When Minister for Privatisation Syed Naveed Qamar briefly held the additional portfolio of finance, he had given a new hope to the textile exporters, promising to continue 6 percent R&D support for the textile sector beyond the June 30, 2008, deadline the State Bank had set for abolishing the facility. That hope now stands completely quashed.
Quoting textile ministry sources, a Recorder Report says the government has conclusively decided to discontinue the programme due to financial constraints. The government had started R&D support programme for the textile sector in 2005, allowing withdrawal of six percent of the value of garments exports to the US and the EU.
The idea was to encourage value addition through skill development and induction of modern technology. R&D, it goes without saying, is an ongoing requirement in this and any other industry. It is also important to remember that Pakistans competitors in the international market - India, Bangladesh and China - all provide assistance, in one form or another, to their respective textile exporters. The cost of doing business in those countries is also much lower than here.
Add to this, incessant gas and electricity shortages our manufacturers have been facing during the last one-year or so, and the situation looks a lot less than promising. No wonder, our report points out that Pakistans textile exports during the first seven months of the current fiscal year decreased by 3.79 percent as compared to the corresponding period in 2007-08.
The excuse of financial difficulties does not help if that is to render textiles, a major component of our exports, uncompetitive in the international market, causing a significant dent in our export earnings. There is an obvious need to continue the support - all the more so in view of reports that, over time, the quality of our textile products has improved but inefficiency remains a serious problem. Even though the stated reason for the discontinuation of R&D is a lack of resources, it also has something to do with the issue of over-invoicing.
Some black sheep among the exporters are known to have been claiming large amounts of refunds on the basis of inflated invoices. It is this part of the problem that needs to be addressed effectively. Lessons can be drawn from the experience of our competitors. In India, for instance, the government helps its export-oriented textile companies improve their performance by sharing 25 percent of the cost of design centres they maintain to promote value-addition.
The same can be replicated here to enhance worker skills and bolster value addition. The textile sector with its 56 percent share in our exports, and being the largest single source of employment generation, is too important to be treated casually. The government must do all it can to help it compete with other players in the international market.