Textile exports drop 16% after rebate reduction

Businesses close down as they are unable to compete in global market

KARACHI: Pakistan’s textile exports dropped 16.1% to $1.002 billion in July 2018 compared to shipments recorded in June, which stood at $1.194 billion.

On a year-on-year basis, textile exports in July did not show any improvement. In fact, they fell half a per cent as exports were slightly better at $1.007 billion in July 2017.

The market had been expecting better performance from textile exporters following 18% rupee depreciation in the past nine months, but exports dropped significantly on a month-on-month basis and nominally on a year-on-year basis. Textile exports roughly make up 60% of Pakistan’s total exports.



All Pakistan Textile Mills Association (Aptma) Patron-in-Chief Gohar Ejaz said the government had recently halved tax rebates that stood at 4-7% and therefore things turned unviable for textile producers.

Ejaz said Pakistan had only adjusted its exchange rate by letting the rupee weaken, but it won’t impact national exports. The rupee had been artificially stabilised at Rs105 per dollar for the past five years, he said.

He pointed out that textile was a very competitive industry internationally and after 4-7% rebate the industry operated at 5% profitability and “if the government reduces the rebate, then operating the industry will be unviable.”

He added that many of the textile players had started closing operations as it had become difficult to run their businesses due to stiff competition in the international market.

However, according to Pak-Kuwait Investment Company AVP Research Adnan Sami Sheikh, textile exports tend to fall in July as exporters try to increase exports in the closing month of earlier fiscal year, which is June.

He added that Pakistan’s textile production faced high input costs due to imports, which diluted the impact of rupee depreciation on the textile industry.

“High quality raw material is imported by brands. Chemicals are imported while energy requirement is also generally fulfilled by consuming diesel which is also imported. So the impact of rupee devaluation is not convincingly passed on to the industry as people generally think,” he told The Express Tribune.



However, he added that the impact of rupee depreciation could not be gauged during summer as it was an off-season for the industry. The impact may be assessed and hopefully the textile group will show better exports in winter when consumption increases in the west due to cold weather and Christmas.

Sheikh said textile exports could be improved by improving localisation and quality of raw material as better brands import better quality cotton to meet their requirement.

Pakistan’s annual requirement stands at 15 million bales of cotton, but it has recently been producing just 10 to 11 million bales.

Published in The Express Tribune, August 21^st, 2018.

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