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Pakistan plans to boost textile exports by 20pc

ISLAMABAD — Pakistan government plans to enhance 20 per cent the country's textile exports by rationalising tariff and duty drawback on textile products in the next budget to be announced on June 9.

This proposed measure is expected to help promote textile exports in the range of $15-16 billion next year compared with $12.5 billion expected textile exports by end of current year.

Minister for textiles Mushtaq Ali Cheema confirmed that duty drawback rates for textile exports would be rationalised in the coming budget along with tariff rationalisation. For example, duty on polyester staple at present was at 6.5 per cent, 155 per cent on caustic soda and 15 per cent on screen etc would also be rationalized and updated.

He said the recent government decision allowed import of long staple cotton from India through land route would also be helpful in meeting cotton shortfall and enhance exports. In addition, a part of about four million bales of surplus Uzbek cotton which is lying at Iran's Bandar Abbas port could also be imported through Torkahan and Chamman borders. Pakistan, he said, currently faced a shortage of 3-3.5 million bales which could be met through land route imports from India and Uzbekistan.

The minister said the textile industry would be provided with level playing field through zero rated exports in the coming budget, because textile industry at present was under-utilised to the extent of 30 per cent and could not earn profits unless interest payments are relaxed. He said the industry would take two-three years to use its full capacity through various measures, including swapping of their expensive loans with inexpensive long term loans, zero rating and import of cotton.

He said one reason why the textile industry could not reach its full capacity was that the textile industry in the US and Europe did not close down with the pace anticipated in Pakistan. However, substantial investments of $6 billion that the industry has made in the recent years give us the confidence that textile exports could increase by 20-25 per cent next year.

He regretted that Pakistan still exported about $1.5 billion cotton yarn that was not only strengthening its competitors but also resulting in low cost exports. "We would now try to utilise this $1.5 billion worth of cotton yarn in the value addition sector, so as to increase overall textile export and create jobs for the local people", he said. Pakistan's total exports of goods in ten months (July-April) of current fiscal stood at $13.909 billion as against $13.456 billion the same period last year, showing an increase of 3.36 per cent. The government has set an export target of $18.6 billion for the current fiscal.

Cheema said the share of textile exports in the country's overall exports has also increased to 67 per cent from about 65 per cent last year. With new measures, the share of textile exports should go beyond 80 per cent next year. To achieve this target, the strategy is to diversify markets and focus on Central Asian Republics, Russia and Turkey.

Chairman All Pakistan Textile Mills Association (APTMA) Shafqat Elahi Shaikh, however, believes that the government would need to take a few corrective measures to achieve this target but agreed that the potential was there for export growth of 20-25 per cent next year. He, however, deplored that the government did not seem serious in putting in place such a mechanism.

There are many variables that are working to our disadvantage. For example, the exchange rate has increased by 13 per cent in India that will help us a lot. There is creeping revaluation in China, which in long run will help Pakistani exporters and then under the Free Trade Arrangement with China, Pakistani exports for domestic consumption in China would be duty free in 2008 that would give us access to over a billion population that has remained untapped so far. This facility is available to only Pakistan. So the environment is shapping up in favour but the government will have to give the textile industry its due right.

The government would need to "remove shackles on our ankles" by allowing cotton imports freely from India, tax assessment on the basis of profits instead of on the basis of sales, by rationalising tariffs and duty drawback rates and by giving relief in interest rates. Also the industry is opposed to subsidising other segments of society in areas of electricity and gas tariffs. If the government wants to subsidise fertiliser or household sector in energy prices, it should not be recovered from the industry but should be funded by the government through some other means, he said.

He said recent decision by the government to allow long staple cotton imports from India through land route meant nothing because long staple cotton was not grown in Eastern Punjab. The decision was not based on economic consideration but on some other consideration, he added.