Post-GSP Plus status: Despite hurdles, textile exports rise considerably

Ultimate winners will be those who innovate and develop new products.

Farhan Zaheer November 30, 2014

KARACHI: Is Pakistan really taking full benefit of the European Union’s (EU) Generalised System of Preferences (GSP) Plus scheme?

Apparently, the answer is no, especially if one goes through recent news stories about acute energy shortages and security challenges. But the situation is not as bad as it may seem.

Despite all difficulties, Pakistan’s textile exports – constituting more than 50% of total overseas sales – to the EU have grown considerably since January 2014, the month when the country got the GSP Plus status.

Though exports of bed wear and cotton cloth have dropped, textile mills, especially those that produce knitwear and garments, have significantly increased shipments to the EU in the last 11 months. Therefore, those who are portraying the dismal picture, especially people from the textile industry, are not showing the complete picture.

Our friends in Europe have done their part by giving us the opportunity to export at preferential import duties until 2017. Now is our turn. However, for that we first need to change the attitude as we always blame the external factors or our internal structural weaknesses.

Pakistan is going to complete a whole year in December since it started enjoying the advantages of zero or low import duty structures under the scheme. It is high time the exporters and government sit together to find out what is pulling them back.

Pakistan’s textile exports to the EU increased to $3.512 billion in the first eight months of 2014, up 21.4% compared to $2.894 billion in the same period of previous year, according to the recent government data.

This $600-million jump in textile exports means Pakistan can easily achieve its target of adding $1 billion every year to total exports to the EU that it set after receiving the GSP Plus status.

“Our exports to the EU have jumped by 10-11% in the last 11 months,” said Babar Khan, CEO of Multinational Export Bureau, a Karachi-based factory which exports over 50% of its knitwear products to EU states.

During the last four months (Jul-Oct), overall knitwear exports have jumped by a handsome 25% compared to the same period of previous year. Similarly, readymade garment exports have increased by 10% in the same period.

However, what is worrying for the industry is the drop in cotton cloth and cotton yarn exports that declined by 36% and 10% respectively.

Despite energy shortages, security challenges and delay in sales tax refunds, Khan is optimistic that knitwear exports to the EU will remain significantly higher in the next 12 months.

But sales of some garment exporters have remained stagnant despite getting all the positives of the duty preference.

“Our exports have not grown in the past 11 months despite garment shipments to the EU markets,” Jawed Suleman, CEO of Sun Textiles, told The Express Tribune.

“After receiving benefits of the scheme, Pakistan’s textile exports should have been doubled in the last 11 months. But we cannot achieve this until we reduce our cost of production and improve the tax collection machinery,” added Suleman, who is also chairman of the Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA).

However, the double-digit growth in exports of knitwear and other garments despite impediments such as the appreciation of the rupee is a healthy sign for the textile industry.

With relative stability in the exchange rate in recent months, strong macroeconomics and declining oil prices, Pakistan has many positives on its side. The winners will be those who innovate and diversify their products according to the market needs. Let’s see how smart the exporters are.

the writer is a staff correspondent

Published in The Express Tribune, December 1st, 2014.

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