PAKISTAN TEXTILE OUTLOOK IN THE POST-GUARD REGIME
A new ball game for our economy
May 09 - 15, 2005
Textile sector plays a key role in the economy of Pakistan. The sector accounts for more than two-thirds of annual exports, 40 percent of employment and 9 percent of GDP. Pakistan textile sector has also helped our economy in earning forex in an ample amount. New era of World Trade Organization (WTO) has knocked our door and given us a news of real challenge for our all sector in general and particular for the textile sector. The Post-WTO regime has heated-up competition, opened new avenues for all the countries to make their all-out efforts and beat their rivals in their respective sectors.
TEXTILE-EXPORTS: QUOTA AND NON-QUOTA
The share of quota exports in total rose from 39.2 percent in first quarter of FY-2004 to 44 percent in first quarter of FY-2005. This rise came from higher growth in quota exports to the US and the EU, with the latter having larger share on account of increased exports of cotton fabric to this region. Pakistan enjoys a strong position in bedwear and cotton fabric exports to USA, whereas its share in knitwear exports is gradually improving. In the EU market, knitwear, cotton fabric and bedwear are important export categories. Keeping in view country's current encouraging performance in the major markets of EU and the US, Pakistan is expected to maintain its present status of a large textile and clothing supplier in the international market despite facing tough competition from China and India.
Another opportunity available to Pakistan lies in the relocation of textile manufacturing units from industrial to developing countries in order to take advantage of lower production cost. While Pakistan is world's fourth largest cotton producer after China, the US and India, it can be considered as a country of choice by some of the big foreign textile producers. Realizing this opportunity, government has already announced certain incentives in the trade policy for FY04. Despite these strengths, country's textile sector is also faced with certain issues in the post-liberalization era. As far as non-quota exports are concerned, Pakistan textile minister Mushtaq Cheema has claimed that Pakistan will export $9 billion worth of textile products this year, of which 65 percent will be non-quota exports.
Major markets are mainly United States, European Union (EU), and Gulf region where Pakistan exports most of its textile products. Though, India and China would be the main beneficiaries of quota-free textile trade, Pakistan would out pace them in almost all textile categories produced by its industry. Pakistan's exports to the United States are expecting sharp rise in the coming year, after quotas will have been removed due to strong advantage in specific textile categories over all its competitors.
As analysts are of the view that China takes gold in the post-quota regime, India appears the only likely contender for silver with textile exports expected to grow from $11 billion to $50 billion in the next five years. India will raise its share in the US clothing market from 4 percent to 15 percent backed by hefty investments and capacity enhancements over the last few years. Logically, India is counting on the fact that buyers will surely diversify out of China and they will be the next logical place for western buyers to look.
According to the WTO study China, India and Pakistan will take advantage of the imminent liberalization in textile and apparel trade. These nations will be able to export more products to the EU and the US at lower prices after costs linked to quotas will have been eliminated. Quotas have the same impact as import tariffs. Their effect on US clothing imports from China, India and Pakistan equals to additional tariffs. However, this increase would be at the expense of other countries. According to analysts, Pakistan would corner both China and India in textiles produced by its most efficient and high tech industries.
TEXTILE EXPORTS AND ITS BUYERS
Following are the major textile exports and their buyer countries:
1. Cotton Yarn; 2. Cotton Fabrics; 3. Hosiery; 4. Ready made Garments, and 5. Bedwear.
COTTON YARN: Pakistan's cotton is regarded as the best among varieties of cottons of similar staples grown elsewhere in the world. Pakistan's textile industry enjoys several advantages over those of many other countries as far as the production of quality fabrics and yarn is concerned and is a world leader in the export of cotton yarn, including coarse, medium and fine varieties. Pakistan's leading buyers are Japan, Republic of Korea and Hong Kong.
COTTON FABRICS: Cotton and Cotton products occupy a pivotal position in the economy of Pakistan. Pakistan's textile industry enjoys several advantages over many other countries as far as the production of quality fabrics concerned, which include availability of high-grade locally, produced raw cotton and trained manpower. Cotton Fabrics buyers are USA, Hong Kong and Dubai.
