Value-added textiles: Seasonal pickup in demand expected to propel exports

Stable rupee and investments are other positives for the industry.

KARACHI: Value-added textile exports have not only remained robust in the first eight months (Jul-Feb) of the current fiscal year but they are expected to continue to perform in a similar fashion on the back of seasonal demand, say industry officials and analysts.

Exports of value-added textile sub-sectors such as knitwear, bed wear, garments and home textile have recorded growth in the range of 5% to 14% from July 2014 to February 2015, providing a vital cushion for the otherwise stagnant overall textile exports.

Leading textile composite mills believe shipments are likely to go further up because of continuous stability in the rupee’s value against the dollar for the past few months.



The executive director of one of the country’s largest composite mills Gul Ahmed, Ziad Bashir, says the relative stability in the rupee-dollar exchange rate and recent investments made by his company have sparked hopes of improved export figures in coming months.

After hovering around Rs106-107 to a dollar, the rupee appreciated swiftly by about 8% in the first few months of 2014, which hit textile exports badly despite Pakistan’s success in winning the Generalised Scheme of Preferences (GSP) Plus status from the European Union.

However, from July and August 2014 onwards, the relatively stable rupee, which has depreciated only 3% since then, has provided an opportunity for the exporters to opt for a long-term strategy.

“We expect exports of the value-added segment to remain robust due to low international oil prices and a seasonal uptick in demand during the second half (Jan-Jun) of the fiscal year,” BMA Research said in a recent report.

“However, the expected hike in gas tariffs is likely to cause a dent in profits of textile companies.”

Analysts say the government has assured the International Monetary Fund (IMF) of rationalising gas prices from April 15 and that will reduce earnings of almost every gas-consuming industry.

The value-added textile industry is one of them primarily because the exporters are unable to pass the tariff increase on to customers in highly competitive global markets.

Despite the jump in exports of value-added products in the first eight months, other textile goods like raw cotton, yarn and cotton cloth have suffered a double-digit decline in shipments, keeping the overall export growth in check.

Total textile exports from July to February remained restricted to $9.2 billion compared to $9.1 billion in the same period of previous year, up just 0.5%.

“Slowdown in European economies, bankruptcies there and the fast depreciating euro against the rupee have compounded the worries of Pakistan’s textile exporters,” says Jawed Bilwani, Chairman of the Pakistan Apparel Forum.

Since the start of fiscal year 2014-15, the euro has lost 18% of its value against the rupee, weakening from Rs134.7 to Rs110.5.

Though Bilwani looks upbeat about the prospects of value-added textile exports to Europe in coming months, he cannot provide figures about investments, if any, by small and medium-sized mills to cash in on the preferential market access provided by the EU under the GSP Plus programme.

THE WRITER IS A STAFF CORRESPONDENT

Published in The Express Tribune, March  30^th,  2015.

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