Missing the big picture

Published November 6, 2006

At a time when Pakistan’s sprawling textile industry was confidently expecting large-scale increase in its exports, following the end of the textile quota, the foreign sales have come down by over 10 per cent during July-September compared to the same period last year.

According to present negative trends, the current quarter’s export performance, it is feared, may turn out to be far worse. Urgent remedial measures have to be taken by the government, industry and exporters, if the adverse trend is to be reversed decisively

The fall in Pakistan’s textile exports has come at a time when not only South Asian competitors in this sector are doing very well but even Cambodia in the Far East is said to be exporting more textiles than Pakistan.

This has happened despite the investment of five billion dollars on the expansion and modernisation of the industry and a million dollars more on the erection of factory buildings.

And this has happened despite the assertion of the ebullient textile industrialists that they will do far better in a textile quota-free world.

While Pakistan’s overall exports rose by only 2.9 per cent in the first quarter of this financial year, Indian exports went up by 37 per cent in the first half of its financial year ending September 30.

Pakistan’s July- September textile exports were for $2.449 billion against $2.73 billion in the first quarter of last year.

Official figures show that export of almost all textile items, except cotton yarn and cotton carded, recorded a negative growth despite the recent support package, fiscal and financial, announced by the government.

The concessions given to the industry by the government, instead of helping to boost the exports, appear to have brought down the prices of Pakistani textiles abroad and reduced their market size except for cotton yarn. Compared to that the more expensive export items of China and India had a far larger sale in the European Union.

The export of ready made garments from Pakistan dropped in the first quarter by 7.84 per cent and cotton cloth export declined by 14.61 per cent. But export of cotton yarn increased by 19.57 per cent.

Export of knit wear, a value added item declined by 10 per cent, bed wear dropped by 19 per cent and towels by 4.82 per cent.

Export of made-up articles including other textiles declined by 33.54 per cent and art silk and synthetic textiles came down by 24.57 per cent. These are indeed large losses, more so for those confidently hoping for larger exports.

Cotton yarn exporters are having an exciting time because of nearly 20 per cent rise in yarn exports. While that makes yarn more expensive for those manufacturing and exporting fabrics and other textiles at home, the yarn is sold at cheaper prices abroad by passing on a part of the benefit to the foreign buyers given by the government to the spinners.

While other textile exporters are protesting against the financial concessions given to the spinners, the spinners are asking for more subsidies. And the All Pakistan Textile Mills Association is supporting that demand as it is dominated by the spinners.

But other textile exporters want a check on yarn exports in the form of quota restrictions or a duty on exports of yarn so that they can get all the yarn that they need and at fair prices and make their products more competitive to sell abroad.

While the interests of the textile industry were being looked after by the ministry of industries and the ministry of commerce until recently there was clamour for a separate textile ministry. But now there is not only a cabinet minister for textiles, but also a minister for state which is wholly unnecessary.

And yet the textile exporters are protesting that all that the textile ministry is doing is to ask for concessions for the textile mill owners and not looking at the larger problems of the industry.

Evidently the three ministries have not been able to solve the problem of the textile industry in a highly competitive world where decisions have to be taken quick and actions follow immediately.

So, the textile exporters sought intervention of Prime Minister Shaukat Aziz. He has promised to do the needful and he has asked the Planning Commission to suggest measures to raise Pakistan’s exports from 13 per cent of the GDP to 15 per cent.

A small committee has been set up under Tariq Saigol to come up with urgent solutions. Both the bodies have yet to submit their reports.

It is not good for the country that the yarn exports flourish at the cost of cotton cloth, readymade fabrics and knitwear which have received serious setbacks on the export front.

The yarn exports are increasing at the cost of other higher priced textile exports at a time when the country has run out of its own cotton and it may have to import a million bales of cotton this year apart from importing finer cotton to make better textiles.

There is nothing glorious in extracting a great deal of concession from the government and then selling the yarn at cheap prices abroad. The textile industrialists should improve the quality of their products and become more venturesome in the exports. If the current policy results in a closure of about 300 knitwear units or eventually a million spindles, as claimed by the textile industry, that would damage the economy a great deal.

Instead of often rejoicing over higher exports, the mill owners should promote the value added goods and try to get far more for every pound of cotton textile. Pakistan cannot sacrifice its large economic interests for the small gains of the spinners.

The spinners have dominated the industry for too long. Now that we have no surplus cotton, the policy of rejoicing over the export of cheap yarn should give way to a more sound approach to textile export.

Textile mill owners should be far more enterprising and far less conventional, and should come up with new products on the basis of market studies abroad and new designs that reflect the new trends abroad. They should look for new markets, moving away from their quest for cheap markets and radicalise their trade.

They should participate in international trade fairs and fashion shows and improve the efficacy of their business practices.

They need more educated sales force and they have to keep up with the new trends in the world textile trade which has changed a great deal after the quota system ended and meet new market demands. And they have to prefer exporting more and more of the value added to cheap goods and emerge successful through a determined quest for success.

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