GROWING TEXTILE EXPORTS

 

Large-scale fresh investment and BMR yield positive results


By SHABBIR H. KAZMI
Nov 10 - 16, 2003

The review of exports of textiles and clothing indicates three important emerging trends, i.e. increase in quantities, total value and improvement in unit price realization. However, news about damage of cotton crop and potential short fall in indigenous production, increase in international and domestic prices of cotton should be a cause of concern. There is an urgent need for defining the future strategy, in consultation with all the stakeholders, to maintain Pakistan's share in global trade of textiles and clothing.

During financial year 2002-03 Pakistan achieved the record export of over US$ 11 billion. Out of this the largest percentage or US$ 7.5 billion was earned from export of textiles and clothing. The four product groups joined one billion club. These were Fabrics ($1.4 billion) Readymade garments ($1.1 billion), Knitwear ($1.1 billion) and bed linen ($1.3 billion). Though there was marginal decline in export of yarn, still it was around US$ 976 million. Out of the total export of textiles and clothing from Pakistan a substantial volume falls under the textile quota regime.

The Textile Directorate of Export Promotion Bureau maintains textile quota utilization data according to calendar year, whereas Federal Bureau of Statistics publishes data according to financial year (July-June). Therefore, it is often not easy for analysts to give comments on emerging trends in textile trade. However, effort has been made to compare the data for full year 2001 and 2002 and nine months of year 2002 and 2003.

For the year 2001, Pakistan had a ceiling of 4,01.04 million SME (square meter equivalent). The country shipped 3,047 million SME showing an average utilization at 74.32%. The ceiling was enhanced to 4,646.31 million SME for the year 2002. The shipments were made to the tune of 3,499.08 million SME and utilization rate improved to 75.31%. In other words there was 13.30% increase in ceiling. In terms of quantity exported the increase was 14.81% but the increase in total value was only 9.19%.

A closer look at nine months data for year 2002 and 2003 reveals some interesting facts. Ceiling for the full year has been raised from 4,646.31 million SME to 4,921.14 million SME. The quantity shipped during nine months period increased from 2,477.34 SME to 2,885.12 SME. The average quota utilization improved from 53.32% for 2002 to 58.63% for the year 2003. The striking feature is that while total quantity increased by 16.46% the increase in terms of total value was by 24.36%. This should be a sign of some relief for those who have been expressing apprehensions about the readiness of Pakistan's textile industry to face free trade in textile once textile quota regime is completely phases out on December 31, 2004.

One may wonder why Pakistan has not been able to increase its export of textiles and clothing despite greater market access. The reason is that the country has mostly benefited from enhanced quantities in fast moving categories. In some of the categories the utilization has always been low and the increase in ceiling was of hardly any consequence.

OUTLOOK

Keeping in view the domestic as well as global shortfall in cotton production the GoP must take two immediate steps 1) ban the export of cotton and cotton yarn up to 20 counts, 2) impose quantitative restriction on export of yarn up to 30 counts. These steps can ensure greater availability of yarn in the domestic market. Such restrictions have been imposed in the past to facilitate export of higher value-added products.

To avoid steep escalation of cotton prices the spinners should not indulge in panic buying of cotton. It is feared that some of the ginning factories are holding the phutti in the hope of getting higher price at this juncture. However, even if the production is around 10.5 million bales, spinners will have to import cotton. They must place orders immediately, should not wait till last minute. Import will ease the pressure of cotton prices. All those mills, which are capable of producing blended yarn, must try to increase its production to achieve higher capacity utilization.

The exporters should also try to export more of those categories where the utilization has been low. If the local manufacturers can compete with other countries in fast moving categories they should also be able to compete in slow moving categories. It is understood that the task is not easy but why to give up?

QUOTA UTILIZATION 2001
(Quantity in million SME)
(Value in million dollars)

REGION

CEILING

SHIPMENT

VALUE

USA

932.73

786.50

1,110,05

EU

2,639.33

2,064.53

1,001.94

Canada

53.52

42.61

54.11

Turkey

475.46

154.17

43.47

 


 

QUOTA UTILIZATION 2002
(Quantity tin million SME)
(Value in million dollars)

REGION

CEILING

SHIPMENT

VALUE

USA

1.076.05

916.42

1,129.61

EU

3,020.38

2,309.02

1,166.30

Canada

60.89

45.29

50.95

Turkey

488.98

228.34

65.82

 


 

QUOTA UTILIZATION 2003
(January-September)
(Quantity in million SME)
(Value in million dollars)

REGION

CEILING

SHIPMENT

VALUE

USA

1,163.51

636.73

926.34

EU

3,184.99

1,952.43

1.063.75

Canada

70.07

29.58

36.40

Turkey

502.57

266.38

77.59