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Further Customs tariff cut to render industry uncompetitive

JAVED MEHMOOD

ISLAMABAD: Further reduction in Customs duty tariff would render the entire manufacturing industry uncompetitive and pave way for massive imports resulting in an unmanageable trade imbalance for the forex-starved country in future.

This is the opinion of some senior government officials in the Ministries of Commerce, Production and the National Tariff Commission who feel that during ongoing talks with the International Monetary Fund (IMF) the economic managers must not agree to further tariff reduction.

The deposed government of Nawaz Sharif had slashed the overall Customs duty tariff by 10 percent in April 1999, trimming maximum tariff to 35 percent from earlier 45 percent, while under $1.6 billion bail-out package of the IMF (now suspended) the government had agreed to further tariff reduction with upper limit at 25 percent.

The government officials told Business Recorder that 10 percent overall tariff cut by the previous government had already opened a Pandora's box for the entire local industry and since then more than 150 various manufacturing sectors in the country have approached the National Tariff Commission for tariff protection.

This process is still continuing and every week the National Tariff Commission is entertaining two to three new requests from the local manufacturers pertaining to tariff protection.

The other serious problem of further tariff revision can be the trade imbalance that would devour foreign exchange resources forcing the economic managers to run after the donors for more economic assistance to bridge the trade gap, said the officials.

The country is already facing $1.30 billion trade deficit in the nine months of the current fiscal and the overall deficit is expected to settle around $1.75 billion in 1999-2000. The trade imbalance would become unmanageable if the government committed the tariff reduction to obtain economic assistance from the IMF.

As the IMF has suspended the bail-out package the economic managers of the military government should take advantage of it and must not agree to further Customs Duty tariff cut.