Textile exports
The good news is that textile exports in FY18 witnessed a rise of 9 percent as compared to the previous year. According to available figures, the growth in exports was led by valued added segments including bedwear, knitwear and readymade garments with the latter two recording double digit growth. This is a good sign and augurs well for the future. However, on a month-on-month basis overall textile exports saw a fall of two percent which might be attributable to a couple of factors. Although the much awaited depreciation of the rupee has taken place, it is not known where the slide will finally stop. In this scenario, exporters are likely to delay transactions in order to profit from further expected currency devaluation. This is a negative element in the situation which works against the maximization of our exports.
In the overall context, the rise in textile exports is not unexpected. There were high hopes pinned on value-added segments to improve the dismal performance of past years in light of the wide range of incentives provided under the PM Textile Incentive Package. But textile stakeholders across the board have expressed disappointment overthe faulty implementation of the export incentive awarded to the textile sector by the government.Value-added players assert that the growth would have been much higher had their pending sales tax refunds which have now been delayed for over two years now in some cases been released in a timely manner.
Industry insiders are of the opinion that in the days ahead the environment for textile exporters and manufacturers will remain under pressure owing to a variety of reasons. The cost of manufacturing in relation to our regional peers is set to rise as the government is likely to increase both electricity and gas tariffs. The provision of more expensive R-LNG to Punjab's industry has already resulted in closure of several units owing to high cost of operations.Moreover, raw material procurement has become tedious and costly. In this context two inhibiting factors are the illogical protection afforded to polyester players and the re-imposition of duty on imported cotton. These have put a drag on textile export momentum.
Textile industry also faces another problem - shortage of raw material. The area under cultivation of local cotton has gone down and the cotton production target was missed by eight percent in FY18 while by an even wider margin of 30 percent and 25 percent in FY16 and FY17 respectively. The current year is likely to be no different when it comes to a shortfall of the required 16-17 million bales by the local industry.Needless to say, Pakistan's textile export drive would need concerted efforts from both private sector players and the government in order to build any kind of momentum to push oursales abroad by a decent margin in the coming years.
The private sector specially needs to pay attention to the evolving preferences of global consumers in favor of man-made fibers, while capacity would have to be increased in order to remain cost competitive with Vietnamese, Bangladeshi and Chinese exporters.From the government's side, the pending sales tax refunds should be cleared soon and policymakers should refrain from imposing duties on key raw material items for the sake of revenue generation. No less important, protection should be withdrawn from those upstream industries that have failed to become internationally competitive after decades and still require protection to remain afloat in the local market. This only hurts the downstream value added segments andhampers their smooth working.