The ob­verse side of the coin

The Pak Banker - - 4EDITORIAL - M Zi­aud­din

WHAT is ail­ing the textile in­dus­try - the back­bone of our econ­omy? Ac­cord­ing to in­dus­try sources, it is the gov­ern­ment that is sti­fling the sec­tor with poli­cies that, it says, have ren­dered it un­eco­nom­i­cal while mak­ing its ex­ports largely un­com­pet­i­tive in the in­ter­na­tional mar­kets. In­deed, the latest ex­port fig­ures re­flect a se­ri­ous de­clin­ing trend. Ac­cord­ing to a news­pa­per ad­ver­tise­ment is­sued by the Pak­istan Textile Ex­porters As­so­ci­a­tion (PTEA), 40 per cent of textile units have been closed down, caus­ing thou­sands of textile work­ers to lose their jobs.

It has fur­ther claimed that 25 per cent of work­ing cap­i­tal has been stuck in a re­fund regime, cre­at­ing a se­vere cash flow crunch, while the in­dus­try has been over­bur­dened with taxes and levies at a time when the costs of in­puts have soared through the ceil­ing, pric­ing our textile ex­ports out of the in­ter­na­tional mar­kets. The elec­tric­ity rate for the in­dus­try is said to have been fixed at 15 cents per unit while the av­er­age rate in the re­gion is eight cents per unit. Through the same ad, the PTEA has de­manded the re­lease of ex­porters' re­funds, eas­ing of other fi­nan­cial stresses and re­duc­tion in crip­pling tax bur­dens. The de­mands also in­clude grants of sub­si­dies and other in­cen­tives, es­pe­cially the re­lease of those that had al­ready been an­nounced ear­lier. While one would like the gov­ern­ment to treat the mat­ter with ut­most ur­gency and due em­pa­thy in view of the fact that the textile in­dus­try is not only our largest em­ploy­ment gen­er­at­ing sec­tor, but also makes up al­most two-third of our econ­omy, it would not be out of place here to take a look at the ob­verse side of the coin as well.

Over the years, this sec­tor, with the ex­cep­tion of a hand­ful, has wal­lowed in wind­fall gains with­out mak­ing any ef­fort at value-ad­di­tion or mar­ket­ing. It has also failed to adopt the mod­ern tech­no­log­i­cal and man­age­rial tech­niques needed to en­hance its pro­duc­tiv­ity and the qual­ity of its pro­duce. For ages, the sec­tor has kept its pro­cess­ing ac­tiv­i­ties con­fined to spin­ning and mak­ing yarn, first for the Ja­panese and lately for the Chi­nese value-ad­di­tion in­dus­tries, both cap­tive and hun­gry mar­kets. These economies, es­pe­cially the Chi­nese, went into top gear over the last 20 years. More than any­thing else, it is be­cause of the sud­den de­cline in the de­mand for our lowend textile prod­ucts in the Chi­nese mar­ket, fol­low­ing the slow­ing down of its over­all econ­omy, that our textile ex­ports have started crash­ing. And it was around this time that elec­tric­ity rates in our coun­try be­gan go­ing up, ren­der­ing our ex­port goods un­com­pet­i­tive in the world mar­ket. The sit­u­a­tion got com­pounded when we failed to keep to our im­porters' sup­ply sched­ule be­cause of ex­tended load-shed­ding which, at times, fol­lowed no sched­ule at all.

When the UK's North­ern Rock was rocked by a sub­prime mort­gage cri­sis in early 2008 in the face of the global fi­nan­cial cri­sis, the UK gov­ern­ment, this great ad­vo­cate of the mar­ket econ­omy, did not think twice be­fore na­tion­al­is­ing the bank to save its eco­nomic back­bone - the fi­nan­cial sec­tor - from keel­ing over. This event has not been re­called here to make a case for na­tion­al­is­ing the trou­bled textile sec­tor in case the gov­ern­ment is con­vinced that most of its de­mands are un­rea­son­able, but to warn the sec­tor to find a way out at the ear­li­est so as to save the na­tional econ­omy from crash­ing along with the sec­tor it­self.

The main rea­son why a large sec­tion of the textile sec­tor is in such a bad shape and is not in a po­si­tion to meet the chal­lenges of the fluc­tu­a­tions in the do­mes­tic and world mar­kets with any de­gree of level-head­ed­ness on its own, is be­cause most of the units are run by boards of di­rec­tors packed with fam­ily mem­bers and flunkies.

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