ACHIEVING TEXTILE EXPORT TARGET IN DOLDRUMS
TARIQ AHMED SAEEDI (email@example.com)
Nov 10 - 16, 2008
Recently, cabinet has decided about line of measures to prop textile sector afflicted with cost management constraints approving a relief package which comprises of cut in mark up of loans to spinning sector and research and development facility to textile and clothing sector which both have evident potential of significant export receipts. While textile industry is stormed by tirades of afflictions from different fronts, this namesake relief will not be sufficient to prepare the sector for attaining sustainable economic growth.
Cabinet package under which spinning sector can reimburse 3 percent interest over loan will not provide any direct subvention to textile sector but cost government approximately Rs. 1.2 billion due to revision in loan reimbursement tenure, cut in interest rates, and R&D.
Ideally, textile and its driving agriculture sector should have been shielded against hard billows of soaring costs of energy and raw materials. This may not have required any rescue package but rationalization of gas and electricity tariffs would be enough. Giving another ideal atmosphere established ground would have reduced susceptibility of textile sector to vicissitudes of economic conditions and strengthened industry to adjust with difficult times.
Although, textile sector bears the brunt of subsidy over gas tariff government provides to fertilizer makers, its pocketing of substantial direct and indirect subsidies should also have enabled it to face the crisis independently. It seems that common focus is on individualism and profitability mitigation is considered as marginalization. It is evident that exports increase whenever exporters find it opportune.
Lending credence to the claim that currency value depreciation has encouraged exports from the country dollar earning only from textile exports was increased during a period when Pak rupee value experienced freefall against greenback. Increasing export receipts from main commodities of textile industry has manifested stimulating textile production sparked by the rupee slump.
Quarter result of this fiscal year shows rise in export revenue from the textile sector. While government earned an aggregate of $2.61 billion from textile exports in the first three months of FY08 it bagged around $2.76 billion in the corresponding period of this fiscal year. Knit wear and cotton cloth are two of major foreign exchange spinners for the country. Export receipts of these subdivisions of textile industry are consistently high, generating substantial revenue for the country.
Government received $625 million from knitwear exports in the staring three months of this fiscal year as opposed to $569 million in the similar months of preceding fiscal year. Similarly, cotton cloth exports in this period earned government $586 million as compared to $564 million previously.
However, exports of certain agriculture commodities are not considered as good for the textile sector. Despite that textile manufacturers often ask government to minimize exports of cotton from the country, its export keeps on rise. $25 million raw cotton was exported in 1QFY09 as compared to $13million in the same period last fiscal.
To maintain the pace of exports, sowing areas of cotton should be expanded further from present around 2.8 million hectares in order to achieve target of 14 million bales. And till such expansion, exports of raw cotton should be limited. It is evident that shortage and resultant cost of raw materials give serious blow to textile production, making it contracted. Since raw cotton is one of the prime inputs that determine volume of annul production from textile industry and cost effectiveness of outputs, the earliest crop cultivation would be augmented the better for multiplying internal sources of generating foreign exchange.
The compounded impact of inflation, mounting energy cost, and sluggish cotton supply over spinning, weaving and allied sectors of textile have signalled blockade within the horizontal and vertical supply chain of textile industry. Supply constraints are posing impending slowdown in the final output. Global economic situation is already exhibiting double edged problem for Pakistan. On one hand, independent analyses have prognosis about deceleration in production of cotton crops worldwide, especially in US, indicating soaring cost, and recession in textile importing markets of Pakistan has activated trend of insipidity in consumer buying on the other, not a good sign for textile exports. This may decrease export revenue of the country.
In order to enhance capacity of textile sector, not only R&D in textile sector is indispensable but output of agriculture sector should also be increased through scientific facilitation to farmers whose adaptability to new methods can be motivated by their influencers. Pakistan's cooperation in water resource management and hybrid cotton with China will be instrumental in this regard. Recently, Pakistan Agricultural Research Council working under Ministry of Food, Agriculture and Livestock and Chinese Academy of Agricultural Sciences have signed MoUs under which exchange of institutional expertises will occur.
Pakistan can get benefits of agriculture knowledge China has gathered in so many years. The expertise will also help Pakistan's agriculture sector to become organized. It is not the first practice of exchanges but many other countries have also shared models of growth with Pakistan. But what happened in result was nothing. One of the reasons behind ineffectiveness of scientific models or agriculture policies is 'rejection to change'. On one hand farmers are apparently reluctant to take assistance of latest agriculture technologies, apprehending that change brings adversary or still having preoccupied with industrial revolution phobia that, of course, imperilled and ate away labour intensive agriculture societies; once this fear dies down, major change can take place. On the other, system of water management and distribution in Pakistan is full of deficiencies and still survives on natural canal and distris.
In concurrence, agro-based revolution will ward off fallouts of inflation and sprinkle stable economic indicators. It will also give impetus to textile sector.