CAN TEXTILE POLICY REALIZE U$25BN EXPORT?

SHABBIR H. KAZMI
Dec 7 - 13, 2009

Minister of textile industry Rana Farooq Saeed Khan has announced a five-year textile policy aimed at achieving US$25 billion textiles and clothing exports by 2014. The policy offers incentives to pull out the industry from the current crisis and achieve higher value-addition.

The policy measures have been welcomed by the industry, which is always seeking incentives but has not learnt to stand without the crutches of the government.

Industry leaders have appreciated the measures announced in the policy. Wajid Jawad, former chairman Pakistan Readymade Garments Manufacturers and Exporters Association (Prgmea) said that it was for the first time that a comprehensive policy had been given to textile sector. Former chairman Pakistan Towel Manufacturers Association termed it the best policy under the prevailing circumstances and stressed the need for implementing the policy in letter and spirit for achieving the targets set in the policy.

Jawed Bilwani of Pakistan Apparel Forum said it was the first serious attempt to sort out issues confronting different segments of textile industry.

The creation of different funds to support the textile industry at different levels would go a long way in reviving the industry, which is presently passing through the most difficult time of its history. Bilwani said fixing the mark-up of export refinance at 5 per cent would definitely enable the exporters of textiles and clothing to compete in the global market.

Rafiq Godil, Chairman Pakistan Knitwear and Sweaters Exporters Association said that the investment support offered in the policy would go a long way in technological up-gradation of the textile industry.

Bilal Mullah, former chairman (Prgmea) said that the duty drawback on export of different textile products, including fabrics would help the exporters to compete with the regional countries. The drawback rates based on value-addition would encourage exporters in achieving higher value addition and quality standards.

The great achievement of textile ministry was of getting a huge allocation of Rs42 billion from the ministry of finance to support different packages announced for the first year of the policy. These include setting one percent duty drawback of FOB value on export of fabrics, two percent on home textiles, and three percent on garments. The most encouraging of all is the additional one percent increase in drawback if an exporter manages to increase exports by 50 percent.

Pakistan's textiles and clothing industry faces many difficulties as machinery and technology has not kept pace with world standards and has been lacking infrastructure, especially power, gas and clean water and skilled manpower. The country has not been successful in negotiating greater market access in the US and the EU market, which could help in achieving high exports.

The sector demands elimination of electricity and gas load shedding. It also wants export refinance at lower rates and relief on existing long-term loans.

EXPORT OF TEXTILES AND CLOTHING

(VALUE IN MILLION $) JULY-OCT 09 JULY-OCT 08 CHANGE
Raw Cotton 70.589 39.450 78.93
Cotton Yarn 468.510 410.741 14.06
Cotton Cloth 543.506 781.066 -30.41
Cotton Carded or Combed 0.896 0.9251 -90.31
Yarn other than Cotton Yarn 14.119 7.745 82.30
Knitwear 624.960 678.827 -7.94
Bed Wear 549.485 603.849 -9.00
Towels 209.646 232.469 -9.82
Tents, Canvas & Tarpaulin 16.697 19.207 -13.07
Readymade Garments 415.482 394.029 5.44
Art Silk & Synthetic Textile 167.031 95.866 74.23
Made up Articles (Excl. Towels, Bed wear) 167.219 168.071 -0.51
Other Textile Materials 100.439 74.056 35.63
Total 3,348.579 3,514.627 -4.72

ACTUAL VERSUS TARGET

Exports of textiles and clothing for July-October 2009 show that the country continues to suffer from an inherent weakness whereby share of yarn and cloth remains substantial in total exports. In fact Pakistan should have bid farewell to export of raw material be it cotton, yarn and cloth to achieve higher value addition.

Lately, the manufactures and exporters of value-added products have been demanding ban on export of yarn. While imposing any ban may not be prudent, it could only be the last resort if the players do not wish to change their mind set.

While some of the experts strongly believe that Pakistan's textiles and clothing sector has not played its real role despite enjoying protections for nearly five decades, no one can deny their right to get uninterrupted supply of electricity and gas at affordable tariffs.

It is the responsibility of the state to ensure availability of basic raw materials and utilities. It is also necessary to highlight that the very purpose of offering new incentives is completely defeated when rising cost of doing business erodes competitiveness of the local players.

Even if Pakistan gets greater access in the US and the UK market without being competitive and offering superior quality it would not be possible to cater to customers.

OUTLOOK

Textiles and clothing was Pakistan's mainstay in the past and will remain the driving engine of the economy. The industry has to regain its lost comparative advantage by improving productivity. It has to learn to compete with China, India, and even Bangladesh.

The textile quota advantage may no longer be there but the country is still among the top producers of cotton, has an elaborate manufacturing infrastructure, and above all hardworking and dedicated workers and entrepreneurs.