Cotton, Crops

Barriers in the textile exports

For about three dozen top groups, textiles still offers a lot of business prospects despite difficulties. But for many industrialists and traders, textile has become a losing proposition as they have either closed down or are about to shut their shops.

“Textile landscape is now littered with dead and dying units’’, Adil Maehmood, Chairman of All Pakistan Textiles Association (APTA), the breakaway group of APTMA said over telephone from Lahore.

“I see good business till June next but beyond summer right up to autumn and winter there is a big question mark,’’ Iqbal Ibrahim, Chairman of All Pakistan Textile Mills Association (APTMA) told Dawn EBR. He represents one of the top textile groups.

As he explained, he was able to get good export orders last autumn which he is servicing now in winter. ‘’Of course, there are many problems and challenges’’ he said pointing out that cotton availability remains a major issue for him. But the main problem Iqbal Ibrahim now faces is that his buyers are reluctant to book orders for next autumn and winter on fears of delayed supplies because of what they apprehend turmoil and troubles in the days ahead.

‘’I am shipping textile products for which the buyers issued purchase orders,’’ he said. For next autumn and winter, the buyers do indicate to place orders but with the instructions to hold on till the situation for them becomes clear in the coming weeks.

Almost all of the top groups have a well-laid network of marketing and information gathering infrastructure in Europe and USA. They have also ware housing facilities abroad. They enjoy tremendous clout with the government so much so that ‘’15 textile mills in Punjab belonging to a few of these big groups managed to get their gas supply resumed when it is being denied to more than 150 textile mills’’ alleges Adil Mehmood. He broke away from APTMA on the plea that interest of small textile businessmen was being ignored.

At least 108 mills were reported to have been closed down because of energy crisis. But with all this clout and influence at home, the top groups are not in a position to persuade their foreign buyers to visit Pakistan or convince them that the supplies against their orders will be transported and delivered on time.

Like many other businesses, textiles too is groaning under the impact of severe energy crisis, particularly in Punjab and in the North; high financial cost jacked up further by recent monetary policy has pushed up interest rate to 13 per cent on bank loans. And the drop in cotton crop has forced mills to import over three million bales and, of course, there is the law and order problem.

A series of bomb blasts in January and growing incidents of lawlessness is keeping foreigners away from Pakistan. On Thursday evening, Shabbir Ahmad a leading exporter of home textiles left for Mumbai to meet his buyers from European countries. Market reports suggest that local businessmen are meeting their foreign partners either in Europe, USA, Dubai, Hong Kong or some other places.

While hit by a negative image, many textile exporters are convinced that they could have made good money in western markets despite reports of recession setting in there. “China has cut down on many cash incentives of its textile exporters’’ owner of a textile mill said while quoting an American newspaper article which revealed that Chinese textile products are now relatively more expensive in the US market. Indian currency too has appreciated from Rs44 a dollar in May last year to Rs38 a dollar recently.

But when these golden opportunities of getting easy access to USA and European markets looked within reach, the cotton crop failed to yield projected 15 million bales. With promulgation of state of emergency on November 3 in Pakistan and subsequent follow up harsh administrative actions created feelings of political uncertainty. But the worst came in end of December, when Benazir was killed and for three days the upcountry remained cut off from Karachi port. This shattered the confidence of foreign buyers who now fear more bad days ahead. The top business groups took advantage of the situation in summer and autumn when Indian currency value appreciated and Chinese discontinued incentives to their exporters. They managed to secure good amount of export orders. Textile export maintained a sluggish growth from July to October. But from November the trend reversed to marginally negative that became more pronounced in December.

Textile and garments export fetched only $894 million in November which came down to $746 million in December. Total textile exports in July-December 2007-08 amounted to $5.25 billion. ‘’We hope some improvement in January export’’ a senior official said over telephone from Islamabad. He is confident that textile export will pick up in February and in next four months net in a total of 12 billion dollars projected export earnings for fiscal year 07-08.

“We will consider ourselves fortunate if we end up with $11 billion export earnings this year’’ a Karachi exporter said. Exporters have pinned their hopes on the coming elected government. “We can work out a short and long- term strategy’’ with the future decision makers.

Textile industry leaders are convinced that their problems can be best solved if the government addresses industry as a whole. The government has to set in place a reliable infrastructure for the industry within shortest possible time. They also complaint that government’s insistence on poverty reduction and improvement of per capita income to 1,000 dollars has denied textile exporters many incentives of access to the EU and the US market. “Bangladesh exports more than $8 billion of textiles to US and Europe because it enjoys duty free access to the markets being a low income country. Pakistan is clubbed in middle income group and hence subjected to duties in EU and US.

‘’Pakistan is still a poor country with a very low per capita purchasing capacity’’ argues a businessman. His prescription is that the government should draw a strategy to generate employment in industry and agriculture, improve incomes, and expand domestic market and then create trade surpluses for export growth.

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