Trade Chronicle May & June 2015

TRADE CHRONICLE
There is dire need of exchange
of delegations between
Pakistan trading partners in
order to improve bilateral trade
relations and attract
investment.
Swiss food giant Nestle which
recently announced to invest
more than $37 million this
year to improve production
capacity has rightly pointed
out that consistent
implementation of prudent
economic policies by the
government remains crucial to
unlocking the country’s full
potential.
Economic experts were of the
view that low foreign direct
investment inflow is an
alarming situation. It is one of
the many but most important
indicators of what the world
feels about us and our
government policies. Apart
from political turmoil and
social unrest, there are many
controllable factors which
affect FDI. These include
rationale monetary and fiscal
policies, government’s
assurance for repatriation of
profits, the government’s other
economic policies that attract
FDI.
The Overseas Investors
Chamber of Commerce and
Industry (OICCI) had rightly
pointed out that the budget
2015-16, has ambitious targets
and incentives for certain
sectors of the economy,
looking for generating growth.
However, the budget does not
contain sufficient incentives to
boost Foreign Direct
Investment (FDI), and large
investments in the country. It
includes only marginal tax
broadening measures and some
proposals are likely to impede
capital formation which is
essential for investment to
drive growth. The Chamber has
urged the government to focus
on attracting foreign direct
investment with supportive
taxation policies. To attract
new FDI, upfront levy of
withholding income and sales
tax at import stage on plant and
machinery should be exempted
for new foreign investment,
the OICCI suggested.
We hope that govt. in view of
the OICCI suggestions, will
improve policies to facilitate
flow of FDI.
EDITORIAL
COMMENTS
GIDC may affect
Industry
Following National Assembly,
the Senate has also passed a bill
to impose and enable
government to collect the Gas
Infrastructure Development
Cess (GIDC) from commercial /
industrial consumers to finance
proposed Iran - Pakistan gas
pipeline and Turkmenistan -
Afghanistan - Pakistan India
Pipeline Project.
The passage of bill will enable
the government to have an
access to about Rs100 billion
lying in its account under the
head of the GIDC. The
government had set a target of
Rs145bn GIDC collection for
the current financial year.
The GIDC was first introduced
through the GIDC Act, 2011 but
was declared illegal and
unconstitutional by the
Peshawar High Court and the
Supreme Court.
However, the federal
government recently passed
the GIDC Act, 2015 and included
Section 8 in it for recovery of
arrears for the period for which
the GIDC levy was declared
illegal.
It is said that the bill was tabled
in Parliament to get nod of
legislators, in order to make it
a law of land and subsequently
meet conditionalities of IMF
and indirectly to meet shortfall
in revenue collection.
All major natural gas
consumers have raised voices
against GIDC. The Federation of
Pakistan Chamber of Commerce
and Industry, Karachi Chamber
of Commerce and Industry, All
Pakistan Textile Mills
Associations, Korangi
Association of Trade and
Industry, five zero rated export
sectors representing seventeen
associations, have requested
govt. to withdraw retrospective
imposition of GIDC. They were
of the view that it would
increase the cost of doing
business tremendously. It
would make export sector
unviable in the global market,
as gas tariff in Pakistan even
without GIDC is the highest.
The government should think
about their worries as country
export has already in hang in
balance around $25 billion for
the last couple of years and
unrest in exporters will further
hit exports. The government
should support the exporters
instead of pushing them to the
wall.
Opposition and some of the
treasury benches claimed the
proposed legislation: the Gas
Infrastructure Development
Cess Bill, 2015, was in gross
violation of the Constitution’s
five Articles, including Articles
158, 161, 162 and 172, and
insisted that it should have been
also placed before the Council
of Common Interests (CCI).
Trade Chronicle - May - June 2015 - Page # 05