It, indeed, is disconcerting to learn that over 300 hosiery-knitting units have stopped production due to ever increasing input costs in the country. This grim disclosure was made to newsmen by Pakistan Hosiery Manufactures Association (PHMA) Chairman, Jawaid Bilwani.
While lamenting that exports of value-added textiles have been seriously hit by the end of textile quota regime and severe competition faced from India, Bangladesh, China and other countries. In this regard, he made a pointed reference to the concessions offered by the importing countries, besides subsidies and incentives they get from their own governments.
In this context, he appealed for removal of certain tough measures introduced in the 2006-07 budget, failing which it may not be possible to salvage the value-added exports from the depth they have sunk to. He also regretted that the textile package submitted by the committee that was assigned the task was subjected to a number of changes that left a great deal to be desired in so as its benefits to the small value-added industries are concerned. Understandable, therefore, was the disappointment he expressed over non-acceptance of the package in toto.
However, the government will be seen to have its own reasons for not doing all that was demanded of it. This, evidently, has reference to the subsidy part of the proposed textile package. For one thing, it will be noted that now that times have changed, even a slight indication of subsidised export is often enough for major importers to slap countervailing duties, thereby nullifying its advantages.
Be that as it may, the fact remains that the grim situation the textile industry, its value-added sector in particular, now faces calls for a thorough probe into its causes, from a downright objective approach, instead of dealing with the predicament through ad hoc measures. It is, however, just another matter that the urgent need for addressing its most pressing problems cannot be relegated to the background either.
And this may be exactly why the Federal Government in collaboration with the State Bank of Pakistan recently took a number of steps to help the textiles sector to avert further decline in its exports. In so far as the State Bank's contribution to the effort is concerned, reference may be made to the measures it announced to meet to the grim situation now unfolding on the textile export front. These included lowering of export refinance rate; slashing the rate of interest on loans for import of machinery; extending the scope of compensatory rebate on printed fabrics and home textiles, along with continuation of rebate for next three years on readymade garments and knitwear.
It will also be noted that the long-term financing scheme provides for imported and locally manufactured machinery along with reduction of banking spread from three percent to two percent. Import of generators is also allowed for financing under the scheme.
Notably, this decision should relieve exporters, to a certain extent, from the adverse impact of menacing loadshedding. Mention may also be made of allowing banks and DFIs to sanction and disburse loans without prior approval of the State Bank.
Needless to point out, Pakistani textiles have been constantly losing ground in the international market to China, India and Bangladesh. This may be partly attributed to 12 percent duty on key Pakistani textile items in the European Union, while Bangladesh, as an LDC has been benefiting from zero duty. Similarly, in the United States we fare no better placed against competitors in the absence of special trading arrangements with the US administration that entitle them to zero percent tariff.
Pakistani exporters have also remained at a disadvantage in freight and input costs in comparison with China and India. As earlier pointed out in these columns, the Trade Policy for last year had allowed six percent compensatory rebate to labour intensive textile garment sector, comprising readymade garments and knitwear.
However, neither sector recorded growth. Rather these units, mostly the smaller ones among them, started to default on repayment of loans. For the more they produced, the larger losses they had to suffer because of textile prices continuing to fall. The State Bank's action would certainly help reduce the cost of production and to enhance exports but to what extent nobody can predict. This, of course, has reference to the manner in which businessmen traditionally respond to concessions and incentives.
For in so far as our failure to meet the competition from the regional countries is concerned, it relates not only to overseas markets but to the domestic market as well.
Most of the industries in other sectors have started feeling its pinch, with more and more switching over to import trading from manufacturing. Of course, this must not be allowed to happen to any sector of the textile industry, in particular, with its value-added potential. It is high time as such, to revamp it in a way to avert a major disaster.