TEXTILE EXPORTS AND ITS PROBLEMS
S.KAMAL HAYDER KAZMI,
Research Analyst, PAGE
Aug 10 - 16, 2009
Textile sector of Pakistan comprises 391 textile mills, out of which 309 are spinning, 45 weaving, and 37 composite units.
EXPORT RECEIPTS BY COMMODITY
TEXTILE GROUP COMMODITY JUNE 2009 (P) MAY2009 (R) JULY-JUNE 2008-09 (P) Raw Cotton 4,835 4,066 105,416 Cotton Yarn 81,789 62,530 988,907 Cotton Cloth 159,626 158,444 2,106,683 Cotton Carded or Combed 14,474 10,300 136,005 Yarn Other than Cotton Yarn 5,415 4,199 70,047 Knitwear 157,465 154,211 2,054,244 Bed Wear 136,357 119,075 1,526,642 Towels 49,476 42,944 546,591 Tents, Canvas & Tarpulin 4,496 4,433 61,294 Readymade Garments 88,966 77,219 983,220 Art, Silk & Synthetic Textile 28,810 25,754 387,356 Madeup Articles (incl. other tex) 24,456 22,432 330,354 Other Textile Materials 40,922 45,802 477,831 Various sources
P: Provisional, R: Revised
Total installed capacity of textile mills accounts for 9,527,857 spindles, 61,256 rotors, 9,922 Shuttleless/Airjet Looms and 717 conventional Looms. The textile sector contributes 8.5% of the GDP and employs 38% of the workforce in the manufacturing sector. It is responsible for about 55% of total exports. Export of textile products reached $ 10.62 bn in the year 2007-08 from $ 5.5 bn in the year 2003-04.
Textile industry has made an investment of $5 bn for expanding its production capacity in the last 5 years while the interest rates were as low as 3% to 4%. However, more than 200% increase in the credit cost, which consequently increased the financial charges of the mills, has now forced the industry to stop further investment. There has been reduction of 6.4% in investment in Textile Machinery in terms of US$ this year as compared to the corresponding period last year. If inflation is also factored in, the drop of fresh investment in Machinery will be in the vicinity of 11% to 12%.
For 2009-10, exports target has been fixed at US $18.3 bn. In 2007-08, imports were almost double of exports but in 2009-10, the excess of imports over exports has reduced to 56.8%. Main reason for this is drastic drop in crude oil prices in the international market. Also imports of machinery specially that of textile has been reduced. The share of cotton and textile in national exports has reduced from 67% to 56%. The share in exports of textiles and apparel to US has also declined in 2008 against 2007 by about 3%. In 2008, the exports of textiles and apparel to US stood at US $3.078 bn, Bangladesh at 3.357 bn, India at 5.078 bn, China 32.678 bn, Indonesia at 5.241 bn, and Vietnam at 5.425 bn. In exports of textiles, share of garments/apparels of all these countries ranges between 60 and 90% but Pakistan's share in apparels is less than 50% of its total textile exports.
Pakistan's textile sector has been confronted with problems such as high cost of production and energy shortage. Other players in the South Asia region have succeeded in creating a niche in the international markets by exporting quality products, augmenting textile exports, and earning rich dividends due to surge in the export of their cotton products. Traditionally, over 60 countries have been exporting garments to the west. After expiry of the quota regime on Jan 1st, 2005, the exports of several dozen of them witnessed a decline as the trade and manufacturing consolidated in nations that excelled in skills, machinery, marketing techniques and the ability to cater to the rapidly changing global market trends and fashions.
This has all resulted because of the slowdown in further investment in the textile industry due to high cost of capital borrowing and increased pressure from regional competition.
PAK SHARE OF TEXTILES IN WORLD TRADE (000 Metric Tons) PERIOD COTTON YARN COTTON CLOTH WE PE PAK SHARE IN WORLD EXPORT % WE PE PAK SHARE IN WORLD EXPORT % 2001 2090 561.3 26.9 2912 271 9.3 2002 2043 550.7 27 3274 299.2 9.1 2003 2120 503.5 23.8 2856 283 9.9 2004 1783 504 28..3 3065 282.2 9.2 2005 1783 671 37.6 3180 239.9 7.5 2006 2380 780 32.8 3235 263.3 8.1 Various Sources WE: World Export PE: Pakistan Export
During the last few years, the textile exporters have faced serious power crisis in the industrial areas, which caused million of rupees losses to every year especially from Dec to July as these months are considered the peak seasons of textile export. The country's energy demand has grown at an annual rate of 4.8% that is expected to grow at 8 to 10% per annum till 2010. Therefore, there is a dire need to have a sustained growth in energy supply and infrastructure capacity of 7 to 8% per annum to support the steady growth in the Country's GDP.
Textile trade in the world is estimated to be around US$300 bn. Industry experts predict that by 2014, the facilities in the west would close down and they would source their textiles from more efficient areas of the world resulting in the trade volume of around US$ 800bn. Government must provide incentives to textile sector in order to increase its share in global trade.