An Analysis of the Trade Policy for the Year 1995-96
Ali, Mhammad Imtiaz, Economic Review
The Trade Policy for the year 1995-96 has further liberalised the trade regime for integrating Pakistan's economy into the global trading system. Introduction of a series of reforms in the external sector of the economy in the form of dismantling and further relaxation of a number of control and regulation constitutes a landmark in the process of the liberalisation of the economy introduced from time to time in the past. These reform measures include liberalisation of trade, decontrol of prices, simplification and liberalisation of investment sanctioning, flexible exchange rate, a policy of denationalisation and a whole series of steps designed to enhance the role of private sector in the economic management and development of the economy.
The exchange system was also liberalised accordingly to boost up trade regime. All the para tariff were merged in the statutory tariff regime. Maximum tariff was reduced from 70 per cent (dropped from 92 per cent last year) to further 5 per cent i.e. 65 percent (in 1995-96). Several meaningful incentives and facilities aimed at enhancing exports along with certain relaxation in imports highlighted the trade policy for 1995-96 announced recently. The incentives given for cotton and textile industries along with favourable changes are prominent and will encourage rapid expansion of production in export oriented industries. The significant steps taken in the trade policy included the adoption of cotton policy for three years in which the present policy of absence of export duty on cotton and cotton yarn will continue while at the same time duty free import of raw cotton will also remain an unchanged feature for the next three years. Thus, the textile industry will be able to plan import of cotton in case of cotton crop failure or shortfall in the country while on the other hand the exporters will be able to sign export orders without hanging on for a change in Government policy.
The concession in customs duty and sales tax and import of machinery, intermediate goods and raw materials for the specific export industries would definitely benefit the export oriented industries. Specially textiles and leather goods and cutlery industries would pick up further strength for increasing production and exports. Facility of borrowing from abroad against letter of credit (L/c) for exporters is indeed a welcome and innovative step as the domestic exporters were looking forward to this channel of financing which has been operative in East Asian countries. Now Pakistani exporters will have an access into international credit market for meeting their financial needs at much lower rate than at home to accelerate the volume of production for exports.
Procedures for jewellery exports have been simplified by removing hurdles in the export of jewellery which has a substantial potential for exports. Local insurance Companies have been allowed to open branches abroad subject to certain criteria governing their financial soundness without taking clearance `OR' N.O.C. from Controller of Insurance or State Bank of Pakistan. This measure will expand and further develop our capital market structure. …