Directive to textile industry

The Ministry of Textile Industry has linked the grant of six percent R&D rebate to supply of complete information on their business and R&D expenditure by all registered textile units, says a Recorder Report.
A letter written to top 12 textile associations in the country has directed all registered units to supply the requisite information immediately, otherwise their claims for receipt of R&D support would not be processed.
The ministry's letter carries an elaborate proforma comprising nine different sections in which the units have been asked to provide details. In section one, the ministry has asked for the company profile, including details of membership of associations, while section two demands supply of information on quality and environment compliance.
Section three demands information on infrastructure, section four on machinery and further investment, section five on human resource and section six on the unit's operations and manufacturing. In section eight, the ministry wants to have details of the total R&D rebate collected by the textile unit, in addition to the expenditure incurred by it on IT and staff training.
The notice warns that the ministry reserves the right to delete the names of associations or of individual defaulters, and it may also issue instructions to the State Bank not to entertain their R&D claims, or further allow the R&D support facility.
Last year the ministry had announced grant of five percent R&D support to textile units on their exports to make Pakistan's textile exports more competitive in the international market. Meanwhile, textile industrialists and associations have voiced concern over the situation, and have decided to fashion a joint strategy against the notices served on them.
The ministry's decision to dispatch the letter seems to have both positive and negative angles to it. The textile units may take the position that the proforma seeking information is rather too intrusive, as it demands privileged information that might in future fall into the wrong hands. Further, it seeks information that may not strictly lie within the administrative realm of Textile Ministry.
However, as most of the industries in Pakistan, including textile, are not particularly known for their focus or expenditure on research and development or on environmental compliance, the information that the letter seeks has relevance to the ministry, though the ministry would have done well to keep its demands restricted largely to information on R&D and environmental compliance. Incidentally, the textile industry's importance to our economy lies in the fact that it employs 38 percent of the country's total industrial labour force and contributes 27 percent of the industrial value addition. It has 67 percent share in the country's total exports.
Further, it consists of a large-scale organised sector and a highly fragmented small-scale or cottage sector. The organised sector comprises integrated textile mills, ie spinning units with shuttleless looms while the downstream industry comprising weaving, finishing, garments, towels and hosiery (which has great export potential) is mostly in the unorganised sector.
The textile industry is currently faced with many problems. These include lack of adequate investment in R&D, the export houses' shortage of capacity to meet bulk orders and the levy of high protective tariffs with a pronounced anti-export bias.
Other factors include lack of a strategic plan, paucity of a professional manpower, use of old plants and equipment, the high cost of operations, multiplicity and a high rate of taxation, high cost of financing, inferior quality, low productivity, lack of marketing expertise and inadequate infrastructure. All these factors have discouraged investment in this export-oriented industry. Un-competitiveness in terms of adherence to contracted quality and the general failure to stick to delivery schedules are the other major reasons that have dented our textile export sector.
The global demand for textiles, which stands at around $19 trillion, is growing at a rate of 2.5 percent per annum. However, Pakistan's share in it is less than 1 percent, which should be a cause of serious concern to the government and the textile industrialists alike.
Fortunately, Pakistan has an enormous potential for increasing its share in the global textile market if it concentrates on modernisation of its infrastructure. It will be recalled that under WTO agreement on textile and clothing, special protection for textiles was phased out in 2005. As a result, the opening up of export markets internationally has intensified. Our textile sector will therefore need to undertake large-scale restructuring to stay competitive in the global market. Textile ministry's high-ups and the captains of textile industry would do well to sort out all bilateral issues amicably.