The textile industry has seen a strong growth in recent months but most industry players are pinning their hopes on the expected approval of European Union’s (EU) Generalised System of Preferences (GSP) Plus status for Pakistan in January 2014.
For them, the GSP Plus is a game changer for the Pakistani textile industry, as it is expected to boost annual exports by $1 billion.
“Textile exports have increased by 4% in the first three months of fiscal year 2013-14 but this increase is below our expectations. What is more important for us is the expected grant of GSP Plus status by the EU. If we get that, our textile exports will jump by at least $1 billion a year,” All Pakistan Textile Mills Association (Aptma) Chairman Yasin Siddik told The Express Tribune.
Textile exports in September 2013 sharply increased by 16% compared to August 2013. Overall textile exports in the first three months (July to September) of 2013-14 jumped to $3.58 billion, up a significant 9% year-on-year (YoY) and a decent 4% quarter-on-quarter (QoQ).
“I am hoping to see more growth in exports in the ongoing quarter (October to December),” said Siddik, who believes that exports of both value added and non-value added products would see a decent rise in coming months.
Siddik added that textile exports must increase by at least $1 billion in case Pakistan wins the GSP Plus trade preference facility.
Analysts believe that the increase in textile exports is mainly aided by stable cotton prices – a key raw material – and depreciating rupee against the dollar over the last few months.
Any increase in cotton prices, they say, will increase profit margins of textile companies, especially in the second half of fiscal year 2013-14.
Analysts also stress that textile exporters that have higher share of finished or value added products will benefit more if Pakistan gets the GSP Plus status.
“Whatever increase we see in textile exports in coming months, it will never be comparable to the jump that we may enjoy after GSP Plus,” said Gul Ahmed Textile Mills Executive Director Ziad Bashir.
“Exports are expected to sustain themselves in the ongoing quarter but I do not think they will increase significantly,” added Bashir.
Pakistan has assured the EU that it is going to implement most of the international conventions required to qualify for the GSP Plus. Most importantly, Pakistan has told the Europeans that it will continue the moratorium on capital punishment – one of the most important EU demands before granting the GSP Plus facility.
GSP Plus is a trade arrangement that allows exporters from developing countries to pay lower or no duties on their exports to the EU.
Countries that want to get GSP Plus need to effectively implement as many as 27 international conventions on environment issues, good governance, labour rights and human rights.
While the standard GSP – which will stay in force until the end of 2013 – allows 176 developing countries and territories to enjoy easy access to EU markets through various duty reductions for certain product lines, the upcoming GSP Plus will be limited to 89 low and lower middle-income countries.
Since many of the countries that enjoy the GSP status are not expected to fall in the GSP Plus group, Pakistan would be in a position to export more of its products to the EU on low duties.
Published in The Express Tribune, November 3rd, 2013.