Lacklustre half for textiles

There were no surprises in the 1HFY19 numbers for textile exports which show the sector continues to struggle. According to the Pakistan Bureau of Statistics external trade statistics for the first half of 2019, total textile exports registered negligible growth both for the 6MFY19 period as well as for Dec-19 on a yearly basis.

The trade war between the US and China continues to take toll on Chinese appetite for yarn imports from Pakistan while domestic demand also increased resulting in 17 percent fall in value of cotton yarn exports and almost 20 percent fall in quantity for 1HFY19 as compared to the same period last year.

Knitwear continued to buck the sluggish trend in other segments and posted 10 percent growth in the first half of the year while the volumetric growth clocked in at 20 percent growth as compared to the same period last year.

Now that the rupee has devalued considerably (almost 30 percent) a rise in quantity is evident across most segments. But the devaluation also means that the value of exports has taken a hit due to exports becoming cheaper.

Those looking for an instantaneous jump in textile exports will continue to be disappointed unless some pressing issues of the sector are addressed. Pending sales tax refunds seem to be priority number one for the textile exporters and the quantum keeps on increasing and Rs100 billion in verified approved claims need to be cleared by the government. (Read: Textile refunds- another circular debt? published on 09 Jan, 2019)

This column has written about the need to abolish duty on imported cotton and the ECC’s recent decision to remove duties on imported cotton is welcome for the sector given there is a shortfall of 5-6 million bales of cotton for the local industry.

The gas price has also been brought down for textile exporters who are now getting gas at $6.5/mmbtu. The mini-budget is further expected to reduce duties on imported raw materials for textiles which will further help in bringing the cost of production down for exporters.

So the sector has seen some of its longstanding demands met while the government is trying to find a way to clear the pending refunds issues as well. However, something to ponder upon is that these measures will only increase textile exports to a certain extent. Unless the production capacity of textile exporters take place textile exports will plateau after reaching a certain mark.