Safeguards imposed on China provide more space for next year

June 06 - 12, 2005

Textile exports projected at US$ 11.16 billion mark for the first time in the history of Pakistan must be the highlight of the financial year 2004-05. Though the textile industry was eyeing for a $15 billion target for 2005-06, it seems modest approach on the part of the high profile textile industry, which has invested over $5 billion in BMR coupled with a bumper cotton crop of 15 million bales besides market appetite in the wake of quota safeguards imposed on China by the United States Administration.

All these positive developments must be provoking to the textile exporters to optimize their export earnings provided they carry a will for an ambitious target for the next financial year.

The textile exporters are expected to gain the most from the US administration's decision to impose `safeguard quotas' on three categories of clothing shipments from China. Despite having a strong presence in textile garments in the EU and the US, the textile suppliers from Pakistan at present are unable to play prominently in these markets mainly due to their handicap of producing exportable surplus on the economy of the scale. It may be pointed out in two of the three items including cotton knit shirts and cotton trousers.

Amazingly, the Chinese competitors including India and Pakistan have already made significant gains after quotas were phased out from January 2005 reflected in impressive textile growth during the current financial year, yet the Chinese exports have recorded a massive 1,005.85 percent growth during the period on the back of their strong manufacturing base as compared to the locally industry working with a low volume of production.

It is learnt that a large number of US buyers and retailers have already begun making enquiries on the capacity of the suppliers elsewhere in this region to ramp up production.

US retailers have been working on developing alternatives to China as a big manufacturing base in this region which essentially bring the textile sectors of India and Pakistan in the limelight of the US market.

In spite of emerging bright scenario, the real handicap is the capacity limitation of the textile sector in Pakistan. According to a report, the entire provinces in China are involved in the production of one or two specialized products, resulting in a mass assembly line production model as compared to lack of production scale in Pakistan.

According to World Trade Organization (WTO) agreement, the member-countries can impose quantitative restrictions in the form of `safeguard quotas' on Chinese imports till 2008 if they can prove that imports from the country are getting `market-disruptive' in nature. The restrictive clause, however, applies only to China because of its late entry into the WTO

In Pakistan, the textile sector was justified to some extent in taking pride to be the leading player contributing over 11 percent in GDP, with exports of Rs450 billion annually and employs over 40 percent of the workforce in the manufacturing sector, yet these achievements do not justify for complacency in any way. The major part of the cake has yet to be shared.

According to APTMA, since October 1999, there is a change in mindset and a tremendous improvement in the relationship between the government and the business community. This sent a signal to the entire government machinery, and now business and government work in the true spirit of public-private partnership. This sense and feeling of working together as partners rather than adversaries is a major shift in paradigm brought about by government.

In the context of value addition, the textile industry has arrived a point where it consumes the entire cotton produced in the country while more often than note it needs to import substantial quantities to meet growing demands.

Today, Pakistan is the largest importers and converter of long staple Pima grade cotton of USA in the world. However, the issue of costly Polyester Staple Fiber continues to be the major concern of the industry. The production of Polyester Staple Fiber in the country has doubled with further capacity expansion already in the pipeline. The industry consumes all of this important raw material produced with in the country and has the potential to double this consumption provided the tariff structure on this product is brought at par with our international competitors.

According to a recent survey of World Textiles, Pakistan, India and China are identified as the three major players in future by international analysts. The analysts also project that of these three countries; Pakistan's textile industry has the best competitive advantage and potential.

The textile today is at crossroads in the future roadmap for Pakistan's textile industry. It may either take a quantum leap to become a major player in global textile trade or become part of a group of averages. Strong signals, however, there on the back of strong will to take advantage of the opportunities available in the global economic scenario.