KARACHI, April 25: Banks continue to offer generous financial assistance to the spinners, contemptuously ignoring the value added textile sectors in matter of allocation of loans.
This approach of the bankers, many small businessmen in the textile sector complain, is defeating the objectives set in the ‘Textile Vision 2005’. This is an operational plan prepared by the government to restructure textile industry, focus on value added sector and enable Pakistan’s textile exporters to prepare for marketing beyond the year 2004 when entire system of textile export quotas would be dismantled.
“Nothing has been done to achieve the objectives of the Textile Vision 2005,” Wajid Jawwad, a well known garment exporter and a former Chairman of the Export Promotion Bureau said. He said there is absolutely no coordination between the government agencies, between the officials and the businessmen and between the manufacturers and exporters of various textile sectors.
Neither the Export Promotion Bureau nor the Board of Investment has ever bothered to take stock of the situation in the textile sector. None of the two agencies has come out with any analytical study to guide the textile exporters. Only the Textile Commissioner’s Office has been doing some strategic exercises for the textile business.
One such study points out that in the year 2001, spinners got more than Rs16.34 billion loans as against a target of Rs1.80 billion. Banks offered the mighty rich spinners more than eight times financial support than originally envisaged. Ironically, spinners are the biggest defaulters on banks’ loans and pay hardly Rs150 million tax a year on their incomes.
The priorities sectors, that include stitchers of apparels, operators of knitting units and finishing plants were given Rs5.58 billion loans as against targeted amount of Rs12.30 billion in 2001.
A detailed presentation made to the Textile Board meeting held on April 18 revealed that value-added textile sector was given hardly 40 per cent of the originally projected financial support by the banks.
Operators of stitching units were given Rs2.28 billion against a target of Rs6.40 billion. Knitting units were given Rs1.28 billion against a target of Rs1.80 billion. Finishing sector received Rs0.02 million, knit processing Rs0.20 million and woven processing Rs1.76 million.
Total exposure of spinners on banks was Rs101.53 billion by the end of December 2000. This expanded to more than Rs124 billion by end-2001. In sharp contrast the exposure of value added sector was only about Rs20 billion by end of the year 2000.
“Spinning is a capital intensive business,” a well known financial analyst of textile sector justified the sanctioning of big amounts for the textile mills. He pointed out that ready- made garments and knitting units are relatively very small operations. Small amounts are needed for setting up of garments and knitting units.
“Garments and knitting is treated as cottage industry by the government,” Wajid Jawwad complained. He said that garment manufacturers and knitwear operators are given hardly half an acre plot to set up their units. In other countries garment manufacturers set up their units on 10 acre plots.
A disturbing phenomenon being observed in the value-added sector is that small operators are literally being crushed by about a dozen giant business groups who are befitting from the banks’ loans, getting government support and has all the clout and influence to expand their business.
Business leaders compare this phenomenon to the one that was witnessed during late Ayub Khan’s infamous decade when 22 families controlled banks, insurance companies and industries.
“With an ineffective monopoly law, total lack of concern on plight of small businessman at the top and no official agency to monitor, monopolies and financial monsters have taken over Pakistan’s business and financial world,” remarked an economist. He fears a social upheaval in the coming years if those in power continue to remain oblivious of the situation.