KARACHI, Feb 26: Textile companies are reporting ‘slight improvement’ in booking of export orders from Europe and a ‘slight pick up’ in import demand from the US in last five weeks.

An analyst in the office of All Pakistan Textile Mills Association (Aptma) indicates a 4 per cent increase in export demand from European Union in the last one month. This export demand has slightly pushed up yarn consumption in the domestic market. “But mind it there is no impact on average unit prices in export market or on yarn in domestic market,” the Aptma analyst hastily pointed out.

Anwar Tata, a former Chairman of Aptma confirms improvement in export demand but terms it ‘insignificant’. Azhar Elahi another noted textile dealer pointed out that “this export demand has partly revived the idle capacities.” He was asked to quantify the impact of concessions obtained from European Union on local textile industry.

“Almost 40 to 50 per cent of textile industry capacity is idle for want of demand,” he said and added that out of this idle capacity “hardly 10 per cent must have been revived in last few weeks.”

Time lag between booking of an export order to its servicing that include the manufacturing and shipment of the product and then finally the receipt of export proceeds take three to six months. Exporters say that the impact on Pakistan’s export should come some time from March onwards. But then the servicing of many of these export orders has activated substantially the closed and idle capacities.

But this revival of textile industry has not made impact on labour market in Karachi and Lahore and other big cities where armies of unemployed, educated and trained young men and women continue to roam on the streets looking for jobs.

The European Union signed an agreement late November last with Pakistan to reciprocate Islamabad’s total support to the US led international coalition air strike on Afghanistan from October 7 following September attack in New York and Washington.

Under this agreement, which was backed up by signing of Memorandum of Understanding, the EU scrapped import duty and offered a straight 15 per cent increase in textile export quotas effective from January 1 this year. The additional export quota is expected to generate 150 million dollars more export earnings.

The EU and the US are the main markets for Pakistan’s textile products. More than 65 per cent of Pakistan’s over six billion textile exports are absorbed in the EU and the US. The all pervading recession in the US and the EU has hit badly Pakistan’s exports during last fiscal and were not showing signs of improvement during this fiscal too.

Textile dealers say that export orders from the EU are mostly for value-added and finished products. Europeans are asking for bedlinen, knitwear, dresses, towels and certain other products. Quite a good number of Pakistani textile dealers are now in Europe to work out delivery schedule with their buyers in those countries.

Some pick up in the US import demand has also contributed in revival of the textile industry. Textile operators look with hope of getting busy in servicing of the export orders for next few months.

But there is a lurking fear that if the EU offered the same tariff concessional treatment to India on textile imports, Pakistan may again be placed on a disadvantageous position. Textile exporters in Pakistan say that depreciation in dollar value has offset, to a great extent, the 7 to 8 per cent tariff concession on textile import in the EU.

India has a much less input cost because of lower utility tariff, much reduced financial charges and cheaper labour. This puts Pakistan at a much disadvantageous position and could put an end to current improvement.

Europe also wants their Pakistani seller companies to abide by the ILO labour conventions, and is expected to set in place some monitoring mechanism. Pakistani entrepreneurs are notoriously anti-labour in their approach and practices. They make all their savings in labour management only as financial cost and utility tariffs are higher than many other countries.

Right now, the textile operators are engaged in servicing of the export orders and have little time to ponder on the issues that may confront them in near future.

Textile industry has the highest weightage of more than 19 percentage points in Pakistan’s industrial production index. It showed a growth of 2.5 per cent in July, 0.3 per cent in August, 3.9 per cent in September, 3.5 per cent in October and 4.8 per cent in November. Analysts say that there has been significant improvement in textile production in December 2001 and January 2002.

Another indicator of industrial performance is the demand for bank credit. In first quarter of this fiscal—July to September 2001—private sector retired an amount of Rs23.5 billion as against Rs4.5 billion in the same period of last fiscal.

Bankers attributed the larger retirement of bank borrowing by the private sector during July to September 2001 to global recession, late arrival of cotton in Pakistan, late crushing of sugarcane. De-listing of cotton fabrics and yarn from eligible items for export finance also affected the demand for bank credit.

Demand for bank credit, however, picked up in the second quarter of the current fiscal during October to December period when bankers reported a net disbursement of Rs62.9bn to the private sector. Though it is relatively less than over Rs85bn credit offered to private sector in the same period of 2000 yet it reflected some activity in otherwise an all pervading recessionary environment.