Textile sector: Add value and don’t hint at a bailout, says govt

Not in a position to award subsidies, APTMA looks to improve export figures.

KARACHI:

In view of power shortages and the Pakistan rupee’s appreciation against the dollar, the textile industry has demanded that the government must do ‘something’ to avoid an industry-wide shutdown.

All Pakistan Textile Mills Association (Aptma) – country’s biggest lobbying group of textile sector – has published advertisements in newspapers, reminding the government about the contribution of the industry and the problems of power outages especially in Punjab. About two weeks ago, Aptma urged the government to provide rebate to textile exporters whose profits have shrunk since January due to the rupee appreciation.

Aptma believes its demands are not tantamount to an effective bailout.

“No, this is not a bailout demand. We want the government to supply proper electricity and gas to textile industries which is our right,” Aptma Chairman Yasin Siddik told The Express Tribune.

Commerce Minister Khurram Dastgir, on his visit to Aptma House two weeks ago, floated questions like what should be the level of government interference in the textile sector and what should it do to increase value addition. His point of government’s interference was directed towards the old rivalry between cotton yarn and fabric producers and the producers of finished garments and other value-added products.

Many economists believe the government should not be in the business of doling out favours to one sector of the economy at the cost of another. The commerce minister’s stress was exactly on this same point when he made it clear that the government was not in a position to give out subsidies or rebates to the textile sector.

Dastgir pointed out that the experiences of previous Pakistani governments’ show that most of the time subsidies went in to the pockets of those who did not need them while the deserving failed to get their due share.

Federal Minister for Textile Industry Abbas Khan Afridi has recently spoken in favour of finished textile goods exporters and said that he has urged the government to facilitate this sector in the upcoming budget.

When contacted, Afridi was not available for comment. Same was the case for Dastgir.

On the other hand, Siddik said that he supported the textile minister’s view on finished goods producers and wanted to see growth in its exports.

“The whole textile chain should get some support especially the value-added textile sector,” Siddik said, while commenting on whether the government should extend a helping hand or not.

Pakistan is far behind its competitors like India, China and Bangladesh in producing finished textile products. There are over 950 textile items that are traded worldwide. Out of those Pakistan exports only 13 items despite having a complete textile chain that its competitors lack. Still, the textile minister believes that this could be raised to 100 items with some value-addition.

The share of the finished knitted and woven garments in Pakistan’s textile exports remained almost the same over a decade as garment exports contributed 29.2% in the total textile exports of $12.3 billion in fiscal year 2012, virtually unchanged from the 29% in FY02. In FY13, it rose slightly to 29.53% of the total textile exports.

Despite the gloomy performance, the present government believes that it should give highly subsidised loans and concessions in import duties on textile machines to spur investment in the sector.

However, it is quite clear that a lot depends upon the private sector to meet requirements of the EU’s 27 conventions to increase exports under the GSP Plus scheme.

Published in The Express Tribune, May 19^th, 2014.

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