Rather than rolling up the sleeves to take head on the coming challenges, the textile industry now looks baffled over reports of a 10 per cent fall in textile exports during July- September 2006. This drop has come in the wake of the government’s decision to extend a 3-5 per cent rebate on export of fabrics and home textiles in addition to continuing six per cent rebate on garments in 05-06.
The business also enjoys the facility of swapping expensive loans with a seven per cent rated loans for export industries. And all these concessions add up to about $25-30 billion. Apparently, this incentive package has done little to lift up the depressed spirits of the industry leaders, for many of whom, the future remains a big question mark. The textile industry faces a twin threat. It is being pushed out from export markets in USA and Europe by China, India and Bangladesh while the domestic market is flooded with smuggled and under-invoiced imported products from China, Thailand and other countries.
”At stake is more than a trillion rupees business,’’ says a former chairman, All-Pakistan Textile Mills Association who wants government to act swiftly before it gets too late and, “we miss the bus again’’. Textile business wants a cut in financial and input costs and other measures to bring down their cost of doing business. Hectic lobbying and political/economic clout has helped the textile business to win over a section of government on their side. But then the government has its own resource constraints. It has already provided about Rs25—30 billion from a pre-election year budget and finds it difficult to give more.
Independent observers say that textile business is being looked after by “too many masters’’ and that is why it does not get any proper attention from someone who can be really effective to handle its problems.
The federal agricultural ministry drawing up cotton production policy has been unable to produce good quality seeds or take a decision on adoption of genetically modified seeds. The commerce ministry looks after the export side of textile business while industry-related issues are addressed by the federal ministry of industry and productions.
The textile ministry managed to get an office and a skeleton secretarial staff after a lot of efforts. It has to look towards the three ministries and finally towards finance ministry. No wonder, it is a big hassle for the textile industry. ‘ Textile performance is bad in the first quarter, it may be worse in the second quarter’’, said Aziz Memon when asked to share his perceptions and expectations of textile business in the coming days.
Aziz, a former chairman of the Textile Export Quota Management Advisory Directorate says he has invested substantially in his garment business to be able to compete from China, Bangladesh, India, Malaysia, Indonesia, Viet Nam, Thailand and now, even Sri Lanka.”
Zahid Bashir, Chairman, Karachi Cotton Association complained of a slump in demand in international market for Pakistan’s textile products but was not in a position to offer his comments on future business prospects. ”Wait for another 15 days when the situation is likely to be a little more clear’’ he said.
The slump in demand for Pakistan’s textile products is feared when a recent survey in USA showed that 62 per cent of small businesses in America is looking forward to a strong holiday sales season. According to this survey, 68 per cent of American small business will manage on line marketing and 20 per cent are engaging additional manpower to cope with rising demand.
Clothing and apparels comes next after food and remains one of the biggest items on demand in the Christmas and new year sales in big and small stores of US. Pakistan’s share will be minimal as China, India, Viet Nam, Bangladesh have already made big inroads in the American market. Amidst these reports of expected rise in demand for textile products in USA and from Europe too, Pakistan’s textile exports in July-September 2006 slumped to $2.45 billion from $2.73 billion in same quarter a year ago. Except for yarn, the fall in the exports is virtually across the board.
What is more alarming is about a 16 per cent drop in textile export during single month of September this year to $824.72 million as against $981.57 million in September last year. “We did relatively well last year after being exposed to competition,’’ an industry leader said, adding that our exports have come under pressure because of aggressive marketing and generous export subsidies by China, India and Bangladesh. Textile exports in September are down by about two per cent over August.
As is the normal practice, the textile exports should start picking up in October with the new cotton crop trickling in about 350 textile mills and looms getting into operation to bring out cloth, towels etc., thus gearing up the entire textile chain. But the ginneries have reported a drop in phutti arrivals this autumn so far. Spinners are not in a panic but they fear a rise in domestic prices. These prices now range between Rs2,400 to Rs2,425 a maund which spinners say are alright.
What is worrying the spinners is the recent assessment of Federal Committee on Agriculture (FCA) which has brought down cotton crop estimates from originally fixed target of 13.8 million bales to 12.4 million bales.
A general belief in the industry is that the federal agricultural ministry gives a depressed estimate of cotton crop in the initial period of season to help growers get a good price. But now cotton imports has been allowed and there are reports of spinners preparing for import of 2.5-3 million bales.
‘”Interest rates are crawling up and dollar is becoming slightly costlier in kerb market,’’ says Mian Mohammad Ahmad, a leader of All Pakistan Textile Mills Association.
The government is not giving any indication of bringing down petroleum prices in domestic market in line of falling international oil prices and the textile business fears a further rise in its production cost because of cotton import and rise in kerb price of dollar.
Responding to the grievances of the textile barons, the prime minister has constituted a task force headed by himself and its sub-committee working out short and long-term strategies to tackle the industry’s problems. The sub- committee is holding a series of meeting with the stake holders to cut down the cost of doing business. A textile vision for 2015 is also being drawn up.
First, a short-term strategy will be drawn up by the sub-committee up to make textile industry competitive. The recommendations are expected to be presented by mid-November to the Task Force. The final decision will be taken by the Economic Committee of the Cabinet for final decision.
Textile industry expects some relief in energy cost particularly in the prices of gas consumed by the power generators installed in factories. The industry also expects same concessions in electricity charges.
For a long-term vision, there is a need to look at each segment of the industry separately and in conjunction with each other. There is a consensus that processing is the weakest link in the chain. This segment needs substantial investment and good managers.
Cotton cultivation is an area which has remained unattended for years. For decades, the textile industry is spinning low counts single yarn. The fabric is being weaved mostly by the informal sector and it lacks proper finishing and processing. The six per cent rebate to readymade garments has been passed on to the foreign buyers and no research and upgrading has been done in the garment industry.
Hardly five per cent of more than Rs300 billion invested in textile industry in last five years was put in the garments industry. It remains a fragmented segment. Readymade garment exports bring the highest amount of foreign exchange.
Rather than rolling up the sleeves to take head on the coming challenges, the textile industry now looks baffled over reports of a 10 per cent fall in textile exports during July- September 2006. This drop has come in the wake of the government’s decision to extend a 3-5 per cent rebate on export of fabrics and home textiles in addition to continuing six per cent rebate on garments in 05-06.
