Country Wise Exports Of Leather Garments

Published Date: 02 Nov 2017

At last the government imposed a ban on the export of meat and live animals, but for three months only, to control the price hike in meat and livestock. For a long time now Pakistan Tanners Association was demanding the imposition of a complete ban on export of livestock, wet blue leather including wet blue split leather of all kinds, raw hides and skins and pickled leather from Pakistan to avert the scarcity of raw materials for domestic leather industry. The non-availability of raw skin, hide causes closure of small and medium units that would create unemployment of about 200,000 people, out of the total 500,000 people employed by the industry. Leather industry is contributing 5 per cent in manufacturing sector of GDP.

To comment on the present scenario we have taken an exclusive interview for Pakistan Today of PTA Chairman Southern Zone, Dr Aziz Ahmed. In a spontaneous reply he welcomed the decision and said that although a ban is imposed on the export of live animals but it is only for three months, which should be on a permanent basis and the ban was not levied on export of wet blue leather. He disclosed that about 10,000 live animals per day are being smuggled from the country. The smuggling of live animals according to him, caused a loss of more than Rs7.5 billion to the national exchequer, besides causing huge raw material shortage to the sector not only for the domestic industry but also to meet the export demand of leather products.

Exports of leather garments has reached US$ 234 million in first seven months of current fiscal year as US$ 221.5 million during the corresponding period last year, showing 5.6 % increase in revenue. The leather garments exports in 2011-12 came down to US $ 341.0 million as decline for the year as compared to 2010-11 was 15.65% in terms of value and 13% in terms of quantity.

A data released by Federal Bureau of Statistics (FBS) on Thursday said exports of leather garments during 2008-09 were US$ 392.5 million which increased to US$ 404.3 million in 2010-11, showing an increase of 3.0%. The reasons for decline in export of leather garments were rising cost of production, little availability of leather and its high prices, law & order situation in Karachi in particular and Pakistan in general and energy crises. The authorities also took steps in consultation with major players of leather sector to enhance the export of leather garments which included release of Rs 881.917 million from 1992-93 to March 5, 2013 for the leather sector from Export Development Fund.

Moreover, in order to improve supply chain of leather sector exports, 25% financial cost for setting up of design centers and labs has been provided by the Ministry of Commerce. Installation of flaying machines in slaughter houses at district level, request of Sialkot Chamber of Industry for provision of common effluent treatment plant for its leather industry has been agreed to and is currently under process. During fiscal year 2011-12, Trade Development Authority of Pakistan (TDAP) organized Pakistan’s participation in nine trade fairs and exhibitions of leather garments and its accessories. Two fairs were allocated to Pakistan Leather Garments Manufacturers and Exporters Association (PLGMEA) in year 2011-2012 and in 2012-13 as well. In these events, 50% subsidy was provided to the trade bodies towards space rent and construction of stalls.

Export of leather and leather items was $1.22 billion in 2007-08, $959 million in 2008-09 and $867 million in 2009-10. These figures he said go on to show that exports have declined in the last 3 years to 30 per cent which is an alarming situation. He said that exports of 2010-11 have shown an upward trend but this was mainly due to higher prices of leather in the international market while in quantitative terms the increase was negligible. Quoting UNIDO report, Dr Aziz said, presently due to the exorbitantly high prices of beef and mutton an average Pakistani family cannot afford to buy meat and as a result Pakistan was declared as a protein deficient nation.

Dr Aziz said that about 1.5 million animals were perished in 2010 floods and 95,523 animals were exported from July 2010 to March 2011. This resulted in an acute shortage and increased prices of mutton from Rs270 to Rs450 and beef from Rs154 to Rs350 per kg from 2008-09 to 2010-11. He further stated that the ban would help in bridging the demand and supply gap and would bring meat and animal prices down that would make prices affordable for poor people. According to him many projects have been initiated in the country to increase the production of livestock but could not increase number of animal to the desired level, which is also one of the reasons for shortage of animals. This situation has frustrated the tanners so much that they threatened to go to all the four provincial High Courts and Islamabad High Court against export and smuggling of live animals, he added.

