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Pakistan's textile sector faced one of its worst years in 2009. The blame, so argues the textile sector, can be laid squarely on the shoulders of the government that failed to take appropriate mitigating measures to support this major earner of foreign exchange for the country. There was a lot to be worried about in the face of multi-dimensional challenges triggered for the textile industry by an acute energy shortage, power outages and, lately, suspension in the supply of gas.
While thousands of small units across Pakistan faced closure threats, the government did continue to put together its efforts to give the industry something to cheer about. The one-mega official endeavor in the year to streamline the government's venture to revive the sector was the announcement of Pakistan's maiden textile policy in more than 60 years.
It may be recalled that a five-year textile policy unveiled on August 12 this year envisages plans to boost textile exports to $25 billion in five years. Rs 40 billion was earmarked for the development of textile sector in the policy, first announced in the budget for 2009/10. Restructuring and reorganisation of the textile sector is on the cards in the new policy which includes drawback of local taxes, refund of past Research and Development claims and magnetisation of PTA.
Key points of the new policy include creation of Textile Investment Support Fund (TISF), Technology Up-gradation Fund (TUF), Infrastructure Development, Skill Development, and Zero Rating of Exports, Tax free import of machinery and Rationalisation of Tariff structure.
The policy also envisages removing regulatory bottlenecks, ie market access, marketing support, export house scheme, marketing insurance scheme and improving Information and communication technology. The policy also encompasses indigenisation, women employment support programme, and support for disabled and the handicapped.
Another achievement of the government is that for the first time it has made the Employees Old-age Benefits Institution (EOBI) part of the textile policy and allowed its reimbursement to encourage women employment in textile industry, and support the handicapped employees in textile units registered with the Ministry of Textile.
The government has also removed 5 percent custom duty on import of cotton yarn. Similarly notifications regarding important policy initiatives have also been issued, including SROs about the free import of machinery for the textile sector. The Ministry of Textile also issued three notifications for the implementation of the Policy, according to which, textile manufacturers will receive three- percent drawback on garments, two percent on home textile and one percent on fabrics.
On the other hand, textile exports fell 3.21 percent during the first five months of the current financial year against the same period last year. Exports during July-November (2009-10) were recorded at $4.20 billion against exports of $4.34 billion during July-November (2008-09), according to the Federal Bureau of Statistics (FBS).
Major textile products that recorded negative growth include cotton cloth and cotton as their export declined by 29.8 per cent and 92.05 per cent respectively. Similarly, export of knitwear declined by 7.52 percent, bed wear by 7.21 percent, towels by 6.01 percent, tents, canvas and tarpaulin by 12.20 percent and made-up articles (excluding towels and bed wear) by 1.17 percent.
During 2009, textile sector also faced several challenges and accused the government of failing to overcome their problems and challenges, which have negatively impacted on the sector, said Pakistan Apparel Forum Chairman M Jawed Bilwani. Talking to Business Recorder, Bilwani said all the stakeholders appreciated the textile policy announced by the government.
But it has proved a failure because of the many challenges facing the sector including slow implementation of the textile policy, gas load shedding, high power tariff, and unavailability of yarn cotton. The textile policy promised undisturbed supply of power and gas to the industry, but a gas load-shedding and power breakdown is continuing, he said.
Dr Shahzad Arshad chairman Pakistan Cotton Fashion Apparel Manufacturers and Exporters Association (PCFAMEA) said that the Ministry has been too slow in implementing its promises. He further said that Rana Muhammad Farooq Saeed Khan, Minister for Textile Industry, recently committed that each word of the textile policy would be implemented, but, the industry people, who were optimistic at the time of the release of the policy, are now pessimistic given the extremely slow implementation.
Textile owners have been attributing the shortfall in exports to low domestic productivity owing to shortage of gas and electricity. It was decided that there would be two-day load-shedding in a week for the textile industry - a condition that has created pressure on the textile owners who are facing difficulties in meeting demand, he added.
"Drawback and research and development fund payment has not reached the pockets of exporters", said Bilal Mulla, Chairman FPCCI Standing Committee on Value Added Textile Products and Acting Chairman Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA).
The State Bank of Pakistan has received Rs 5 billion under the textile package but there has been no instruction for its utilisation. A letter of the State Bank addressed to PRGMEA said the Ministry of Textile had yet to mention exact areas where the amount would be utilised, he added.
Dr Shazad said that Pakistan's cotton demand is around 16 million bales, four million bales above production of 12 million bales, but the policy does not focus on increasing the output. The textile industry has been facing a financial crunch and is still waiting for R and D claims. Their 60 percent R and D dues are yet to be paid, he added.
The government has earmarked Rs 5.6 billion for R&D claims. Around 10,000 exporters' R&D claims are pending, but only 298, registered with the R&D Cell of the Ministry of Textile, have been assured reimbursement. Objections have been raised against application of 434 exporters, whereas 4,000 applications are pending with the ministry for registration. Textile value-added sector is also badly affected by the yarn cotton crises during 2009.
According to the official data 300 million kg cotton yarn was exported, from July to November 2009, which means 60 million kg per month, while textile ministry says that it will monitor and make sure that not more then 50 million kg will be exported, due to which the local industry has been affected, Dr Shahzad Arshad added. He said that law and order situation is also not favourable and the country's image is being destroyed and foreign customers are not willing to come to Pakistan to place orders.
"We have already lost orders for Christmas and spring and now fall orders are also being lost", he added. He further said that average rate (B-3/B-4) of electricity tariff for the textile industry was Rs 3.70 per unit in 2007, which rose to Rs 6.35 in two years, an increase of 60 per cent. "The textile industry is not in a position to bear the unprecedented hike in power tariff effective January 1, 2010", he concluded.

Copyright Business Recorder, 2010

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