STRATEGIC TRADE POLICY FRAMEWORK 2009 - 12

TRADE POLICY 2009

Ministry of Commerce – July 27, 2009

Scheme of Presentation

Policy Statement

2

Policy StatementTrade ReviewChallenges & OpportunitiesChallenges & OpportunitiesSynopsis of Strategic Trade Policy FrameworkP d T d P li I i i iProposed Trade Policy Initiatives

Over archingS S ifiSector SpecificTrade Diplomacy

In line with Manifesto of Pakistan Peoples Party, the Trade Policy Aims at

Growth with Equity3

Greater Opportunities for Gainful EmploymentSound Marco-economic Framework for Trade EnvironmentEnvironmentConcern with Poverty Eradication and Environmental ProtectionInvesting in Human ResourceTargeting Poverty AlleviationPromoting Private Sector as Engine of GrowthFocus on Small Scale Sector Particularly Agriculture

Policy Statement4

y

The Ministry of Commerce’s endeavor is to provide e M s y o Co e ce s e deavo s o p ov de medium term policy framework with focus on improving supply side to achieve sustainable export growth.

The policy thrust would be to enhance quality, improve business processes through structural transformation and business processes through structural transformation and transferring resources to achieve production and export of a more sophisticated and diversified range of products

T d R i

I d E 2008 09

Trade Review5

Imports and Exports 2008-09

Exportsp

Exports 07Exports 07 0808 US$ 19 1 BillionUS$ 19 1 Billion6

Exports 07Exports 07--0808 US$ 19.1 BillionUS$ 19.1 Billion

Export Target 08Export Target 08--0909 US$ 22.1 BillionUS$ 22.1 BillionExport Target 08Export Target 08 0909 US$ 22.1 BillionUS$ 22.1 Billion

Actual Exports 08Actual Exports 08--0909 US$ 17.8 Billion*US$ 17.8 Billion*

Export GrowthExport Growth -- 6.7%6.7%• WTO estimated a 9% shrinkage in

global trade• Pakistan is less hurt than competitors-

* Provisional* ProvisionalExport growth in China declined by 24%, India by 31% and Bangladesh by 14%

Exports Reviewp

Exports were 6.7% less than 2007-08 due to 7

pExogenous factors - demand shrinkage, financial crisis and ensuing protectionist policies. Domestic Factors - Power shortages/outages high financial Domestic Factors - Power shortages/outages, high financial cost, bad law & order situation and competitiveness erosion

Traditional sectors like textile (- 9.5%), Leather (- 29%) declined, whereas Rice (8%), Engineering goods (26%), , ( %), g g g ( %),Jewelry (35%) recorded growth in exports

Exports – Historicalp

YValue Change

8

YearValue

(FOB $ Billion)Change (%age)

2000-01 9.2 -

2001 02 9 1 0 72001-02 9.1 -0.7

2002-03 11.2 22.2

2003-04 12.3 10.3

2004-05 14.4 16.9

2005-06 16.5 14.3

2006 07 17 0 3 22006-07 17.0 3.2

2007-08 19.2 13.2

2008-09 (P) 17.8 - 6.7( )

Export of Major Commodity Groups(US$ Billion)

Change

9

Product Group 2007-08 2008-09Change

%

Food 2.83 3.02 6.7

Textile 10.57 9.56 - 9.5

Leather and Products 1.11 0.84 - 24.3

Chem. & Pharma. 0.62 0.61 - 2.1

Petroleum & Coal 1.26 0.81 - 35.5

Engineering 0 21 0 27 26 1Engineering 0.21 0.27 26.1

Other Manufactures *(Slide 96) 1.72 1.86 8.1

Others 0.73 0.81 11.0

Total 19.05 17.78 - 6.7

Export Profile 2008-09p

Other Mfg. G

Others4%

10

Food17%

Group20%

4%

Petroleum5%

Textile 54%

Export Destinations11

p

0 9%

26 3%22.3%

6.2%0.9%

008-

09

44.3%26.3%

0 9%

20

28 5%23.1%

5.9%0.9%

007-

08

41.5%28.5%2

Oceania Africa Americas Europe AsiaOceania Africa Americas Europe Asia

Import Reviewp

Imports were US$ 34.8 billion in 2008-09 as

12

Imports were US$ 34.8 billion in 2008 09 as compared to US$ 40 billion in 2007-08 , a decrease of 13 %Lower imports are attributed mainly to demand shrinkage of items in Transport Group (-41%), and g p p ( )Textile Group (-29%) whereas imports of Petroleum decreased by 17% due to drop in international prices of crude oil; imports of fertilizer were lower both in terms of value (39%) and quantity (45%)

Imports – Historical13

p

YearValue

(C&F US$ Billion)Change (%age)

(C&F US$ Billion)

2000-01 10.7

2001-02 10.3 - 3.6

2002-03 12.2 18.2

2003-04 15.6 27.6

2004-05 20.6 32.1

2005-06 28.6 38.8

2006-07 30.5 6.9

2007-08 40.0 30.9

( )2008-09(P) 34.8 - 13.0

Import of Major Commodity Groups

(US$ Billion)

