The decision had already been taken, in principle, by the ‘Daily Economic Monitoring Committee’ (DEMC) on August 28, but the Economic Co-ordination Committee (ECC) of the Cabinet in its next meeting will accord ex post facto approval.

The committee had turned down a proposal for setting up of Investment Support Fund (ISF) under which 5 percent of interest on loans obtained for textile machinery and equipment would be reimbursed from July 1, 2007, for five years, by the government. Also, tax credit facility at the rate of 20 percent may be given on investment under ISF. Giving the background, sources said that the Ministry of Textile Industry had submitted a summary to ECC for R&D support for textiles and clothing industry, which was considered on August 26, 2008.

The ECC decided that all ministries and stakeholders should be invited to discuss these issues in detail in the Daily Economic Monitoring Committee (DEMC), before bringing it to the ECC for decision. In accordance with the ECC decision, a summary regarding support for textiles and clothing Industry was discussed in DEMC’s meeting on August 28, 2008 and following decisions were taken:-

a). State Bank of Pakistan (SBP) to condone the delay in filing claims for first six months and allow reimbursement of 3 percent interest to textile beneficiaries (spinning) with date extension beyond 30-6-2008 for which expenditure is estimated at Rs 750 million. The facility may also be extended till June 30, 2009.

b). Disbursement of R&D support to textile and clothing exporters for shipments made till June 30, 2008 covering claims filed within 90 days thereafter.

c). The R&D support may be converted into ‘drawback’ and extended for one year only to those garment units having at least in-house cutting and stitching facilities. Expenditure on the scheme during 2008-09 will be Rs l2 billion for which funds may be allocated by the Finance Ministry and SBP. Exports from EPZs will not be eligible. R&D will be completely eliminated from next year.

d). SBP will be requested to instruct commercial banks to provide the facility of moratorium on loans on case to case basis. Sources said that SBP allows 180 days for utilising Export Refinance (part-Il) and the claims previously were to be submitted within 90 days after the realisation of export proceeds.

According to exporters, delay in taking decisions to cover shipments made till June 30, 2008 has already taken about 60 days (after 30 June ) and they may not be able to claim their right if the anomaly is not rectified. The ministry has proposed that R&D support may be disbursed to textile and clothing exporters for shipments made till June, 2008 covering claims filed within 180 days thereafter instead of 90 days.

“We have approved a total package of Rs 12 billion as Research and Development (R&D) support for the textile and garment sectors. Now it is the responsibility of the Textile Ministry to calculate percentage of R&D in consultation with stakeholders,” said one of the officials of the Finance Ministry.