World Bank urges caution against regulatory duties

KARACHI: Pakistan should reduce average tariffs and minimise the use of para-tariffs, such as regulatory duties, World Bank Senior Economist Nadia Rocha said on Thursday.

Speaking at the launch of the Pakistan Development Update, a twice-a-year publication, the World Bank official said the country’s current tariff policy is based on “revenue and protectionist considerations” instead of long-term competitiveness-enhancing measures.

Contrary to the World Bank’s advice against the use of para-tariffs, Pakistan recently imposed regulatory duties on 731 items to control the burgeoning import bill.

Says current tariff policy is more protectionist, does little to enhance competitiveness

Pakistan imposes import tariffs that are almost twice as high as the world average, and three times higher than those in Southeast Asia, according to the World Bank.

She said the country imposes high import duties on intermediate inputs and raw materials used by exporters, which hurt the competitiveness of its exports. Pakistan’s exports grew only 27.3 per cent from 2005 to 2016 against an increase of 276pc, 445pc and 165pc in the exports of Bangladesh, Vietnam and India, respectively, over the same period.

“Pakistan’s poor trade performance in recent years is an outcome of diminishing export competitiveness,” the World Bank report said.

The country has lost 1.5pc annually in the export market share over the past decade while peer economies like Malaysia, Mexico and Thailand doubled their market share of global exports.

Exporters in Pakistan have difficulty retaining export relationships, it said, noting that they succeeded in retaining only 41.5pc of export relationships in 2010-15 as opposed to India and Vietnam that preserved 54.7pc and 66.4pc of their export relationships over the same period, respectively.

Speaking on the occasion, Sustainable Development Policy Institute Deputy Executive Director Vaqar Ahmed said the recent efforts to enhance the documentation of the economy have also led to increased compliance costs for businesses.

He called for a single tax collection body instead of 14 federal and provincial authorities that taxpayers currently deal with to pay as many as 47 different kinds of taxes. He said provinces currently collect over a dozen taxes separately. Revenue collection under some of these heads is minuscule, he said, adding that these should be consolidated into a single tax to facilitate taxpayers.

Mr Ahmed noted that Pakistan’s exports to China declined even though it has a free trade agreement with it. World exports to China decreased 5.4pc in 2013-15 while the decline in Pakistan’s exports to Beijing was almost 10pc over the same period.

Taking part in a panel discussion, cab-booking service Careem Pakistan Managing Director Junaid Iqbal urged the State Bank of Pakistan to allow fin-tech companies, like Easypaisa and JazzCash, to “pull money directly from bank accounts”.

Currently, users of e-commerce platforms, like Careem, pay through either cash or online wallets. The regulator’s view that allowing fin-techs to draw money from customers’ conventional bank accounts would drain money out of the banking system is misplaced, he said. He also asked the central bank to do away with the upper limits on the value of daily transactions.

Urging conventional banks to jump on the bandwagon of e-commerce, he said they will become irrelevant if they stick to their current business model that revolves around taking deposits from the public to invest in riskless government securities.

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