CRISIS OF TEXTILE SECTOR BADLY AFFECTING ECONOMY
Jan 07 - 13, 2008
The post - 2005 era has been witnessing major changes in the textile sector. While in some countries like Bangla Desh, China and India this particular sector is enjoying a boom, in other countries like Pakistan it is going through a major decline. In order to stay and stabilize in the international market, we must ensure that our required textile products are faster to reach the market; they are cheaper and of better quality than any one else in the world.
Before it is too late, immediate steps are required for revival of this sector, which in actual fact means revival of the country's economy. Textile in the past has been playing a vital role in the country's economic growth and even today textile makes more than 64-67 percent of the total exports, contributes 40 percent to the manufacturing sector, employing 38 percent of the total industrial labour force in the country, providing employment to 70 percent of the women workforce and contributing 27 percent towards the industrial value addition.
Mian Zahid Aslam, Chairman Pakistan Textile Exporters' Association requests for a real and genuine focus of the government to resolve the problems of this sector as it is not yet forthcoming, in the light of the new scenario unfolding in the international open competitive trade environment. According to him the government has yet failed to take the required measures to streamline the things. Prices of our textile products were, as a result, uncompetitive because their prices were higher as compared to those of rival countries like India, China and Bangla Desh. The foreign buyers, therefore, diverted to these countries. He emphasized there is an urgent need to search out internal and external factors, which are responsible for downward trend in our exports of textile products.
Pakistan loses its competitive edge in textile as its aforementioned regional competitors are enjoying more incentives, financial support in the form of cash rebate, subsidies, substantial cuts in utilities, concessions in the interest of bank loans for investment as well as for running the business. Evidently the competition of our textile sector is, therefore, not with our competitors but with their governments.
Aptma's spokesman has shown concern at the enhancement of 10 percent hike in electricity tariff, while 60 percent of the textile industry is dependent on electricity.
Textile manufacturers need to be at par with competitors in getting necessary incentives, concessions, cheap and easy bank loans, less expensive and subsidized and constant supply of utilities including gas, electricity to promote the textile sector to be competitive in the world's market.
According to APTA, the government has so far failed to implement the mark down of the interest rate on its outstanding loans classified or unclassified and allow 6.5 percent R&D on yarn. On the other hand a letter has been sent by the Ministry of Textile Industry to the top 12 textile associations in the country linking the grant of the aforesaid R&D rebate to the registered units to the supply of the requisite information immediately otherwise their claims for the rebate would not be processed. The Ministry's letter desires information in accordance as per an elaborate Performa, consisting of 9 different pages. This Performa asks for information about the Company's profile, details of membership of the associations, quality and environment standards of plants, infra-structure, machinery and other investments thereon, human resource, units operations and manufacturing details, details of the total R&D rebate collected by the textile unit and the expenditure incurred by the unit on IT and staff training. Textile associations and textile units have expressed reservations about this letter and notice. They are of the opinion that the textile ministry is seeking information, which does not fall in the administrative ambit of the Textile Ministry. It should have rather restricted largely to the information on R&D and environmental compliance.
The Apta had been trying its level best to save the actual position of the spinning industry and has all along been making efforts to impress upon the government that the textile industry, in general, and the spinning industry, in particular, was going through one of the worst crisis in its history and feared that it must collapse if remedial measures were not taken without delay.
Problems being faced by the Industrial Sector:
- Since the year, 2004 bank interest rates had shot up to 240 percent, thus transferring all the profit from the industrial sector to the Banking Industry.
- During the last year minimum wages have increased at the rate of 33 percent.
- Inflation has increased from 12 percent to 13 percent during the same period.
- Transportation costs have increased three fold since 2004.
- Gas prices for captive power generation increased by 36 percent during the last one year.
- Huge amounts have been stuck up in sales tax despite zero rating of this sector.
- Load shedding has become order of the day, as a result of which the consumption of local yarn has decreased due to its reduced usage in the weaving sector.
