Textiles and clothing make up more than 50% of Pakistans merchandise exports

Textiles and clothing make up more than 50% of Pakistan's merchandise exports

Pakistan's textile industry is pessimistic about its prospects, warning of wholesale closures amongst fabric mills unless the government steps in to help.

Despite the fact that Pakistan has been benefiting from its GSP+ trade preference status for exports to the European Union (EU), its upstream textile sector has been struggling to compete against competitors, notably in India.

At a press conference in Lahore, SM Tanveer, chairman of the All Pakistan Textile Mills Association (APTMA), warned of a potential 15% dip in textile exports in the year ahead, without government assistance. "About one-third capacity is already closed and about a million jobs lost, the textile industry is struggling to stay afloat," he said.

Shabir Ahmed, chairman of the Pakistan Bedwear Exporters Association warned just-style: "The 'closures' being mentioned are not a threat but an unavoidable consequence if government delays corrective measures".

A senior official in Pakistan's ministry of textile industry told just-style that several fabric-making units have already closed down, including factories in Faisalabad, Karachi and Lahore.

Textile mills had hoped for assistance in the government's June budget but were disappointed. "We find the aloof attitude of the current ruling party disturbing and the tendency to exclude businessmen from the economic decision-making is suicidal", Shabir argued.

Tanveer was also critical of the government, saying it was "losing credibility fast". He identified India, Bangladesh, China and Vietnam as key competitors.

Ijaz Khokhar, chairman of the Pakistan Readymade Garments Manufacturers & Exporters Association said Pakistan's textile companies were trailing its rivals in India despite some comparative advantages in technology and strong market access into the EU.

In particular, Pakistan's textile sector has been hampered by unreliable power suppliers, power cuts and high electricity prices - with the ongoing energy crisis responsible for prolonged down-times and increasing production costs.

The Pakistani government began implementing rolling electricity blackouts in 2008, resulting in a significant number of factories shutting down, or running at reduced capacity.

Textiles and clothing make up more than 50% of Pakistan's merchandise exports, and under its current textile policy (2014-19), the government "aims to further promote high value-added activities and improve productivity in the subsector." Among its goals are doubling the country's textile and clothing exports to US$26bn in the next five years, with plans for authorities to spend $650m on subsidies and develop the infrastructure to attract $5bn of investment to the sector.

The EU's GSP+ scheme provides Pakistan's exporters with duty-free access to the EU over a period of ten years.

However, Pakistan's GSP+ status will be reviewed every two years as its continuation will depend upon the country implementing 27 core international conventions relating to human rights, labour rights, sustainable development and good governance.

Furthermore, the scheme will be reviewed after three years, whereupon Pakistan could lose its GSP+ status if EU imports from Pakistan covered by GSP+ exceed 2% of EU imports from all GSP beneficiaries.

It is reckoned that GSP+ status could provide the textile and clothing industry in Pakistan with a 10-14% duty advantage.

However, warnings from the textile industry appear to contrast with figures that show EU textile imports from Pakistan shot up in value by 18.1% in 2014, positioning Pakistan as the fastest growing textile supplier among the EU's leading 20 textile supplying countries during the year.

In clothing, EU imports from Pakistan surged by an even faster 30.5%, and this made Pakistan the fastest growing clothing supplier among the EU's leading 20 clothing supplying countries.

That said, Pakistani exporters appear to be targeting EU countries at the expense of the US market. US textile imports from Pakistan were up in value by only 1.4% in 2014 while US clothing imports from Pakistan fell by 1.1%.

Click on the following link for more insight: Pakistan sees surge in clothing exports to Europe.