A crisis like situation appears to have hit the textile industry, one of the major industries of the country, which contributes 11percnt to the Gross Domestic Product (GDP), in addition to providing 40 percent of the workforce in the manufacturing sector.
It not only has biggest share in the country's industrial sector but also has a major share of 62 percent in the total exports, textile exports stood at 8.92 billion during the last fiscal year 2005-06.
Textile sector contributes 46 percent in the country's total production, while its employment provision ratio is around 35 percent of total labour working in the country.
The high cost of doing business has brought about decline in country's textile export by 1.12 percent during the first five months of current fiscal year 2007 as compared to the same period of the last fiscal year.
According to the statistics available here Pakistan's textile exports stood at $4.192 billion during the first five months July-November period of the current fiscal year as compared to $4.239 billion during the same period of the last fiscal year 2005-06, showing a decrease of $47.54 million in five months.
All Pakistan Textile Mills Association (APTMA) claimed that during the first five months of the current fiscal year textile exports have declined by 3.333 percent.
In July declined by 8.20 percent, in August 6.50 percent, 15.95 percent in September and 5.11 percent in October. However, statistics shows an increase of textile export by 27.68 percent in November 2006, which was the first month of the current fiscal year only in which the export graph moved up.
Investment ratio in the textile sector is higher than any other sector in the country, it stood at $50 billion dollar. During the last five years only $5 billion investment has been recorded.
Pakistan's share in the current trade volume is around 3 percent of the world's total textile trade. Country's textile exports alone are potentially targeted to reach $24 billion at the end of 2014.
New investment in the country is gradually declining due to post-quota regime in the international market with much high competition.
All the textile sectors exports including yarn, readymade garments, bed-wear, towel, knitwear, hosiery and other sectors indicates decline during the current fiscal year.
Industrialist said that the major hurdles in the Pakistan's textile export, are the high cost of doing business, unskilled manpower, new financing and deteriorated law and order situation, in addition to post quota regime.
However, after three months later, government announced five-percent research and development fund on the export of textile on the demand of exporters.
The State Bank of Pakistan (SBP), with the aim of relieving some of the difficulties faced by the textile sector due to increasing competition from the neighbouring countries and the rising manufacturing and business costs, offered a debt swap option under the 'Long Term Financing for Export Oriented Projects (LTF-EOP)'scheme for exporters.
The option provided an opportunity to the textile sector (excluding spinning sector but including its six sub sectors) to swap their long term loans taken from commercial banks and DFIs for import of machinery for their units under LTF-EOP Scheme, which offers mark up rates fixed for the tenor of the loan, approximately 5-6% below market rates, SBP said.
Figures shows that under LTF-EOP scheme SBP has allowed amount of Rs 34 billion as refinance to commercial banks/DFIs as debt-swap option to textile industry under LTF-EOP Scheme up to 31st December, 2006 against the target of Rs 30 billion.
According to the SBP that Textile exporters have the flexibility to seek additional new loans under LTF-EOP as banks by and large are currently within the refinance limits set by SBP for 2006-2007.
Despite these incentives exporters are still not satisfy and they demand more relief to boost up the textile export.
"These incentives are very helpful for the textile industry, however we are still not able to compete the international and our regional competitors in the wake of high cost of production," said Shafqat Elahi chairman and Iqbal Ibrahim zonal chairman of APTMA.
They said that our in put cost have been increased by more than 60 percent, interest rates have been increased by 143 percent during the last two years when central bank increased the interest rates to control the inflation, which make negative impact in the browning of the credit by textile sector.
Furnace oil prices increased by 77 percent, gas tariff 53 percent, goods freight 67 percent, cotton 82 percent and wages by 33 percent during the last three years, they said.
Cost of production is the chief hurdle, which is much higher than India, China and Bangladesh, they added.
Bangladesh encouraged local production of yarn and fabric by giving garment mills at 5% subsidy on local procurement of yarn. They have now attained a capacity of over 5 million spindles despite the fact that there is no indigenous cotton and no man-made fibre production, they added.
The emergence of China as a burgeoning force in world textiles is also a cause for concern in a number of textile sub-sectors, they said.
They said that our Textile Industry has made an investment of $5 billion for expanding its production capacity during the last five years while the interest rates were as low as 3% to 4%. However, now more than 200% increase in the credit cost, which consequently increased the financial charges of the mills, has now forced the industry to stop further investment.
They said there has been reduction of 6.4 percent in investment in textile machinery in the year as compared to the corresponding period last year.
Iqbal Ibrahim said that 11 percent inflation rate is also a contributing factor, which drop in fresh investment in textile, while slow down in further investment in the textile industry due to high cost of capital borrowing and increased pressure from regional competition.
He said that Pakistan is one of the leading textile manufacturers in the world. However, our value-added sectors, particularly apparel and knitted clothing have a very small share in the world trade. These sectors are also suffering from the intense competition from China, India and Bangladesh.
He said that since the abolition of quotas in post 2005 scenario, the textile industry has is up against the adverse situation on account of rapid changes on the national and international fronts, where per unit prices of all textile products is declining,
Post quota Pakistan textile products started confronting market competition on account of unfair trading practices of competitors, besides a negative perception of the country of buyers and investors, he added.
Shafqat Elahi said that in order to compensate textile industry the government announced a relief package for the value-added textile sector but left spinning and weaving sectors in spite of being capital intensive, on their own to face harsh realities.
Since last two years economic parameters have badly affected the viability of the industry and retarded its growth and sustainability, while the investment made by the spinning and weaving industry thus is under serious threat, he said.
He said that the strident rise in various cost push factors has an estimated financial impact to the tune of Rs 80 million for a spinning unit of the size of 20,000 spindles and weaving unit having 120 looms to the tune of 65 million.
"We are the largest investors of this nation. We request to the high authorities now to immediately convene local textile investors meeting under president or Prime Minister command. Together we can formulate a strategy to implement your vision for a dynamic, vibrant and prosperous Pakistan," he concluded.
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