regional integration that can increase the market access of domestic traders.
Pakistan needs to achieve greater benefits from European Union GSP plus scheme. The significance of services trade has increased considerably as services sector is now the major contributor towards GDP. In order to increase the services trade, the government should implement the strategy that is already approved. Exchange rate movements also affect the exporters which should be kept in check by the authorities to make it less vulnerable.
For the development of agriculture sector, the traders stressed that indirect taxes should be decreased on farm inputs and the subsidy should only be given to micro and small farmers. The zero rating on import of agriculture machinery is required to boost the usage of latest machinery in the sector for which trade barriers must also be removed. Government should increase the budgetary allocations for food security in deprived regions. Livestock sector should also be given due attention to develop the value chains. Water storage facilities including dams must be built and government should allocate the necessary budget to resolve the water shortages.
In order to increase the services trade, the government should implement the strategy that is already approved. Exchange rate movements also affect the exporters which is why should be kept in check by the authorities
Business community demanded that indirect taxes should be consolidate at federal and provincial level. The corporate tax base must be broaden to lessen the load on industry. The process of giving unfair exemptions and concessions to selected sectors must be stopped. The traders also wanted to decrease the regressive withholding taxes on turnover.
For the revival of energy sector, the traders suggested that investment in transmission and distribution networks must be made. Technical losses and theft must be curbed in order to reduce the energy prices. The government can increase its revenues through reforms in DISCOs. Energy sector is having hidden subsidies which should be eliminated. Hydro projects are the only least cost option to bring down the energy prices.
The tariffs are higher in Pakistan as compared to its competitors. The government is unable to phase out the excise duties for which it has promised. The double taxation in terms of GSTS and federal excise duties should be examined.
Provincial governments can also play their part through merging the revenue departments at provincial level as this will ease the process for tax filing. An independent policy board which monitors the FBR is required for a smooth functioning. There is no grievance redressal mechanism from any tax authority which may resolve the matters at earliest. Government should provide incentives to those who are paying their taxes so that other may encourage filing their tax returns.
The business community is looking towards CPEC as a bright prospect for Pakistan and business activities, however there is need to further enlighten the business community regarding joint venture policies so that more collaboration can be done with Chinese counterparts. China itself is a bigger market and Pakistani traders can export fruits and vegetables to China.
Business community is of the view that following these recommendations will surely increase the pace of development in the country and further prospects will develop. Exports can increase in a favorable business environment for which these measures must be applied in true spirit.
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The opinions expressed in this article are the author's own and do not necessarily reflect the viewpoint or stance of SDPI.