Alert Sign Dear reader, online ads enable us to deliver the journalism you value. Please support us by taking a moment to turn off Adblock on

Alert Sign Dear reader, please upgrade to the latest version of IE to have a better reading experience


Insufficient capacity: GSP Plus status for Pakistan

November 08, 2013

OPPORTUNITY is for those who are ready to grab it. Unfortunately, few in Pakistan are prepared to handle the huge opportunity provided by the European Union under its GSP Plus scheme, comprising generous trade concessions. The approval on Tuesday of GSP Plus status for Pakistan and nine other countries by the EU Committee on International Trade has brought us very close to preferential trade with the 27-nation bloc from January next year. The formal approval of the EU Parliament next month will allow almost 20pc of Pakistani exports to enter the EU market at zero tariff and 70pc at preferential rates.

EU trade concessions will benefit the country’s largest manufacturer and exporter, the textile and clothing industry, the most by enabling its products to compete with those of regional rivals like Bangladesh and Sri Lanka, which already have duty-free access to the bloc’s market. At present, our textile and clothing exports to the EU constitute more than half of the country’s total exports of almost $9.5bn to the bloc. These have the potential to more than double in a few years. Though the scheme caps annual growth in the textile and clothing imports from Pakistan at 14.5pc, the industry expects to boost its earnings from the EU by up to $1bn annually. But can it?

For many years now, the industry hasn’t invested in capacity expansion due to various reasons — growing energy shortages, high credit cost, poor security conditions, etc. A substantial part of its capacity in Punjab is inoperative because of severe gas and electricity shortages. By the time the EU trade concessions become effective, more capacity will be closed down, though temporarily, as the government plans to cut off gas supply to the industry for three months to facilitate domestic users. Indeed, a few large manufacturers have invested money in value-added textiles despite all these problems with a view to take full advantage of the GSP Plus scheme. But even they have invested in traditional, cotton-based products. The government’s skewed policies that have discouraged the use of manmade fibre and diversification of textile exports will restrict the industry’s ability to reap the full benefits of the newly acquired status. If the government wants the industry to gain maximum advantage from the concessions, it must help the manufacturers revive capacity by ensuring uninterrupted gas and electricity supply as well as cheap credit for new projects and by easing restrictions on the import of fabric and other raw materials not produced domestically, in order to encourage product diversification.