Textile growth stalemate continues

LAHORE: Textiles sector despite being the main headache for our economic planners leads our exports as its exports in the first five months of this fiscal were $5.76 billion, equivalent to 60 percent of our total exports of $9.54 billion.

A look at the performance of its subsectors that cumulatively account for 90 percent of total exports in this sector reveals the exports in all these sectors remained volatile during the year 2019.

The six major textile subsectors are yarn, fabric, readymade garments, knitwear, bead wear, and towels.

The export performance of yarn remained erratic in entire 2019. In February this calendar year its exports were $108.36 million. During the year they crossed $100 million mark -in April, May and August. In November the yarn exports were only $98.5 million. In the same way the exports of cotton cloth were also disappointing.

Fabric exports remained higher in March at $181.3 million. The only other month when $180 million barrier was breached was January. In November fabric exports were only $168.3 million.

Readymade garments exports in January were $256.3 million and in November a little lower at $250.6 million. Knitwear sector was the star performer during 2019 starting with exports of $248.5 million in January and ending in November at $266.8 million. It breached the $270 million barrier thrice in past 9 months. On the other hand, bed wear exports remained stagnant in true sense. Starting January 2019 with $193.3 million, its exports reached $195 million in November. It crossed $200 million barrier twice and $210 million milestone once in the year.

The exports of towels similarly remained depressing, fluctuating $54.7 million in June 2019 to $472.5 million in May 2019 and were $65 million only in November.

A month ahead of the close of the year, the textile exports, from January through November 2019, stood at around $12 billion and may reach $13.5 billion by the end of December. This is the same export figure achieved in 2012-13 or around 5 percent higher than the textile exports last fiscal.

This export is 2.5 times less than the textile exports of Bangladesh or Vietnam.

The 11 month performance of textiles does not offer much hope for future. Many capacities in various textile sectors have closed down. There are no chances of their revival. The exports attained in 2019 at a very low per unit price mean we have attained our maximum productivity in most sectors. We now simply do not have any export surplus to boost exports. The industry is sitting on obsolete technology and is inefficient. The question is as to why our overall exports and textile export particularly are stagnant? The story is not as simple as that. The exports in this sector have remained stagnant since 2012-13 going down in some years along with our total exports.

The textile story, in fact, is the same for over a decade. The sector is dominated by the spinning sector that though accounts for only 40 percent of textile exports but has a greater say in influencing the government policies than the value-added sectors. Basic textiles flourished on government facilitations and subsidies and continue to look for any possible dole-out even at a time when the government doesn’t have resources for that.

The pampered basic textile sector did not let the high-value-added apparel sector to grow to its potential that is definitely higher than the combined export potential of Bangladesh and Vietnam. The combined textile exports of Bangladesh and Vietnam are touching $60 billion per annum compared with average textile exports of $12.5 billion from Pakistan.

We have textile tycoons in the basic textile sector, while in the value-added textiles the exports are dominated by small players. There are thousands of exporters managing exports of less than $1 million per year. They need to scale up through bank credit. Almost 90 percent of the bank finances go to yarn and fabric sectors and rest to the value-added sectors that account for 60 percent of the textile exports.

When the present regime announced special and low energy and power tariffs for textile sector and few other exporting sectors in the last quarter of calendar year 2018, it was presumed the exports would shoot up to historic highs in 2019. Besides low power and energy tariffs, the textile package announced by the previous government also offered special refunds to those exporters that increased their textile exports by 10 percent over the previous year. Another positive was the massive decline in rupee value. This provided Pakistani textiles the competitive edge they were looking for a long time.

The labour cost of exporters also declined appreciably in dollar terms. Labour wages in Pakistan are slightly higher than Bangladesh. Two years back our labour cost was also double than that of Bangladesh. Still the textile performance has left much to be desired.

The entrepreneurs lack marketing skills and only a few exporters have stable and permanent buyers. Quality is not the issue, nor is the price. In fact per unit rates in all subsectors of textiles are the lowest in Pakistan, compared with the competing economies. Exporters are paying a premium because of the negative perception of their country abroad.

The present regime is banking on substantial increase in exports to narrow down the trade deficit. In real terms the textile exports have remained stagnant in last six years. During the same period the textile exports from Bangladesh and Vietnam increased at a compound rate of over 7-10 percent. Our share in global textile trade has declined from 2.2 percent at the start of century to less than 1.70 percent.

Exports increase when new efficient capacities are added. The situation in this regard is very disappointing. If we look at the technology investment of China, India, Bangladesh, and Pakistan in last one decade, we find we are not even close to Bangladesh in adding new machines.

Data from International Textile Machinery Federation reveals from 2008-09 till 2016-17 China added 46.2 million spindles, India 20.2 million, Bangladesh 3.75 million, and Pakistan installed only 2.45 million new spindles. So we were way behind even Bangladesh in spindle technology upgrade.

Shuttle-less looms that weave fabric reveal even a more disturbing reality. From 2008-09 till 2016-17 the Chinese added 427,000 shuttle-less looms, India 89,000, Bangladesh 41,000, and Pakistan added only 7,600 shuttle-less looms.

Now having way higher fabric producing capacities, why would the Chinese, Indians, or Bangladesh import fabric from Pakistan? One more thing worth noting is that Pakistan gained market in value added-apparel in the European Union but at the same time lost substantial knitwear market in the United States. That sort of balanced out the gains that were being made in Europe. In apparel and knitwear the entrepreneurs have utilised the equipment of sick units and have not added new technology.