Excessive SRO Usage hinders Progress

Pakistan is notorious for the excessive usage of Statutory Regulatory Orders (SROs). These SROs are issued with the aim of incentivizing the disadvantaged business groups and improving the performance of the economy. In order to assess the impact of these SROs on the economy, Policy Research Institute of Market Economy (PRIME) recently launched a study ‘How Intimately SROs and Development in the Textile Sector Related?’

According to the study Federal Board of Revenue (FBR) under the Customs Act 1969 has the power to issue SROs at its discretion and as many as 4,500 SROs have been issued so far. Furthermore textile sector is among the top beneficiaries of these SROs. Based on the data it can be said that in the textile industry since 2006 the number of SROs released increased dramatically guised as a tool for improving standards and share of textile exports. In order to increase the performance of the sector and exports majority of textile mills get exemptions on import of textile machinery from custom-duty.

This research indicates that despite the tall claims of using SROs to stimulate textile sector exports since 2009 the share of exports from textile sector has not seen a major change it still is within the range of 55 percent. Furthermore FBR registered FIRs against giant textile units for misusing SROs claiming a loss of Rs. 6 Billion to the revenues (under invoicing, fake evidences).

According to the study despite the best of intentions these SROs are treated with suspicion by the business community. The chambers of commerce and other bodies like All Pakistan Textile Mills Association have expressed their reservations on the extensive usage of SROs.

Therefore it can be said that the SROs have failed to fulfill the underlying purpose of their usage which was supporting sick industries and stimulating exports. Now they have become a tool used to provide benefits to influential groups and businesses. This increased reliance on SROs to reward favorites and penalize others has hampered the growth of the various sectors, encouraged rent seeking culture, deterred foreign investment and on the whole rendered Pakistani businessmen inefficient to compete in the international markets.

For Media Inquiries:

Ali Salman, Executive Director, PRIME (Cell: 0301 845 1179)

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