KARACHI, Nov 24: After claiming about Rs30 billion as cash subsidy, concessions on bank loan rates and also on export refinance in last 30 months, the textile sector has shown an insignificant growth of only one per cent in the first four months of the current fiscal year.
Textile sector export during July to October 2007 amounts to about $3.65 billion as against $3.61 billion in the same period of last year. This includes $11 million export of raw cotton in last four months.
“This sluggish export growth in Pakistan’s textiles has come when exchange value of Indian rupee has appreciated by about 10 per cent and that of Chinese yuan by about 6 per cent,’’ said an official in Islamabad, who wondered as to why Pakistani exporters were not able to make a big headway in international export market with all these advantages.
There is a concern in official circles as well as in the business on Pakistan’s textile export trailing behind the indicated export target of $12.21 billion, which should have shown at least $1 billion textile export every month. Textile exports in September amounted to $922.41 million, which declined by about 3 per cent to $836.85 million.
The proportionate textile export target for four months of July to October is $4bn but actual export is $3.65 billion.
“All is not lost yet,” the official said while pointing out that Pakistan textiles still hold the ground and maintain a rising trend of one per cent, which when compared to average four per cent annual growth of global textile export, offers some ground to cover.
The government started offering 6 per cent Research and Development (R&D) subsidy to the readymade garment exporters since May 2005. In the following year, the cash subsidy incentive was extended to other value added sectors at the rate of three per cent and five per cent.
The textile sector has so far claimed Rs25 billion cash subsidy and according to a report of an international consultant the real beneficiaries were commercial exporters. There was a recommendation to shift payment of cash subsidy to the manufacturers from commercial exporters with close monitoring to ensure that the available cash subsidy should be invested in upgrading manufacturing quality and development of brand names for textile products.
“Nothing of that sort happened and commercial exporters are rolling in money while industry, particularly the ginning, dyeing, garments and knitwear remains in state of disrepair and obsolete.
In addition to Rs25 billion cash subsidy, the government provided financial relief by way of swapping high interest bearing loans of textile mills to long- term concession rated loans and offered export refinance at 7.5 per cent rate. Later, a 3 per cent concession on bank loans was also given to certain category of spinners.
“The textile sector was given financial relief at the cost of about Rs1 billion every month from the budget,’’ a leather industry leader remarked who pointed out that six per cent cash subsidy was given to the shoe makers in January 2006.
The leather garment manufacturers are also seeking same cash subsidy on export. But all their efforts and lobbying has so far failed to produce any results, he added.
According to official estimates cash subsidy on footwear export has so far claimed Rs29 million only. The shoe export in last four months has shown a negative growth of a little over one per cent to $35 million in last four months. Overall, the leather made ups export has shown a negative growth of more than 17 per cent.
Falling export of labour intensive industries—textile and leather—failed to attract as much attention of the outgoing government of Shaukat Aziz as it should have as according to a leader of textile industry, “He (Shaukat) was more interested in stock exchange operations, where he promised, before leaving his office, to extend exemption from capital gains tax.’’
As if all this was not enough, the ginners are now engaged in a head-on clash with the spinners. About one thousand ginners in Punjab and 200 in Sindh plan to go on strike as they complain the spinners are on a go slow on buying resulting in piling up of inventory of ginned cotton and phutti with them.
“Spinners want us to sell them cotton at Rs3,000 for a bale as against a cost purchase price of Rs3,400 to Rs3,500’’ Sohail Mahmud, the chairman of the ginners association said.
Ginners say that they are stuck up with huge bank loans for purchase of cotton from the growers at Rs600 for maund. But due to suspension of purchase of ginned cotton by the spinners, their cash liquidity is badly impaired. The ginners too are also under attack from the growers, who are not ready to accept that they are providing cotton that contains too much moisture and is contaminated.
Spinners say that most of the ginning machines are obsolete and the cotton they get from the ginning units is of bad quality, which creates problems in yarn spinning. Quite a good number of spinners have not been able to get credit margins from their bankers as most of them have defaulted on servicing of the previous loans.
“All industries need a close and analytical look,’’ said a market analyst, who pointed out that services sector in Pakistan has expanded to about 53 per cent of the national economy by shrinking real sectors — agriculture and industry. Time has come to bring about a realistic parity ratio of all these sectors of the economy.
