LIBERALIZATION OF IMPORTS
LIBERALIZATION OF IMPORTS has become a common term used by the government, the SPPF and those with a vested interest in the current political power structure. The statement that imports have been liberalised is made in the media especially when shortages of essential commodities suddenly appear which, according to the party line should not be possible under a liberalised import regime. In the same breath the same party line blames the merchants for the shortages. This propaganda is designed to make he public believe that the private sector is the main cause of the shortages. Let us look at the reality.
Do we really have a liberalized import regime in
Now let us honestly, as well as openly deal with the role of the commercial banks in this matter. How many Letters of Credit or foreign currencies have been made available by the commercial banks to the private sector importers over the past six months, for example, for the importation of essential commodities? This information continues to be a closely guarded secret even though it is the public that suffers from the shortages the politicians are blaming the merchants for. According to a reliable source only 10% of the importers considered as the top 10 of the country got a few Letters of Credits opened or forex allocation during 2006 for importation of essential commodities. The remaining 90% were completely neglected by the commercial banks. These are the facts. Yet the merchants are being blamed for not importing essential items like sugar, oil, onions etc.
Let us take the statement by the managing director of SMB in the People newspaper that the private sector does not import sunflower oil because of low profit margin on the item. It is strange, that SMB, being not only the largest importer of this commodity but also, for nearly two decades, the only importer, to ignore the fact that under the Trades Tax Act, more precisely under the customs HS CODE 1515, the maximum profit margin allowed is 30%. In his statement to the People newspaper, the Managing Director of SMB was trying to deliberately mislead the public to create sympathy for SMB’s failures – if he actually did make the statement attributed to him.
The fact is, for the private sector to import these essential commodities, it would have to rely on the black market for foreign exchange, since the commercial banks are unable to provide the required allocation. This means that the price it will have to charge the public would be twice as much as what it would have been if the banks had provided the foreign exchange at the official exchange rate. But merchants cannot take the risk of importing at the black market rate, if at any time SMB would bring in supplies based on the official exchange rate from foreign exchange provided to it (on a preferential basis) by the commercial banks and therefore undercutting them on price – which it would inevitably do – unless it ignores the price control and decide to make a killing. Already, those merchants that have taken the risk of importing small quantities of items such as cooking oil or rice, have been accused – by the same politicians - of profiteering because their prices are higher. Those politicians, who are blaming the merchants rather than the failure of the system in place, are indulging in blatant demagoguery. The facts are being hidden from the public because it would be too politically embarrassing.
Perhaps all merchants should adopt a new national anthem - “TOU SA KI MON FER