Textile exports: higher value addition and volumes

Textile industry has witnessed an unprecedented growth as depicted by an increase of 22% in exports in FY21 as compared to FY20 and 15% when compared to FY19. The resulting hike in exports was the direct result of enabling environment provided by the current government.

Contrary to a “rudimentary” analysis in an article published by BR on July 16, 2021 (https://www.brecorder. com/news/40107598), where higher world cotton prices has been stated as cause of higher earnings. It is important to highlight that FY20 was the year of Covid where prices plummeted due to black swan event. Thus, we must compare prices with previous year i.e., FY19 where A-index prices decreased by 4.24 percent from 86.07 in FY19 to 82.42 in FY21. Given the fact that orders and prices are booked 6-8 months in advance, the earnings are certainly not the result of increased prices.

Since, the increased exports have not resulted from higher cotton prices, it is logical to assume that reduced yarn and cloth exports have translated into manufacturing of value-added products. As already stated in the article that yarn consumption increased 38% to produce value-added products, and we already established that export earnings are not due to higher prices and are based on a volumetric increase in exports.

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                          Table 1: Value Added Textile Exports
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                                   In Million Dollars
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Year    Value of Local   Value of     Value of    Total      25%       Value of     Ratio
          Production     Imported      Cotton    Exports   Domestic   Production
                          Cotton
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FY12       7157.88         490.35     7648.23     13360      3340      16700.00      2.18
FY13       4502.09         881.13     5383.22     13060      3265      16325.00      3.03
FY14       4906.94         573.86     5480.80     13720      3430      17150.00      3.13
FY15       5182.42         343.81     5526.24     13450      3363      16812.50      3.04
FY16       2992.05         750.36     3742.41     12450      3113      15562.50      4.16
FY17       3190.54         805.13     3995.67     12450      3113      15562.50      3.89
FY18       3545.24        1077.92     4623.16     13520      3380      16900.00      3.66
FY19       3392.00         767.50     4159.50     13320      3330      16650.00      4.00
FY20       2391.55         880.11     3271.67     12530      3133      15662.50      4.79
FY21       1641.37        1316.00     2957.37     15330      3833      19162.50      6.48
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Demand in the domestic market maybe on the rise and there are more than 400 textile mills in the country - not all of them are exporters - to cater for rising demand. It is only viable to sell a value-added product for dollars rather than rupees. Those hard-earned dollars have significantly contributed to Pakistan’s economic growth – Balance of Payment (BoP) improved, rupee appreciated, and it also funded our imports.

Increased exports were the result of implementing Regionally Competitive Energy Tariffs (RCETs) which reduced the conversion cost while making Pakistani products competitive in international market. When majority of (regional) markets were down with Covid-19, the industry not only endured the crises but also flourished – industry was running round the clock on full capacity to meet the high demand which paid off in terms of record number of exports.

The cloth consumption has increased many folds to cater for higher demand of value-added products. Exports of knitwear and bedwear increased 40% and 30% respectively.

In terms of improvement in quality, approx. USD $ 2 billion has been invested, and another $2 billion is in the pipeline, to upgrade existing and add new machinery, so that Pakistani products meet international standards.

The industry has dealt with many crises including historic cotton decline, gas and electricity outages, billions of rupees in tax refunds, efficiency audits, labor and raw material shortages etc. Despite all, we performed the exports have increased. Textile industry – Pakistan’s single largest contributor to exports (60%), manufacturing sector employment (40%) and banking credit (40%) and almost 8.5% contribution in GDP is not only the result of window-dressing or fudging numbers (as highlighted by our friend in the aforesaid article) but as a result of sustained industry profitability.

The All Pakistan Textile Mills Associations (APTMA) as a trade organization representing the largest sector of Pakistan – Textile – encompassing more than 400 textile companies has always played a pivotal role in safeguarding the business interests of not only textile companies but of other sectors to enable their contribution in country’s economic prosperity. APTMA through its political, economic, and social capital capabilities, has always played a leadership role for business facilitation and government relation services.

Copyright Business Recorder, 2021