KARACHI, July 20: The trade policy for 2005-06, which is scheduled to be announced on Thursday, would be tailored to benefit the textiles sector. That would be in line with previous trade policies and would conform to the government’s declaration of giving boost to the industry that contributes largest share of 65 per cent to the country’s total exports.

A poll of some leading analysts brought out a consensus view that the trade policy in essence would be an extension of the unprecedented incentives granted to the textile industry in the budget 2005-06.

Khalid Iqbal Siddiqui, head of research at InvestCap observed that incentives could also be given to export of other items such as electronics and machinery, but the focus is likely to remain the same as in the previous trade policies, which is the government’s declared objective of promoting investment in and exports of textile products.

As per preliminary government estimates, the trade policy was likely to set an overall export target of over $16 billion, depicting an increase of 11 per cent over the $14 billion actual export level of the previous year.

Tanvir Abid, head of research at Live Securities said that in the post quota-free WTO regime, the country’s exports had seen a mixed trend. He said that measures could be announced to promote Pakistani textile goods on a sustainable basis so that our industries can compete with other regional players, such as China, India and Bangladesh. “Those textile mills, which are utilizing government incentives given in the budget and those mills that are going for value additions would gain a significant edge over others,” the analyst said. In the recent times, most industrial units have invested heavily in Balancing, Modernization and Replacement (BMR). In order to increase exports and enhance revenues, larger textile units have adopted an aggressive approach to undergo capacity enhancement and asset modernization coupled with increased focus upon venturing into new international markets for value-added products. Industries that went for vertical integrations would be bigger gainers.

The textile sector was already the largest beneficiary of federal budget FY06. Government had entertained major demands of the textile manufacturers and abolished 15 per cent GST on whole chain of textile products including yarn, fabric and ready-made garments. Other major steps to promote export and investment in the sector included: Reduction of duty on PSF import from 20 to 6.5 per cent. Then, the duty on PTA and MEG, raw materials for PSF manufacturing was also reduced. The previously existing 5 per cent duty on ginning machinery import was abolished.

The budgetary measure of reducing GST from 15 to zero per cent on all textile exports was meant to improve cash flows and remove hassles faced by the manufacturers in the refund process. It also should have reduced dependence on running finance facility and lower companies’ short-term borrowings.

Humaira Zaheer, head of research at Capital One Equities observed that it would be the endeavour of the government to bring down the trade deficit. This year, the country would be relying heavily on manufacturing sector to compensate for lower contribution by agriculture. Besides, import of food items would have to be compensated by larger exports. “Export-oriented industries would benefit from the upcoming trade policy,” observed the analyst. She said that historically emphasis has remained on textile exports and the policy is likely to continue this year as well. The analyst believed that the focus could be to promote import of machinery to introduce new technology to ride out the challenges posed by the post quota free WTO regime.

Analysis of the official statistics suggested that Pakistan’s textile exports during Jan-May 2005 (quota free regime period) had surged by 9 per cent and reached $3.8 billion as against $3.4 billion during the corresponding period of last year.