Textile industry: after the boom

Textile exports were targeted at $16 billion for this year (FY12). But with international sales of the countrys total textile sales abroad only managing to reach $10 billion, it is evident that another $6 billion of exports over the next two months is unlikely. To say that the performance of the textile sector has been below satisfactory would be an understatement. In the first 10 months of this fiscal year, quantity exported of all major textile products plunged, especially value-added products such as readymade garments and knitwear. The commodity price rally which took international cotton prices soaring over $2 per pound has become a distant dream for exporters this year. Barring the price spike in FY11, the medium term trend for international cotton prices appears restored. In other words, neither cotton farmers nor textile manufacturers fear any sudden spurt or plunge in cotton prices in FY13. If the international market appears calm at the moment, on the internal front the government is also unlikely to introduce any significant game changer for the sector. A recent InvestCap report predicted government would likely initiate steps to increase availability of credit for textile exporters and offer zero-rated facility to the unregistered weaving sector. In a nutshell, the Federal Budget brings neither carrot nor stick for the sector. Given this context, Pakistans cotton and textile exporters appear to have gained very little from the commodity boom. Raw cotton exports went against the tide, rising by four-fifth in 10MFY12. But given the low prices, raw cotton sales to other countries only stretched to $433 million in this period. "Clearly, when the dust settled on the rally, the local industry appears to be getting even more uncompetitive" said a local knitwear exporter. He said that in the case of Bangladesh, favourable export terms for that country to the EU is hurting the competitiveness of Pakistani exports. He also criticised government for not providing high rebates on exports as practised by China. But the depreciation of the local currency will make textile exports from Pakistan cheaper globally. Pakistani rupee has shown signs there may be room for weakening soon as speculations run rife over when the government may approach the IMF once again. But given the countrys textile sectors inability to capitalise on the commodity boom in the recent past, it is difficult to imagine any significant uptick in the growth of exports over the next few months. Here is to hoping that the sector provides a pleasant surprise next year.