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EU markets have a great attraction for Pakistani textile products

From KHALID BUTT, Lahore
Oct 17 - 23, 2005

The government is considering to hire the services of two reputed firms by the end of this month for lobbing access of textile products to European Union markets, besides resolving the pending issues to this effect, it is reliably learnt.

Sources told The PAGE that these firms would propose for taking appropriate measures in achieving market access and help settle the issues like anti-dumping duties on Pakistani bed-linen in EU markets. Pakistani textile exporters are paying 100 million dollars per annum on the export of bed-linen to European Union markets in terms of custom and anti-dumping duties in quota free regime.

The EU markets have a great attraction for Pakistani textile products and textile exporters have to compete with their counterparts in China, India, Sri Lanka, and Bangladesh.

Sources said that the 13.1 percent anti-dumping and 12 percent custom duties put a heavy burden on bed linen exports to EU markets and it was a conspiracy on EU side to deprive the Pakistan products from reaching big markets. European Union is the principal market for Pakistan's bed linen exports with a market size of over $500 million per annum, however, 100 million dollars are being paid against the WTO rules.

The Ministry of Commerce officials said Pakistan's bed linen exports have traditionally enjoyed entry into the EU market at EU/GSP preferential tariffs under general arrangements and in 2002 nearly all the manufactured goods, except yarns and fabrics, in the textile sector and whole of the leather sector were granted full duty exemption by virtue of recognizing Pakistan as a drug combating country.

Pakistani exporters of bed wear contested the anti-dumping proceedings against Pakistani bed linen at every stage but it did not result in bringing any relief to them. On the other side, India is enjoying an advantage of over 15.58 percent in duties over Pakistani textile exports to European markets in the quota-free era that began in January 2005, industry sources said.

If the government did not take any action in this regard, it would be difficult to achieve the set target of 17 billion dollars for the financial year 2005-06," the sources added. Under the European Union's Generalized System of Preferences (GPS), Sri Lanka and Bangladesh enjoy zero import duty for their exports to EU. The Pakistani textile sector does not enjoy this benefit but apparel exports continue to benefit from this. India has to face a 9.6 per cent import tariff and contributes 21.5 per cent of EU's textile imports. The post quota period (January-July, 2005) saw Chinese exports gain the most. They grew by 110 per cent compared to last year, while India's grew by 35 per cent, Sri Lanka 14 per cent, Pakistan 12 per cent and Bangladesh 26 per cent. The growth in India's fabric sector is just 1 per cent compared to China's 47 per cent and Pakistan's 12 per cent. The only remarkable thing for India has been its yarn exports growing by 300 per cent. According to exporters, out of the $13 billion worth of textile exports, apparel constitutes 50 per cent but the "various lobbies in the industry are moving in cross-direction". The apparel industry, which is less capital intensive, can employ 12 million workforce at present; the sector employs 7 million people with 4 million directly employed in the industry. Elaborating on the need for greater exports, they said, "If we export 1 kg of cotton, we get $1.20 but if we export 1 Kg of cotton apparel we get $12." Dismissing the projection of the Textile Ministry that India will increase its exports to $50 billion by 2010, the experts said, "It can be $30-35 billion." For this the industry requires an investment of Rs 50,000 crore which means every major player has to double his capacities. He suggested that the government must usher in FDI in this sector to achieve this target. The various infrastructure bottlenecks like poor road and ports and high cost of power has impaired the growth of the industry.


The Privatization Commission is likely to hold bidding of Pakistan State Oil in the month of December this year, it is reliably learnt.

The PSO is the largest state-run oil company in the country and also a listed entity at bourses. The PC Board had recently approved the pre-qualification of seven bidders, out of 11 who submitted statement of qualification, for Pakistan State Oil Company Limited (PSO) privatization and the names of the bidders are being kept confidential due to reasons best known to PC officials.

A total of 15 companies submitted Expressions of Interest (EOIs) for the PSO privatization, out of which the PC board has pre-qualified seven bidders. It was learnt that the bidders, pre-qualified for the strategic sale of the company, had been asked to complete the due diligence process as soon as possible so that the bidding could be arranged in December, a senior PC official told PAGE.

The pre-bid conference and bidding date for PSO would be decided soon after the bidding of Pakistan Petroleum Limited (PPL), expected any time next month. The Board of the Privatization Commission and the Cabinet Committee on Privatization had already approved the strategic sale of PSO and PPL by December this year, said the official.

The process of privatization of PSO and PPL might slow down during the holy month of Ramazan, but during recent meetings Federal Minister for Privatization and Investment Dr Hafeez Sheikh has directed the PC officials, financial advisers and bidders to line up the bidding of PPL and PSO in November and December, respectively.

The Federal Government holds approximately 54 per cent stake in Pakistan State Oil Company Limited (PSO), including both direct holdings of the Federal Government and indirect holdings through GOP owned institutions. The government intends to divest 51 per cent shares in PSO to a strategic investor along with management control.

JP Morgan had been working as the Financial Advisor for the privatization of PSO. The PC had invited Expressions of Interest for the strategic sale of PSO in January this year. The last date for submission of Statement of Qualifications by all interested parties was April 15, 2005. The Commission earlier indicated June 2005 deadline for holding bidding for PSO, but the date was extended to December 2005, as the required process could not be completed. PSO is the largest oil marketing company in Pakistan, engaged in storage, distribution and marketing of petroleum products, liquid petroleum gas, compressed natural gas and petrochemicals.

As on June 2004, the company has more than 3,800 retail outlets with 60 per cent market share in POL products. PSO's storage capacity is 860,000 metric tons, which is 81 per cent of the national storage capacity.

The operating profit of the company has gone up from 4 billion rupees in FY-01 to 6.09 billion in FY-04. Its profit after tax also has surged from 2.25 billion in FY-01 to 4.21 billion in FY-04 and the base of assets enlarged from 30.13 billion to 42.40 billion during this period. PSO is one of the most favorite scrips at stock market in Pakistan. On Tuesday its share closed at Rs 410.


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