Highlights of trade policy 2008-09

[Naveed Yaseen]

Highlights
('The News' reports)
ISLAMABAD: Following are the salient features of Trade Policy 2008-09 announced by Commerce Minister Ahmad Mukhtar Friday.

The export target for the fiscal year 2008-09 has been fixed at $22.10 billion, which represents a growth of 15% over the last year's exports worth $19.22 billion.

* The total merchandise exports for the year 2007-08 were $19.22 billion with a record net increase (between 2006-07 and 2007-08) of $2.246 billion.

* The total imports during the 2007-08 amounted to $39.97 billion giving rise to a trade deficit of $20.7 billion.

* The underlying causes for this year's trade deficit were mainly the increase in oil prices raising its import bill to over $11.3 billion as against $7.3 billion last year; import of wheat at higher than previous prices; increase in price of palm oil from $502.7 PMT to $839.3 PMT; raw cotton imports due to crop shortfall; increase in import of machinery and increase in import of fertilizers and chemicals.

* This year again the imports compared to last year have increased by $9.428 billion whereas exports have also increased by $2.246 billion.

Plant, machinery and equipment imported to setup a unit in DTRE scheme will be exempt from duty and taxes.

* Inputs in DTRE will also be allowed to be imported from India, even if these are not included in the importable items from India, or manufactured locally.

* The period of retention of raw material and components for export under temporary importation scheme (SRO 1065) may be increased from current 12 months to 18 months i.e. at par with DTRE.

* It has been decided to increase the draw back rate by 1% of FOB value for 14 products i.e. (i) Tents, Canvas & Tarpaulin, (ii) Electric machinery,

(iii) Carpets, Rugs, & Mats, (iv) Sports Goods, (v) Footwear, (vi) Surgical Goods/Medical Instruments, (vii) Cutlery, (viii) Onyx manufactured, (ix) Electric

Fans, (x) Furniture, (xi) Auto Parts, (xii) Handicrafts, (xiii) Jewellery and (xiv) Pharmaceuticals .In order to facilitate the exports, the government has decided to introduce a new scheme where by a notified percentage of inputs may be allowed to be imported at zero duties against fob value of exports with flexibility to import any product among the notified list in any quantity within the overall entitlement of the exporter.

* It is proposed to allow the temporary import of PET bottle scrap for manufacture and export of PSF in the DTRE scheme, subject to non-hazardous certification.

* It has been decided to support the setting up of new pharmaceutical plants by providing it with the incentive of having an accelerated depreciation allowance facility of 90pc in the first year on investment in Plant Machinery and Equipment.

* It has also been decided that Ministry of Health will draw up a proposal for establishing bio-availability and bio-equivalence laboratories in the National Institute of Health.

* Export of free samples up to 5% of quantity is allowed against exports in the preceding year to pharmaceutical exporters.

* In order to further facilitate exports in this sector it has now been decided to allow exporting companies to send free samples to the extent of 10% of the commercial quantity exported in the preceding year.

* In addition pharmaceutical sector would also be allowed to retain 15% of their export proceeds.

* To increase the exports of gems and Jewellery sector, and to encourage investment and remove all anti-export biases, gold, silver, platinum, palladium, diamond and precious stones be exempted from levy of customs duties & sales tax.

* It has been decided that import of machinery / equipment for mining /quarrying and grinding of minerals (along with spares) would be allowed from India.

http://www.thenews.com.pk/top_story_detail.asp?Id=16071

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Detail
(Business Recorder reports)
MUSHTAQ GHUMMAN
ISLAMABAD (July 19 2008): Commerce Minister Ahmad Mukhtar on Friday announced Trade Policy 2008-09 with an export target of $22.10 billion envisaging an export growth rate of 15 percent - the same rate achieved in 2007-08. He did not mention any import targets for the current fiscal year but top officials in the ministry are speculating a figure of nearly $40 billion which means a trade deficit of around $17.9 billion.

-- Export target set at $22.1bn

-- Imports likely to hover around $40bn

An official told Business Recorder that the commerce ministry had proposed $21 billion export target for the current fiscal year with a 10 percent growth rate, but Planning Commission Deputy Chairman Salman Farooqi argued that the target should be fixed at the same rate as was achieved last year. This assertion was approved in a special Cabinet meeting.

Ahmad Mukhtar said customs duty on the import CNG Buses was brought down to zero from 15 percent in the Budget 2008-09. In case any Indian manufacturer of CNG buses makes a firm commitment to establish manufacturing unit of such buses in Pakistan, the ministry of commerce may provide special dispensation for import of 10 buses by road via Wagha from each possible investor as test consignments.

Chaudhry Mukhtar announced that plant, machinery and equipment imported for the purpose of setting up a unit in DTRE scheme will be exempted from duty and taxes. Inputs in DTRE will also be allowed to be imported from India, even if these are not included in the importable items list from India, or if they are manufactured locally.

