TEXTILE SECTOR IN THE WAKE OF GLOBAL FINANCIAL MELT DOWN
SHAMSUL GHANI (email@example.com)
Mar 16 - 22, 2009
Our textile sector's woes are multi dimensional. From globalization threats to lack of technological advancement, from high cotton prices to low product quality, from crop uncertainties to entrepreneurial short-sightedness, from lack of skilled human capital to gas and power crises, from global financial meltdown to self-inflicted economic degradation, from lack of investment to expensive credit, every thing seems to have contributed to change the once burgeoning sector to an ailing industry struggling for survival. The role of this sector is too important for Pakistan's economy and measures to make it stay competitive in the world markets are imperative.
TABLE- CONTRIBUTION OF TEXTILE INDUSTRY TO THE ECONOMY (ECONOMIC SURVEY 2007-08) (JULY-FEB) 2006-07 2007-08 Share in Total Exports 61.1% 53.8% Share in Manufacturing 46% 46% Share in Employment 38% 39% Share in GDP 8.5% 8.5% Textile Exports $6.6 billion $6.3 billion Investment in Textile $6.4 billion $7.0 billion
The traumatic influence of Global Financial Meltdown (GFM) has shaken, together with the developed economies, a number of emerging economies as well. The slackening global demand for textile products, in the wake of closure of thousands of retail outlets, has caused loss of millions of jobs on one hand and greatly increased the price competition on the other. Like Pakistan, India too is struggling to save its textile industry from a sharp downturn as its exports have been halved against the target set for the current fiscal. The competitors, giving tough time to both Pakistan and India are China, Vietnam, Cambodia and Bangladesh. According to an estimate our textiles are 19 per cent costlier than those of India. In this scenario, it shouldn't be difficult to gauge Pakistan's position in the international market. Dwindling demands from US and UK exporters and piled up textile inventories have pushed the Karachi cotton market into non-operative mode. On March 04, not a single bale changed hands in regular trading. Recently, the committee has revised official spot rates downward by Rs.50/- per maund to attract buyers. Dawn has reported some leading spinners claiming that unsold stocks of both cloth and cotton yarn are piling in the absence of foreign demand, creating liquidity problems for both the leading and small textile groups.
According to textile sources, the majority of units have curtailed production by switching over to one or two shift operations instead of the normal three shifts. The effects of GFM are slowly but surely enveloping the developing economies. The drop in our textile exports during the first seven month of the current fiscal year has been to the extent of 3.8 per cent. We exported textile products worth $5.827 billion during the said period as against $6.056 billion during the corresponding period of the previous year. The textile tycoons' waning interest in the revival of the industry is also evident from the fact that the import of textile machinery decreased by 40 per cent during the period under reference. The state of affairs is no doubt alarming but the sharing of blame has to be just and proportionate. The government failed to deliver on support front whereas the industry failed to maintain its focus on development. The governments need political will and economic sense to iron out economic solutions for the revival of a particular industry. Unfortunately our governments, particularly those given to democratic mode of governance, get little time to focus their attention on serious economic issues. Most of their time is spent in political maneuvering and economic issues are relegated to the lower echelons of power with the result that vested interest groups are formed that take the shape of cartels to broker terms with the government functionaries. Oil marketing and refining companies' cartel is such an example. The imposition of 10 per cent antidumping duty on the supply of polyester by the Chinese exporters is being blamed on the cartel of domestic synthetic fiber manufacturers. It is being argued that antidumping duty ordinance should be applicable only to the import of finished goods and not to the raw material as is the case of imported polyester. The tenability of the argument notwithstanding, the fact remains that the cartel theory is at work in our country.
After the termination of textile quota regime in 2005, both the industry and the government(s) have failed to measure up to the task of developing a new-look textile sector. The government failed to take timely actions. The consultant hired by the ministry of textile industry recently made a draft presentation during which he said that many of the problems now being faced by the textile industry of Pakistan should have long been taken care of. Pakistan's failure on this account ensues from the government's lack of political will. The consultant further said that way back in 1978, the World Bank conducted a study on Pakistan's textile sector and pinpointed certain deficiencies for immediate remedial treatment but unfortunately no action could be taken with the result that those infirmities still exist. Other nations that made quick decisions in line with the challenges of Multi Fiber Agreement (MFA) are now better equipped to operate in the changed conditions. We made investment in technology but hardly did anything to improve human skills and to adapt to modern marketing techniques. We made a number of good studies namely vision 2000, vision 2005 etc. but never bothered to implement them. In the words of the Korean minister, we are good planners but fail to implement our plans. Who else could be better qualified to pass these remarks as Koreans have the history of making good use of our "Five Year Plans?" The consultant representative summarized his presentation by saying that to-day China with an export of $180 billion dominates the textile trade. India and Pakistan are struggling at $20 billion and $11 billion marks respectively. Even Bangladesh which did never made any textile exports till 1990, is now exporting more than what Pakistan is exporting.
It will be unfair if the textile industry itself is not held responsible for the crisis it is now in. We all know how the money meant for productive activities was diverted to speculative sectors during the last 5 years. Both corporate and financial sectors were involved in this dirty business. The relieved SBP governor pointed out last year that a possible misuse of the low cost export refinance facilities could not be ruled out as this money did not appear to boost country's export.