The share of textile sector in country's exports has registered a negative growth of three percent in July-February 2007-08 as compared to the same period last year, indicating a widening trade deficit that can hurt balance of payments.
Textile is the most important industrial sub-sector that contributes nearly 68 percent to the total exports of the country. It provides largest employment base to industrial labour and is the largest foreign exchange earner in the country.
In July-February 2007-08, the overall exports of the country stood at $11.7 billion as compared to $10.8 billion in corresponding period of last year, registering an increase of 7.2 percent. During the period, textile exports stood at $6.8 billion as compare to $7.3 billion in corresponding period of last year.
For the last few years, the textile sector has invested about $6 billion in value addition but due to the continuous rise in the cost of doing business, resulting from rising prices of raw materials including raw cotton , utilities, inflation and bank refinancing rate on exports, Pakistan textiles are becoming uncompetitive in the international market.
The cost of doing business has increased to almost 12 percent as compared to the regional competitors like India, Bangladesh and Sri Lanka. Well-placed sources in Ministry of Textile told Business Recorder that the government has already provided 6 percent subsidy in the name of R&D.
"The government does not have enough resources to supply electricity and gas at cheap rates to the textile sector", they said. "It is true that the textile exports are declining gradually but we have started establishing new textile zones in Faisalabad, Karachi and Lahore and we are hopeful that till 2010, we will again be able to have a big share of textile exports in our overall exports", the asserted.
The demand of energy in Pakistan has increased at the annual consumption growth rate of 4.8 percent. There can be further increase in its growth accounting at 8-10 percent annually till 2010. The global textile industry is likely to grow from $300 billion to $850 billion and Pakistan would be an opportunity to capitalise on a much larger portion of this growth.
It has become need of the hour to have self-sufficiency in better-managed cotton crop, availability of hedging mechanism for interest rates like cross currency swap. The total international trade in textiles is currently about $350 billion of which Pakistan's share is less than 3 percent. A textile industrialist, who wished not to be named, emphasised the R&D facility should be extended for a period of five years (2013).
"Our cost of production is 30 percent more than that of Bangladesh and the gas prices are 50 percent less than that of Pakistan", he disclosed. Moreover, the cross-subsidy of 30 percent is immensely harmful for industrial growth in Pakistan, as handful of industrial users bear the burden of subsidy to 165 million domestic consumers.
The high electricity and gas charges are also said to be main factors behind the declining textile exports. The gravity of the situation may be gauged from the fact that almost 75 percent industrial units, including 300 spinning and weaving mills are closed.
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