The period of retention of raw material and components for export under temporary importation scheme (SRO 1065) may be increased from current 12 months to 18 months ie at par with DTRE.

To encourage export of value added products and in particular those products manufactured by SMEs, it has been decided to increase duty drawback rate by 1percent of FOB value on this account for 14 products ie (i) tents, canvas & tarpaulin, (ii) electric machinery, (iii) carpets, rugs, & mats, (iv) sports goods, (v) footwear, (vi) surgical goods/medical instruments, (vii) cutlery, (viii) onyx manufactured, (ix) electric fans, (x) furniture, (xi) auto parts, (xii) handicrafts, (xiii) jewelry and (xiv) pharmaceuticals.

Commerce Minister, in his speech telecast on the electronic media said the government is committed to providing 'zero rating' to exports by refunding of indirect taxes on input costs incurred on manufacturing of merchandise, which is exported.

He said a study will be conducted jointly by the FBR and the ministry of commerce to quantify the extent of refund, which will become due on this account. A new scheme for further facilitating exports has also been announced which will reduce excessive documentation on schemes of zero-rated imports for re-export like DTRE and temporary importation schemes (SRO-1065).

In order to facilitate the exports, the government has decided to introduce a new scheme whereby a notified percentage of inputs may be allowed to be imported at zero duty against FOB value of exports with flexibility to import any product among the notified list in any quantity within the overall entitlement of the exporter.

Regarding DTRE export of regenerated PSF, he said that there is a potential to manufacture and export regenerated Polyester Staple Fiber (PSF) by using PET bottle scrap, the import of which will be allowed subject to non hazardous certification.

He said that there is an anomaly in the DTRE scheme wherein temporary importation of the same is not allowed; he proposed temporary import of PET bottle scrap for manufacture and export of PSF in the DTRE scheme, subject to non-hazardous certification.

It has also been decided to support the setting up of new pharmaceutical plants by providing incentives that include accelerated depreciation allowance facility of 90 percent in the first year on investment. He said that it has also been decided that the ministry of health will draw up a proposal for establishing bio-availability and bio-equivalence laboratories in the National Institute of Health.

Export of free samples up to 5 percent of quantity is allowed against exports in the preceding year to pharmaceutical exporters. In order to further facilitate exports in this sector it has now been decided to allow exporting companies to send free samples to the tune of 10 percent of the commercial quantity exported in the preceding year. In addition this sector would also be allowed to retain 15 percent of their export proceeds.

Biotech drugs is a high tech value added sub sector of pharmaceuticals sector which needs to be encouraged. It would be desirable to accord pioneer industry status to this sub sector and also allow it tax incentives.

A committee comprising ministries of commerce, health, finance and the FBR will work out a detailed proposal for a decision in this regard by the government. Regarding seafood, the commerce minister said the government has decided to undertake following measures to support the sea food sector:

Consultancy services will be arranged through FAO/INFOFISH for aquaculture; peeling shed at Karachi Fish Harbour will be set up in co-ordination with TDAP and Sindh government; and funding will be arranged through the Public Sector Development Programme.

To increase exports of gem and jewelry and to encourage investment and remove all anti export bias, gold, silver, platinum, palladium, diamond and precious stones will be exempted from levy of customs duties & sales tax.

Mining industry has serious problems of availability of good quality stones for further processing due to blasting which creates wastage of precious resources. To remedy this it has been decided that import of machinery/equipment for mining/quarrying and grinding of minerals (along with spares) would be allowed from India.

In order to assist exporters to comply with environmental standards, a 6 percent mark-up subsidy on loans to set up in-house effluent treatment plants was provided. To further encourage this, it has been decided that the subsidy given from EDF would be increased to 8 percent or 50 percent of the mark-up, whichever is lower.

Initiative of hiring of consultants for benchmarking studies of leather garments exporting units will also be continued on a cost sharing basis. He said that export potential of furniture is constrained due to lack of wood seasoning plant and skilled labour.

The ministry of industries would set up a wood seasoning plant and Navtec will set up a couple of vocational training centres on modern lines to overcome these deficiencies. To promote floricultural exports it has been decided that a 'Flora Common Facility Centre' would be set up in collaboration with Punjab government near Lahore; depending on its success the project will be replicated in other provinces.

An irradiation facility based on the latest E-Beam technology would also be set up in Karachi in collaboration with Sindh government to facilitate export of horticultural products.

It has also been decided that the existing facility of picking up the first 6 percent mark-up rate on loans obtained for cool chain and cold storages for horticulture will be revised to 8 percent or 50 percent of the prevailing mark-up rate whichever is lower.

