Pakistan's new textile policy aims to double exports
An initiative was launched last year by USAID to help small and medium sized knitted garment manufacturers in Pakistan build their businesses
Pakistan’s second Textile Policy aims to double the country’s textile and clothing exports to US$26bn in the next five years as it seeks to reap full benefits of the EU GSP+ scheme.
The ambitious plans for the period from 2014-19 will see authorities spend PKR65bn (US$650m) on subsidies, and developing the infrastructure to attract investments of US$5bn in the sector, according to Abbas Khan Afridi, federal minister for the textile industry. The proposed measures will promote value-addition and generate employment for more than 5m people, the minister claimed.
Under the policy, Pakistan’s textile and clothing exporters will be helped by subsidies of 4% on exports of woven and knitted garments, 2% on made-ups, and 1% on dyed and printed fabrics. The payment will be based on incremental exports made in FY2013-14 compared to exports made in FY2012-13.
Other key initiatives under the new policy include the creation of a Technology Up-gradation Fund (TUF), low interest rate loans under the Long Term Finance Facility (LTFF), and tax-free imports of machinery for garment makers. Loans under the Export Finance Scheme (EFS) will be provided at 7.5% to garment exporters.
The policy will also focus on small and medium enterprises by improving the domestic weaving sector; setting up textile industry clusters, industrial cities, garment parks, and a weaving city at Faisalabad; and introducing product development centres in order to widen the product range to children wear, lingerie, beachwear, leisure wear, technical textiles, geo-textiles and medical textiles, along with training facilities for garment workers.
SM Tanveer, chairman of the All Pakistan Textile Mills Association (APTMA), told just-style that the policy lags behind the textile plans being implemented in India and Bangladesh. Bangladesh, too, is aiming to double its garment exports to $50bn over the next seven years.
Tanveer also urged authorities to address the industry’s structural issues – including the supply of energy at a competitive price – warning that unless this is done, the objectives would not be achieved.
Muhammad Jawed Bilwani, chairman of the Pakistan Apparel Forum, described the policy as growth oriented and expressed hope that it would go a long way towards benefiting the textile sector and boosting garment exports.
This was Pakistan’s second textile policy under the remit of the country’s Textile Ministry. The first five-year plan was announced in 2009 with the objective of restructuring the industry by spending PKR188bn. But just 15% of the plan was implemented.
No significant investments have been made in the sector since 2006 due to a shift in government policies, rising interest rates, energy problems, and security issues.
That said, Pakistan’s textile and clothing exports have risen 45% over the past five years (2009-2014) to $13.7bn, in part due to benefits offered by the European Union under the GSP-Plus duty-free trade scheme, which came into place on 1 January 2014.
Over the first three-quarters of 2014, EU clothing imports from Pakistan surged 23% in volume and 27% in euro terms. Similarly manmade fibre apparel imports from Pakistan into the US rose 26% in value in 2014.
The textile industry is the most important manufacturing sector in Pakistan, providing employment to about 40% of the industrial labour force, consuming more than 40% of banking credit, and accounting for more than 8% of the country’s GDP.
But Pakistan’s apparel industry lacks labour productivity, quality control, maintenance services, and environmental care systems. It also needs to adapt to the labour and environmental standards of the US and EU for sustainable growth.
Local businesses are also being affected by the country’s poor security situation, with investigators recently blaming gangsters for setting fire to the Ali Enterprises garment factory in Baldia Town, Karachi in September 2012, killing more than 250 workers.
Last month Canadian men's wear company Kanati Co became the second high profile company to pull production from Pakistan, blaming disruptions to orders and the country’s instability. Its decision came after US-based Walt Disney last year phased out the sourcing of Disney-branded products from Pakistan, saying the country no longer met its guidelines on working conditions.
And China's Shandong Ruyi Technology Group recently pulled out of a deal to acquire a majority stake in Pakistan's Masood Textile Mills, one of the country’s few vertically integrated textile plants with in-house yarn, fabric, processing, printing and knitted apparel facilities.
But more positive moves have also been taking place, with a buyers’ forum established in December to promote the sustainability of Pakistan’s garment and textile industry. With an initial membership of 17 brands but more expected to follow, the forum was instigated by the Netherlands Government, the International Finance Corporation, and the International Labour Organization (ILO).
And a new energy deal was also signed at the end of last year to import clean energy from Kyrgyzstan and Tajikistan.
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