In an otherwise mixed economic scene, Pakistan’s textile industry is a bright spot. The latest reports show that Pakistan’s textile exports have recovered from Covid-19 pandemic shocks and are growing fast. The data published by the Pakistan Bureau of Statistics for the first four months of the current financial year shows that textile and clothing exports have picked up, both in terms of quantity and dollar value. The data shows that textile shipments have surged by 3.8 per cent to $4.8 billion between July and October, from $4.6b a year ago. The rise in the textile and clothing group has been a little faster than the 0.6pc growth in the overall exports.
The best performers have been knitwear, home textiles and denim sectors. As we know, the textile sector is the backbone of Pakistan’s economy. It has around 60 per cent share in total exports. Its contribution to the national gross domestic product (GDP) is 8.5 per cent and it employs around 15 million people, directly and indirectly.
In the first five months of 2020-21, the sector posted export revenue of $6.05 billion against $5.76 billion for the corresponding months of the previous year. It is a great achievement but the situation could have been much better. According to the Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA), Pakistan has missed an opportunity to earn more revenue by exporting polypropylene masks at the right time. Unnecessary approvals required from different departments caused delay in the export of masks. It is said that timely action in the matter would have enabled Pakistan to earn around $200 million through the export of polypropylene masks but in reality we managed to earn only $30 million.
An analysis of the overall situation shows that basic textile commodities, such as yarn and grey cloth, have stagnated, which is a good sign, indicating that the country is exporting more value-added products than ever before. At the same time, the trend points to a shortage of raw materials for the value-added industry owing to a poor cotton harvest in the country this year. It is worth noting here that local cotton prices have peaked to a 10-year high on account of a sharp drop of 37.6pc in cotton arrivals for ginning to 4.6 million bales by early December 2020, compared with 7.4m bales the previous year. Currently, the entire value chain is overloaded with export orders due to lockdown in competing markets. However, securing raw material is becoming a challenge since the country’s cotton production has dropped drastically.
The government has recently announced a comprehensive energy package for the industry to help the exporters recover from the Covid 19 shock. Among other things, the package does away with peak electricity rates, offers reduced tariffs on additional power consumption, and fixes the power price at $0.07 a unit and gas tariff at $0.065mmbtu for the export industries. In addition, the State Bank of Pakistan (SBP) has reduced interest rates by 625bps, approved refinancing of wages to prevent layoffs during the lockdown period and deferred payments of the principal amount of loans as part of the debt restructuring offered to households and businesses, provided relief under the Export Financing Scheme (EFS) and the Long-Term Financing Facility (LTFF). Furthermore, the State Bank of Pakistan has also launched a long-term concessionary financing facility to boost investments in new capacity expansion and upgradation of technology. Given the favourable conditions, the domestic industry is already planning expansion and is ready to invest $5 billion across the textile chain to double its exports by 2025.
Despite growing exports, the fact remains that Pakistan has a very small share in global textile exports. Pakistan’s share was calculated at 1.7 per cent in 2019, out of the $941 billion world textile market and it may have slightly improved in 2020 due to a rise in value-added products. According to experts, big textile houses, which are working on value addition, should start a research and development (R&D) programme focused on identifying emerging trends in the international market. To this end, it is necessary to provide concessionary loans to medium and small-scale units, which are at present unable to enjoy cheap loans and are burdened with lengthy and hectic documentation which militates against their efficient working.
Experts emphasise putting more focus on value addition for a greater share in the European and American markets. A lack of value addition is the reason why export figures have been almost stagnant for a decade. According to the All Pakistan Textile Mills Association (APTMA) chairman, new investment is needed to boost the sector for long-term sustained growth. The present government has performed a good job by rationalising energy tariff and easing bank borrowing. But further steps are needed to improve the sector, like formulating a proper textile policy and implementing it in letter and spirit to build the confidence of investors.