ITEM 2007-08 2008-09%

Ch% Share

14

Change

Food Group 4.21 4.14 -1.8 11.9

Machinery Group 7 37 6 59 -10 5 18 9Machinery Group 7.37 6.59 -10.5 18.9

Transport Group 2.27 1.34 -41.1 3.8

Petroleum Group 11.46 9.51 -17.0 27.3p

Textiles Group 2.33 1.66 -29.0 4.8

Chemical Group 5.80 5.23 -9.8 15.0

Metal group 2.71 2.75 1.8 7.9

Miscellaneous Group. 0.74 0.67 -8.7 1.9

Other * 3.07 2.92 -4.6 8.4

Total 39.97 34.82 -12.9 100

Balance of Trade (US$ Billion)( )

Export Import Balance

15

4034 8

Export Import Balance

16.5 17 19.1 17.8

28.6 30.534.8

2005-06 2006-07 2007-08 2008-09-12.1 -13.5

-20.9 -17

2005-06 2006-07 2007-08 2008-09

Challenges 1/3g /

External Factors:

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Economic downturn in our major markets:Consumer confidence erosion in USA and its ripple effects in EU; Economic slowdown

Buyers’ perception of Pakistan as a supplier of low quality products and inability to deliver in bulk and in quality products and inability to deliver in bulk and in time.Negative travel advisories.

Challenges 2/3g /

Domestic Factors

17

Domestic Factors

High cost of financeEnergy Crisis (Electricity and Gas)Energy Crisis (Electricity and Gas)Law and OrderLack of International CompetitivenessLack of International CompetitivenessInvestment declined to 19.7% of GDP as against 22.0% of last year% yLarge Scale Manufacturing growth declined by 7.7% (Jul-Mar) as against increase of 4.8% in 2007-08

Challenges 3/3g /

Sliding Down the Competitiveness Index

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Indicator Ranking 2007-08 Ranking 2008-09

Sliding Down the Competitiveness Index

(Ranking among 131 countries)

g g

Overall Competitiveness 92 101

Infrastructure 72 85

Labour Market Efficiency 113 121

Financial Market Sophistication 65 71

Technological Readiness 89 100Technological Readiness 89 100

Innovation & Sophistication Factors

78 85

S Gl b l C titi R t 2008 09 W ld E i FSource: Global Competitiveness Report 2008-09, World Economic Forum

18

Opportunities19

ppFavourable market access owing to bilateral t d ttrade agreementsPotential of doubling the value- addition of

fcotton of which Pakistan is the 4th largest producer Strong resource base in many sectors (food, building stones, gems & jewelry, leather, rice, cement, light engineering)Growing Services Sectorsg

Inference

Pakistan is fortunate to be less hurt by global

20

Pakistan is fortunate to be less hurt by global recession and this has placed Pakistan in a position to take “rebound opportunity” if :-pp y

Supportive & Targeted policies are adopted to help export sector increase competitiveness & improve product sophisticationSupply side constraints like power shortages and high cost of finance are removedcost of finance are removedLaw & Order situation is improved

Strategic Trade Policy Framework 21

Strategic Trade Policy Framework 2009- 12

Main Features

Three years strategic framework

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Three years strategic frameworkReview mechanismWell defined business processesWell-defined business processesShift from Comparative Advantage to Competitive AdvantageAdvantage

Trade Policy Objectives 1/2y j /

People centric : Poverty alleviation and employment 23

generation through export led growth

1 Enhance the competitiveness of Pakistan’s exports1. Enhance the competitiveness of Pakistan s exportsa) Increase the sophistication level of Pakistan’s exports by

increasing the technology component and value addition. b) Trade Facilitationb) Trade Facilitation

i. Process Improvementii. Aligning Tax Reform with Trade Facilitation with the aim to reduce

the cost of doing businessgc) Address supply side constraints – power shortage & high

financial costd) Reduce anti-export bias) p

Trade Policy Objectives 2/2y j /24

2. Reducing Cost of Doing Business3 Protection and promotion of SMEs Slide 943. Protection and promotion of SMEs4. Focus on products with higher sophistication potential5 Promote agricultural development through exports

Slide 94

5. Promote agricultural development through exports6. Enable Pakistani exporting companies overcome the

negative effects of global demand contractionnegative effects of global demand contraction

Focus Sectors of STPF 2009 - 12Textiles Support to initiatives

Services Develop and implement a

h i t 25

ppin Textile Policy

comprehensive export plan

Pharmaceuticals Increasing overall titi

Focus Sectors Policy Thrusts

LeatherGems & Jewelry

competitivenessMoving up the sophistication ladder

Engineering GoodsSurgical. Medical, Dental Beauty care

pSMEs Cluster developmentCreating supply and d d id li kDental, Beauty care

instrumentsAgriculture & food

demand side linkagesImproving Domestic Commerce in these sectors

Halal Products

Strategic Trade Policy Framework 2009-12

Linking Trade Policy 2009-12 with other 26

Linking Trade Policy 2009-12 with other development strategies by synergising the ‘’Functional Linkages’’ betweenFunctional Linkages between

trade and industry;trade and investment;trade and investment;trade and education;trade and science & technology trade and science & technology; trade and social protection policy

