Textile industry bounces back stronger

Published December 14, 2020
Pakistan’s textile exports seem to have largely recovered from the Covid-19 pandemic shocks and are still growing. — Reuters/File
Pakistan’s textile exports seem to have largely recovered from the Covid-19 pandemic shocks and are still growing. — Reuters/File

Pakistan’s textile exports seem to have largely recovered from the Covid-19 pandemic shocks and are still growing. The recent monthly data published by the Pakistan Bureau of Statistics for the first four months of the current financial year confirms that the textile and clothing export shipments are back on growth trajectory both in terms of their quantity and dollar value.

The data shows that the textile shipments have surged by 3.8 per cent to $4.8 billion between July and October from $4.6bn a year ago. The rise in the textile and clothing group has been a wee faster than the 0.6pc growth in the overall export. The export recovery is most prominent in the knitwear, home textiles and denim segments.

There is also a significant decline in certain cases — in the shipments of the basic textile commodities such as yarn and grey cloth, indicating that the country is exporting more value-added products than ever before. It also reflects a shortage of raw materials for the value-added industry owing to an extremely poor cotton harvest this year. Besides, the local cotton prices have peaked to a 10-year high on account of a sharp drop of 37.6pc in the cotton arrivals for ginning to 4.6 million bales by December 3 compared with 7.4m bales last year.

‘The domestic industry is already planning expansion and is ready to invest $5 billion across the textile chain to double our exports by 2025’

The government has recently announced a lucrative energy package for the industry to help the exporters recuperate from the Covid 19 shock. The package does away with peak electricity rates, offers reduced tariffs on additional power consumption, and fixes power price at $0.07 a unit and gas tariff at $0.065mmbtu for the export industries.

In addition to that, the central bank has reduced interest rates by 625bps, approved refinancing of wages to prevent layoffs during lockdown period and deferred payments of the principal amount of loans as part of the debt restructuring offered to households and businesses, provided relief under the Export Financing Scheme (EFS) and the Long-Term Financing Facility (LTFF). Furthermore, the State Bank has also launched a long-term concessionary financing facility for boosting investments in new capacity expansion and up-gradation of technology.

“Most exporters have orders filled till March,” says M I Khurram, chairman of Comfort Knitwear. “The recent rise in exports is because of strong orders for the winter season in Europe and the United States. We are expecting exports to increase in the coming months.”

He says the textile exports have been helped by multiple internal and external factors after three tough years. “Internally, the energy package announced for the export industry and market-based exchange rates have helped exports become competitive. Moreover, the suspension of the International Monetary Fund economic stabilisation programme has also provided the economy with some breathing space.”

Textile shipments have surged by 3.8% to $4.8 billion between July and October from $4.6 billion a year ago

The external factors that have helped the orders from the West to almost double since July, according to Mr Khurram, include the US-China tensions, and ongoing supply disruptions induced by the Covid-19 pandemic in India and Bangladesh. “These factors have helped Pakistan grab additional export orders from Europe and America. With Vietnam and Cambodia already working to their full capacity, the buyers had only Pakistan, where manufacturers had idle production capacity, to turn to.

“Europe remains our biggest buyer at the moment as the demand in the US remains subdued owing to rising infections there. But many like us are now planning to expand our production capacity, hoping we can increase and retain our market share in future as well.”

He says Pakistan could not increase its unit prices in dollars because of product quality issues. “Since most exporters of value-added textiles are small- to medium-enterprises they do not have capacity and wherewithal to improve the product quality. Additionally, we grow very poor quality cotton. Unless we work across the textile supply chain to improve the product quality our export will not grow rapidly (both in dollar and volume terms).”

Others agree with him. “At present, we are the most competitive textile exporting country in the world,” argues Khurram Mukhtar, chief executive officer of Sadaqat Limited in Faisalabad. “Currently, we are witnessing an unprecedented boom in export demand. “We have both cost and tariff advantages over our Chinese competitors in European and American markets while our Indian and Bangladeshi rivals are struggling because of supply chain disruptions. Pakistan is now an emerging country in textiles.”

He sees a resurgence of a strong appetite for value-addition in the country. “The data shows that value-added exports are rising at the expense of raw materials like cotton, yarn and cloth. Now we need to prepare ourselves to sustain our increased share in the international market when our rivals return to it and fight back for their lost share. The domestic industry is already planning expansion and is ready to invest $5bn across the textile chain to double our exports by 2025. But for that to happen we require the long-term policy framework in the shape of the textile policy to ensure that the present favourable policies will not be rolled back in the middle of the way.”

But exporters like Ijaz Khokhar think both the government and the exporting community need to somewhat temper their optimism. He believes that the resurging virus infections at home and abroad and possible raw material shortages for the value-added industry could reverse the export gains in two to three months. “How the situation turns out eight weeks from here depends on if the government is ready to tweak its policies like removal of customs duty on yarn imports to support the exporters”

He concludes: “we are seeing unprecedented growth in textile & clothing exports. The new orders are a windfall for Pakistan’s industry. How long will this windfall last? You never know. It can sustain for years to come and it can fizzle out soon. It all depends on how we want to steer this industry into the future.”

Published in Dawn, The Business and Finance Weekly, December 14th, 2020

Opinion

Poisoning minds
23 Jan 2021

Poisoning minds

ICS cadets were raised on James Mill’s notorious work.
The fog of Broadsheet
23 Jan 2021

The fog of Broadsheet

How can the government pump credibility into an official probe when it has already declared its own political verdict?
Cheating on online exams
23 Jan 2021

Cheating on online exams

The difficulty of preventing online cheating and low ethical standards means that these days most students cheat.
Language mess
Updated 22 Jan 2021

Language mess

Our policy confuses the medium-of-instruction debate with the language-acquisition debate.

Editorial

23 Jan 2021

Power price hike

ALREADY struggling to cope with the impact of the Covid-19 pandemic and rising food prices, consumers received yet...
Updated 23 Jan 2021

Israeli land grab

WITH the chapter now closed on the Trump presidency, the eyes of many in the international community — ...
23 Jan 2021

New PhD policy

EARLIER in the week, the HEC chairman announced several changes for undergraduate and PhD degrees in the country....
Updated 22 Jan 2021

Time to heal

A multitude of foreign issues will test Biden’s mettle and require progressive thinking.
22 Jan 2021

Foreign funding

AS the pressure builds on his party in the foreign funding case, Prime Minister Imran Khan has called for an ...
22 Jan 2021

Decaying PTV

THE Cabinet Committee on State-Owned Enterprises has decided to remove Pakistan Television from the list of...