LAHORE, June 10: Knitwear exporters, struggling for survival in the wake of plunging unit prices of their products in the US and Europe, are trying hard to comply with the security requirements of buyers before the abolition of quotas from Jan 1 next year.

"To meet the security requirements of the US administration is a bit difficult for many exporters, especially the smaller ones, as it involves additional investments and costs," M.I. Khurram, a leading knitwear exporter, told Dawn here on Thursday.

"In order to be a security compliant producer, you got to have a separate, specialized security zone at the factory for storing your finished goods before transporting the stock out of it for shipment to the importing countries," he says.

Moreover, the exporters are required to keep a "track" of the vehicles transporting their goods to the ports to ensure that nobody tampers with them for hiding any explosives that could be used for terror acts in the importing countries.

"This is an expensive and challenging condition to comply with because it would add to our expense (without any hope of increase in the unit prices of the products)," Mr Khurram says. "Anyway, we got to do it if we want to sustain in the global markets in the changed environment."

The security compliance condition was imposed by the US in the aftermath of tragic events of 9/11 to prevent entry of explosives that could be used for terror attacks on its soil in future. "The condition is going to hit our exports hard to the US, at least in the shorter run, if Washington decides to implement it strictly," says another exporter.

Apart from the security issue, the abolition of textile quotas from Jan 1, 2005 is also worrying knitwear exporters. "The buyers are already pressing for 5-10 per cent discount although we don't factor in the quota price in the price offered to them. I think that the first six months of market adjustment would be difficult for us. At the end of six months, we would know where do we stand," Mr Khurram says.

The former Pakistan Hosiery Manufacturers Association chairman and a member of the Quota Supervisory Council, Shahzad Azam Khan, says several units had closed down or forced to cut down their production due to the losses as a result of the decreasing prices, increasing production cost and liquidity crunch faced by them due to the stuck-up sales tax refunds.

"The industry is incurring net losses of 10-15 per cent due to falling unit prices," Mr Khan says. "If the government fails to take steps and support the industry, more units are likely to close down," he warned.

Mr Khan says the government is fully aware of the situation in the industry, closures and layoffs. "When I took up this matter with Finance Minister Shaukat Aziz during his recent visit to the Lahore Chamber of Commerce & Industry, he assured me that he was aware of the situation and had indicated that the government would take action to save the industry. Whether he keeps his promise in the budget or not remains to be seen," he said in answer to a question.

The knitwear manufacturers almost doubled their production capacity during the last few years in anticipation of exploiting the quota free textile trade. But the situation obtaining in the region after 9/11 made most to operate far below their capacity, and lay off workers due to the losses.

According to another exporter, about 50 units or more have already closed down or cut down production by one-third in Lahore and Faisalabad. It is said to have resulted in the loss of 15,000 or so jobs.

The exporters feel that they can offset their losses provided they get 10 per cent duty drawbacks on their exports. In India and China, knitwear exporters get 10 per cent and 13 per cent direct or indirect rebate from their government in spite of the fact that they use indigenous raw materials.

"If you want us to compete with these two regional giants, you got to help us in the similar way in which they are being helped by their governments, that is, allow us at least 10 per cent rebate," Mr Khan says.