Pakistan's Textile export earnings shrink(China, India and Bangladesh gain)
Textile export earnings shrink
By Sabihuddin Ghausi
KARACHI, Sept 14: While the local textile market is flooded with cheap products from China and Thailand, export prospects of Pakistan’s textile industry in coming months remain pretty uncertain, causing sleepless nights to the textile barons.
“The industry has been upgraded with heavy investment, the government has given rebates, subsidy and concessions in financing and cotton crop prospects are not that bad, but we do not see light at the end of the tunnel,” moaned a well-known leader of the textile industry who does not want to be named because he is frequently consulted by the government on business affairs.
After almost 21 months of lifting of textile export quota barriers and ushering in of a virtual free flow trade system since the beginning of 2005, Pakistan faces a twin menace. An open price-war in the most affluent markets –- the US and the EU -— has put Pakistan under tremendous pressure by China, India and Bangladesh. In the domestic market, cheap clothing, apparels and home textiles from China and Thailand are attracting a large number of buyers.
In this liberal trade environment, Pakistan’s textile industry, according to market analysts, made gains only in quantity terms. It means that the industry exported a big quantity of textile products to get too little money. “This is the reason that Pakistan’s textile industry continues to ask for one concession after another,” an official of a government agency replied when asked to quantify in money terms the rebate and concessions on bank financing being offered to the textile industry in the current fiscal year.
Figures for the money to be doled out to the richest people of Pakistan -— textile barons -— vary from Rs25 billion to Rs40 billion after the government announced to continue six per cent research and development (R&D) rebate to garments and knitwear in the current fiscal year. Fabrics and home textiles are also being given three and five per cent R&D rebates. Bank loans given to textile mills are being swapped with the long-term finance facility for export-oriented units at seven per cent. In addition, textile exporters are being given export refinance at much reduced rate.
“Nowhere in the world is export refinance offered,” reminded State Bank Governor Dr Shamshad Akhtar to the textile business in Faisalabad last week. She disclosed that 3,000 cases of fraudulent R&D rebate had been detected. Neither the State Bank nor any government agency nor any trade body that offers a certificate to the exporter has come out with facts and figures to disclose as to who were the businessmen involved and how much money was involved.
Bankers, officials and textile industry leaders say that a total amount of about Rs450 billion has been invested in the modernisation and improvement of production techniques of the textile sector. Textile machinery worth about $4 billion (Rs240 billion at rate of one dollar equal to Rs60) was imported in the last four years. At least a sum of $1 billion (Rs60 billion) was invested in import of supporting machines and electric generators. About Rs100 billion was invested in civil work.
Figures gathered from various sources revealed that banks provided a total sum of Rs188.50 billion assistance to the textile sector during December 2000 to March 2006. In the five-year textile vision drawn up by former commerce minister Razak Dawood to upgrade Pakistan’s textiles for open competition in the world market after phasing out of textile export quotas in 2005, five sectors were declared as priority areas. These were stitching (apparels), knitting, finishing, knit processing and woven processing.
Out of total Rs188.50 billion, these five priority sectors received only Rs43.19 billion. The woven processing sector was given Rs22.12 billion in the last five years, followed by Rs7.5 billion to stitching, Rs6.33 billion to knitwear, Rs5.42 billion to knitting and Rs1.76 billion to finishing. All these priority sectors are labour intensive and value-added, which need least capital to give maximum employment and big amount of foreign exchange.
The traditional five sectors of textile are capital intensive with relatively less employment opportunities and were given Rs145.26 billion in the last five years. The spinning sector claimed the highest amount of more than Rs96 billion followed by weaving jet air Rs26.57 billion, polyester fibre Rs9.26 billion, weaving water jet Rs1.81 billion and weaving Rs1.48 billion.
Even after investment of such a huge amount, Pakistani textile exporters find themselves hard pressed because what they feel “cost of doing business in Pakistan too high”. After getting rebates for R&D, swapping of high cost loans with subsidised rate loans, the textile mill owners now want a cut in utility cost. Gas and electricity rates are too high for the industry and a fresh look on the matter is the demand.
