zaheeruddin dar needs

8/6/2019 Zaheeruddin Dar NEEDS

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National Engineering ExportsDevelopment Strategy

(NEEDS)Presented by:

Mr. Zaheeruddin Dar

Development Analysis & Research Team



NEEDS

� Soul Searching

� Envisioning the Future

� Charting a Road Map� Private Public Partnership



PROPOSALS

1. Marketing

2. Investment & Finance

3. Fiscal & Regulatory Regimes4. Support Organizations

5. Human Resource, Capacity Building &

Technology Up-gradation6. Institutional Framework



Export Houses

� Trading export businesses

� Assist in exports by micro and small manufacturers

� Already existing trading export businesses

� Concept recognition and framework needed to:i. Safeguard manufacturers

ii. Facilitate export houses

iii. Treat export houses at par for fiscal, monetary and other

incentives and schemes



Export Market Studies

� Knowledge of Export Destinations

± General Macro Analysis of the Country

± Logistics Need Analysis

±Product Group/ Category Analysis in the Target Market &Market Analysis

± Fiscal and Regulatory Regime in the Target Market

± Starting a business & developing links in Target Market

�

Product Group/ Category wise studies of TargetMarkets



Trade Fairs, Delegations & Exhibitions

� Participation in Specialized Trade Fairs/Exhibitions

± Marketing

± Exposures ± Global Supply Chain

± Joint Ventures� Govt. Lead Delegations

� Past Experience of Engineering Industry

� EDB to coordinate with Industry & organizeparticipation



Investment Need Analysis

� Total Investment need of US$ 7.5 billion out of

Financial Institutions in 15 years

�

Provision out of LTFF� EXIM Bank

� Venture Capital Fund



Engineering Industry Venture Capital

Fund Management Company

� Investment in ideas, new technologies, new

processes, new products, etc

�

Non availability of funds from banking system� High Yield: High Risk

� International Best Practices

�Targeted Venture Capital Fund

� Regulatory Regime of SECP



EXIM Bank of Pakistan

� Current Commercial Banking System

� Need for a Bank with focus on Exports

� Functions of EXIM Bank ±

Normal Banking Functions for Export Businesses ± Additional Banking Functions for Export Businesses

� Bid Bonds, Performance Guarantees

� Management of special schemes for exports

� Principle Financial Institution for dealing with exports

� Proposal already exists but dormant

� Ministry of Finance and State Bank of Pakistan to facilitateestablishment of Bank



Export Credit Insurance Corporation of

Pakistan

� Securitization of loans from banking sector

� Provision of risk cover against credit, bid

bonds, performance guarantees, etc.� Further insurance related products

� Private Public Partnership



Banking Links in Target Markets

� No direct Banking Links in a large part of potential

markets

� Problems of third party confirmation

� Additional Costs and Delays

� Pakistani Bank Branches in Potential Markets

� Additional National Bank of Pakistan Branches

± Africa 10 ± Americas 5

± Asia 8



Export Refinance

� Inclination of Commercial Banks towards traditionalexport sectors

� Little knowledge and reluctance in Commercial Banksto understand Engineering Industry

� Design of Scheme is not suitable for EngineeringIndustry

� Allocation of minimum share for EngineeringIndustry

� Export Refinance Scheme to be modified to suitEngineering Industry needs



Export Policy Order

� Para 7 of EPO: Exports to Afghanistan and CAR

� Successive changes due to various reasons

�Coherence and possibility of multipleinterpretations

� Rewriting of Para 7



Occupying Domestic Space to Enable

Exports

� Importance of Occupation of Domestic Space toEnable Exports

� Expertise

� Economies of Scale� Customs Exemption Notification 575(I)/2006 and

condition of Not Manufactured Locally

� PPIB and power sector imports PPRA,

� Local Procurement, SRO 827(I)/2001

� Fair competition Level playing field



Income Tax, Federal Excise Duty and Sales Tax

� Levy of withholding Income Tax on Exports @ 1% as Final Liability

� Marginal or no profit due to high entry costs in export markets

� Non traditional exports need to be encouraged

� Rate of Withholding Income Tax may be reduced to 0.5%

� Levy of Federal Excise Duty @ 10% on Franchises

� Designs, Drawings, Technical Assistance, Royalty, etc. included in the wordfranchise

� Goods exported have an in built cost of FE duty on franchise fee. It becomes a taxon exports.

