40 percent garments units closed down: high utilities cost, R&D subsidy shift blamed

The continuous increase in the cost of utilities and the shift of R&D subsidy towards the real 'research and development' has forced 30-40 percent garments producers to close their businesses, sources told Business Recorder here on Saturday.
They said that the increasing cost of utilities, like electricity and gas, and the grant of 6 percent R&D subsidy to the real 'research and development' of the textile sector instead of giving it to exporters, has forced the garments industrialists to close their factories to avoid any further losses.
The frequent interruptions in gas and electricity supply cause delay in meeting export orders. Therefore, to overcome the delay, the exporters have to send their consignments by air instead of sea which costs Rs 150 per roll of fabric, sources said.
According to Federal Bureau of Statistics, the country's overall trade balance stood at $1.089 billion in July 2007 against $1.12 billion in the same month of 2006. The export growth of Pakistan is not indicating a remarkable development for the last three years. There is just 6 percent R&D subsidy that is being given to the exporters.
With the 30-40 percent garments units' closure, about one million spindles of 160 textile mills are inoperative. In Lahore, Karachi, Faisalabad and Multan, most of the knitwear companies have already shut down.
The government has set export target of $19.2 billion for 2007-08, whereas in the first quarter of this fiscal year, exports grew at less than 5 per cent, to $4.25 billion, while imports grew by 8.5 percent, to over $8 billion.
While total share of Indian textile industry in its export earnings is 16.63 percent, Pakistan's textile industry share is more than 60 percent. Pakistan is giving just 6 percent subsidy to exporters for R & D while India has provided visible and invisible cash subsidies to its exporters in order to get the export target of $50 billion by 2010.
A textile exporter said that the Ministry of Textile has written letters to all textile industrialists that 6 percent subsidy, that was being given to the exporters in the name of R& D, would now be used in real 'research and development'. It means that now the textile exporters will not be paid subsidy on exports.
A committee has also been set up which will monitor whether the exporters are using this 6 percent in real 'research and development' or not. The committee will consist of representatives of 4 garment associations of Karachi, Secretary of Textile Ministry and the Chairman of FPCCI.