LAHORE: Issues such as market access, infrastructural constraints, political concerns of foreign investors and high inflation rate continued to adversely affect steady growth of the textile sector throughout 2005, the first year after phasing out of the Multi-Fibre Agreement (MFA).
There was a worldwide consensus that only three countries, China, India and Pakistan, would be the leading ones in the field of textile in the post-quota regime. But the performance of Pakistan, say the textile experts, was not up to the mark despite an impressive growth both in terms of expansion and exports.
It is also being feared at the start of 2005 that the prices could come down to 15 percent due to the transitional period from the quota to the non-quota regime. The fears have come true in case of Pakistan where per unit prices came down from 10 to 15 percent in 2005. Market access: Issues such as withdrawal of General System of Preferences (GSP) by the European Commission, coupled with imposition of anti-dumping, affected the growth of textile industry in Pakistan when compared with China and India. The issues could not be resolved throughout 2005 despite hectic exercise by Commerce Minister Humayun Akhtar Khan.
Particularly, the small players were caught unprepared and some 90 units in knitwear sector found no way but to close down their operations by the end of 2005. There is no doubt that the prepared ones made good money, but the number of such success stories could be counted on fingers. The textile industry has been attracting $1 billion investment each year since 2000 and it reached $5 billion by 2005. But the question arises whether this investment has filled the gap created in Nineties, when no major investment took place due to political uncertainty? Yes, say a few experts while pointing out that the textile sector exports have jumped to $9 billion by 2005 from $ 6 billion in 2000. Export target for the next year is being estimated at $10.6 billion, they add. But is it a quantum jump in terms of growth? No, they add in the same breath and express the hope that the sector still has big potential and reliance of country? economic growth would depend much more on this sector in future.
Infrastructural constraints: No major breakthrough took place in mitigating the infrastructural constraints throughout 2005. Rather, it aggravated in terms of transportation and shipment from Lahore to Karachi. Prime Minister Shaukat Aziz inaugurated a Lahore-Karachi bound Freight Train Express near the close of 2005 with the announcement that the train would fetch consignments from Lahore to Karachi within 24 hours. A big achievement, but still this arrangement is not enough to meet the transportation issues from upcountry. Similarly, issues such as dual carriageway, bad road network and slow pace of work of the motorway expansion continued throughout 2005. Then, despite the fact that the government had announced the setting up of Garment Cities around the country, Laboratory Centres, an Expo Centre in Lahore and N Tevta in Islamabad in the budget 2004-05, but none of the plans got materialized in 2005 and the bureaucracy continued to delay the projects despite the presence of dynamic leaders such as President Pervez Musharraf and Prime Minister Shaukat Aziz, said Tanvir Ahmed, one seasoned industrialists.
Political concerns of foreign investors: The textile sector, say the experts, couldn? grow at its own anywhere in the world. It needs foreign investment to grow and stabilise in the long run, they say and point out the examples of countries such as South Korea, Thailand and Bangladesh in this respect. According to these circles, no major foreign investment in Pakistan? textile sector took place throughout 2005 comparing with India where each and every brand right form Wal-Mart and Sears to Marks and Spencer have ensured their presence, but none of them have yet considered Pakistan a safe country to invest. These circles say political certainty was a must for continuity of economic policies. That is why, they say, the only investment Pakistan could have in 2005 was in telecom, oil drilling and stock market sectors.
The image of Pakistan as a safe haven for foreign investment has yet to hold weight in the eyes of foreign investors interested in investing in the textile sector, they argue. Inflationary pressure: The inflationary pressure continued to haunt the growth of textile sector and many unit holders in value-added sector are not in a position to succumb to it for long. Tariq Saeed Saigol, a business tycoon, said in the presence of top economic policy-makers of the country in the later half of 2005 that industrialist could not export inflation and urged them to control it at the earliest. The KIBOR rate jumped to 9.5 percent by the end of 2005 compared with 4.5 percent at the start of the year. Though the government offered six percent Research & Development Fund to the value-added sector in the same year, increase in export refinance rate siphoned off the positive impact of the fund. Shehzad Azam Khan, chairman of the Pakistan Hosiery Manufacturers Association, told a press conference towards the end of 2005 that export refinance in India was said to be available at LIBOR plus 0.75 percent, which worked out to be 5.5 to 5.75 percent. Similarly, interest rate on long-term industrial, investment loans was stated to be 10 percent. With the Indian government offering 5 percent subsidy on it, the effective rate of interest at which their industry was securing long-term loan stood at 5 percent, he added.
