Pakistan exporter disappointed with the delay in approval of the second five year textile policy 2014-19

Pakistan exporters disappointed with the decision of the Economic Coordination Committee to delay the approval of the second five-year Pakistan textile policy 2014-19 for another couple of weeks, as they were eagerly awaiting cash incentives for their future exports and investments.

The textile policy was originally due in September. The sooner the policy is finalised, the better for the industry and textile exports, as the Heimtextil fair [in Germany] is fast approaching.

According to reports, the ECC had discussed the draft policy in its meeting on Thursday, but Finance Minister Ishaq Dar formed a committee to review it and suggest changes in it by the middle of this month. Now the package will be put before the ECC after November 15 for approval.

The exact details of the incentive package proposed in the policy are not known so far. However, it is expected to target a doubling of textile exports from the current $13bn to $26bn in five years. Various cash incentives, credit subsidies and tax exemptions will set the government back by over $1.25bn.

Around one-third of this amount will be allocated for the outstanding claims filed by manufacturers and exporters for refunds under the previous textile policy for 2009-14, and the remaining amount will be available for initiatives to be undertaken under the new policy.

The industry is expecting priority energy supply, tax-free import of machinery and other equipment, establishment of textile parks to encourage value-addition, creation of an investment support fund and duty drawbacks of up to 3pc on incremental export basis and value-addition.

The draft incentive package isn’t much different from that in the preceding textile policy, which was implemented only partially because of unavailability of promised funds .

Ijaz Khokhar, chairman of the Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA), is of the view that Pakistan has failed to take advantage of the trade concessions given by the European Union under the GSP Plus scheme because of lack of support from the government.

The Pakistani policymakers do not realise that government investments in the value-added textile industry are investments in the country’s future.
Textile is the backbone of Pakistani economy and will always continue to dominate it. The government need to heavily invest in textile infrastructure, human resource training and research for boosting exports of value-added textiles and developing products. Without the help from government, the country cannot take full advantage of the EU trade concessions.

Arshad Aziz, a former Prgmea chairman from Karachi, argued that the country can not increase its exports despite the increased access to the EU market because most value-added textile producers were in ‘ICU (intensive care unit)’ on account of liquidity crunch, energy shortages, lack of access to cheaper credit and uncertain conditions in the country.

In fact, textile exports have declined by almost 4pc from $3.56bn to $3.42bn in the first quarter of this financial year, from a year ago.

According to All Pakistan Textile Mills Association Pakistan lost $1.2bn in textile export revenue between April and September, mainly on account of energy shortages in Punjab, where three quarters of the industry is located. The export revenue losses could shoot up to $2.2bn during the current year if uninterrupted gas and electricity are not provided to factories for the rest of the year.

So far, the decline in exports is in single digits, but it will widen soon if the government doesn’t help the industry with its problems, warned M.I. Khurram, a leading knitwear exporter and former chairman of the Pakistan Hosiery Manufacturers Association.

Khokhar said that Pakistan’s rivals are already capturing its share in the world market. If they have raised their export if they had prepared well for GSP Plus. But the government didn’t pay attention to prepare and reap the benefits of the trade concessions. They can still recover lost ground, provided the government is ready to do what it must to help the industry.

The textile policy was being awaited because the different incentives could help exporters. Still, the announcement of the package alone will not do the trick. The government will be required to implement the incentives it plans to give the exporters.