IPR releases fact sheet on state of textile industry (The Nation (Pakistan))

Pakistan has steadily been losing textile market share to regional competitors from the last four years. In textiles, countries like India, Turkey and Vietnam have achieved significant growth in exports. In clothing, other countries like Bangladesh, Cambodia, Indonesia, Sri Lanka and Thailand have edged out Pakistani exports. China continues to be the dominant exporter, with exports of textiles and clothing approaching $300 billion, compared to Pakistan’s $ 13.5 billion.

This was stated in a fact sheet released by the Institute for Policy Reforms on the state of textile industry. According to this fact sheet, Pakistan’s premier industry, textiles, appears to be in trouble.

According to IPR fact sheet, over 60 per cent of the output of the textile sector is exported. Exports of textiles showed high growth of 10 per cent annually from 2001-02 to 2010-11. Since then they have stagnated at under $14 billion. This is despite cumulative depreciation of 19 per cent in the value of the Pakistani Rupee and, more recently, the granting of GSP+ status by the EU. The latter has led to some diversion of exports, without raising substantially the global volume of exports.

Fact sheet pointed out that there are a number of structural factors which have adversely impacted on the industry. First, there is the persistent energy shortage. Frequent outages have limited the effective capacity and raised cost due to the resort to some self-generation. Second, there has been inadequate investment in technology upgrading and replacement by the industry. Import of textile machinery reached a peak of almost one billion dollars in 2004-05. Since then, it has fallen to less than $ 500 million annually.

Key indicators of the loss of competitiveness of the textile sector of Pakistan are, first, the import of cotton yarn for the first time from India since 2013-14 of over $ 200 million. Second, almost 70 per cent of Pakistan’s exports globally of yarn are to China. These fell by 20 per cent in 2014-15, with the gain primarily to Vietnam.

In its fact sheet IPR recommended that there are clearly two policy options. Either, the government moves away from its stubborn policy of maintaining the nominal exchange rate and adjust it downwards, at least to the extent of rise in costs due to recent tax moves and pricing of electricity. For the textile industry, the rise in costs as a percentage of the value of output is 4 per cent.