INCREASE IN TEXTILE EXPORTS
The most disturbing fact is that unit price realization has gone down despite claims of higher value addition by the government and exporters
SHABBIR H. KAZMI
Oct 21 - 27, 2002
During the first quarter of current financial year, Pakistan has registered over 15 per cent increase in exports of textile products as compared to the proceeds realized during the corresponding period of last year. However, some sector analysts believe that the increase is below the expectations because Pakistan now enjoys enhanced market access to the European Union (EU).
Some sector analysts say that an increase of 15 per cent is a remarkable achievement in the prevailing global economic scenario. However, their point of view may not be correct because of two reasons: 1) World Trade Centre was attacked on September 11, 2001 and had hardly any impact on exports for the quarter and 2) the market access for Pakistan for year 2002 is higher than the ceilings available for different products for year 2001.
The data available on export of textile products, falling under quota management reveals some alarming details. However, the most disturbing fact is that unit price realization has gone down despite claims of higher value addition by the government as well the exporters. The increase in terms of total quantity exported is 19.22 per cent, whereas increase in terms of base total ceiling is 12.25 per cent. However, the increase in terms of total value is as low as 6.27 per cent.
A closer look at exports to the US, the EU, Canada and Turkey indicates even more interesting trend. In the US market, there has been a significant increase in quantity exported but the total amount realized has come down, so does the average unit price realization. Contrary to this, there has been increase in quantity, value and unit price realization for the products exported to the EU. There was decline in quantity as well as overall proceeds from Canada. As opposed to the above mentioned two major markets, Turkey witnessed very substantial increase in quantity exported and total proceeds but average unit price realization came down drastically, from as high as US$ 3.16 to as low as US$ 0.29.
Some sector analysts have been saying that neither the government nor the textile manufacturers are giving attention to the quota phase out process. The GoP formulated Textile Vision 2005 way back but was not able to create enabling environment for fresh investment. The industry also made investment in spinning and grossly ignored made-up manufacturing sector. These are the reasons local manufacturers have been forced to bring down unit price realization to enhance quantities.
Some sector analysts had pointed out in the past that to achieve higher export of value-added goods, local manufacturers of textiles and clothing should give more attention to made-ups manufacturing. Pakistan's textile tycoons have failed to capitalize closure of textile made-ups manufacturing facilities in South Asia.
In this context Japan is a perfect case study. Closure of made-ups manufacturing units in Japan started many years ago. Japanese entrepreneurs were keen in forming joint venture with South Eastern countries. While India, Thailand and Sri Lanka, even China, succeeded in attracting Japanese investors/buyers, Pakistan failed completely in attracting the Japanese investors.
It is understood that Japanese investors are once again evaluating Pakistan as possible destination for investment in textiles and clothing business. The beauty of entering into joint venture with Japanese is that it will not only bring the FDI but also induction of new technology. Japan is the manufacturer of state-of-the-art garment manufacturing machines. The added advantage is that these investors, themselves, will be the sole buyers of the made-ups produced at these units.
The GoP must give attention to the US as well as the EU markets. So far, the local manufacturers of textiles and clothing have not been able to take advantage of exceptionally large quota ceiling available to Pakistan. They have been exporting low quality and low price products. Pakistan has the potential to enhance export proceeds by producing better quality made-ups, which can fetch higher price.
Some of the sector analysts say, "We have already wasted a lot of time and only two years are left, after which there will be no quota restriction. Buyers will be free to buy as much quantity as they like from any country. India is far ahead in this race and even Bangladesh and Sri Lanka are eroding Pakistan's market share. If the local manufacturers do not wake up now, it will not be possible for them to retain their market share."
EXPORTS FROM PAKISTAN
(Value in million US dollars)
% Change Yarn 243 240 1.44 Fabrics 318 246 29.53 Garments 269 228 17.54 Knitwear 270 240 9.07 Made-ups 373 308 21.04 Bedware 286 217 31.47