GSP-plus, sliding rupee could boost textile exports to $15b in fiscal 2014

Analysts remain upbeat on textile sector’s profits in the current fiscal year .

KARACHI:

All Pakistan Textile Mills Association (Aptma) Chairman Yasin Siddik said that the country’s (textile) exports can hit $15 billion in fiscal 2013-14 because of the approval of the Generalised System of Preferences Plus (GSP-plus) status from the European Union (EU) in January 2014 and sharp slide in the rupee against the dollar in recent months.

However, Siddik said he was equally perturbed with the rise in electricity and gas prices, which may off-set the prospects of any big jump in textile exports in the ongoing fiscal year.

While speaking to The Express Tribune, Siddik said that the grant of GSP-plus status from EU will have a positive impact on both unfinished and value-added textile exports of Pakistan.

Last year, Pakistan exported around $13 billion worth of textile products.

The fall of rupee has been seen as a positive sign for exports of Pakistan. The rupee has fallen 8% since the beginning of 2013. Moreover, it depreciated faster in the last two months, as it went down by a sharp 4% against the greenback.

With a share of over 50% in the country’s total exports, the textile industry is expected to emerge stronger in fiscal 2013-14.

Analysts believe that Pakistan’s textile exports are going to benefit from two more reasons. Firstly, China is focusing more on the technology sector instead of textile, but yarn demand from China is growing.

Secondly, Bangladesh – the second biggest textile exporter in the world after China – is not getting the same number of export orders as it was getting a year ago. The country is facing major challenges in safety concerns of textile workers. Recent fire incidents in factories of Bangladesh, where hundreds of workers had died, attracted negative international media coverage.

Despite these two developments, Pakistan is in the middle of cut-throat competition from India – the country’s regional competitor in textile exports. India – the third biggest exporter of textile goods in the world – is looking forward to make the most of these changing trends in the regional market and is targeting $17 billion textile exports this year.

Leading textile industrialists insist that the rise in gas tariff for captive power plants by 17.4% and electricity rates for industrial units by 57% in recent months are going to hit the profitability of the sector in the ongoing fiscal 2014.

However, despite these expected increases in the cost of production, analysts are upbeat on the profits of the textile industry in the fiscal year.

Pakistan is trying to get duty-free access to the United States – one of the world’s biggest markets for textile products – where Bangladesh exports its textile products in huge quantity and has managed to become a dominant player. On rising concerns of international labour rights associations, the US is in the process of suspending the GSP-plus status to Bangladesh. If this happens, it will give another boost to Pakistani textiles exports to the US in the coming years.

Pakistan only holds 1.5% of the global market share in textiles, which means that this industry has strong prospects to grow. Analysts believe that Pakistan’s textile exports will likely double in the next five years to $26 billion if the country receives the GSP-plus status from the EU.

Published in The Express Tribune, October 6^th, 2013.

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