Fr om the

Holy Quran
In the name of ALLAH,
the Most Magnificent, the Most Merciful

He is the One who has created gardens, trellised and

untrellised, and date-palms and crops with a variety of
edibles, and the olive and the pomegranate, (some)
similar to one another, and (some) dissimilar. Eat of its
fruit when it bears fruits, and pay its due on the day of
harvest, and do not be extravagant. Surely, Allah does
not like the extravagant.

(Surah 6: Surah Al-Anaam, verse 141 Translation : Mufti Taqi Usmani

http://www.quranexplorer.com

Respecting the sanctity of the Qur'anic verses is the duty of all of us

Vision
To be the Preference in Value
Optimization for Business

CORE
Mission
To develop Business Leaders through imparting quality
education and training in financial and non-financial
areas to bring value-addition in the economy
Core Values
Competence Innovation Ethics

Transparency Professionalism

This Journal is also available on ICMA Pakistan’s Website : www.icmap.com.pk/management_accountant.aspx

 MANAGEMENT
ACCOUNTANT
Official Journal of Institute of Cost and
Management Accountants of Pakistan
Inside this Issue Volume : 28.5 l Sep-Oct, 2019

2 President's Message

3 From the Desk of Chief Editor

Research & Publications Committee SPECIAL MESSAGE

Chairman Mr. Kunio Mikuriya
Muhammad Yasin, FCMA
4 Secretary General, World Customs Organization (WCO)

Members EXCLUSIVE INTERVIEWS

Dr. Salman Masood, FCMA
Ms. Uzma Adil Khan
Muhammad Kashif Tajammul, FCMA
Muhammad Azhar Khan, FCMA
6 Chairperson, Oil and Gas Regulatory Authority (OGRA)
Salman Haider, FCMA
Mr. Abdul Khaliq
Farough Ali Naweed, FCMA
Rashid Mehmood, FCMA 9 Chairman, National Tariff Commission (NTC)
Saqib Masood, ACMA
Sohail Anjum, ACMA Mr. Arif Ahmed Khan
Mohammad Abdur Rab Khan, ACMA 12 Chief Executive, Trade Development Authority of Pakistan (TDAP)

Editorial Board
Mr. Irfan Iqbal Sheikh
Muhammad Yasin, FCMA
Chief Editor
16 President, The Lahore Chamber of Commerce & Industry (LCCI)

Prof. Lakshman R. Watawala

FOCUS ARTICLES
President, Institute of Certified Management
Accountants of Sri Lanka (ICMASL) Trade, Tariff and Tax Policy Zero-Taxation on Salaried Class
Dr. Samina Khalil
20 By Dr. Manzoor Ahmad 32 By Syed Shariq Waqar, FCMA
Director, Applied Economics Research
Center (AERC), University of Karachi Tariff Regime and Issues in
24 Trade, Tariff and Taxation:
The Pillars of Economy 34 Pakistan: A Comparison with the
Editor By Syed Shamim Ahmed, FCMA Regional Countries
Shahid Anwar, Director By Jamshaid Hassan Butt, ACMA
Research & Publications, ICMA Pakistan
National Tariff Policy
Correspondence Address
ST-18/C, ICMAP Avenue, Block-6,
28 Anti-Dumping Laws – Lifeline for
Domestic Industry in Era of 38 and Taxation System
Trade Liberalization By Wasful Hassan Siddiqi, FCMA
Gulshan-e-Iqbal, Karachi-75300, Pakistan. By Saifullah Khan, FCMA
Ph: + 92 21 99243900 Ext. 117 / 107
Fax: + 92 21 99243342
Email: rp@icmap.com.pk
ARTICLES SECTION
URL: www.icmap.com.pk
43 Pakistan Banao Certificate: Some Suggestions by an Overseas Fellow member
By Syed Asad Abidi, FCMA
Our Next Issue
Nov-Dec 2019 45 ByAs Qasim
Professionals, How Well Have You Planned Financially to Meet Your Death?
Abbas, FCMA
Foreign Aid:
Blessing or Curse OTHER FEATURES
Research and Publications Committee
would welcome articles from members and 47 Economy Watch
51 Sector Brief: Sugar Sector
other writers on the above-mentioned theme
latest by 20th December 2019
DISCLAIMER: The Management Accountant is
published bi-monthly. Views or opinions
49 Regulatory Watch 53 Glossary of Management
Accounting Terms
expressed by the authors of the articles published
in this Journal do not necessarily reflect the views /icmapak /icmapdotpk /company/icmap
of the publisher and/or the Editor.
 ICMAP

Estd. 1951

President's
Message
I am pleased to issue this message for the Sep-Oct 2019 issue of Management Accountant which is on the theme of 'Trade,
Tariff and Taxation' - a much broader theme that encompasses the different dimensions of the trading activity, including
customs and tariff; and the tax-related issues and challenges. In my view the selection of this theme is quite timely in the
backdrop of current economic scenario facing our country vis-à-vis the initiatives being taken by the government to boost
national exports; improve tariff regimes and enhance tax revenues. I do hope that the articles contributed and suggestions put
forward by our members and experts in this issue would provide food for thought for policymakers.
In a recent Tweet, Dr. Abdul Hafeez Shaikh, Federal Finance Minister, has stated that 'as a result of the stabilization measures,
trade and tax reforms initiated by the Government, we have achieved real progress last year to create a platform for sustainable
development'. This news is a good omen for all of us as the country is passing through the most critical juncture of history with
not much impressive economic indicators that could stimulate growth and investments. However, it seems that the corrective
measures taken during the last year, are now bearing fruit, leading to improving economic indicators. As reported in the press,
Pakistan's trade deficit during the first quarter (Jul-Sep) of FY 2019-20 has come down by 35% to $5.72 billion from $8.79
billion due mainly to a reduction in imports. Pakistan's exports also saw an increase of 2.67% in September 2019 which translates
to growth of $1.76 billion as compared to $1.72 billion in September 2018. Let's hope that this positive trend continues.
It is also heartening to know that the World Bank in its latest ranking on 'Ease of Doing Business 2020 has improved
Pakistan's position by 28 points from 136 to 108. This improvement in ranking is unprecedented in the history of Pakistan. One of
the areas considered for EODB ranking is trading across borders and in this area, Pakistan has made improvements by easing
procedures; enhancing the integration of various agencies into an electronic system and improving coordination of joint
physical inspections at the port.
As far as tariffs are concerned, the government should take concrete steps for tariff rationalization. Though in the Federal budget
2018-19, the government has reduced the maximum general tariff rate from 25% to 20% (except for vehicles) and simplified
tariff structure by reducing the number of duty bracket from six to four, there is a need for further reduction in tariff to achieve
rapid export growth. The World Bank has observed in its flagship report titled 'World Development Report 2020 - Trading for
Development in the age of global value chains' that Pakistan's tariffs on intermediates average 8 percent which is four times the
average in East Asia and its regulatory and additional duties are also high. Due to this high tariff, the Pakistani exporters of
textiles and apparel rely mostly on domestic cotton rather than importing manmade fibers such as polyester. I think the
government should address this issue.
To conclude, I congratulate the Research and Publications Committee for choosing this important theme and hope that this issue
would be quite insightful for our members, students, businessmen, and others.
Please enjoy reading!

Zia ul Mustafa, FCMA

President, ICMA Pakistan

2 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019

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 ICMAP

Estd. 1951

From the Desk of

Chief Editor
T rade, Tariff, and Taxation are closely interlinked and all of them play a pivotal role in the economic development of any
country. The Research and Publications Committee has chosen this important theme for the current issue of Management
Accountant Journal in order to bring into focus the various impediments and challenges as well as potential and emerging
opportunities in these areas for Pakistan. I do hope that our members and other readers, including those representing the business
and industry, would find this issue interesting and insightful. I further hope that the policymakers and concerned government
ministries would derive useful ideas and strategies from the contributions made in this issue for bringing improvements in trade,
tariff, and taxation system of our country.
I would begin by expressing deep gratitude to the dignitaries who have shared special message and exclusive interviews for
publication in this issue. I would like to thank Mr. Kunio Mikuriya, Secretary-General of World Customs Organization (WCO)
for sending his 'special message' for this issue. I also wish to pay my special thanks to Ms. Uzma Adil Khan, Chairperson, Oil and
Gas Regulatory Authority (OGRA); Mr. Abdul Khaliq, Chairman, National Tariff Commission (NTC); Mr. Arif Ahmed Khan,
Chief Executive, Trade Development Authority of Pakistan (TDAP) and Mr. Irfan Iqbal Sheikh, President, Lahore Chamber of
Commerce and Industry (LCCI) for sparing their precious times for exclusive interviews.
In the Focus Section, five write-ups have been contributed by the members of the Institute viz. Syed Shamim Ahmed, FCMA;
Mr. Wasful Hassan Siddiqi, FCMA; Mr. Saifullah Khan, FCMA; Syed Shariq Waqar, FCMA; and Mr. Jamshaid Hassan Butt,
ACMA. It is a privilege for us that Dr. Manzoor Ahmed who is currently the Chairman of the 'Customs Tariff Advisory
Committee' set up by the Ministry of Commerce, Government of Pakistan in February 2019, has also sent his exclusive article for
publication in this issue. Dr. Manzoor had also served as Pakistan's Ambassador to the WTO at Geneva. We are really thankful to
him and also to other writers for their useful contributions.
In the Articles Section, we have two articles contributed by Syed Asad Abidi and Mr. Qasim Abbas, both of them are Fellow
members of the Institute based overseas. Syed Asad Abidi, in his article, has provided some useful suggestions to make the
Pakistan Banao Certificate more attractive for investments by overseas Pakistanis. Mr. Qasim Abbas, in his article, has touched
upon a very thought-provoking matter of planning financially to meet our death.
The Feature Section includes useful information such as Economy Watch, Regulatory Watch, etc. A new segment in this section
is being introduced by our R&P Department which is on 'Sector Brief'. In this segment, all basic information and SWOT analyses
of different industries would be published and to begin with, the first sector selected is 'sugar industry'. We hope that the readers
would find this segment interesting and useful.
Please enjoy reading and do share your valuable comments on this issue on email rp@icmap.com.pk

Muhammad Yasin, FCMA

Chairman, Research and Publications Committee

ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 3

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 ICMAP

Estd. 1951
Special Message

WORLD CUSTOMS ORGANIZATION

I would like to wish ICMA

Pakistan and its members and
stakeholders much success. You
undertake areas of work that are
critical to the effective
functioning of all organizations,
especially in ensuring good
governance in the management
accounting and finance domain,
and in ensuring the application of
best practices at all times .

Kunio Mikuriya
Secretary General
World Customs Organization (WCO)

I t is a great honour for me as Secretary-General of the World Customs Organization (WCO) to be

invited by the Institute of Cost and Management Accountants of Pakistan (ICMA Pakistan) to
contribute a special message for publication in this edition of Management Accountant, ICMA
Pakistan's official journal.
I should like to begin by telling you a little about the
Pakistan is the seventh country in the Asia- WCO and what we do. With its headquarters in
Brussels, Belgium, the WCO is the only international
Pacific region in which the nCEN has become inter-governmental organization focused uniquely
on Customs matters. From 17 founding members in
operational. Added to this, Pakistan's National 1950, when it was first established, it now numbers
183 members across the globe that collectively
Targeting Centre Project is also underway process approximately 98% of world trade.
Recognized internationally as the voice of the global
Customs community, the WCO is noted for its expertise in developing global standards, simplifying and
harmonizing customs procedures, facilitating trade, ensuring the security of the trade supply chain and
bolstering Customs enforcement and compliance, as well as managing the Harmonized System goods
nomenclature and dealing with matters pertaining to the valuation and origin of goods.

4 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019


Special Message
Our expertise in all matters that fall within the Customs domain is
complemented by the WCO's robust technical assistance and
capacity building activities, aimed at ensuring that all the
organization's member Customs administrations are well-
equipped with the right tools and knowledge to serve their
respective governments effectively and efficiently, especially at
national borders.
Let me now turn to Pakistan in particular. Not long after the
establishment of the WCO, Pakistan joined the Organization in
1955, nearly 65 years ago. Indeed, the Pakistan Customs
Service has, over the years, played an active role at the WCO,
sharing its experiences and expertise with other WCO
members at various WCO working bodies, and contributing to
the development of many of the Organization's instruments,
tools, and numerous programmes.
Here, it would be opportune for me to highlight an example of
the Pakistan Customs Service's modernization and reform
achievements, in particular, its home-grown Customs
Management System, which has enabled substantial gains to be
achieved in the automation of Customs procedures. Indeed, the
use of technology to facilitate trade whilst ensuring its security
is a key Customs issue, one that
Pakistan takes seriously. Pakistan Customs
The Pakistan Customs Service
implemented WeBOC (Web-based played an active role at the WCO, sharing its
One Customs), a Customs Clearance IT
System, with 40 modules to support experiences and expertise with other WCO members at
various Customs and other various WCO working bodies, and contributing to the
government agencies' business
processes. It has also initiated steps to development of many of the Organization's
implement a Single Window, involving
all relevant government agencies. instruments, tools, and numerous programmes
Just very recently, Pakistan joined the
club of 35 Customs administrations that have deployed the
National Customs Enforcement Network (nCEN) application, a
WCO tool to assist its members in fighting trans-border crime at
the national and international levels. This is a clear
demonstration of the Pakistan Customs Service's commitment to
safeguarding the country's borders while facilitating the
movement of legitimate trade.
In fact, Pakistan is the seventh country in the Asia-Pacific region in
which the nCEN has become operational. Added to this,
Pakistan's National Targeting Centre Project is also underway.
Thus, the nCEN application will be a significant addition to the
existing electronic systems operated by the Pakistan Customs
Service, and a useful tool in the enhancement of the country's
enforcement, intelligence, investigation, and targeting
capabilities.
Pakistan has also taken a keen interest in bettering the leadership
and management skills of its Customs officers. Here are just two
examples: 12 officers have benefitted from the WCO Scholarship
Programme, aimed at enhancing the human resources of WCO
Members; and 8 have attended the WCO Fellowship Programme,
aimed at endowing officers with the technical knowledge and
capacities required to drive a Customs administration's reform
and modernization activities.
To support the Pakistan Federal Board of Revenue's (FBR)'s
quest to become a modern Customs administration, the WCO
ICMAP
Estd. 1951
has been providing all necessary technical assistance based on
the FBR's identified needs and priorities that include an
authorized economic operator (AEO) programme, e-
commerce, and National Targeting Centres. The FBR is also
receiving further training on the post-clearance audit, another
fundamental work area.
After ratifying the WTO's Trade Facilitation Agreement (TFA) in
October 2015, Pakistan has shown that it is fully committed to
implementing the TFA, having already met many of the
requirements of the TFA, in particular, the Customs-centric
measures, such as pre-arrival processing, and appeals and
publication of Customs-related information.
In the above regard, Pakistan organized a multi-stakeholder
workshop that was designed to support the country in
developing implementation plans for selected TFA measures,
while raising awareness about the provisions of the TFA,
including its many benefits for traders and governments alike.
The WCO's TFA implementation guidance, as well as related
WCO instruments and tools, were central to the workshop's
deliberations, which were a great success.
Service has, over the years,
It is quite clear, from the above, that Pakistan and it's Customs
Service are on the right road, developing digital solutions to
enhance economic growth, implementing tools to ensure
operational efficiencies, and continuing to build capacity where
it is needed. In this regard, the Pakistan Customs Service has
been able to count on the full support of the WCO, both in the
past and in the future.
Let me close by referring to the theme of this edition of your
journal, namely “Trade, Tariff and Taxation,” an apt theme for our
current global trade environment, as all these issues are closely
related: trade is critical to a nation's economic success, including
the well-being and social development of society; the tariff is
equally important not only for correct goods classification but
also for the collection of statistics; and taxation is also essential
for revenue collection, enabling governments to implement the
necessary programmes to benefit their citizens.
Finally, I should like to wish ICMA Pakistan and its members and
stakeholders much success. You undertake areas of work that are
critical to the effective functioning of all organizations, especially
in ensuring good governance in the management accounting and
finance domain, and in ensuring the application of best practices
at all times.
Warmest regards to all readers.
www.wcoomd.org
ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 5
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 ICMAP

Estd. 1951
Exclusive Interview

OGRA has been determining and

notifying prices for natural gas,
RLNG, LPG, Petroleum products, and
wellhead gas prices. This function is
being effectively performed
through qualified and professional
management accountants

Ms. Uzma Adil Khan

Chairperson, Oil and Gas
Regulatory Authority (OGRA)

ICMA Pakistan: What is the regulatory role of OGRA, especially in

Currently, OGRA has a protecting the public interest and consumer rights?
UAK: Oil and Gas Regulatory Authority is an independent

significant number of Cost regulatory body established on March 28, 2002 in pursuance of
the OGRA Ordinance, 2002 with the objective to 'foster
competition, increase private investment and ownership in the
and Management midstream and downstream petroleum industry, protect the
public interest while respecting individual rights and to provide
effective and efficient regulations'.
Accountants in its core To protect the interest of consumers and licensees, OGRA accords
topmost priority to the resolution of complaints about its
pricing teams and they are regulated activities. It entertains the consumers' complaints
against Gas, LPG, CNG and Oil companies without charging any fee

an integral part of the and with almost no formalities. The complaints are resolved
expeditiously and the public is largely appreciative of the efficient
and judicious manner in which this department is providing
whole exercise for tariff remedy against the errant service providers or consumers.
An important aspect of OGRA's complaint resolution procedure is
setting and monitoring that the persons, not satisfied with the orders of the Designated
Officer, deciding the complaint in the first instance, have the right

6 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019


Exclusive Interview
To protect the interest of consumers
and licensees, OGRA accords topmost
priority to the resolution of complaints
about its regulated activities
to appeal to the Authority. Such appeals are normally disposed
of by the Authority expeditiously, after providing an
opportunity of hearing to both the parties.
ICMA Pakistan: Do you engage stakeholders while making
policies and setting pricing structures?
UAK: OGRA is not a policy-making body. It implements the
Government policies in mid and downstream petroleum
sectors which are not consistent with its statute and relevant
rules. As far as the pricing structure of natural gas is concerned,
OGRA only determines the prescribed price i.e. the price
determined by OGRA are allowed to the gas utility companies
after engaging all stakeholders and forwards the same to the
government who in turn decides sale price or consumer price as
per its socio-economic agenda for various categories of
consumers.
OGRA's regulatory framework is quasi-judicial in nature for
issuance of licenses, tariff setting, and maintenance of proper
standards and quality of services by the licensees. Therefore,
the Authority is vested under the Ordinance and Rules with the
power of passing decisions. The Authority is also vested under
the law with the appellate power against the decisions of its
delegates and also has the power to review its own decisions.
All petitions are examined in the light of relevant rules, which,
inter-alia, involve an interactive process of consultation with all
stakeholders including consumers through public hearings.
This provides the general public an opportunity to put across its
point of view on the cost and quality of service provided by the
utility companies. This enables the Authority to have the
benefit of a wider range of information and opinions, which it
evaluates before reaching a decision.
OGRA's regulatory framework is quasi-
judicial in nature for issuance of
licenses, tariff setting, and maintenance
of proper standards and quality of
services by the licensees
ICMAP
Estd. 1951
ICMA Pakistan: Please briefly tell us about the criteria
followed by OGRA to determine the gas and power tariff?
UAK: OGRA is mandated to determine the gas tariff of natural
gas whereas the determination of power tariff is undertaken by
NEPRA.
OGRA determines the revenue requirement / prescribed prices
of natural gas utilities for carrying out regulated activities of
transmission, distribution, and sale of natural gas under
Section 8 of the OGRA Ordinance, 2002. The Gas Tariff
determination process includes the following steps:
a) Admission of petition
b) Public notice seeking comments/interventions
c) Public comments/interventions
d) Public notice announcing program of hearing
e) Public hearing
f) Final scrutiny
g) Determination of Revenue Requirement/Prescribed
Prices and submission to the Federal Government
OGRA's role is limited to the
determination of gas tariff and the
Federal Government has the
mandate to set sale price for different
categories of consumers
h) The Federal Government advises on sale prices for gas
consumers for various categories of consumers in such a
manner that the total Revenue Requirement of the gas
companies is adequately met.
i) Notification of Sale Prices of various categories of gas
consumers is then issued by OGRA
ICMA Pakistan: How the increase in exchange rate has
impacted the cost of gas. Is OGRA working to rationalize gas
tariff structure?
UAK: The revenue requirement consists of the following major
components:
a) Cost of gas paid to the gas producers
b) Transmission and distribution cost, including depreciation
c) Prescribed rate of return (on net operating fixed assets)
The cost of gas, which constitutes the bulk of the revenue
requirement of the gas utilities, is linked with international
prices of crude oil and High Sulphur Fuel Oil (HSFO) according
ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 7
 ICMAP
Estd. 1951
In the future, we expect positive
developments in our energy sector as
the law and order situation in the
country has tremendously improved
to the Gas Pricing Agreements between the Federal
Government (GOP) and the gas producers. Any change in cost
of gas is, therefore, practically a pass-through amount which is
closely monitored by OGRA and its impact on revenue
requirement is assessed on a half-yearly basis.
OGRA's role is limited to the determination of gas tariff and the
Federal Government has the mandate to set sale price for
different categories of consumers as explained earlier.
ICMA Pakistan: ExxonMobil, the world's largest O&G
company would be investing after long time in Pakistan. Do
you think it would pave the way for more investment in
petroleum sector?
UAK: Various countries/investors have shown their interest to
invest in Pakistan's energy sector, and in the future, we expect
positive developments in our energy sector as the law and
order situation in the country has tremendously improved.
ICMA Pakistan: UAE has recently announced USD 5 billion
investment in establishing Oil Refinery in Pakistan. By when
you expect this investment and from which other countries
new investments are expected in energy sector?
UAK: Establishing a refinery is a long-term project and requires
huge capital investment. In order to materialize this expected
investment, different departments at both Federal and
provincial levels are involved. Once the basic criteria are
fulfilled and land acquired, the investor will approach the
regulator for grant of licensing to establish the refinery.
ICMA Pakistan: Gas theft by means of illegal connections,
especially by industrial sector concern has been a major issue
as far as loss treasury is concerned. What ways are adopted to
control these malpractices?
UAK: Gas losses known as UFG have many factors that cause
this loss that includes above and underground leakages,
8 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019
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Exclusive Interview
measurement error, billing errors and theft of gas, both by the
consumers and non-consumers. This is major issue facing the
gas utility companies, due to which not only the utility
companies and government suffer huge losses in revenue,
furthermore, the scarce resource is also wasted. Linking gas
theft only to industrial consumers is not depicting the true
picture of the issue. OGRA has set certain benchmarks,
wherein gas utility companies are allowed up to fixed
percentage of gas losses to be recovered from the consumers.
The losses over and above that percentage are born by the
companies themselves.
ICMA Pakistan: Do you think Management Accountants have
a significant role in setting and monitoring of Energy prices?
UAK: Tariff setting is one of the main functions of OGRA which
is fairly critical and sensitive requiring not only computational
expertise but also analytical, evaluation and scrutinizing skills.
OGRA has set certain benchmarks,
wherein gas utility companies are
allowed up to fixed percentage
of gas losses to be recovered
from the consumers
Currently, OGRA has a significant number of Cost and
Management Accountants in its core pricing teams and they
are an integral part of the whole exercise for tariff setting and
monitoring. Presently, OGRA has been determining and
notifying prices for natural gas, RLNG, LPG, Petroleum
products, and wellhead gas prices. This function is being
effectively performed through qualified and professional
management accountants.
The Editorial Board thanks Ms. Uzma Adil Khan, Chairperson, Oil and Gas
Regulatory Authority (OGRA) for giving his exclusive interview for
Management Accountant Journal.
 ICMAP

