The government has no plans to bailout the textile sector that is in the throes of a severe crisis due to the high cost of production, associated with increasing electricity and gas tariff as well as global recession which has decreased demand.
Senior official of the Ministry of Textile, on the condition of anonymity, told Business Recorder here on Friday that the government did not have adequate financial resources to help out the depressed textile industry. "According to estimates by the International Monetary Fund (IMF), Pakistan needs additional 8.3 billion-dollar external assistance in the current fiscal year. The government simply does not have sufficient funds to bailout the textile industry.
"Knowing this, the Ministry of Textile is unlikely to send any proposals regarding a bailout package for the textile industry in the 2009-10 budget", the official lamented. He added that the country had lost the foreign investors in the name of "war on terror." He said the "Textile City" project was in doldrums since 2007, as the Ministry of Finance had not released Rs 500 million for the project despite its tall claims that it would release the money by the end of June 2008.
The poor law and order situation, including suicide attacks, had already reduced the rate of foreign direct investment (FDI), he said, adding the high cost of production of the textile sector due to continuous increase in gas and electricity tariff had forced the investors to switch over their business to neighbouring countries like Bangladesh, he said.
The official said: "The textile industry of Bangladesh accounts for about five million dollars in exports annually, while providing jobs to about three million workers. The textile industry of Bangladesh is making progress by leaps and bounds due to two main elements - the MFA agreement with North America and the special market entry to European markets.
Besides, the announcement of a bailout package of 496 million dollars for the textile industry has encouraged the foreign investors to switch over their businesses to Bangladesh from neighbouring countries," he added.
According to him, the cost of production in Bangladesh is lower than in other countries, which is the main reason why several countries are relocating to Bangladesh. Moreover, the Central Bank of Bangladesh has restricted commercial banks to a maximum limit of 13 percent interest, with a maximum of seven percent for export financing.
Reliable sources told this scribe that the government was making lame excuses while saying that Pakistan could not provide incentives or a bailout package to the textile industry because it was a signatory to the World Trade Organisation (WTO).
"We had been providing six percent research and development (R&D) support to the textile sector for the last three years that was in conflict with the WTO conditions. We were not afraid of violation of the WTO rules at that time. Then why are we behaving like cowards and hesitating to provide a bailout package to the textile industry that it merits given its contribution to our total exports," said the sources.
Exports of textile products declined by 7.58 percent during July-March 2008-09: from 7.7883 billion dollars of the same period last year to 7.193 billion dollars. As a result, total exports declined to 723.333 million dollars in March 2009 as compared to 929.953 million dollars in March 2008.
Similarly, exports of cotton witnessed a negative growth of 5.62 percent during the period under review. Moreover, the export of raw cotton dipped by 85.95 percent to 2,181 million dollars in March 2009 from 15.523 million dollars in the same month of last year.
The exports of yarn, other than cotton, declined by 30.66 percent, knitwear by 22.12 percent, bedwear by 22.52 percent and towels by 14.21 percent. The government has decided to set the textile export target at 25 billion dollars for the next five years, while the textile export target set for 2008-09 is 10 billion dollars. These targets appear unrealistic.
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