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According to a report that appeared in The Economic Times (India) on January 27, the Indian textile exporters were expecting to face a dilemma of lower prices of their products following the scheduled end of the import quota regime, with effect from January 1, 05.
China is reported to have already reduced prices of its textile products and overseas buyers are reportedly adopting an aggressive posture to put pressure for price reduction in the post quota regime. A three to four per cent price cut might, in fact, have to be allowed with immediate effect.
According to industry sources, textile exports could come down initially in the post-quota period because of the confusion over a number of issues. Overseas buyers were now reportedly asking for reduction in lead time by 30 days from the 90-120 days prevalent, at present.
It may be difficult to make this reduction possible due to electricity breakdowns, transport bottlenecks and other infrastructural difficulties. However, in case of failure to reduce the lead time, the textile exports would be likely to suffer.
On the one hand, the dilemma of lower prices was creating uncertainty among the textile exporters and, on the other hand, export orders from overseas buyers were expected to increase manifold. Textile exporters could cash this opportunity only if they could manage to accept a price, nearly 10 percent lower than current prices.
Overseas buyers like Wal-Mart and Target were understood to be stepping up their orders for the post-quota period and they were reportedly asking the suppliers to become vertically integrated, to be in a better position to meet their requirements.
Future outlook: The textile industry in Pakistan had, in fact, been leading the export bonanza in respect of manufactured products in recent years. Pakistan had emerged as one of the major cotton textile exporters in the world market, with a share of about 30 percent in the world yarn trade and 8 percent in the trade of cotton cloth.
The share of textiles in the country's export earnings was around 68 per cent, with a value of approximately $7 billion, at present. During the last 4 years the government, in collaboration with the industry, had embarked upon a plan to prepare the industry to meet the challenges of opening up to foreign competition in the post-quota period.
The year 2003-04 had witnessed massive investment in the expansion of value added and BMR in the textile sector. According to an estimate, the textile sector had received $4 billion worth of investment during the last 4 years and an encouraging feature of this investment was that modernisation and higher value-addition had received the highest priority in the aforesaid investment.
The above-mentioned investment in the textile sector, it is hoped, would enable the Pakistan textile industry to face the formidable challenges resulting from the elimination of the import quotas under the WTO rules, with effect from January 1, 2005.
During the year 2003-04, the textile sector had shown great resilience to higher cotton prices and had performed satisfactorily in very difficult circumstances.
In view of the position stated above, one strongly hoped that the local textile industry would be able to face the challenges ahead and take full advantage of the opportunity arising out of much bigger orders from the overseas buyers in the wake of elimination of import quotas from next year.
There is hardly any doubt that Pakistan would have to face tough competition from both India and China in this region. India, like Pakistan, is preparing very hard at the moment, in order to be in a position to take full advantage of the opportunity when it comes. So far as China is concerned, it had already reduced the prices of its textile products to attract overseas buyers.
However, according to the report referred to in the preceding paragraphs, the overseas buyers did not want to put all their eggs in one basket, by meeting all their requirements from China.
Re-emergence of the dreaded SARS and problems in the Chinese economy had made them cautious enough to look for alternative suppliers, in addition to China. Pakistan, therefore, had an opportunity and it should be fully prepared to grab it.
