Textile industry in deep turmoil (The Financial Daily (Pakistan))

Pakistan’s textile industry, including its value-addition sector, is in turbulence. This can be ascertained from the ‘voluntary’ closure of as many as 30 percent textile units in the past few weeks. The Ministry of Textile Industry has reportedly abandoned the proposed legislation “textile industry development, promotion and standard Act” which was aimed at overriding multiple laws and ordinances under its administrative control. Work on important issues regarding textile policy, proposed textile bill and Export Development Fund (EDF) has almost come to a standstill. The primary industry, textiles, appears to be in a state of distress. This industry has threatened to go on a strike if remedial measures are not taken by the government by the 31st of August. This is unparallel as, despite a business- cordially government, APTMA is neglected for the first time. Historically, it was seen that they had the advantaged access to the corridors of power and enjoyed exceptional treatment.

The law and order problems, severe energy crisis rise in costs of production, partly due to higher input costs and also partly to higher taxes, to delays in refunds by the Federal Board of Revenue. All these factors combined together have rendered this sector unable to compete with our three major regional competitors namely India, Bangladesh and China.

There are a number of other reasons which have adversely impacted on the industry. There has been inadequate investment in technology upgrading and replacement by the industry. Import of textile machinery reached a peak of almost one billion dollars in 2004-05. Since then, it has fallen to less than $ 500 million annually. The strong protest by APTMA has been prompted by some more recent developments. There is the introduction of various surcharges on the electricity tariff, especially the so-called ‘tariff rationalization surcharge’ of Rs 2 per Kwh on industry. The Gas Infrastructure Development Cess (GIDC) has been levied at the rate of Rs 200 per MMbtu on supply to captive power.

The textile sector has a vital bearing on the growth of the industrial sector, GDP, exports and employment. There is a full-fledged Ministry of Textiles and a Textile Policy has been announced for the period, 2014 to 2019. Despite all this, the industry appears to be deteriorating due to neglect and lack of implementation of the Policy. Over 60 percent of the output of the textile sector is exported. Exports of textiles showed high growth of 10 percent annually from 2001-02 to 2010-11. Since then they have become at stand still under $14 billion.

During the last four years, Pakistan has gradually been losing market share to competitors. In textiles, countries like India, Turkey and Vietnam have achieved significant growth in exports. In clothing, in addition, other countries like Bangladesh, Cambodia, Indonesia, Sri Lanka and Thailand have beaten Pakistani exports. China, of course, continues to be the dominant exporter, with exports of textiles and clothing approaching $300 billion, compared to Pakistan’s $ 13.5 billion. The overall growth of the textile industry in 2014-15 is under 1 percent, while it was just over 1 percent in 2013-14.In 2014-15, the big drop is in exports of cotton cloth and yarn of 11 percent and 8 percent respectively. Fortunately, value-added textiles have shown positive growth of 3 percent, primarily because of GSP plus.

The sector has also frequently brought it to the notice of the government that in several occasion , international orders could not be honoured during the time agreed in their contracts because of law and order issues, including the four-month-long Pakistan Tehreek-e-Insaf (PTI) dharna last year. The government has reportedly taken notice of the 12 percent decline in textile exports during the last one month (July) and an emergency meeting was called. The government has allowed this sector – the largest export earner as well as the largest employer in the country to decline so significantly before calling an emergency meeting. There is urgency for the government to focus on the revival of exports.

This is essential not only because of the upcoming strike by APTMA but also because exports have started plummeting. A large part of the blame for the poor export performance of the textile sector rests with the government which has constantly shown its inability to take timely decisions and has instead waited until and unless a crisis becomes full blown before dealing with it. This approach must change before the loss of export revenue becomes permanent.