As if Pakistani textile makers weren facing enough challenges in international markets, they received another blow last month. The jolt came from the Turkish manufacturers of denim fabric, who initiated safeguard measures to protect themselves from low cost fabric imports from Pakistan.
Turkish denim manufacturers have proposed to increase the duties on Pakistani fabrics from 6.5 percent to 34.5 percent and on garments from 9.5 percent to 52 percent. This would be an increase of 28 percent and 42.5 percent respectively, which could sabotage the nearly $350 million worth of Pakistans textile exports to Turkey.
"Exporters have informed that they are selling about 35-40 percent of their total mills fabric production to Turkey...also, statistics received from Turkey show that polyester cotton fabric, under chapter 5211, enjoys as high as a 69.2 percent share in the Turkish market," Dr. Mirza Ikhtiar Baig, Advisor to Prime Minister on Textile told BR Research.
Some corners argue that the increasing of duties could be a lessing in disguise, as the price of denim fabric could fall in the domestic market, enabling Pakistani value-added textile makers to lower their cost of production and become more competitive in their exports to the US and the EU.
This argument is based on the fact that Turkey, which is Pakistans eighth largest export destination, purchased $343 million worth of textile goods last year, of which cloth/fabric amounted to $238 million. That means Pakistani value-added makers have plenty of room to play with.
But Ibrahim Mahmood, a researcher at PRGMEA - Pakistans garment export association - is skeptical of this view. "Turkish value-added producers already have long established business lines with the buyers in the EU, whereas due to the efficiency and geographical proximity their delivery time to the EU is also at least one-fourth of that offered by Pakistani value-added textile makers".
This skepticism makes sense when seen in the light of the central banks recent comments on the proposed EU tariff concessions. The State Banks latest review of the economy noted that despite having lower prices than competitors, Pakistans share in EU markets is low, on reasons that revolve around obsolete technology, outdated designs and lower efficiency.
Therefore, considering that Pakistans value-added makers stand little chance of gaining the remote blessings from the Turkish duties, two things, must be addressed to the Turkish authorities.
First, as Baig argues, the imposition of these duties negates the efforts made by both countries to sign PTA and FTA and to facilitate the land route trade for enhancement of bilateral trade.
Second, if the likes of EU could explore ways to help Pakistan by giving trade breaks, then the Turkish government is expected to at least do the same, given the friendly relationship between the two Muslim countries, instead of creating such obstacles.
Thankfully, the Turkey-Pakistan Business Council understands this and has already sent strong letters to Turkish PM in support of Pakistan, according to Baig.
Hopefully that, coupled with the delegation led by TDAP chief Tariq Puri, will help win the heart of Turkish authorities in Pakistans favour. Yet, that shouldn keep Pakistani fabric makers from exploring backup plans on an immediate basis.
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EU clothing imports 1HFY10 $/ kg
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BD China India World Pak
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Woven Clothes
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Men Overcoats 11.2 15.8 18.5 17.2 9.8
Men Suits 11.6 9.6 14.3 12.6 10.1
T-Shirts 10.1 15.1 19.0 16.1 10.6
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Knit Clothing
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Men Overcoats 19.4 18.5 23.2 21.0 18.4
Men Suits 12.4 15.3 19.6 18.4 12.9
Women Suits 13.7 18.2 33.2 22.5 14.0
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EU clothing imports 1HFY10 volume share (%)
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BD China India World Pak
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Woven Clothes
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Men Overcoats 5 62 3 24 6
Men Suits 11 53 5 25 5
T-Shirts 35 22 8 34 1
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Knit Clothing
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Men Overcoats 2 77 1 19 1
Men Suits 16 45 6 27 7
Women Suits 8 54 7 28 3
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Source: SBP
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