Aptma team, SBP governor invited to meet President: December 18 seminar postponed

All Pakistan Textile Mills Association (Aptma) has postponed its national seminar scheduled for December 18, Saturday, titled 'implications of high interest rate regime on industrialisation'. Chairman Aptma, Gohar Ejaz told Business Recorder that President Asif Ali Zardari has invited Governor State Bank of Pakistan (SBP), Shahid H. Kardar and Aptma team to Islamabad ahead of the official visit of Chinese Prime Minister.
Therefore, he said, the seminar has been postponed till a next date is fixed. It may be noted that Governor SBP, Shahid H. Kardar had given consent to chair the seminar with keynote addresses by Sartaj Aziz, former Federal Minister for Finance, Razzak Dawood, former Federal Minister for Commerce and Dr Salman Shah, former Advisor on Finance, Sultan Ahmad Chawla, President Federation of Pakistan Chambers of Commerce & Industry (FPCCI) and Waqar Malik, CEO ICI Pakistan Ltd.
Ejaz said that industrialisation process in the country has come to a halt due to non-availability of liquidity, high interest rate and widening banking spread in lending and borrowing rates. He further added that the textile industry is passing through terrible times due to unprecedented cotton prices in the international market, hitting through the roof since last year, while the prevailing energy constraints in the country are rubbing salt in the industry's wound.
According to him, there is no doubt that inflation and discount rate go side by side but still, financial policymakers should bear this in mind that the textile industry cannot make exports, especially when it is facing extraordinary competitive regime in the region.
Chairman Aptma said that as of June 2010, total credit extended by SBP, under classified loans, was Rs 5738 billion. Of this amount, a major chunk was taken by the government and thus, only eight percent of this amount was allocated to the textile industry. Given the textile industry's contribution to the economy; 50 percent contribution to export receipts, 40 percent employment and 8.5 percent to GDP, this figure of eight percent is rather iniquitous and unfair and does not bode well for the economy.
He further said that since 2004, the textile industry has made investments exceeding six billion. The record shows that every year from 1999 to 2004, investment in the textile industry continued to increase year after year in succession. It is noteworthy that this investment trend was enabled only by a low rate of interest, he added.
Ejaz highlighted that with the rise in interest rates, there came about an increase of non-performing loans. In addition, he said, negative fallout of higher interest rates was whittling down exports. In spite of the fact that the textile industry installed sizeable additional capacity to create exportable surplus, textile exports either declined or stagnated, both in quantity terms as well as value-wise.
He lamented that banks prospering at the expense of the industry in Pakistan does not portends well, neither for the textile industry nor for the economy. In the third quarter of 2010, compared with the corresponding period the previous year, net profit margin of banks increased by 149 percent, he maintained. Chairman Aptma opined that industry in general has been facing adversity not only on the interest rate front, but also as a consequence of unfavourable fundamental economic indicators and operational factors, which have resulted in massive increase in the cost of doing business.
He stressed that the textile industry urgently requires a special line of credit for industry at competitive interest rates to encourage industrial investment in the country. Also, export refinance should be available and open to the textile industry value chain from yarn to garmenting and made-ups. Adequate liquidity should be on offer to meet the recent trend of rising raw material and commodity prices internationally, he added. Aptma is prepared to enhance country's exports to $25 billion, assures an investment of dollars five billion and promises direct employment to an additional one million people, he concluded.