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Tuesday March 19, 2024

Anti-dumping duty on synthetic fibres hits textile exports

By Mansoor Ahmad
March 31, 2017

LAHORE: Declining exports should have given economic managers nightmares, but they are ignoring the threat to our economy.

They think the textile sector is a rent seeker, while non-textile exports have declined more sharply indicating overall decline in Pakistan’s global competitiveness. The issues impeding export cannot necessarily be resolved by rebates (even those are not actually paid). The high power tariff compared with regional economies is an issue.

The withheld genuine refund is an issue for the exporters. Flawed government policies that deprive the industry from entering the global markets are also a major issue. And corrupt bureaucracy, that is not accountable for its misdeeds, is the biggest issue.

Take for instance the case of textiles. The total global annual trade of textile exceeds $840 billion. Our share in this trade is only $12 billion that is little less than 1.5 percent.

Around 80 percent of the global textile products are made from synthetic fibres. Most products are made from 100 percent man-made fibre and some are produced by blending cotton with man-made fibre.

The use of cotton in textile products is just 20 percent of the global textiles. Pakistan exports products made of cotton only. This means that out of the global textile trade of $840 billion Pakistan has access to market only $168 billion of cotton products, while the remaining $672 billion market is inaccessible as we do not use man-made fibre for exports. In the $168 billion market for cotton, Pakistan’s share is 7.2 percent.

It is worth noting that there are no separate machines for weaving cotton or man-made fibre. Both cotton, blended, and man-made yarns can be spun on the same machines with equal efficiency.

Similarly, our weavers can weave cotton, blended or man-made fibre yarn into fabric. Is it not surprising that we are not targeting the major textile markets of blended textile products despite sitting on huge unutilised capacities? It does not make business sense.

There is however a valid reason for this. The access to synthetic fibre is denied to our textile industry through a high tariff regime. There are few producers of only one type of man-made fibre in Pakistan and that is called polyester fibre. The local manufacturers of polyester fibre are highly influential.

From 1997 to 2007 these industries were protected by high duty that the state guaranteed. Thereafter, they ensured that polyester fibre was protected by a lesser duty on imports. The government has now allowed duty free import for exporters. But the influential lobby of the polyester manufacturers succeeded in getting anti-dumping duty imposed not only on polyester fibre but on all other man-made fibres as well.

The result is that the cost to the industry is high and products made from man-made fibres cannot be exported.

The world over, demand for textile yarns is over 85 million tons, of which cotton yarn is 22 million tons, the remaining demand of 63 million tons is being met by man-made or semi synthetic yarns, chiefly polyester which accounts for over 65 million tons.

The normal consensus is that 70 percent of the incremental demand for yarn during the coming years will be met by polyester. Polyester yarns are also now being produced in various types and shapes to cater for the ever increasing demand for comfort, performance, hygiene, and aesthetics.

Management Properties, Copolymer Polyesters, Cationic dyeable Polyester Staple (DAK), and Polyester with cross section moisture management thru capillary action, solution dyed polyester, with or without UV protection, are only a few of the special types of polyester fibres which are required for the production of specialty yarns to be further processed in high value fabrics and garments.

These garments are gaining market share in developed and under developing countries having high consumer demand for niche products. Generally, these types of specialty polyester fibres used for the production of yarns are produced by polyester staple producers in China, Thailand, Korea, and Japan, the C&F prices of these fibres are higher as compared to normal PSF Fibre.