ECC decision to exempt cotton yarn import duty likely to hamper Pakistan textile exports

The Economic Coordination Committee (ECC) of the Cabinet, which met under the Chairmanship of the Federal Minister for Finance Mohammad Ishaq Dar last week, has decided to withdraw SRO 15(I)/2010, which exempted cotton yarn import from custom duty of 5 percent, in order to check import of cotton yarn.

The value added textile, which contributes around 80 percent to Pakistan’s overall textile exports, has expressed disappointment on the withdrawal of the duty exemption on cotton yarn import as it would negatively affect the export of value-added textiles from Pakistan.

According to Mr. Bilwani, chairman of the Pakistan Apparel Forum, and chief coordinator of the Value-Added Textile Forum, the spinners will have a monopoly if the five percent duty exemption on import of cotton yarn is withdrawn by the Government, which would be disadvantageous to the value-added textile sector. The decision of the ECC has been influenced by the spinning sector, which contributes only 20 percent of the total textile exports from Pakistan.

Already the appreciation of the Pakistani rupee against the US dollar in recent months has put the value-added textile export sector in problem; with the withdrawal of the duty exemption on import of cotton yarn it would further worsen the problem of the exporters as it will only lead to an increase in cotton yarn prices, which in turn would raise the price of the value-added textiles, making them uncompetitive in the global market.

Pakistan’s textile and apparel exports has increased by 8.28 percent year-on-year to US$ 9.155 billion during the eight-month period from July 2013 to February 2014, likely to see a downward trend with the decision taken by the government.

However, if the Government decides to stick to the decision it should also impose duty on cotton yarn export, otherwise it will hamper the country’s exports to the EU markets under the GSP Plus status.