Family-dominated and subsidy-addicted businesses that have diversified towards trading from core industrial activity in recent years found Rs2 trillion budget 2009 proposals, presented in the national assembly on Wednesday, harsh offering much less than what is required to energise investors in a big way.

There are meek signals of a shift in the government policy reflected in the first budget of the coalition government. The thrust of the policy, in contrast to the earlier focus on trade, has moved towards the commodity producing manufacturing and agriculture sectors. There are a number of measures announced to facilitate the industrial revival and check the process of de-industrialisation.

The budget envisages upward revision of duties in specific sectors such as sewing machines to promote the local industry. There are number of suggestions to reduce the tariff on raw material used by industry under stress of rising costs, loosing competitive edge in globalised market place.

The reduction in tariff on raw material imports by the local pharmaceutical industry that is not produced locally, has been reduced from 10 to five per cent.

There is a proposal to allow zero-rated export of samples by exporters. Duty on polyester fibre used by the textile sector has been reduced by half. Special incentives have also been announced to encourage agro-based industry such as tax exemption in industrial set-ups outside urban areas.

Above everything else, the government has guaranteed uninterrupted energy supply round the clock to the textile sector and 18 hours to certain other industries to save them of losses incurred because of electricity outages.

Most of the business leaders in Karachi, have expressed disappointment, frustration and anger on being heaped upon with what they perceived “unbearable burden of taxation and levies” in the federal budget 2008-09. They were particularly critical of an across the board increase in general sales tax rate from 15 to 16 per cent that, they said, will push up production cost.

They feared that rising inflation would more than neutralise the relief provided to the poor and middle classes in form of cash transfers and increase in salary. The domestic demand that has fallen drastically in a number of consumer items and durables may depress further, taking steam out of the already slowing growth momentum.

Mr Tanveer Sheikh, President Federation of Pakistan Chamber of Commerce and industry (FPCCI) was particularly critical of retaining 35 per cent margin on imports and possible discontinuation of research and development subsidy on textile export as budget is silent on these issues.

Iqbal Ibrahim, Chairman All Pakistan Textile Mills Association (APTMA), however, acknowledged the change in the government policy and termed it positive. “For long we have floundered opportunities by supporting manufacturers of other countries by allowing them free access in our market at the cost of the domestic industry. The policy led to initiation of highly dangerous process of de-industrialisation that led to low job creation, a primary reason for scores of social problems confronting Pakistan”, he told Dawn over telephone from Lahore.

”An investor would invest in sectors with better promise of returns at minimum risk. The policy framework during Shaukat Aziz era favoured trading over industry so the capital diverted away from industry. This added to the vulnerability of the economy to exogenous shocks”, the textile tycoon said.

He advocated the need for a long- term strategy of industrial development with private sector involvement. “I think we need to realise that times have changed and government is not in a position to dole out favours. We need to tighten our belts and prove to the world that we have all it takes to surmount challenges”, he said.

Another textile tycoon from Punjab unwilling to own his remarks said that the government accommodated most of our demands by guaranteeing uninterrupted electricity supplies, providing better cotton crop so that raw material can be secured locally, controlling multiple deficits to bring the inflation down. Now he said it is industry’s turn to prove its worth by posting record gains in total turnover and productivity,

One of the key areas where the government did not do anything visible is increasing demand of trained manpower to manage our projects.

Qaisar Waheed, President Pakistan Pharmaceutical Manufacturers Association saw incentives for the drug industry to be cosmetic. The increase in duty on raw material produced locally and sales tax will more than neutralise the impact of savings made on import of raw material that is not produced locally on half the rates. “If they wanted to support the growing drug industry they should have given concessions on packaging material”.

He gave a long wish list that he felt could boost the total quality turnover and accelerate the pace of advance in the industry.

Eijaz Sheikh, President All Pakistan Cement Manufacturers Association bitterly criticised the government for deviating from their commitment to phase out excise duty from cement that cannot be treated like other consumer items for its role in the construction industry. “The excise duty was reduced from Rs1000 to Rs750 per ton four years back on the understanding that it would be phased out gradually. In the current budget, the industry that has a high potential of export in a cement deficient region has been burdened with additional Rs200 excise duty to reach Rs950 mark that would blunt the competitive edge for the sector”.

He also criticised levies on builders and developers that in his view would slacken the expansion in the construction activity that has strong backward and forward linkages and absorbs unskilled manpower in a country where a large chunk of population is still illiterate.