The present decline in textile industry, among other factors, is mainly due to the increasing cost of doing business in Pakistan.

Nov 20 - 26, 2006

The exports of textile products, the mainstay of the economy, witnessed an across-the-board decline in the two-way trade during the first quarter of 2006-07, causing a serious concern among the industry as well as the economic managers.

It is estimated that steps would have to be taken to reduce input cost, especially of energy and taxes, which are lying heavily on the overall production cost, leaving textile products incompetitive in the international market.

Consequently, the decline in the export of cotton was estimated at 56.16%, cotton fabric 14.61%, readymade garments 7.84%, knitwear garments 10.08%, bedwear 19.06%, towels 4.82%, made-ups and another textile products about 33.54%, while art silk and synthetic textile exports reduced by 24.57%. In the first quarter, the import of textile machinery declined 31% to $145.73 million as against $210 million in the same period last year. Similarly, the total import of the textile machinery for the year 2005-2006 stood at $771.61 million, which is 17% less than the previous year. Import of textile machinery in the year 2004-2005 amounted to $928.60 million.


It was expected that once quota restrictions will abolish, Pakistani textile exports will significantly increase. Textile industry has also invested more than $ 5 billion under BMR to meet the challenges of quota-free competition. Initially, the textile exports increased, but finally our regional competitors like India, China and Bangladesh significantly increased their exports and market share, as a result Pakistan's textile exports for the first quarter (July-September 2006) registered a decrease of 10.33%.

In fact, the actual overall decline in textile is about 13.43% with over $1.9 billion exports in September 2005 dropping to over $ 1.65 billion in September 2006, but due to increase in the export of cotton yarn, the overall decline dropped to 10.33% which is mainly due to decline in exports of fabric and value-added items. I would like to share some statistics indicating that the new investment planning in textile sector is diminishing.

Giving an overview of the textile sector, Dr. Mirza Ikhtiar Baig said that he was positive with pragmatic approach, "but the present critical situation has forced me to express my concern on this present declining trend in textile exports, its reasons and solutions to overcome it". He says if we do not achieve our export target for the current year, this will further increase our trade deficit to alarming level. Only last year, we had $ 12 billion trade deficit. The burgeoning trade deficit jumped to $4.053 billion during July- September 2006 from $2.912 billion of last year which turned Pakistan's current account negative at $2.654 billion, depicting an increase of $1.066 billion, or more than 67 percent, over $1.588 billion of corresponding period of last fiscal year.

During a meeting in Karachi with President Gen. Pervaiz Musharraf, Baig requested him to pursue US to give us free market access for our textile products, which will give a quantum jump to our exports. "I told President that we are the front-line state with them in war against terrorism and need job creation and exports to reduce our trade deficit and to uplift our economy." America has already given free market access (FTA) to Morocco, Jordan, Kenya, and Bahrain whereas they have not sacrificed like us. Gen. Pervaiz Musharraf agreed to his point of view and said America is allowing us Special Opportunity Zones (SOZs) which will allow duty-free export of goods to US market of the goods manufactured in those Special Opportunity Zones.

He apprised Gen. Musharraf that these zones are required to be setup near Afghanistan's border or earthquake-affected areas where there is no infrastructure, skilled manpower and necessary facilities and it will take long time to develop textile manufacturing units. President Musharraf said that marble and granite could be good option for exploring these Special Opportunity Zones.

The closing down of the textile mills also added to the unemployment rate in the country as textile sector is the largest single sector of our economy, contributing more than 60% of our export, providing 38% employment, having 46% share in the manufacturing sector which contributes about 11% share in GDP.

It is imperative that the government takes immediate remedial measures before we lose our market share to China, India and Bangladesh. The present decline in textile is mainly due to the increasing cost of doing business in Pakistan, the higher mark-up rates, non-adjustment of currency exchange rates, non-availability of technical staff, higher production cost due to many hidden indirect taxes like 1.25% withholding tax on exports (at source deduction).