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Sunday January 26, 2025

Govt urged to ease tax burden on raw materials’ import

By Mehtab Haider
July 29, 2017

ISLAMABAD: A key player in Pakistan’s diaper industry asked the government to reduce tax burden on import of raw materials and rather increase taxes on finished products in order to promote localisation.

“We have invested over $18 million to establish a local manufacturing facility in Pakistan for manufacturing baby diapers,” Haroon Rashid, general manager at Ontex Pakistan told journalists during their visit to the company’s plant located at Port Qasim Industrial area in Karachi early this week. Ontex Pakistan (Pvt) Ltd was established in 2011.

“If government policies remain favourable for further investment we are exploring markets in Gulf, Afghanistan and other countries for exporting our products,” said Rashid.  Ontex, an international brand with manufacturing operation in more than 18 countries including Pakistan from last five years, produced baby diapers known as Canbebe and other products, invited journalists from Islamabad and Lahore as well as from Karachi at its plant site.

Flanked by Ameen Jan, management advisor and consultant of Ontex, Rashid said they are quite optimistic that Pakistan’s industry could boost exports on the back of China-Pakistan Economic Corridor.

They installed three imported machines and produced around 180 million diapers last year. The fourth machine, they said, could be installed after exploring export markets in different parts of the world.

Furthermore, Ontex remains optimistic about Pakistan and sees the country as a hub for its future investment in manufacturing in order to serve Pakistani consumers and exports to regional markets, they added.

In 2016 alone, Ontex has paid almost Rs1 billion to national exchequer in shape of taxes. In the first half of 2017, the company has contributed more than Rs600 million in taxes. 

“With favourable circumstances, we believe our future tax contribution can enhance significantly,” Rashid said. “By investing in technology transfer and local manufacturing at international quality levels, Ontex exemplifies the type of foreign direct investment that Pakistan can most benefit from.”

He said tax incentives should be considered for export-oriented manufacturers. Duties on imports of finished products should not be reduced, which would create a disincentive for shifting manufacturing to Pakistan and would contribute to the country’s already large and growing export gap, he added.

“We urge policymakers to focus on reducing duties on import of raw materials, machinery and technology instead of finished goods, and to actively promote a “made in Pakistan” brand,” Rashid said.

Ontex’s more than 200 employees are trained by master trainers from Germany and other parts of the world.  Pakistan’s large population and growing consumer understanding of the benefits of hygienic products for babies offer a large potential consumer base for diapers, said the company’s official.

In order to take advantage of the potential demand growth in Pakistan, foreign investors that have established manufacturing operations in Pakistan should be supported by the government through incentives, such as reduction in custom duties for raw materials and machinery. 

The diapers market in Pakistan is growing at a rapid pace with mainstream segment contributing approximately 60 percent and tier 2 (discounted) segment roughly 40 percent of market share by value. The discounted diapers segment includes mainly low quality imported diapers, which have largely displaced local Pakistani manufacturers.

Ontex brand is available in more than 110 countries. It has manufacturing sites across Europe, North Africa, Asia Pacific and Americas.