Pakistan Business Council warns of consequences if export facilitation scheme revoked

Pakistan’s business leaders are urging the government to maintain the Export Facilitation Scheme (EFS), warning that its revocation could cripple the country’s export sector, lead to mass unemployment, and exacerbate the economic crisis.

In a letter addressed to key federal ministers, the Pakistan Business Council (PBC) described the EFS as a “lifeline” for the country’s value-added export industry.

The scheme allows manufacturers to import high-quality raw materials without upfront taxes, enabling them to compete globally and earn foreign exchange.

The PBC cautioned that ending the scheme would have “devastating consequences,” including a loss of export competitiveness, declining foreign exchange earnings, and a widening current account deficit.

“Revoking the EFS is not an option—it is economic suicide,” said Ehsan A. Malik, CEO of the Pakistan Business Council, in the letter dated March 7, 2025.

“The scheme is the backbone of our value-added export sector, and dismantling it would leave Pakistan vulnerable to growing trade imbalances.”

The PBC highlighted that Pakistan’s competitors, including Vietnam, Bangladesh, India, and several African nations, have successfully implemented similar schemes to boost their export sectors.

For instance, Vietnam’s duty-free import policies have helped it become a textile and apparel powerhouse, with exports exceeding $44 billion in 2023. Similarly, Bangladesh’s ‘Back-to-Back Letter of Credit system’ has fueled its rise as the world’s second-largest textile exporter after China.

The council acknowledged concerns raised by the domestic spinning industry, which alleges that some exporters are illegally diverting imported yarn into the local market without paying sales tax.

However, the PBC argued that the issue lies in enforcement failures by customs authorities and the Federal Board of Revenue (FBR), rather than the EFS itself.

Instead of revoking the EFS, the PBC recommended strengthening oversight through blockchain technology, digital invoicing, and mandatory audit trails to ensure accountability. It also called for harsh penalties for companies found guilty of misuse.

The PBC warned that revoking the EFS would force Pakistani exporters to rely on lower-quality, higher-cost domestic raw materials, making them uncompetitive in global markets.

This, in turn, would lead to a decline in foreign exchange earnings, mass unemployment, and a higher current account deficit. The government’s target of achieving $60 billion in exports within three years would also be at risk, the council said.

The PBC’s letter comes at a critical time for Pakistan’s economy, which is grappling with a trade deficit and dwindling foreign exchange reserves. The council urged the government to focus on enhancing enforcement measures and supporting legitimate exporters, rather than dismantling a policy it described as a “proven success.”