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The reduction in unit price realization is a source of concern

By SHABBIR H. KAZMI
Dec 03 - 09 , 2001

Pakistan's exports of textiles and clothing have significantly improved, both in terms of quantity and value, for the year 2001 as compared to previous year. However, the real cause of concern is that while there was 12 per cent increase in quantity, value went up by 5.3 per cent indicating reduction in unit price realization. As the deadline for complete phase out of quota regime has been fixed, December 31, 2004, Pakistani exporters must realize that unless they improve quality standards they will not be able to retain their share in the quota free environment.

According to the data available about textiles and clothing export, the adjusted ceilings for the regions (USA, European Union, Canada and Turkey) and utilization in all the categories have improved significantly. Quota utilization in major categories in 11 months is also above the full year level of 2000. However, some sector analysts apprehend that Pakistan may not be able to record such a performance in year 2002 because inflow of new orders have reduced. Contrary to this, other analysts strongly believe that despite an increase in quota ceilings by the European Union, Pakistan will be able to achieve 100 per cent utilization of ceilings of major categories. This statement is based on the recent reduction of tariff on made in Pakistan products by the Union which is expected to improve competitiveness of Pakistani exports and have started yielding results.

MARKET ACCESS IN THE US

Pakistan has requested the US to reduce its tariffs to allow a greater market access to its exporters and enhance textile quota to make up for the loss in exports after September 11. However, action on Pakistan's request is being delayed because of the pending approval of the proposed Trade Promotion Act (TPA) by the Congress. The US administration has expressed its inability to take an affirmative action on it at least till December 6, 2001. The approval of the TPA would give more leverage and authority to the US administration to sign trade agreements with several countries. It must be remembered that TPA is not Pakistan specific. If the Congress rejects it, the US government would have to come up with country specific proposals to help Pakistan.

Some sector analysts are concerned about the delay in announcement by the US government regarding increase in quota ceilings and reduction in tariff rates. They strongly believe that the US may not be able to withstand its commitment — not because it is not willing to honour its words but because of immense pressure from US manufacturers of textiles and clothing. There are indications that as a result of recession in the US, particularly after the September 11 incident, there has been a massive reduction in retail sales. The US gross domestic product shrank 1.1 per cent in the July-September quarter, the biggest dive in a decade. As the manufacturers are already feeling the pinch, they are putting pressure on the US for not allowing greater market access to low cost products from other countries.

OUTLOOK

Bulk of Pakistan's export of textiles and clothing comprise of products falling under quota regime and to the US and the EU. There are indications that utilization is high in main categories. However, issue of reduction in unit price realization has to be addressed. A positive development is that a significant number of textile mills are going through expansion and BMR to achieve higher value addition. Analysts say that quota ceilings is not a constraint. If local exporters go for higher value addition, total proceeds in dollars terms can be improved significantly.

Sector analysts also demand that the GoP must take immediate steps to implement Textile Vision 2005. Implementation of the Vision is a must to combat the challenge posed by other textile exporting countries, particularly India.

An area which needs the joint efforts of Export Promotion Bureau and textile exports is improvement in Pakistan's image. Since the traffic of prospective buyers is expected to remain at the lowest in near terms, trade delegations must be sent on priority basis. However, only reputed manufacturers and exporters should be included in the delegations.

Yet another area which demands attention of exporters is their participation in international textile fairs. Their active participation and display of higher value-added products can also help in improving country's image.

Adjusted Ceiling
(up to November 26, 2001)
(Quantity in million SME)

Region

2001

2000

USA

1,097.30

1,013.97

EU

2,574.02

2,366.08

Canada

57.23

53.31

 

 
Utilization
(up to November 26, 2001)
(Quantity in million SME)

Region

2001

2000

USA

825.43

740.31

EU

1,802.56

1,565.08

Canada

36.80

34.40

 

 
Value
(up to November 26, 2001)
(Million US$)

Region

2001

2000

USA

1,059.12

1,019.74

EU

885.17

821.77

Canada

49.19

45.49