CHAIRMAN’S REVIEW
(April 2000 - December 2000)

Honourable Members of the Management Committee and Distinguished Members of APTMA, I welcome you to the Annual General Meeting.

With the blessings of Allah and your support I finally took over charge of Chairman APTMA on 5th April 2000. At that time, APTMA and the Textile Industry was passing through a very critical and uncertain phase. APTMA's image required restoration with the Government Ministers, Bureaucrats and other Trade Organizations and major problems and crucial issues of APTMA Members lying unresolved required urgent resolution. Excepting a few, APTMA Members had no participation in the Operation of the Association. Alhamdolillah, with your positive support and participation within a very short period, APTMA has been able to:

- Resolve most of the outstanding issues of its Members.
- Establish excellent working relationship with all relevant Ministers, Bureaucrats and other Trade Organizations, including FPCCI
- Elevate the Institutional image of APTMA.
- Promote positive participation and understanding amongst APTMA Members.

The nine months that I had the honour of being the Chairman of APTMA has been a very active period in the history of APTMA and can be characterized as a period of achievements and consolidation. In the past nine months we strived hard to revive, consolidate, redirect and reform the Textile Sector. There is ample evidence to this effect and recognition too.

Looking back, all of us can be justifiably proud of the performance of the Managing Committee. Let me briefly highlight some of the major achievements of the past nine months.

COTTON
In the Field of Cotton, we have been able to convince the Govt. to allow free import and export of cotton entailing no custom and excise duty on import of cotton. As a result, the Government on our representation, withdraw the 15% excise duty on import of cotton below 28mm staple length.

During my nine months tenure it has been our persistent demand that economic working of Textile units is primarily linked to supply of Raw Cotton in reasonable quantity and at reasonable price. In the period under review, with the improved cotton situation, the Textile production of the Mills was reviewed. We made it abundantly clear to the Govt. that at no point of time, the equilibrium was to be disturbed.

The Government, on our repeated requests, introduced a major change in its Cotton Sale Policy to offset the expected losses in cotton export and directed the Trading Corporation of Pakistan to lift the curb on sale of its cotton stock to the local buyers, who were the main consumers of cotton.

Not only Ginners, but all those concerned with cotton in any form admit that seed cotton with higher content of trash and moisture is being delivered to the mills. It has now being admitted that for bringing over all improvements in the quality Cotton, Cotton Ginning has a major rule to play. Accepting our point of view, the Commerce Minister was pleased to constitute a Committee for preparing an Action Plan to ensure supply of Contamination - Free Cotton to Textile Mills in the Country.

We had proposed to the Govt. to establish Ginning Institutes in the Cotton Growing and Ginning areas to improve the quality of Ginned Cotton. The Federal Government has very generously approved a plan to set up a Cotton Ginning Research Institute in Multan at a cost of Rs. 110 million, with the objective of improving the quality of cotton.

Switching over to Staple Grade Pricing System to wipe out the stigma on Pakistan in the international and local market as a seller of poor quality lint, I am proud to announce that Pakistan has now joined the select band of major world cotton producing countries as the fourth largest producer of graded Cotton. A uniform grade of local lint has been prepared by the PCSI and is currently being promoted.

CUSTOMS
Our request for allowing duty free import of textile machinery needed for Balancing, Modernization and Replacement was favourably responded to by the Minister of Commerce. In addition, decision was also taken under Trade Policy 2000-2001, whereby import of machinery more than five-years old is now allowed.

Previously the duty free import of Ring Spinning Frames was not allowed under the mistaken impression that these were being manufactured domestically. Their import was being unfairly subjected to custom duty @10%, which has now been withdrawn on the persistent representations of APTMA..

Duty Free plant and Machinery has been allowed by the Government under SRO 369 dated 17th June, 2000 for expansion and BMR. Since the conditions placed to utilize the above facility are very harsh and cumbersome, APTMA has proposed the following amendments in the SRO.

1. The value added industry attains a minimum value addition of forty percent of production value to be determined by the Committee comprising representatives of the Engineering Development Board, the National Tariff Commission, the Central Board of Revenue, the Board of Investment and Ministry of Industries; or

2. The export industry annually exports minimum average fifty percent of its production in first ten years.

We have been assured by Ministers for Finance and Commerce that SRO 369(I)/200'0 would soon be modified in the near future, as proposed by APTMA.

TAXATION
On the demand of APTMA, the practice of renewal of Income Tax Exemption Certificate after every three months has been done away with. Now all such Certificates under section 50 (4) and 50 (5) will be valid for 12 months.

