PAKISTAN is figuring out where to position itself as Asia turns into global hub of textiles production and export.
The stagnation and slow growth in exports is continuing, as shown even in the July-August- the first two months of the current fiscal 2008. Textile exports in these two months rose merely 1.18 per cent, according to Federal Statistics Bureau (FBS). But, the industry insists the exports actually have declined 5.27 per cent.
Problems
The problem with Pakistani textile industry is that until the onset of the WTO regime and abolition of the textile quotas, it had it too good a time until 2004. It only half-heartedly had realised that it will have to cope with the situation and then started new investment. It did not realise how hard will new comers like Bangladesh, Indonesia, Vietnam, and Cambodia, fight, and grab, increasing share of the expanding and global trade in textiles, besides the two giants China and India. These six, and others still joining, are the low-cost Asian countries where textile production is now concentrated, and largely feed the global markets and the developed countries.
China, India and Bangladesh also have a large and strong value-added textile segment. They are using their domestically produced yarn, in which they have made large investment, rather than importing yarn from countries like Pakistan. Pakistani yarn has largely lost most of this market. Pakistani yarn exports have also weakened because China, Bangladesh and Indonesia themselves produce yarn at a comparatively low cost, rather than importing it.
Domestic Capacity
Industry analysts insist that Pakistan will have to expand its own domestic capacity to convert its yarn into fabrics and other value added products as it is loosing export markets. Value-added products are an area that has remained neglected by the industrialists who have been keen over years to make a quick buck by spinning yarn and grey cloth -the two low-value products — and exporting them in large volumes. Global demand for these Pakistani products continues to shrink.
The result is the textile tycoons are sulking. The industry has to diversify. It has to upgrade quality and offer greater variety to beat the declining unit prices for its products in the global market. It has to cut cost of production in an environment of rising prices of state-supplied utilities, and higher financial costs.
The government and the people are in trouble too, because textiles is the country's biggest industry, its biggest manpower employer, and it earns the country 67 per cent of its overall forex earnings. Its weight in national economy is 24.49 per cent. Textile production grew only 8.5 per cent in fiscal 2007, which is considered poor.
Exports
Exports 2007 & 2008: Textile exports were $ 9.20 billion in 2005 which rose to $ 10.37 billion in 2006 and rose 4.0 per cent in 2007, industry reports.
Pakistan's total exports were $ 17.01 billion in 2007, and are projected at $ 19.2 billion in 2008. Any increase in textile exports will depend on how much exportable surpluses are generated, an improvement in quality, and fetching better unit prices for various products, than it has received so for.
It is ironic that even Bangladesh, the late-comer in textiles — besides China and India are receiving better prices for their products in foreign markets than Pakistan which has been active in this business for more than half a century.
The powerful textile lobby has, for years, dictated the government, and got away with all the tax breaks, incentives and privileges it wished. But things have domestically changed, too, and the government does not favour subsidies and incentives any more.
'We are now thinking of an exit strategy, rather than rival of the industry, says an irate textile tycoon. While the slow growth of textiles exports has been experienced over the last three years, does fiscal 2008 offer better prospects?
But, while textiles exports, as a whole, declined 5.27 per cent, in the fist two months of fiscal 2008, compared to the like period of 2007, the most significant decline of 36.33 per cent was in the case of cotton fabrics volume-wise and 17.93 per cent by value. Bed wears declined 13.39 per cent. Cotton yarn was down 6.75 per cent.
Investment
New investment for up-gradation, modernisation and expansion, too has slowed down. Investment in 2007 was only $ 471 million-down from $ 910 million in 2006. The industry invested $ 4 billion during June 1999 to October 2006 in imported machinery, and equivalent to $ 2 billion domestically. Half of the imported machinery was for spinning, 25 per cent for fabrics and cloth, and bulk of the remaining amount went into dyeing and finishing. Ready-to-wear garments and knitting received small amounts, despite the fact that these are two value-added sectors which offer better prices abroad, and where demand is booming.
While investment in textile industry has declined in Pakistan, other regional competitors, including India, are putting huge amounts of cash into their own industry. Critics say, the industry made excessive investment in spinning and yarn production in the hope, it will enlarge exports. But, these projections proved wrong. They also say large investment has gone into such sectors where it did not pay off in terms of exports in view of the changing demand pattern and the buyers shifting to other Asian countries because they were offering better products at competitive prices.
Demand
Demand for yarn from Pakistan's traditional importing countries including US, EU, Japan and Hong Kong, has largely weakened over the last three years. Chinese import of Pakistani yarn has increased, but the gap created by the shortfall in demand from developed countries is widening.
All Pakistan Textile Association (APTA), the powerful lobby, is now ringing alarm bells. Adil Mahmood, APTA Chairman, told his members 'about 160 mills have already closed down. An APTA statement also said the increase in financial cost in the last few years from four to 14 per cent annually, 10 per cent rise in electricity cost, and a recent increase in fuel cost, has rendered our business un-competitive in the world market.
'The textile industry has sustained a loss of Rs17 billion last year. It limits the industry's capacity to pay back Rs200 billion outstanding loans of banks, APTA warned. It also demanded the government to take notice of the deteriorating situation in the textile industry and demanded recovery measures.