Exclusive Interview Estd. 1951

Management Accountants should

have very important role in the
policymaking in the Government
policies for increasing the
competitiveness, reduction of costs
and increasing general welfare

Abdul Khaliq
Chairman, National Tariff
Commission (NTC)

ICMA Pakistan: Please tell us briefly about the core functions and
regulatory role of NTC? The members of ICMA
AK: The National Tariff Commission (NTC) is a body corporate
established under the National Tariff Commission Act, 1990. The
functions entrusted to the NTC under the said Act were to advise
Pakistan are capable to
the Federal Government in matters of providing assistance to the
indigenous industry in the Tariff matters, Anti-Dumping and other lead the domestic industry
unfair trade practices. Besides this the NTC is to advise the
Government to improve competitiveness of the domestic industry
and promoting exports from Pakistan.
and in this way to help the
This is clear from the above that the focal point for NTC is the
domestic industry. The objective to achieve is to improve
NTC, in achieving its
competitiveness of the domestic industry. The tool to be used is
the tariff (border taxes). The tool used from its establishment from objectives and assisting the
1990 to 2000 was primarily the tariffs, to be more particular
'customs duties'.
Point to be noted is that the world agenda is to bring transparency
domestic industry
and consistency in tariffs and the liberalization of trade. To this
extent the WTO consistent Trade Remedy laws were promulgated
in the form of the Anti-Dumping Duties Ordinance, 2000, Subsidies
and Countervailing Duties Ordinance 2001 and Safeguard
Measures Ordinance 2002. The role of Investigation Authority

ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 9

 ICMAP
Estd. 1951
with regard to Trade Remedy laws was entrusted to NTC in
addition to tariff matters. Therefore, removal of unfair trade
practices i.e. dumping and subsidy that causes injury to
domestic industry have been added in the functions of NTC.
Immediate resolution of the problems of domestic industry
arising from sudden surge in imports is also included in the
functions of NTC.
The NTC has an advisory role in the case of Tariff Matters and
Safeguard Measures (surge in imports) while in case of unfair
trade practices adopted by the Foreign Exporters and
Governments, the NTC is an investigating authority and can
take the measures at its own.
The role of NTC is to improve the
competitiveness of the domestic
industry or to provide level playing
field for the domestic industry
ICMA Pakistan: How NTC involves the stakeholders while
making policies and setting price structures?
AK: At the outset, it is stated that NTC does not have a direct
bearing on the pricing of a product or services. The role of NTC is
to improve the competitiveness of the domestic industry or to
provide level playing field for the domestic industry. Indirectly
the actions taken by the NTC may affect the prices. However, in
terms of section 12 (i) (ii) of the NTC Act, NTC would have to
ensure that additional cost to consumer is not excessive.
The process adopted by NTC is quite transparent. The
stakeholders at all levels are taken in confidence. In almost all
matters the known stakeholders are informed through
individual letters and advertisement/ publication in the press
about inquiries and investigations. All the reports are placed
on the website. Public hearings are called where all
stakeholders are given full opportunity to defend their interests
and express their opinions on the proposals/investigations.
ICMA Pakistan: How is NTC contributing to improving the
competitiveness of the domestic industry?
AK: The NTC has four instruments to address the issue of
improving the competitiveness of the industry.
i. The issues of tariff Anomalies, infant industries, excessive
cost of the production of the domestic industry are
addressed under the National Tariff Commission Act,
2015. The measures are a reduction in Customs Duty on
imports of raw materials or increase in duty of outputs
which improve the competitiveness of domestic industry.
ii. The issues of dumping by foreign producers and exporters
are addressed under the Anti-Dumping Duties Act, 2015
and the measures are anti-dumping duties or price
undertakings.
iii. The issues of subsidies by foreign Governments and cheap
imports as a result thereof and material injury caused
10 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019
Exclusive Interview
thereby are addressed under Countervailing Duties Act,
2015. The measures are Countervailing Duties or Price
undertakings.
iv. The issues emerging from the sudden surge in imports are
addressed under Safeguard Measures Ordinance 2002
and the measures safeguard duty or import quota.
ICMA Pakistan: What is the future strategy of NTC to bring
reforms for simplifying and rationalizing the tariff structure?
AK: The National Tariff Commission was established in 1990.
The tariffs at that time were very high and the cases of tariff
protection were not dealt with in a transparent manner.
Subsequently, the tariffs were made simple and significantly
lowered. The NTC has been advocating the cascading principle
to encourage value addition, transparency, and predictability
in tariffs. The problems of unfair trade practices and sudden
surge in imports are dealt with in accordance with WTO
consistent laws in a transparent manner.
ICMA Pakistan: Does any special tariff structure being
planned by NTC for the growth of SMEs in the country?
AK: The tariff on imports and exports is levied keeping in view
the nature of product and not the size of an enterprise.
However, generally the products manufactured by SMEs are
consumer products that attract higher rate of duty. In this way
the SMEs are protected automatically. In case of trade remedy
actions, SMEs may face difficulty in collection of data and its
proper presentation before NTC. The NTC may work out plans
with regional chambers for improving the understanding of
laws. NTC has already pursued outreach programs for
improving the understanding of Trade Remedy laws.
ICMA Pakistan: How do you foresee the role of Management
Accountants in policymaking, especially price setting, and
monitoring?
AK: It is clear that the focus of the training of the Management
Accountants to optimize the cost of production and reduction
Presently, I feel that the strength of
Cost and Management Accountants
need to be increased. This is my feeling
not because I myself is a Cost and
Management Accountant but because I
seriously feel that the knowledge of
accounting, especially Cost and
Management Accounting is very
important to NTC work

Exclusive Interview
Accountancy is an important field in
the qualifications for membership of
both the National Tariff Commission
and Anti-Dumping Appellate Tribunal.
The members of ICMA Pakistan
should compete for membership
of both Institutions whenever
a vacancy arises
in cost in order to make the enterprise cost-competitive. If this
objective is seen in a broader context at a macro level, it
increases consumer welfare which is the objective of any
political and democratic government. Accordingly, the
Management Accountants should have very important role in
the policymaking in the Government policies for increasing the
competitiveness, reduction of costs and increasing general
welfare.
ICMA Pakistan: The cost of production is a major
consideration in determining the normal value of an
investigative product by NTC? Do you think there is a greater
role for cost and management accountants in this process?
AK: It is not only normal value but trade remedy laws as a whole
require extensive knowledge of accountancy and especially
management accounting. In the trade remedy laws
dumping/subsidy and injury are important parameters. The
whole structure of trade remedy laws depends on the
determinations of these parameters. This requires extensive
knowledge of accounting. Sensitivities to accounting and
costing methodology are essential for justice to all
stakeholders. The tariff matters under NTC Act require a
comparison of cost of indigenous production and the landed
cost of imported products. These tools are to be used carefully
and keeping in view the reasons and basis for cost changes. For
these very reasons the Cost and Management Accountants
were essential ingredients (part) of original NTC (Team).
Presently, I feel that the strength of Cost and Management
Accountants need to be increased. This is my feeling not
because I myself is a Cost and Management Accountant but
because I seriously feel that the knowledge of accounting,
especially Cost and Management Accounting is very important
to NTC work. Even today the structure (membership) also
includes qualification of Cost and Management Accountants
for the Commission member. The role of Cost and Management
Accountants as consultants is also crucial and important. In
view of this the Cost and Management Accountants have very
important role in the working of NTC.
ICMAP
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ICMA Pakistan: Do you agree that cost and management
accountants be taken on board as a member of Anti-Dumping
Tribunal?
AK: Accountancy is an important field in the qualifications for
membership of both the National Tariff Commission and Anti-
Dumping Appellate Tribunal. The members of ICMA Pakistan
should compete for membership of both Institutions
whenever a vacancy arises. The members of ICMA Pakistan
would have an edge on other members by virtue of their
qualifications, training, and aptitude.
ICMA Pakistan: It is expected that China-Pakistan FTA can lead
to an upsurge in cheaper imports into Pakistan. How NTC is
envisioning its regulatory role in effectively protecting the
local industry in the future scenario?
AK: The basic purpose of FTA is both the creation of trade and
the diversion of trade between the trading partners. China has
the advantage of bigger manufacturing base and economies of
scale. This may pose a challenge to our domestic industry. But
it would provide an opportunity for our export-oriented
industries. The tools are available to address the challenges.
However, it is necessary that domestic industry is vigilant an
approaches right forum, which is NTC, at right time. It is also
important that the domestic industries must be conscious of
increases in cost of production and remain competitive in
international market which is key to success.
China has the advantage of bigger
manufacturing base and economies of
scale. This may pose a challenge to our
domestic industry. But it would
provide an opportunity for our export-
oriented industries
ICMA Pakistan: In what areas ICMA Pakistan and NTC can join
hands for mutual benefit?
AK: ICMA Pakistan is a professional accounting body that
imparts extensive training to its students before becoming
Cost and Management Accountants. The objectives of Cost
and Management Accountants is to increase general welfare.
The members of ICMA Pakistan are capable to lead the
domestic industry and in this way to help the NTC, in achieving
its objectives and assisting the domestic industry.
For creating a better understanding of the trade remedy laws
among the members of ICMA Pakistan and the domestic
industry, the ICMA Pakistan and NTC can work together. The
details can be worked out jointly by two institutions.
The Editorial Board thanks Mr. Abdul khaliq, Chairman, National tariff
commission (NTC) for giving his exclusive interview for Management
Accountant Journal.
ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 11
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 ICMAP

Estd. 1951
Exclusive Interview

There is need for creating an

even better enabling environment
for the export sector and increased
support for their capacity building
and efficiency enhancement
initiatives on a national level

Arif Ahmed Khan

Chief Executive,
Trade Development Authority
of Pakistan (TDAP)

ICMA Pakistan: Pakistan's exports are stagnant at around $24

Projects related to market billion whereas exports of Bangladesh have surpassed $40
billion. Can you share the key reasons for our stagnant export
growth and how TDAP is tackling this issue?
research, value addition, and AAK: Development of exports is an integrated process involving a
host of factors concerning different facets of an economy,
cost optimization can be taken performance of export entities, dynamics of the international
market influencing global trade flows, and global economic
up in association with the growth scenario. Pakistan is likely to miss its export target due to
structural problems like lack of diversification and innovation, high
ICMA Pakistan where TDAP cost of doing business and business-unfriendly climate, lack of
foreign direct investment in the export industry, the phenomenon
of pre-mature de-industrialization, poor intellectual property
acting as a bridge can protection. Resultantly, little technological progress and human
resource development, Market access issues, access to cheap
cultivate useful linkages finance and non-development of the SME export sector amongst
many others are factors to obstruct a desirable growth in exports.
between trade/ industry and The other challenges for the stagnant exports of the country
include lack of export-oriented FDI, inadequate legal coverage for
the ICMA Pakistan for the intellectual property rights discourage private sector to undertake
costly research and development activity, presence of informal
players in potential sectors, costly certification for CE markings
benefit of all and UL certification for engineering and electronic goods

12 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019


Exclusive Interview
Pakistan is likely to miss its export target
due to structural problems like lack of
diversification and innovation, high cost of doing
business and business-unfriendly climate
(especially fans) and surgical instruments are hampering
quality certification efforts.
SMEs and other export-oriented units face problems regarding
local availability of quality raw materials and components, low-
value addition in such products as cotton yarn and cotton cloth
resulted in a decline in their exports. Pakistani exporters are
continuing with products that are losing value or appeal in the
global market. The textile industry is heavily cotton-oriented.
Globally, the demand for cotton-based textiles is losing ground.
Our competitors are shifting towards specialized garments but
we are lagging behind it.
The success story of the Readymade Garment sector in
Bangladesh has completely changed the economic
development spectrum of the country. GDP has grown at an
average of 6.6% from 2013 to 2018 and trade grew by an
average of 19% annually. Several factors have contributed to
the remarkable growth of this sector in Bangladesh. The key
factors were the quantitative restrictions or the quota regime
under the Multi-Fabre Agreement (MFA). The Least
Development Country status under the General System of
Preferences (GSP) for zero duty market access to the markets of
the developed nations also helped Bangladesh to accelerate its
exports. Bangladesh reversed the nationalization process in
1981 and around 300 textile companies were returned to their
owners. The National Industrial Policy of 1982 is said to be an
important milestone in industrialization in Bangladesh which
encouraged local and Foreign Direct Investments in the Export
Processing Zones. Consistent policies for duty drawback
facilities, tax holidays, cash assistance, rebate on taxes, zero
tariff on machinery inputs, rebate on freight and power rate,
bonded warehouse facilities, provision of import under back-
to-back letters of credit, loans at concessional rate, export
development fund, etc. have contributed to remarkable export
growth in Bangladesh.
At the level of TDAP, we set targets in terms of activities to be
undertaken by the TDAP, like arranging exporters'
participation in international trade fairs, organization of
Pakistani exporters are continuing with
products that are losing value or appeal in
the global market. The textile industry is
heavily cotton-oriented. Globally, the demand
for cotton-based textiles is losing ground
ICMAP
Estd. 1951
foreign trade delegations, holding of single country
exhibitions abroad to showcase Pakistan and its products,
holding of mega domestic expositions, etc. We participate in
over 120 international trade fairs annually. Similarly, we send
and receive around 40 trade delegations annually to/ from all
countries of the world based on our strategic plans. We
organize single country exhibitions and roadshows in priority
countries that include Sri Lanka, Chile, Thailand, Qatar, Kenya,
Kazakhstan, India, and some other countries, particularly in
Africa, Middle East, and Central Asia.
TDAP works in close collaboration with the Ministry of
Commerce and trade bodies, including FPCCI, Regional
Chambers, Trade Associations, as well as individual exporters.
The objective of this collaborative effort is to produce
optimum impact with the available resources through the
development of synergies and avoidance of unnecessary
duplication of effort.
TDAP has also been acting as a bridge in the development of
linkages between international organizations, overseas
chambers and trade bodies, foreign trade promotional
organizations, etc. and respective counterpart institutions in
Decrease in Trade Deficit is definitely a
good sign to improve the trade balance.
However, an increase in exports should be
the national agenda
Pakistan. Such events have contributed to the development of
our institutions and exporters, in particular SMEs and
enhancement of their knowledge about the dynamics of
international markets and prevailing best practices in different
fields.
Besides this, TDAP has also organized a large number of
seminars on women entrepreneurship development and
specific fairs for the women entrepreneurs like Blue Fair in
Multan, Wexnet at Lahore, and Women Fair at Peshawar, etc.
In addition to these, seminars on Fisheries, WEBOC, Chilies'
export potential, re-financing facility for Agro-food exports
were organized in Sukkur. Additionally, product development
seminars for women entrepreneurs were organized through
PUMs, Netherlands (Programma Uitzending Managers (PUMs)
Senior Experts - which has been advising businesses in
developing countries and emerging markets for 35 years) at
Lahore, Mango Show, Dates show in Khairpur, similarly Single
Province Exhibitions in Swat, and apple and cherry shows in
Quetta. The reason behind all these seminars and events is to
educate the local entrepreneurs and exporters about the
potential markets as well as product processing and market
adaptation techniques. TDAP has also now activated the
dormant Export Promotion Committees for various sectors
and 18 meetings have been already held in different cities with
a view to assessing the current status of the various industrial
sectors and the measures for removing bottlenecks and
enhancing their productivity as well as exports.
ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 13
 ICMAP
Estd. 1951
TDAP prepared research studies on 50 markets and 10 products
for the information of stakeholders of Pakistan and made
available on TDAP portal. TDAP is working with International
Trade agencies like ITC and World Bank for the formulation of the
export strategy of Pakistan and development of export sectors.
TDAP organized the first series of National Exporters Training
Program (NETP) at FPCCI, Karachi and planned to organize the
training in all cities of Pakistan as capacity-building programs to
increase the strength of the exporters of Pakistan.
In order to penetrate in the non-traditional
markets, TDAP has revised its subsidy policy
in Africa and increased its subsidy to 80%
for exhibitors in these regions
For capacity building of TDAP officers, trade promotion training
is arranged in Karachi as a part of the implementation of MoU
between TDAP & Directorate General of National Export
Development (DGNED) of Indonesia signed in January 2018.
TDAP has made good progress and achieved significant results
if measured from the quantum and quality of activities
undertaken and export promotional support extended.
ICMA Pakistan: It is satisfying that Pakistan's trade deficit has
narrowed down by 38% in July-Aug of current FY; however,
this was mainly due to decreased imports, rather any rise in
exports. Do you think we are going in the right direction or do
we need to concentrate more on increasing our exports?
AAK: Decrease in Trade Deficit is definitely a good sign to
improve the trade balance. However, an increase in exports
should be the national agenda. TDAP has taken various steps to
increase the exports of Pakistan. TDAP is developing National
Export Strategy of Pakistan to set short term, medium-term and
long-term export targets at HS 6-digit level. Keeping in view of
the export plans, TDAP regularly conducts meetings with the
trade associations of different product sectors for meeting
challenges and issues pertaining to their export sectors. I assure
them to resolve the same at the earliest. However, most of the
issues are related to infrastructure, technology, shortage of
skilled manpower, rebates and customs. We are also liaison
with the other government departments for resolving export-
related issues. We are also working with World Bank for
developing an interactive web portal which may provide
procedure of exports of all products/sectors with the
specification of relevant department and officers as done by
Kenya. It may work as a single-window for the exporters.
ICMA Pakistan: How can we improve upon the global
competitiveness of Pakistani exporting firms and low value-
added nature of our exports?
AAK: Ranking of Pakistan in the Global Competitiveness Index
has shown a decline from 106th to 107th in 2018. In order to
move towards higher value-added processes and productions,
14 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019
Exclusive Interview
Pakistan should focus on the development of institutions,
infrastructure, macro-economic stability, resolving health
issues, development of products and markets, capacity
building, technology readiness, and business dynamism.
Pakistan with notable problems related to violence, crime or
terrorism should also be addressed properly for the
improvement.
ICT adoption and innovation capability are the two areas
where Pakistan lags even further behind the regional
countries. India ranked 31st in terms of innovation capability,
and is an outlier in the region, with the second-best country,
Pakistan, following far behind at 75th.
ICMA Pakistan: What initiatives TDAP plan to take to broaden
the export portfolio and explore new export destinations?
AAK: TDAP has the plan to focus China and organized China
International Import Expo, Shanghai (5-10, November 2018).
On the sidelines, a Trade & Investment Conference, Shanghai
was held on (5th November 2018) and a delegation of 51
companies participated. Pak China Trade Forum on the sideline
of Belt & Road Forum was organized during 27-28 April 2018
wherein 85 companies participated from Pakistan and 16
MOUs were signed and 350 Chinese companies attended the
plenary session. TDAP participated in Li & Fung Pakistan China
Suppliers Conference at Shanghai, China during 17-18 June
2019 and delegation comprising 26 companies participated
from Pakistan.
In order to penetrate in the non-traditional markets, TDAP has
revised its subsidy policy in Africa and increased its subsidy to
80% for exhibitors in these regions. Africa Desk has been
established at TDAP HQs which has been looking after all
The stuck-up refunds had become a major
headache for exporters in the past as the
FBR used to withhold refunds amounts to
inflate its revenue collection figure but it
resulted in escalating the cost of doing
business in Pakistan
activities performed in the region. TDAP concentrates on top
ten African Economies to enhance trade; i.e. Nigeria, Kenya,
South Africa, Morocco, Algeria, Egypt, Sudan, Kenya, Tanzania
and Angola as they constitute 78% of Total African GDP, in the
first phase of enhancing engagement.
ICMA Pakistan: There is good scope for exports of services,
especially IT exports. Does TDAP has prioritized this sector in
trade policy?
AAK: TDAP has established a full-fledged Division for the
export of the Services Sector. TDAP in collaboration with the

