Bureaucratic hurdles in exports

LAHORE: Recently a raid on the factory of an apparel exporter by the Federal Board of Revenue (FBR) in the presence of foreign buyers led the leading foreign brand to put on hold all its orders forthwith. Later the exporter was given a clean chit, but the damage was done.

Genuine exporters that have survived the economic ups and downs for decades often wonder whether it is the high costs that impact their orders or it is the way the bureaucrats mistreat them. In fact, if we study the general behavior of the bureaucracy, it would be found that the hidden cost of doing business is much higher than the increase in raw material prices and higher power and energy tariffs.

In some cases the bureaucrats cross all lines to almost ruin the exporters by conducting raids at their premises in the presence of foreign buyers, who frequently visit to conduct audits of their suppliers to ensure social and environmental compliance.

Foreign buyers’ particularly major brands before placing orders make sure that their suppliers operate within the law of the land. And if the officials of the revenue agencies raid a supplier’s manufacturing premises with full police force and confiscate all the records and the computers in the presence of foreigners conducting audits, it not only frightens them but also creates doubts about the credentials of the suppliers.

We are all aware of the powerful technology of smartphones that capture the ugly scenes, which are then sent promptly to the principal office of the foreign buyer and perhaps to all regions where the company has a presence. If the video goes viral and reaches other brands too, the supplier’s reputation will be ruined.

This has happened recently in Lahore. The raid was conducted without prior notice, and at a time, when unfortunately foreign agents of a large retail brand were also present. The first reaction of the foreign buyer was to put their orders on hold.

For the last 35 years the company has held an unblemished record in the export business. In the past too, authorities concerned have conducted several detailed audits, and in some cases, asked the company to pay additional taxes.

However, each time the company has sought the court and won the case. No bribes were paid either.

After the recent incident, the FBR officials who carried out the raid have been suspended. But the name of the exporter has been tarnished in the international market.

Many other hurdles are created by the officials that increase the cost of doing business. The custom officials are authorised to check a certain quantity of garments from each export consignment.

During checking they take away a few pieces. The cost of each piece ranges from $30-$150. The buyers do not pay for short supply, which results in loss of foreign exchange.

Automated refunds are delayed for one reason or another, thus landing in the hands of the sales tax staff where those paying speed money are entertained. The bonded warehouse facility provided to the exporters is an excellent step where duty free imported inputs can be kept for over a year. But few exporters avail the facility as FBR staff harasses bond owners by frequently visiting to check the usage.

The exports give a true picture of usage and no audit or check should be conducted if the export invoice confirms exports.

Another high cost that our apparel exporters bear is unusual delay in clearance of their inputs needed for producing apparel. In Bangladesh, exporters face none of these hurdles.

Accessories and other inputs of apparel exporters are cleared within three hours. This gives them a huge advantage over Pakistani apparel exporters.