The umbrella National Trade Corridor Programme is also making provision for development of a cool chain infrastructure. It has been decided that the horticulture export would be declared as industry to qualify it for industrial credit, relief in taxation, etc thus facilitating much needed modernisation and infrastructure development in this sector.

RICE: Area under rice cultivation is under pressure from other crops and the yield is decreasing as no high yielding Basmati variety after "Super Basmati" has been introduced. The cumulative effect of these two factors could erode the exportable surplus.

IT IS THEREFORE PROPOSED THAT: The ministry of food and agriculture may focus on evolving new varieties & increasing area under cultivation; paddy harvesters & paddy dryers may be provided on matching grant basis in rice growing areas; the Minfal will explore the possibility of using Agribusiness Support Fund for this purpose.

Initially, for demonstration purposes, four dryers and harvesters will be provided from the Export Development Fund to the Minfal. Furthermore, rice farm machinery namely paddy harvesters and dryers will be importable from India through Wagha by road.

Unhindered import of rice seeds increases disease risks, therefore, all such imports shall undergo strict quarantine measures. For this purpose the "Seed Act" and other related laws will be amended accordingly.

To promote export of herbal medicine, 50 percent of the cost of registration of herbal medicinal products abroad shall be picked up by the government as is done in the case of export of pharmaceutical products.

He said that special focus would be on promotion of various activities related to the Prime Minister's Programme of "One Village- One Product" - a programme that was the brain child of former Prime Minister Shaukat Aziz.

Ahmad Mukhtar said that substantial Halal food is imported in the Middle East. Muslim consumers in other countries are also conscious about Halal method of slaughtering and Halal ingredients in other processed food products for which Halal certification is essential.

It has therefore been decided to establish a Halal certification board, under the ministry of science and technology, to devise and enforce Halal standards and certification mechanism for export of Halal food products. Currently exporters setting up slaughterhouses are facilitated by the Export Development Fund picking up the first 6 percent of the mark-up on investment financing.

It has now been decided to enhance this facility and the EDF will therefore pick up the first 8 percent or 50 percent of the mark-up whichever is lesser. Exporters are allowed to send $25,000 worth of samples to foreign buyers. Since automobiles have higher unit value therefore it has now been decided to increase the limit to $50,000 in the case of automobiles. The world over development of industrial clusters helps tremendously in boosting production and exports.

IT HAS THEREFORE BEEN DECIDED THAT TDAP WILL ESTABLISH THE FOLLOWING NEW CLUSTERS:

(i) Surgical Instruments, Sialkot;

(ii) Gloves and Personal Protective Equipment, Sialkot;

(iii) Sports Wear, Sialkot;

(iv) Leather & Leather Products Sialkot and Charsadda;

(v) Sports Goods, Sialkot;

(vi) Weaving and textile processing sector, Faisalabad;

(vii) Light Engineering Sector, Gujranwala;

(viii) Auto parts, Lahore;

(ix) Ceramics, Multan and Hala;

(x) Ajrak and Bangles in Hyderabad/Hala;

(xi) Embroidery in Balochistan.

It has been decided that a system of voluntary pre-shipment inspection and sampling of agro-products for exports will be introduced. In this regard lists of concerned products, corresponding standards and accredited labs shall be notified by the ministry of commerce after consultation with the Minfal & the Ministry of Science and Technology.

It has also been decided that the Federal Export Promotion Board chaired by the Prime Minister will be activated and reconstituted to provide effective and high-level co-ordination required for this purpose.

The commerce minister said that an effective trade dispute settlement mechanism increases confidence of foreign buyers to purchase from Pakistan and the present system is ineffective. Therefore it has been decided that a Trade Dispute Settlement Organisation, under the administrative control of the ministry of commerce, will be set up to deal with trade disputes arising from exports.

With regard to Trade Development Authority of Pakistan (TDAP), it has been decided to revisit the working and structure of TDAP so as to make it more responsive to the exporter's needs. In the near future necessary changes including warranted amendments in the TDAP Act will be undertaken for this purpose.

In order to realise the full export potential of Northern Areas and to facilitate local exporters, it has been decided that Trade Development Authority of Pakistan would open an office in the Northern Areas. Furthermore the Minfal will also arrange for SPS controls at Pak-China border for certification of cherry and other fruit exports since they are in great demand in the Chinese market.

To facilitate exports to the Afghanistan provinces of Paktia (Gardez) and Khost, it has been decided that a customs station at Pak-Afghan border would be set up at an appropriate location. This will reduce transportation cost and delivery time to this area from Pakistan. The commerce minister said that the government has decided to allow import of used buses.

TR SCHEME: At present, buses not older than 3 years are permissible for import under the TR scheme. It has now been decided to allow import of buses which are not more than 10 years old under the same scheme. This facility will help expatriates, with limited means, to create an economic opportunity for themselves as well as ease the shortage of such buses on inter city routes.

