Textiles need support, not isolation

The stakeholders in the textile trade want the federal government to maintain an independence status of Ministry of Textile, while the establishment wants its merger with Commerce Ministry (MoC) - a situation that existed before the bifurcation. In essence 57 percent will be merged with 43 percent of country's exports. Previously, there was a textile section within the MoC. Since its upgrade to a separate division, the Commerce Ministry appears to have lost its considerable weight and clout. Prime Minister Nawaz Sharif has been mulling taking a decision now for over four months. On one side is the bureaucracy that wants to merge the two ministries ostensibly as a cost-saving measure. While on the other side are his friends/and supporters who are opposed to the proposed merger. As Chinese strongman Deng Xiaoping famously said: "It doesn't matter whether a cat is black or white, as long as it catches mice." The real reasons behind falling exports need to be determined and rectified.
Three factors play a critical supportive role in exports: (a) Exchange Policy; (b) Interest Rate Policy; and (c) Taxation Policy. Export refinance rate has come down with a drop in nominal interest rate. Taxation policy has not changed much except the rate that still remains the highest in the region. The situation has been compounded by the fact that the government has not kept its promise and continues to hold back billions in refunds. According to exporters, the present government has been unable to correct an overvalued PKR parity with dollar to compensate for inflation differential while their competitors have depreciated their currencies. Hence, they argue that an average Pakistani textile exporter is unable to compete with his regional counterparts.
It increasingly appears that the PML-N government has decided to abandon the textile sector; it is now caught between a rock and a hard place. Cotton-based textile sector confidently points towards the high electricity rates, gas tariffs and water charges as well as the taxation rates and wants to be compensated for it. Textile businesses further claim that their regional competitors are being heavily subsidized by their respective governments. Such strategies help their competitors retain and capture more market share. They cite investment figures in spindle and shuttles looms undertaken by regional competitors to provide new jobs to millions coming into the employment market.
Prime Minister Nawaz Sharif appears to have a fixation where he correlates the strength of the economy with the firmness of rupee. There is no doubt that forex reserves have gone up. But his government needs to break the rise in forex reserves into components. He will then find out the contribution of borrowed funds in our forex reserves. Further, the PM needs to realistically see the contribution of remittances ($18.2 billion) in covering the trade gap despite a massive fall in the crude and other POL products' import prices. And, then ascertain the reasons behind a worful decline in country's exports.
Value-addition in exports does pay dividends. Pakistan is an agrarian economy and softening of commodity prices will adversely affect its trade. However, if Pakistan exports garments instead of raw cotton, or yarn and grey cloth, it will not only earn more dollars but also provide employment to its teeming millions.
What has been the result of Prime Minister's dilly-dallying on merger of textile division into the commerce ministry? According to a Business Recorder report, Textile Ministry is no more pushing for legislation of the "Textile Industry Development, Promotion and Standard Act" aimed at overriding various laws and ordinances under its administrative control. As a consequence, textile policy as well as Export Development Fund (EDF) has come to a grinding halt. The Law Ministry is yet to clear the draft bill. It has taken six years in drafting a bill which empower the textile ministry to be the supreme body on all matters related to textiles. This is impractical. Even the Ministry of Commerce or the Planning Division cannot override the powers enjoyed by Ministry of Finance.
Ministry of Finance has a clear precedence over any ministry or division. After all, the Minister of Finance is head of the Economic Co-ordination Committee (ECC) of Cabinet, a premier committee of the federal cabinet, which is entrusted with equivalent powers of the Cabinet itself on economic issues. This newspaper has been advocating a change in the governance pattern; and it has been consistently underscoring the need for adopting modern management techniques in running the government. Only the government of the day can come up with sound proposals and take decisions since it is the repository of various studies undertaken for this purpose.
One thing is, however, quite certain: if the country's premier cash crop is adversely affected millions of farmers will suffer. Not only are cotton-based textiles the biggest provider of employment in the country, they are also main source of earning dollars. Therefore, the government must not allow this situation to persist any longer. If our cotton-based textile makers lose - so would the nation.