What the textile sector needs from the government right now is not more free money but the rude shock of having to fend for themselves and investing in competitiveness. PHOTO: AFP/FILE
An irony that may, perhaps, be lost upon Finance Minister Ishaq Dar is the fact that this latest round of begging from the perennially pleading textile lobby is due to one of the policies he is most proud of: pushing the exchange rate down to below Rs100 to the US dollar. This has reduced the rupee value of the dollar revenues that textile companies earn when they export their products. As compensation for those reduced revenues (in rupee terms), they are now demanding that the government foot the bill for lowering their costs. The height of insanity for the government would be to give in to those demands.
The textile industry has been mollycoddled for far too long and, as a result, has grown lethargic to the point of being slothful. The share of value-added garments as a percentage of total textile exports is less than a quarter, a proportion that has not shifted in over a decade. Most of the exports are commodity-like items such as yarn. And, barring a few players, there has been little investment in upgrading their competitive strengths. This is an industry that is addicted to government handouts and will never learn to support itself unless the government slowly but firmly weans it off taxpayer-funded bailouts.
The textile lobby is fond of saying that the sector is far too important to be left without government support. We agree, but what the textile sector needs from the government right now is not more free money but the rude shock of having to fend for themselves and investing in competitiveness. The Pakistani economy cannot afford any less from this critical sector.
Published in The Express Tribune, May 9th, 2014.
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COMMENTS (4)
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When your broke you can't afford to subsidize anyone ... let alone your biggest exporter which has reaped the rewards of low rupee for years.
I STRONGLY agree with the editorial.
No bailouts for any industry. I dont pay my taxes so that others can benefit from bail outs caused due to their own incompetence.
Contrary to what this Editorial says, Now is the time to help the textile industry by totally exempting them from taxes and providing loans at subsidised rates. Pakistan has been granted/awarded the GSP+ package by the European Union for a period of only 4 years, out of which only 3 years now remain. And despite having the GSP+ package, Pakistan is not really benefiting from it as its production of goods is considerably low, one of which is textiles. If the government really wants to try to "fix" this, atleast to some extent, it should do whatever it takes to help the textile manufacturers to increase their production to generate revenue. This itself will help them stand on their own feet and will help Pakistan's economy a bit too. Else the GSP+ status will remain almost 'useless' and Pakistan will forever remain stuck to borrowing money and/or asking for 'help' from Saudi Arabia/ China/ US/ IMF/ WB, etc.