FALLING TEXTILE EXPORTS

TEXTILE EXPORTERS ESTIMATE THAT EXPORT PROCEEDS WOULD HARDLY TOUCH $13 BILLION-MARK BY END JUNE 2012.

KANWAL SALEEM
(feedback@pgeconomist.com)

June 25 - July 1, 20
12

Pakistan's export of textile and clothing declined 9.961 per cent in the first 11 months of the current fiscal year due to weak demand from recession-hit key markets Europe and US.

The exports proceeds from these sectors fell to $11.273 billion in July-May 2011-12 from $12.472 billion over the corresponding period of last year.

As per data of Pakistan Bureau of Statistics (PBS), last year exports from textile and clothing sector crossed $14 billion. For the current fiscal year, the government has projected a target of $16 billion.

Textile exporters estimate that export proceeds would hardly touch $13 billion-mark by end June 2012. As a result of poor performance of the textile and clothing sector, overall exports also fell 3.37 per cent to $21.500 billion in the July-May period as against $22.388 billion over the corresponding period last year. The government has projected an overall export target of $25.8 billion, which doesn't seem achievable in the last one month of 2011-12.

Analysts believe that crisis in the Eurozone and stiff competition in textile products from China, India, and Bangladesh in the international market also cause decline in export proceeds from the country. Local manufacturers of raw materials and value-added sectors have already projected a 25 per cent drop in export to Europe alone due to debt crisis.

Contrary to this, over 6.03 per cent decline was also witnessed in terms of rupee despite depreciation of rupee against the dollar in the past few months, indicating that the fall in the health of rupee did not support Pakistani textile and clothing products to penetrate in the international markets.

A sector-wise analysis showed negative growth in exports of all products of textile and clothing sectors except raw materials.

At the same time, there was a 9.63 per cent decline in import of machinery in the value-added sector to increase quality and capacity of production. This indicates that local manufacturers were also not expanding their production capacity. Product-wise details showed that export of raw cotton increased 31 per cent because of high demand for cotton, especially in China following a ban by Indian government on cotton exports. Also, export of tents and canvas were up by 101.75 per cent during the period under review.

The export of readymade garments declined by 6.45 per cent, knitwear 13.19 per cent, bed wear 15 per cent and towels 9.51 per cent during the period under review. And, export of cotton yarn declined by 19.89 per cent, cotton cloth 3.13 per cent, cotton carded or combed 61.58 per cent and art silk fell by 15.9 per cent during the period under review.

In FY 2010-2011, Pakistan exported record textile goods worth $14 billion and the government had fixed a target of $16 billion for textile exports during FY 2011-12.

Exporters fear that because of financial problems in the European markets and crippling energy crisis in the country, Pakistan's textiles exports "may not exceed $12 billion till June 30 this year, incurring a loss of $4 billion from export projections".

Chairman All Pakistan Textile Mills Association (APTMA), Mohsin Aziz, has feared that the textile exports have dropped by over 30 per cent in 2011-12 due to energy shortage in the country. Commenting on the unprecedented fall in textile exports in the month of May 2012, he said the textile exports in the month of May 2012 suggest that overall textile exports would hardly cross the $12 billion mark against projected $16 billion target.

Although in the extreme crisis month, the exports remained much below over a billion dollar from $800-900 million, adding with gas supply we cross over $1 billion last two months but we should have crossed $1.3 billion.

Chairman APTMA said persistent electricity and gas cut to the industry has crippled the production capacities of textile industry, which despite being export-oriented is unable to cross $1 billion a month over the last six months against traditional exports of $1.25 billion a month in the past.

Mr. Mohsin said a minor improvement in energy crisis during last two months had jacked up exports to $1.1 billion per month but still it would not help recovering the shortfall. He said the textile exports could hardy reach to $11.2 billion in eleven months and it may hardly cross $12 billion on 30th June 2012 mainly due to energy crisis, including electricity and gas, coupled with high interest rates and other impediments confronting the industry.

According to him, the nonperforming loans (NPLs) of the industry have reached to more than 30 per cent of its portfolio, which is quite alarming and prime cause of drop in local sales and exports, adversely affecting the viability of industry. Some of the units either have closed or partially operational. The industry would not come out of sluggish mode until and unless its issues are properly addressed by the government, he added. The issues of high interest rate and energy crisis are not addressed.

Chairman APTMA said a minimum of five days a week gas supply to textile industry was imperative and any move for reduction to this arrangement would definitely be detrimental to the export-oriented textile industry.