Free-fall continues: a review of Pakistan’s textile exports for 1st Quarter 2009-10

Provisional first quarter figures for the fiscal year 2009-10 of Pakistan’s textile exports shows no letup as free-fall continues. The declining trend is really alarming because exports continued to decline in the same period (Jul-Sep) last year and in comparison current years’ figures are really dismal.

Overall, textile and clothing sector shows a decline of US$ 316.5 million (-11%) in the first three months of the current fiscal year as compared to the same period last year.

Raw cotton exports continue to increase, which registered an increase of US$ 11.4 million (39%) in this period. High prices of cotton in the local market and subdued purchases from the textile mills seem to be the reason for this increase. Processed cotton (carded or combed) shows a decline of US$ 5.8 million (-88%), showing that the importing countries are processing cotton themselves.

Cotton yarn shows a slight increase of US$ 11 million (3%), while man-made yarn exports increased substantially by US$ 2.8 million (39%). This trend shows increased activity in this commodity especially in synthetic yarn which is not a traditional export.

Fabric exports also show declines as cotton fabric exports declined by US$ 212 million (-35%) and knitted/crocheted fabric declined by US$ 2.2 million (-13%).

The only positive aspect is the slight increase in exports of readymade garments which grew by US$ 11.7 million (4%). Knitwear exports, on the other hand, declined by an alarming US$ 69.6 million (-13%).

Bedlinen, another traditional and major export declined by US$ 72.5 million (-15%). While export of towels declined by US$ 25 million (-14%).

Artificial silk and synthetic textiles, another non traditional export, increased substantially by US$ 29 million (33%) while exports of tents and canvas products fell by US$ 5.4 million (-33%).

It is now expected that export figures for the next quarter will register better results because of shipments for approaching Christmas season and because of the steps taken to stem decline in the recently announced Textile Policy 2009-14.

Textile Policy 2009-14: hard work still ahead

The first ever Textile Policy 2009-14 was announced by the Federal Minister of Textile Industry Rana Farooq Saeed Khan on Wednesday. The policy sets an ambitious target of achieving $ 25 billion over the next 5 years as compared to exports of $ 9.6 billion achieved during last fiscal year.

The policy is really a broad based document which encompasses areas like technology up gradation, infrastructure development, skill development, etc. and addresses rationalization of fiscal measures for the ailing textile industry along with removal of regulatory bottlenecks.
The government has for the first time, addressed all sub sectors of this industry separately with special emphasis on the value added sectors.

The policy provides many measures to address the falling trend of textile exports, but the most notable are as under:

Tiered drawback scheme with maximum benefit to the value added sub sectors.

• Full refund of past R&D Claims.
• The availability of export refinance at 5%.
• Priority in gas and electricity load management.
• Relief on existing long term loans.
• Zero rating of exports.
• Tax free import of machinery.

Although the textile policy is a very comprehensive one and covers almost all the relevant areas of the textile industry like skills development, market support, zero rating of exports, incentives for employment of women and disabled persons, etc. but the government will have to devise a proper SOP framework in order to implement and monitor policies which are contained in the policy. It is really advisable that the government should consider a fast and transparent procedure for the disbursement of funds allocated for various programs. By breaking the overall target of $ 25 billion into intermediate yearly targets will also help the industry in monitoring its own progress. Only timely government decisions will make this policy meaningful and any delay in framework formulation will make this policy ineffective.

Textile Policy 2009-14 is certainly a welcome initiative taken by the government. This policy seeks to revive the ailing textile sector through some key immediate measures and sets a vision for transforming the present textile industry into a new era. The policy looks at the industry from almost every perspective and identifies key areas where investment can bring about fruitful results.

Now that the policy has been unveiled, hard work follows. The government now needs to set its priorities and bring about a framework which will give practical meaning to this policy. Needless to say that this framework should be formulated ASAP, keeping in view that it should be transparent, works fast and should be meaningful to the industry.

By presenting this policy, the government has also recognized that only textile sector can be an engine for rapid growth for Pakistan's economy. If this policy is properly implemented and if due market access is provided, Pakistan's textile industry certainly has the capacity to bring about rapid progress and prosperity which may not be limited to industrial areas only and which may easily spill into the remote areas where progress is really needed.

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