S.KAMAL HAYDER KAZMI,
Research Analyst, PAGE
Nov 1 - 7, 2010
Textile sector emerges as the largest in the country as it represents 391 textile mills out of which 309 are spinning, 45 weaving and 37 composite units. Textile industry has been playing a pivotal role in the national economy. Its share in the economy, in terms of GDP, exports, employment, foreign exchange earnings, investment and contribution to the value added industry makes it the single largest determinant of growth in manufacturing sector.
Textile industry of Pakistan contributes 8.5 per cent of the GDP and employs 38 per cent of the workforce in the manufacturing sector. It is responsible for about 55 per cent of total exports. In spite of the government's efforts to diversify exports as well as industrial base, the textile sector remains the backbone of industrial activity in the country.
During April 2010 nine selected commodities of textile manufactures contributed 49.43 per cent of total exports in which the share of cotton fabrics was (9.19 per cent), bed-wear (8.77 per cent), cotton yarn (8.08 per cent), knitwear (7.89 per cent) and articles of apparel and clothing accessories (excl. knitwear) (6.27 per cent). During July-April, 2010 these nine commodities contributed 50.68 per cent of total exports showing a decrease of 2.20 per cent as against their combined share of 51.82 per cent during the corresponding period of last year.
However, during April 2010 textile group contributed 2.30 per cent of total imports in which the share of synthetic and artificial silk yarn and synthetic fibre were 1.23 per cent and 1.07 per cent respectively. During July-April, 2010 this group contributed 2.06 per cent of total import showing an increase of 23.36 per cent as against their combined share of 1.67 per cent during the corresponding period of last year.
Pakistan today faces a tough competition from China, India, Bangladesh, and Turkey in the EU market for textile apparel. In case of bed wear, its exports to EU market are rising after reduction of anti-dumping duty on this category from the previous level of 13.1 per cent to 5.8 per cent. However, in the US market, this category of export faces a tough competition in terms of prices, especially from China that is where the textile exports are suffering from structural issues, which need to be addressed by the industry itself.
India is also weighing the option of reducing custom duty and excise duty on furnace oil, which is heavily consumed by the textile industry.
Despite all these, textile industry has made an investment of five billion dollar for expanding its production capacity in the last five years while the interest rates were as low as three per cent to four per cent. However, more than 200 per cent 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 per cent in investment in textile machinery in terms of US Dollar 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 per cent to 12 per cent. This has all resulted because of the slow down in further investment in the textile industry due to high cost of capital borrowing and increased pressure from regional competition.
EXPORT RECEIPTS BY TEXTILE GROUP
|Cotton Carded or Combed||212,015||136,562||131,889||32,190||34,413|
|Yarn Other than Cotton Yarn||80,453||70,047||46,853||12,767||7,019|
|Tents, Canvas & Tarpaulin||71,063||61,294||75,593||14,405||13,862|
|Art, Silk & Synthetic Textile||399,233||387,410||409,123||88,993||134,274|
|Made-up Articles(incl. Other Tex||365,718||330,484||327,482||71,853||90,051|
|Other Textile Materials||588,323||477,808||594,351||135,483||157,190|
Textile has 40 per cent share in employment and 60 per cent in the export of the country and Pakistan is recognised as one of the leading textile manufacturers in the world. However, value-added sectors, particularly apparel and knitted clothing, have a very small share in the world trade. These sectors are also suffering from the intense competition from China, India, and Bangladesh. Unfortunately, there was no such relief given in the federal budget to this sector. Increase in the withholding tax, general sales tax, and federal excise duty will result in negative impact on the overall economy of the country as well as on the textile sector. The soaring inflation has resulted in increased cost of doing business while shortage of power and gas has distracted the economic activities. Out of $18 billion export target of this year, the $10 billion belongs to the textile sector. If this government gives some incentives and relief to exporters, the export of textile sector may reach to $80 billion in year 2020. Government must support this industry to multiply export earnings and create jobs in the country.