HOSIERY: Hosiery goods exported from Pakistan are known for their fine quality in the world market. Manufacturers follow international sizes and specifications. They also welcome buyer's samples, specifications and designs. For this item the leading buyers are USA, United Kingdom and Germany.
READY MADE GARMENTS: Pakistan produces ready made garments of all pattern and styles, of the latest fashions and quality. The industry is adequately equipped to produces latest fashions to suit tastes and needs in any part of the world. For this segment the buyers are USA, Saudi Arabia and Germany.
BEDWEAR: The bedwear has a distinctive identity. Pakistan manufactures the best quality printed and dyed bed sheets, quilt covers fitted bed sheets, flannelette bed sheets matching pillow covers that are displayed in famous departmental stores in Europe and United States. Exports for bedwear are moving to such quality-conscious markets as France, Germany, Benelux, United Kingdom, Norway, Sweden and the United States.
Anti-Dumping Duty is the intensifying trend in the developed countries (such as Canada, Australia the EU and the US) to impose anti-dumping duties so that they could not only restrict their import levels but also provide couched protection to their domestic industries. As a matter of fact, under the umbrella of WTO an importing country can impose an anti-dumping duty if there is evidence that dumping is occurring and it is hampering the local firms. Since the use of this measure is not always fair, there is a need to make this procedure more transparent. Currently, Pakistan is facing anti-dumping duty on one of its major textile export category i.e. bedwear, that has resulted in a steep fall in country's bedwear exports during Q1-FY05.
In this connection, the textile exporters lament that they would not be able to reap the benefits of the end of quotas owing to high production costs, social compliance and environmental issues, and above all withdrawal of duty concessions in the EU and continuance of the 13.1% anti-dumping duty on Pakistan bedlinen.
Pakistan has to move on this count cautiously and ensure that we fulfill all fundamental requirements of the environmental agreements, the agreement on technical barriers to trade, substantially improve quality of our exports and make our policies and implementation mechanism environment-friendly.
The unbridled and unethical use of spurious pesticides must end. Pakistan should introduce eco-labelling across the board, be prepared to switch over to organic cotton growing and effectively stop the use of hazardous chemicals in the whole range of textiles and clothing.
For us, there is no policy option as 55 percent of our exports are destined to the US and the EU, which have very high health, safety and environment standards.
Social issues such as respect for core labor standards, including child labor's minimum age, would continue to be raised.
As far as buyer specification is concerned it can be either an opportunity or a threat. Because, in post-WTO era all the exporters are getting ready to meet the buyer needs. So, in this situation, Pakistan textile sector has to be very cautious that it must try hard to meet the buyer needs otherwise due to tough competition we could be beaten by our competitors. Thus, we have to be on toes to face the buyer needs and requirements.
Since Pakistan is a partner of United States in combating terrorists, now Pakistan's image is improving. United Sates is continuously rewarding Pakistan with certain incentives. We can't deny that all countries have their strengths and weaknesses. Success depends upon efficient capitalization of strengths and management of weaknesses to provide an honest and positive business image. It is also recognized that image management has to be professionally achieved for best results.
Majority of our exporters are presently weak in the marketing management abilities and the financial/human resources required for aggressive market share enhancement and product and geographical diversification. It is essential that professional and financial help be provided by the government in partnership with the exporters, for aggressive international promotions, distributors and gaining access to new customers and markets.
Businesses in Pakistan do not have a research-based 'business plan' to meet the challenges and opportunities of post quota regime. Even the larger businesses houses have not developed capacity for in-house marketing research. The new world trade order incorporates opening of the markets and therefore will most definitely result in the consumers preference of choosing from countries/suppliers the best quality products at the most economical prices.
By and large our textile industry decision makers have to adopt a very aggressive and dynamic policy of marketing to maintain and increase share of the world trade in all fields of textiles.