Overarching Goals of Strategic Trade Policy Framework 2009-12Framework 2009-12

Ensuring sustainable energy supply

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Ensuring sustainable energy supplyReducing cost of capitalReforming domestic commerceReforming domestic commercePromotion of Trade in ServicesC lid i d i i d li iConsolidating gender sensitive trade policiesGreening of ExportsConnecting Supply and demand better

Trade Policy Formulation Processy28

Invitation of Proposals from all Chambers & Association registered under TO Ordinance, Ministries, Provincial Governments, Departments, AcademiaMeeting of the Advisory Councilg yShort listing of Proposals received in response to invitation or in the Council meetingFirming up the proposals in consultations with major Firming up the proposals in consultations with major Chambers/ Associations and relevant ministriesDrafting of the PolicyP i h P i Mi iPresentation to the Prime MinisterSubmission to the CabinetIssuance of SRO’s and notifications subject to approvalj pp

Breakup of Proposals Consideredp p29

O i tiNo. of

OrganizationProposals

Federation of Pakistan Chambers of Commerce & I d

57& Industry

Chambers of Commerce & Industries 219

Trade Associations 202Trade Associations 202

Pakistan’s Missions Abroad 147

Provincial Governments 140Provincial Governments 140

Ministries/ Federal Government Departments 397

Miscellaneous (Industrial Units/ Individuals) 80( / )

TOTAL 1242

TargetsIndicator Target 2012

Merchandise Exports (US$ Billion) From 17 8 to 23 5

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Merchandise Exports (US$ Billion) From 17.8 to 23.5

Competitiveness Ranking From 101 ≤ 75

Engineering Sector Export-Share From 1.5% ≥5%

From US$ 1000/bale Value – addition of Cotton

From US$ 1000/bale

to 1500/ bale

Expansion of Regional Trade From 17% ≥25%

FTAs EU, USA

Operational ROZs 7

Strategic Trade Policy Framework

P d I i i i

Strategic Trade Policy Framework 2009-12

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Proposed Initiatives

Proposed Trade Policy

R i d b F d d

oposed ade o cyInitiativesRequired to be FundedEstimated Cost: Rs. 35.22 BillionPeriod : 2009-12

Addressing Supply-Side 33

N I i i i

Addressing Supply Side ConstraintsNew Initiatives

Financing at Reasonable Markupg p

Businesses need short to medium term certainty in

34

Businesses need short to medium term certainty in the interest rate for investment. Currently, there is no policy instrument provided by the government or p y p y gprivate sector for providing finance at fixed interest rates for a short to medium termIt is proposed that a fund may be created to hedge markup rate hikes. The fund shall be managed by an organization (TDAP/ NIC) of the Ministry of Commerce and shall be financed from EISF.

Reliability of Electricity Supplyy y pp y

The electricity shortages is an irrefutable fact and is 35

adversely affecting industrial productivity. While little can be done, in short term, to increase the quantum of supply there is possibility for introducing an element of pp y p y gpredictability of power supply.It is therefore proposed that Electricity Distribution Companies (DISCOs) being bodies corporate should Companies (DISCOs) being bodies corporate should enter into agreements with clusters of industries whereby electricity is supplied at mutually agreed times The agreements should have punitive and times. The agreements should have punitive and compensation legally enforceable clauses; the compensation could be in the form of electricity charges credit etccredit etc.

Insurance Cover for Visiting Buyersg y

Purchasers, inspectors and sourcing agents of overseas 36

, p g gbuyers are reluctant to travel to Pakistan and the exporters have to meet them in other countries. This increases cost of doing business It has been learnt that increases cost of doing business. It has been learnt that apart from travel advisories that stop the purchasers/importers from coming to Pakistan but also the fact that the insurance companies refuse to cover the period of stay in Pakistan on usual rate of premium.A scheme may be launched for picking up the full cover A scheme may be launched for picking up the full cover for stay in Pakistan for valid insurance policy of visiting buyers/ buyers’ representatives.

T d F ili i

E i i I i i i b C i d

Trade Facilitation

Existing Initiatives to be Continued

Facilitating Presence in International M k tMarkets

To encourage local firms to have international

38

To encourage local firms to have international presence and thereby increase the profitability following initiatives were taken in previous trade g ppolicies:

Support for Opening Exporters Offices AbroadSupport for Opening Retail Sales Outlets Abroad

It is proposed that the above initiatives may be allowed to be continued throughout the period of STPF 2009-12

Warehousing Facilityg y

To make inroads into non-traditional markets and / 39

/or to introduce non-traditional products in traditional markets a warehouse scheme was l h d d h bli h d i launched and a warehouse was established in Kenya. The changing patterns of trade require direct to store deliveries and thereby need of direct to store deliveries and thereby need of warehouse even in traditional markets.It is proposed that the warehousing scheme may be continued and its scope expanded to include traditional markets and traditional products.

