DECLINING BEDLINEN EXPORTS
The government must look into and remove the factors eroding competitiveness of local exporters
SHABBIR H. KAZMI, Special Correspondent
June 18 - 24, 2007
After having achieved exports of US$ 2 billion in 2005-06, exporters of bed linen set a target of US$ 2.3 billion for the current financial year. However, keeping in view of the export proceeds realized during July-May period this year, amounting to US$ 1.8 billion, achieving the target seems almost impossible. As the GoP has to make effort to achieve 2007-08 export target, it is imperative that problems being faced by the bed linen exporters should be resolved on priority basis.
Exports of bed linen are mainly to the developed countries and Pakistani exporters have been competing with China and India under the textile quota regime. They are still capable of competing with China and India. However, they could not put up any resistance due to rising cost of production and doing business in Pakistan. On top of this due to imposition of anti dumping duty by the European Union, Pakistani exporters are losing their market share.
Anti-dumping duty has been imposed by the European Union on the basis of constructive value, which suggests that Pakistani exporters were exporting their products below cost. Initially, the anti dumping duty was imposed at 13% rate, which has been reduced to 5.3% lately. The issue is not that Pakistani exporters are selling below cost. The real issue is that cost of production in developed countries is higher compared to developing countries. Therefore, the European Union has to restrict imports for protecting the local manufacturers.
As against this the attitude of concerned ministries in Pakistan is a little hostile towards exporters, especially the exporters of value added products. Ironically, the GoP tends to bow down before the pressure of spinners and continues to offer them more and more incentives. It is true that once upon a time, raw cotton, yarn and unprocessed cloth used to the major foreign exchange earners. However, with the passage of time, the share of these products in total textile exports has been on the decline but exporters of these items continue to be the largest beneficiaries of the GoP policies.
"We do not demand incentives but certainly have the right to approach the GoP for resolution of the outstanding issues. The GoP must treat all the groups equally and must abstain from supporting one group at the cost of another group. Since we compete with China and India the GoP policies must offer similar incentives. The GoP should also remove all the irritants, particularly those pushing up cost of production" said Shabbir Ahmed, Chairman, Pakistan Bedwear Exporters Association.
"I agree that the GoP should facilitate growers in getting international prices for locally produced cotton, but manufacturers should also get electricity at competitive rate. We should also be charged interest at rates being offered in China and India. I know that this may not be possible but many issues facing the exporters could be resolved, if we are given patient hearing" added Shabbir.
He went on to say "We can still compete in the global markets but the recent electricity crisis has broken our back. Our industry is labour intensive and long load shedding hours severely affect production of smaller units. Interruption in power supply affect processing and at time the entire lot is rendered un-useable. On top of this productivity and efficiency of workers is affected adding to overall cost of production."
Shabbir also pointed a budget anomaly created in the Federal Budget 2007-08, wherein the rate of deduction of withholding tax on yarn has been reduced from 1.5 per cent to one per cent and no reduction of withholding tax has been made and it remains at the level of one per cent for the value added sector.
While strongly protesting over the decision he demand the GoP should abolish tax deduction on export of bed linen and other made-ups. He also pointed out that prices of dyes and chemicals have already increased due to the levy of one per cent surcharge on imports, which would increase overheads of exporters.
According to Economic Survey the less than satisfactory export performance of textile sector can be attributed to a number of factors. These include 1) inability to compete with China, India and Bangladesh, 2) Anti dumping duty on bed linen, 3) Contaminated cotton and 4) Rise in price of prima cotton (genetically modified cotton imported from the USA and an important input for producing higher quality bed wear and fabrics).
It is generally argued that Pakistan's exporters often fail in withstanding their commitments with reference to terms of contracted quality and delivery schedule. However, this perception is not correct because some of them have been serving the same client for years.
One of the points of concern is that while Pakistan's competitors have been investing heavily for achieving better quality standards and economies of scale, local manufacturers/exporters are lagging behind. The entrepreneurs have to first analyze the issue and also suggest a solution because government plays the role of a facilitator and provides financial assistance to address short term issues.
Last but not least, bed linen manufacturers must keep it in their minds that dumping allegations and imposition of counter veiling duties would be more frequent because most of the developing countries would use these as a tool to protect their domestic industries.