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ANALYSIS: WTO to provide massive
opportunities to textiles
By our correspondent
KARACHI :The World Trade Organisation (WTO)
would provide massive opportunities for established textile
mills, senior analyst Faisal Shaji of Capital One Research
said in his report on Friday.
"We earnestly feel that despite lingering uncertainties, WTO
provides massive opportunities for established Pakistani
textile mill owners, as they are all set to gain from
massive demand emanating from important regions of the
world," said the analyst.
He said: "In our extensive coverage on textiles on periodic
basis, we have been reiterating our optimistic stance on the
sector especially with respect to key companies outlook."
However, it is important to highlight some of the glaring
facts embracing the textile scene in light of an end to the
Multi Fibre Agreement (MFA) era and beginning of the quota
free world, he said and added: "Moreover, recent
developments pertaining to GSP by EU also heave some
dampeners for key textile producers."
While talking of the uncertainty part, many of the textile
pundits tend to forget the demand side; which is expected to
come alone from the huge US market.
Pakistani exports of value added textiles already surged in
FY04 on account of trade concessions due to the front line
status. As per international studies, the value of the
global textile and apparel industry will go up to $250
billion by CY08, with countries like China, India and
Pakistan would be the clear frontrunners.
Pakistan alone has the potential to grow from $5 billion to
nearly $10 billion by CY08, which delineates that sales
would be up by 6 per cent to about $4 billion in the fourth
year of the post quota period.
Time and again, we have highlighted the looming ‘capacity
rationalisation’ phenomenon coming in the US, which clearly
indicates that existing capacities of the textile producers
would not be good enough to meet the projected demand
relating to value added textiles.
Despite this rosy picture, it is important to understand few
under-mentioned dynamics that would follow suit in the post
WTO period for Pakistan.
Worries about WTO: It is true that developed countries have
agreed to remove quotas but they can still restrict textile
imports from a developing country like Pakistan under the
garb of creating legal lacunas by imposing regulations such
as anti-dumping,environmental protection laws, product
standards and quality compliance to attain relevant
benchmarks, intellectual property protection etc.
In other words, by using said measures, developed nations
can restrict more market access to Pakistan, which it badly
needs.
The Government of Pakistan on its part is also a signatory
to various such related agreements under WTO and needs a sea
change in approach in running economic policies to maintain
competitive edge in textile trade.
This aspect is particularly true in a sense that Pakistan
faces a dilemma that it is not a part of any preferential
regional agreement and thus cannot receive any preferential
treatment as against regional countries close to the world’s
major markets.
Likewise, looking at the domestic front, we feel that
barring big players in the textile industry, middle and
small tier producers still lack speed production, quality
control management, marketing and time to market technology,
which can hamper their profitable existence in the WTO era.
‘China safeguard’ measures from US not forthcoming,
threatening Pakistan’sshare Until now, EU and US have not
made significant efforts to curb value added imports from
China, which is all set to take a 50 per cent share of the
global textile market by CY08.
According to industry estimates, China’s apparel exports
would increase to nearly 17 per cent per year to $125
billion in the same period.
Pakistan can also be a victim of quota removal and China’s
persistent expansion, which also operates at an average
productivity level of 55 per cent as against its own 15-16
per cent in accordance with US standards.
Concessions from EU going under GSP: It is being reported
that Pakistani textile products would be subjected to normal
custom tariffs from Jan 1 in 25 EU member states. Until now,
Pakistan was getting exemptions on custom tariffs under
Generalized System of Preference (GSP).
Pakistan, despite qualifying under the newly structured GSP,
may not benefit from it, as it does not fall in the category
of least developed countries (LDCs). Under this GSP
arrangement, only those countries can avail exemptions whose
exports to EU are less than one per cent, whereas Pakistan
is a bigger supplier of textiles to EU and has a major
share.
This implementation would add some vows among the big
exporter to the region viz-a-viz Nishat Mills, Gul Ahmed
Textiles, Al-Abid Silk Mills, M Farooq and Kohinoor Textile
Mills, which would stand to loose the competitive advantage
in pricing as against other world players due to high
tariffs and existing anti-dumping duties in certain bed
linen categories.
Courtesy: `Business Recorder
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Pakissan.com;
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