Textile exports in FY18 witnessed a modest increase of 9 percent as compared to the previous year. The growth in exports was mainly led by valued added segments including bedwear, knitwear and readymade garments with the latter two recording double digit growth.
However, on a month-on-month basis overall textile exports saw a fall of two percent which might be attributable to a couple of factors. One, even though the much awaited depreciation of the rupee has taken place, it is anyone’s guess where the final stop may be at. In this scenario, exporters might have delayed transactions in order to profit from further expected currency devaluation.
There were high hopes pinned on value-added segments to improve the dismal performance of past years in light of the plethora of incentives provided under the PM Textile Incentive Package. But textile stakeholders across the board have decried the shabby implementation of the export incentive awarded to the textile sector by the government.
Value-added players assert that the growth would have been much higher had their pending sales tax refunds which have now been delayed for over two years now in some cases been released in a timely manner.
Going forward, the environment for textile exporters and manufacturers will remain under pressure owing to a variety of factors. The cost of manufacturing in relation to regional peers is only set to increase as the next government is very likely to increase both electricity and gas tariffs. The provision of more expensive R-LNG to Punjab’s industry has already resulted in closure of several units owing to high cost of operations.
Moreover, raw material procurement has become tedious and costly. This newspaper has highlighted the illogical protection afforded to polyester players and the even more befuddling re-imposition of duty on imported cotton. (Read: Textiles: paying for polyester protection and Leave imported cotton alone).
The area under cultivation of local cotton has gone down and the cotton production target was missed by eight percent in FY18 while by an even wider margin of 30 percent and 25 percent in FY16 and FY17 respectively. The current year is likely to be no different when it comes to a shortfall of the required 16-17 million bales by the local industry.
Pakistan’s textile export share would need a concerted effort from both private sector players and the government in order to build any kind of momentum in increasing exports by any decent margin in the coming years. The private sector needs to pay heed to the evolving preferences of global consumers in favor of man-made fibers while capacity would have to be increased in order to remain cost competitive with Vietnamese, Bangladeshi and Chinese exporters.
From the government’s side, the pending sales tax refunds should be cleared soon while policymakers should refrain from imposing duties on key raw material items for the sake of revenue generation alone. Lastly, protection should be removed from those upstream industries that have failed to become internationally competitive after decades and still require protection to remain afloat in the local market. This only hurts the downstream value added segments that are caught in a bind when it comes to raw material procurement.
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