Support for Compliance CertificationIn the previous three years government announced 50% subsidy for various quality, environmental and

l f f h h

40

social certifications. To encourage further, the subsidy was progressively increased to 100% of the cost of certification when a manufacturing units gets cost of certification when a manufacturing units gets four of the specified certifications*. It is proposed that the initiatives may be continued It is proposed that the initiatives may be continued in the Trade Policy 2009 and list of certifications may be expanded by TDAP in consultation with the may be expanded by TDAP in consultation with the Industry.

* (i) ISO 9000, (ii) ISO 140001, (iii) OHSAS 18001, (iv) SA 8000, (v) WRAP, (vi) EKOTEX, (vii) BSCI, (viii) BRC

S S ifi

N I i i i

Sector Specific

New Initiatives

Compensating Inland Freight Chargesp g g g

Extra cost on inland transportation erodes export 42

p pcompetitiveness of a range of developmental products.It is proposed that a scheme may be launched to compensate inland freight cost to exporters of cement light engineering leather garments cement, light engineering, leather garments, furniture, soda ash, hydrogen peroxide, sanitary wares including tiles, finished marble/ granite/ / /onyx products. The scheme may be funded from Export Investment Support Fund

Technology, Skill and Management Up-gradation Fund for Value Added Products

All final use products do require continuous research

43

gradation Fund for Value Added Products

All final use products do require continuous research and development for enhancing competitiveness either by technology up-gradation, skill y gy p g ,development or by improved management systems. A fund dedicated to support these activities is required.It is proposed that a Technology, Skill and Management Up-gradation fund of Rs. 3 billion may be established.

Brand Promotion Support for Surgical I t t S t d & C tlInstruments, Sports goods & Cutlery

The manufacturing in these sectors is largely done under

44

The manufacturing in these sectors is largely done under the brands of foreign companies, and that result in lower prices for manufacturers in these sectors.It is proposed that surgical instruments*, sports goods & cutlery sector may be granted 25% subsidy on brand

i l lik d i i i d promotional expenses like advertisement in recognized trade journals, certification cost.

* Term Surgical includes surgical medical dental veterinary * Term Surgical includes surgical, medical, dental, veterinary, beauty care (manicure/ pedicure etc.) and like instruments

Product Development and Marketing Fund for Light Engineeringfor Light Engineering

Engineering sector is dynamic and resilient but it is

45

Engineering sector is dynamic and resilient but it is fragmented. This sector has shown promising growth during 2008-09 with an export growth of 32.1%.

In order to increase the sophistication level & realize true potential of this sector, it is proposed that a special fund of Rs 2.5 Billion may be created for product development & marketing for light engineering sectordevelopment & marketing for light engineering sector.

Enhancing Sophistication in Surgical I t t C t f E llInstruments – Center of Excellence

Shortage of well-trained skilled manpower is

46

Shortage of well trained skilled manpower is impeding growth of surgical instruments manufacturing industry.g yIt is proposed that Ministry of Industries and Production may establish a center of excellence for ycatering to the training, designing, research & development needs of surgical instrument*s sector at Sialkot* Term Surgical includes surgical, medical, dental, veterinary, b t ( i / di t ) d lik i t tbeauty care (manicure/ pedicure etc.) and like instruments

Enhancing Sophistication in Leather A lApparel

Leather apparel industry needs to adapt to changing 47

pp y p g gtrends for which they need expert input for improving quality and efficiency.I i d h f EISF b ll d fIt is proposed that use of EISF may be allowed for:-

Providing on the floor expert advisory / consultancy services to leather apparel manufacturers cum exporters.pp pMatching grant to establish design studios or design centers in their factories.Establishing R&D Centers in Karachi and Sialkot by PLGMEA Establishing R&D Centers in Karachi and Sialkot by PLGMEA for providing Research & Development support to Leather Garments & Leather Goods Exporters.

Freight Subsidy on Export of Live Sea F dFood

Live sea food fetch very high prices in international

48

Live sea food fetch very high prices in international markets as compared to frozen products, minimum price ratio is 1.10. In fact, maximum value addition p ,is through export of live sea food. This product offers immense potential in export markets. It is, therefore, proposed to grant 25% freight subsidy if live seafood products are exported by air. This will also compensate exporters to overcome losses incurred due to mortality.

Support on Export of Processed Foodpp p

Raw and semi-processed agricultural produced being

49

Raw and semi processed agricultural produced being currently exported can get higher values if exported as processed food. However, TBTs on processed food require compliance to more sophisticated standards and thereby higher cost of productionI i d h d f d b It is proposed that processed food exports may be supported initially by reimbursing R&D cost @ 6% of the exports; the quantum & mode of support to be the exports; the quantum & mode of support to be adjusted after a detailed study but not later than May 2010.

Introduction of PAKGAP Standard

Good Agricultural practices are essential to ensure 50

g pfood safety both locally and in export markets and thereby a better acceptability; our agricultural

i l ki i d i l l i sector is lacking recognized agricultural practices standards.It is proposed that PAKGAP (Pakistan Good It is proposed that PAKGAP (Pakistan Good Agricultural Practices) standards initially for five major horticultural exports (citrus, mango, date, potato and onion) may be worked out by MoST and implemented by MINFA in collaboration with PHDEB.