Exclusive Interview
Pakistan Software Houses Association for IT and ITES (PASHA)
will conduct research studies and data collection of the
exporters of IT sector. We are preparing export development
plan of the Services Sector to boost the industry.
I appreciate the idea of collaboration of
TDAP with ICMA on capacity building in
trade and industry and also advise to keep
pursuing the initiatives of joint research
and exporters surveys
ICMA Pakistan: FBR has recently placed a new refund
payment system known as FASTER? What is TDAP's viewpoint
on the success of this system in resolving the liquidity issue of
the export industry?
AAK: I appreciated the efforts of FBR to run the automatic
release of genuine refunds. The stuck-up refunds had become a
major headache for exporters in the past as the FBR used to
withhold refunds amounts to inflate its revenue collection
figure but it resulted in escalating the cost of doing business in
Pakistan. The exporters became uncompetitive because of
stuck up refunds. With massive devaluation and other
measures, the exports could be given boost in months and
years ahead if the refunds mechanism runs in smooth manner.
ICMA Pakistan: The Industry has concerns about the high cost
of doing business in Pakistan. How TDAP is facilitating and
helping the industry in taking up this issue with the concerned
government departments and regulators for resolution?
AAK: In order to improve competitiveness of Pakistani products
in the overseas market, there is need to further reduce the cost
of doing business in Pakistan. Accordingly, there is need for
creating an even better enabling environment for the export
sector and increased support for their capacity building and
efficiency enhancement initiatives on a national level. One of
the main pillars of TDAP's export strategy has been the product
and market development. TDAP facilitates and helps exporters
in international exhibitions by providing 40% subsidy to core
products, 50% subsidy to other core and 60% subsidy to the
developmental products.
TDAP provides B2B connectivity, exploratory options, and trade
delegations to traditional, non-traditional markets, technical
assistance and financial subsidy to delegates, subsidize US$ 100
per day and 50% of the airfare to the delegates to explore new
markets for Pakistani Products.
ICMA Pakistan: The setting up of a joint forum of experts can
be considered by our two organizations for guiding the
industry, especially SMEs, in reducing the cost of production
and improving cost competitiveness. What is your comment
on this proposal?
AAK: Product costing and manufacturing/ processing cost
optimization is among the weak areas for our SMEs. In order to
ICMAP
Estd. 1951
be competitive in international markets and achieve
meaningful value chain progression our exporters need to
improve in this area and exercise much greater control on
various aspects of direct and indirect costs. Furthermore, there
is also a need for studying the cost structures and dynamics of
our competitors to learn lessons and improve our cost
structures. Accordingly, projects related to market research,
value addition, and cost optimization can be taken up in
association with the ICMA Pakistan where TDAP acting as a
bridge can cultivate useful linkages between trade/ industry
and the ICMA for the benefit of all.
TDAP may invite ICMA Pakistan team in the National Exporters
Training Program (which is specially designed for SMEs and
new exporters) as an expert to guide the industry in reducing
cost and improving cost competitiveness.
ICMA Pakistan: TDAP and ICMA Pakistan can jointly organize
'Industry-Specific Roundtables' to highlight production and
export-related issues of industries. Can you suggest a
mechanism to take this idea forward for implementation?
AAK: Yes, if properly managed, such an intervention could be
beneficial for the trade and industry. However, this has to be a
sustained activity with proper follow-up and continued
TDAP may invite ICMA Pakistan team in
the National Exporters Training Program
(which is specially designed for SMEs
and new exporters) as an expert to
guide the industry in reducing cost and
improving cost competitiveness
support to the sectors and SMEs involved. Accordingly, this
would require a longer-term and serious commitment from
both ICMA and TDAP.
ICMA Pakistan: TDAP can organize Seminars and training
programs in collaboration with ICMA Pakistan on capacity
building in trade and industry, in addition to conducting joint
research and exporters surveys. Please share your views on
these proposals.
AAK: I appreciate the idea of collaboration of TDAP with ICMA
on capacity building in trade and industry and also advise to
keep pursuing the initiatives of joint research and exporters
surveys. TDAP is already assigned a team for the survey of
major exporting units of Pakistan to find export-related issues
and information regarding vendors of the exporting units. We
may organize meetings of TDAP officers and ICMA team to
conclude outcomes of these surveys.
The Editorial Board thanks Mr. Arif Ahmed Khan, Chief Executive, Trade
Development Authority of Pakistan (TDAP) for giving his exclusive interview
for Management Accountant Journal.
ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 15
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 ICMAP

Estd. 1951
Exclusive Interview

Currently, the economy of Pakistan

is facing stiff challenges as the
interest rates have gone up to
13.25%, Inflation is over 10% while
devaluation of more than 25% has
taken place in last one year and
exports are stagnant

Irfan Iqbal Sheikh

President, The Lahore
Chamber of Commerce &
Industry (LCCI)
ICMA Pakistan: First of all, congratulations on being elected as
I think there are four areas President of Lahore CCI. What priority areas you would be
focusing on during your tenure for improving business and
where ICMA Pakistan and Lahore investment climate in the country?
President LCCI: First of all, thank you for congratulating me on my
Chamber of Commerce and election as President LCCI. Well, my top priority would be to work
for the betterment of trade and industry in order to revive the
Industry can jointly undertake national economic growth. The Industry in Pakistan contributes
around 21% to the GDP but it is growing at only 1.4 percent. A lot of
research which are (1) Enhancing focus would be given on regional trade and exports and for this
purpose, an 'Export Facilitation Centre' has been established at
the Export Competitiveness of LCCI to guide the members about the export procedures and
potential markets/products.
Pakistani Industry (2) Promoting LCCI would continue its policy advocacy to the Government for
introducing a rational system of taxes for the small businesses and
Regional Trade (3) Increasing traders. This would help lead to broadening the tax net and help
the Government in achieving the tax collection targets. LCCI would
Access to Finance for SMEs in also advocate to the Government to expedite the process of 'Ease
of Doing Business' reforms through smart regulations, particularly
Pakistan and (4) Broadening the in registering companies and paying Taxes, and online portals so
that Pakistan is able to break into top 50 countries in the world in
Tax Base of our country Doing Business.

16 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019


Exclusive Interview
ICMA Pakistan: What are your views on the current economic
situation? Are the government's economic decisions in the
right direction?
President LCCI: Currently, the economy of Pakistan is facing stiff
challenges as the interest rates have gone up to 13.25%,
Inflation is over 10% while devaluation of more than 25% has
taken place in last one year and exports are stagnant.
Furthermore, the businesses have to face high taxation rates.
The taxes on raw materials are much
higher and need to be brought down to
make the industry competitive
The Government has taken a number of steps to address these
issues. LCCI recommends that business community should be
taken into full confidence before implementing macro-
economic, taxation and sector-specific reforms as the situation
of economy directly impacts the businesses.
ICMA Pakistan: What are the main issues of manufacturing
sector which are still unresolved and needs Government
attention?
President LCCI: I would like to briefly pinpoint few of the major
issues faced by the manufacturing business. Firstly, the
businesses engaged in the manufacturing sector are not getting
their refunds in a timely manner which is squeezing their
working capital. This issue needs urgent attention of the
Government which must put in place an efficient system of
refund payments.
Secondly, the taxes on raw materials are much higher and need
to be brought down to make the industry competitive. I may
mention here that recently the Government imposed
additional custom duty on many items which have impacted
the competitiveness of our Industry. Similarly, the customs duty
on intermediate products, including machinery need to be
brought down to enable our Industry to do BMR and increase
its competitiveness.
There is a dire need to diversify exports in
terms of markets as about 55 percent of
Pakistan's exports go to only ten countries viz.
USA, China, UK, Germany, France, UAE,
Afghanistan, Bangladesh, Italy and Spain
Thirdly, the electricity and gas rates for industry in Pakistan are
higher as compared to other economies in the region. This
adversely impacts the competitiveness of our Industry. These
rates need to be rationalized. Fourthly, the sales tax rate of 17%
is extremely high and needs to be brought down to a single
digit. In addition, the rate of withholding tax on sales of goods is
very high at 4.5% and should be reduced. Lastly, the uncertainty
in Government policies including interest rate, exchange rate
ICMAP
Estd. 1951
and inflation are also adversely impacting the manufacturing
sector. The Government should take steps to reduce the
interest rate since it has made the borrowing expensive for
manufacturing sector which ultimately discourages
investment.
ICMA Pakistan: Our exports are not growing despite all
efforts. What are main obstacles and how these could be
surmounted?
President LCCI: In my opinion, there is a dire need to diversify
exports in terms of markets as about 55 percent of Pakistan's
exports go to only ten countries viz. USA, China, UK, Germany,
France, UAE, Afghanistan, Bangladesh, Italy and Spain.
Furthermore, USA has the largest share in exports (16%)
followed by European Countries (11%) in total exports. There is
an ample potential of increasing exports to other world
markets where Pakistan is an under achiever such as South
America, Africa, Central Asian Republics (CARs) and Russia
where the combined share of Pakistan's exports is less than 10
per cent of its total exports. Here comes the role of the Tarde
Development Authority of Pakistan (TDAP) which should assist
the businesses in organizing trade fairs/exhibitions in these
potential markets. The assistance can be provided in the form
of subsidy in stalls, freight and travelling/accommodation
expenses of bringing the exhibitors to the exhibitions. This
would help in increasing the share of Pakistan's export to these
markets and promote market diversification.
The role of Commercial Sections of Pakistan
Embassies is also important as they need to
work more efficiently; prepare fresh market
research reports in their concerned country
and send those reports to all the Chambers of
Commerce in Pakistan
Similarly, Pakistan's exports are highly concentrated in few
items like cotton & cotton manufactures, leather, rice which
account for about 70% of our total Exports. To capture a large
share in the world trade, Pakistan has to make a strategic shift
in the composition of its exports which requires promoting
exports of medium/high technology products. There should be
a special focus on development of export-clusters for
technology intensive products (Engineering, Surgical, Sports
Goods, Value Added textile, Halal Food, Marbles and
Pharmaceuticals etc). This would increase value addition and
help us to fetch greater export revenues.
The role of Commercial Sections of Pakistan Embassies is also
important as they need to work more efficiently; prepare fresh
market research reports in their concerned country and send
those reports to all the Chambers of Commerce in Pakistan.
They should also play a pivotal role in developing liaison
between Pakistani manufacturers and importer of that
country. In the case of any conflict, the commercial section
needs to become a bridge between the two parties in order to
resolve the conflict swiftly.
ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 17
 ICMAP
Estd. 1951
The exporters are still facing issues in
getting their refunds from the Government in
a timely manner. We hope that in the current
scenario when the zero rating has been
abolished and exporters are facing liquidity
issues, the Government would enact an
efficient and automatic system of Refund
payment for the exporters
ICMA Pakistan: What efforts need to be taken by the
Government to improve the cost of doing business?
President LCCI: I think that the Government should focus on the
priority concerns of the trade and industry which include timely
payment of refunds; reduction in duties on raw materials;
reduction in duties on intermediate products and machinery to
enable to industry to do BMR; rationalizing the tariff of
electricity and gas; and providing land on lease to businesses in
the Industrial Zones at competitive rates.
ICMA Pakistan: What kind of reforms are needed in taxation
system in the country that could boost tax revenues?
President LCCI: All the incomes must be treated and taxed
equally. Measures should be taken to make sure that tax
Collection from all sectors is commensurate to their
contribution in the GDP. The users of commercial electricity
meters should be registered by FBR for broadening of tax base.
To enhance the tax base, a rational Fixed Tax/Turnover based
system should be introduced for small traders and businesses.
Furthermore, to encourage more people to come into the tax
net, the Government should consider to exempt the new
entrants from audit for 3 to 4 years and atleast 20% exemption
to those taxpayers who deposit 20% more tax from the last year.
To let the businesses, work freely and contribute in tax
revenues, questions should not be asked about the source of
income. A one-page return form be also introduced to facilitate
the taxpayers.
ICMA Pakistan: The domestic trading community is opposing
FBR move to document the economy. What is the viewpoint of
LCCI?
President LCCI: LCCI fully supports the Government's effort of
documenting the national economy. Documentation of
The ICMA professionals can upload their
profiles on the LCCI Employment Exchange
Portal http://lcci.rozee.pk/.
These profiles can then be viewed by the
member companies of LCCI
18 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019
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Exclusive Interview
national economy is very essential for increasing the tax net.
However, we are of the view that it should be done in a gradual
and step-wise manner so that the business gets used to the
changes. This will also help the Government to achieve its
objectives.
ICMA Pakistan: Are the exporters still facing liquidity problem
due to delay in refunds from the FBR?
President LCCI: The exporters are still facing issues in getting
their refunds from the Government in a timely manner. We
hope that in the current scenario when the zero rating has
been abolished and exporters are facing liquidity issues, the
Government would enact an efficient and automatic system of
Refund payment for the exporters.
ICMA Pakistan: Lahore Chamber has recently launched an
Employment portal in collaboration with Rozee.pk. How
qualified professionals of ICMA Pakistan can utilize the LCCI
portal to offer their services to the member companies of LCCI?
President LCCI: The ICMA professionals can upload their
profiles on the LCCI Employment Exchange Portal
http://lcci.rozee.pk/. These profiles can then be viewed by the
member companies of LCCI.
The Lahore Chamber of Commerce and
Industry (LCCI) would look forward to a
long-lasting partnership with ICMA Pakistan
for the betterment of Trade, Industry
and our economy
ICMA Pakistan: ICMA Pakistan and Lahore CCI can work
together in facilitating the business and industry in improving
cost efficiency and remaining cost competitive in
international export markets? What do you say on this
proposal?
President LCCI: This proposal is very good. LCCI would look
forward to a long-lasting partnership with ICMA Pakistan for
the betterment of Trade, Industry and our economy.
ICMA Pakistan: Can you suggest few areas where our two
organizations can conduct joint research studies and industry
surveys?
President LCCI: I think there are four areas where ICMA
Pakistan and Lahore Chamber of Commerce and Industry can
jointly undertake research which are (1) Enhancing the Export
Competitiveness of Pakistani Industry (2) Promoting Regional
Trade (3) Increasing Access to Finance for SMEs in Pakistan and
(4) Broadening the Tax Base of our country. We can initiate
dialogue soon to chalk out the action plan to undertake these
research studies.
The Editorial Board thanks Mr. Irfan Iqbal Sheikh, President The Lahore
Chamber of Commerce & Industry (LCCI) for giving his exclusive
interview for Management Accountant Journal.
 ICMAP

Estd. 1951
Focus Section

Trade, Tariff
and
Tax Policy

The Editorial Board especially thank Dr. Manzoor Ahmad, CEO, World Trade Advisors, and Chairman of
the Customs Tariff Advisory Committee of the Ministry of Commerce, Government of Pakistan, for
sharing this article exclusively for publication in the current issue on Trade, Tariff and Taxation.

Trade performance with some other developing

countries which overtook it in the last three
Trade plays a very important role in any decades.
country's prosperity. In recent times, we have
seen many developing countries pull Pakistan's comparison with Turkey is
millions of their people out of poverty pertinent. Until 1980, the two countries'
through promoting their international trade. exports were worth about US$3 billion each.
Indeed, trade is the shortest way to Moreover, their export baskets contained
prosperity. Not only does it increase similar goods, mostly agricultural products
prosperity but trade also brings significant and low technology textile goods. While
other benefits. Consumers benefit from Pakistan continues to rely on textiles and
greater variety and affordability of goods. agricultural products, Turkey is now mostly
Greater competition arising from trade leads exporting high-value engineering goods. Its
to more innovation and better quality of exports have risen to over $160 billion while
goods. Pakistan's have been stagnant between US$
20 - $25 billion for the last ten years. Turkey's Dr. Manzoor Ahmad
Pakistan's trade flourished during the first exports of automobiles alone exceed the
two decades following the country's entire exports of Pakistan.
creation. During that period Pakistan's One of the factors stopping
exports were more than the total exports of An even more impressive performance is
the countries now comprising ASEAN. that of Vietnam. When it started opening up Pakistan from reaching its
Now, however, Pakistan lags far behind any and reforming its economy in 1986, its potential is its outdated trade
one of those countries. exports were less than US$500 million. Over
the next 10 years, it reached the same level as and tariff policies, which have
Even till the early 2000s, Pakistan's trade-to- Pakistan whose exports at the time were
GDP ratio was similar to other South Asian about $ 5 billion. Now 25 years later, exports not kept pace with the changing
countries, but then we started falling behind. of Vietnam are over $ 250 billion with China patterns of international trade
It will be worthwhile to compare Pakistan's
20 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019
 ICMAP

Focus Section Estd. 1951

Exports of Goods and Services (current US dollars, billions) 1970 - 2018

parts and components. It means that instead of vertically
Billion integrated industries, different components are produced in
350
several countries and then assembled. This applies not only to
300
INDIA
engineering goods but to most industrial and even agricultural
MALAYSIA
products.
250
VIETNAM

200
According to a recent World Bank report1, Pakistan is poorly
TURKEY
integrated into GVCs. The key reason is that Pakistan's tariffs on
150
intermediates goods are rather high. To become part of GVCs,
100 the country needs to lower tariffs to foster the use of imported
50
inputs and improve export performance.
PAKISTAN

0
b) Improving regional trade
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Source: World Bank data Intra-regional trade accounts for over 40 percent for most
countries. For Pakistan, it is less than 5 percent. Pakistan is a
being one of its largest markets buying about $ 40 billion worth contracting party to the South Asian Free Trade Agreement or
of goods. SAFTA since 2006 but has hardly any trade with other regional
countries. For example, India and Bangladesh have a bilateral
There are many other countries which made impressive
trade of about $10 billion and India and Sri Lanka's trade volume
progress. Before embarking on reforms in 1992, India's exports
is about $6 billion but in case of Pakistan and India, it is a paltry
were static at about $20 billion. Now, this level has risen to over
$2 billion. Also non-functional is Pakistan's other regional trade
$300 billion. Similarly, exports of Bangladesh in 1992 were less
agreement with the Central Asian countries known as Economic
than $2 billion. Now they have crossed over $40 billion. As
Coordination Organization Trade Agreement (ECOTA), which
compared to these, Pakistan's exports have grown very slowly
was signed in 2003. Thus, despite having an advantageous
from about $13 billion in 1992 to about $23 billion in 2018.
location, we hardly have any regional trade. According to the
World Bank estimates, the liberalization of trade in goods with
Exports (USD billions) the region could result in a growth of Pakistan's economy by 30
350 300 percent by 2047.
300
250 c) Diversifying into value-added products
200 Pakistan's tariff policy is so structured as to encourage low-value
150 and low-skill products such as yarn and textiles, which comprise
100
40
over 60 percent of exports. The share of engineering and other
50 20 13 23 value-added products is almost negligible. Our exports of
2
0 pharmaceutical products have been stagnant at about $200
India Bangladesh Pakistan million. The industry claims that certain steps if taken could
result in a ten-fold increase in the export of pharmaceutical
1992 2018 products. These include an improvement of regulatory functions
Source: Author's research in accordance with international practices, fast-track
registration, and setting up of FDA (Food and Drug
One of the factors stopping Pakistan from reaching its potential Administration) approved pharmaceutical manufacturing
is its outdated trade and tariff policies, which have not kept pace plants.
with the changing patterns of international trade. A recent World
d) Moving from import substitution to export-led growth
Bank study shows that this factor “has also discouraged foreign
firms from considering Pakistan as a destination for efficiency- Many developing countries followed import substitution
seeking investments. As a result, Pakistan's exports have policies which encouraged protectionism and high tariffs to
remained stagnant, undiversified and unsophisticated”. promote local industry. However, forward-looking countries
such as South Korea, Malaysia, Taiwan, and Chile realized the
As compared to Pakistan, most other developing countries have
disadvantages of this approach and abandoned it in favor of
adjusted their trade policies allowing them to:
export-led growth. Import substitution policies were
a) become part of the global value chain
Automobile Production
b) improve regional trade 6,000,000

c) diversify into value-added products 5,000,000

d) move from import substitution to export-led growth

4,000,000

Each of these factors is discussed below.

3,000,000
a) Becoming a part of the global value chain (GVC)
2,000,000
Since the mid-1980s, the process of production and exports of
goods has been evolving in the world. The change involves 1,000,000

value addition in various countries before products make their

way to consumers. Thus, instead of finished goods, over 70 0
Pakistan South Malaysia Indonesia Turkey Thailand Mexico Brazil India
percent of trade is now carried out in intermediate goods such as Africa

2005 2018

ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 21

 ICMAP
Estd. 1951
particularly prevalent in the auto industry. But since the
adoption of the WTO rules on Trade-related Investment
Measures (TRIMs), almost all countries gave up import
substitution policies. On the other hand, a few countries such as
Pakistan, South Africa and to a certain extent Malaysia
continued with them. The following chart compares the growth
of auto industry in countries that gave up import substitution
policies to those that did not.
Unless Pakistan changes its import substitution policies, it's
auto industry would continue to produce low-quality, high-cost
cars, surviving only because of tariff walls.
Tariff Policies
Tariff policy plays a very important role in promoting a
country's exports and industrialization. This is particularly true
for Pakistan as tariff is the main policy instrument of our trade
policy. Unfortunately, our tariff policy is highly regressive and
out of tune with modern times. It effectively blocks Pakistan's
progress towards producing high value-added products.
Throughout the world, tariffs have been falling to enable the
country to integrate with others.
Although Pakistan has done some reforms since the 1980s, its
pace has been slower compared to its competitors. According to
the World Bank, Pakistan is currently the 7th most protectionist
country in the world. High protection weakens productivity
growth and is an impediment to efficient resource allocation.
While reviewing the trade policy of Pakistan, the WTO
Secretariat report2 noted that the “overall tariff levels remain
high, which weakens productivity growth and constitutes an
impediment to efficient resource allocation and the integration
of Pakistan into global value chains. In addition, the use of ad
hoc trade policy instruments under SROs remains common and
severely undermines the predictability of the trade regime; it
also supports a culture of rent-seeking”.
Pakistan relies heavily on customs duties which contribute
about 18% of the country's tax revenues. In most other countries
the contribution of customs is much lower. For example, the
share of customs duty of Malaysia is 4.5%, China 5.2%, Sri
Lanka 7%, India 7.5%, and Bangladesh 10.6%3. In most
developed countries, the share of customs duty is less than 2%.
Customs Duties as percentage of tax revenues (2018)
20.0%
18.0%
18.0%
16.0%
14.0%
12.0% 10.6%
10.0%
8.0% 7.0% 7.5%
6.0% 4.5%
5.5%
4.0%
2.0%
0.0%
Malaysia China Sri Lanka India Bangladesh Pakistan
According to a recent study by UHY, an international
accounting and consultancy network, consumers in Pakistan
face customs duty rates nearly four times the global average.
Unless we lower our taxes on international trade to make them
competitive against other developing countries, we would
remain isolated in terms of international trade.
22 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019
Focus Section
If an investor has a choice to manufacture a low-value product,
the tariff policy provides all the incentives. For example, if
someone wants to import raw cotton and convert it to low-value
yarn, the tariff rates for the cotton as well as the needed
machinery are zero. Also, the costs of utilities for such industrial
activity are relatively low. On the other hand, raw material such
as artificial or man-made fibers needed for manufacture of
higher value fabric attracts duty.
If Pakistan wants its exports to be
competitive against other developing
countries, it would need to rationalize
its tariff policy. It would need to
benchmark its tariff against other
regional countries and bring it at par
with them. One of the main reasons
why it is so difficult to reform customs
tariff is the pressure of major industrial
groups who fear competition
Manufacture of high-value goods faces many barriers. Duties
on machinery and raw material such as iron and steel used for
producing engineering goods are high. Hi-tech machinery and
computers and access to data all required for the manufacture of
software for export are taxed at a high rate. The import of 3-D
printers, used for modernization of many industries throughout
the world, is not even allowed in Pakistan.
Another defect of our tariff policy is its bias against small and
medium enterprises (SMEs). Large industrial units enjoy special
concessions either through various schemes, depriving SMEs
equal opportunities to grow and compete. The success of
Vietnam has been mostly because of its encouragement of
SMEs.
Although there is a general perception that Pakistan's tariff
policy is liberal and all sorts of luxury goods are allowed to be
imported at low taxes, the fact is that the import taxes are very
high on such consumer goods. For example, the total impact of
taxes on tiles works out to 98%. While customs duty is
relatively low at 20%, there is number of other taxes. These
include additional customs duty of 7%, regulatory duty of 45%,
sales tax of 17%, additional sales tax of 3% and withholding
income tax of 6%. Similarly, the total impact of various import
taxes on electronic goods, tyres, fabrics, and paper is over 50%.
There is a direct relationship between high duties and
smuggling. Such items are often imported through transit trade
for Afghanistan and then rerouted to Pakistan.
Pakistan's tariff is also biased against access to technology.
More than half of the WTO members, representing about 97
percent of world trade in IT products have completely
eliminated tariffs on IT products covered by the WTO
Information Technology Agreement. Pakistan has been debating
for over twenty years to do so but has not done it as yet. Pakistan
has to realize that for stimulating innovation and spreading new
technologies, it needs to lower costs for IT products. Pakistan

