The Operation of the Export Bonus Scheme in Pakistan’s Jute and Cotton Industries

The author’s intention is essentially to extend the Bruton and Bose study of the Pakistan Export Bonus Scheme [1], in terms of both time and commodity. However, in this paper we examine the operation of the scheme in jute and cotton industries only. In our next paper, which is now in process, we take up the other industries covered in [1] and also a few more. Very briefly, the scheme works in the following way1. The exporter of a “bonus commodity” surrenders his foreign exchange earnings to the State Bank of Pakistan and receives, in addition to the rupee equivalent, a voucher that entitles its owner to purchase foreign exchange equal in value to 20 or 30 per cent (depen¬ding on the commodity exported) of the amount earned. The voucher can be utilised for obtaining foreign exchange for use in a) importing a wide range of goods, b) business travels and c) opening and maintaining commercial offices abroad. Vouchers are issued for all goods except raw jute, raw cotton, hides and skins, raw wool and rice. The voucher is freely transferable, and its price (which is commonly known as the premium) is determined by the market. Imports permissible under bonus vouchers include a large number of items—both capital and consumer goods.