KARACHI: Another textile maker joined on Tuesday the steadily growing list of industrial units that’ve either scaled back or suspended operations citing unfavourable economic conditions.
Crescent Fibres Ltd is curtailing production by up to 50 per cent owing to “widespread demand destruction,” it told shareholders on Tuesday.
Earlier, Suraj Textile Mills Ltd announced it was bringing down its production by 40pc. Nishat Chunian Ltd also announced its partial shutdown because of poor business conditions. Similarly, Kohinoor Spinning Mills Ltd temporarily shut down production partly because of a high production cost and low demand.
The industry-wide production halts are reflective of a rising cost of doing business locally coupled with unfavourable conditions that are prevailing in the global market, analysts said. The trend is already apparent in foreign trade numbers as textiles constitute the main source of the country’s export proceeds.
Speaking to Dawn, Pakistan Apparel Forum Chairman Jawed Bilwani said the clothing industry in Pakistan is currently operating at “50-55pc” below its optimum capacity.
“In addition to low international buying, the country’s apparel makers are suffering because of a host of domestic issues. There’s a shortage of dollars to import raw materials. Machinery imports are in limbo. Utility rates have gone up so much that we’ve become uncompetitive versus Bangladesh,” he said.
Bangladesh is still growing its monthly exports by around a quarter on an annual basis even in the middle of a downswing in the global markets. “Bangladesh’s exports are growing because its products are cost-effective but ours aren’t,” he said.
According to Pak-Kuwait Investment Company Ltd Head of Research Samiullah Tariq, the sector-wide downswing is mainly caused by a low demand in export markets coupled with a bad cotton crop, rising utility rates and unusually high interest rates that’ve increased the overall cost of doing business. Proceeds of textile sales in the international markets dropped 18pc in November to $1.42 billion on a year-on-year basis. The annualised decline in the first five months of 2022-23 remained 5pc.
High living on borrowed dollars
Speaking to Dawn, development economist Kaiser Bengali said the central bank made an “unintelligent decision” of restricting the imports of industrial inputs to save dollars. “Imports of consumer items, however, are still going on under one pretext or another,” he said while holding the policymakers responsible for the collapse-like situation in the textile industry.
He said the government should suspend the local assembly of vehicles while immediately introducing the rationing of petroleum products. “One car should get a quota of 150 litres of petrol per month,” he said.
Even though automakers have also observed production shutdowns in recent months, Dr Bengali shows little sympathy for the industry that operates on “borrowed dollars”.
“We pay dollars to import car engines. We pay dollars to import petrol. We pay those dollars out of the foreign loans we take out so liberally,” he said.
Pakistan imported petroleum products worth $1.6bn in November, down 25pc from a year ago but up 39pc on a month-on-month basis.
Curbing petrol imports and the local assembly of vehicles will result in layoffs in related sectors, he says, but the move will free up the resources to create jobs in export-oriented segments like textiles.
Published in Dawn, january 4th, 2023