GSP Plus gateway can bring many positive changes in Pakistan textile industry

Pakistan has witnessed an increase of 20-25 percent in enquires and order from European countries in the last 11 months, said Multinational Export Bureau CEO Babar Khan who runs two textile factories in Karachi that export most of their knitwear to the EU and United States, is not the only one who has benefited from the duty concessions.

Most of the garment exporters have achieved growth in their exports but of varying degrees. For the exporters who are looking for more trade avenues, the European Union’s Generalised Scheme of Preferences (GSP) Plus has opened new doors of opportunities.

According to Khan, the GSP plus is a gateway that can bring many positive changes in the Pakistan textile industry, their export can grow further if they managed to curb the rising cost of production. As they not only have new customers but have been able to retain the old ones from the EU.

Knitwear exports jumped by a handsome 25% from July to October this year compared to the same period of previous year. Similarly, readymade garment exports rose 10% whereas cotton cloth and cotton yarn shipments dropped 36% and 10% respectively, according to the latest government data.

The government expects to achieve its target of $1 billion in additional exports to the EU by the end of December. Looking at the data of the first eight months, the goal seems realistic. Textile exports to the EU jumped to $3.512 billion from January to August, up 21.4% compared to $2.894 billion in the same period of previous year.

Reflecting the government’s optimism, Khan believes Pakistan will succeed in increasing exports by $1 billion by the year-end.

A record decline in international oil prices, recent 0.5-percentage-point cut in benchmark interest rate, five-year low cotton prices and 11-year low inflation are some of the factors that will support textile exporters in coming months.

However, there are worries as well as the rupee has appreciated against the euro. Since July this year, the rupee has strengthened over 6% against the euro, which is eroding profit margins of exporters. However, a significant increase in volumes may help offset the negative impact to some extent.

Speaking about the lack of product diversification in the textile sector, Khan is of the view that diversification happens where the exporter sees some stability. In this scenario, he can plan for the long run.

Unfortunately, overall uncertainty in the market and fluctuations in export orders depending on the season have always discouraged the investors from long-term planning.

Also the country has experienced serious security and energy challenges, resulting in shrinking of the textile industry over the last few decades. Bangladesh, which is a major competitor in the EU market, has remained relatively undisturbed by such challenges.

Khan is of the view that the attitude of a visionless bureaucracy has compounded the problems as it has failed to give any direction to the key export industry.

However, Pakistan can regain the lost ground against regional competitors including Bangladesh and India, if the successive governments takes export industries seriously or it will be a long and painful journey.