Since the US and the EU economies are under
tremendous pressure, not much could be expected.
By SHABBIR H.
Oct15 - 21, 2001
While soliciting suopprt of the GoP in the war
against terrorism, the US and European Union (EU) hinted towards easing
of quota restrictions and lowering of duties on textiles and clothing of
Pakistan origin. Pakistani manufacturers have been anxiously waiting the
formal announcement. However, it appears that probability of
withstanding the promise is diminishing. Many analysts had expressed
their apprehensions even when such indications were given.
To some extent apprehensions of these analysts were
based on the past experience. However, this time it looks even more
difficult for the respective governments to facilitate greater imports
of textile products from Pakistan. It may not be true that these
governments do not wish to fulfil their commitments. The harsh reality
is that with the sudden and substantial drop in consumer spending it may
not be considered advisable for these governments to create further
competition for the local producers of textiles and clothing.
Analysts say that this is not an opinion but a fact.
The outlook for economies of the developed countries has changed
sharply. This change is due to: attacks causing devastating blow to the
financial sector, overall disruption in economic activities, decline in
consumer and business confidence and increase in cost due to security
measures. They also say that full repercussions of the September 11
attacks remains unknown. The sectors adversely affected are airlines,
insurance and banking. All these will have an spillover effect on
manufacturing, retailing and technology sectors.
The September 11 attacks have caused serious jolts to
the US economy which has always been consumption oriented. The fear of
prolonged war in Afghanistan and potential threat of biochemical attacks
on the US has resulted in war syndrome, which they have never
experienced in the past. Added to this is increasing rate of
unemployment. Though, the attacks on Afghanistan was aimed at restoring
the confidence of US citizens, the swift shift in public opinion towards
the US government policies, has become a serious threat. This was
evident from anti-US demonstrations in many countries.
Despite a number of meetings of the US and EU
officials with the GoP representatives from Pakistan, presumably these
governments may not be able to ease quota restrictions and/or reduce
duties. At the best they can increase quota ceilings. This belief is
based on two factors: economies of these countries plunging into further
recession and 2) particularly in case of the EU easing of quota
restrictions was delayed due to toppling of the democratic government in
October 1999. Waiver of these conditions may not be an easy task.
Analysts refer to the recent decision of the US government regarding
withdrawal of economic sanctions on Pakistan. They strongly believe that
these governments face a dilemma. If they had to offer any incentives to
Pakistan, they have to also offer similar facilities to India because
both the countries export similar products to these countries.
Though, the data about Pakistan's export for the
month of September does not indicate any substantial fall in outflow of
textiles and clothing, analysts anticipate significant fall in quantum
in the remaining three months of year 2001. This apprehension is based
on the fact that Pakistani exporters are hardly getting any fresh orders
from the two main buyers. The reduction in quantities is expected
because of two factors: 1) lower demand in importing countries and 2)
fear of delay due to the war in Afghanistan, also affecting working of
the factories located in Pakistan.
Yet another factor potentially holding the decision
in favour of Pakistan is prospects for bumper cotton crop and its lower
prices in the country. These countries apprehend that easing quota
restrictions and lowering of duties may open the flood gates for influx
of textiles and clothing into these countries. They (importing
countries) also anticipate that Pakistani exporters may also slash their
prices in an effort to minimize their losses or to break-even.
At the same time analysts warn about two potential
fallouts: 1) even if the prices are lowered, US importers may not be
keen in placing orders with Pakistani exporters and 2) as a consequence
of deeper recession in the US and the EU Pakistan's exports of textiles
and clothing to other countries may also go down. The products which may
witness substantial decline in quantities exported are 100 per cent
cotton yarn and fabrics and poly-cotton products. However, they indicate
probability of increase in quantum of tents due to influx of large
number of refugees from Afghanistan.
Therefore, these analysts suggest that instead of
waiting for any concessions from importing countries, Pakistani
exporters should explore new markets, improve quality standards and
competitiveness of their products. Cost cutting approach is not the