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Textile sector needs hi-tech

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Rs 333 billion have allocated for this purpose

May 08 - 21, 2000

The textile industry in Pakistan is poised to achieve $4.8 billion exports at the end of June this fiscal.

This was stated by Mohsin Aziz, Chairman of All Pakistan Textile Mills Association at his recent visit to Karachi Press Club with an objective to seek media cooperation in building up image of the textile industry. The target of $9 billion for the current fiscal set by the government in the budget is however well in sight this year. He said that the textile industry, which contributes over 65 per cent of the total exports, has the potential to multiply foreign exchange earnings provided it is supported by the firm government policies. Mohsin Aziz accompanied by leading textile industrialists said that the industry could not cross the barrier of $5 billion mainly because of frequent changes in the policies. He said that consistency in policies is a pre-requisite for economic growth in Pakistan. He cited the example of investment outflow from Korea diverted to other regional countries instead of Pakistan due to inconsistent policies plus bureaucratic hurdles which proved counter productive for achieving investment targets in this country.

Meanwhile the government in order to help the textile industry to overcome its financial constraints has decided to allow working capital and BMR requirements to the textile industry at a mark up rate of 14 per cent. Instructions in this regard have already been conveyed to the banks to extend all possible cooperation to the textile industry. Earlier the industry was getting this facility at 15-17 per cent.

According to APTMA Chairman, the textile industry needs about $400 million for BMR. Import of over $300 million textile machinery has already been made. The industry was in need of BMR for the last three to four years but due to financial constraints and huge defaults, the banks were reluctant to provide capital to the textile industry. It is generally felt that stagnation in the textile industry due to lack of BMR the modernization process has been stalled.

Realizing the present state of the industry, the present team of the economic managers have chalked out a plan to allocate an amount of Rs333 billion so that the textile sector could be equipped with hi-tech with the sole purpose to make it competitive in the world market. The financial aspects of this textile plan is already under discussion between the Ministry of Commerce and the State Bank of Pakistan (SBP).

Razak Dawood, the minister for commerce has indicated that under the draft proposal named 'textile vision 2005' the country would have to spend billions of dollars to upgrade and expand its textile industry which was the only way of increasing export earnings in a short period of time.

The government is also working on a textile policy to provide a road map to the textile industry to achieve the desired goal of $13.8 billion exports. According to Commerce Minister Razak Dawood, in order to enable the textile sector to hit a target of $13.8 billion a year, export policy will be implemented in three phases i.e. low road, middle road and the high road. This textile policy is being evolved in the face of the challenges ahead of phasing out of textile quotas by year 2004 under WTO rules.

The textile policy suggests to open market allowing innovative and dynamic and free flow of ideas through global integration and open competitiveness. The minister also indicated that after the textile policy is announced, the quota distribution policy would also be framed for long term period, which can be for year 2001-2003. The quota distribution system will be redesigned in such a way to prepare the industry for the year 2004 and will be fully equipped to exploit the opportunities created by the MFA phase out. It is however doubtful that textile quota would be totally eliminated by 2004 under WTO rules. It is generally believed that in case of free global trade China will be controlling the US textile market and the US would not like monopoly of the market by any country. Hence the textile quota is likely to prevail, said an exporter. The textile quota provides a sort of protection even to substandard quality textile products. Removal of quota will mean that only the fittest will survive with quality competitive products.

The Commerce Minister who recently visited APTMA office sounded a note of warning for APTMA members that in order to face the challenges ahead with phasing out of textile quotas given under MFA, the textile industry would have to change its concept of easy going by producing course and medium count yarn. The commerce minister cited the example of China which is at top of the textile exporting countries with a prestigious exports figure of $39 billion while India which is 5th in rank exporting textiles worth $9 billion, while Pakistan comes to 8 with an exports of around $5 billion.

One of the major step the government is considering to take to enhance value addition in the textile products is to do away with the export financing on yarn and gray cloth. The value-added products like bed-wear and ready-made garments would however continue to enjoy this facility.