Pakistan has lost market worth over $6 million in 2006 due to the high cost and poor quality of its textile exports to Japan, says a Recorder Report, quoting the Japanese ambassador in Pakistan, Seiji Kojima. The ambassador was addressing business leaders at the Rawalpindi Chamber of Commerce and Industry.
"Pakistani textile products have failed to compete with those of India and China. Hence India has been able to capture some of the textile market in Japan, which was previously held by Pakistan," the envoy said. Giving a broader picture of the economic relations between the two countries, he went on, Japan had provided Rs 15 to Rs 20 billion (30 to 40 billion yen) to Pakistan in FY 2005 and FY 2006 on commitment basis and it was at the top in the list of official donors to Pakistan during 1990-2004.
Besides, Japanese investors have invested more than $150 million in Pakistan during the last three fiscal years, while FDI from Japan in general has registered an ascendant trend. He hoped that Japanese investment in Pakistan, especially in the automobile sector, would increase further. Considerable reinvestment by Pak-Suzuki Motor Company was essential, as the automobile giant has expanded its production from 66,000 units per annum in 2004 to 150,000 units in 2006.
Talking about Pak-Japan trade, the Japanese ambassador told the local business community that Pak-Japan bilateral business volume had increased from $501 million in 2001 to $1.8 billion in 2006. However, the volume of exports from Pakistan had not registered any improvement since 1991, when it had reached $650 million.
In fact, it declined to $209 million in 2006. The volume of Pakistani exports to Japan nose-dived in 1996-2003, and the country lost aggregate market of $458 million, when its annual exports dropped to $134 million. Pakistan's hefty loss of share in Japan's textile market is indeed extremely worrisome, particularly in this age of globalisation when product quality and competitiveness is the name of the game.
As trade and industrial sectors are currently undergoing rapid transformation in compliance with WTO guidelines, there is an urgent need for Pakistan to improve the quality of its textiles, from raw cotton to finished products. Despite establishment of a separate Ministry of Textiles and the proposed "textile cities", the loss of $600 million in one year to Pakistan's textile export sector is not only a reflection of lax quality control but also mirrors the high input cost and exorbitant profit margin exacted by our exporters.
This can prove lethal to the country's economy, as textile sector accounts for as much as 60 percent of Pakistan's total annual exports, with their share in the country's GDP standing at 11 percent.
Further, the textile industry employs some 40 percent of the country's workforce, which is reflective of the pivotal position it enjoys in Pakistan's economy. Experts believe that textile sector needs to diversify its base from cotton products to synthetics, in keeping with the consumption patterns of major export markets.
This could well be a contributory factor in the loss of our exports to Japan, as there is a growing international market for man-made fibre and products, which should be tapped by increasing the production capacity of synthetic blends. Further, our focus should be on value addition instead of intermediate and raw products.
In addition to the steps taken at the domestic level, intra-regional coordination, based on specialisation among South Asian countries, too is essential for strengthening the competitiveness of our textile exports. The rising cost of inputs such as electricity, and the skyrocketing land prices in the country have meanwhile seriously eroded the competitiveness of our exports.
A major factor that has made doing business in Pakistan comparatively an unattractive proposition for both local and foreign investors is, therefore, the exorbitant land prices and the high utility rates charged here. For instance, a study has revealed that while gas rates for captive power plants and general industries in Bangladesh stand at $1.90 and $2.65 respectively, a unified rate of $4.02 is being charged for both the categories in Pakistan.
The government should, therefore, undertake a comprehensive rationalisation of utility rates for all categories of industrial consumers if it wants to achieve its goal of enhanced productivity and competitiveness.
Meanwhile, exercise of poor quality control despite presence of a plethora of rules and regulations, constitutes a serious indictment of the implementation arm of the government. There is a need also for the government to exercise strict regulatory control on the production process to maintain competitiveness of our exports in the international market.
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