Pakistan clothing sector welcomes new EU access
Pakistan's struggling clothing and textile industry, which generates 65% of the country's total foreign exchange earnings, is anticipating a significant boost in export sales following the recent World Trade Organization (WTO) decision to approve a waiver allowing 75 Pakistani products duty-free access to European Union (EU) markets for two years.
Indeed, with the bulk of these benefiting the clothing sector, the All Pakistan Textile Mills Association (APTMA) placed paid advertisements in Pakistani newspapers expressing gratitude and praising the Pakistan government for pursuing their cause.
"We commit ourselves to making the best of this opportunity. We applaud the government on fostering exports under its 'trade not aid' policy," the association declared.
Although delayed, the WTO's reply to the EU's request (made as long ago as November 2010 to help Pakistan recover from unprecedented floods that year) has lifted the spirits of those involved in the textile and garment industry.
Pakistani exporters say the benefits of the EU concessions will take time to materialise, but there is already a sense of anticipation among textile mill owners, garment manufacturers and workers.
Hoping for major improvements in garment sales, owners are re-hiring workers they had sacked due to the recession, power cuts, the non-availability of gas and poor law-and-order security.
Karachi-based garment manufacturer Asghar Hussain says he has re-hired some workers and now has a total of 50 staff. "It is much less than the workers we had prior to the devastating summer floods in 2010, but the signs are good and we will hire more as garment exports to Europe pick up due to the EU concessions."
Also sounding upbeat about the future, APTMA chairman Mohsin Aziz says Pakistan's textile and clothing exports could increase by up to US$400m this year and US$600-800m in 2013 after gaining duty-free access to European markets.
However, he is quick to add that much will depend on the availability of a regular supply of natural gas and electricity to run the manufacturing units. "These targets are achievable as we are capable of generating export surpluses. The EU concessions would serve our textile industry well," he says.
Some exporters and analysts, however, are more cautious when calculating the estimated increase in Pakistan's textile exports. Atiq Kochra, the Karachi zone chairman of Pakistan Ready-Made Garments Manufacturers and Exporters Association (PRGMEA), feels exports to European markets will increase by US$150m to US$200m annually.
He points out that the EU and US were Pakistan's traditional markets but are facing recession, and without economic recovery could have declining demand over the long term for Pakistani exports.
"Pakistan urgently needs to diversify its export destinations to minimise the effect of recession in the West. We also want our government to bring Pakistan's garment exports under duty-free regime with China," he argues.
A report by Pakistani financial group BMA Capital says the value of Pakistan's textile exports fell by 17% year-on-year to US$982.4m in January 2012, partly due to the decline in global cotton prices.
It notes that persistent gas supply problems and a reduced desire for imports in western economies have started to take a toll on Pakistan textile export volumes. The report forecasts that Pakistan's textile exports will be US$12.6bn in financial year 2012, down by 4% from the US$13.07bn earned the year before.
Mirza Ikhtiar Baig, textiles advisor to Pakistan's prime minister, believes the WTO waiver is a positive development but in real terms is too little to overcome the accumulated problems of the Pakistani economy.
"We estimate an increase of 0.7% in Pakistan's overall US$25bn exports for the year while it would contribute 1.26% to our US$13.8bn textile exports," he adds.
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