Exporters unsure about future growth
Surging cotton prices behind record exports in October.
KARACHI:
Despite achieving record exports of $1.98 billion in October, the highest ever monthly figure in the country’s history, manufacturers remain sceptical of the export growth rate going forward – they say basic irritants are still haunting the manufacturing sector.
The value-added textile sector that guided the preceding month’s exports has shown a deal of improvement. Although textile exporters acknowledge this, they say the increase follows a surge in cotton prices instead of the quantity of products sold.
“The increase in exports is because of the increase in base prices of textile products,” says Mohsin Ayub Mirza, former chairman Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) and CEO Joe’s Fashion. “The energy shortage in Bangladesh and high wages in China have resulted in the closure of many industries in these countries. This actually helped Pakistan as now the orders are diverting here.”
A sharp increase in the prices of cotton and other raw materials has raised the prices of finished products – this is what has resulted in the high export figures. Exporters say that even though the figures have surged, the margin of profit has not.
Over the past six months, the per maund price of cotton has increased from around Rs5,500 to Rs8,500 – crossing the Rs11,000 mark during the journey. Prices in international markets have also witnessed a similar trend in recent months.
Idrees Gigi, another textile exporter who agrees that the jump in export figures can be attributed to higher cotton prices, says the country can achieve exports up to $3 billion a month if it works on value-addition instead of exporting raw commodities.
What now?
“The value-added industry is facing serious problems because of which I don’t see any improvement in exports in coming months,” says Feroz Ahmed Lari, CEO Afroze Textiles.
Problems like political uncertainty, the deteriorating law and order situation and energy deficiency are all contributing to woes of local manufacturers. “Tell me which of these problems have been controlled that we can expect growth in coming months?” he questioned.
Meanwhile, analysts believe that exports may cross $22 billion in fiscal 2010-11 on the back of high cotton and rice prices despite multiple problems on the economic front. The government also hopes to break the $20 billion psychological barrier of exports this year.
In the light of challenges like the security crisis and energy shortage, observers say the growth in exports seen in October is ‘commendable’.
In terms of export, the textile sector is the single largest, accounting for more than half of the country’s total exports. With the increase in cotton prices, its share has increased to 60 per cent in October against the 57 per cent in the same month last year.
Knitwear tops October’s exports by earning almost $207.6 million, up 39 per cent, while cotton cloth fetched $201.9 million with a robust growth of 37 per cent if compared with the corresponding month of last year.
Other important export items like bed-wear, cotton yarn, readymade garments and rice were over $100 million with average growth rate of 33 per cent.
The consolidated figure for July-October 2010-11 is $7.17 billion – 19.2 per cent higher if compared to the last fiscal year.
Published in The Express Tribune, November 27th, 2010.
Despite achieving record exports of $1.98 billion in October, the highest ever monthly figure in the country’s history, manufacturers remain sceptical of the export growth rate going forward – they say basic irritants are still haunting the manufacturing sector.
The value-added textile sector that guided the preceding month’s exports has shown a deal of improvement. Although textile exporters acknowledge this, they say the increase follows a surge in cotton prices instead of the quantity of products sold.
“The increase in exports is because of the increase in base prices of textile products,” says Mohsin Ayub Mirza, former chairman Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) and CEO Joe’s Fashion. “The energy shortage in Bangladesh and high wages in China have resulted in the closure of many industries in these countries. This actually helped Pakistan as now the orders are diverting here.”
A sharp increase in the prices of cotton and other raw materials has raised the prices of finished products – this is what has resulted in the high export figures. Exporters say that even though the figures have surged, the margin of profit has not.
Over the past six months, the per maund price of cotton has increased from around Rs5,500 to Rs8,500 – crossing the Rs11,000 mark during the journey. Prices in international markets have also witnessed a similar trend in recent months.
Idrees Gigi, another textile exporter who agrees that the jump in export figures can be attributed to higher cotton prices, says the country can achieve exports up to $3 billion a month if it works on value-addition instead of exporting raw commodities.
What now?
“The value-added industry is facing serious problems because of which I don’t see any improvement in exports in coming months,” says Feroz Ahmed Lari, CEO Afroze Textiles.
Problems like political uncertainty, the deteriorating law and order situation and energy deficiency are all contributing to woes of local manufacturers. “Tell me which of these problems have been controlled that we can expect growth in coming months?” he questioned.
Meanwhile, analysts believe that exports may cross $22 billion in fiscal 2010-11 on the back of high cotton and rice prices despite multiple problems on the economic front. The government also hopes to break the $20 billion psychological barrier of exports this year.
In the light of challenges like the security crisis and energy shortage, observers say the growth in exports seen in October is ‘commendable’.
In terms of export, the textile sector is the single largest, accounting for more than half of the country’s total exports. With the increase in cotton prices, its share has increased to 60 per cent in October against the 57 per cent in the same month last year.
Knitwear tops October’s exports by earning almost $207.6 million, up 39 per cent, while cotton cloth fetched $201.9 million with a robust growth of 37 per cent if compared with the corresponding month of last year.
Other important export items like bed-wear, cotton yarn, readymade garments and rice were over $100 million with average growth rate of 33 per cent.
The consolidated figure for July-October 2010-11 is $7.17 billion – 19.2 per cent higher if compared to the last fiscal year.
Published in The Express Tribune, November 27th, 2010.