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1- YARN PRICE INCREASES
2- RESULTS: LOCAL COMMERCIAL RAND 
3-
ARIF HABIB INVESTMENT
4- REFORMS IN THE CAPITAL MARKETS
5- RECAPITALIZATION: CHANGING THE FORTUNE OF PROJECTS

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YARN PRICE INCREASES

 

Upward trend all over the world

 

By AMANULLAH BASHAR
Mar 17 - 23, 2003

 

 

Textile exports from Pakistan are likely to cross $6 billion mark at the end of the current financial year provided international trade goes unhurt on account of Iraq war during remaining three months.

So far, the performance of the textile sector is unprecedented in terms of volume while the exports have also got a jump in terms of value in the last quarter of the year. The international prices have registered an upward trend owing to increase in cotton, which has reported a worldwide shortfall in production.

A very little credit, however, goes to the government policies in achieving the outstanding performance, said an active player in textile industry. In fact it was the efforts of the industry, which made higher investment for expansion of the industry in diversified manners. During the last three years, the industry has spent over $1.5 billion from its own resources without any help of the banking sector. Since, development financial institutions have gone out of business, there was no support available for project financing to the industry while the commercial banks are offering for working capital alone.

Textile sources expressed their dismay that the only support the government could provide to the industry was swift arrangement for the timely refunds to avert liquidity crunch, it was unfortunate that the government functionaries failed even to meet that genuine demand. The textile exports are supposed to be zero rated, hence the refunds on the Sales Tax, Income Tax and Withholding tax was the right of the industry yet it is going on at snail's pace so far.

 

 

YARN

There has been an abnormal increase in prices of yarn in the local market which has risked export orders worth millions of dollars obtained by the textile sector in the Heimtextil fair January last.

The export orders booked by Pakistani exporters at the fair were finding themselves in a fix as to how to honor export commitments in the face of increase of raw material that cotton and yarn by at least 25 per cent in the local market.

Spelling out the reasons for increase in yarn prices, sources said that basic factor was the increase in cotton prices due to extended demand and shortfall in the supply.

They said that almost all the cotton producing countries including Pakistan have reported a lower yield against the expectations which naturally helped increasing the cotton prices in the international market. As a result of this short supply the usual prices which remain below 50 cents have jumped to 58 cents in New York futures are likely to go even beyond 60 cents in the days to come.

On the home front while cotton crop is likely to remain around 10 million bales, the consumption of cotton has increased considerably from 9 million bales two years back to around 12.25 million bales this year.

According to reports, the exporters booked some 50 per cent more orders at the fair either may have to bear the loss due to increase in input cost or may opt to default. The last option, however, earns a bad name not only for the exporting company but to the country as well. Sources, however, set aside any possibility of subsidy from the government as reported in a section of the press. "Profit or loss is the part of the business" when the exporters make profits they never share with the government similarly they should enjoy the losses with same spirit, they observed.

As far as the overall textile exports were concerned, the industry is very close to its target as indicted by the export figures of the last 8 months regarding contribution of the textile sector in the total exports of the country is likely to exceed 67 per cent this year despite a pattern of increase in the prices of raw material available within the country.

The unusual increase in prices of raw material such as yarn in the local market is feared to hit the bright prospects for the textile sector. The textile sector has witnessed a boom in investment as well as exports of the textile products ahead of the quota free phase commencing from January 2005.

During first 7 months of the current financial year, the textile industry hit the mark of $4 billion and sure to go beyond $6 billion at the end of the year. It is an unprecedented performance that the exports never fell below $800 million per month during the whole year, said an exporter.

Use of polyester fiber in the textile made ups that has gone up to 50 per cent all around the world while it is hardly 20 per cent in Pakistan. The main reason for comparatively lesser use of man-made fiber in Pakistan is undue protection provided to the local polyester industry by the government. As a result of this protection to local polyester industry, the textile industry has to pay at 25 per cent more, which may be the reason for stagnant growth of use of man-made fiber in Pakistan.

It is in the interest of the country that instead of protecting the multinational companies producing polyester fiber, an even playing field should be given to the textile industry, the mainstay of the economy.