Focus Section
has to face the fact that it is one of the “most exposed to the threat
of robotization-induced reshoring because its exports are
4
heavily concentrated in goods that robots can help produce. ”
Pakistan has recently made some progress in making importing
and exporting easier by developing a new container terminal and
enhancing its customs platform for electronic document
submission. It could greatly supplement these by simplifying its
customs tariff. This would considerably reduce the chances of
corrupt practices and level the playing field for all to compete. It
would also encourage new investments coming into the country.
If Pakistan wants its exports to be competitive against other
developing countries, it would need to rationalize its tariff
policy. It would need to benchmark its tariff against other
regional countries and bring it at par with them. One of the main
reasons why it is so difficult to reform customs tariff is the
pressure of major industrial groups who fear competition.
Tax Policy
Tax and tariff policies are closely
linked. For Pakistan to reform its
tariff policy, it would have to carry
out overall reforms of its tax policy.
Unlike most other countries that rely
on direct taxes such as income tax or
consumption taxes, Pakistan's
reliance is mostly on indirect taxes. According to the 2018
yearbook of the FBR, direct tax collection is about 40 percent of
the total while the indirect taxes such as sales tax, customs, and
the Federal Excise Duty constitute the remaining 60 percent.
Furthermore, about 70 percent of total direct tax collection is
through 'withholding tax' (WHT).
Pakistan's tax policy does not come up with any of the accepted
principles of sound taxation. For example, according to the
Association of International Certified Professional
5
Accountants , sound tax policy should be based on 12 principles.
These are Equity and fairness; Certainty; Convenience of
payment; Effective tax administration; Information security;
Simplicity; Neutrality; Economic growth and efficiency;
Transparency and visibility; Minimum tax gap; Accountability
to taxpayers and Appropriate government revenues. Some of
these are discussed below in the context of Pakistan's policy.
The first principle is Equity and Fairness. The tax liability
should be according to a person's or a company's ability to pay.
In Pakistan, people living in big mansions can get away with not
paying their fair share of taxes. Commercial importers typically
pay six to seven percent withholding tax, while major industrial
houses are exempt from paying advance income tax on their
imports. SMEs, which constitute 90% of all the enterprises in
Pakistan, employ 80% of the non-agricultural labor force and
contribute 40% to the GDP, have no chance of competing
against the big industrial houses as they cannot avail of any tax
concession.
This gives rise to inequality which has an economic cost. A
study by OECD showed that a 1% increase in a nation's
inequality lowers its gross domestic product by between 0.6%
and 1.1%. This inequality is further increased by the fact that
there is no wealth tax on the rich people, but the poor have no
exemption from the withholding taxes.
The second principle is Simplicity and Convenience of
payment. The taxes should not be too many and the procedure
of filing should be simple. Pakistan is ranked at 173 out of 190
ICMAP
Estd. 1951
countries for payment of taxes according to the World Bank
Group's Ease of Doing Business report. This means that
Pakistan is among the worst 10 percent of countries in the world.
There are 47 different taxes and it takes 293 hours per year for
payment of those taxes. Compared to Pakistan, there are 8
different taxes in Malaysia and it takes 188 hours. Even
compared to other South Asian countries, taxation system of
Pakistan is complex. Now with each province having its own tax
collection authority, the situation has further worsened.
Pakistan needs a major overhaul of
its trade, tariff and tax policies. It
must benchmark them against other
major countries
The third principle is that taxes should be Broad-based and
carry Low rates. Our taxes are neither broad-based nor low.
Whether it is sales tax, corporate income tax or customs duty, we
have higher rates compared to our neighbors and other
competing countries. Our standard rate of sales tax is 17% as
compared to 12% in India and Sri Lanka. Our corporate tax rate
is 29% as compared to 20% in Vietnam or Turkey 22% or
Bangladesh is 25%. The global average is 22% whereas, in some
countries such as Switzerland, it is 8%. If an investor has a
choice, he would rather put his industry in Vietnam where taxes
are 50% lower than in Pakistan. A consequence of high rates is
that the share of the informal sector in Pakistan's economy is
much higher than other developing countries. According to
ILO, almost three-fourth of employment in Pakistan is
generated by the informal sector.
The fourth principle of any sound tax policy is Neutrality. This
implies that taxes should not encourage or discourage any
economic decisions. The purpose of taxes should be to raise
needed revenue, not to favor or punish specific industries,
activities or products. As discussed above, our tax policy
supports some sectors at the expense of others. As a result, the
overwhelming number of industrial activities is in those sectors
where taxes are lower.
To sum up, Pakistan needs a major overhaul of its trade, tariff
and tax policies. It must benchmark them against other major
countries. The earlier Pakistan can integrate its economy with
other countries, the quicker it can regain its share of
international trade. It is only through improving its trade to GDP
ratio, that Pakistan can reduce poverty and become an important
global player.
End-Note
1. World Development Report 2020: Trading for Development in the Age of Global
Value Chains.
2. WTO Trade Policy Review Doc no WT/TPR/S/311, Feb 2015
3. Business Recorder, 1 May 2019, quoting FBR sources
4. World Development Report 2020: Trading for Development in the Age of Global
Value Chains
5. https://www.aicpa.org/advocacy/tax/downloadabledocuments/tax-policy-
concept-statement-no-1-global.pdf
About the Author: Dr. Ahmad is currently the Chairman of 'Customs Tariff
Advisory Committee' set up by the Ministry of Commerce, Government of
Pakistan in February 2019. Previously, he has held various senior positions in
the government and in international organizations such as Deputy Director,
World Customs Organization, Brussels; Member Customs, FBR and Pakistan's
Ambassador to the WTO at Geneva. He is also CEO of World Trade Advisors
and a regular columnist on trade issues.
ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 23
Back to Contents Page
 ICMAP

Estd. 1951
Focus Section

Trade, Tariff and Taxation:

The Pillars of Economy
Trade Trade is a complex and sophisticated
mechanism. The smarter you are; the good
The 3-Ts constitute the backbone rather trader you can be. World giant traders have
than a power source of any economy. Trade even defeated some of the famous economic
covers all buying and selling activities with principles. Some say trade expands with
specific reference to imports and exports. low prices as Chinese traders are swelling
The world has become a global village but under this principle but some say otherwise;
only to the extent of communication, travel, as Germany flourished on quality with no
transportation, and information. Otherwise, regard to price. Just compare the Japanese
every country has its own sovereign Suzuki Car at US$5,000/- with that of Syed Shamim Ahmed, FCMA
boundaries to be crossed only through a German BMW Nazca at US $3 million or for
system. People advocate free and fair trade that matter Rolls Royce Sweptail at US$13
and various countries have reached trade million. That's how people do trading. One
a g r e e m e n t s u n d e r Wo r l d T r a d e sells at a low price making it a mode of
Organization (WTO) and European Union transport when other sells at a high price for A blooming trade
(EU) but still most governments impose luxury and prestige. Both excel with
protectionist policies intended to support dexterity and aggressive marketing, not not only brings fortune
local employment and industries by with callousness.
imposing tariffs on imports and subsidies to and wealth to people
exports. Economists still support free trade Protection is a law of nature - self-protection,
for various benefits but foster their own self-development, self-prosperity-buy
but also serves as a
where you get the best value for your money
interest only.
and sell where you get the most. tool to attract more
Trade is prosperity. Trade is the survival of
the fittest. A blooming trade not only brings Politics play an important role in formulating tariffs and taxes
fortune and wealth to people but also serves a trade policy. Rich friendly countries allow
as a tool to attract more tariffs and taxes. relaxation and also make a direct investment

24 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019

 ICMAP

Focus Section Estd. 1951

in developing countries. China and Pakistan are the best l Respect for national cultural values.
examples of such concessions. They extend CPEC and Free l Human rights and international labor standards.
Trade Agreements. However, this plays a two-edged sword.
China exported worth US $ 11.46 billion to Pakistan whereas l Principles of equality to support decent work and living
Pakistan exports to China were only for US $1.76 billion wages.
creating a negative trade gap of US $9.7 billion for Pakistan but l Being compatible with candid economic models.
the positive gap for China. Who was benefitted from Free Trade?
The brilliant. l Building global rules for corporations.
Global Trade Scene: In spite of the above tall claims just have a glimpse at the world's
some mammoth corporations: -
My loss is your profit. Shrewd wins and nincompoop loses.
Total world exports nullify total imports leaving a nil balance of l Apple US $ 915 billion
trade-- but weak with pains and strong with comforts. l Amazon US $ 828 billion
We all need one another to improve upon the global lifestyle. l Alphabet US $ 781 billion
Resources of one are shared with others against a price. This l Microsoft US $ 771 billion
price is the focal point. Everyone tries to get the maximum out of
this price. One who can afford does not pay a penny more. The l Facebook US $ 556 billion
exploitation is the main curse widening the gap in per capita Further, if the international community had followed the
incomes. No one can live a better life in isolation even with all advocated golden resolutions the balance of trade could not have
the resources at one's disposal as there is always a better option been that far apart:-
across the border with cost and benefit correlation and ingenious
of other people. Trading at the global level provides business Trade Surplus Trade Deficit
access to the world of opportunities with huge potentials like: - China US $ 421.4 billion USA US $ 466.2 billion
l Increased revenues as your market and clientele spread. Germany US $ 281.3 billion UK US $ 107.0 billion
l Decreased competition due to the large consumer market.
Russia US $ 115.4 billion India US $ 57.0 billion
l Low risks as you are not dependent on one small local
market. South Korea US $ 95.2 billion Canada US $ 49.0 billion
l An outlet for surplus goods. All the above situation is indicative of the fact that trade is not a
l Enjoy an international reputation. fair game but a lethal war.
l Advantage of currency fluctuation. Back Home:
l Specialization with the brand name.
We are an atomic power and rated as the 4th smartest people in
l Increased employment and usage of local raw material. the world. We have plenty of natural resources yet our trade
Due to international trade complexities, the above also attach position is in bad shape. Our imports were US $55.6 billion and
with it the following disadvantages: - exports only US $ 24.8 billion, leaving a trade deficit of US
$30.8 billion. For the last 5 years, we could not improve our
l Currency fluctuation may not always be in your favour. exports showing a decline of 5% per year from US$ 43.3 billion.
l Changes in laws and tariffs may restrict your profit margin. The Commerce Division recently formulated the Trade Policy
l Credit risk - delayed payments. under the Mission Statement:
l Shortage of products in your domestic market. “Contributing to National Economy through Trade
l Depletion of your resources. liberalization and facilitation, improving export
competitiveness, reducing the cost of doing business and
Even giant economies could fall prey to such uncontrollable achieving higher market access for Pakistani products. Thus, the
variables. The tension between the USA and China on economic export target was focused at the US $ 35 billion”
issues is the best example manifesting the above pros and cons.
Due to the huge trade deficit, the USA is now incriminating
others for taking advantage of them. Even Pakistan is at a loss in In order to improve trade, it is
trade with a friendly China.
suggested that the export business may
Trading is getting more and more specialized. Hightech
services are dominating the field and people are shifting from be declared tax free and trade houses
rural to urban areas. Service Sector is expanding fast. Global
money titans are mainly in the service sector. An educated may be declared out of bond for
workforce is excelling in Research and Development,
generating knowledge and improving procedures and processes government officials or their front men
in every sector. The world service sector is contributing around
63% of the total global wealth. Industry only 30% and
Agriculture hardly 6.4%. No tangible improvement was seen on the table. Framing of
policies and reigniting an efficient globally competitive
At most of the international trade conferences, speeches are industrial sector are two different phenomena. Japan, a
delivered and resolutions passed for following main reasons: country virtually with no major natural resources with aging
l Just and fair international trade system. population enjoys the highest living standard of its people with

ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 25

 ICMAP
Estd. 1951
per capita income of US $ 45,400, GDP of US $ 4.8 trillion, a
highest tax rate of 56%, tax to GDP around 33% -- just to show
the will of a nation.
We are at position 136 out of 190 economies for ease of doing
business; down from 85 during 2009 as per World Bank ranking.
However, there are indications that Pakistan improved a lot in
the upcoming World Bank ranking.
Our main exports are textile, rice, and cotton yarn but are on
decline basically due to:-
l Increased prices of raw material, inefficient and arrogant
labor, interrupted power and gas supply.
l Uncertain fiscal policies and delayed decisions make it
difficult to set achievable targets.
l Corruption increases costs and discourages traders.
Albeit exporters get electricity and power at low rates,
subsidized loans and certain tax exemptions else currency
devaluation of around 27% in the last one year yet sustainable
growth in export is a far cry.
The recent reduction in imports for
about US $ 6 billion was the result of the
low import of mainly crude oil and
machinery. This could also mean
projects slowed down, low industrial
output, and delayed machinery
addition/replacement
Our services sector is also in line with the global trend
contributing almost the same portion of 60% of GDP and still
has great potential with an educated and enterprising workforce
for rapid technological change with innovations. Our export
quantum of this sector was the only US $16.2 billion against
India at US$162.0 billion and world contribution of this sector
at US$4.9 trillion (2016). These figures show the potential lying
ahead. The services sector is easy to develop by human talent as
it does not require large capital or infrastructure especially
information technology. Further, it is not only dependent on
domestic demand but on the increasing international clamor.
Panacea:
In order to improve trade, it is suggested that the export business
may be declared tax free and trade houses may be declared out of
bond for government officials or their front men. Only the
Economic Division or any other Ministry may be the link
between the traders and other government departments for any
purpose. Further, union activities in factories and businesses
may be suspended for some time.
Tariff
The tariff is, in fact, a restriction any country may exercise by
levying extra cost to products coming into or going out of its
territory with the intent to protect its local industries and to
provide better commodities at fair prices to its people. The level
of such restrictions and intensity of tariff depend on the overall
26 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019
Focus Section
health of its economy. The tariff is not an end in itself but a
means to achieve the end result i.e. prosperity. The tariff
structure is a complicated discipline and demands deft handling
accounting for the political, economic and strategical
conditions. The favorable situation would demand a liberal
Tariff policy or otherwise. Countries with trade surplus impose
low tariffs like Germany (almost nil except for production share
1.82% on manufactured goods), China (average 9.3%) Russia
(7.8% except for agriculture items). Contrarily countries with
trade deficit are hard on tariff like USA (average import duty
1.4% but from China it is 18.3%) and UK (average import duty
20% except for EU Countries).
We have rationalized our tariff structure by reducing slabs from
5 to 4 and the highest rate at 20% except for cars where the
amount of import duty is charged as per engine power. Import
duty on raw material for the export industry has been brought to
zero on 1650 items and only 5% in some categories, yet obdurate
exports were at US $30.8 billion with no enrichment.
The recent reduction in imports for about US $ 6 billion was the
result of the low import of mainly crude oil and machinery. This
could also mean projects slowed down, low industrial output,
and delayed machinery addition/replacement.
Pakistan faces the serious menace of smuggling. Goods are
imported for Afghanistan which is then smuggled into Pakistan
via tribal areas together with contraband items. This is not only
adversely affecting our local industry but also spreading drug
use, especially in our youth.
Protecting imports or encouraging exports have no absolute
advantages or disadvantages. Therefore, while developing a
tariff structure it requires great care as a liberal export tariff may
starve the local people or exhaust the resources. Similarly, a too
lenient import tariff may spoil the local industry, create
unemployment and eat up the foreign exchange. Tariff
mechanism is a tricky business.
Taxation
Every country needs money to run its affairs. Taxes are imposed
as a compulsory levy under the law mainly for the welfare of
people like health education etc., national security,
infrastructure development, improving the standard of living of
common men, debt payments and meeting the government's
expenditure.
Priorities may differ with every country depending upon the
overall predicament. Pakistan has a huge debt portfolio with
 ICMAP

Focus Section Estd. 1951

foreign loans of around US$100 billion and domestic

borrowings Rs.18.2 trillion (US$ 110 billion). Thus 28% of its
budget spending goes to debt servicing and due to hostile
neighbors, our defense spending forms 23% of the total budget.
Such a situation clearly indicates our priorities and after
accounting for the portion needed to run the civil government,
less than 1% is available for peoples' welfare. All this requires a
huge amount of tax revenue but whom to tax when per capita
income is US$ 1500 and over 40 million people live below the
poverty level (below US$ 2 a day); thus only 1% pay tax. In fact
it is not the payment of tax but it is the capacity to pay tax. Look
at the two most rich countries and their debts but also their
potency to pay tax.
USA Japan Pakistan
GDP US $ 14.39 US $ 4.83 US $ 300
Trillion Trillion Billion Around 60% of taxes constitute indirect taxes viz Sales Tax,
Debts to GDP 108% 235% 65% Federal Excise Duty, Customs Duty, etc levied on products of
general usage with exemptions as prescribed. During 1990-91
Per Capita Income US $ US $ US $ direct taxes used to be 18% and with positive signs reached 40%.
54,500 45,400 1500 Sales tax forms over 53% of indirect taxes and has more
Tax to GDP 36 % 33 % 9.5% potential if the government succeeds in bringing down the
traders towards documentation.
Our target is to collect more taxes for which our economic
engine has to be efficient. To attain high speed, you need to have Loud Thinking
a powerful engine. a) More efforts should be diverted to upsurge trade and
Taxation Policy: industry. Improvement in tax revenues would come
automatically.
Famous canons of taxation demand that the tax system is based
on equality, certainty, economy, elasticity, convenience, b) Anyone paying 10% more tax compared to the previous tax
productivity, simplicity, and diversity. These principles amount may be exempted from audit.
guarantee more and more tax collection because these c) Anyone paying 20% or more tax compared to previous
commandments are the crux of justice. The moment one feels payment may be exempted from submitting bank
that the tax system is not based on fairness he would tend to statements and sources of income.
avoid tax payment.
d) Tax forms should be made simple deleting various
details/categories.
Sales tax forms over 53% of indirect e) Tax returns may be allowed to be filed electronically or
manually by post.
taxes and has more potential if the
f) Tax collectors may not be provided any information about
government succeeds in bringing down bank accounts of any person/company. This would increase
business transactions through banking channels.
the traders towards documentation g) Impose a proper tax on income from agriculture or do away
with subsidies to agriculture sector which are almost 20
Stories of the rampant corruption of our tax authorities are times the tax paid by this sector.
common. Generally, people consider it convenient to get away h) Inculcate documentation culture by providing ease and
or pay small amount of tax in connivance with masters. Power trust. The undocumented economy is 40% of GDP and if
corrupts and more power corrupts more. reduced would increase the same percentage of tax revenue.
For the last over 70 years, only tax collectors remained i) The use of computer technology is an effective tool for
responsible for tax policy and tax administration resulting: - detecting non-taxpayers enjoying high living standards.
l Tax collection to GDP is around 9 to 13% for many years. We must not be discouraged. Every country has its own kind of
l Direct taxes form 40% of the total. problems. No country is problem-free. Those who stand up to
fight crisis they succeed. We have the capacity and capability to
l The agriculture sector is 19.2% of GDP but contributes only
recover but need a steel frame will.
0.6%.
l The services sector is 60% of When you have serious problems you
GDP but contributes 29.5%.
need serious people to solve them.
l The undocumented economy About the Author: The writer is a senior Fellow member of ICMA Pakistan. He
is over 40% of GDP causing retired as General Manager Finance from the Karachi Port Trust (KPT) where he
tax losses of the same served for around 22 years in different positions. He was also member of Karachi
Dock Labour Board for 7 years. After doing his MBA from IBA Karachi, he started
percentage. his initial career from Citibank and then served in Awami Autos (now Pak Suzuki).

ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 27

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 ICMAP

Estd. 1951
Focus Section

Anti-Dumping Laws
– Lifeline for Domestic Industry
in Era of Trade Liberalization
Protectionism for the domestic industries has signed by 123 nations in Marrakesh on 14
a long history which dates back to the 12th April 1994, of the Uruguay Round
century, starting from the ban on imports and Agreements which established the World
movement of skilled personnel. During the Trade Organization (WTO) on 1st January
18th century, high tariffs were considered as 1995. The WTO is a successor to the GATT,
a tool to control imports and protect the and the original GATT text (GATT 1947) is
domestic industry. However, high nominal still in effect under the WTO framework,
tariffs often provided negative protection to with modifications of GATT 1994.
emerging activities and contributed to
This trade liberalization and its resultant
misallocation and under-utilization of capital
gains in wealth also brought along unfair
in capital-scarce economies. Over-valuation
trade practices that caused harm to emerging
of the exchange rate resulting from import
and established industries alike. These
restrictions discouraged exports and
practices also included dumping, which is a
penalized agriculture - further reducing the
type of price discrimination whereby a firm
size of the market for import-competing
industries. After World War II, countries felt
charges a lower price for its exported Saifullah Khan, FCMA
the need for trade liberalization which
required reduction in tariff and removal of
non-tariff barriers to promote free trade. In Pakistan, the National Tariff Commission (NTC),
Trade liberalization started with the General
Agreement on Tariffs and Trade (GATT) as an autonomous government agency, is entrusted to
signed amongst 23 countries in 1947 that
aimed at reducing tariffs and increasing conduct trade remedy investigations and has the sole
international trade. But its exception clause
was so liberal that every signatory
authority to impose anti-dumping duties
excessively took shelter under the clause
making it virtually ineffective. Although, it products than it charges in its home market
remained effective until a new protocol was for the same products.

