According to J. A. Schumpeter, an economist, UK owes its predominance to a single industry--the textiles. Can the same be said of Pakistan? Pakistans textile exports touched $10.3 billion mark in 9M FY14, a growth of 7.9 percent over the corresponding period of last year, as per Pakistan Bureau of Statistics.
The increased growth was mostly attributable to rise in export of raw cotton, low value-added (such as cotton cloth and made-up products) and value-added (knitwear and bed wear) products due to depreciation of rupee.
However, the readymade garments (RMG) sector grew 9.36 percent in 9M FY14 to reach $1.43 billion. Compare that to Bangladesh where official figures show RMG exports for the same period at $18 billion.
On monthly basis, textile exports witnessed a paltry growth of over 6 percent in March 2014 (it was 9.2 percent in February 2014) over the corresponding month of last year. It seems like Pakistan is failing to fully capitalize GSP+ status gains extended by the EU, by not removing the supply-side bottlenecks.
According to an industry analyst, Pakistans daily wages per hour are $0.51, while these are $0.38 in India and $0.32 per hour in Cambodia. Similarly, electricity tariff in Pakistan is $0.17 per unit, whereas it is $0.13 in India, jacking up the cost of doing business in Pakistan.
As stated by a member of APTMA, the textile lobby, the Punjab textile sector is subjected to eight hours of electricity and five days of gas outages, due to which the industry there is making a loss of Rs80 billion per annum.
He further adds that the appreciation of the rupee against dollar is limiting the gains estimated to be brought about by the GSP+ status. Moreover, he warns that the withdrawal of the duty exemption on import of cotton yarn by the ECC will lead to a rise in cotton yarn prices, hampering the countrys exports to the EU markets under the GSP+ status.
In addition, Indian yarns, both fine and coarse, are said to be seeping into Pakistani market because the domestic downstream or value-added textile sector finds it more profitable to use cheaper imported yarns. Likewise, competitive marketing by Indian yarn exporters also triggered setback to Pakistani spinners who earlier enjoyed benefit in the Chinese market.
In this era of severe competition, to benefit from the GSP+ status from the EU, where styles change continually, Pakistans textile sector must cut the time it takes to initiate new styles. It also needs huge investments in developing infrastructure and capacity-building of factories that can meet the global demand.
Its time to put emphasis on the resurgence of exports by distributing gas and power to the industry on a priority basis, lowering the costs of doing business, compensating manufacturers for huge exchange rate losses, and backing up exporters against their regional competitors in the global market before it is too late. It is not easy to re-establish a factory once it shuts down.
Source:- brecorder.com
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