Only value-addition to help textile exports pick up lost threads

LAHORE: Over the recent years, not only have our basic textile exports flatlined, but the value-added apparel sector has also petered out as local apparels fetch lowest per-square-meter value for clothing exported to the United States.

Pakistan will have to come out of low value culture to make a mark in global textile market. It is understandable that yarn and fabric fetch lesser prices being basic raw materials for knitwear and readymade garments. But it is a pity that we are exporting most of our apparel for peanuts.

Pakistan for instance is placed fourth in exports to the United States as far as the quantity is concerned; however in terms of value they are far behind than countries exporting lower quantities.

The official export data of textiles by the US government reveals that in the month of February Pakistan’s small and medium enterprises (SME) sector (apparel exporters the world over are mainly SMEs) exported apparel equivalent to 222.6 million square meter of fabric against which they earned a foreign exchange worth $251 million.

Bangladesh on the other hand exported apparel equivalent to 214.2 million square meter of fabric fetching $509 million. This is over two times what Pakistani exporters fetch for 20 percent higher quantity.

Bangladesh is not the only country in this regard. In fact the top 14 exporters of apparel to United States fetch more dollars per square yard of fabric consumed than Pakistan.

Indonesia for instances exported only 148 million square yard equivalent fabric in February 2018 and earned $428 million almost three times higher than Pakistan. India, Vietnam, China and Mexico all earned more through higher value-addition.

Industry insiders say the low value-addition cannot be exclusively blamed on the private sector. The government policies in this regard also played an important role. Pakistan is a cotton producing country and its textile industry is cotton centric. The global trend is to blend 20-25 percent cotton with manmade fibers. The textile industry has conditional access to manmade fibers.

The manmade fibers are subjected to import duties in order to safeguard the domestic industry. This is not fair as access to an exportable raw material should be zero rated. The government schemes that allow duty free import of raw materials used for exports are too cumbersome for the small and medium exporters. The inability to procure manmade fibers at globally competitive rates impedes manmade fibers’ use in the country.

When the local spinners do not blend cotton with manmade fibers there is no possibility of producing various types of fibers popular globally. Since our fabrics lack the variety needed to produce high value-added garments our apparel exports fetch much lower prices than our competitors. Our planners makes make cumbersome policies fearing misuse of facilities provided to boost exports.

The exporters particularly the smaller ones are almost always unable to fulfill the conditions required to obtain that facility and become noncompetitive globally.

Out apparel exports also lack variety. In fact we are restricted mostly making shirts and trousers for men only. This way we leave out 50 percent of the total export market as women make up almost 50 percent of the global population.

The government needs to take stock of the situation and allow import of manmade fibers, yarn and fabric at zero-rate for a period of five years. This would help us produce globally acceptable basic raw materials for our industry at globally competitive rates and the exporters could go for high value-addition.

This would also impact the inefficient local manmade fiber industry and may result in loss of few thousand jobs and investment worth $2-3 billion but it would start creating a million jobs and an investment of at least $1 billion every year for next five years. The exports would then be on sustainable path.

The local spinners, weavers and manmade fiber producers would be forced to improve their efficiencies and restart supplying yarn and fabric not only to local market but to the global markets as well.

Protectionism has landed us in trouble but transparent free market approach would put Pakistan again on the global textile market.