TEXTILE MINISTRY HAILED

From SHAMIM AHMED RIZVI,
Islamabad

Sep 27 - Oct 03, 2004

Throughout the country, addition of one cabinet portfolio i.e. the ministry of textile is being hailed in the concerned circles as it meets an old outstanding demand of the industry. All Pakistan Textile Mills Association has lauded the creation of 'Textile Ministry' and cited it as the need of the hour. Aptma Chairman Waqar Monnoo said that the Textile Ministry had been an old demand of the Association.

"India, Sri Lanka and Bangladesh have already created separate ministries for the textile sector. Now, the textile sector in Pakistan would be able to resolve the sector's problems and issues with the help of an exclusive ministry, he said adding that the Indian textile ministry co-ordinates and monitors the activities relating to research and development in collaboration with textile associations. It also extends financial support to the associations for undertaking research and development projects, he said, and added that the new ministry in Pakistan would help develop relation between the industry and the government. Presently, the textile related policies and operational decisions are effected at various ministries like ministry of industry and production, ministry of agriculture and ministry of commerce. This has often paralyzed implementation of important decisions in timely manner and many justified proposals and demands of the proposals and demands of the industry went unattended, he said.

Textile industry has developed as the most important industrial sector of Pakistan both from internal and external point of views. This sector showed an expansion of over 35 percent during the last financial year and contributed $ 9 billion in country's total export earning of about 12.5 billion dollars. It still has a tremendous export potential and for that it needs further expansion and development. But at the same time it is faced with new challenges under the coming World Trade Organization (WTO) regime and for promptly dealing with the day to day problems and to undertake short-term and long-term measures to protect and promote the problems of this industry a separate Ministry was highly advisable. Despite the gap between demand and supply of cotton lint, Pakistan's textile industry with the industry's exports climbing to nearly $ 9 billion in fiscal year 2003-04. We can safely say that the overall textile exports may touch a magical mark of $ 10 billion by the end of the current fiscal. As of today, textile companies have exhausted more than 40 percent of the total allotted textile quota for United States said a research analyst.

The analyst believed that this surge in textile exports had beep in the backdrop of increase in industrial activity in the country that had been spurred by the private sector credit demand (Rs 76 billion in nine months to the textile sector). The rates of State Bank of Pakistan (SBP)'s concessionary Export Finance Scheme (EFS) have gone as low as 3 percent from 13 percent (rates prevailing couple of years ago), encouraging textile mills to raise money for working capital requirements. Likewise, textile companies had carried out capacity expansions to face the post WTO challenges. Textile machinery imports had surged in the last nine months to Rs. 370 billion (roughly 4 percent of total import figure and 17 percent of the total machinery import figure).

Although the phased implementation of the agreed framework under the World Trade Organization 9WTO) regime started as early as 1995, its real effect will be felt from January 1, 2005, when most trade barriers will either be removed or significantly reduced.

Among these an important and much talked about non-tariff barrier critical to Pakistan's exports that will be withdrawn relates to textile quotas. While this will represent a big step in making global trade freer, the eventuality of this act is being viewed cautiously by a circumspect set of developing countries with a large textile manufacturing and export sector. Consumers are looking forward to the gains that will accrue from the freer movement of textiles, while some producer countries are awaiting 2005 with a sense of uncertainty for the fierce competitive environment that may result from the dismantling of the quota regime. Pakistan, with textiles contributing 67 percent of total exports and 46 percent of its total manufacturing sector is one such country.

There is an urgent need to assess the fate of Pakistan's textiles once the shift to a non-quota regime has been made. The intense competition that will be generated as a result will require both producers and government to realign and reorient their policies and strategies. Obviously, only the most efficient, dependable, quality conscious and cost competitive manufacturers and exporters will be in a position to reap the benefits of free trade. In acquiring these gains, the Government of Pakistan will have a key role in complementing the efforts of producers by facilitating access to raw materials and in exporting finished goods. This will call for a policy framework in partnership with the private sector on WTO related matters. A detailed policy paper is, therefore, required to set out the contours of such a partnership.

How can we compete with China and India and how can we increase, or even sustain, our present share of 20 to 25 percent in world trade in textiles? What steps can Pakistan take to ensure that it does not lose out in a world in which quotas will no longer be a factor in determining where buyers purchase textile products and or where investors set up production capacities?

Since these are the worries and challenges facing our textile entrepreneur today, both the government and the private sector need to get their act together and identify, based on their present level of preparedness, the additional work needed and the timeframe available to them to turn this lowering of trade barriers to our advantage. These are the formidable challenges for the new minister for textile needing full-time attention.