Expected relief measures missing from budget 2006-07

June 19 - 25, 2006

All Pakistan Textile Manufacturers Association (APTMA) has expressed its disappointment that the Budget did not incorporate any relief measures that the Industry expected eagerly and expectantly to make it viable in the face of regional competitors.

In fact, the members opined, some of the measures proposed in the budget will only add to the cost of production and thereby create further imbalance with respect to the regional countries engaged in textile trade.

An emergent meeting presided over by APTMA Chairman Ahmed Kuli Khan Khattak held in Karachi also took note of the fact that massive investment in Textile Industry was made to meet the challenges of post WTO period despite the absence of any long term Textile Policy of the Government. It was assumed that the Government would share their vision and support them when an occasion so demanded. In contrast, regional countries have defined programs and support for the industry to achieve envisioned economic growth. The apathy shown by the government towards this sector is bound to have negative repercussions to the detriment of the national economy.

The members felt that the government has to act swiftly to remove the factors causing the imbalance in the cost of production in comparison with the regional competitors. Even playing field can only be brought about either through the removal of the incentives offered by the regional countries or offering similar quantum of motivation to the local industry. Then only can the Textile industry, with its capacity to earn foreign exchange and generate employment, remain vibrant and sustainable. Otherwise, some members expressed, there were also fears that defaults with financial institutions would occur if the crisis gets any deeper.

The meeting unanimously called upon the government to take urgent steps that would make our textile products competitive in the world market.

Meanwhile, APTMA has also shown serious concern over the increase of cotton cess from Rs11 to Rs20 per bale, without any visible benefit to industry. APTMA feels that this would neither increase production of cotton nor improve quality of cotton.

The industry strong exception to utilization of 88 percent funds towards salaries and hardly 12 percent is left for Research and Development in cotton quantity and quality, in fact there is no coordinated efforts for research work. At least it is not visible in current production. PCCC must restructure itself with modern research equipments with introduction of young researchers. APTMA urged the government to seek guidance from China, Brazil and even from India to improve production and quality of cotton being produced here. They said that B.T cotton calls for immediate attention, hence it is the need of the time that road map should be drawn in this respect and explain to stakeholders with objects and requirements of the textile industry. Only thereafter proper budget be prepared cotton cess is not a levy it is a contribution towards Research & Development. The industry cannot live only on nature and weather conditions. At least India with similar weather and soil conditions has increased cotton production by 20 percent to 20 million bales whereas our cotton has decreased.

APTMA complained that 90 percent increase in cess will render textile mills more uncompetitive. The cost of doing business will increase further. The industry is already facing host of u productive cess increase, therefore the increase in cotton cess be suspended till review of the entire PCCC working.

The Textile Industry today contributes 11 percent of GDP, with exports of US dollars 8.3 billion annually, and employs over 40 percent of the workforce in the manufacturing sector. It has benefited from its location in Pakistan, from Pakistani raw materials and from Pakistani enterprise. And in turn, it has been the most resilient pillar of this economy.

The impressive growth of textile industry has been predicated upon the continuity of policies followed by the present government. There have been some significant developments that have helped fuel this growth:

*A long-term fall in interest rates
*Strong foreign exchange reserves
*Exchange rate stability
*The removal of Sales Tax on Cotton
*Access to alternative sources of energy
*Aggressive investment and technology up-gradation by industry

It is now even more critical that our critical cost factors: the cost of money, of power and internationally competitive raw material, are maintained, because we foresee the potential for even stronger growth in the next 5 years.

Textile industry in Pakistan blessed with the fourth largest cotton crop in the world and are today converting it more efficiently than ever before. On the average, however, the growth of the industry is more rapid than the more finite growth of the cotton crop, and we have in most years overshot our national production.

However, the cotton consumption by the textile industry estimates in excess of 14 million bales, and could even be significantly higher, allowing for the shift away from expensive polyester.

There are two profit centers between the farmer and the textile mill - the broker and the ginner and the very serious effort of the Government to support the farmer is not as efficient as a result of this unique structure.

APTMA proposes that the Government and the growers together should devise a way to directly support the grower in years where international cotton prices necessitate such intervention.

The current system of TCP intervention is also not in line with the Government's free market policy. It is also evident that the industry's increased consumption leaves little as exportable surplus. The industry feels very strongly that it should, at the very least, be allowed to bid in an open tender for purchase of cotton.