The government has yet to come up with any substantial measure of providing incentive for the textile sector

From KHALID BUTT, Lahore
May 15 - May 21, 2006

The Indian government aimed at building up a world-class infrastructure for exports, however, the Pakistani government, on the contrary, has left the local textile industry to its own to find their own way to survive, said a group of local industrials traveled back from India, Bangladesh and Sri Lanka

These entrepreneurs pointed out that the Indian government had provided industry-friendly export facilities to their industry. They said that those government had extended benefits extended in shape of a concessional duties and taxes regime with low rates of taxes, were engaged in the inherent capacity build-up of its industry, particularly the textile and clothing sector.

They said that the Indian government is providing Rs. 20 crore under Textile Centre Infrastructure Development Scheme (TCIDS) to modernize infrastructural facilities at major textile centers.

Similarly, they said, the Duty Drawback Scheme is there to reduce the burden of indirect taxes on exports and all taxes and levies are factored in to ensure zero rate regime.

Among these schemes include the Apparel Parks for Exports (APE) Scheme, Textile Centre Infrastructure Development Scheme (TCIDS), Duty Drawback Scheme, Human Resource Development, Construction of Apparel International Mart, Setting up of modern laboratories and the presence of The EXIM bank of India.

They said that the EXIM Bank of India had different export capability creation programs numbering about 20 that focus on creating and enhancing the export capability of different manufacturing units, that range from Lending Programs for Export Oriented Units to provision of Long Term Working Capital.

These export capability creation programs give an idea of the concerted and coordinated planning and action that is being undertaken by India to enhance its export capability, they said.

They pointed out that under t he Apparel Parks for Exports (APE) Scheme, the Indian government provides grant of up to Rs.17 crore per apparel park for infrastructure work, training and common facilities. The 1st Apparel Park was inaugurated on 9th January 2005 at New Tirupur. The Park has created 5,000 additional employment opportunities and is acting as one stop shop for international buyers.

The government has planned twelve Apparel Park projects at an estimated cost of Rs. 433 crore and five such projects to be completed by the end of current year, which would create additional employment for 2,50,000 people.

Attention is paid to Human Resource Development and institutes like National Institute of Fashion Technology (NIFT) are imparting training to meet the growing needs of apparel industry.

According to them, the Apparel Export Promotion Council in India has constructed an Apparel International Mart (AIM. This would provide a world-class facility to the apparel exporters to showcase their products and will serve as one stop shop for reputed international buyers.

The Ministry of Textiles has assisted the Textile Committee in setting up of modern textile laboratories to ensure that the textiles exported from the country meet all international environmental standards.

The EXIM bank of India with chief aim of financing is facilitating and promoting of foreign trade of India, coordinates the working of different institutions engaged in financing exports and imports, particularly those imports that are required for export of finished goods.

The government has yet to come up with any substantial measure of providing incentive for the textile sector despite the fact that India has created Technology Up-gradation Fund Scheme (TUFS) five years back in order to provide subsidized credit to the its industry.

Talking to the PAGE the independent economists and textile experts said that the industry had stopped ordering the foreign suppliers of textile machinery during the last many months following the ever-increasing cost of bank loans. The said that the current interest rates have forced it to stop any more fresh investment in the import of machinery.

They said that the textile industry could not get incentives in the form of reduced cost of loans, Pakistan would fail in achieving the target of raising its share in the international textile export market. They said that the international demand had been expanding at an amazingly rapid rate and is likely to grow in size to $800 billion by 2014 from the present $350 billion.

The industry players said that any complacency on the part of the Pakistani government to support and give an impetus to its otherwise as yet vibrant and to-date self-propelling textile sector would have adverse consequences.

The experts said that the Pakistani textile industry was already operating with heavy odds mainly in the form of over-priced inputs as compared to other countries in the region, which were in competition with it in the international textile market, enabling a level-playing field for this sector. The experts said that was vital to Pakistan's economy in terms of the country's export share and as an employment provider would ensure a place of primacy for Pakistan in international textile trade.

The experts said that a focused and initially a time-bound Pakistani fund on the lines of the Indian TUFS would provide a focal point for further modernization of the Pakistani textile industry through technology up-gradation and also enable capital formation and ensure a strong and competitive textile industry. A determined effort on the part of the government is called for.

The textile industry has invested $5 billion in the last five years. But the rising interest rates had now forced the industry stop fresh investment.

A study conducted by the ministry of commerce revealed that the Pakistani textile industry had an outstanding opportunity for enhancing its share in the global market up to five per cent in 2014 as the size of international market rises to $800 billion in 2014 from the present $350 billion.

However, that cannot be achieved without boosting investments in the industry by offering it credit at a lower cost. "Investment in textile machinery in terms of dollars has reduced by 6.4 per cent this year as compared to last year. If inflation is also adjusted, the decline in investment would be 10-12 per cent," the study says.

Experts said that the situation for the textile industry in Pakistan was going worst as the of the elating interest rate. The Pakistani textile industry players claimed that the only way to make the textile industry viable and competitive in the export market was to reduce the credit cost through the establishment of a fund on the lines of the Indian TUFS, enabling the industry to obtain loans on lower rates and modernize by importing state-of-the-art machinery. The experts said that would also help it in capital formation and make it economically viable and internationally competitive.

The industry players said that the government should come up with any scheme with amplitude in providing for nominal reimbursement of the normal interest charged by the lending agency on rupee term loan.