Textile sector and VAT collection


Editorial May 12, 2010

The textile lobby is at it again. In a bid to pressure the government into acceding to their demands for a ban on yarn exports, the value-added sector staged a strike on May 11. They were protesting what they said was the non-availability of yarn in the country, bringing one of the largest industrial sectors in the country to a grinding halt. It seems that the textile manufacturing sector has not fully understood the concept of free markets. People and companies are free to choose with whom they buy and sell goods and services. In this particular instance, the yarn manufacturers are getting a higher price for their product from buyers outside the country and so they are exporting it.

The decision to do so is purely logical and bears no malice towards the local industry. Yet the textile composite sector seems to be unwilling to pay the new price for yarn and instead claims that a shortage of yarn exists in the country. The fact remains, however, that there is no shortage, just an unwillingness by a perennially uncompetitive sector to pay market prices. Their recalcitrance is understandable; their attempt to hold the entire economy hostage is not. The government seems to have struck a compromise, announcing that it will impose a duty on yarn exports rather than an outright ban. But why should the yarn manufacturers be penalised for the inefficiencies of the value-added sector and locked out of the international market for their product? The truth is that the Pakistani textile industry has been uncompetitive for quite a while now, relying on government subsidies and tax exemptions. The government needs to remove some of the protection so that the industry can grow and mature.

Published in the Express Tribune, May 13th, 2010.

COMMENTS (2)

Sara | 11 years ago | Reply Government should act wisely in this competitive scenario of the Textiles Industry all over the world.....everyone is subsidizing to compete after the elimination of MFA and we are imposing more taxes and exporting yarn instead of giving it to our industry . Is the Ministry of Textiles sleeping if so they should hire the people for Ministry from foreign lands who could open their eyes when make a new policy and who could do SWOT analysis and make policies according to the needs of the industry. Why the industry is going down, Downsizing and exploitation is a common practice now in almost all the textile factories for the labour force but resson behind is diminishing revenues. The Ministry of textile should work more positively and actively.
Meekal Ahmed | 11 years ago | Reply Well said. We go through this every three years or so. But on a more general point, Pakistan cannot remain a textile-producing country for ever. It is a low-productivity activity and therefore means low incomes. We desperately need to diversify (as others have done) away from textiles to higher value-added and higher productivity products. That is the only way to raise average incomes and living standards.
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