EXPORT POLICIES

Pakistan promotes the export of Pakistani products, such as textiles, surgical products, leather and sports goods, with measures such as tariff concessions on imported inputs, and income and sales tax concessions. Pakistan did not provide any export subsidies in the form of cash grants in the 2011-2012 Budget due to resource constraints. In 1989, Pakistan established its first Export Processing Zone (EPZ) in Karachi.

The EPZ provides special fiscal and institutional incentives specifically targeted to encourage the development of export oriented industries. An export oriented industry is defined as one that exports 80 percent to 100 percent of its production. The government subsequently created EPZs in eight additional locations, including Risalpur in Khyber Pakhtunkhwa Province, Gujranwala and Sialkot in Punjab, and Saindak, Gwadar, Reko Dek, and Duddar in Balochistan. Of these, only Karachi, Risalpur, Sialkot, Saindak, and Dudder are operational. Principal government incentives for EPZ investors include: exemption from all taxes and duties on equipment, machinery, and materials (including components, spare parts, and packing material); indefinite loss carry-forward; and access to Export Processing Zone Authority One Window services. Foreign investors are eligible to establish businesses in the EPZ and are guaranteed full repatriation of capital and profits. Import and foreign exchange control regulations are not applicable in these zones.

The Export Processing Zone Authority (EPZA) has the exclusive right to collect estimated taxes on exports. Final taxes are one percent of the total profits. EPZA collects a "development surcharge" of 0.5 percent of the total profits. Companies‟ exports are otherwise exempt from all other federal, provincial, and municipal taxes

There are no minimum or maximum limits for investment. However, despite these incentives, most of the EPZs have failed to attract significant investment.

COUNTRY-WISE EXPORTS OF LEATHER GARMENTS (US$000)

Country

July-June 2007-08

July-June 2006-07

%Change

U.A.E.

88,174

16,253

442.51%

South Africa

59,188

89,780

-34.07%

Germany

52,734

35,379

49.05%

U.S.America

52,568

47,898

9.75%

Spain

48,834

36,934

32.22%

United Kingdom

36,510

31,896

14.47%

France

33,663

27,725

21.42%

Netherlands

22,898

17,603

30.08%

Belgium

22,814

12,021

89.78%

Saudi Arabia

17,313

3,526

391.01%

Turkey

11,964

3,595

232.80%

Italy

10,977

7,063

55.42%

Sweden

8,074

5,477

47.42%

Canada

7,065

8,005

-11.74%

Greece

5,589

5,658

-1.22%

Malaysia

5,410

822

558.15%

Denmark

5,076

6,766

-24.98%

Japan

3,942

3,251

21.25%

Australia

2,677

2,431

10.12%

Russian Fed.

2,625

1,312

100.08%

Norway

2,446

1,254

95.06%

Kuwait

1,612

662

143.50%

Qatar

1,577

1,414

11.53%

Portugal

1,479

1,668

-11.33%

Sudan

1,397

289

383.39%

Ukraine

1,321

76

1638.16%

Finland

1,289

1,400

-7.93%

Poland

1,182

482

145.23%

Hong Kong 

831

2,978

-72.10%

Bahrain

784

284

176.06%

Senegal

696

-  

100.00%

Benin

509

-  

100.00%

Mozambique

473

-  

100.00%

China

286

745

-61.61%

Ireland

249

260

-4.23%

Iran ( Islamic R.)

170

-  

100.00%

Lithuania

167

33

406.06%

Brazil

135

342

-60.53%

India

126

277

-54.51%

Korea, Rep. Of

122

372

-67.20%

O.Asia(Tai.For.Pe.Ki

99

142

-30.28%

Singapore

97

123

-21.14%

Chile

95

65

46.15%

Colombia

55

4

1275.00%

Mexico

41

124

-66.94%

Thailand

38

104

-63.46%

Philippines

34

4

750.00%

Argentina

34

35

-2.86%

Oman

34

100

-66.00%

Sri Lanka

17

2

750.00%

Egypt(U.A.R.)

