EXPORT TARGET MAY SLIP: TRADERS

KANWAL SALEEM
(feedback@pgeconomist.com)

May 17 - 23, 2010

High cost of doing business, persistent power crisis, war on terrorism, inconsistency in the government policies, continuously rising power tariffs and other factors not only cripple the economy but also leave negative impact on the country's exports. The electricity cost in Pakistan is 40-60 per cent higher when compared with India, Bangladesh, China and Turkey.

Goods worth $14.162 billion were exported from July 2009 to March 2010 against the total export target of $18 billion. During this period, the country's textile export has witnessed increase while leather, surgical and cement exports declined during the said period mainly due to power crisis and high cost of doing business.

Officials circles claimed the government has taken many initiatives to boost export which included development of new export strategy, products/services focused export development and market focused export development.

The focused trade fair participation was an important promotional tool for the marketing of products in the world. The government has organised Pakistan's participation in 129 fairs and exhibitions worldwide during March 2008-Janurary 2010. As many as 36 visits of trade delegations were arranged abroad to boost the export during the said period.

On the other hand, the exporters are unhappy with the government over indifferent attitude of the government towards facilitating the exporters in fetching forex through facilitating them in real sense. They are of the view there exists vast room to enhance exports provided the government facilitate the exporters apart from helping in exploring new markets. The government would not be able to achieve the export target fixed for current fiscal, they said.

According to Pakistan Tanners Association, North Zone Chairman Sheikh Muhammad Naeem the leather sector has registered an average decline of 25-30 per cent in the exports of goods during the last two years.

Highlighting the leather industry's problems, he said the shortage of raw stocks in the country is one of the top threats and termed it as amongst the main reasons behind the decline in exports. Giving out reasons and aftermath of this shortage, he disclosed that smuggling of live animals to Iran and Afghanistan is causing shortage of raw stocks. Due to smuggling of live animals, prices of mutton and beef have increased to Rs450 and Rs300 per kg, respectively within the country.

The PTA North Zone Chairman invited the government's attention towards the people who are not associated to leather trade and are exporting raw stocks at the initial stage. The raw hides/skin and wet blue is officially being exported to our competitors like India and China on very cheap prices, he maintained. Now we are bound to import the same raw material that we are exporting and our value-added sectors of leather industry like garments, gloves and leather products are in a pathetic position, he said.

Sheikh Muhammad Naeem pointed that leather is the second largest export industry of Pakistan, catering to the daily life needs of 250,000 families directly. This industry is facing a great crisis. Alongside electricity, gas and fuel shortage and various other ailments are worsening the crisis. He urged the government to adopt measures for early ratification of the said issues so that value-added sector can be encouraged and the country could earn precious foreign exchange.

He said the leather industry needs immediate measures to save this vital sector that has been facing pressure for the last 18-months in the backdrop of persistent decline in leather and leather products exports mainly because of the affects of war on terrorism, which shooed away foreign buyers from Pakistan.

According to the data made available from the Bureau of Statistics, the leather exports have been declined by 28.83 per cent, leather apparel and clothing by 25.49 per cent, leather gloves by 9.42 per cent and leather footwear by 2.49 per cent. However, other leather goods showed upward trend by 8.41 per cent but total decline during the year was 22.24 per cent from $1220.121 million in 2007-08 to $948.800 million during the financial year 2008-09.

Similarly, during first five months of the current fiscal (July-November 2009), the exports of leather sector further dropped 25.53 per cent. The leather exports have been declined by 23.93 per cent to $111.129 million, as compared to $146.09 million in the corresponding period of 2008.

The leather apparel and clothing recorded a loss of 15.88 per cent to $165.146 million as compared to $196.315 million, leather gloves by 59.03 per cent from last year $76.070 million to $31.167 million, leather footwear by 13.57 per cent from $42.120 million to 36.403 million during July-November 2009 as compared to corresponding period of last year.

Contrary to the last year, the exports of other leather products also declined by 40.50 per cent to $3.276 million as compared to last year exports of $5.506 million. As such, during July-November 2009, the total exports decreased from $466.102 million in 2008 to $347.121 million during July-November 2009.

