Pakistan textiles lifted by WTO trade waiver

hopes high for a major improvement in garment sales after World Trade Organization approved unprecedented waivers.

KARACHI: It makes a change, but Pakistani textiles boss Asghar Hussain is pleased. A year ago, recession, power cuts and poor security forced him to sack most of his workers.

Now he's hoping for a major improvement in garment sales after the World Trade Organization approved unprecedented waivers allowing 75 Pakistani products duty free access to markets in Europe for two years.

The European Union is Pakistan's largest trading partner, receiving nearly 30 percent of its exports -- worth almost 3 billion euros ($3.9 billion).

"It means we should expect good gains... as Europe is a huge market for Pakistani readymade garments," said Hussain.

The signs are so good that Hussain has re-hired some workers, bringing his total staff to 50.

It is a fraction of the number he employed before devastating floods in 2010, but he expresses hope it could be a pointer to rosier times ahead.

The WTO passed the waivers as an unprecedented concession in order to help Pakistan recover from the floods, yet in 2011, the business climate had already started to improve.

Cotton prices rose to an all-time high of 229.67 cents a pound in March, and although they have since retreated to a modest 87 cents a pound, it is good news for Hussain, who says he exports 25 percent of his goods to Britain and Germany.

There was also a fall in Islamist and sectarian violence in the second half of 2011 and power cuts also diminished owing to priorities being given to industry.

"The situation isn't ideal. Cotton prices have decreased again, but power supply is better and industrial peace is there," said Hussain.

Textiles dominate Pakistan's trade with the EU, accounting for more than 70 percent of its exports to the trading bloc.

The products chosen for the waiver, which needs to ratified at the WTO general council meeting on Tuesday and Wednesday, would amount to around 900 million euros in import value, about 27 percent of EU imports from Pakistan.

Pakistani textiles are currently hit with a 7.19 percent import duty in the European Union. If approved, the waiver will apply until end-2013.

"Such concessions will bring life to our dying industry," said Shehzad Salim, Chairmen of Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA), without providing precise figures.

"Our value-added textile industry's exports have suffered a lot because of electricity and gas shortages, devaluation of rupee and many other factors. The EU's package is promising and seems a breather for a choked economy."

Mirza Ikhtiar Baig, textiles advisor to the prime minister, revised down an initial estimate that the EU package may increase exports by 400 million euros, agreeing with independent analysts who forecast a slightly lower figure.

Most believe the waiver will equate to a 0.7 percent increase in Pakistan's overall exports and a 1.5 percent increase in its textile exports.

"This package would increase Pakistan's exports by $175 million a year," said Furqan Punjani of Equity Research, a market research firm.

The package includes over 30 products of non-value added textiles -- items such as gray cloth, cotton yarn and fabric -- 23 of textile garments and the rest made up of home textiles, value-added leather, footwear, raw leather and ethanol and vegetables.

"We estimate an increase of 0.7 percent in Pakistan's overall $25 billion exports for the year while it would contribute 1.26 percent to our $13.8 billion textile exports," said Baig.

"The increase is a good positive for our economy, yet it should not be called significant given the fact that a ceiling has been imposed on our 15 quality products."

A.B. Shahid, an independent analyst, was more cautious.

"The WTO waiver is a positive development, yet it is too little to handle the increasing negatives the economy is accumulating," he told AFP.

That caution is something that skilled garment worker Mohammad Wahid understands only too well. When he was sacked two years ago, he struggled to feed his family of five until he was rehired 10 months later.

"Life is better now," he said.

"Concessions in Europe are good, yet no-one knows how long this job lasts. In Pakistan, the feeling of insecurity never bites. It stings fatally."