28 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019


Focus Section
Goods are considered to be 'dumped' when an overseas
supplier exports goods to a country at a price below its
'normal' value (i.e. the price charged in the supplier's
home market) or less than its cost.
The use of tariffs to target specific imports (such as dumping)
began in 1904 when Canada sought to discourage a U.S.
manufacturer from selling steel to the Canadian railroads. The
first U.S. antidumping law was passed in 1916, and subsequent
revisions of the law have made it progressively easier for
domestic firms to get protection against imports perceived as
Companies, normally, engage in
dumping in order to; dispose of their piled-
up inventories and utilize their idle
capacities in order to capture more shares
in the export market
unfairly priced. Assessing the importance of trade remedy laws
after trade liberalization, dumping had been a part of GATT
negotiations and Antidumping Agreement was included in
GATT 1994 as The Agreement on Implementation of Article VI
of the General Agreement on Tariffs and Trade 1994. The
Antidumping Agreement sets out the rules and principles that
countries must follow to counter the effects of dumping.
Rationale Behind Dumping and its
Consequences on Domestic Industries
Dumping follows the concept of variable costing technique
(also known as direct or marginal costing) wherein the only
variable cost is considered for the pricing decisions. When an
exporter is covering its fixed costs from domestic market sales
or sales to an already established export market and has
surplus/idle capacity, he is in a position to explore new export
destinations with variable plus pricing considering that every
additional unit sold with a contribution margin will positively
contribute towards overall profitability. Companies, normally,
engage in dumping in order to; dispose of their piled-up
inventories and utilize their idle capacities in order to capture
more shares in the export market.
The situation of the domestic industry gets even worse when the
competing exporters beyond indulge in a price war which is very
ICMAP
Estd. 1951
difficult for the local producer to sustain. Local industry has to
set its prices absorbing all of its costs incurred in production and
sales of its products which makes it uncompetitive against the
unfairly low priced imports. Dumped imports have a direct
impact on market share, sales volume and prices of the domestic
industry which is then translated into reduced production and
capacity utilization, higher cost of production due to absorption
of fixed costs on fewer units, reduction in profitability and return
on investment, deterioration in cashflow, inability of the
domestic industry to raise investment and grow, leading to
reduction in employment. Not being able to compete, the local
industry collapses and eventually shuts down its operations.
Resultantly, market gets completely dominated by imports and
foreign exporters are then in a position to charge prices of their
own choice. In short, dumping leads to erosion and in some
cases the disappearance of domestic industries. In markets
where dumping is occurring for reasons unrelated to the relative
competitiveness of local industries, it may enable less efficient
firms to prevail over more efficient firms in international
competition.
Legal Remedies to Restrain Dumping
Under the Anti-dumping Agreement, any local industry which is
facing injury due to dumped imports can file an application with
its local authority to seek protection from unfair practices of
dumping. The applicant industry needs to prove injurious effects
of the dumped imports to the domestic industry, for which a
detailed examination of all the relevant economic factors is
required. A 'causal link' must also exist between the material
injury being suffered by the local industry and the dumped
imports. The administering authority after conducting a
thorough investigation may impose anti-dumping duties on
products being dumped and causing injury to the domestic
industry. Anti-dumping duty is actually a measure to rectify the
situation arising out of the dumping of goods and to neutralize its
trade distortive effect eliminated so as to re-establish fair trade.
As a result of levy of anti-dumping duty, landed price of the
imported products increases easing downward pressure on the
prices of domestic industry. Since, the landed price of the
imported products increases, it does not remain lucrative for the
users to go for the imports, hence their reliance on domestic
product increases. Eventually, the sales price of the local
industry products gets a chance to attain a reasonable level and
thereby dumped imports start reducing and market share of the
local industry starts increasing. This results in a positive effect
on overall performance indicators of the domestic industry.
Under the Anti-dumping Agreement,
any local industry which is facing injury
due to dumped imports can file an
application with its local authority to seek
protection from unfair practices of
dumping
ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 29
 ICMAP

Estd. 1951
Focus Section
Until the 1990s, Australia, Canada, the European Communities, information/evidence from domestic industry, importers,
and the United States initiated most anti-dumping exporters, and other interested parties for the purpose of arriving
investigations. However, by now, many other countries have at the determination of dumping of the investigated product,
also adopted anti-dumping legislation and applied anti- injury to the domestic industry and causal link between dumping
dumping measures. According to recent WTO statistics, from and injury. During the course of investigation, NTC issues its
1995 to 2018, 5,725 anti-dumping investigations were initiated preliminary findings within 60 180 days of the initiation of the
and India has been a leading user of anti-dumping law with 919 investigation and, in order to provide relief to the domestic
initiations. Indeed, it has been observed that developing industry during the course of investigation, imposes provisional
countries now initiate about half of the total number of anti-dumping measures for a period of four months. After
antidumping cases and some of them employ anti-dumping preliminary determination, NTC continues its investigation and
measures more actively than most of the developed country collects further information/evidence to conclude its final
users. Thus, the anti-dumping law is by far the most actively findings. Within 180 days of the date of preliminary
used trade remedy instrument. Pakistan is also one of the
prominent users of antidumping laws with 131 initiations and 85
measures applied until now. It has been observed that developing
Pakistan, in the Context of Anti-dumping countries now initiate about half of the
Laws Practice
total number of antidumping cases and
Pakistan, as a member of the WTO and being signatory to the
GATT, is obliged to ensure that its anti-dumping proceedings some of them employ anti-dumping
comply with the Agreement. Its anti-dumping mechanism is
derived from internationally agreed rules and procedures under measures more actively than most of the
the auspices of the WTO. In Pakistan, the National Tariff
Commission (NTC), as an autonomous government agency, is developed country users
entrusted to conduct trade remedy investigations and has the
sole authority to impose anti-dumping duties. The governing
law in Pakistan to deal with the matters of dumping is 'the Anti- determination, NTC concludes its investigation and if satisfied,
dumping Duties Act 2015' (previously the Anti-dumping Duties issues its final determination thereby levying final anti-dumping
Ordinance 2000). The first anti-dumping investigation by NTC duties for a period of up to 5 years which is further extendable
was initiated in 2002 against the dumped imports of Tinplate subject to sunset review investigation and so on.
from South Africa and since then, it has initiated 131 anti-
dumping investigations and imposed 85 measures involving all Anti-dumping Measures-Success Stories of
major industries of Pakistan like Iron & Steel, Chemical, Paper
& Paperboard, Textile, Petrochemical, Tiles & Sanitary Ware,
Pakistan's Domestic Industry
Packaging, Automotive Parts, etc. Anti-dumping measures have proved to be very helpful in
All these measures were imposed after thorough investigations uplifting the performance of various industries in Pakistan.
on applications by the affected industries facing unfair trade From chemicals, paper & paperboard to steel industries, there
competition from dumped imports. are many examples of industries being devastated by the
harmful effects of dumping from the very start of their inception
The process of an antidumping investigation starts with or expansion and anti-dumping measures provided sigh of relief
application by the domestic industry aggrieved from the to such industries.
dumping practices of foreign exporters. NTC initiates an
Hydrogen Peroxide (HP) industry for example; started in
investigation upon the application received from the domestic
2008 but was continuously incurring losses under pressure from
industry. After initiation of the investigation, NTC collects
the dumped imports, NTC conducted
investigation and levied anti-dumping
Summary of anti-dumping measures imposed by Pakistan
duty ranging from 3.52% t0 84.48% on
Sector No. of Anti-dumping imports of HP from various sources in
Measures Duty Ranges 2011. Levy of this anti-dumping duty
provided level playing field to the
Products of the chemical and allied industries 31 3.48% - 96.50% domestic industry and its losses turned
Resins, plastics and articles; rubber and articles 11 3.43% - 57.09% into profits.

Paper, paperboard and articles 13 1.64% - 39.10% The same is the case with flat steel
industry in Pakistan. A major portion of
Textiles and articles 13 2.14% - 29.68% flat steel industry is covered by Cold
Articles of stone, plaster; ceramic prod.; glass 2 9.35% - 36.35% Rolled Coils and Galvanized Coils. After
the downfall of Pakistan Steel Mill,
Base metals and articles 13 6.09% - 40.47% private sector started setting up its
Miscellaneous manufactured articles 2 9.56% manufacturing units for flat steel products
in Pakistan. The industry started its
Total 85 production in 2011 and was under severe
30 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019

Focus Section
Anti-dumping measures have proved to be very helpful in uplifting the performance
of various industries in Pakistan. From chemicals, paper & paperboard to steel
industries, there are many examples of industries being devastated by the harmful
effects of dumping from the very start of their inception or expansion and anti-
dumping measures provided sigh of relief to such industries
pressure from dumped imports which urged it to file an
antidumping application against dumped imports. NTC
concluded anti-dumping investigations on cold-rolled coils &
galvanized coils and imposed anti-dumping duties ranging from
6.09% to 40.47% in 2017. After levying of anti-dumping duty,
the performance of the domestic industry started improving,
Sales of the domestic flat-rolled industry went up by 3 times
production improving capacity utilization and its losses turned
into profits. By the virtue of anti-dumping duty, the domestic
industry was able to increase its capacity from approx. 500,000
tons per annum to approx. 1.7 million tons per annum. Now
Pakistan's steel industry, in addition to catering domestic
demand, is competing in export markets with its quality
products.
Paper and Paperboard sector is also one of the prominent
industrial sectors in Pakistan which had been facing injury due
to dumped imports of paper and paperboard. Paper &
Paperboard industry had undergone huge capacity expansion
during and after 2009 when the leading players in paper and
paperboard industry commissioned their new production lines
for manufacturing quality paper and paperboard. Since then
Pakistan's paper and paperboard industry had to face tough
competition from imports. Left with no other option, domestic
paper and paperboard industry had to file an anti-dumping
application with the NTC which, after its due process of
investigation, levied antidumping duties on paper and
paperboard products ranging from 1.64% to 35.93%. With the
In the changing trade dynamics
where countries are required to
liberalize their tariffs, high tariffs for
protection of domestic industry is no
more a feasible solution
imposition of anti-dumping duties on these products, the
domestic industry became competitive against the imports and
had been able to capture more market share.
Anti-dumping duties also paved the way for performance
improvement of the plastic film manufacturing industry in
Pakistan. Facing severe competition from imports, plastic films
industry filed antidumping application for imposition of anti-
dumping duties on dumped imports of Biaxially Oriented
ICMAP
Estd. 1951
Polypropylene Films (BOPP Films) from various sources. NTC
upon application of the domestic industry conducted
investigation and imposed anti-dumping duties ranging from
22.95% to 57.09%. Due to levy of antidumping duty, the
domestic industry became well off against imports and its sales
and profitability improved substantially. At the time of
investigation, there were only two producers of BOPP Films in
Pakistan. As a result of levy of anti-dumping duty, not only
performance of the existing BOPP Films manufacturers
improved but new players also entered the domestic market by
setting up their production lines in Pakistan. Now Pakistan's
BOPP Films industry is serving the entire domestic of BOPP
Films in Pakistan but is also exporting BOPP Films to earn
precious foreign exchange.
Conclusion:
In the changing trade dynamics where countries are required to
liberalize their tariffs, high tariffs for protection of domestic
industry is no more a feasible solution. In order to increase its
exports, Pakistan will need to have preferential market access in
other export destinations with reduced/ concessional duty rates
for which it would have to undertake more FTAs, PTA and other
trade agreements. In return, Pakistan will also have to allow
more access to its trading partners with concessional duty rates
for some tariff lines which may cause exposure for its domestic
industry. In such a scenario antidumping measures will be the
most workable and feasible tool for the protection of the
domestic industry.
About the Author: The writer is a Fellow member of ICMA Pakistan and
has over 20 years of practical experience as an international trade lawyer
and trade policy expert in the areas of Trade Remedy Laws and
international trade policy. He is also serving as Advocate High Court.
ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 31
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 ICMAP

Estd. 1951
Focus Section

Zero-Taxation on
Salaried Class
T he salaried class signifies that
segment of the population which
cannot shout; cannot smile or cannot
cry, whatever inflation, high taxation and
exchange rate does with them, especially in a
entrepreneur had to bear this gigantic cost
increase and to save their profit margins, are
forced to go for right-sizing which
subsequently leads to downsizing of
employees. Resultantly, the salaried class
country like Pakistan. They are helpless and suffers.
altogether ignored by the tax policymakers Increasing efficient technology levels also
and receive their salaries only after attracts entrepreneurs and technology being
deduction of taxes. a 'monster' of downsizing, digests many -
It is a fact that in Pakistan a major portion of not only inefficient workers but sometimes
tax revenues are contributed by the 'salaried efficient and smart employees in
class'. Higher taxation always causes higher government organizations are also forced to
inflation which hits nobody but the common leave. Because of high-end politics and
man who pre-dominantly belongs to the inefficiency networks, good workers are
'Salaried class'. The salaried class is not only forced to leave the organization. Syed Shariq Waqar, FCMA
the biggest contributor to taxes, it also
contribute highly in government donations
like Dam funds, hospital development
charities, street beggars' charities, etc.
Despite this it is also the biggest victim of
street crimes.
Whenever Government direly needs money
to run the affairs of the country, it raises taxes
which leads to an increase in the prices of
essential commodities like groceries,
utilities, etc. The higher cost of taxation
means higher cost of production, logistics,
and energy. At the end of the day, an
32 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019

Focus Section
Taxation on the salaried class is always a high-end debate.
Normally, what salaried class does is that at the time of salary
negotiation, they demand net of tax salaries and then tax factor is
added on it which not only adds to the cost but also becomes part
of the cost of doing business. During the time of recession, this
cost hurts the entrepreneurs.
Now let's come to the point as to 'How to tackle this issue?'. Tax
on salaried class should be zero at all levels, but a million-dollar
question arises, 'How the Government can bear this tax burden
which is on the shoulder of 'salaries class'. Because of zero tax
By adopting a zero-taxation policy for salaried class, the economy will move
faster. Due to increase in both supply and demand, more manpower would be
required which would lead to generating more job avenues for the people
on salaried class, this amount will not come into the government
exchequer. So, the answer is quite simple i.e. there may not be
any taxes on the salaries, either anyone is earning 100k or
1000k. Zero taxation on salaries will allow the people to have a
complete value of their salaries in their hands, which will
increase their purchasing power. They will spend more money
on savings, more money on their cost of living, more traveling,
more shopping, and more entertainment. Needless to say that
due to high-end taxation, they are sacrificing.
In 2018-2019, Only 67.7% of financial targets of Pakistan's
budget were achieved. It is a very simple economic
phenomenon to never keep wealth in one hand, rather always
keep it in circulation as 'wealth generates wealth'. All the
economic experts should focus, before diverting the tax burden
to salaried class, on 'How to improve the buying power of
salaried class?'. If they have more purchasing power, they will
spend more, but cutting their throats is not the solution.
We can understand the above phenomenon through the
following economic act.
A person goes to a hotel and asks at the reception counter that he
needs a room and what would be its cost. The owner replies that
it would cost him Rs. 1,000/-. The person gives Rs. 1,000 to the
owner and says that he wants to first see the room to decide
whether to stay or not. An attendant takes the customer to visit
the rooms, meanwhile a meat supplier of the hotel comes and
ask the owner for the clearance of his dues amounting Rs.
1,000/-. The hotel owner gives him the same Rs. 1,000 which he
ICMAP
Estd. 1951
receives from the customer. The meat vendor goes to his shop
where his landlord is waiting for him and demands his
outstanding dues to settle. The meat vendor gives him Rs. 1,000
rupees note to settle his dues. The landlord who had borrowed
Rs. 1,000 from one of his friends, returns that money to him. His
friend is staying in the same hotel so he receives his dues and
checks out from the hotel after paying same Rs. 1,000 against
his room rent. The customer who is visiting the room comes
back and says to the owner and he does not like the room and
asks to return his Rs. 1000/-. The hotel owner returns the same
Rs. 1,000 to him. The moral of the story is that issues of four
persons were solved by just circulating Rs. 1,000 and nobody
lost nothing.
By adopting a zero-taxation policy for salaried class, the
economy will move faster. Due to increase in both supply and
demand, more manpower would be required which would lead
to generating more job avenues for the people.
Now. one more million-dollar question arises, 'How
Government exchequer will bear this burden of 'salaried class'
tax loss?'. The answer is quite simple. The total value of tax
coming from the salaried class will be proportionately adjusted
through indirect taxation, for e.g. 17% GST will be increased by
0.5% and likewise, other taxes may also be increased by 0.5% or
as per requirement. I believe accounting will become easier ,
'Salaried class' and entrepreneurs, will be happy and on the other
hand, the Government exchequer will be with more money and
the economy will run more efficiently.
Based on these zero taxation on 'Salaried class', I believe
everybody, especially the 'salaried class' will buy all their cost of
living items through GST-base invoices and Indirect taxation
revenue will increase which would compensate for the
foregoing impact of 'salaried class' taxation. Professionals and
Budget experts only need to properly and wisely apportion the
'salaried class' tax collection which impacts other tax slabs.
About the Author: The writer is a Fellow member of ICMA Pakistan and has
around 23 years of diversified experience in manufacturing, retail, aviation
and education industry. He is associated as faculty with various Universities.
He also contributes to TV talk shows on economic front programs.
ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 33
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 ICMAP
Estd. 1951
Tariff Regime and Issues in Pakistan:
A Comparison with the Regional Countries
T he tariffs play a vital role in building a
wall to safeguard the domestic
industry of any country against the
potential competition of foreign business
giants. Effective implementation of tariffs,
besides protecting domestic industry, can
leads towards a better allocation of
resources; attracting and protecting
investments; improving competitiveness of
the domestic industry in long term;
generating employment opportunities for
skilled and unskilled workforce; improving
balance of payments of the country; serving
as a source of revenue and income
distribution by levying higher import duties
on luxury goods and lowering tariffs on raw
materials and intermediate goods. On the
other hand, an excessive tariff can impact
negatively by increasing cost of inputs which
may lead towards de-industrialization by
making industrial investment less viable due
to eroded competitiveness; impose extra
burden of costs on consumers by making
industrial products expensive which
ultimately would create an anti-export bias
by making the domestic market more
attractive than export market. The fact that
the exports to GDP ratio of Pakistan which
has gone down from 13.5% in 2010 to 10% in
2018 speaks volumes about the impact of
higher tariffs on exports.
34 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019
Focus Section
Background
In Pakistan, the import tariffs have
traditionally been employed as a revenue
generation tool rather than an instrument of
trade policy as import tariffs are easy to levy
and administer than direct and indirect
taxes.
Pakistan uses the Harmonized System to
classify goods. Customs duties are levied on
an ad-valorem basis. The country had
gradually liberalized tariffs, though with
occasional increases in tariff protection
from time to time. The number of general
tariff slabs was gradually reduced from ten Jamshaid Hassan Butt, ACMA
(10) in 1993 to six (6) in FY 2015. In the
federal budget 2018-19, the maximum
general tariff rate was reduced from 25
percent to 20 percent (except for vehicles)
The exports to GDP ratio of Pakistan which has gone
down from 13.5% in 2010 to 10% in 2018 speaks volumes
about the impact of higher tariffs on exports
and the government simplified the tariff
structure by reducing the number of duty
brackets from six to four. The overall
average applied tariff of the country in 2018
 ICMAP

Focus Section Estd. 1951

was 10.09 percent. The further harmonization in this regard was months have shifted the weightage of revenue collection from
made though Finance Act, 2019 whereby, further relief direct to indirect tax as envisaged in tabulated figures from
measures were introduced for import of health sector Federal Budget 2019-20:
items/medicines, prefabricated structures of hotel to promote
tourism and good quality paper for standardized printing and Break-up of Tax Revenue
preservation of Holy Quran. The government also took (Rupees in Billion)
measures to incentivize twenty-four local industries by
2020 2019 % Change
rationalizing custom duty on the raw material and ancillary
inputs used in these sectors of the economy. Income Tax 2073 1652 25
Workers' Welfare Fund 5 4 25
Regulatory duties also became another instrument for revenue
generation in addition to the above-mentioned customs duties. Customs Duty 1001 735 36
Sales Tax 2108 1490 41
Pakistan GDP Growth rate during the last 5 Years Federal Excise Duty 364 266 37
Fiscal Year GDP %age Change Petroleum Levy 216 204 6
Growth Rate in Exports Gas Infrastructure Cess 30 25 20
2012-13 3.65% 13.58% Natural Gas Surcharge 10 8 25
2013-14 4.05% (1.48%) Others 15 10 50
2014-15 4.06% (6.34%)
The estimated share of direct taxes in total revenue has
2015-16 4.56% (1.6%) decreased from 38% in FY 2019 to 36% in FY 2020 whereas, the
2016-17 5.37% (0.78%) share of indirect taxes is estimated at 36% which shows 2%
2017-18 5.23% 9.92% increase from the previous year. The current budgeted ratios of
2018-19 2.91% (2.2%) revenue collection cannot be considered encouraging at macro
level as it seems that the burden of taxes has been shifted on the
general public in the form of indirect taxes rather than collection
Since the FY2013, the GDP growth increased from 3.65% in of taxes from higher income group in the form of direct taxes.
2012-13 to 5.2% in FY2018. The inverse trend between The revenue collection model and strategies would definitely
economic growth and exports in 2014-19 shows that exports need to be re-addressed in the foreseeable future so as to provide
have not been making major contribution to the economic significant relief to lower-income group by reducing or stopping
growth of the country. to increase shares of indirect taxes in total revenue collection of
One of the major causes of the decline in exports was the the country.
consistent increase in the proportion of trade-related revenue Issues in Tariff Regime
through multiple layers of tariffs and taxes. The industrial
The current tariff regime is the result of multiple factors. One of
production has been rendered less competitive internationally
those being the challenging situation of trade deficit which the
under the burden of higher tariffs. The tariff revenues increased
country has been facing since decades and to resolve the same
by 169% during 2010-16, whereas imports grew by only 17%
the following main issues are required to be addressed:
during that period. Regulatory duties have increased from 105
tariff lines in 2013 to over 1500 tariff lines in 2017; the share of (i) Employment of import tariffs as a revenue tool has affected
collection from Regulatory duties in the import revenues the competitiveness of the manufacturing industry,
increased from 1.5% to now more than 8% of the customs especially the export-oriented sectors, as the cost of inputs
revenue collection. and intermediary goods increase because of higher import
tariffs on imported raw materials, intermediate goods, and
The government of Pakistan has always been strategizing to machinery.
increase the share of direct taxes in overall revenue collection of (ii) Multiple duty slabs, high tariffs, various concessions
the country, however, the most recent budget reflects an through specific SROs and regulatory duties keep the tariff
opposite picture of what the government has been advocating structure complex which is prone to misuse through
and for which the country has been striving since long. The big- smuggling, under-invoicing, and mis-declaration of
bang changes in taxation structure of Pakistan during the last six quantity and quality of goods.