By Sabihuddin Ghausi
KARACHI, Sept 14: While the local textile market is flooded with cheap products from China and Thailand, export prospects of Pakistan’s textile industry in coming months remain pretty uncertain, causing sleepless nights to the textile barons.
“The industry has been upgraded with heavy investment, the government has given rebates, subsidy and concessions in financing and cotton crop prospects are not that bad, but we do not see light at the end of the tunnel,” moaned a well-known leader of the textile industry who does not want to be named because he is frequently consulted by the government on business affairs.
After almost 21 months of lifting of textile export quota barriers and ushering in of a virtual free flow trade system since the beginning of 2005, Pakistan faces a twin menace. An open price-war in the most affluent markets –- the US and the EU -— has put Pakistan under tremendous pressure by China, India and Bangladesh. In the domestic market, cheap clothing, apparels and home textiles from China and Thailand are attracting a large number of buyers.
In this liberal trade environment, Pakistan’s textile industry, according to market analysts, made gains only in quantity terms. It means that the industry exported a big quantity of textile products to get too little money. “This is the reason that Pakistan’s textile industry continues to ask for one concession after another,” an official of a government agency replied when asked to quantify in money terms the rebate and concessions on bank financing being offered to the textile industry in the current fiscal year.
Figures for the money to be doled out to the richest people of Pakistan -— textile barons -— vary from Rs25 billion to Rs40 billion after the government announced to continue six per cent research and development (R&D) rebate to garments and knitwear in the current fiscal year. Fabrics and home textiles are also being given three and five per cent R&D rebates. Bank loans given to textile mills are being swapped with the long-term finance facility for export-oriented units at seven per cent. In addition, textile exporters are being given export refinance at much reduced rate.
“Nowhere in the world is export refinance offered,” reminded State Bank Governor Dr Shamshad Akhtar to the textile business in Faisalabad last week. She disclosed that 3,000 cases of fraudulent R&D rebate had been detected. Neither the State Bank nor any government agency nor any trade body that offers a certificate to the exporter has come out with facts and figures to disclose as to who were the businessmen involved and how much money was involved.
Bankers, officials and textile industry leaders say that a total amount of about Rs450 billion has been invested in the modernisation and improvement of production techniques of the textile sector. Textile machinery worth about $4 billion (Rs240 billion at rate of one dollar equal to Rs60) was imported in the last four years. At least a sum of $1 billion (Rs60 billion) was invested in import of supporting machines and electric generators. About Rs100 billion was invested in civil work.
Figures gathered from various sources revealed that banks provided a total sum of Rs188.50 billion assistance to the textile sector during December 2000 to March 2006. In the five-year textile vision drawn up by former commerce minister Razak Dawood to upgrade Pakistan’s textiles for open competition in the world market after phasing out of textile export quotas in 2005, five sectors were declared as priority areas. These were stitching (apparels), knitting, finishing, knit processing and woven processing.
Out of total Rs188.50 billion, these five priority sectors received only Rs43.19 billion. The woven processing sector was given Rs22.12 billion in the last five years, followed by Rs7.5 billion to stitching, Rs6.33 billion to knitwear, Rs5.42 billion to knitting and Rs1.76 billion to finishing. All these priority sectors are labour intensive and value-added, which need least capital to give maximum employment and big amount of foreign exchange.
The traditional five sectors of textile are capital intensive with relatively less employment opportunities and were given Rs145.26 billion in the last five years. The spinning sector claimed the highest amount of more than Rs96 billion followed by weaving jet air Rs26.57 billion, polyester fibre Rs9.26 billion, weaving water jet Rs1.81 billion and weaving Rs1.48 billion.
Even after investment of such a huge amount, Pakistani textile exporters find themselves hard pressed because what they feel “cost of doing business in Pakistan too high”. After getting rebates for R&D, swapping of high cost loans with subsidised rate loans, the textile mill owners now want a cut in utility cost. Gas and electricity rates are too high for the industry and a fresh look on the matter is the demand.
posted by India News Watch at 1:02 PM
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