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Sialkot exports may suffer 30 drop if zero-rating regime not restored

June 4, 2020 07:12 PM


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The export-oriented industry of Sialkot, including the apparel sector, has reiterated its demand of restoring zero-rating regime for the five exporting sectors, expressing fear that $2.5 billion foreign exchange earning industry may suffer 25-30% dent in export in absence of this facility.

The representatives of five zero-rated export sectors’ bodies, including the Pakistan Sports Goods Manufacturers & Exporters Association, Pakistan Gloves Manufacturers & Exporters Association, Surgical Instruments Manufacturing Association of Pakistan, Pakistan Leather Garments Manufacturers & Exporters Association, Pakistan Hosiery Manufacturers & Exporters Association and Sialkot Chamber of Commerce and Industry held a meeting with Pakistan Readymade Garments Manufacturers and Exporters Association chief coordinator Ijaz Khokhar and regional chairman Soahil A. Sheikh.

They expressed their serious concerns over severe liquidity crunch owing to non-payment by the international buyers for an indefinite period amidst worldwide lockdown due to pandemic. The export industry leadership unanimously asked PM Imran Khan to announce the previous system of ‘No Payment No Refund’ at least for one year to save the export industry, as FBR claim of instant refunds release has totally failed, especially in the challenging time of global epidemic when the foreign buyers have also held the payments for an indefinite time.

PRGMEA regional chairman Soahil A. Sheikh and chief coordinator Ijaz Khokhar observed that that the country’s export target of $25 billion would not be achieved particularly at a time when authorities are not ready to facilitate the exporters by reviving previous workable regime of ‘no tax and refunds.

They said the country’s exports decreased by almost 50% while home remittances also declined significantly due to closure of global markets while another 25% decline in exports is expected.

“Payments of already shipped goods in Jan, Feb and March from foreign buyers have been held for an indefinite period. We don’t have liquidity in hand to run the industry in coming months, so we are seeking restoration of the zero-rating regime to run the wheel of industry,” PRGMEA chief coordinator observed.

He said small and medium apparel export industry is continuously complaining of running out of cash to pay wages to their workers, pay utility bills and run industries, which can be handled only if the government restored the previous system of zero-rating.

He added: “There is no binding of IMF or World Bank to withdraw zero-rated regime, especially in these present circumstances, as Pakistan is not the single country which has been suffering coronavirus rather the whole world is facing this economic crisis. Therefore we need a bold step from the Ministry of Finance to restore this regime so that we could sustain our export.”

PRGMEA regional chairman Sohail A. Sheikh said that Sialkot is the second-largest source of foreign exchange earnings for Pakistan because of its exports' and remittances from overseas manpower. He said amid global economic slowdown due to corona pandemic, the financial losses to textile export industries were multiplying every day and exporters were facing severe liquidity crises. He said that with a view to keep the industry live major problem is cash flow and the zero-rating facility is the only way for survival.

PRGMEA regional chairman stated that the restoration of zero-rating would help revive exports and earn the much-needed foreign exchange, keeping in view the projected contraction in the national economy, which is expected to shrink for the first time in last 70 years due to Covid-19.

“It is fear that thousands of SMEs may close down in next few months with a drastic downfall in country's exports and foreign exchange earnings, resulting into un-employment of hundreds of thousands of workers, as only textile sector earns 60 percent of total export in Pakistan,” he added.

Sohail said the already businesses are limited, as most of the orders have been cancelled or put on hold. As a result, the majority of industrial units are running at almost 30-40% capacity and continue to retain the workers on jobs despite severe liquidity crunch.

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