Pakistan - Growth of exports Pakistan - Exports, percent of GDP

15 14
10 13
5 12

0 11

-5 10

-10 9

-15 8
2012 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018
Source: TheGlobalEconomy.com, The World Bank Source: TheGlobalEconomy.com, The World Bank

ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 35

 ICMAP

Estd. 1951
Focus Section
(iii) The sustained high level of tariff protection creates China (4.6%). The total revenue collection in Pakistan at the
inefficiencies in the manufacturing sector which is unable import stage was around 44% of the total tax revenues in 2018.
to protect its share in the domestic market, as well as unable
to maintain its competitiveness in the global market. It Regional Growth Trends
creates an anti-export bias as the producers of goods finds The South Asian Region is at top of the list amongst world's
export markets less attractive than the protected domestic fastest-growing regions, with annual growth of 7.0% and the
market. The burden of the protection is borne by domestic prediction for 2020 and 2021 is approximate 7.1%; but on the
consumers since domestic prices for the protected items are other hand the region desperately needs to increase its exports
maintained above international market prices. to endure its higher growth and reach its optimum economic
(iv) There are several raw materials on which there are different potential as the regions fast growth is mainly driven by
tariff rates for industrial and commercial importers for the domestic demand, which ultimately increases imports and
surpasses exports, further widening of trade gap, current
account deficits and causing currency depreciation in some
Currently, Pakistan maintains the countries including Pakistan.
Strong domestic demand, fueled by higher consumption and
third-highest average weighted tariff investment, resulted in higher growth of import at 14.9 percent
in 2017 and 15.6 percent in 2018, which is almost twice the
amongst the 68 countries having more region's export growth. In contrast, the growth in exports
recorded only by 4.6% in 2017 and 9.7% in 2018.
than US$ 20 billion annual exports There is a collective need for regional countries to make
relentless efforts for stimulating entrepreneurship, polishing
their citizens' skills to compete in the global market.
same products. It makes the system prone to mis- Despite a few months of progress in the regional exports, South
declaration and creates distortions by disadvantaging the Asian countries export only one-third of their potential, and the
SMEs who cannot import raw materials themselves. trade gap is still widening. The region's export gap widened over
time, standing at over 20 percent of GDP in 2017, as South Asia
(v) The frequent imposition of regulatory duties has made the has not taken full advantage of the favorable international global
tariff structure inconsistent and unpredictable, which trade environment.
hinders investment decisions.
(vi) The replacement of 0% duty slab, covering primarily the Real GDP growth in South Asia
raw materials and machinery, with 3% slab (plus additional 2018 2019 2020 2021
duty) has been adversely affecting the competitiveness of
the manufacturing sector. Afghanistan (CY) 1.0 2.5 3.2 3.5
Bangladesh (FY) 7.9 7.3 7.4 7.3
Regional Tariff Trends
Bhutan (FY) 5.7 5.4 5.4 5.2
The experience of developing countries demonstrates that the
pace of development in those countries, which have undertaken India (FY) 7.2 6.8 7.0 7.1
programs of structural reform, tariff rationalization and trade Maldives (CY) 7.9 5.7 5.2 5.3
liberalization, was faster than the others. During the last decade,
all the 20 fastest export-growth economies have reduced import Nepal (FY) 6.3 6.0 6.1 6.2
tariffs; the two fastest-growing economies have reduced tariffs Pakistan (FY, factor prices) 5.8 3.4 2.7 4.0
by 72% and 51%, while in Pakistan the trend has been the
Sri Lanka (CY) 3.2 3.5 3.6 3.7
opposite with an increase of 11% in import tariffs. Additionally,
the imposition of regulatory duties has increased the effective
tariffs even higher. Afghanistan:
Pakistan's export growth since 2001 has been commensurate GDP is estimated to grow a little better than the past and jump
with the tariff liberalization. The applied weighted mean tariff in over to 3 percent over the forecast time period, with the
Pakistan was reduced from 20.62% in 2001 to 8.92% in 2014. assumption that the political stability will be restored and
During the same period, exports increased by 173% from US$ drought conditions will ease. A better security situation would
9.2 billion to US$ 25.1 billion. Since 2014, the tariff support confidence and resultantly gear up economic activity in
liberalization has been reversed by gradually increasing the the country.
applied tariff to 10.09%; the exports declined by 19% to US$
20.4 billion. Bangladesh:
Currently, Pakistan maintains the third-highest average GDP is forecast to average 7.4 percent in 2020. Activity will be
weighted tariff amongst the 68 countries having more than US$ supported by robust spending on infrastructure and healthy
20 billion annual exports. The import tariffs constitute 13% of investment with expanding credit growth. However, a
the total tax revenues in Pakistan compared with the export- slowdown in the economic activity of trading partners could
driven economies e.g. Malaysia (1.6%), Turkey (2.0%), restrain the contribution of net exports to growth next year.
Indonesia (2.5%), South Korea (3.9%), Thailand (4.3%) and

36 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019


Focus Section
Bhutan:
GDP growth supported by tourism and retail trade is expected to
remain solid at 5.4 percent in FY2019-20 and will remain over
and above 5 percent over the forecasted time period of 2021.
India:
Indian economy grew at a 5-year low pace of 6.8% in the last
fiscal year mainly due to the manufacturing and agriculture
sectors showed signs of slowing down over the past year. GDP is
forecasted around 6.8 to 7% for the year 2019-20 before
stepping upto 7.1% in 2020-21.
Maldives:
The Country growth driven by tourism, commerce, and
construction, has been strong in recent years. Economic activity
is forecast to expand by 5.2 percent in 2020 and to moderate to
5.3 percent over the forecasted time period, as investment
projects converge to historical averages.
Nepal:
GDP growth is projected to average 6.1 percent over the next
two years. The services sector would get benefit from strong
tourism and manufacturing which has also been supported by
the opening of Nepal's largest cement factory in the recent past.
Sri Lanka:
GDP growth is expected to pick up to 3.6 percent in 2020 and to
grow upto 4 percent over the forecast horizon. The recovery of
economic growth will be supported by a pickup in the services
sector and solid infrastructure investment.
Pakistan:
GDP growth is expected to slow further to 2.7 percent in
FY2019/20 because of the higher interest rates leading towards
depressed domestic demand. Pakistan at the moment could be
ranked on the bottom of the list of south Asian countries in terms
of GDP growth, the most downside of its last five years growth
statistics, almost closer to the country like Afghanistan's which
has been largely affected by political distortion since a couple of
decades. The government is taking corrective measures to
gradually resolve macroeconomic disparities, reflected in large
fiscal and current account deficits. The flow of foreign
remittances is likely to support growth and the current account
balance in the coming year. A comparatively more stable
external environment is seen as helping a pickup in economic
activity starting from FY2020/21.
Tariff Policy Objectives
The main objectives of a good tariff policy are summarized
below:
i) To create new employment opportunities by attracting
efficiency-seeking investment in the manufacturing sector
by making tariff regime transparent and predictable;
ii) To focus on consumer well-being by reducing the
distortions in the domestic price structure.
iii) To improve the competitiveness of manufacturing,
including the export sector, through duty-free access to
imported raw materials by rationalizing the tariff structure;
ICMAP
Estd. 1951
iv) To remove glitches in the tariff structure which is causing
distortions between sectors and in the value chain of the
same sectors.
Tariff Policy Principles
The Policy should be based on the following principles:
a) Tariffs as a trade policy instrument
The tariff policy should be employed as an instrument of
trade policy rather than revenue. The tariffs should be
leveraged for creating the right balance between trade
liberalization and time-bound protection.
b) Simplification
The tariff structure should be simplified as much as
possible by reducing unnecessary exemptions and
concessions.
c) Cascading
The principle of vertical consistency through cascading
tariff structures (increasing tariffs with stages of
processing of a product) should be retained so that at any
point in time, tariffs on inputs are lower than (or at least
equal to) the tariff on the finished product. Besides, the
steepness in the escalation of tariffs should be reduced.
d) Strategic Protection
Strategic protection should be provided to the domestic
industry/sectors against the foreign competition during the
initial startup phase keeping in view the cost of doing
business. The protection should be time-bound and phased
out so as to make the industry globally competitive.
e) Competitive Import Substitution
The size of the domestic market should be leveraged for
development of competitive import substitution industry.
The time-bound protection should be provided in the
domestic market, which should be phased out to make the
industry competitive for export-oriented production.
Research References:
– Pakistan Economic Survey 2018-19
– US Department of Commerce's Economic Research Reports on
Pakistan and South Asian
– IMF and World Bank Reports on Pakistan and South Asian Region
– Pakistan's National Tariff Policy 2018 and 2019 - Ministry of
Commerce
– Finance Act, 2019 (PAKISTAN)
About the Author: The writer is an Associate Member of ICMA Pakistan having
over 10 years work experience with Tax & Corporate advisory firms,
Government departments, manufacturing, and service sector organizations. He
is currently working as Senior Associate with M/s. A. Qadir & Co. (Taxation &
Corporate Law Consultants), Karachi.
ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 37
Back to Contents Page
 ICMAP
Estd. 1951
National Tariff Policy
and Taxation System
Pakistan's Economic Scenario
The economy of Pakistan is the 23rd largest
in the world in terms of purchasing power
parity (PPP), and 42nd largest in terms of
nominal gross domestic product. Pakistan
has a population of over 212 million (the
world's 6th-largest), giving it a nominal GDP
per capita of $1,357 in 2019, which ranks
154th in the world and giving it a PPP GDP
per capita of 5,839 in 2019, which ranks
132nd in the world for 2019. However,
Pakistan's undocumented economy is
estimated to be 36% of its overall economy,
which is not taken into consideration when
calculating per capita income. The economy
is semi-industrialized, with centres of
growth along the Indus River. Primary
export commodities include textiles, leather
goods, sports goods, chemicals, carpets/rugs
and medical instruments.
38 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019
Focus Section
Foreign Trade
The share of foreign trade in Pakistan's
GDP continues to be low, at 25.8%. Despite
economic and political difficulties,
Pakistan has taken steps to liberalise its
trade and investment framework as part of
commitments made with the WTO, IMF
and the World Bank. Textile products
accounted by far for the largest share of
exports (around 23%), followed by cotton
and rice. In regards to imports, the largest
item was petroleum products, followed by
palm oil, gas and ferrous waste.
Wasful Hassan Siddiqi, FCMA
The United States is the top destination for
Pakistani exports (mainly textile), followed
by United Kingdom, China, Afghanistan
and Germany. China is by far the largest
Pakistan has bilateral and multilateral trade
agreements with many nations and international
organizations. It is a member of the World Trade
Organization, part of the South Asian Free Trade
Area agreement and the China-Pakistan Free Trade
Agreement

Focus Section
supplier of goods and services to Pakistan (around 27%),
followed by United Arab Emirates, the United States, Saudi
Arabia and Indonesia. Pakistan's trade structure has been
structurally in deficit, with exports remaining sluggish on the
back of low global demand for Pakistani crops. Trade deficit,
including services, rose to US$ 34.7 billion in 2017 (WTO) and
grew further to US$ 37.6 billion at the end of the 2017-18 fiscal
year (Pakistan's fiscal year runs from 1 July until 30 June)
(Pakistan Bureau of Statistics - PBS). Trade deficit contracted
over 11% to US$ 21.5 billion in the first eight months of the
2018-19 fiscal year, down from US$ 24.5 billion the same time a
year earlier, owing to a steep decline in imports and low oil and
gas prices weighing on the energy import bill. Exports edged up
only slightly to US$ 15.1 billion, from US$ 14.83 billion a year
earlier, whereas imports fell rapidly to US$ 36.6 billion, from
US$ 39.03 billion.
The government expects exports to rise to US$ 27 billion at the
end of the current fiscal year, against a backdrop of enhanced
access to the Chinese tea and rice market and a reduction in costs
of doing business for exporters. The free trade agreement (FTA)
with China has been detrimental to Pakistani manufacturing
exports, which have declined continuously in recent years, and
local businesses worry the completion of China-Pakistan
Economic Corridor would further increase the share of Chinese
products in the domestic market. At the same time, Pakistan and
Saudi Arabia are expected to sign a Trade and Investment
Framework Agreement by the end of 2019.
Pakistan has bilateral and multilateral trade agreements with
many nations and international organizations. It is a member of
the World Trade Organization, part of the South Asian Free
Trade Area agreement and the China-Pakistan Free Trade
Agreement. Fluctuating world demand for its exports, domestic
political uncertainty, and the impact of occasional droughts on
its agricultural production have all contributed to variability in
Pakistan's trade deficit. Pakistan's exports continue to be
dominated by cotton textiles and apparel. Imports include
petroleum and petroleum products, chemicals, fertilizer, capital
goods, industrial raw materials, and consumer products.
Tariff
The tariffs play an important role in allocation of resources,
protection of the domestic industry against foreign competition,
improving competitiveness of the domestic industry, generating
employment opportunities, attracting and protecting
investments, improving balance of payments, serving as a
source of revenue and income distribution by levying higher
import duties on luxury goods and lowering tariffs on raw
materials and intermediate goods. On the other hand, employed
excessively, the tariffs erode competitiveness of industry by
increasing cost of inputs, cause de-industrialization by making
ICMAP
Estd. 1951
industrial investment less viable due to eroded competitiveness,
breed incompetence by protecting the inefficient producers,
impose costs on consumers by making industrial products
expensive, and create anti-export bias by making the domestic
market more attractive than exports. The fact that the exports to
GDP ratio went down from 13.5%in 2010 to 8.2% in 2017,
speaks volumes about the impact of higher tariffs on exports.
Reasons for Tariff
l To protect newly established domestic industries from
foreign competition.
l To protect aging and inefficient domestic industries from
foreign competition.
l To protect domestic producers from dumping by foreign
companies or governments.
l To raise revenue.
Following are the tariff in Pakistan
1. Import duty
2. Export duties
3. Regulatory duties
4. Additional custom duty
In Pakistan, the import tariffs have traditionally been employed
as a revenue generation tool rather than instrument of trade
policy as import tariffs are easy to levy and administer than
direct taxes.
Pakistan had gradually liberalized tariffs, though with
occasional increases in tariff protection from time to time. The
number of general tariff slabs were gradually reduced from ten
(10) in 1993 to six (6) in FY2015. The maximum tariff was
reduced in FY2015 to 25%; on the other hand, 1% duty was
imposed on the 40% tariff lines, mainly essential raw materials
and machinery, which were hitherto exempted from duty. In
FY2016, the number of slabs was further reduced to 5 and the
maximum tariff was reduced to 20%; on the other hand, the
lowest slab was increased from 1% to 2%. In FY2017, the slabs
were reduced to four, by merging the slab of 2% and 5% and
creating a new slab of 3%. It increased the import tariff on raw
materials and machinery from 0% in FY2014 to 3% in FY2017.
An additional duty of 1% was levied under SRO 1178(I)/2015,
which was increased to 2% in FY2018. It made the duty on raw
materials and machinery to 5% in FY2018 from 0% in FY2014.
The current four duty slabs are 3%, 11%, 16% and 20%, with a
large number of tariff lines subject to additional duty of 2%.
Duty Slab No. of Tariff Lines Value of Imports
(US$ billion)
3% 2,747 24.2
11% 1,096 11.1
16% 513 2.5
20% 2,419 7.1
Regulatory duties also became another instrument for revenue
generation in addition to the above-mentioned customs duties.
ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 39
 ICMAP
Estd. 1951
During the last decade, all the 20 fastest export-growth economies have
reduced import tariffs; the two fastest growing economies have reduced
tariffs by 72% and 51%, while in Pakistan the trend has been the opposite
with an increase of 11% in import tariffs. Additionally, the imposition of
regulatory duties has increased the effective tariffs even higher
To facilitate the manufacturers-cum-exporters, a number of
schemes are in place to waive/reimburse the import duty on their
inputs; however the benefits of such schemes cannot be availed
by all. Many exporters especially SMEs often fail to avail the
benefits of such exemption schemes or duty drawbacks.
Besides, a large number of concessionary Statutory Regulatory
Orders (SROs) and Customs General Orders (CGOs) were
issued from time to time to provide concessions and
exemptions. Realizing the complexity and distortions created by
the SROs, efforts were initiated to phase out the concessions.
However, instead of doing away with such concessions, a large
number of those were moved to the Fifth Schedule of the
Pakistan Customs Tariff.
Issues in Tariff Regime
There are several factors responsible for the current tariff
regime. One of those being the challenging situation of trade
deficit which the country is facing now due to which the
following main issues need to be addressed:
i) Employment of import tariffs as a revenue tool has created
multiple distortions and affected the competitiveness of
manufacturing, especially the export-oriented sector, as the
cost of inputs and intermediate goods increase by higher
import tariffs on the imported raw materials, intermediate
goods and machinery.
ii) The sustained high level of tariff protection creates
inefficiencies in the manufacturing sector which is unable
to protect its share in the domestic market, not to speak of
competitiveness in the global market. It creates an anti-
export bias as the producers of goods find export markets
less attractive than the protected domestic market. The
burden of the protection is borne by the domestic
consumers since domestic prices for the protected items are
maintained above international market prices.
40 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019
Focus Section
iii) Multiple duty slabs, high tariffs, concessionary SROs and
regulatory duties keep the tariff structure complex which is
prone to misuse through smuggling, under-invoicing and
mis-declaration of quantity and quality of goods.
iv) There are several raw materials on which there are different
tariff rates for industrial and commercial importers for the
same products. It makes the system prone to mis-
declaration and creates distortions by disadvantaging the
SMEs who cannot import raw materials themselves.
v) Frequent imposition of regulatory duties has made the tariff
structure inconsistent and unpredictable, which hinders
investment decisions.
vi) The replacement of 0% duty slab, covering primarily the
raw materials and machinery, with 3% slab (plus 2%
additional duty) is adversely affecting the competitiveness
of the manufacturing sector.
Regional Trends
The experience of developing countries demonstrates that the
pace of development in those countries, which have undertaken
programs of structural reform, tariff rationalization and trade
liberalization, was faster than the others. During the last decade,
all the 20 fastest export-growth economies have reduced import
tariffs; the two fastest growing economies have reduced tariffs
by 72% and 51%, while in Pakistan the trend has been the
opposite with an increase of 11% in import tariffs. Additionally,
the imposition of regulatory duties has increased the effective
tariffs even higher.
During the last 10 years tariffs on international trade flows have
been further reduced. As of 2012, the average tariff applied on
imports is less than 1 per cent in developed countries and
averages between 4 and 10 per cent in developing countries
regions. Lower import tariffs are mirrored by more liberal
market access conditions, especially for developing countries.
In 2012, the average tariff faced by exports ranged from 1 per
cent for Latin America to about 3.5 for South Asia.
About 60 per cent of South Asian and Sub-Saharan African
imports face an average tariff rate of over 5 per cent. Even in the
case of East Asia, about one-fourth of imports are taxed at a rate
of 5 per cent or higher. The degree of tariff restrictions is greater
when considering the number of bilateral trade flows rather than
the value of total trade. Notably, about 40 per cent of trade flows
of Sub-Saharan African countries are subject to import tariffs of
15 per cent or higher.