On the other hand, despite recurrent demands by the local textile apparel sector for cotton yarn, its exports continued from the country. The spinners continued yarn export keeping in view the global needs and future shortage of the raw commodity, despite the repetitive demands from the textile apparel sector on its export capping for its shortage locally. The country is facing serious shortage of cotton yarn as spinners prefer foreign export orders over the ones from local industry because foreign buyers offer them higher prices for the commodity, the industry sources said.

They said: "The huge export has resulted in cotton yarn shortage on the local market, which eventually jacked up its prices to an unaffordable level for the textile value-added sector, which has over 50 per cent share in the country's overall exports."

According to the latest statistics, overall exports of cotton yarn registered an increase of 18 per cent to 590 million dollars in first five months (July-Nov) of the current fiscal year against 498.82 million dollars in corresponding period of last fiscal year. Month on month basis cotton yarn exports mounted by 32.82 per cent to 116.987 million dollars during November of current fiscal year as compared to 88.08 million dollars in the same period of last fiscal year.

However, cotton yarn export in November 2009 was some 16 per cent lower than October 2009, as cotton yarn export in October 2009 stood at 139.69 million dollars. With current trend of cotton yarn exports, it is likely that its exports would cross one billion dollars mark during the current fiscal year. Although, on the protest of value-added textile sector the ministry of textile has asked the Trade Development Authority of Pakistan (TDAP) to monitor and register export of cotton yarn. However, local textile industry wants a ban, or ceiling, on export of the commodity for a continued export of value-added textile products.

It may be noted that China is the largest importer of Pakistan's cotton yarn and some 60-70 per cent of cotton yarn is being exported to China while Bangladesh is the second largest importer of Pakistan's cotton yarn.

All leading cotton-related goods export has posted declining trend during first five months of current fiscal year. Cotton cloth export declined by some 30 per cent to 665.71 million dollars; knitwear export dipped by 7.52 per cent to 764.53 million dollars; bed wear exports with a decline of 7.21 per cent stood at 701 million dollars; towels export declined by 6.61 per cent to 270 million dollars; and tents export declined by 12.20 per cent to 22 million dollars in July-November. However, export of readymade garments surged by 2.31 per cent to 521 million dollars in first five months of current fiscal year.

A spokesman of All Pakistan Textile Mills Association (APTMA) said that the APTMA's "Elders" Committee" discussed with the Ministry of Textile Industry (MinTex) prevailing cotton crisis, and apprised the Ministry on extensive cotton shortage, leading to yarn crisis and subsequent implication on the textile value chain in general.

It may be recalled that the APTMA Central Executive Committee unanimously resolved and authorised the Acting Chairman Shahzad Ahmed and Chairman APTMA Punjab Gohar Ejaz to form an Elders' Committee with the mandate to negotiate with the MinTex on behalf of APTMA. The Elders' Committee comprised of senior members representing their respective regions along with Chairman and Vice-Chairman APTMA

The Elders' Committee presented APTMA stance to MinTex authorities on serious cotton shortage scenario in 3rd of May meeting in Islamabad. The Elders' Committee also apprised the Ministry that the spinning industry was likely to discontinue operations in such a grave disappointing situation, resulting into closure of about 70 per cent of the spinning industry due to cotton shortage. This situation may trigger yarn shortage in the country, likely to affect the ancillary industry badly for its inability to import yarn from any international source. Accordingly, the country's exports to the tune of over one billion dollar will be hit very badly till the arrival of new cotton crop.

The APTMA spokesman said it is highly unfortunate that some elements representing self interest were propagating that the government was going to impose 25 per cent regulatory duty on the export of cotton yarn. He made it clear that no such decision was taken in the 3rd of May meeting in Islamabad and stressed the point that APTMA will not let anybody to frighten the spinning industry, likely to add fuel to the fire in a situation when cotton prices are hitting through the roof internationally.

The spokesman said that APTMA firmly believes that the government should offer direct financial subsidy/support to bail out the ancillary industry from one-off crisis until 30th June 2010 instead of distorting the free market mechanism.