The Chairman of All Pakistan Textile Mills Association (Aptma), Iqbal Ebrahim, has commented on the report attributed to the Governor State Bank of Pakistan that the textile sector has abused the R&D support. He said that the export of textile sector has increased from $8.564 billion to $10.757 billion in 2006-07 as compared to 2004-05, an increase of 25.6 percent.
He said that exports of textile sector during July-March 2004-05 was $5.972 billion whereas for the corresponding period of 2007-08 it is $7.766 billion--an increase of $1.794 billion or 30 percent--even though the industry is facing manifold problems such as massive load shedding including suspension of gas supply in Punjab and NWFP to the industry during winter season which have caused an unprecedented disruption in the industrial production all over the country and the cost push factor has made the exports uncompetitive.
Due to law and order situation prevailing in the country foreign buyers are reluctant to come to the country and prefer to go to safer destinations, which is an additional cost borne by Pakistani exporters as they have to travel to other destinations to meet their buyers/customers and it also hampers the development of product and design. He further said that the items of textile sector entitled for R&D support have shown a growth of 25 percent to 30 percent during last three years.
The Aptma Chairman further stated that the decline in export of textile sector by 3.14 percent during first 9 months of the current fiscal year as compared to the corresponding period of the last financial year is due to many reasons such as increase in cost of doing business, import of about 25 percent of the raw material ie cotton to meet the consumption requirement of the industry. In addition to the above export proceeds of number of textile exporters are stuck up in USA and other countries due to slowing down of their economies.
Iqbal said that due to withdrawal of duty-free concession to Pak goods starting January 2005 by European Union, textile exports received a setback because of continual increase in cost of doing business and the exporters were losing the hard earned market share fast.
Furthermore, duty drawback rates were slashed drastically and interest rates started to rise due to which R&D support was provided to exporters to offset the cost. If this support was not given, the exports would have suffered beyond repair, he said.
He said that the textile sector has invested about $6 billion during last 6 years in balancing, modernisation and replacement (BMR) of the industry at the lower interest rate of 3-4 percent prevailing at that time which is now ranging around 13-16 percent.
He said that mark-up rate on export refinance was increased from 3 percent to 9 percent, which later on reduced to 7.5 percent but the banks are reluctant to provide finance at this rate due to change in the refinance scheme provided by SBP. Furthermore, Islamic banks and leasing companies do not provide financing for exports under SBP schemes.
Referring to the news item published in the press on May 7, 2008 that the textile sector is the biggest beneficiary of subsidised loans and has availed an export refinance of Rs 176 billion in the first 9 months of the current fiscal year which is about $2.9 billion.
The Aptma Chairman said that whereas the exports of textile sector during the same period is $7.766 billion, which is about 2.7 times of export refinance provided to the industry, keeping in mind that the government has subsequently reduced refinance facility from 70 percent to 50 percent.
In view of the above reasons and to make the exports, especially textile goods, competitive in the international market the Aptma Chairman demanded that the government should continue the R&D support to textile industry and resolve the issues concerning the industry to earn the much-needed foreign exchange and to capitalise Pakistan's share in the world textile exports.-PR
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