Pakistan govt accepts 3 demands of textile industry to boost production

The Pakistan government has accepted three out of the eight demands of the textile industry to help boost production and exports at reduced prices. But the Pakistan’s textile industry welcoming this gesture announced that it will continue to agitate for the acceptance of the rest of the demands. The three accepted demands are:

First, raising the regulatory customs duty on import of Indian cotton yarn and fabric-coarse cloth from the present five percent to 25 percent – but the government raised it only to 10 percent, effective from November 1. Second is provision of more and cheaper, long-term financing to the ginning and spinning sector and thirdly, is reduction in long-term financing and export financing (ERF) by one percent.

Textile industry is hopeful that the rest of the eight demands will soon be considered favourably, and resolved by the government for the viability of the industry and increasing exports off the country, according to All Pakistan Textile Manufacturers Association (Aptma), the industry leader.

The industry and business analysts insist that its products ranging from high value fashion garments to common textiles are enjoying a big boom in markets ranging from the UAE to EU, but it still has to lower its cost of doing business in order to reduce the sale price of its products in the export markets.

The industry has been encouraged by its recent holding fashion shows in the UAE, Middle East, EU and elsewhere.

Pakistani fashions and designers are vigorously competing in countries across the globe, ranging from top fashion designer names from France to India and Japan to China.

The credit for bringing the industry back to production followed the latest, Pakistan-wide shut down of all textile industrial factories and allied manufacturing and processing units across the country. Prime Minister Nawaz Sharif’s pro-business policies and a team of his three negotiators conceded some of the demands. The negotiators included Finance Minister Ishaq Dar, Commerce Minister Khurrum Dastgir Khan and Haroon Akhtar Khan, Special Assistant to Prime Minister on Revenue.

Finance Minister Dar said that they need more revenues and rapidly enlarge their forex earnings to expand nationwide development work and repay foreign loans. But they have chosen to help the textile industry as it is the biggest labour employer and foreign exchange earner through exports.

This quarter – October- December 2015-16 hopes that production and exports will start moving up – making the country happy.

The seriousness of the textile industry crisis can be gauged from the fact that its exports have been declining during the last three years – down to a level of around $13 billion a year. Still its significance is that it makes a big chunk of the overall total annual exports, which have also been stagnating at around $24 billion a year.

Besides the big role of earning foreign exchange, textile industry is the biggest employer of labour, the largest tax-payer and consumer of most of its 12 to 13 million bales of its home grown cotton. The official statistics indicate that the overall Pakistani textile exports in financial year 2014-15 were down 10 per cent as compared to 2013-14. Even in first quarter of 2015-16 – July-September 2016, the exports were down 14 per cent.

As of September the textile exports picture is almost gloomy reaching a total of just $1.093 billion compared to $1.110 billion in August – down 1.52 per cent according to Pakistan Bureau of Statistics (PBS).

Although as far as acceptance or rejection by government of all the remaining demands of the industry is concerned, the decision will several more weeks. These include the demand to reduce the electricity and gas tariff, cheaper bank credit, other incentives to bring down the cost of doing business and banning smuggling-in of foreign textile products. The industry said that the governments of India, China, Bangladesh, Sri Lanka and Vietnam – the principle competitors against Pakistani textile exports – provide all these incentives and facilities.

But whatever progress has been made, most sub-sectors of the industry seems to be satisfied. Hover some are not. Javed Balwaani, Chairman Pakistan Apparel Forum (PAF), for instance, is critical of the government for raising customs duty on Indian yarn imports from five to 10 percent and on Indian and foreign fabrics from 10 to 15 percent.

The government has not done its homework before raising these duties as it has just obliged the domestic spinner sector, which was facing competition from foreign yarn imports as well as the fabric manufacturers.

According to Aptma chairman Tariq Saud, the government seems to be showing some flexibility in connection with bringing down the power tariff and taxes. But it has still to meet several of their key demands, including a reduction in Rs170 billion additional taxes on the textile sector.