We had agitated consistently for the creation of the Institution and appointment of Tax Ombudsman at the earliest. You will be pleased to know that our efforts have borne fruit and the Govt has announced the appointment the Tax Ombudsman to look into and decide the complains of the Tax Assesses.

The Government has also accepted another very important demand of APTMA for payment of Tax Prospectively instead of Retrospectively. Tax refund cases have been expedited and the last date for Tax Amnesty was extended by the Govt at our request.

Refunds Under Income Tax U/S 80-D
After the decision of the Honourable High Court and Supreme Court that the benefit U/S 80-D be extended to all companies who did not file suit as well as to loss making companies, APTMA requested the Minister for Finance and Chairman CBR to implement the decision at the earliest. APTMA also requested CBR that refunds to companies who have already been charged Income Tax U/S 80-D be refunded immediately. CBR was also persuaded by APTMA not to file any petition against the decision of the Supreme Court and High Court.

WEALTH TAX
As regards the Wealth Tax, we had proposed to the Government that Wealth Tax act 1963 should be abolished to encourage investment. The Govt has responded positively to our suggestion and has abolished the Wealth Tax Act 1963.

PENALTY FOR DELAY IN PAYMENT
Under section 33 and 34 of the Sales Tax 1990, the word "Shall" was inserted for imposing penalty and additional tax. Therefore any kind of delay in payment would automatically carry additional amount of Sales Tax by way of penalty/additional tax. We had proposed to the Govt that the word "shall" be replaced with words "shall be liable" so that the adjudicating officer was vested with the authority of waiving penalty/additional tax in cases where delay was genuine and beyond human control. The Government has accepted our plea.

MONETARY POLICIES
On APTMA's representation the State Bank of Pakistan allowed export financing on bleached and unbleached cloth at 10% mark up instead of earlier 8%. All other categories of Cloth / Fabric such as dyed and printed fabrics were also allowed export finance at 8%. The facility will be available until June 30, 2001.

EXCHANGE RATE POLICY
APTMA had proposed to the Government that State Bank of Pakistan should formulate a system of exchange rates where by the Country does not lose its competitive advantages in any market.

The Finance Minister in his budget speech confirmed that the State Bank of Pakistan would follow an exchange rate policy that would maintain its competitiveness in relation to market forces and inflationary differentials between Pakistan and its major trading partners.

The State Bank of Pakistan has now allowed the Rupee to float against the Dollar. This move by the State Bank of Pakistan is to keep Pakistan's export competitive to counter the persistent disadvantage as against the Indian Rupee.

BMR
Inspite of the Government and textile industry's keenness, the Textile Industry was unable to pursue the much required value addition due to non availability of adequate BMR financing, as financial institutions were unable to extend sufficient funds to projects for BMR. Commercial Banks too were reluctant to extend project finance. In response to APTMA's persistent representations, the Governor State Bank of Pakistan instructed all Banks to provide financing to Textile sector on priority basis. As a result the Textile Industry is now being facilitated in its BMR drive.

Under the Investment Policy, a liberal first year allowance ranging for 40% to 80% is available to new industries, and we appreciate the introduction of provision for tax credit equal to 10% of investment in plant and machinery for new investment and BMR made during 2 years from 1st July 2000. This tax credit would be in lieu of the 1st July 2000. The tax credit would be in lieu of the first year allowance at the option of the taxpayer.

State Bank and lending institutions have been convinced by APTMA of the need for any adequate financing to the Textile Industry at low mark up rates.

MEMBERSHIP OF GOVERNMENT BODIES
Honorable Members of APTMA, you will be glad to know that during my tenure as the Chairman, APTMA has been given membership on Federal Export Promotion Board headed by the Chief Executive of Pakistan, the Textile Board, Committee to implement Textile Vision 2005, National Accountability Bureau and CIRC. I, in my personal capacity, have been honoured by nomination as a director of Habib Bank Limited for 3 years.

Sales Tax Refund Rules (SRO 417)
SRO 417 falls in the Category of impediments. The conditions of the SRO are nowhere to be found in a similar document anywhere in the world. SRO 417 needs drastic amendments so as to make it workable, otherwise it is bound to hamper exports. The rules under this statutory order not only ask for innumerable
documents to consider sales tax refund but also provide extra-ordinary discretionary power to Sales Tax officer to scrutinise the genuineness of the refund claims. Stage-wise refunds have been provided and only 50% of the claim ,amount is payable after 30 days and the rest over a long period subject to verification and audit. The new rules will block the liquidity and choke the cash flow of the exporters. We have raised this issue with the Govt and .hoped that our cogent arguments for this unresolved issue will be considered on merit.

