The textile items export rises by 18.4 percent during July-May FY 2005-06, against nominal growth of 4.4 percent realised during the same period of the last year. According to official sources, both the low value-added and high value-added products contributed in this impressive growth.
The increase in the textile exports in the post-Multi Fibre Agreement (MFA) period is a good omen for the economy, which remains heavily dependent on textile exports. In FY05 textile exports suffered due to uncertainties surrounding the end of MFA in the middle of FY05. Although the growth in the post MFA period in FY05 was 9.3 percent, the growth prior to it was just 1.2 percent; as a result, FY05 growth was restrained to 4.9 percent.
Within the low value-added group, cotton yarn and cotton fabrics showed 35.2 percent and 15.5 percent growth during the period, as against minus 4 percent and 9.3 percent growth in the same period of last year.
Along with increase in quantum, the low base effect explains the growth in the group. With regard to high value added products, bed-wear and readymade garments were the major contributors, registering 46.5 and 27 percent growth during the period under review, against growth of minus 0.3 percent and 6.7 percent in the same period of last year. Almost the entire increase in bed-wear was explained by the quantum impact, while increase in readymade garments was also caused by high unit values.
It is hoped that the reduction in the European Union (EU) antidumping duty from 13.1 percent to 5.8 percent with effect from May 7, 2006 will have favourable impact on the export growth of bed-wear in the forthcoming months.
Official sources hoped that Pakistan would be in a better position as compared to its major competitor India facing 6.6 percent anti-dumping duty on its bed-wear exports.
However, fall in the unit values of knitwear and towels together with high base, affected the growth in these commodities adversely. The knitwear showed nominal growth of 6.2 percent during the period under review as compared to growth of 13.7 percent during the corresponding period of last year. However, despite the fall in unit values the export of towels witnessed a robust 12.9 percent growth, though this was sharply lower than the 31.2 percent rise seen during the corresponding period of FY05.
The exports of synthetic textiles, other textile made ups and tarpaulin and other canvas goods exports declined during the period.
Official sources explained that the strong export growth is commendable, particularly given headwinds from the withdrawal of the preferential access to Pakistan under the Generalised System of Tariff Preferences (GSP) and the anti-dumping duty on Pakistani bed linen exports by the EU. Further, the appreciation of Pakistani rupee against Euro up to January 2006, and relatively higher domestic inflation throughout FY06 probably also had an adverse affect on the export growth.
Also encouraging is the rise in the share of manufactured products in the total exports compared to primary and semi-manufactured goods.
Specifically, the share of manufactured products in the total exports has increased to 78 percent during July-January FY 06 from 72 percent in the same period of FY01.
However, relative weakening of dollar against Euro February onward and consequently that of rupee and reduction of anti-dumping duty from 13.1 percent to 5.8 percent May 2006 onwards is likely to give boost to exports in the EU region in the months ahead.
On the flip side, sustaining the high FY06 export growth is not likely to be easy.
A closer look at the monthly growth profile reveals two distinct trends; a very strong growth of 20.9 percent during July-January FY06, followed by a considerable slowdown to an average monthly growth of 10.5 percent in the February-May FY06 period. The differences in exports performance in the two periods appear to lie essentially in the basis of the growth comparison. In the first half of the previous fiscal year, export growth had been constrained by the MFA quotas, and as exports in the comparable period of FY06 were not restricted by quotas, the growth rate appears that much stronger. The growth recorded for the February-May FY06 period however, is based on post-MFA performance in both years. The lower growth rate in the latter period, therefore, provides a better basis for estimating future export growth.