KARACHI, May 12: Pakistan’s textile exports have started picking up after the removal of quotas from January 1, a closer look at the latest data on external trade shows. Textiles exports in July-December 2004 totalled $3.743 billion before rising to $5.972 billion at end-March 2005, thus showing an increase of $2.229 billion in three months or $743 million per month. This means an increase of $119.2 million or 19.1 per cent in average monthly exports of textiles in January –March this year, as monthly average exports in July-December 2004 was $623.8 million.

“This is quite encouraging,” says Riaz Ahmed Tata, a leading textile exporter and former head of the apex private sector’s representative body.

“But if we want to sustain the post-quota gains the government will have to save value-added textiles exports from the adverse impact of rising cost of export finance,” the former president of the Federation of Pakistan Chambers of Commerce and Industry told Dawn.

The export finance rate or the rate at which businessmen get export loans from banks shot up to eight per cent this month from just 3.5 per cent at end-June 2004, showing a huge increase of 4.5 percentage points within 11 months.

The rate looks set to rise further as the State Bank is tightening the interest rates at a much faster pace now than in the first three quarters of this fiscal year to check rising inflation. Inflation rose to 9.06 per cent in July-March 2004-05, over the same period last fiscal year and is likely to end up at around 9-10 per cent towards the end of the year in June.

“In the post-quota regime we have to compete against giants China and India in value-added textiles...we cannot compete well if input costs continue to rise,” said Mr Tata, claiming that both China and India offer hidden subsidies to their value-added textiles. Though textile exports in January-March 2005 grew remarkably, the overall growth in exports in nine months of this fiscal year over the same period of last fiscal is slightly above two per cent.

The $5.972 billion textile exports in July-March were up 2.09 per cent only, over the $5.85 billion exports in a year-ago period, the FBS data show. The growth in textile exports would have been higher had the European Union not re-imposed a 12 per cent customs duty besides slapping a 13.1 per cent anti-dumping duty on Pakistan’s bed-wear.

Pakistan has so far tried diplomatic channels to get the EU decision of re-imposing customs duty and anti-dumping duty reversed. It has still not sought the legal remedy through the WTO forum, but it may have to try that also to avoid a further fall in bed-wear exports.

That Pakistan’s textiles sector is disadvantaged as compared to its peers in China and India is a widely-held perception. In its recently released Pakistan Economic Update, the Asian Development Bank also dealt with this issue.

A special report carried in the update noted: “Pakistan’s T&C (textile and clothing) exports are significantly disadvantaged because of cost/productivity differentials. One influential (World Bank) study has suggested that Pakistan’s efficiency in the sector was 38 per cent of globally feasible levels, while for firms in China this ranged from 40 to 65 per cent.”

According to a World Bank study, various production costs such as electricity, wages, sales and general administration, and interest and rent were all substantially higher in the case of Pakistan’s apparel manufacture as compared to China, India and Bangladesh. At $5.972 billion, Pakistan’s textile exports in nine months to March 2005 were 57.3 per cent of its total exports of $10.206 billion.