Conversion of PHDEB into a companyp y

Pakistan Horticulture Development & Export Board

51

Pakistan Horticulture Development & Export Board is a EDF funded project of the Ministry of Commerce. Due to its undefined status it can neither seek international assistance which is otherwise available nor contribute fully to the development of the sector. It has therefore being changed into a corporate body.It is proposed that, on incorporation, O&M expenses of PHDEB may be funded for a period of three years.

Improving Supply Chain of Leather S t E t Fl i M hiSector Exports – Flaying Machines

It is estimated that a minimum of 25% hides 52

It is estimated that a minimum of 25% hides and skins are rendered useless from butcher cuts. There is an imminent need to introduce flaying machines in abattoirs but local governments have limited resources to install

fand run flaying machines.It is therefore proposed that EISF may be used f d h d for providing matching grants to district governments for installing flaying machines.

Improving Supply Chain of Leather S t E t Fi i h d L thSector Exports – Finished Leather

Finished leather is one of the major export products & 53

an intermediate product in which substantial value addition can be achieved by adopting modern production processes and creating trendy finishes. There p p g yis a need to encourage tanneries to upgrade production and designing facilities and to facilitate them for complying with international standards. p y gIt is therefore proposed that EISF may be allowed to be used for:-

Sharing 25% financial cost of setting up of design centers Sharing 25% financial cost of setting up of design centers and labs in the individual tanneries.To provide matching grant for setting up of effluent treatment plants in individual tanneriestreatment plants in individual tanneries.

Services Export Development Fundp pServices sector has immense potential for earning foreign exchange however high pre-project costs are a deterrent to

54

g g p p jits expansion. Support to Services Sector in tendering process and preparing prefeasibility / feasibility studies shall be instrumental in helping the sector to achieve its shall be instrumental in helping the sector to achieve its potential.It is proposed that a Services Export Development Fund may b bli h d id i i h f f be established to provide assistance in the form of reimbursable grants, to Pakistan service exporters for Tendering or negotiating for international projects and for conducting pre-feasibility or feasibility studies for international projects.

Halal Products - Cost sharing of C tifi tiCertification

Halal Products (Food & non-food) is an over trillion

55

Halal Products (Food & non food) is an over trillion dollar market. Pakistan despite being a Muslim country is being left behind and one of the major y g jreason is lack of recognized halal standards. MoSTis charged with working out the standards and setting up a Halal Certification Board.It is proposed that till the time the HalalCertification Board is setup, the government may subsidize the cost of certification by internationally

i d b di b 50%recognized bodies by 50%.

Compliance with Safety Standardsp y

Safety Standards Certification by Underwriters 56

Safety Standards Certification by Underwriters Laboratories (UL) increases the level of acceptability of manufactured products acceptability of manufactured products particularly domestic electrical appliances in international markets international markets. It is proposed that 50% cost of UL certification may be subsidizedmay be subsidized.

S S ifi

57

C i i I i i i

Sector Specific

Continuing Initiatives

Cluster Developmentp

It was decided in last years Trade Policy that Trade 58

y yDevelopment Authority of Pakistan(TDAP) will establish 11 new clusters such as surgical/sports

/ l /l h f ili ll iwear/gloves/leather etc to facilitate small units.

Si l i l f d l Since export clusters are essential for development promotion of non-traditional products, it is proposed to continue with this initiative in current trade policy to continue with this initiative in current trade policy to gain maximum benefit from the establishment of these clusters.

Support on Export of Motorcyclespp p y

Export of Motorcycles was facilitated through R&D

59

Export of Motorcycles was facilitated through R&D support of US$ 50 (Rupee Equivalent)/ Unit. However the disbursement was started in end of FY 2008-09.It is proposed that the support may be continued till p p pp yJune 2010.

Pharmaceutical

Pharmaceutical sector was given following incentives 60

g gin previous years:

Support for hiring medical representatives abroad Support for registration of pharmaceutical products abroadSupport for bioequivalence certificationSupport for bioequivalence certification

The sector has responded wellIt is proposed that the above initiatives may be It is proposed that the above initiatives may be allowed to be continued throughout the period of STPF 2009-12

Matching Grant for Paddy Harvesters d P dd Dand Paddy Dryers

A large number of export consignments of rice are

61

A large number of export consignments of rice are being rejected due to aflatoxin infestation; a condition attributed to high moisture contents of paddy. The possibilities of aflatoxin infestation can be minimized by introducing paddy harvesters and paddy d hi h h f l d dryers which the farmers are reluctant to procure due to high cost.It is proposed that matching grants may be given to It is proposed that matching grants may be given to farmers / rice millers for purchase of paddy harvesters and paddy dryers.p y y

Zero Rating of Exports and AdhocR li f @1%Relief @1%

Exporters are forced to export indirect taxes, estimated to be around 9%

62

of the cost of production. Trade Policy 2008 proposed a study to calculate the burden of these taxes and pending that to give interim relief to fourteen sectors in shape of additional duty drawback @1% of export value. Though the proposal was approved by the Cabinet, FBR did not allow additional duty drawback.

