Even though many of the issues affecting the textile sector affect the entire value chain such as currency devaluation and cost competitiveness, yet some measures are often aimed to benefit only a part of that value chain.
The tussle between the spinning and value added garments sector has been going on for a while now. As this column has commented on before, the textile spinners are in the habit of creating a protectionist environment.
More often than not, APTMA has gotten its demands met due to strong lobbying as many spinning mill owners wield considerable political influence. This has often come at the cost of the value added players who are unable to match the resources employed in lobbying tactics used by the spinner association.
APTMA has been complaining of higher imports of yarn into the country while at the same time pushing for making import of cotton duty free. Recently, it decided to request the Federal Board of Revenue (FBR) to make it compulsory for all consignments of imported yarn from India and China to be subjected to independent inspections at three stages under SRO 322 and SRO 45. Ostensibly, it has termed this necessary to keep in check excessive imports of cotton yarn by mis-declaration and misuse.
But according to players in the value added sector this reason is unjustified. The Pakistan Textile Exporters Association (PTEA) believes that such measures will have a severely negative impact on the entire textile value chain and points out that only 3 percent of total yarn consumption is being imported.
Recall that the government had allowed exporters to import duty free raw material for re-export under SRO 327, 450 and 322 several years ago in order to ensure provision of quality raw material at competitive prices.
Mr. Azizullah, Secretary General of PTEA points out that if this recommendation of APTMA were to be adopted it would bind buyers to procure locally at a higher cost making the value added textile sector lose its cost competitiveness further. The cost difference between exports of Pakistan compared to India and Bangladesh already stands around 6-8 percent on the higher side due to inconsistent policies and higher energy prices.
He notes that the textile exports of Bangladesh and Vietnam have increased by a wide margin in recent years because of liberal import policies that allow textile manufacturers to import yarn from around the world duty free for re-export.
This column believes a level playing field should be provided to the entire textile sector. In addition, the government should especially encourage policies that have a positive impact on the export oriented value addition sectors further down the value chain.
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