$14.5 billion textile export target possible: FPCCI
KARACHI (January 22 2007): Pakistan can surpass textile export target of $14.50 billion in three years by focusing on value addition, Tanvir Ahmed Sheikh, President Federation of Pakistan Chambers of Commerce and Industry (FPCCI) told Business Recorder. He said that value addition was the only possible way to increase exports of textiles.
Continuing he said that textile exports were growing at a reasonable pace all over the world. Presently, textile exports are around $350 billion and were expected to increase to $800 billion in 2014. Pakistan's share in the world markets was about 3 percent. In view of the global competition, the country has set a target of exports of textiles at $14.50 billion by 2010.
"I am of the opinion that the expected investment of $6 billion in three years will enable us to achieve this target. However, if we desire to achieve or beat this target, we will have to focus on value addition and this is the only possible way to increase exports of textiles," he said. He said that the industry would have to promote garment sector and improve quality of the products and designing skill as well. He said that the first quarter of the current fiscal year witnessed a sharp decline of 10.29 percent in textile exports to $2.449 billion.
However, the improvement by more than 20 percent in the October-November 2006, if not connected with political upheavals in Bangladesh, is a green signal that Pakistan may achieve the textile export target, envisaged for the current fiscal year.
But a detailed overview of the textile exports shows that Pakistani exporters are facing serious challenges in the international market.
Commenting on the less than expected textile exports, he said that the basic reason was the strong competitive pressure from China, India and Bangladesh. Antidumping duties and loss of preferential access under the Generalised System of Preferences (GSP) in the European Union (EU) market are some of the other major factors that affect Pakistan's exports adversely.
Some internal factors, including increasing cost of production, higher mark-up rates, reduction in domestic cotton production, non-adjustment of currency exchange rates, non-availability of technical staff etc also hit the textile exports.
He mentioned that the textile industry was confronted with numerous problems, including increase in the cost of production that made the industry less competitive in the global market.
Input cost especially utilities and interest on bank loans had also increased, especially during the last one and half years.
"We have lost the advantage of indigenous production of cotton in the past as its local consumption has increased to 16 million tons while production stands at 12.5 million tons and that the balance has to be imported at higher cost, he said.
He was of the considered view that the current rise in the textile exports was not due mainly to the provision of 5 percent research and development (R&D) assistance to the textile industry.
He said, "if 5 percent R&D support is spent on the specific purpose for which it is provided, it may bring positive results. We can use this facility for enhancing our total factor productivity, which is lower as compared with the competing countries like China, India, Bangladesh and Indonesia.
The government subsidy to exports in form of R&D, rebate in taxes announced last year is not helping to raise the quality of the products fetching higher prices, he added.
FPCCI President said that like various developing countries, access to finance was a serious problem in the growth of small businesses as indicated in a UNDP report 'unleashing entrepreneurship'. The basic reason for non-availability of finance is that a large number of small businesses are being operated informally, on account of which banks do not provide the required finance.
Finance was provided to SMEs on high mark-up rate. "Although SME Bank and Khushhali Bank are providing finance to the promote SMEs, still the benefit is limited."
He said that the industry had invested heavily on import of modern textile machinery, adequate availability of skilled manpower to run the machinery was not available, which was one of the major impeding factors in the growth of the sector.
"During the last five years about $5.6 billion have been invested in the textile sector. We are expecting more investment in balancing, modernisation & restructuring (BMR), however there is a dire need for the training of the staff in line with the modern techniques. There is a need for the establishment of textile related vocational and training institutions in the country so that we could produce the required skilled labour, with improved productivity."
Pakistan is presently fourth largest producer of cotton in the world. This crop provides raw material to 337 textile mills, 1500 ginning factories and 5000 oil mills. The local cotton yield is less than 20 mounds per acre although in the neighbouring country with similar soil conditions and resources the yield is more than 40 maunds per acre. In spite of cotton, Pakistan is considered as one of the largest exporters of textile items in most of the developed countries like EU, USA, and Canada.
In 2005, Pakistan stood fifth in the export of textile products to the European Union. Share of Pakistan's textile products in the United States' total textile import is 7.6 percent and ranked sixth largest exporter, Tanvir Sheikh said.
Pakistan's performance in clothing sector is not that good as in textile sector. However clothing and readymade garment is a high potential sector in which Pakistan can increase its export share in the world market by many folds.
In respect of BMR and new machinery in the textile sector, about $550 million have been invested. We are expecting more investment in the remaining six months.
The post quota scenario has dramatically altered the global trading pattern. With the complete phasing out of quotas, the textile and clothing sector has been experiencing another global revolution. With the opening of world markets and increased global competition, new focus is required for textile industry to compete globally. In this context, both the government and the textile manufacturers will have to work together to come out with a workable solution to enhance productivity and to reduce cost of doing business so that they become competitive in global market and increase their market share.
Replying to a question whether Pakistan can achieve current fiscal year's target of textile exports, he said that if the rise in exports of textile during October-December 2006 continued, the target could be achieved.
"However, I emphasise on the need to promote value addition if we wish to achieve the target. If, we are not able to achieve the target, it may negatively affect the overall export targets of Pakistan."
He recommended that there was an urgent need for the improvement in the textile sector as more than 60 percent of our export depends on textile sector.
To make our textile sector compatible with the post quota situation, textile sector should be declared as a priority sector for application of a separate lower gas tariff as they have done in Bangladesh.
A strategy should be devised to bring down price of furnace oil for power generation. A 10 percent financial support for capital investment in textile sector should be devised. Customs duty on import of textile machinery, spare parts and generators of textile machinery should be reduced to zero. Withholding tax on exports of textile should be at 0.25 percent. Modern techniques should be employed to increase the yield of cotton. Some long-term strategies require to be implemented for the improvement of textile sector including establishment of textile training institutes, agriculture research support institution and compatible infrastructure etc.
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