Crisis deepens in Pakistan's stagnant textile sector

Textile sector is facing a tough competition in the international market from China, India, Bangladesh and Vietnam.

Pakistan's textile sector is bogged down with problems like energy shortage, high cost of doing business, rising energy prices and high taxes.
Due to an appreciation in the value of rupees against dollar and euro, textile sector is also facing a tough competition in the international market from China, India, Bangladesh and Vietnam.
Experts say the issues must be addressed on priority for a sustainable growth in exports. The entire textile industry is up on warpath against the government and has been threatening to go on strike across Pakistan.
"The talks between the government and leadership of the All Pakistan Textile Mills Association (Aptma) have failed again and again as the finance ministry refused to accept the industry's demand for withdrawal of the recently imposed surcharge-taxes on electricity and the Gas Infrastructure Development Cess (GIDC) tax, plus a range of other harsher taxes," Aptma chairman S.M. Tanveer said.
Haroon Akhtar, Special Assistant to the Prime Minister on Revenue informed Aptma that a cut in the electricity price for a specific industry would not be possible for the government.
According to Aptma, close to 30 per cent of all industries and factories are shut down. A number of big textile mill owners have shifted their industries abroad - as far away as Africa - and they themselves have migrated.
Currency market operators said that rupee parity is around five per cent higher against the greenback and up to 15 per cent higher against the euro. "This artificial appreciation of the rupee has made us incompetitive in most of the world markets," said Gohar Ijaz, senior leader of Aptma.
Pakistan's budget deficit is rising and government is trying to narrow the gap by rapidly increasing taxes on industries. But the fact is that all the industries - including textiles - are stagnant for the last five years and will not be able to bear that burden.
Aptma chairman S.M. Tanveer said that textiles industry hoped that the government would resolve industry's problems.
"We simply wants fair and transparent policies for our industry. We do not want to pay for the inefficiencies of the power sector," he said.
"Our competing countries are giving huge subsidies, cheap power, ensuring lower cost of doing business and other supplies and low interest rates to their textile industries and exports," Tanveer said.
There are good reasons why should the government give the textile sector a fair deal and let it grow. The reason is that the industry is getting a tough time at home and abroad. It needs to help raise domestic output and exports more - to earn more. Textiles is the biggest exporter and earned $14 billion out of the overall annual total exports of $25 billion last fiscal. All other export items contribute jus $11 billion. This cash is desperately needed to pay for nearly $40 billion annual national import bill.
The fact is that Pakistani textile exports remained stagnant over the last three years. They rose only 22 per cent even during 2006-13 period. Its 33 per cent of spinning industry was either completely closed or operated only partially. It means a $3.5 billion loss in terms of exports. During the same periods, exports from its rival countries were rising fast.
For instance, between 2006-13 period India raised its exports by 94 per cent, Bangladesh by 160 per cent and Vietnam by an unprecedented 230 per cent.
The State Bank of Pakistan spokesman said textile exports in FY-14 were $13.658 billion, as compared to $13.527 billion in FY-15 - a small reduction but still a cut - not an increase.
Views expressed by the author are his own and do not reflect the newspaper's policy.

• Pakistan