Govt’s export incentives

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The government has announced an incentive package to the exporters of the country that amounts to a total of 180 billion rupees and comprises partially of duty drawbacks for textile garments at 7 percent, textile made-ups 6 percent, processed fabric 5 percent, yarn and grey fabric 4 percent and sports goods, leather and footwear at 7 percent, and partially of a complete end of customs duty on man-made fibres excluding polyester and sales tax on the import of textile machinery. In simple terms, a drawback is a government scheme that pays back excise duties, import duties and other taxes on imported goods which are exported again after processing indigenously, in order to boost the competitiveness of the country’s exports sector. While it may be a moment to rejoice for the exporters of the textile industry, however, looked at from a holistic perspective, it betrays a fundamental flaw with the over-arching policy of the country’s exports; the costly electricity.
The exports industry, by and large, has been suffering from the monstrous price of electricity provided to the industrial sector which jacks up the costs of manufacturing goods. By the time the end product comes out of the factories, it already is cumbered with an exorbitant cost, making it more expensive for the consumers within the country and importers without, making indigenous products highly undesirable. The goods coming out of China, for example, leave the Pakistani products in their wake due to their low costs. China, and now India, have the world’s lowest average costs of electricity; while Pakistan, despite its proverbial abundant natural resources, has a tremendous cost of electricity. The statistics are harrowing if the cost of labor is taken into perspective. The minimum wages of workers in Pakistan, as things currently stand, are amongst the lowest in the world. Globally, China has been able to send the US job market into a meltdown by making US companies outsource their manufacturing to China due to the cheap labor available there. While conditions for Pakistani wage workers are similar to, if not worse than, those in China; the volume of Pakistani exports is incomparably low. Apart from the poorly skilled labor available in Pakistan, the single most significant factor in this difference is the cost of manufacturing goods.