In the contemporary world, the only constant is ‘change’. The world is transforming and consumer preferences are changing across a wide range, from food consumption to the standard of living, to travelling and then to clothing.
Simple textiles and clothing have evolved into fashion brands. Everyone has now jumped on the environmental bandwagon. Textile consumer preferences are shifting from cotton-based apparel to synthetic man-made apparel. In the world market, consumption of man-made or synthetic fibres against natural fibres has shifted to a ratio of 70:30, with synthetic fibres having the lions share – a decade ago it was 30:70.
Polyester is now the most dominant man-made fabric across the globe. Its demand surpassed the demand of cotton in 2002, and it has continued to grow ever since at a significantly faster rate than all other types of fabric. Man-made fibres are cheaper, environment-friendly and more durable; their quality does not deteriorate with washing. Technological advances in synthetic material have offered textiles that are softer, hang better and even have better moisture absorbency than cotton.
The demand for man-made fibres such as polyester staple, viscose and tencel is increasing as a substitute for cotton, amid changes in the global fashion trend. But the policy situation remains the opposite in Pakistan; its exports are still primarily cotton-based. Pakistan’s major export destination of textiles and apparel is the US and Europe. The US imports of synthetic apparel overtook cotton-based imports from 36 percent in 2006 to 54 percent in 2016. Pakistan’s share in the total textile and apparel imports of the US in 2016 declined to a mere three percent owing to its narrow export basket which basically comprises natural fibre. This means that if we do not keep up with the new world preferences, our international market share will continue to shrink.
One reason for reliance on cotton based products in Pakistan is that, apart from polyester, nothing is made in Pakistan. We virtually import all synthetic fibres including nylon, viscose etc. Further, when raw materials such as Polyester Staple Fibre (PSF) are imported for the local production of synthetic man-made fibre (MMF) yarn, providing raw material to our spinning industry and helping diversifying our textile exports, the import duty reaches up to 20 percent – 7 percent import duty and 2.9 to 11.5 percent anti-dumping duty.
However, when MMF yarn is imported directly it faces a lower import duty of five percent (under the South Asian Free Trade Agreement) to 10 percent, under chapter 55 for MMF yarns import, resulting in a dichotomy. Resultantly imported PSF (input to our spinning mills) becomes more expensive than international prices. The aforementioned anomaly in regulatory duties is making domestic MMF yarn production uncompetitive, even in their own domestic market. This led to a downfall of 36 percent of domestic MMF yarn production capacity in the last one year alone.
Amidst the ongoing crisis, foreign exchange spent on the import of MMF yarns from Indonesia, China, Thailand and India is around Rs12 to 16 billion. In Pakistan, the domestic production of polyester viscose blended yarns is approximately 165,000 tons per annum. More than 50,000 tons of PSF yarns are imported per annum. This is equivalent to the production of almost 15-20 domestic mills in the business of 100 percent polyester, polyester viscose blended, viscose or polyester yarns and other synthetic fibre-blended yarns spun out of a total of 45-50 mills. These mills provide employment to 100,000 people.
Importers of synthetic blended yarn not only put local industries out of competition but also fully exploit them to sell the product at a cheap rate equivalent to India. On the other side, the value-added export sector imports cheap MMF yarns under the Import Policy Order 2012-15 (SRO 193(1)/2013) which allows import of MMF yarns consisting of pure polyester, polyester viscose and others, with five percent import duty on yarn imported from India. The export sector uses this imported yarn, adds value to it and then exports the product claiming full duty drawbacks, which is patently unjust.
What is hurting the local synthetic fibre manufacturing industry most is the lack of a level-playing field, with higher tariff barriers being imposed on the import of raw materials and a minimal duty on import of MMF yarns, leading to the widespread dumping of MMF yarn and fabrics in the country. By imposing 20 percent regulatory duty on $100 million imports of MMF yarn, jobs of 100,000 people employed in our spinning industry can be saved with using the additional revenue of around Rs2 billion in the Federal Board of Revenue’s kitty. The MMF industry, which is backed by sufficient raw materials and a huge global demand, can give a boost to the textiles. It is high time that the government and the industry realised this and captured a bigger share in the growing market for synthetic textiles.
Being high-technology products, man-made and synthetic textile products can attract additional Foreign Direct Investment (FDI) in Pakistan, since the world has moved away from cotton-based textiles. India, Vietnam and Bangladesh have gone way ahead of us in terms of growth. They could do so by following a uniform tax structure and attracting FDI through manmade synthetic textiles.
With the world population growing and requirement for food grains and land available for cultivation mounting, natural fibres will diminish with time. This will in turn lead to reduced supply of natural fibres like cotton; which will increase the price due to a shortage of supply. High price and shortage of supply will further propel people to use more man-made synthetic fibre-based apparel. In Pakistan, cotton cultivated area had reduced to 16.7 percent within a year (from 2015-16 to 2016-17)’ it was substituted by sugar cane and maize. Furthermore, a growing population will need more land to grow more food crops.
Synthetic fibres are here to stay and their demand will only increase over time. Synthetic fibres will find varied usages because of their property to be designed and verified as per a desired use. Pakistan is clearly missing the shift from cotton to man-made fibre apparel and needs to re-examine its position and flawed policies to become conversant in manufacturing MMF-based fabrics in order to maintain, if not improve its share in the world textile trade.
Shahid Sattar is a former member of the Planning Commission.
Hira Tanveer is a policy analyst.