Unspinning a mess

Textile exporters have slammed the government’s failure to resolve cotton yarn supply issues and are now warning that the industry could collapse. The supply shortage is based on a combination of local and international factors. Domestically, production has seen a 34% decline year on year due to lower yields and reduced area of cultivation. Meanwhile, international prices have shot up by about 11% in the past two weeks. The exporters say they will not be able to meet pending international orders if they don’t get yarn soon. This would lead their foreign clients to abandon Pakistan in favour of India, Bangladesh and other countries in the region.

Pakistani exporters have seen a higher number of orders this year thanks to coronavirus-induced lockdown in much of the region. This, in turn, increased their demand for yarn. The exporters claim that they had told the government some five months ago that problems were on the horizon, but no action was taken. The exporters also say that despite lower domestic output this year, the shortage is partly artificial, created by hoarding. Yarn-spinners deny the accusation of hoarding, but their own figures also show that output has been flat this year, confirming that they have not been able to keep up with increased domestic demand.

The accusation of exporters is startling, considering the government’s claim of treating textile exports as a priority. For that matter, even if it wasn’t an official priority, it is still — by far — the largest export industry and a significant employer. It is also surprising that the government had not already acted to address their rather simple demand — duty-free yarn imports. Considering that the industry is literally based on value-addition, any forex ‘losses’ due to yarn imports will cancel themselves out thanks to their higher value when being exported as finished products.

The government needs to find a quick fix to ensure there is no deluge of missed orders. It must then, as promised, treat the sector as a priority and find a way to ensure consistent supply to meet rising demand.

 

 

Published in The Express Tribune, March 8^th, 2021.

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