� Theoretically and Legally sales tax on exports is zero rated

� Input Tax paid on raw materials and utilities

� Carry forward and refund of input tax

� Time limits to be prescribed and monitored for grant of refund due to zero ratingon exports



Common Facility Centres, Testing Labs &

Standard Certification, Business Support Centres

� Importance of Common Facility Centres, Test Labs

� Incentivizing CFCs and Test Labs in Private Sector

� High risk, long gestation projects

� Feasibility and business model

� Funding out of EIVCFMC

� Income tax exemption for 10 years

� Capacity needs of Micro and Small Enterprises

� Need of an Institutional Arrangement to Support Micro and SmallEnterprises

� Business Support Centres to be established in clusters of micro and smallenterprises

� Company registered under Section 42 of SECP Laws



Energy Efficiency Audits

� Scarcity of Energy

� Energy as a component in Cost of Production

� Old productive assets and old technologies

consuming more energy� Need for Energy Efficiency Audits

� Role of ENERCON and NPO

� Campaigns to raise awareness

�

Assistance in Energy Efficiency Audits� Assistance in becoming Energy Efficient



Trade Agreements

� FTAs, RTAs, PTAs

� WTO issues and NAMA

� Consultative process

� Opportunities arising out of trade negotiations

� Awareness campaigns to raise understanding

� More direct consultative process

�

Low level of understanding in Engineering Industry



Role of Universities, Colleges,

NAVTEC and TEVTAs

� Academia Industry Linkages

� Curriculum Improvement

� Advisory Council on Engineering Industry needs in NAVTEC and TEVTAs

� Limitations on Government Run System

� Need for private sector to compliment Government Effort

� Need for Incentives

� Initial investment may come out EIVCFMC

� Subsidy by contributing 50% of course fee out of EDS

� Income Tax exemption for first 10 years of operation

� Feasibility and Business Model to be developed by EDB/ NEEDC



Corporatization of Engineering Industry

� Engineering Industry needs to be made aware

of the benefits of corporate structures/

professionally run businesses

� Income Tax Laws to be rationalized to promote

Corporatization

� SECP Laws to be reviewed to reduce

Skepticism in Industry



Engineering Industry Technology

Up- gradation and Acquisition Schemes

� Funding needs may be met out of EIVCFMC.

� Funding needs may be met out through a new

scheme to be announced by SBP on the lines of LTFF

� Government may provide grants for acquisition of

new technologies through a specially constituted

Fund in Ministry of Industries & Production



Engineering Industry Statistical Data

System

� Industrial & trade data needs

± For industry

± For Government

� Current state of data collection

� Industry Associations Role

� Engineering Industry Manufacturers Register



Trade Diplomacy & Trade Missions Abroad

� Functions

� Status

� Administrative Control

�

Roaming Trade Ambassadors (5)� New Trade Missions (17)

� Structure of Trade Missions

� Display Centres

� Database

� Resources

� Training

� Performance Targets



Apex Organization to Coordinate Policies

Relating to Engineering Industry

� Need to create harmony

� Proposals contained in this report

� Coordination of various policy instruments otherwise

falling in domain of separate departments

� Creating synergies

� Organization with a focused approach



National Engineering Exports Development

Council (NEEDC)

� Oversee and Assist in the Implementation of Proposals

� Chaired by Engineering Industry leader

� Membership from Engineering Industry &Govt. Departments

� Secretariat, Administrative and Logistic

Support� Financial Resources



The Vision

A globally integrated Engineering Industry

capable of exporting engineering goods,

services and solutions to the satisfaction of

international market as per norms of quality,

cost and delivery and by doing so provide

engineering back bone to national economy as

its engine of growth.



The Promise

Projected Exports of Engineering Goods (Million US$)

0

2000

4000

6000

8000

10000

12000

2 0 0 8

- 0 9 ( B a

s e Y e a r

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2 0 0 9 - 1

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2 0 1 0 - 1

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2 0 2 0 - 2

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There are two types of workers. One type

would say that give me a job and I would

spend all my life polishing the tools. The other

type would say that give me the tools and I

would finish the job.



Thank You.

zaheeruddin dar needs

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