The investment made by the textile industry over the
last couple of years has started yielding results exhibited by enhanced
exports and improved unit price realization. However, a lot more has to
be done, at a faster pace, to retain Pakistan's share in the global
textiles and clothing trade. Some of the textile tycoons still do not
believe that textile quota regime will be completely phased out at the
end of year 2004. Once the quota regime is over, the importing countries
will no longer be obliged to buy textiles and clothing from Pakistan. If
the local exporters want to retain their share, they will have to
compete with other countries on the basis of their ability to deliver
what the buyers need, meet the quality standards and make timely
shipment. Are they really ready to meet the challenge?
The first and most important factor for achieving
competitiveness is cost optimization. The prime factor for attaining
greater competitiveness is the cost of cotton. This does not necessarily
mean availability of cotton at lower price. Cost optimization has to be
achieved through best use of available cotton, improving production and
productivity at each stage of conversion — from spinning to ultimate
production of finished products. Ideally, the spinners should get
locally produced cotton but if there is a shortfall in supply, they
should make timely arrangements for import of cotton.
The cotton consumption has definitely increased after
the addition of new spinning capacity as well as balancing,
modernization and replacement (BMR). According to industry experts the
spinners need around 12 million bales — about 11.5 million bales of
locally produced cotton and another half a million imported long staple
cotton. It was estimated that the country would be able to produce above
11.5 million bales. However, after the heavy rains, flood in certain
areas and pest attack, the quantum of expected production has been
reduced to around 11 million bales.
Not only that the expected domestic supply has been
reduced, there are apprehensions of shortfall in global supply of
cotton. Therefore, the prices of cotton are expected to be higher during
this year as compared to last year. However, a positive factor is that
the country has ample supply of polyester staple fibre (PSF), The
average capacity utilization of local PSF manufacturers is around 70%.
They are in a position to meet the additional demand. The improvement in
capacity utilization may help in keeping the prices of locally produced
PSF below its international prices.
The prices of locally produced PSF is directly
related to price of crude oil as two of the basic raw materials PTA and
MEG are oil based. The overall consensus is that crude oil prices have
stabilized to a large extent and may witness further reduction.
The movement of crude oil prices would largely be
dependent on accumulation of reserves before the commencement of winter
and uninterrupted oil supply from Iraq. However, analysts are confident
that OPEC will keep on adjusting the production quota to maintain crude
oil prices within its promised band. Ranging from US$ 20-25 per barrel.
Historically Pakistan has been exporting nearly half
of the locally produced yarn. However, the quantity of yarn exported as
a percentage of total yarn produced has been on constant decline. The
obvious reason for this has been the higher offtake of yarn by local
weaving and knitting units. There is also a change in the product mix
— gradual shift to finer counts and higher production of blended yarn.
However, the growing concern is that the country has
not been able to increase the number of shuttle-less and air-jet looms.
Weaving is still largely confined to narrow-gauge power looms mostly
operating in the unorganized sector. Another factor inhibiting
production of superior quality fabrics is inadequate processing
(bleaching, dying and printing) facilities. Though, some of the larger
groups have made their units fully upward integrated but the number can
be counted on the five fingers of a hand.
The GoP needs to address two issues on priority.
These are import of fabrics and arrangement of funds for the
manufacturers of made-ups, both woven and knitted. The policy planners
must follow the policy of Bangladesh. Despite no local production of
cotton, Bangladesh has succeeded in increasing its export of made-ups by
allowing import of fabrics and utilization its manpower for the
production of made-ups.
Globally, production of made-ups is done at smaller
units and Pakistan is no exception. However, making the specialized
financial institutions i.e., SME Bank and Khsuhhali Bank to play a more
active role can only increase availability of funds to these smaller
units. It should also be made mandatory for commercial banks to lend a
specified percentage of their total advances to SMEs without insisting