It is proposed that the exports may be completely zero rated and till such time the decision to give additional duty drawback to specified sectors may be implemented as an interim relief measure in Trade Policy 2009; the sectors are tents & canvas, electric machinery, carpets, rugs and mats, sports

d f t i l/ di l/ t i / b t i t t goods, footwear, surgical/ medical/ veterinary/ beauty care instruments, cutlery, onyx products, electric fans, furniture, autoparts, handicrafts, jewelry and pharmaceuticals

Assistance to Horticulture Sector

It was decided in trade policy 2008-09 that a farm

63

It was decided in trade policy 2008 09 that a farm to port cool chain will be established, till completion of cool chain, support for cool chain and cold , ppstorages for horticulture will be given at 8% or 50% of the markup, which ever is lower.It is proposed that this facility for horticulture may be continued.

Mi ll64

N I i i i

Miscellaneous

New Initiatives

Greening of Industry g y

Energy efficiency of the boilers being used by our

65

Energy efficiency of the boilers being used by our industries can be enhanced by 30% thereby reduce the cost of production. Service providers for p pconversion of boilers are available but are reluctant to come to Pakistan.To encourage conversion of boilers for increasing efficiency the government should underwrite the agreement between service providers and the industry.

T d P li I i i i

66

P R i i

Trade Policy Initiatives

Process Re-engineering

R d C f D BReducing Cost of Doing Business

Import of Used Drilling Rigsp g g

Oil and gas and petroleum sector companies are

68

Oil and gas and petroleum sector companies are allowed import of second hand plant and machinery equipment required for their project in Pakistan subject to pre-shipment certification to the effect that such plant, machinery and equipment are in good working condition and are not older than 10 yearscondition and are not older than 10 years.Since drilling rigs usually have a useful life of around 20 years it is proposed that the age limit for them may 20 years it is proposed that the age limit for them may be enhanced to 20 years subject to PSI certification.

Import of Specialized Machineryp p y

There are various restrictions on import of specialized 69

p pmachinery and transport equipment e.g. Concrete Transit Lorries, Concrete Pumps, Crain Lorries, Concrete PlacingTrucks Dump Trucks Waste Disposal Trucks PlacingTrucks, Dump Trucks, Waste Disposal Trucks, cement bulkers and Prime Movers. These conditions include age restrictions, actual use etc. It is therefore proposed that Import of specialized machinery/ transport equipment by actual users (construction companies etc ) in used condition provided (construction companies etc.) in used condition provided they fulfill emission standards and have sufficient productive life irrespective of the age.

Trade-in of Machineryy

There is a possibility for Industrial Users to trade-in new, 70

refurbished or up-graded machinery with their obsolete machinery. Current import and export regimes do not provide for trade-ins whereas if allowed it could preduce the expenditure on BMR.It is therefore proposed that Industrial importers be allowed to import new, refurbished and upgraded allowed to import new, refurbished and upgraded machinery on the basis of trade-in with their old, obsolete machinery. Likewise export of their old/obsolete machinery for trade in with new old/obsolete machinery for trade in with new, refurbished or upgraded machinery may also be allowed.

Advance Remittance for Expeditious I tImports

State Bank of Pakistan has discontinued the facility 71

yto remit US$ 10,000 per invoice, as advance payment, for import of spare parts, consumables/

i l Th di i i f h f ili raw materials etc. The discontinuation of the facility has increased the cost and time to effect urgent imports.imports.It is proposed that facility to remit US$ 10,000 per invoice, as advance payment, for import of spare parts, consumables/ raw materials etc may be restored by State Bank of Pakistan.

Waiver of Size Restrictions on Import of Secondary Quality Iron & Steel Plates/ Sheets/ CoilsQuality Iron & Steel Plates/ Sheets/ Coils

Import of secondary quality iron and steel 72

p y q ysheets/plates / coils is allowed provided the sizes are over 48" (length) x 20“ (width). The size

i i i i i l d diffi l i l restriction is irrational and difficult to implement. The industrial users face difficulties in getting clearance of unsorted scrap which adds to cost of clearance of unsorted scrap which adds to cost of doing business.It is proposed that minimum size restrictions on import of secondary quality iron and steel sheets/plates / coils may be waived off.

R d C f D B

S S ifi

Reducing Cost of Doing Business

Sector Specific

Reducing Cost of Doing Business –Gems & J l S t& Jewelry Sector

To promote Gems and Jewelry sector, the Cabinet in 74

Trade Policy 2008, approved waiver of customs duties and sales tax on import of Gold, Diamonds, Silver, Platinum ,Palladium and precious stones. The waiver was , pnot extended to pearls and other synthetic or reconstructed precious or semi precious stones though these are increasingly being used in jewelry production. g y g j y pFurther FBR didn’t comprehensively implement the decision.It is proposed to exempt natural pearls and other It is proposed to exempt natural pearls and other synthetic or reconstructed precious or semi precious stones from customs duty and sales tax. Implementation of Cabinet decision may be expeditedof Cabinet decision may be expedited.