13

39

-66.67%

Kenya

10

-  

100.00%

Bangladesh

10

79

-87.34%

Mauritius

7

11

-36.36%

Afghanistan

1

2

-50.00%

Viet Nam

1

9

-88.89%

Indonesia

1

22

-95.45%

Gambia

-

23

-100.00%

Other Countries

12,621

11,296

11.73%

Total

528,154

 388,115

36.08%

Some essential theories regarding general tax aspect of Pakistan leather industry

Taxes should be reduced He suggested that Withholding Tax on export of leather is 1 per cent that should be reduced to 0.5 per cent for at least two years. Further, Export Development Surcharge of 0.25 per cent should also be suspended for at least 3 years.

Moreover, one per cent Excise Duty imposed through SRO 655(I)/2007 on different importable items should be removed he said. Duty on Chromium Sulphate, Formic acid and Fat Liquors, the main raw material of leather industry, should also be reduced. The chemicals used by the industry should be allowed to be imported from India, as they are cheaper in India as compared to any other country. Therefore, they may be included in the "positive List of Indian items". Therefore, 6.3 per cent Duty Drawback on export of finished leather should be given so that we can have to some extent a level playing field in competing with India, China and Bangladesh, the chairman said.

The Chairman PTA said subsidy for trade delegates should be increased from present level of $100 per day to at least $200 per day. Further, subsidies must also be enhanced from 50 per cent to 75 per cent on space rent and cost of construction for participation in international fairs.

The PTA Chairman proposed that the government should formulate a permanent trade policy and set up implementation committee to ensure implementation of all the measures announced in that trade policy. He demanded that a leather ministry should be established on the pattern of Textile Ministry to enable PTA to take up all the genuine issues with this Ministry for solving problems.

The government he said should provide ado relief in the shape of additional duty drawback at the rate of 1 per cent of export value to the exporters of leather industry to play their viable role in promoting export.

Some essential theories regarding GST aspect of Pakistan leather industry

Various leather industry associations presented a united front in opposition to the imposition of reformed General Sales Tax (GST), which they claim may very well push the export-oriented sector to the brink of closure.At a press conference, jointly chaired by LCCI President Shahzad Ali Malik, Chairman Pakistan Tanners’ Association Khurshid Alam, Pakistan Leather Garments Manufacturers and Exporters Association (PLGMEA) Vice Chairman Mudassar Masood Ch., Pakistan Footwear Manufacturers Association Chairman Farrukh Saleem and Representative of Pakistan Gloves Manufacturers & Exporters Association Shahid Latif, participants were critical of the government’s continuous ignorance on the reservations of exporters regarding the imposition of the reformed GST.

The LCCI Senior Vice President Sheikh Mohammad Arshad, who also belongs to the leather sector, criticised policy-makers for not taking the stake-holders into confidence on decision of reformed GST. The Pakistan Tanners’ Association Chairman Khurshid Alam claimed that corrupt individuals were firmly embedded in the decision-making process of the government. He maintained that this disreputable group was responsible for the government’s ignorance of the reservations held by the exporter community and protests by leading political parties against imposition of reformed GST.

The Pakistan Tanners Association (PTA) Chairman said that Rs 12 billion of the leather sector would get stuck up in tax refund system annually after imposition of reformed GST. He added that the government was also holding up hefty amounts of exporters’ under the export rebate which currently stands at around one percent.

It seems impossible in the present state of functioning that FBR could smoothly release 15 percent of GST refunds. To meet this shortfall in working capital, exporter/entrepreneur would resort to the bank for financing its export for which mark-up rate itself is on a parallel rise. Thus the industry would ultimately collapse. Government should wisely consider the implication of reformed GST instead of blindly following the IMF agenda, he added. Highlighting major issues of the leather industry, Khurshid said that smuggling and export of live animals was creating scarcity of hides and skins for leather along with a shortage of milk and meat for the common man.

