September 04, 2006	Monday	Sha'aban 10, 1427

For more than 15 years, the government and the textile industry have been talking about the shift towards value-addition. All kinds of incentives including low mark-up on loans for export-oriented textile industry have been offered. However, the outcome has been much below the expectations.

Semi-manufactured goods like cotton yarn and cotton cloth are sold to other countries, which have been adding value to the semi-finished material to earn much higher income. A recent UNDP report revealed that the Pakistan was selling its textile products to European Union and United States at cheapest rates in the South Asian region. The report clearly indicated that the country has lost the best time to grab the market when China and India were capturing the European and American markets after the end of Multi-fibre Agreement in January 2005.

The volumetric increase of exports by China and India shows that Pakistan has lost the race for acquiring additional share in Western markets. The demand for the Pakistani textile products is shrinking and the prices have sharply fallen compared to the textile products of China, India and Bangladesh.   

The UNDP’s “Asia-Pacific Development Report 2006” which was launched here on August 25, showed that Pakistan was getting the lowest price for its textiles and clothing compared to Bangladesh, India and China.   

Except Bangladesh, all the three countries are large producers of cotton in the region. Bangladesh not only succeeded in getting a better price as compared to Pakistani textiles products but it also increased its export by 2.3 per cent value-wise and 4.2 per cent in terms of volume in 2005 compared to 2004.

Being in the list of the least developed countries (LDCs), Bangladesh has some concessions in the import tariff but Pakistan exported more and got less money than Bangladesh. The report also disclosed that Pakistan could not capitalise on abolition of Multi-fibre Agreement (MFA) while China and India captured the maximum space created after quota- free regime. Pakistan exported about one billion Kg textiles and clothing to European Union and United States during 2005 and at the rate of $5.38 per kg.

India secured much higher price of $8.60 per kg and Bangladesh got even higher at the rate of $8.67 per kg. China received the highest price of $9.85 per kg.    Pakistan exported textiles and clothing worth $5.393 billion in 2005 while Bangladesh increased its export to $6.986 billion during the same period. But Bangladesh exported 805 million kg of textile and clothing while Pakistan exported over one billion kg.  

The newly set-up Bangladeshi textile industry is mostly run by Pakistanis and gradually they are training the locals to run the machines by themselves.

However, the Bangladeshis marketed products by themselves showing their marketing and managerial skills, potential of making plans, ability to exploit situation in their favour and knowledge to deal with the global business changes.   

Pakistan had an excellent chance to penetrate the EU and US market after MFA-end as the country’s had record cotton production in 2004-05 and slightly less in 2005-06. The textile export, which rose during the two years, was because of record cotton production and not because of any strategy or plan of the government or the textile sector.   

At least five ministers including the textiles’ are working to take care of the economy which heavily depends on textile sector for growth, employment, revenue and foreign exchange earnings. But what they did has resulted in record trade deficit and increased borrowings from external sources.

Despite heavy investment of $5 billion in the textile sector during the past five years, the Pakistani exporters still rely heavily on semi- raw manufactures like cotton yarn and grey cloth for their exports earnings. This is surprising that we are importing machines of billions of dollars to produce the same raw material like cotton yarn and cotton cloth. The value has been added to machines but the products are getting cheapest prices?

The finished textile products are facing serious problems and the industry is asking for help from the government. India and Bangladesh prepared for the situation but the policy makers in Pakistan were relying and enjoying the benefits of 9/11. For more than a decade, Pakistani textile tycoons have been talking about the shift from semi-raw material to finished products, which could add enormous value to their products, but the things are moving at a snail’s pace.   

The report said that the 12 major Asian producers and exporters have collectively increased their share to the US and EU markets. Overall, in both markets, their combined share has increased from 44 per cent in 2004 to over 51 per cent in 2005.

Among the Asian exporters, the biggest gains have been experienced by China and India. In the two markets combined (EU and US), China’s share has increased from 20 per cent to 27 per cent, while that of India has gone up from around 5-6 per cent.   

The report said that the initial losers, in terms of the decline in value of exports to the US and EU markets are Nepal, the Philippines, Thailand and Pakistan. Pakistani textiles and clothing export to EU and US slipped by 0.8 per cent in 2005.       During 2005-06 Pakistan exported cotton yarn worth $1.424 billion, which was 34 per cent higher than last year, and in terms of volume it increased by 36 per cent over the previous year.

During the same period export of cotton cloth, another semi- manufacture, was at $2.139 billion, which was 14 per cent higher than last year. In terms of volume, it also increased by 16 per cent. Together, the two raw items constituted 36 per cent of the total textile manufactures. Apparently no worthwhile strategy has been devised either by the relevant ministry or textile sector itself. European Union has put some restriction on import of Chinese textile products to protect their market which also provides a space for exports for countries like Pakistan to the EU.

However, the restriction would be over in 2008 and the Chinese being very good planner must have a complete strategy to flood the EU market with their cheaper products. This will further narrow the scope for Pakistan to increase its export to the region; it may lose substantially if proper strategy is not adopted.