In order to reduce the cost of manufacturing of liquefied gases etc, it has been decided to allow import of used cryogenic containers/cylinders by industrial consumers, provided the Department of Explosives gives prior NOC and the containers/cylinders are refurbished prior to shipment, inspected by a duly notified independent international certifying body that such containers/cylinders are compliant with international safety standards, and such containers/cylinders are not older than 10 years.

It has also been decided to allow import of cement bulker semi trailers, without prime movers in second-hand/used condition to cement manufacturers for transportation of bulk cement subject to the condition that they will not be older than 10 years.

In last year's trade policy, prime movers not older than 4 years, which were Euro-III compliant, were made importable for a period of one year ie 2007-08. This facility was only available to registered transport companies and established fleet operators operating at least 25 prime movers in their name. Last year however this facility was not utilised.

It has now been decided to extend this facility for 2008-09 and enhance it by relaxing the age limit to 5 years and reducing the minimum fleet requirement to 15 prime movers. In order to reduce cost of raw material imports and thereby make our export products more competitive the import of job lot & stock lots of raw material, which attracts duty up to 5 percent, would now be allowed.

At present municipal bodies/corporations/cantonment boards can import old/used waste disposal trucks provided they are not more than 15 years old, directly or through their nominated agents for their own use only. It has now been decided that the facility of importing old/used waste disposal trucks would also be extended to the "authorised contractors" of municipal bodies, etc. However in all cases the imported trucks shall not be older than 10 years.

Stainless steel and cotton yarn is importable from India by train. In order to further reduce the cost of doing business, it has been decided to allow their import by trucks through Wagha as well.

In order to facilitate physically handicapped persons, it has been decided that used motorcycles or tri-wheelers especially designed/made or altered for the handicapped would be allowed to be imported, subject to disability certification from the ministry of health.

If Pakistani nationals importing a vehicle are unable to release their vehicle due to high tariff or other reasons, re-export of such vehicle would be allowed by the FBR if there was no contravention of the Import Policy Order during import stage. It has also been decided to do away with the requirement of a driving license for the TR scheme.

The prices of academic, scientific & reference books are quite competitive in India and technical and professional books are already importable from India. Now in order to give access to Pakistanis to cheaper books it has been decided that import of academic, scientific & reference books may be allowed from India.

In compliance with the UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic substances 1988, import of Toluene, MEK, Potassium Permanganate would be allowed subject to NOC issued by the Ministry of Narcotics. The commerce ministry has decided to allow import of explosives and chemicals subject to approval of Ministry of Industries (Department of Explosives) which will be issued only after NOC from Ministry of Defence Production.

To avoid any potential disruption to Nadra system and misuse, it has been decided that only Nadra would be allowed to import specialised printers, laminators and laminator rolls used for printing visa stickers and passports. It has been decided that no import of wildlife, including CITES appendix II species, would be allowed without NOC from National Council for Conservation of Wildlife (NCCW) and the respective provincial wildlife department.

To prevent unscrupulous elements from selling unrefined palm oil in the market and endangering public health, it has been decided that only recognised manufacturers would be allowed to import crude palm oil for further processing and refining. Furthermore manufacturers who import palm oil in crude form will not be allowed to sell it to non manufacturers. However commercial importers who have invested in bulk storages will be allowed to continue importing crude palm oil subject to a safeguard mechanism to be drawn up by the FBR.

Construction companies or oil and gas companies are presently allowed to import mobile transit mixtures/dumpers. In order to avoid misuse of this facility, Certification of the Chief Executive of a company of the respective sector, endorsing requirement of the contractor, sub-contractor or service companies shall be required.

It will be mandatory to register the imported vehicles with the local Registration Authority. Vehicles shall be non-transferable and shall be liable to confiscation in case these are found involved in violation of the above conditions to their importation.

Presently used dump trucks without age limit and, designed for off-highway use, with payload capacity exceeding 5 tons, are importable by commercial importers. Construction companies however can not import these trucks if they are more than 10 years old. It has now been decided to remove this anomaly by restricting both categories of importers to the above conditions ie of not importing trucks more than 10 years old.

In compliance with the Montreal Protocol agreement, import of CFC gas based refrigerator and freezing equipment (falling under HS 84.18) are banned. In order to remove any possibility of misuse, it has been decided that import of CFC based compressors may also be banned.

Used and old static road rollers which are not manufactured locally are importable without restriction of capacity and age by commercial importers. In case of a construction company, the limitation is that it should not be older than 10 years and the capacity should not exceed 12 tons. It has now been decided to remove this anomaly by restricting both categories of importers to the above conditions ie these rollers should not be more than 10 years old and the capacity should not exceed 12 tons.

http://www.brecorder.com/index.php?id=772986