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Pakistan - Duty cut to cause shutdown of PSF industry [ 22 Jun, 2008]
A 2 per cent cut in the customs duty on the import of polyester staple fibre (PSF) will cause the shut down of domestic PSF industry, said spokesman of PSF Manufacturers Group (PSFMG), Ali Zaman.
In a statement issued here Saturday, he said the reduction in the customs duty on the import of PSF from 6.5 % to 4.5 % has given a state of deep shock to the local industry.
He pointed out that textile exporters already have the option of importing PSF duty free under the DTRE scheme, thus this reduction will not offer any benefit to the textile exporters.
"It is perplexing that the import substitution industry of PSF which saves $ 250 million of foreign exchange has been discouraged in the budget which has a theme of reducing widening budget deficit", he added.
Zaman noted that PSF manufacturers feel that they have been singled out and are being treated differently. All this was done despite the fact that PSF consumption in Pakistan stands at 16% (2007) as a percentage of total fibre consumption at par with the world average of 17% primarily due to local availability of PSF at highly competitive prices.
He alleged that apparently this reduction of import tariff specific to the PSF industry has been carried out on the demand of APTMA.
Staff Reporter adds: It would be pertinent to recall that the government in 2005 on the request of APTMA reduced import tariff on PSF from 20% down to 6.5% with the aim of boosting the textile sector's performance. However, the textile sector's performance since then has been exhibiting a decline in growth rates.
What APTMA needs to realize is that the cure for their problems is not import tariff on PSF. This reduction will end up destroying the PSF industry, however, the consequential benefit in terms of reduction in cost of manufacturing the final products (such as garments etc.) would be negligible at less than half a percent.
The financial performance of the domestic PSF manufacturers isolated from their respective business group's performance clearly shows that they are struggling to survive even at 6.5% import tariff. With the reduction of tariff down to 4.5% the domestic PSF industry will shut down resulting in:
Firstly, many spinners closing down as they do not possess the financial capability of importing PSF
Secondly, non-availability of a strategically critical raw material equivalent to 3.9 million bales of cotton
Thirdly, it would have negative impact of approximately US$ 250 million on the foreign exchange reserves resulting in increase in unemployment and reduction of the manufacturing base of the country
It has been felt by the exporters that a great injustice has been done to the domestic PSF sector. The self-sufficient domestic PSF industry has never sought nor will it ever seek any subsidies or support of any other kind from the Government.
The domestic manufacturers are world class manufacturers who can compete with the best the world can offer, however tariff protection is needed to compensate the incremental cost of doing business in Pakistan as acknowledged in the budget speech as well.
Some of these factors which are beyond the manufacturers' control are higher logistics cost, unreliable power supply, under developed vendor industry, high labour cost, underdeveloped upstream chemical industry, additional freight charges and relatively higher cost of borrowing.
There is another highly critical issue of zero rating of PTA tariff for which the government must continue the previous mechanism of reimbursement which was very efficient. Why try out a new system which may not work.
The government must take cognisance of this anomaly where abnormal treatment has been meted out to the PSF industry and rectify it before irreparable damage is done to the entire textile chain.
The import tariff on PSF must be restored to 6.5% otherwise the industry will shut down.
Source: nation.com.pk
Pakistan - Polyester staple fiber: association assures CCP not to interfere in prices` fixation [ 20 Jun, 2008]
The polyester staple fiber manufacturers have assured the Competition Commission of Pakistan that the concerned association has no authority to fix prices of the item or fluctuate prices on the request of manufactures.
According to an announcement of the Competition Commission on Thursday, the polyester staple fiber manufacturers have given an under-taking that the association does not interfere into the prices' fixation.
The competition, as successor of Monopoly Control Authority has passed the order in the matter of Polyester Staple Fibre (PSF) manufacturers. The case was heard under the Chairmanship of Khalid A Mirza. Abdul Ghaffar, Mrs Rahat Kaunain Hassan and Maleeha Mimi Bangash, Members and Senior Executive (Mergers, Cartels, Monopoly and Trading) and Registrar assisted the Commission during hearings.
Under the order, the Commission has mentioned factors which were indicative of a tied arrangement and it has been observed that it would be incorrect to state that it was merely a case of price parallelism or that every thing could be justified under one umbrella that the prices were determined by the "market forces".
It has been stated in the order that nothing cogent has been provided as to how these market forces were, whereas on the other hand there was some reason to believe that market forces could have been impeded by collusive behaviour. The commission was not fully satisfied with the grounds and explanations offered on part of the concerned undertakings namely M/s Dewan Salman Fiber Ltd, M/s Pakistan Synthetics Ltd M/s ICI Pakistan Ltd, M/s Rupali Polyester Ltd, M/s Ibrahim Fibres Ltd.
However, the Commission, after considering the facts of the case, the submissions of the authorised representatives and the fact that the parties voluntarily furnished undertakings on behalf of their Board of Directors and Affidavits of their chief executive officers, was inclined to give the benefit of doubt to the said undertakings.
The said undertakings are, however, cautioned that the Commission shall maintain a vigilant eye on their conduct of business, and in the event any violation of the law is apprehended or detected, the Commission shall proceed in accordance with the law. In terms of foregoing, the subject show cause notices are accordingly disposed off.
All parties to these proceedings submitted that they are not members of any formal association and the informal association that does exist, in no manner meets or co-ordinates to adopt or fix parallel pricing or levels of output. They denied that they quoted any price in the media or discontinued the same at any stage. They also filed undertakings and affidavits with the commission assuring their contentions.
Source: Business Recorder
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