Global recession is taking its toll on the clothing industry of Pakistan as a big unit employing 12,000 workers has closed down in Punjab after its consignment worth millions of rupees was returned by a multinational chain on slight delay in shipment.
Clothing industry exporters told The News they were working under immense pressure. The exporters were literally operating on zero margins just to retain their skilled workforce and keep the factories running. They said they were not in a position to withstand any mishap or misadventure because they had exhausted all resources and could not bear any loss.
The exporters said the global recession had made exports highly risky. “We are not sure whether payments for consignments will be made or not as hundreds of firms in developed economies are filing for bankruptcy. Those foreign buyers who are still afloat have tightened their screws and reject consignments on minor flaws which they used to ignore in the past.”
The News has learnt that one of the largest knitwear concerns having production facilities in Lahore and Multan has been forced to shut down after its consignment was rejected by the buyer on flimsy grounds. The exporter could not make the shipment on time due to political turmoil in the country and the buyer asked the exporter to ship the consignment through air which was done. However, the buyer after inspecting the consignment rejected the goods and sent them back to Pakistan.
What disturbs the exporter is that he has been supplying the same products to the multinational chain for years. The buyer used to ignore minor flaws and in some instances rejected part of the goods considered defected.
However, this is the first time that a complete consignment has been rejected. In normal circumstances, the exporter could have borne these losses. However, after operating on zero margins and sometimes exporting below cost the exporter is not in a position to bear this loss and has closed down its units in Lahore and Multan employing over 12,000 workers.
Pakistan Hosiery Manufacturers Association former chairman M I Khurram said exports had become very risky during the period of global recession.
He said the surviving units in the knitwear industry had reduced cost to maximum level by improving operational efficiency and cutting all unnecessary expenditures. Even then, he added, the industry was unable to generate any profit.
“Exports are being made on ‘no-profit-no-loss’ basis and under these circumstances no operating industry is in a position to bear any loss.”
He said the Chinese government had increased rebate on clothing exports from 11 per cent to 13 per cent and then to 17 per cent in February in a bid to protect its exporters from global recession. India and Bangladesh had done the same while rebate in Pakistan was 0.25 per cent only.
PHMA Vice Chairman Adil Butt said “mishaps are part of business. Entrepreneurs earmark some resources to cope with such situations.
The clothing industry of Pakistan has, however, exhausted all its resources during the past two years in order to cope with ever increasing cost of doing business.”
He said all operating units were at grave risk of closing down if any of their consignments was rejected due to delay in delivery or if the importing firm went bankrupt.
Sheikh Zafar Ahmad, a leading knitwear exporter, deplored that the government had cleared only 40 per cent of the research and development grant relating to exports made before June 30, 2008. He said refund amount worth Rs10 billion was still stuck which brought into question credibility of the adviser to prime minister on finance who had promised two months ago that refunds would be released in days and not weeks.
Clothing industry exporters told The News they were working under immense pressure. The exporters were literally operating on zero margins just to retain their skilled workforce and keep the factories running. They said they were not in a position to withstand any mishap or misadventure because they had exhausted all resources and could not bear any loss.
The exporters said the global recession had made exports highly risky. “We are not sure whether payments for consignments will be made or not as hundreds of firms in developed economies are filing for bankruptcy. Those foreign buyers who are still afloat have tightened their screws and reject consignments on minor flaws which they used to ignore in the past.”
The News has learnt that one of the largest knitwear concerns having production facilities in Lahore and Multan has been forced to shut down after its consignment was rejected by the buyer on flimsy grounds. The exporter could not make the shipment on time due to political turmoil in the country and the buyer asked the exporter to ship the consignment through air which was done. However, the buyer after inspecting the consignment rejected the goods and sent them back to Pakistan.
What disturbs the exporter is that he has been supplying the same products to the multinational chain for years. The buyer used to ignore minor flaws and in some instances rejected part of the goods considered defected.
However, this is the first time that a complete consignment has been rejected. In normal circumstances, the exporter could have borne these losses. However, after operating on zero margins and sometimes exporting below cost the exporter is not in a position to bear this loss and has closed down its units in Lahore and Multan employing over 12,000 workers.
Pakistan Hosiery Manufacturers Association former chairman M I Khurram said exports had become very risky during the period of global recession.
He said the surviving units in the knitwear industry had reduced cost to maximum level by improving operational efficiency and cutting all unnecessary expenditures. Even then, he added, the industry was unable to generate any profit.
“Exports are being made on ‘no-profit-no-loss’ basis and under these circumstances no operating industry is in a position to bear any loss.”
He said the Chinese government had increased rebate on clothing exports from 11 per cent to 13 per cent and then to 17 per cent in February in a bid to protect its exporters from global recession. India and Bangladesh had done the same while rebate in Pakistan was 0.25 per cent only.
PHMA Vice Chairman Adil Butt said “mishaps are part of business. Entrepreneurs earmark some resources to cope with such situations.
The clothing industry of Pakistan has, however, exhausted all its resources during the past two years in order to cope with ever increasing cost of doing business.”
He said all operating units were at grave risk of closing down if any of their consignments was rejected due to delay in delivery or if the importing firm went bankrupt.
Sheikh Zafar Ahmad, a leading knitwear exporter, deplored that the government had cleared only 40 per cent of the research and development grant relating to exports made before June 30, 2008. He said refund amount worth Rs10 billion was still stuck which brought into question credibility of the adviser to prime minister on finance who had promised two months ago that refunds would be released in days and not weeks.
