LAHORE, March 11: Margins of Pakistani garment exporters are squeezing in the European Union (EU) markets because they are constrained to sell larger part of their goods through “middlemen instead of directly to the customers” since the Sept 11 events.

“It is mainly due to low (country) credibility of Pakistan and lack of confidence on our manufacturers capability to execute the orders in time as a result of the post 9/11 developments,” Jawwad A Chaudhry said while talking to Dawn here at the PRGMEA office.

“Since the terror attacks on the US cities, majority customers are shaky about Pakistan. They want to pass on the risk of a delayed delivery of the orders to someone else. They need somebody who will ensure timely execution of the orders. And there are several companies in Europe and elsewhere that would be willing to take the risk for commission,” Jawwad says.

“The panicky exporters, who are short of orders since Sept 11, readily agree to lower prices just to secure orders to keep their production units operational,” he says.

The price of several categories of readymade garments are said to have declined by 10 per cent in the last couple of months. The 15 per cent increase in the textile quota and removal of tariffs, says Jawwad, has also contributed to the fall in the prices. “The exporters, who are not getting any orders from the US market, are also turning towards Europe. They see a big opportunity in Europe for themselves after the increase in the textile quota by the EU.

Furthermore, several new exporters have also jumped in to the fray because they see this concession as a good opportunity for themselves to enter the export markets. This glut of exporters from Pakistan is also partly responsible for the decline in the average prices, nullifying the benefit of zero-rated imports to the EU states,” Jawwad claims.

He says the exporters margin further squeezes due to “auction” of quota at high rates by the government, which also increases the price of quota in the open market.

“The real beneficiary of the increased quota is the government that makes a lot of money out of it and not the exporters. The quota should first be distributed amongst the exporters on the basis of performance and value-addition. Then the new exporters need to be accommodated. If something is still left, it should be auctioned. This is the only way to encourage its cent per cent utilization,” Jawwad says.

Last but not the least, he feels that the “exporters also need to be compensated for the loss of value of the dollar against the rupee.” The abrupt strengthening of the rupee, he says, since the Sept 11 attacks has dealt a severe blow to the exporters who have suffered huge losses because of a sudden drop in the value of the dollar. The exporters, he believes, could be compensated for this loss by being allowed an increased duty drawback of 7-8 per cent, instead of the existing 4.5-4.8 per cent. In addition to this, he suggested, they should be allowed a premium for loss in the value of the greenback.

There are around 1,100 readymade garments manufacturers in the country. Of them, 400 are located in Punjab. Only 7-8 per cent of them may be categorized as “big producers”. The rest are small or medium sized manufacturers, involving a big number of women.

Pakistan’s entire readymade garment exports are close to $825 million per year. In the first seven months of the current fiscal — July to Jan — their exports rose by 6.16 per cent to $503.495 million from last year’s $474.284 million during the same period.

The official export figures for the first seven months reflect that the readymade garments exports dropped by $35.548 million in such markets as the US, Germany, Canada, Belgium, Denmark, Japan, Irish Republic, Thailand, S. Korea, Turkey, Indonesia and China.

The biggest setback was suffered in the American market, where exports fell by $25.643 million.

However, the garments exports rose by $56.999 million to these countries: the UK, Spain, Sweden, Australia, Saudi Arabia, Dubai, Netherlands, France, Italy, Bangladesh, Hong Kong, etc.

The highest exports growth of $16.710 million was registered to Dubai, which was followed by the UK with $9.827 million and Saudi Arabia with $9.266 million.