Focus Section
Tariff Policy in Pakistan
National Tariff Policy 2019 aims to achieve the following
objectives:
i) To improve competitiveness of manufacturing, including
the export sector, through duty free access to imported raw
materials by rationalizing the tariff structure;
ii) To increase employment opportunities by attracting
efficiency-seeking investment in the manufacturing sector
by making tariff regime transparent and predictable;
iii) To lessen the distortions in the domestic price structure and
improve consumer welfare by reducing the burden of
excessive protection;
iv) To remove anomalies in the tariff structure which is causing
distortions between sectors and in the value chain of the
same sectors.
The Policy is based on the following principles:
a) Tariffs as trade policy instrument
The tariff policy will be employed as an instrument of trade
policy rather than revenue. The tariffs will be leveraged for
creating the right balance between trade liberalization and
time-bound protection.
b) Simplification
The tariff structure will be simplified by reducing
exemptions and concessions.
c) Cascading
The principle of vertical consistency through cascading
tariff structures (increasing tariff with stages of processing
of a product) will be retained so that at any point in time,
tariffs on inputs are lower than (or at least equal to) the tariff
on the finished product. Besides, the steepness in escalation
of tariffs will be reduced.
d) Strategic Protection
The domestic industry will be provided 'strategic
protection' against the foreign competition during the
infancy phase keeping in view the cost of doing business.
The protection will be time-bound and phased out so as to
make the industry globally competitive.
e) Competitive Import Substitution
The size of domestic market will be leveraged for
development of competitive import substitution industry.
The time-bound protection will be provided in the domestic
market, which will be phased out to make the industry
competitive for export-oriented production.
Taxation System in Pakistan
Taxation system in Pakistan is a complex system of more than 70
unique taxes administered by at least 37 agencies of the
Government of Pakistan. The government is seriously indebted
-- and only 2.12 million people in a country of 212 million filed
tax returns at all in 2018. An estimated 10 million people are
registered to pay taxes in Pakistan; the great majority does not
pay a rupee.
ICMAP
Estd. 1951
Pakistan's Current Taxation system is defined by Income Tax
Ordinance 2001 (for direct taxes) and Sales Tax Act 1990 (for
indirect taxes) and administrated by Federal Board of Revenue
(FBR).
Federal taxes in Pakistan like most of the taxation systems in the
world are classified into two broad categories, viz., direct and
indirect taxes. A broad description regarding the nature of
administration of these taxes is explained below:
Direct Taxes
Direct taxes primarily comprise income tax, along with
supplementary role of wealth tax. For the purpose of the charge
of tax and the computation of total income, all income is
classified under the following heads:
i) Salaries;
ii) Interest on securities;
iii) Income from property;
iv) Income from business or professions
v) Capital gains; and
vi) Income from other sources.
Personal Tax
All individuals, unregistered firms, associations of persons, etc.,
are liable to tax, at the rates ranging from 10 to 35 per cent.
Tax on Companies
All public companies (other than banking companies)
incorporated in Pakistan are assessed for tax at corporate rate of
29%. However, the effective rate is likely to differ on account of
allowances and exemptions related to industry, location,
exports, etc.
Inter-Corporate Dividend Tax
Tax on the dividends received by a public company from a
Pakistan company is payable at the rate of 5% and at the rate of
15% in case dividends are received by a foreign company. Inetr-
corporate dividends declared or distributed by power generation
companies is subject to reduced rate of tax i.e., 7.5%. Other
companies are taxed at the rate of 15%. Dividends paid to all
non-company shareholders by the companies are subject to with
holding tax is of 15% which is treated as a full and final
discharge of tax liability in respect of this source of income.
Treatment of Dividend Income: Dividend income received as
below enjoys tax exemption, provided it does not exceed
Rs.10,000/-.
i) Dividend received by non-resident from the state
enterprises Mutual Fund set by the Investment Corporation
of Pakistan.
ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 41
 ICMAP
Estd. 1951
ii) Dividends received from a domestic company out of
income earned abroad provided it is engaged abroad
exclusively in rendering technical services in accordance
with an agreement approved by FBR.
Unilateral Relief
A person resident in Pakistan is entitled to a relief in tax on any
income earned abroad, if such income has already been
subjected to tax outside Pakistan. Proportionate relief is allowed
on such income at an average rate of tax in Pakistan or abroad,
whichever is lower.
Agreement for avoidance of double taxation
The Government of Pakistan has so far signed agreements to
avoid double taxation with 39 countries including almost all the
developed countries of the world. These agreements lay down
the ceilings on tax rates applicable to different types of income
arising in Pakistan. They also lay down some basic principles of
taxation which cannot be modified unilaterally.
Customs
Goods imported and exported from Pakistan are liable to rates of
Customs duties as prescribed in Pakistan Customs Tariff.
Customs duties in the form of import duties and export duties
constitute about 37% of the total tax receipts. The rate structure
of customs duty is determined by a large number of socio-
economic factors. However, the general scheme envisages
higher rates on luxury items as well as on less essential goods.
The import tariff has been given an industrial bias by keeping the
duties on industrial plants and machinery and raw material
lower than those on consumer goods.
Central Excise
Central Excise duties are leviable on a limited number of goods
produced or manufactured, and services provided or rendered in
Pakistan. On most of the items Central Excise duty is charged on
the basis of value or retail price. Some items are, however,
chargeable to duty on the basis of weight or quantity.
Classification of goods is done in accordance with the
Harmonized Commodity Description and Coding system which
is being used all over the world. All exports are exempted from
Central Excise Duty.
Sales Tax
Sales Tax is levied generally at various stages of economic
activity at the rate of 17 per cent on:
l All goods imported into Pakistan, payable by the importers;
l All supplies made in Pakistan by a registered person in the
course of furtherance of any business carried on by him;
l There is an in-built system of input tax adjustment and a
registered person can make adjustment of tax paid at earlier
stages against the tax payable by him on his supplies. Thus
the tax paid at any stage does not exceed 17% of the total
sales price of the supplies.
Problems and Issues in Taxation System
Pakistan's tax system is characterized by a number of structural
problems.
First, the overall level of fiscal effort is low and the tax-to-GDP
ratio has remained, more or less, stagnant. This is one major
42 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019
Back to Contents Page
Focus Section
explanation why budget deficits have been high, generally in
excess of six percent of the GDP.
Second, there is over dependence on indirect taxes, which until
recently accounted for a share in revenues of over 80 percent.
This has increased the regressivity of the tax system and
imposed a higher excess burden of taxation.
Third, within indirect taxes there is domination of taxes on
international trade, which has promoted inefficiency, distorted
the allocation of resources and encouraged illicit trade.
Fourth, the effective tax bases of most taxes is narrow due to
wide ranging exemptions and concessions and rampant tax
evasion. For example, there is less than one income tax assessee
per 100 persons and less than 60 percent of importers actually
pay duty. Consequently, tax rates had to be pitched at high levels
which has created a vicious circle of more tax base erosion and
higher tax rates.
Fifth, the tax administration is characterized by primitive and
out moded procedures, complex laws and considerable
arbitrariness and discretion. The common perception is one of
high levels of corruption and inefficiency.
l Pakistan Taxation System consists of various heads and sub
divisions with a complex structure.
l Understanding these systems is essential in order to avoid
any illegal act.
l Business can also benefit in certain ways e.g. Subsidies and
Refunds.
l Understanding the system can help to reduce expenses.
l Due to this complex structure many individuals avoid
enrolling in Tax system.
References:
i) Draft of National Tariff Policy 2019 (www.commerce.gov.pk)
ii) https://www.nordeatrade.com/dk/explore-new-market/pakistan/
trade-profile
iii) http://www.spdc.org.pk/Data/Publication/PDF/PP-12.pdf
iv) https://tradingeconomics.com
v) https://defence.pk/pdf/threads/pakistan-tax-structure.22908/
About the Author: Mr. Wasful Hassan Siddiqi, B.COM, LLB, FICS,
FPFA, FCMA is a practicing Cost and Management Accountant. He is also
the author of academic and professional books on finance, tax and
corporate laws.

Articles Section
Pakistan Banao Certificate:
Some Suggestions by an Overseas Fellow member
I n January 2019, the Government of
Pakistan announced the launch of
Pakistan Banao Certificate (PBC) as a
new initiative. It is an investment instrument
launched for Pakistani expats / overseas
Pakistanis which can help Pakistan
Government to seek an alternative of foreign
debts to some extent from IMF / World Bank
etc. You can say that it is identical to a
sovereign bond. Sovereign debt represents
roughly 40% of all bonds worldwide. As per
Bank of International Settlement, more than
USD 30 trillion of international debt
securities have been issued. Pakistan Banao
Certificates are risk-free instruments and are
available with maturities of 3 years and 5
years with profit rates of 6.25% and 6.75%
per annum respectively. A minimum
investment of USD 5, 000 is required with no
maximum limit. The Certificate can be
encashed at any time, however, encashment
in USD within one year of issuance entails a
penalty of 1 percent. The Pakistan Banao
Certificate provides overseas Pakistanis a
chance to contribute to their country's
development as well as earn substantial
returns. This type of certificate helps the
government to generate finance without
complying stringent term and condition of
international financing agencies.
ICMAP
Estd. 1951
Around 9 million overseas Pakistanis are
working aboard and sending money of over
USD 20 billion per annum. Overseas
Pakistanis have very limited investment
opportunities and majority of them dump
their cash savings in non-revenue-
Syed Asad Abidi, FCMA
generating activities such as buying plots in
remote areas in Pakistan. The Pakistan Banao
There is no doubt that the Government of
Pakistan offers very attractive investment
Certificate provides
opportunity to overseas Pakistanis. The rate overseas Pakistanis a
of profit i.e. 6.75% is one of the highest rates
any investor can get of deposit. Pakistani chance to contribute
banks on US dollar deposits are offering to their country's
only 2% per annum profit. Currently, the
Bank of America is just offering a 0.35% development as well
profit on the USA's profit on Certificate of as earn substantial
Deposits (CD) accounts. In Qatar, Doha
bank is offering highest rate which is 3% returns
profit on deposits. In July 2019, India also
ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 43
 ICMAP
Estd. 1951
unveiled plan to raise USD 10 billion with foreign currency-
denominated bonds and possibly offer around 3% profit.
Despite this attractive profit rate, Government of Pakistan is
able to issue only USD 30 million worth of Pakistan Banao
Certificates upto August 2019. Hence this initiative failed to
achieve its target so far and desired number of investors have not
shown interest in this opportunity.
Pakistan Banao certificate is a
traditional fixed-term profit certificate
and does not declare to comply with
the Islamic Sharia
Suggestions to make PBCs successful
As an overseas Pakistani, I would like to provide feedback on
this initiative and suggest followings:
Making the Certificates Sharia Compliant:
Majorities of Pakistani prefer Islamic certificates; however,
Pakistan Banao certificate is a traditional fixed-term profit
certificate and does not declare to comply with the Islamic
Sharia. It cannot be a big issue if Government of Pakistan
modifies the terms and conditions of these certificates to
overcome this issue.
Reducing the Minimum Investment Requirement:
A minimum investment of USD 5,000 is required to get the
certificate. It is prudent to reduce this minimum investment
amount (let's say USD 1,000) in order to attract low saving
investors who are in millions.
Allowing eligibility to other nationals:
The Pakistanis having CNIC/ NICOP or holders of Pakistan
Origin Card (POC) having bank accounts outside Pakistan are
only eligible to invest. Since the certificate's main purpose is to
generate finance why it cannot be opened to any nationality. It
will significantly increase the number of potential investors.
Removing the Penalty to improve investors' confidence:
There is a one percent penalty, in case of premature encashment
in USD before completion of one year. It is better to remove this
condition to improve investor confidence.
Simplify Remittance Instructions / Swift code instruction:
It has been mentioned for the investors that while remitting
funds to State Bank of Pakistan, the investor must provide a
44 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019
Back to Contents Page
Articles Section
unique reference number, Date of Birth and Place of Birth in the
Field 70/ 72 of the SWIFT message. In Gulf banks, international
remittance section is different than the person sitting at branch
counter for public. To ensure that bank will insert all these
instructions in the swift message is not an easy job for any
investor and raise unnecessary pressure on investor. National
Bank Branch in New York, should be capable of tracing
remittance with bank account/title etc. Hence it is better to
simply these instructions or find some easier way.
Providing complete details about Beneficiary / Account:
The Investor who has applied for the certificate will be getting
instruction via email about the bank in which the amount is to be
deposited. Surprisingly, some important details are missing such
as IBAN number / Name of account holder, etc. Although
provided details are sufficient to remit amount; however, since
investor has to complete remittance form which normally
requires a lot of input data, it is suggested to provide more
comprehensive details which are normally asked from overseas
banks.
Explaining details for Withdrawal of Profit or Investment:
The Certificates are issued for 3 to 5 years. Overseas Pakistani
bank accounts can change over time. There is a lack of clear
guidelines as to how the funds can be withdrawn, or change of
bank account be notified, or how the profit will be withdrawn,
which form to fill to take back the money and shall there be any
charges, etc. Hence these important issues should be properly
explained.
Since the certificate's main purpose
is to generate finance why it cannot be
opened to any nationality. It will
significantly increase the number of
potential investors
Marketing Efforts:
It seems that the Government has not done proper marketing
efforts. Although Pakistan Banao Certificate has its Facebook
page however viewers/followers are very limited. With
minimum investment, social marketing campaign around the
globe can be made.
Help Desk:
In the Pakistan Banao certificate website, there is no information
available about the focal person contact, phone number, mobile
number, especially WhatsApp number in case of any additional
information or special issue.
In summary, I emphasize that the Pakistan Government can
generate more finance with this initiative which has huge
potential after incorporation of above suggestions.
About the Author: Syed Asad Abidi is a Fellow member of ICMA Pakistan
and a Certified Financial Consultant. He holds a Master's degree in
Economics and has been working for over twenty years in Pakistan and
abroad in oil and gas and investment banking industry. Currently, he is
working as Senior Executive in one of the leading Oil and Gas Company in
Qatar. He can be contacted on email: sasadabidi@yahoo.com

Articles Section
As Professionals, How Well Have You
Planned Financially to Meet Your Death?
Please do this for your family's financial stability before
your death A sound financial planning
F inancial planning plays a vital role in
the life of an individual in day to day
tasks and also for secured future. Even
companies, organizations, and corporate
sectors follow this rule for betterment of
tasks and better future. However, in the case
of an individual, financial planning should
not take consideration for himself only and
for day to day tasks in his lifetime only, but
one should also take into consideration the
future of his family members – particularly
in case of sudden and unforeseen
circumstances. One of such unforeseen
circumstances is death. In case of death of an
individual, in some cases, complicated
matters do arise e.g. inheritance; his
survivors' well-being after death; legal
matters arising out of the remaining wealth of
individual, hardships to survivors in absence
of non-receipt of inheritance left by the
departed soul, etc.
Death is certain for everyone. No one can
stop death. Almost in all religions' scriptures,
death has been described as a "fact with
certainty”. The Holy Quran also says about
death, as below:
ICMAP
Estd. 1951
“Every soul shall have a taste of death."
(3:185, 21:35 & 29:57).
"But to no soul will God grant respite when
the time appointed for it (death) has come."
(63:11)
While living in any part of the world, we
should know this fact that when someone
passes away, the funeral cost is certain, and
the cost depends upon various factors i.e.
funeral rituals according to the faith of the
deceased, local community and government Qasim Abbas, FCMA
regulations, country in which you reside etc.
etc.. For example, in Asian countries,
When we know that death is certain, we cannot avoid and
stop it. However, the head of the family can do some good
arrangements in his lifetime in order that in the event of his
sudden death, his wife and children are not met with
financial difficulties after his death
funeral cost is very reasonable. But in
Europe, North America, etc. the funeral cost
is very high. Therefore, it is certain that the
ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 45
 ICMAP
Estd. 1951
cost may run in thousands of dollars in Europe and North
America. Therefore, the survivors i.e. immediate relatives have
to arrange for the above amount towards the funeral cost after the
death of their loved one wherever they live.
However, as per law of most countries, when a person passes
away, in absence of his registered/notarized Will, whatever
property, assets and amount left in the bank by the deceased, are
taken over by the government, and after that, immediate
relatives have to go through lengthy and complicated legal
formalities and have to pay heavy lawyers fee to recover the
property, assets, and money in the bank, left by the deceased.
And these formalities take a considerable time.
It is in the best interest of the head of the
family that he should write Will in his lifetime,
get it registered/notarized since we must
know that Muslims are directed in Holy Quran
to write a Will
In case the deceased has made the Will in his life as per Quranic
Orders and/or law of the land and duly registered/notarized, his
immediate relatives have to complete few legal formalities to
recover the property, assets, and money in the bank, left by the
deceased, and in that case, less time is required.
In most countries, the above procedure i.e. recovery based on
Will can easily be completed without any frustration and without
any lawyer's help. However, in Arab countries, in case of death
of a person having written Will, his legal heirs have to go
through formalities with Shariah Court, as per law of Arab
countries, where all inherited properties, assets, bank balance,
etc. are distributed by Shariah Court in accordance with Islamic
Inheritance Law, as detailed in Verses 10, 11 and 176 of Chapter
4 of Holy Quran. While my stay in U.A.E., I have witnessed
couple of such cases, and in these cases, I myself was witness at
Shariah Court to testify and confirm the identity of legal heirs of
a deceased.
When we know that death is certain, we cannot avoid and stop it.
However, the head of the family can do some good arrangements
in his lifetime in order that in the event of his sudden death, his
wife and children are not met with financial difficulties after his
death. Therefore, it is strongly advised to the head of the family
to write the Will and get it registered/notarized. This will also
fulfill the obligation of Holy Quran directive as well.
As Muslims, we should also know that in the Holy Quran, it is
ordered to write a Will, as mentioned in 2:180, 2:240, 5:106, etc.
This is in order that no dispute should arise after the death of an
individual.
Also, it is very strongly advised that the head of the family
should open JOINT BANK ACCOUNT with the condition of
RIGHT OF SURVIVORSHIP with his wife and/or with his
children and with the condition that ACCOUNT BE
OPERATED WITH ANYONE'S SIGNATURE. In such case, in
the event of death of one of the Joint Bank Account holders, one
of the survivors can easily, legally and without any difficulty,
can withdraw the money from such Joint Bank Account at any
time. Even the survivor can legally claim and receive full
amount and close such Joint Account after submitting certified
Death Certificate. In most countries, except in Arab countries,
46 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019
Back to Contents Page
Articles Section
this task can be completed very easily and without the help of
any lawyer or further documents. And in this way, the immediate
relatives of the deceased will not face any financial problem. In
North America also, I myself have witnessed such few cases.
In this connection, I narrate here an incident noted by me in
Canada. A person had passed away. He had opened JOINT
BANK ACCOUNT with his wife, with the conditions of RIGHT
OF SURVIVORSHIP and ACCOUNT TO BE OPERATED
WITH ANYONE SIGNATURE. This Joint Bank Account had a
balance of substantial amount. After his death, his wife closed
this Joint Account with her signature only and opened another
Joint Bank Account with her son in the same branch of the bank,
with the conditions of Right of Survivorship and account to be
operated with anyone signature, and then transferred entire
balance of old Joint Bank Account into new Joint Bank Account
legally, easily and without any hassles and without any
assistance or advice from any lawyer, since she was officially
and formally authorized to operate the bank account as one of the
authorized signatories. What a planned and timely action! Then
she also obtained a Safe Deposit Box in the same bank branch to
keep their jewelry, with three signatures i.e. her, her son's and her
daughter's. Now anyone of the above three can have access to
Safe Deposit Box at any time, with proper identification and
signature.
Here is one more incident witnessed by me in Canada in the year
2008. An immigrant was murdered. He left behind wife, one
grown-up son and one grown-up daughter. Unfortunately, the
immigrant couple had no Will and no Joint Bank Account. After
the death of this immigrant, the family faced great financial
difficulties to cope with funeral and other expenses including
college fees. And they had to appeal to the public for
charity/donation in view of their existing circumstances. This
was duly reported in Canada's newspapers.
Conclusion
To summarize, it is in the best interest of the head of the family
that he should write Will in his lifetime, get it
registered/notarized since we must know that Muslims are
directed in Holy Quran to write a Will. It is also advisable to
open a JOINT BANK ACCOUNT with wife and/or children
with the condition of RIGHT OF SURVIVORSHIP and with the
condition that ACCOUNT TO BE OPERATED WITH
ANYONE SIGNATURE so that in the event of his sudden death,
his wife and children will not face any financial difficulties.
It is a fact that in many countries, except Arab countries, the
Inheritance/Succession law of any specific religion is not
applicable. In absence of Will by the deceased person,
government will take control of all the assets, property and bank
accounts of the deceased, which can only be recovered after
lengthy and complicated legal formalities. Therefore, it is
strongly advised that the head of the family should follow the
above guidelines in the best interest of his loved ones, since no
one can stop death – sudden or due to old age, but he can do some
best arrangements i.e. sound financial planning for his loved
ones in case of his death.
Another aspect of sound financial planning is life insurance.
However, religious scholars differ on this issue about the
legitimacy of life insurance under Islamic laws. Therefore, the
matter of life insurance is not discussed here since it may take a
lengthy debate and separate article.
About the Author: The author is retired FCMA and FCA based in Canada,
having completed course of Arabic language from Arab country.
 ICMAP

Other Features Estd. 1951

Economy Watch
By Research and Publications Department, ICMA Pakistan

SBP: Annual Report 2018-19 on the State of Pakistan's Economy

S tate Bank of
Pakistan (SBP
has released its
Annual Report on The
State of Pakistan's
(b) Agricultural output undermined due to water shortages and
rise in input prices.
(c) Overall foreign exchange reserve position remained
challenging due to current account deficit and financing of
external obligations. Pakistan signed an agreement with
Economy for FY
2018-19 on October IMF for balance of payment support.
28, 2019. The Report (d) Significant reduction in imports and high level of financial
states that several inflows from friendly countries.
policy measures were
(e) Overall fiscal deficit reached a historic high in FY19 which
taken during the year
revealed fundamental structural deficiencies in the
to manage the twin
deficits crisis, country's tax system.
including adjustment (f) Rise in share of non-tradeable services in GDP (which do
of exchange rate to not add to the exports base) at the expense of the declining
market fundamentals; share of the commodity-producing sectors.
curtailment in public sector development expenditure, and
The report suggests structural reforms aimed at increasing the
increase in energy prices, which led to a welcome reduction in
the current account deficit. This, however resulted in competitiveness of Pakistan goods, adapting to the
contraction in the large-scale manufacturing sector and increase international trends and shifting towards exportable services.
in inflation. SBP continued to maintain tight monetary It also stresses upon improvement in human capital and
conditions to manage demand and anchor inflation productivity for sustainable future growth. Additionally, the
expectations. The SBP's monetary policy committee (MPC) report features a special chapter dedicated to the factors
increased the policy rate in all six decisions during the year, by a constraining investment in Pakistan, particularly beyond the
cumulative 575 bps. conventional macroeconomic factors. The chapter also
reflects upon the ongoing policy reforms for improving the
Some main highlights of the SBP Annual Report are as under:
investment environment and stresses upon elements that will
(a) Economic growth slowed down due to reduction in be crucial in future for addressing the problem of under-
demand pressures and supply side constraints. investment in the count

SBP: Overseas Pakistanis remit US $5.4 billion in Jul-Sep 2019-20

T he overseas Pakistani
workers has remitted US$
5478.11 million in the first
three months (July to September)
of FY 2019-20, compared with
million, US$ 216.75 million, US$
134.49 million and US$ 41.14 million
respectively in September 2018.
Remittances received from Malaysia,
Norway, Switzerland, Australia,
US$ 5557.61 million received Canada, Japan and other countries during September 2019
during the same period in the preceding year. amounted to US$ 200.95 million together as against US$
According to SBP, during September 2019, the inflow of 185.31 million received in September 2018.
workers remittances amounted to US$ 1747.95 million, which
is 3.4% higher than August 2019 and 17.6% higher than
September 2018.
The country wise details for the month of September 2019 show
that inflows from Saudi Arabia, UAE, USA, UK, GCC
countries (including Bahrain, Kuwait, Qatar and Oman) and EU
countries amounted to US$ 420.88 million, US$ 363.34
million, US$ 281.91 million, US$ 264.89 million, US$ 162.77
million and US$ 53.20 million respectively compared with the
inflow of US$ 360.16 million, US$ 308.13 million, US$ 240.49

ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 47

 ICMAP

Estd. 1951
Other Features

SBP: Mid-Year Performance Review (MPR) of Banking Sector

T he State Bank of Pakistan has issued the Mid-Year

Performance Review (MPR) of the Banking Sector for
the calendar year 2019 (CY19). The review
comprehensively covers the performance and soundness of the
banking sector. According to the review, the performance of the
banking sector remained satisfactory, despite challenging
macroeconomic environment. Banking sector maintained its
growth trajectory with asset expansion of 5.3 percent during
H1CY19 (Year-on-Year (YoY): 7.9 percent), primarily funded
by deposits that witnessed the highest growth since H1CY16.
There was some deceleration in growth in advances a
consequence of economic slowdown. Investments grew
marginally and banks exhibited renewed interest in long-term
government securities i.e. Pakistan Investment Bonds (PIBs).
The overall risk profile of the banking sector remained robust.
Though the asset quality moderated, the earnings of the banking
sector improved owing to increase in Net Interest Income (NII).
Resultantly, all profitability indicators showed improvement.
The Capital Adequacy Ratio (CAR) at 16.1 percent was well
above the local and international minimum benchmarks of 11.9
percent and 10.5 percent, respectively. The review also includes
the results of the 4th wave of SBP's Systemic Risk Survey,
which represents the views of the market participants. The
report is accessible at URL: http://www.sbp.org.pk/
publications/HPR/H1CY19.pdf

Developing of Gwadar Port as a Duty-Free Port

P
akistan is taking initiative to
develop Gwadar Port in
Balochistan as a duty-free port
with free economic zone on the lines of
UAE's Dubai. The government led by
Prime Minister Imran Khan plans to
provide exemptions from income tax, sales tax and custom
duties to the Gwadar Port for 20 years. The Economic
Coordination Committee (ECC) has approved a proposal for
amendments to various laws that would provide exemptions
from income tax, sales tax and custom duties to the Gwadar Port
for 20 years, until 2039. The proposal in this regard was
submitted by Ministry of Maritime Affairs and sought changes
in the country's tax laws in line with the concession agreement
between the Gwadar Port Authority and China Overseas Ports
Holding Company Pakistan. The ECC has asked the Law
ministry for a legal way out in order to provide a legal cover for
the amendments. The initiative will benefit those who intend to
set up industries in Gwadar and would also lead to boost in
business activities in Gwadar.