Pharmaceuticals Exports - Facilitationp

Marketing of pharmaceutical products involve 75

Marketing of pharmaceutical products involve number of complexities in the international territory including need for extensive sampling territory including need for extensive sampling at product launching stage.It is therefore proposed that limit for It is therefore proposed that limit for physicians' samples may be enhanced to 20% (current limit 10%) at the time of launch with (current limit 10%) at the time of launch with first shipment

Special EOU Status to Engineering U itUnits

Currently, units that export 100% of their production 76

y, p penjoy the status of Export Oriented Units and the benefits thereof. Since, engineering industry, particularly auto motive parts manufacturing industry particularly auto motive parts manufacturing industry has vast export potential but cannot export all of its production in initial stages it needs special treatment.It is proposed that engineering units may be allowed EOU facility on export of 50% of their production for the first three years After that engineering units should the first three years. After that engineering units should be allowed this facility on export of 80% of their production.

E R l dExport Related

Export of Edible Oil in Bulkp

At present export of edible oil from Pakistan is

78

At present export of edible oil from Pakistan is allowed in retail packs. The permission for export in Bulk should be allowed. There have been export pdemands for domestic edible oils like sun flower, canola and cotton seed.It is therefore proposed that export in bulk of these oils (sun flower, canola and cotton seed) may be allowed.

Export of Pulsesp

Currently exports of all types of pulses is banned

79

Currently exports of all types of pulses is banned due to domestic supply reasons. There is a growing international demand for this item. Opportunities ppexist for exporting pulses obtained on processing of imported inputs.It is proposed that exports of pulses obtained on processing of imported inputs may be allowed subject to necessary safeguards against export of indigenous pulses. Regulatory duty on such exports

b i d ffmay be waived off.

Enactment of G.I Law

Absence of sui generis law on Geographical

80

Absence of sui generis law on Geographical Indication (G.I) has exposed Pakistani G.I products particularly Basmati rice to infringements. The draft p y gG.I law is under preparation.It is proposed that G.I law may be enacted on fast p p ytrack basis and Trade Development Authority of Pakistan (TDAP) may be given the mandate to apply for and to hold G.I registration of Pakistani products.

I R l d

R l

Import Related

Regulatory

Controlling Import of Poppy Seedsg p ppy

Presently there is no restriction on import of Poppy

82

Presently there is no restriction on import of Poppy seeds as far as the origin is concerned. Single convention binds the signatories to import poppy g p p ppyseeds only from the countries where it is legally produced.In view of the international commitments it is proposed that source of import of opium poppy seeds may be restricted to the countries where it is legally produced.

Controlling Import of Scrap/Waste Pl tiPlastics

Presently import of waste, parings and scrap of

83

Presently import of waste, parings and scrap of polyethylene and polypropylene is restricted to industrial consumers while import of other plastics is p pallowed on commercial basis.To regulate import of such scrap, it is proposed to g p p p prestrict import of all types of plastic scrap to industrial consumers only and strictly in accordance with the Provisions of the Basel Convention.

Import of Used Computer Componentsp p p

At present old and used computers and peripherals

84

At present old and used computers and peripherals thereof are freely importable but the import of used components (RAM, Casing, Motherboard, p ( , g, ,Processors etc) is banned. Thereby depriving the low income strata of computer use.In order to encourage use of computers by low income segment of population, it is proposed that import of old & used computer components may be allowed.

Restricting Import of Used CRT M itMonitors

Second hand Cathode Ray Tubes (CRT) monitors are

85

Second hand Cathode Ray Tubes (CRT) monitors are being imported and used as televisions thereby posing a threat to local television industry; excessive p g y;import of first world’s e-waste is also a threat to the environment.It is therefore proposed that import of CRT monitors may be disallowed unless imported alongwith used computers.

Protecting Local Vaccine Producersg

Local manufacturing of vaccines is of strategic 86

Local manufacturing of vaccines is of strategic importance and now local companies have started venturing into this high tech segment started venturing into this high tech segment. Unhindered import of vaccines is a discouraging factordiscouraging factor.It is proposed that to encourage local manufacturing import of vaccines may be manufacturing, import of vaccines may be allowed only from World Health Organization (WHO) approved plants(WHO) approved plants.

T d P li I i i i

87

I F ili i

Trade Policy Initiatives

Import Facilitation

Import of Donated Ambulancesp

Only such used ambulances (not more than 15 years

88

Only such used ambulances (not more than 15 years old) that are donated by "reputable organizations" are allowed for imports by charitable p yorganizations/ trusts/ hospitals.It is proposed that import of used ambulances that p p pfulfill certifiable standards and have minimum 10 years of useful life may be allowed when donated by any organization / individual to charitable or non-profit organizations, trusts or hospitals.

