In an ominous warning, value-added textile exporters have cautioned the government to address the central problems of the industry or the current drop in exports may widen further in the next fiscal year.
“The government needs to address major taxation issues with the Federal Board of Revenue (FBR) to at least stop the current dip in textile exports,” Pakistan Apparel Forum Chairman Muhammad Jawed Bilwani told The Express Tribune.
He said that the textile exports of Pakistan got a boost of 13% due to import duty concessions under the European Union’s (EU) Generalised System of Preferences (GSP) scheme in the outgoing fiscal year.
Looking at the expected 2% drop in exports, one can safely say that if there was no GSP scheme, textile exports would have seen a significant drop of 15% in fiscal year 2015.
“I fear Pakistan’s textile exports may drop by more than 15% in the next fiscal year if the situation persists,” Bilwani said, adding that both the finance minister and FBR are not realising the gravity of the problems.
Textile exports in the first 11 months (Jul-May) of fiscal year 2015 stood at $12.25 billion, down 1.7% compared to the previous year.
“One of the key problems that our government has created for the export oriented textile industry is the slow clearance of sales tax refunds of the industry. This is besides domestic problems like water shortages,” Multinational Export Bureau CEO Babar Khan told The Express Tribune.
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Khan, whose company exports most of its knitwear to the European Union (EU), said that the economic slowdown in Europe and the depreciation of the euro against the dollar and Pakistani rupee have also adversely affected Pakistan’s exports to the EU.
Weaker cotton demand
AKD Research on Tuesday reported that the supply of cotton in both local and exporting markets by regional competitors, mainly India, continues to test Pakistani textile manufacturers. This excessive supply is exerting undue pressure on the local industry that is already facing dull demand from major consumers like China.
Within textile exports, decline was observed across all major categories of both low value and high value added segments. The exports of value-added goods went down by 2% year-on-year (YoY), while low value added goods recorded a steeper decline of 14.1% YoY.
Read: Trade map: Why are Pakistan’s exports declining?
High value added exports dropped primarily due to lower knitwear (down by 11.3% YoY to $222,000) and bedwear (down by 9.8% YoY to $173,000) exports. On the other hand, cotton cloth (down by 15.7% YoY to $200,000) and cotton yarn (down by 8.0% YoY to $135,000) dragged low value segment numbers.
Published in The Express Tribune, June 24th, 2015.
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