- The banking sector had an exposure of Rs.120 billion to the textile industry, issuing a warning that if proper measures were not taken to resolve the problems being faced by the textile sector, the credit would be converted into bad loans.
- Increase in polyester prices by Rs.4 during March, April 2007
- The supply of main raw material viz. cotton is not being kept with the growing capacities, both in terms of quality and quantity, whereas the production of cotton in India has been showing an increase of 20 percent on yearly basis for the last seven years.
- The political crisis in the country is such that no foreign buyer wishes to visit Pakistan for reasons of security.
- Appropriate and well organized infra-structure (roads, transportation and communications, water, electricity and gas) is a pre-requisite for increasing production, which in Pakistan is not that ideal.
- Suitable warehouse facilities for storing cotton according to international quality standards, preventing it from contamination and sunlight are lacking, which must be provided.
- Concentration of industrial areas in mega cities is causing great problems including extremely high prices of industrial and residential plots. New industrial estates should be established in the suburbs of big cities with provision of adequate infra-structure.
- There is lack of a mass transit system which increases the time and cost of commuting within cities.
There are also some external factors, which are affecting our export targets including: i) anti dumping duty ii) comparatively higher custom tariff and iii) non-tariff barrier. These external factors are responsible for raising the cost of our production and have thus made our products uncompetitive in the international market.
The bad and sad effects of these factors are apparent. The result is closure of innumerable number of textile/spinning units, downfall in our exports, increase in bank defaults and job losses and increase in unemployment. By May 2007 116 textile mills had closed down their operations with their 700,000 spindles. Still about two dozen mills were on the verge of closure.
It would be appropriate to point out that Tanvir Sheikh, Secretary, All Pakistan Textile Association criticized the government for forbidding cultivation of Bt cotton, which has proven more beneficial in other countries and requires far less pesticide sprays. The present production of cotton in Pakistan on an average is 18 maunds per acre whereas growing Bt cotton would bring about 35-40 maunds per acre. India, which is now leading the world in cotton production, because of Bt cotton cultivation, has increased its production from 16 million bales in 2003 to 38 million bales last year.
It is still strange and sorrowful that while Atomic Energy Commission and National Institute of Bio-technology and Genetic Engineering in Faisalabad, the Centre of Excellence Molecular Biologies in Lahore had evolved Bt cotton varieties, IRFH-901 and CIM482, the government did not allow their cultivation on commercial scale, without assigning any reason.
In this situation it is pointed out that some Pakistani cotton growers have been depending upon smuggled Bt cotton seed from India which, for obvious reasons, is not giving the desired results because this smuggled seed is not the first generation seed but third or fourth generation seed, which besides giving low production does not possess that capacity of protection of the crop against diseases which the cotton crop of first generation seed is possessing.
In sharp contrast:
I) Bangladesh gas prices for captive power generation are one third of those in Pakistan.
II) Fuel prices are nearly half, thus reducing the transport cost to one third of ours.
III) Cash rebates are paid to purchase local yarn and fabrics.
IV) Preferential duty rates are charged on Bangladeshi products in Europe and U.S.A.
As regards India, it gives direct subsidies on interest rates to the entire textile chain including spinning.
Chairman, Pakistan Textile Mills Association, after a meeting with the care-taker Minister for Textile and Commerce, Shahzada Alam Mannoo is hopeful that the minister after meeting the representatives of textile sector would come with some solution to steer the sector out of the present troubled waters. The soonest textile sector is brought out of crisis, the better it would be for the country's economy. Instead of accusing and counter-accusing each other, the Government and the Textile sector must sort out the genuine problems to enable the sector work profitably and proficiently. Textile Associations and textile mills are now clamouring on gas shut downs and electricity breakdowns, which are badly affecting their operations, causing a great setback in fulfillment of their commitments and timely compliance of orders of foreign buyers. The government must not be oblivious to these genuine problems of the textile sector.