Industrialists in Pakistan selling assets to repay loans
The government, instead of solving exporters’ problems, has made matters worse by failing to release promised research and development grant, reduce inflation and bank mark-up and has even withheld their small dues.
Exporters are dismayed because they are already under pressure due to global recession. Prices of their products have gone sharply down in the international market while cost of production has risen due to high inflation and bank mark-up.
“Banks are the foremost worry for those manufacturers who have serviced their loans by liquidating their assets during the past one year,” said All Pakistan Textile Mills Association former chairman Abid Farooq.
He said more than half the time of exporters was consumed in satisfying banks. Banks were more aggressive with those who had been making loan repayments on time for more than two decades.
He said most of the industries which met repayment schedules were on the verge of collapse, adding besides rescheduling they needed substantial reduction in bank mark-up to remain competitive.
Leading textile exporter Ejaz Gohar said he had been forced to close his state-of-the-art knitwear factory as he was unable to compete in the global market. He said his spinning and weaving mills were still operative because he was diverting funds from other business ventures to spinning.
A spinning mill of 25,000 spindles costing Rs1,000 million, he said, required to stock cotton worth Rs500 million for consumption throughout the year, adding stocking cotton was essential to ensure uniform quality as same quality of lint could not be assured if the mill chose to buy on monthly or fortnightly basis.
He said it was impossible to pay 20 per cent mark-up on loan and produce competitive products for the export market. He appealed to the government to take cue from competing economies which were facilitating their exporters through various measures.
Pakistan Hosiery Manufacturers Association former chairman Shahzad Azam Khan said after making many promises which in fact were not honoured, Adviser to the Prime Minister on Finance Shaukat Tarin promised in a meeting with the textile sector at the Governor House Punjab that research and development claims of the clothing sector up to June 2008 would be released within a week. However, no progress had been made in that regard even after a passage of two weeks.
“Every day is important for the exporters as they are selling their assets to service high mark-up loans. Billions in this regard have been held up which means a loss of Rs200 million per Rs1 billion held up by the government for almost one year,” he pointed out.
Leading textile exporter MI Khurram said the government had not even been honouring its commitments for facilitation in the trade policy. Two years ago, he said, the government had announced that it would pay back the testing fees paid by the exporters for materials tested by international laboratories.
He said these refunds were to be made from the Export Development Fund which in fact was collected from the exporters. However, no exporter had been reimbursed the amount. He said his firm had until now filed claims worth Rs100 million in that regard while many exporters had stopped filing claims.
The manufacturers have urged the State Bank of Pakistan to cut the mark-up instead of instructing banks to extend credit at current rates which was not commercially feasible.
“These are not normal circumstances. The manufacturers are finding it hard to stay competitive both in the domestic and foreign markets. Bank defaults are on the rise and would continue to increase if banks failed to reduce mark-up and treat those in trouble on the basis of ground reality,” a manufacturer said.
From The News
