TEXTILES THE MAINSTAY OF THE ECONOMY

S.KAMAL HAYDER KAZMI,
Research Analyst
, PAGE
July 21 - 27, 2008

Textile sector is the backbone of Pakistan's economy. Pakistan's role as one of the world's leading cotton producers provides the basis for the domestic textile industry to lead the rally of economic growth of the country. The textile sector is contributing 9% to the GDP growth of Pakistan . Being the principal industry, the textile is contributing more than 67% to the country's total export earnings and accounting for about 46% of total manufacturing in Pakistan . The sector generates employment opportunities for over 38% of the work force. More than US$ 4 bn of textile and garment machinery has been imported during last few years under BMR.

Currently, Pakistan's textile industry is facing the problem of Low productivity due to its obsolete textile machinery. To overcome this problem and to stand in competition, Pakistan Textile Industry will require high investments. Pakistan is on the road to invest in processing sector, but traditional sectors are also demanding high amount of investments. There is a continuous trend of investing in spinning since many years. Pakistan 's textile industry estimates that around Rs 1,400 bn of investment is required till 2010 in order to achieve the government's export target. Pakistan has been a major Asian market for major textile machinery manufacturing nations. China and Switzerland has been among top exporters of textile machinery in Pakistan . Switzerland exported machinery of around 91 m Swiss franc (CHF) to Pakistan in 2006.

EXPORT RECEIPTS BY COMMODITY

('000' US $)

 

MAY (P)

APRIL (R)

MAY

JULY - MAY

JULY - JUNE

Commodity

2008

2008

2007

2007-08 (P)

2006-07

2006-07

2005-06

Textile Group

871,148

859,179

860,473

9,438,339

9,096,832

10,011,350

9,141,596

Raw Cotton

10,158

12,494

5,595

79,526

70,388

75,640

99,672

Cotton Yarn

84,831

87,516

82,970

1,078,286

982,252

1,075,966

894,930

Cotton Cloth

183,783

174,089

204,439

1,973,057

2,113,222

2,318,481

2,259,124

Cotton Carded or Combed

12,940

21,742

28,779

197,415

254,529

275,972

284,828

Yarn Other than Cotton Yarn

4,428

4,125

10,625

73,376

133,086

141,307

111,234

Knitwear

168,258

173,614

174,480

1,932,002

1,910,147

2,104,198

1,917,854

Bed Wear

133,760

125,786

122,785

1,330,014

1,263,553

1,394,372

1,313,318

Towels

47,770

38,261

15,317

378,104

150,007

166,288

120,715

Tents,Canvas & Tarpulin

4,380

5,932

3,418

63,319

66,439

72,334

73,321

Readymade Garments

99,809

93,664

93,841

1,105,877

985,624

1,097,732

963,856

Art, Silk & Synthetic Textile

34,180

36,668

39,424

348,311

342,164

385,991

281,674

Madeup Articles(incl. Other Tex )

32,878

32,862

29,033

330,497

316,619

346,840

313,689

Other Textile Materials

53,974

52,425

49,767

548,553

508,803

556,229

507,381

P: Provisional, R: Revised.


IMPORT PAYMENTS BY COMMODITY

('000' US $)

 

MAY (P)

APRIL (R)

MAY

JULY - MAY

JULY - JUNE

Commodity

2008

2008

2007

2007-08 (P)

2006-07

2006-07

2005-06

Textile Machinery

37,112

43,317

31,501

390,595

435,721

471,627

822,807

Raw Cotton

56,155

105,537

63,588

1,058,492

571,406

647,187

427,586

Synthetic Fibre

23,216

23,391

18,731

244,946

193,965

214,427

238,881

Synthetic & Artificial Silk Yarn

25,995

23,600

24,657

237,773

213,200

233,853

225,165

Worn Clothing

725

839

576

6,479

6,740

7,357

9,766

Other Textile Items

18,554

16,119

14,387

168,067

148,435

162,730

188,912

P: Provisional, R: Revised.

TEXTILE COMPETITORS

Recently, Pakistan is facing a tough competition from China , India , Bangladesh and Turkey in the EU market for textile apparel. In the case of bed wear, its exports to EU market are rising after reduction of anti-dumping duty on this category from the previous level of 13.1% to 5.8%. However, in the US market, this category of export faces a tough competition in terms of prices, especially from China and that is where the textile exports are suffering from structural issues which need to be addressed by the industry itself. Indian textile Industry is expecting that the budget 2008-09 will introduce a cut in the rate of excise duty. It is expected that the level of Basic Excise Duty (BED) on the textile equipments and machinery will come down to 8% from the existing level of 16%. India is also weighing the option of reducing custom duty and excise duty on Furnace oil which is heavily consumed by the textile industry. There are possibilities that, the excise duty on furnace oil will be lowered to the level of 8% whereas, customs duty will be completely withdrawn.

OVERVIEW

All Pakistan Textile Mills Association (APTMA) has termed that the federal budget of FY8-09 is a balanced budget and supported the steps taken for the improvement of agriculture of the country. Textile sector contributes 40% share in employment and 60% in the export of the country but there is no such relief given in the federal budget to this sector. Increase in the withholding tax, general sales tax and federal excise duty will result in negative impact on the overall economy of the country as well as on the textile sector. The soaring inflation has resulted in increased cost of doing business while shortage of power and gas has distracted the economic activities. Out of $18 bn export target of this year, the $10 bn were of textile sector. If the Government will give some incentives and relief, the export of textile sector may reach to $80 bn in year 2020.