Pakistan’s textile exports grow amid severe economic crunch. A look at reasons for this upturn
Amid much uncertainty in the times of pandemic, there is finally something to celebrate. The encouraging development is that while the national economy is under pressure on the whole, a few sectors have shown promise and registered significant growth over the recent months. This is no ordinary news keeping in view that Pakistan’s economy recently contracted for the first time in decades and its growth forecast for the following years is dismally low.
Among the few sectors that have done well recently, is the textiles, the backbone of economy and contributor of around 65 per cent to Pakistan’s exports. It is heartening to note that most textiles mills are running at full capacity to cater to the needs of the local as well as international markets and more orders are pouring in. Here one can recall the statement of Prime Minister Imran Khan about the unmet demand of hundreds of thousands of workers in textiles sector. This upturn in the sector has been attributed to exports which definitely has a positive impact on the domestic market of related goods.
Market analysts believe that the domestic market for textiles has not expanded much but their exports have gone up. This is also evident from the figures for the ongoing year. One sees a growth over the corresponding period of the last year when business was as usual and Covid-19 had not yet surfaced. What surprises us is that the Pakistani textiles exports are going up at a time when their overall global demand has shrunk and people in destination countries are opting for basic clothing and not high-end products. This merits a detailed study of the reasons and factors that have given the boost to textiles export.
The official figures released earlier this month show that Pakistan’s exports grew for the third consecutive month in November to $2.161 billion, up 7.67 per cent from $2 billion in the corresponding month last year. A major contribution to this figure has come from the textiles sector which is a very encouraging news from the industry. During this period, exports of home textiles have grown by 20 per cent, pharmaceutical products by 20 per cent, surgical goods 11 per cent, stockings and socks 41 per cent, jerseys and pullovers 21 per cent, women’s garments 11 per cent and men’s garments 4.3 per cent compared to November 2019.
Abdur Razzak Dawood, advisor to the prime minister on commerce, trade and investment, took no time to express his excitement through a tweet. He said that though the textiles exports had registered an increase in November 2020, the export of cotton yarn had declined by 25 percent, raw leather by 21 percent, and cotton fabric by 12.2 percent. “This is an indication that exports of low value-added products are decreasing and we are moving towards more value-added exports,” he noted.
Hasaan Khawar, an analyst with interest in international trade, points out possible boosters for the sector. He says it’s a good time for the textile sector, with export orders lining up and our textile mills running at full capacity. This, he says, could be partly attributed to early opening of industry after the lockdown but there are a number of other factors at play here. For example, he says, a favourable exchange rate has helped the textile exports. Other factors include financing schemes like Export Finance Scheme (EFS) and the Long-Term Financing Facility (LTFF) that offer credit to the industry at concessional rates.
“It is a good time for the textile sector, with export orders lining up and our textile mills running at full capacity. This could be partly attributed to early opening of industry after the lockdown but there are a number of other factors at play here,” says Hasaan Khawar, an analyst.
No doubt it was a major plus point for Pakistan that its mills opened earlier than the Indian and Bangladeshi industries after the lockdown due to Covid-19. Because of this international buyers turned to Pakistan to meet their demands. As Indian and Bangladeshi industries were closed, Pakistani industrialists also grabbed export orders for face masks and personal protective gear for export. This added to their product range.
Raza Baqir, the representative of All Pakistan Textile Mills Association (APTMA) in the Punjab, tells TNS that this was an opportunity for Pakistan to show the quality of its products to the buyers of Indian and Bangladeshi textiles products. The challenge now, he says, is to retain these buyers because before long they will again have the option to choose suppliers from Pakistan, India and Bangladesh. He says the government can play a major role in this regard by facilitating the textiles sector and bringing its input costs down so that it can offer competitive rates in the international market without compromising on quality.
Baqir says the government has done well to release the stuck up refunds of textiles exporters. This has improved their financial flows and encouraged many who are now increasing their production capacity and modernizing their facilities. Another government incentive that has yielded results is the provision of electricity at 7.5 cents per unit, Regasified Liquid Natural Gas (RLNG) at $6.5 per MMBTU and domestic gas at Rs 786 per MMBTU. Earlier, he says, Pakistani textile industry was having a tough time in the highly competitive international markets because of the high inputs costs it was incurring.
Baqir hopes the situation will improve further as the federal government seems all set to announce a national textiles policy for five years (2020 to 2025) which will offer a range of incentives and concessions to the sector. If there is consistency in policy and no disruption for five years, the industry will scale new heights of performance and excellence, he hopes.
Lastly, the positive impact of US-China trade feud on Pakistan’s textiles industry cannot be overlooked. Players in Pakistan’s textiles industry say when the US imposed high tariffs on imported Chinese products these became non-viable and the buyers had to look at other options including Pakistan. Many importers gave orders to Pakistani companies as they could no longer procure products from Chinese suppliers due to the high duties imposed on them.
Pakistani industrialists must not relax and should focus on improving the quality of their products without letting the input cost spiral upwards. They should also focus on supplying value-added products in the global market. What if relations between US and China improve after the departure of Donald Trump and some of the trade restrictions on the latter are lifted?
The author is a staffer and can be reached at [email protected]