IMF releases Flagship Surveys - WEO and REO

T he International Monetary Fund (IMF) has recently

released its two flagship surveys namely the 'World
Economic Outlook (WEO)' and the 'Regional Economic
Outlook (REO) Updates for 2019.
World Economic Outlook (WEO) presents
IMF staff economists' analyses of global
economic developments during the near and
medium-term. WEO's October 2019 issue
has pointed out that the downside risks to
global economy have increased, which
meant that the forecast for growth in world
output for 2019 and 2020 has been reduced from IMF's July
2019 WEO update by 0.2% and 0.1%, respectively, to 3% for
2019 and 3.4% for 2020.
Regional Economic Outlook
(REO) Update for 2019 for all
global regions has identified
Pakistan as a country where
internally 'social tensions are
rising in the context of lower
growth and reform fatigue,
threatening macroeconomic

stability'. The Report

indicates that Pakistan's
growth would slow down
from 5.2 percent in 2018 to
2.9 percent in 2019 which is
lower, in turn, from the
projections of WEO at 3.3
percent. The Report further
says that Pakistan's reliance
on remittances could be
negatively affected by
overall global downturn
affecting elsewhere in the
region.

48 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019

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 ICMAP

Other Features Estd. 1951

R EGULATORY W ATCH
By Research and Publications Department, ICMA Pakistan

FBR: Tax returns filed per day in 2019 increased by 127pc

T he Chairman FBR, Mr.

Shabbar Zaidi, has disclosed
that the total number of income
tax returns filed in 2019 till October 25
stood at 918,027, as against 585,209 tax returns filed in the
The status of returns filed is as under as reported by PRAL.

Return 2019 Status

Filed Up To 20-Oct 788,389
same period last year. He further stated that the tax returns per
Filed on 21-Oct 22,016
day had risen by a whopping 127 percent as compared to last
Filed on 22-Oct 26,125
year. These details were shared by the Chairman FBR in his 25,619
Filed on 23-Oct
Twitter post (given below) Filed on 24-Oct 30,471
Filed on 25-Oct 9pm 25,407
Total Returns-2019 filed so far 918,027
Returns-2018 filed YTD 585,209

From November 1, 2019 strict enforcement Difference with 2018 YTD (Ahead) 332,818
will be made against unauthorized interaction 2019 Average Returns filed per Day 18,735.24
between FBR staff and business community. 2018 YTD Average Returns filed per Day 8,242.38
Business community is suggested to report to Average Increase in per day filing 127%
FBR in any person contact through any
manner without proper authorisation. No
harassment.

The FBR chairman further informed in a Tweet message that w.e.f.

November 1, 2019 strict enforcement will be made against
unauthorized interaction between FBR staff and business
community. He said that the business community is suggested to report to FBR if any person contacts them through any manner
without proper authorization.

FBR: Urdu website of FBR launched

T he Federal Board of Revenue (FBR) has launched the Urdu version of its
website in order to facilitate the taxpayers. The launching was made by Mr.
Shabbar Zaidi, Chairman FBR. The Urdu website offers online facilitation
and services to taxpayers about Income Tax, Sales Tax, Customs and FBR
Maloomaat. It also contains special features including useful reservoir of
information relating to taxation and customs. With the launch of Urdu website, the
people cannot only file their complaints in Urdu but can also seek responses of their
queries in national language. The URL link of the FBR Urdu website is
http://urdu.fbr.gov.pk/

FBR: RSTMC established to identify fake and flying invoices

T he Federal Board of Revenue (FBR) has established a

Regional Sales Tax Monitoring Cell (RSTMC) to
identify the cases involved in fake and flying invoices,
fake transactions and sales suppression. This decision has been
taken by FBR in view of decline in sales tax payments during
first quarter of FY 2019-20. Mr. Jafar Raza Kazmi,
Commissioner IR, Zone-IV Karachi has been appointed as the
head of the RSTMC. The Cell will be monitoring monthly sales
tax returns to identify cases where action under Section 38 of the
Sales Tax Act, 1990 is required to be taken on the basis of
abnormalities, causing huge decline in sales tax payment etc.
The Cell will also prepare desk audit report, showing details of
records/data scrutinized, discrepancies observed and potential
revenue involved. The cell can take action under section 38 of
Sales Tax Act, 1990 against the person as per law and submit
detailed report with impact of revenue to the Chief
Commissioner IR, CRO, Karachi.

ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 49

 ICMAP

Estd. 1951
Other Features

FBR: Extension in Date of Filing of Income Tax Return for Tax Year 2019

T he Federal Board of Revenue

(FBR) vide its circular dated
31st October 2019, has
extended the date of filing of income
tax returns/Statements for the Tax
Year 2019 upto 30th November 2019
for both individuals and Associations
of Persons (AOP) as well as for
Companies. The last extension in date
of filing ITR was given by FBR upto
30th October 2019.

SECP: Amendments in Credit Rating Companies Regulations, 2016

T he Securities and Exchange Commission of Pakistan

(SECP) has introduced amendments in the Credit Rating
Companies Regulations 2016 in order to provide a more
conducive regulatory regime for Credit Rating Companies.
To provide ease of doing business and reduce cost of business,
the SECP has abolished the requirements for disengagement
period of two years for private ratings; submission of annual
accounts of associated concerns and obtaining documents
relating to default status of associated concern; submission of
industry specific studies, additional copies of application,
updated resume, and dissemination of financial statements of
CRCs on website.
To reduce cost of doing business, the SECP has waived fee to be
paid at the time of permission and renewal of license; and
reduced the fee at the time of grant of license from Rs 1,000,000 have also been allowed to outsource their internal audit and
to Rs 100,000. To encourage new professional entrants with compliance functions to independent chartered accountants'
extensive research experience, individuals have been allowed to firms.
hold 40% of shareholding of Credit Rating Company. CRCs

SECP: Adjudication Department created in SECP

T he Securities and Exchange Policy Board has approved

the creation of a centralized Adjudication Division
which would be a quasi-judicial arm of the Commission
and be entrusted the responsibility for its entire adjudication
work pertaining all regulated entities and persons instead of the
various departments/divisions within the Commission. The
centralization of adjudication would likely enhance the
effectiveness of the Commission, ensure fair and consistent
decisions, and minimize any creeping risk of arbitrariness in the
discharge of its judicial function.
existing practice of adjudication being carried out separately by

SECP: Amendments in Future Brokers (L&O) Regulations 2018

T he Securities and Exchange Commission of Pakistan

(SECP) has notified amendments in the Futures
Brokers (Licensing & Operations) Regulations, 2018 in
order to bring business efficiency, remove regulatory
impediments and create a more pro-growth regulatory regime
for the futures brokers.
The primary amendments include introduction of requirement to
submit an undertaking at the time of renewal evidencing
compliance with regulatory requirements instead of submitting
detailed documents relating to education, financial standing,
sponsors and directors, etc. SECP has eliminated the obligation
to maintain net capital balance of Rs 5million since risk is
managed through cash margins in futures trading. Moreover, the
sponsors are only required to submit a tax certificate from
auditor as evidence of their net worth. The requirement for CEO
to hold a postgraduate degree has also been relaxed in lieu of
possession of at least 7 years' senior management experience. A
grace period of 30 days has been allowed to the broker to rectify
non-compliance relating to financial resources requirement. The
notification and amended copy of the Regulations are available
on SECP website: www.secp.gov.pk

50 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019

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 ICMAP

Other Features Estd. 1951

SECTOR BRIEF
Sugar
Sector
By Research and Publications Department, ICMA Pakistan
Historical Background: Molasses are also being used in the production of sweetened
products e.g. chocolates.
At the time of independence, there were only two sugar factories
in the country and to meet shortfall sugar was being imported Sugarcane production:
from abroad. In 1961, the first sugar mill was established at The sugarcane production in Pakistan during 2017-18 stood at
Tando Muhammad Khan in Sindh Province. By 1980, there 83.3 million tons which shows an increase of 15.9 million tons
were 35 sugar mills in the country capable of providing one from 2013-14. The area under cultivation also increased from
million tons of sugar. By 1990, ten more sugar mills were 1.172 million hectares in 2013-14 to 1.341 million hectares in
installed which raised the production capacity to two million 2017-18. The sugarcane utilization by mills remained limited to
tons. Population and per capita increase always kept the demand 65.6 million tons in 2017-18.
high and number of sugar mills increased to 89 in 2018.
Sugarcane Production [Last 5 years]
Current Scenario: Year Area Production Yield Tons/
Today there are 89 functional sugar mills in the country, out of Hectares Tons Hectare
which 44 are located in Punjab; 38 in Sindh and 7 in KPK 2017-18 1,340,926 83,289,340 62.11
provinces. The sugar industry provides direct and indirect
2016-17 1,216,894 75,450,620 62.00
employment to 75,000 people, including management experts,
technologists, engineers, financial experts, skilled, semi-skilled 2015-16 1,130,820 65,450,704 57.88
and unskilled workers. Sugarcane cultivation provides partial 2014-15 1,113,161 62,794,827 56.41
and seasonal employment to around 3.9 million people which is 2013-14 1,171,687 67,427,975 57.55
approx. 12.14 percent of total agricultural labor force. The sugar Source: Pakistan Sugar Mills Association (PSMA) Annual Report 2018
industry contributes around Rs. 22 billion to the Government
exchequer. Sugar production:
Sugarcane and its by-products: Sugar sector constitutes 4.2 per cent of manufacturing. The
Sugarcane is a major Kharif crop of Pakistan and primary sugar production during 2017-18 stood at 6.576 million tons as
contributor to sugar mills. Sugarcane cultivation starts from compared to 7 million tons last year. With a carryover stock
February and extends till April whereas harvesting is done inventory of 1.974 million tons from the preceding year, the total
between October-December Among the provinces, Punjab availability of sugar was 8.591 million tons, including beet
accounts for 65 percent of sugarcane area; Sindh 25 percent, and sugar of 40,922 tons. This quantity was almost surplus of 3.391
KPK 10 percent. There is a small sugar beet industry in the million tons after defraying domestic requirement of about 5.2
higher elevations of KPK Province. If we compare globally, million tons.
Pakistan stands as the world's 5th largest sugarcane grower. Sugar Production [Last 5 years]
Brazil stands on top, followed by India, Thailand and China.
Year Cane Crushing Sugar Production Recovery
The by-products of sugarcane are utilized in many other Tons Tons Ratio
industries for production of different products such as 'bagasse' 2017-18 65,615,550 6,576,534 10.02
is used in paper and chip board industry; 'press mud' is used as a
2016-17 70,989,946 7,005,678 9.87
rich source of organic fertilizer for crop production. Besides,
'molasses' and its by-product alcohol are widely use 2015-16 50,024,249 5,082,110 10.16
domestically in industries such as food, herbal medicine, paints 2014-15 50,795,218 5,139,566 10.12
and varnishes, cosmetics, paper glazing and leather polishing, 2013-14 56,460,524 5,587,568 9.90
livestock feed, industrial alcohol and tobacco blending. Source: Pakistan Sugar Mills Association (PSMA) Annual Report 2018

ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 51

 ICMAP

Estd. 1951
Other Features
World Scenario: The per capita consumption of refined sugar in Pakistan was
Pakistan is 8th largest producer of sugar as well as 8th largest estimated at 25.65 kg in FY 2017-18.
sugar consumer in the world. Similarly, Pakistan is also the 7th
Exports of Sugar and Molasses:
largest net exporter of sugar in the world.
The World Top 10 list indicates that Brazil is the largest sugar Pakistan exports of sugar increased to 1.47 million tons valued at
producer as well as sugar exporter whereas India is the largest Rs. 56.38 million from 0.31 million tons valued at Rs. 16.87
sugar consumer in the world. The following table depicts the million in 2016-17. Similarly, exports of molasses also showed
rankings of countries: increase from 0.17 million tons in 2017-18 from 0.10 million
tons in 2016-17.
WORLD TOP 10
Sugar Producers, Consumers and Exporters Exports of Sugar and Molasses
(Figures in million metric tons, tel quel) from Pakistan (Last 5 years)
Ranking Largest Sugar Largest Sugar Largest Sugar (Quantity in Million Metric Ton: Value in Million Rupees)
Producers Consumers Net Exporters
1 Brazil (38.10) India (24.52) Brazil (28.70) Export of Sugar Export of Molasses
2 India (22.45) EU-28 (18.00) Thailand (6.94) Year Quantity Value Quantity Value
3 EU-28 (17.52) China (16.09) Australia (3.84)
2017-18 1.47 56.38 0.17 2.11
4 Thailand (10.78) Brazil (10.92) Guatemala (1.84)
5 China (9.31) USA (10.09) Cuba (1.12) 2016-17 0.31 16.87 0.10 1.22
6 USA (7.51) Indonesia (6.75) Mexico (1.04) 2015-16 0.29 13.82 0.07 0.87
7 Russian Fed. (6.59) Russian Fed (5.80) Pakistan (0.62)
2014-15 0.71 32.69 0.08 1.01
8 Pakistan (6.55) Pakistan (5.07) Ukraine (0.60)
9 Mexico (6.05) Mexico (4.44) eSwatini (0.51) 2013-14 0.65 29.64 0.20 2.51
10 Australia (4.48) Egypt (3.60) Colombia (0.51) Source: Pakistan Sugar Mills Association (PSMA) Annual Report 2018

SWOT Analysis of Sugar Industry

STRENGTHS
 Second largest industry in Pakistan after textiles sector
 Ideal temperature for sugarcane cultivation.
 Multipurpose domestic uses of sugarcane by-products
 Earning foreign exchange through export of molasses
 A highly tax-compliant industry as sugarcane price is
fixed by government
WEAKNESSES
 Low per hectare yield [44 tons] of sugarcane as against world average of 60
tons/hectare.
 Low Sucrose contents [10% to 11%] in sugarcane as against world average of
14% to 24%.
 Low production quality of sugarcane due to low level of sucrose contents.
 Lack of modern farming techniques, including mechanization as adopted in other
countries.
 Farmers limited financial capability of investing in modern technology. Lack of
high-yielding varieties of sugarcane
 Cartelization in industry due to political affiliations of millers
 A lower crushing capacity of small sugar millers

OPPORTUNITIES THREATS
 Setting up of new distilleries can increase ethanol  Water shortage is a threat as sugarcane production is mainly dependent upon
production in Pakistan water.
 Rising cost of energy can lead to increased use of  High increase in support prices of sugarcane leading to closure of sugar mills due
bio-fuel to losses
 Increasing petrol prices offer chances of increase  Minimum Support Price is linked with weight and not quality, leading to low
use of ethanol quality of sugarcane
 Sugar mills can utilize molasses to meet energy  Decline in sugarcane cultivation area by 10% as farmers have moved towards
cost and generate power other crops.
 Growing population is an opportunity for  Sugar mills operating at below 70% capacity leading to sugar crisis in the country'
development of sugar industry.
 Increase in Gur manufacturing from raw cane especially in KPK leading to
decline in sugar production

52 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019

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 ICMAP

Other Features Estd. 1951

Management
Accounting Terms
Activity reduction Decreasing the time and resources required by an activity.
A committee responsible for setting budgetary policies and goals, reviewing and approving
Budget committee the budget, and resolving any differences that man arise in the budgetary process.
Common-size financial Financial statements prepared in terms of percentages of a base amount.
statements
The cost of salaries, wages, and fringe benefits for personnel who work directly on the
Direct labor cost manufactured products.

Expected value The sum of the possible values for a random variable, each weighted by its probability.
Fixed overhead spending The difference between actual fixed overhead and applied fixed overhead.
variance
The degree of association between Y and X (cost and activity). It is measured by how
Goodness of fit much of the total variability in Y is explained by X.

Horizontal analysis An analysis of the year-to-year change in each financial statement item.

Material that either are required for the production process to occur but do not become an integral
Indirect material part of the finished product, or are consumed in production but are insignificant in cost.
Just-In-Time (JIT) A demand-pull system whose objective is to eliminate waste by producing a product only
manufacturing when it is needed and only in the quantities demanded by customers.

Kaizen standard An interim standard that reflects the planned improvement for a coming period.

An approach that identifies the environmental consequences of a product through its entire
Life cycle assessment life cycle and then searches for opportunities to obtain environmental improvements.

Marginal revenue curve A graph of the relationship between the change in total revenue and the quantity sold.

Non-financial measures Measures expensed in non-monetary units.

The use of fixed costs to extract higher percentage changes in profits as sales activity
Operating Leverage changes. Leverage is achieved by increasing fixed costs while lowering variable costs.
A process that provides critical and responsive service to customers after the product or
Post-sales service process service has been delivered.

Qualitative Characteristics Factors in a decision analysis that cannot be expressed easily in numerical terms.

Return on investment (ROI) The ratio of operating income to average operating assets.

Relevant costing analysis that focuses on whether a product should be processed beyond
Sell or process further the split-off point.

Total preventive Maintenance A program of preventive maintenance that has zero machine failures as its standard.

Usage (efficiency) variance The difference between standard quantities and actual quantities multiplied by standard price.

An analysis of the relationship among various financial items on a particular financial

Vertical analysis statement. Generally presented in terms of common-size financial statement.
The life cycle cost of a product plus costs that consumer incur, including operation,
Whole-life cost support, maintenance, and disposal.
An alternative approach to budgeting in which the prior year’s budgeted level is not taken
Zero based budgeting for granted. Instead, the existing operations are analyzed, and continuance of the activity
or operation must be justified on the basis of its need or usefulness to the organization.
The complete book on Glossary of Management Accounting Terms is available on link: https://www.icmap.com.pk/News_Pdf/Final_Glossy.pdf

ICMA Pakistan’s Management Accountant, Sep-Oct, 2019 53

 ICMAP

Estd. 1951

I am very pleased to see the latest issue of Management

I very much enjoy the content
that you have published in this
issue. It is a very professional
magazine.
I trust that you and your
colleagues are doing well.
Gary Cokins
Speaker & Author, EPM/CPM
www.garycokins.com
919 720 2718
Cary, North Carolina
Regards,
Accountant. It is full of useful information. I can easily compare it
with the magazines of other international accounting bodies
working in Pakistan whom I am also a member. In fact, ICMA
Pakistan's Journal is probably more beneficial to its members and
readers than the one issued by them. Of course, it is not possible
without colossal efforts from different stakeholders. I would like to
extend my heartiest congratulations to ICMA Pakistan in general
and Research and Publications and IT departments and
Committees in particular for their efforts in producing such a
quality material.
Stay blessed ICMAP.

Muhammad Hammad ur Rehman

Trained Strategist from Harvard (MA, USA)
B.COM, MA (Economics), DAIBP, APA, MBA (MBS, UK), FCCA,FCMA

The March-April issue of Management

Accountant has come out as a treasure
trove of valuable information on
"Institutional Reforms and Governance".
The subject has been dealt from a wide
variety of perspectives and I am sure it
would e a good reference material for
anyone wanting to understand the matter
in Pakistani context. The layout and
presentation is as good as anywhere in
developed countries for which you and your
staff deserve kudos.
Regards,
Syed Mohibullah Shah
Karachi, Pakistan.
Reader's
Comments
We believe that the readers are the best judge to highlight the areas
where improvement in 'Management Accountant Journal' can be
made. The Research and Publications Committee invites your
valuable comments and suggestions on the editorial, articles and
other contents of the Journal. These comments/suggestions will be
published in the Journal on a regular basis.
The Committee reserves the right of editing the comments and
suggestions.
The intellectual and research based inputs may be sent on email:
rp@icmap.com.pk

54 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019

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 ICMAP

ICMA Research & Publications Directorate

Estd. 1951
Pakistan

MA Journal e-Archive / Web Search Engine

Have you written article(s) in any issue(s) of MA Journal during the period from 1961 to 2019 and want to view or
download these articles?
Are you a writer, a student; an academician, a journalist or a researcher and want to access the repository of all articles
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ICMAP

ICMA Research & Publications Directorate

Estd. 1951
Pakistan

Other Publications of
Research and Publications Department
Students' e-Magazine Official Newsletter Authors' Directory Budget Proposals Booklet

The official flagship Journal of ICMA Pakistan

MANAGEMENT
ACCOUNTANT
ICMA Pakistan’s
AUTHORS’ DIRECTORY Fiscal Budget
2018 Proposals 2019-20
[A listing with brief profiles of Authors’ who contributed articles in the bi-monthly
Management Accountant Journal of ICMA Pakistan during the year 2018]

Encouraging the Authors while motivating others to be the next

I.C.M.A.P.

ICMAP

Estd. 1951
Estd. 1951

Published by:
Research and Publications Department
Institute of Cost and Management Accountants of Pakistan
Institute of Cost and Management Accountants of Pakistan
 National Council
2018-2020

Office Bearers
President Vice President Honorary Secretary Honorary Treasurer

Zia ul Mustafa, FCMA Abdul Wasey Khan, FCMA Shehzad Ahmed Malik, FCMA Muhammad Yasin, FCMA
CFO & Business Administrator Group Director Internal Audit Chief Executive Officer Chief Financial Officer
Pakistan Expo Center (Pvt) Ltd FAV Group of Companies Shehzad Malik Management Jamshoro Joint Venture Ltd,
Consultants (Pvt) Ltd Associated Group

Members Government Nominees

Mohammad Iqbal Ghori, FCMA Abid Lateef Lodhi, FCMA Sumaira K. Aslam Iram Anjum Khan
Director Strategic Planning CEO, Central Power Purchasing Additional Secretary Cost Deputy Auditor General (Policy)
Sadaqat Ltd Agency Guarantee Ltd, Accounting Wing, Finance Division Auditor General of Pakistan
Ministry of Energy, Govt. of Pakistan Government of Pakistan

Ather Saleem Ch, FCMA Ghulam Mustafa, FCMA Jameel Ahmad, FCMA Tahir Mahmood , FCMA
Member Chief Executive Officer Deputy Governor Commissioner, Securities
Anti-dumping Appellate Tribunal Tariq Qazi Management State Bank of Pakistan and Exchange Commission
Consultant of Pakistan (SECP)

Executive Director

Aamir Ijaz Khan, FCMA

56 ICMA Pakistan’s Management Accountant, Sep-Oct, 2019

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