Growing energy crisis deprives Pakistan textile from grabbing big opportunities

Japan has diverted its business to other textile producing countries Vietnam and Cambodia from China due to the political unrest between Beijing and Tokyo due to which Japanese textile imports from China has dropped from 86 percent to 74percent of its total purchases of $40b last year. Pakistan textile exporter from Faisalabad stand a chance as the Japan have shown keen interest on sourcing their imports from them but with the growing energy crisis faced in Pakistan, they are likely to lose this chance and would be in a position to grab big opportunities. Pakistan holds a share of $93m in Japan’s total textile purchases worldwide.

Shortage of energy has not only led to closure of a large textile manufacturing capacity in Pakistan but has been depriving them to take full advantage of trade concessions given by the European Union under its GSP Plus system.

The expectations of new investment in textile manufacturing capacity to take advantage of the trade concessions are fading down as the industry fights a battle for its survival. In fact, they are trying to save what has already been invested. There is no interest shown to invest in capacity expansion or set up a new project when the existing capacity is at risk of total closure.

According to manufacturer, more than a quarter of the Faisalabad’s total production capacity is lying idle on account of power and gas cuts. And, a large capacity is shut down for some years due to loss incurred by exporters on account of other factors. But if the entire closed capacity are revived, it can bring back nearly an additional $1b in export revenues without new investment.

In 2013, number of containers shipped from the Faisalabad Dry Port has dropped to just 6,000 containers from some 33,000 container shipped in 2007, which mean the country’s exports from Faisalabad have reduced not under loss.

In fact, the gas shortages has created an intra country difference, it gives a 6-8percent cost advantage to textile exporters from other parts of the country where mills are getting uninterrupted supplies of gas.

Similarly, the increase in the price of electricity last September has set the industry in Punjab back an additional Rs80b a year. On top of that, rivals India and China are giving huge rebates to their textile exports, adding to the affliction of Pakistani exporters. All these factors have made Pakistan’s competitiveness in the international markets even tougher.

However, the Pakistan government is taking steps to distribute gas and power to the industry on a priority basis, trying to counter balance the massive loss incurred by manufacturers over exchange rate, bringing down the costs of doing business and supporting exporters against their regional rivals in the global market to reviving exports