The textile industry in Pakistan is 80% dependent on exports. With the recent global recession which is expected to continue till the end of 2010, Pakistan's textile sector is facing a do or die situation in which governments of regional competitors are extending assistance to their industry to ensure they wither the global recession.
The assistance by the Chinese Government to their exporters in the form of duty drawbacks falls between 5 to 13%, in Bangladesh the drawback amount of 5% backed by low gas/electricity/interest rates and waiver of 12% import duty by the EU under the GSP program.
The USA and EU are Pakistan's largest trading partners. The recent global recession has resulted in sharp increase in bankruptcies putting the unemployment % well above 10% in the US market. Forced with reduced sales, buyers in the USA and EU are drastically cutting orders and reducing prices putting the textile sector under further stress. Exports incentives in China, Bangladesh and India are making it difficult for Pakistani exporters to remain competitive.
The installed capacity in the Pakistani textile sector is mainly dependent (80%) for its functioning on export orders coming mainly from US and EU zones, and any recessionary trend in these markets, currently being observed due to the global recession, can have serious negative implications, which in fact can lead to industry closures at home.
The main factors responsible for the increase in costs are as following, It is estimated that the industrial sector in Pakistan pays the highest charges per unit in South East Asia. The electricity rates in Pakistan are US $10.08 cents per unit (Rs 8 per unit, industrial tariff is Rs 5 per unit which increases to Rs 9 per unit during the peak hours).
Electricity tariffs in neighbouring countries are as follows. Gas has been increased by 37% in a time frame of less than a year linking to international petroleum prices. The rate of Interest in Bangladesh, India and China are significantly lower than Pakistan. Prevailing rates in Bangladesh are 9% while in China are 5.6% as compared to 16.0% in Pakistan.
Frequent POWER DISRUPTIONS ranging from 6 to 8 hours severely hampers productivity preventing companies from operating at full capacities which in turn lead to more lay-offs. Pakistani textiles are subjected 12% import duty by the EU whereas Bangladesh and Sri Lanka are exempted under GSP Program. This is the main reason why Pakistan's share of textiles in the European Union is merely 1.5%.
For the US market, 13% share of Pakistan in textiles is significantly lower than our competitors. Without a favourable business environment based on lower electricity/gas prices, low interest rates supported by assistance in the form of Research and Development at 6% including spinning sector and stable political order, increase in exports cannot be achieved. The Government need to offer various incentives for the spinning mills up-gradation and modernisation.

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Bangladesh   5.23 cents / unit     (Pak Rs 4.184 / unit)
Sri Lanka    7.28 cents / unit      (Pak Rs 5.82 / unit)
India         8.14 cents / unit      (Pak Rs 6.5 / unit)
China         8.50 cents / unit      (Pak Rs 6.8 / unit)
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