Major textile exporters of Pakistan and Bangladesh should benefit from the abolition of global quotas that takes effect from January 1, officials and analysts said on Thursday. The decades-old quota system, which provides poor countries access to the rich markets of the United States, Canada and Europe, will be replaced by more open competition under a 1994 pact.
Textiles and clothing account for between 70 and 75 percent of total merchandise exports from the two countries.
The State Bank of Pakistan (SBP) said, in a quarterly report issued on Wednesday, the increased competition in global textiles from next year could slow Pak exports. But officials and analysts in Pakistan say the availability of good quality cotton, a cheap and efficient workforce and investment in the sector over the past few years, will help the country benefit from the new trade regime, despite strong competition from rival exporters - China and India.
China is expected to be the biggest winner. The World Trade Organisation (WTO) says that within three years, China will account for more than half of the world's textile and clothing market, as compared with 17 percent in 2003.
"We have our own cotton, we have good quality machinery and healthy surplus for exports, which all goes to our advantage", Textiles Minister Mushtaq Ali Cheema told Reuters.
"Yes, the competition would be there, but all in all it would be better for Pakistan", he added.
Industry leaders in Bangladesh are also confident that they have the critical mass to benefit from the new regime.
"Big buyers like Wall Mart, JC Penny, Sears or Tesco are expanding their official capacity in Bangladesh, and we consider it as a green signal for us," said Anisul Huq, president, Bangladesh Garment Manufacturers and Exporters Association.
"Small countries like Nepal and the Maldives may lose their textile markets, and we are hopeful to get those", he added.
Pakistan's textile sector has been steadily gearing up to compete in the new era, with $4 billion invested in the last few years under its 'balancing, modernisation and rehabilitation' programme, according to industry estimates.
Of this, around $1.6 billion has been spent on imports of modern textile machinery alone.
Analysts said that while the effect of the new system on Pakistan's exports was difficult to quantify, the country's established textile millers were set to gain from the massive demand in the United States and Europe.
"Expansions have been undertaken all around to meet any eventuality of the increased demand, and to be able to cater to huge orders from various locations," said Mohammed Sohail, head of research head Karachi brokerage Invest Capital and Securities.
During the past few years, Pakistan's focus has also shifted from the traditional Far Eastern markets to countries in Europe, Africa and South America.
"This has not only allowed for new relationships to be cultivated, but also eased the progress from traditional cotton yarn and fabric exports to focus on more value-added exports", said Sohail.
Economists in Bangladesh said such improvements would be critical in winning business away from other textiles producers.
"What Bangladesh has to do is to ensure political stability and also proper port facilities, power supply as well as smooth road communications and telecommunications," said Abu Ahmed, Professor of Economics at the Dhaka University.
Anisul Huq said Bangladesh had taken measures to boost the industry's momentum heading into the new year, including waiving value-added tax, cutting insurance premiums on exports by up to 40 percent, and clearing red-tape at customs.
Arif Saeed, chairman, All Pakistan Textile Mills Association, said the government needed to reduce utility tariffs, ensure sufficient raw material supplies and develop infrastructure to maintain the country's advantage.
"We will be competitive in the free market, in fact, we are superior in some sectors, such as spinning," said Saeed, adding: "But I cannot give a blanket statement that we will be the net gainers."
Cheema said the government was looking into areas where it could provide relief, but added the uncertainties regarding the new system would vanish with the passage of time.
"It will be a new system of trade and reservations will be there," he said, adding: "Eventually, it will turn out to be good for us."
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