Disabled Persons – Import of M t i d Wh l Ch iMotorized Wheel Chairs

Secondhand / used motorized wheel chairs are 89

Secondhand / used motorized wheel chairs are presently importable only by charitable institutions and hospitals whereas actual users institutions and hospitals whereas actual users cannot do so.To facilitate disabled persons it is proposed To facilitate disabled persons it is proposed that import of one Secondhand / used duty free motorized wheel chair may be allowed to free motorized wheel chair may be allowed to actual user.

Disabled Persons - Import of Duty Free CCars

Disabled persons are allowed waiver of import duty 90

which is in excess of 10% on CKD kits that are imported for assembling of car for them. Restricting disabled persons to use locally assembled cars limits the choice to p yfew makes; there have been persistent complaints of non-availability of customized vehicles among the local makes. Previously duty free import of customized cars y y pby disabled persons was allowed.To facilitate disabled persons to actively participate in economic activity the facility to import duty free economic activity, the facility to import duty free customized cars, not above 1350cc of engine capacity, may be allowed.

I R l d

91

Lib li i

Import Related

Liberalization

Transfer of Residence (TR) Rules -A d tAmendment

In case a passenger who brings/imports vehicle

92

In case a passenger who brings/imports vehicle under TR scheme dies before the issuance of TR, there is no provision in Import Policy Order for p p yrelease of such vehicle. It is proposed that vehicle imported by a overseas p p p yPakistani, under TR rules, may be released to legal heir(s) in case of his / her death.

Pakistan's low degree of Structural T f ti d Di ifi tiTransformation and Diversification

94

Pakistan's exports ranked by sophisticationPakistan's exports ranked by sophisticationand share in total exports. All of them RCA>1and share in total exports. All of them RCA>1

Commdity Sophistication 1985 1990 1995 2000 2005 2006

Medical Instruments and appliances, nes 20814.00 1.23 0.95 0.89 0.88 0.97 1.00

95

pp ,other sporting goods and fairground amusements, etc 15712.00 1.22 1.87 2.00 1.85 1.76 1.94

Cotton fabrics, woven, bleached, dyed, etc, or otherwise finished 11214.00 3.46 4.11 6.02 3.61 4.78 4.48Leather of other bovine cattle and equine leather 10168.00 2.21 2.04 1.31 0.92 1.17 1.14Clothing accessories, knitted or crocheted, nes 9429.00 0.23 0.36 0.73 0.90 1.65 1.95Fabrics, woven, less 85% of discontinuous synthetic fibres 8683.00 0.10 2.49 3.09 4.00 3.48 3.17

Womens, girls, infants outerwear, textile, not knitted or crocheted; 8585.00 1.24 2.59 1.90 2.44 2.59 2.77other outer garments of textile fabrics, not knitted, crochetedOther made-up articles of textile materials, nes 8359.00 0.89 0.93 1.60 2.86 2.79 2.72

Outerwear knitted or crocheted, not elastic nor rubberized; jerseys, 8199.00 0.16 1.16 1.65 3.79 3.23 3.05pullovers, slip-overs, cardigans, etcArticles of apparel, clothing accessories of leather 8176.00 2.11 4.49 4.80 4.61 2.96 2.73

Outerwear knitted or crocheted, not elastic nor rubberized; other, 8119.00 0.28 0.96 1.63 1.70 2.18 2.17clothin• accessories non-elastic knitted or crocheted

Linens and furnishing articles of textile, not knitted or crocheted 7,345 3.66 5.45 5.94 9.30 12.63 13.38Under-garments knitted or crocheted; of cotton not elastic nor 7 122 1 00 2 27 4 27 3 62 3 55 3 87Under-garments, knitted or crocheted; of cotton, not elastic nor 7,122 1.00 2.27 4.27 3.62 3.55 3.87rubberized

Men's and boys' outerwear, textile fabrics not knitted or crocheted; 6,798 0.28 0.64 1.25 2.75 2.96 3.15trousers, breeches and the likeCotton yarn 5,728 10.32 16.91 18.91 13.21 10.14 10.53Carpets, carpeting and rugs, knotted 5,309 4.57 3.86 1.82 2.33 1.93 1.74

SITC R2, Aggregate 4

Rice, semi-milled or wholly milled 5,060 8.63 4.64 5.55 5.71 5.82 6.46Cotton fabrics, woven, unbleached, not mercerized 4,578 5.07 5.15 6.88 6.16 5.15 5.20

Sub-total (%) 46.70 60.90 70.20 70.60 69.70 71.50Sophistication at the country level 7231.00 7693.00 8268.00 8362.00 8833.00 8,72a

Slide 24

* Other Manufactures US$ Million

Item 2007-08 2008-09 Change %

96

Gems & Jewelry 220.9 291.8 32.1%

Gloves (Sports) 76.3 88.5 16.0%

Cement 417 576.6 38.3%

Cutlery 54.9 47.2 -14.0%

Auto Parts 21.0 12.5 -40.5%

Fans 27.0 29.0 7.4%

Pharma Prods. 110.5 111.0 0.5%

Guar & Guar Prods 36 7 28 1 -23 4%Guar & Guar Prods. 36.7 28.1 23.4%

Electrical Machinery 38.2 45.9 20.2%

Surgical Instruments 261.1 250.4 -4.1%

Slide 09