He further apprised that government has already been approached on several occasions to take note of malpractice of under-invoicing. Vice Chairman PLGMEA Mudassar Masood stated that leather and leather products have an export of 95 percent and the government has failed to recognise the importance of 2nd largest exporting industry of Pakistan. Gas load-shedding and shortage of raw materials have hampered the continuous industry processes and directly threatening the competitiveness of leather sector.

Pakistan Footwear Manufacturer Association Chairman Farrukh Saleem, while agitating against imposition of RGST, said that Rs 420 million of leather exporters is held up on account of deferred claims of sales tax and government departments are not paying any attention to resolve these cases. Revoking the zero-rate status from leather industry would create an acute shortage of working capital and would hence reduce size of the sector, while exports might dwindle by 30 percent.

Supporting the arguments, Representative of Pakistan Gloves Manufacturers & Exporters Association Shahid Latif termed the imposition of reformed GST as a hasty decision. He stressed on the need to completely revamp the FBR and the tax machinery if the government was serious at gaining fruit out of the reformed GST imposition. He said that the government and IMF should first bring reforms for FBR while focusing on the real essence to bring ease and comfort for the tax payers’ community.

Lahore Chamber of Commerce & Industry President Shahzad Ali Malik advised the government to focus on strengthening its export base rather than look at IMF.

He said that industrialist had never backed out in the hour of need and recalled the notable contribution by leading exporters and industrialists for earthquake and flood victims. He asked the government to extend trust on exporters and industrialists as they possess the potential to give a much needed boom to the economy. He told that LCCI is ready to extend its support to five exporting sectors for establishing a joint forum to plead its case against imposition of reformed GST and discontinuation of zero-rating of sales tax.

Some important tax and tariff aspect for exports of Pakistan leather industry

To "Impose Complete Ban on Export of Wet Blue leather including Wet Blue Split Leather of all kinds / Raw Hides & skins and Pickled Leather from Pakistan" to avert the scarcity of these essential raw materials for domestic Leather Industry.

To oppose the export as well as smuggling of live animals which are detrimental to the leather industry and at the same time it not only increases the prices of meat but also hampers the livestock wealth. It is requested that the concerned Ministry may be asked to immediately stop issuing licenses for the export of live animals and control smuggling thereof .

To induct Chairman, PTA as Permanent Member on the Board of Administrators of EDF.

To notify upward revision of Duty Drawback Rates at least 6.3% on export of Finished Leather for goat/sheep skins, cow/buff hides and Cow/Buff Leather for Upholstery to make it realistic, presently DDB rates on these items are very low i.e. 0.80%, 1.17% and 2.12% respectively.

To reduce duty on Chromium Sulphate, Fat Liquors, Buffing Paper, Pigments, Formic acid & Dyes from present duty (different slabs of 15%, 20%, 25%) to 10% as the main raw materials of leather industry.

To reduce duty to 5% on hot stamping foils falling under H.S Code 3212.1000 which is presently at 20%?

To reduce duty to 5% on polyester foils falling under H.S Code 3920.6900 which is presently at 20%?

To allow duty free import of all Spare Parts, Accessories and tanning Machinery for Leather & Leather Products which is presently @5%?

To exempt all spare parts of tanning industry from Sales Tax.

To exempt all hot stamping foils / polyester foils for leather industry from Sales Tax.

Expeditious implementation is needed to release fund from Ministry of Finance for the Export Investment Support Fund under STPF-2009-12 for Matching Grant for setting-up of Effluent Treatment Plants as well as Labs in individual Tanneries.

Present 1% Withholding Tax on export of leather should be reduced to 0.50% for at least two years which is a recession period.

To reduce Withholding Tax (Presumptive Tax) on Import from 1% to 0.25%.

To suspend Export Development Surcharge @ 0.25% for at least 3 years.

To withdraw anti-dumping duty on all items of chemicals.

To allow "0% Duty" under FTA to be renewed on import into China and Export from Pakistan to China on all Items of Leather & Leather Products under Chapter 41, 42 & 6.

To increase subsidies from 50% to 75% on space rent and cost of construction for participation in International Fairs.