ANNUAL DINNER
General Pervez Musharraf, Chief Executive of Pakistan was the Guest of honour at APTMA's Dinner 2000 held at Marriot Hotel, Islamabad. The Annual Dinner was attended by the Minister of Finance, Minister of Commerce, Federal Secretaries, Senior Government Officials, Army Generals, Ambassadors of foreign countries and the elite of the Country. The Annual Dinner Function.

APTMA'S DROUGHT RELIEF FUND
During the year the rural areas of Sindh and Baluchistan experienced the worst drought in the Country's history. To fulfill its social responsibility, APTMA collected and contributed a sum of Rs. 40.5 million it towards the Chief Executive's Drought Relief Fund. Cheques for Drought Relief were personally presented to the Chief Executive of Pakistan and Governor Sindh.

REUNIFICATION OF APTMA WITH FPCCI
In 1999 APTMA had disassociated itself from FPCCI due to personal differences of an APTMA Member with the Management of FPCCI. Soon after becoming Chairman, I reconciled the unnecessary rift between APTMA and FPCCI, and re-unified the two premier institutions of the Country for mutual benefit.

VISIT OF APTMA DELEGATION TO INDIA
I led a Delegation of twelve APTMA Members to India last month. The Delegation was very warmly welcomed through out India.

During our stay in India the Delegation held a number of meetings with various Textile Associations of India, including the Indian Cotton Mills Federation, Northern India Textile Mills Association, Cotton Textile Export Promotion Council and Indian Textile Engineering Exporters Council. The APTMA Delegation also availed the opportunity to see the 6th International Textile Machinery Exhibition in Mumbai where the Textile Machinery Manufactured in India was also displayed. The APTMA Delegation discussed matters of mutual interest with their Indian counterparts. In particular, emphasis was placed by both sides on exchange of relevant information and creating understanding in respect of production and prices of the Textile Products so that the producers of both the Countries are able to secure optimum prices for their products in the international markets rather than undercutting each other's exports. It was also suggested that advantages should be taken of the technological advancement made by the more advanced Countries in the field of Textile production, quality improvement and development in operational technology. However, there should be maximum understanding, through mutual discussions, between Pakistan and India's Textile Associations as to the price, quality and other terms of import so as to insulate from exploitation. The need for exchange of information on the Cotton Crops, eradicator of diseases more common to the Cotton in Pakistan and India and other matters related to Textiles was also emphasized.

The quality of Textile Machinery manufactured in India and the prices thereof can be termed as fairly reasonable. Pakistan should seriously consider entering into a bilateral agreement with India for the import of Textile Machinery and Accessories in exchange for Pakistani goods for which a niche can be found in the Indian market. The Textile Machinery manufacturers of India assured Chairman APTMA of specially attractive prices for Pakistan's Textile Industry.

NOW, THE FUTURE
The new challenges and opportunities of globalization of economies can be fully harnessed to our advantage if we optimize our resources untilization. We have an important role to play in this context. The present Government has provided the necessary investment policy frame work which we can exploit to contribute fully in the development of the Textile Sector.

It is interesting to observe that when the developed countries plead for global free trade regime in respect of the Textile Sector, special dispensations are sought by such developed countries essentially to protect their domestic interests on the plea of getting 'breathing space' for structural adjustments.

Consequently, the Textile Trade is being regulated by restrictive short-term/long-term multifibre arrangements. Presently, under the agreement on Textile and Clothing (ATC) phase out of quantity restrictions on textile exports to developed countries would take place by the end of 2004. This will open up of global Textile Trade to all for free competition. This would also eliminate the dual market system presently prevalent for export market and the domestic market. In the free global market after 2004, unless a product is competitive in the export market, it may not be possible to sell it even in the domestic market.

I take this opportunity to convey my grateful thanks to Mr. Abdul Razzak Dawood, Commerce Minister and Mr. Shaukat Aziz, Finance Minister for earnestly trying to redress the difficulties faced by the Textile Industry and APTMA Members. I am confident that under their leadership and guidance, our Textile Industry will flourish in the coming years.

Finally, I must express my profound gratitude to all my colleagues who stood by me and cooperated with me in discharging my onerous duties in the past nine months. I made changes where these were judged prudent and necessary but maintained and consolidated the practice that stood the test of time.

Mentioning the APTMA secretariat, I would like to thank the whole team individually and collectively for their support during my nine months tenure.

Thank you.

LO-MY LORD IS INDEED HEARER OF PRAYER
(HOLY QURAN)

MOHSlN AZIZ
Chairman

31st December, 2000