Textile sector in utter bliss

Pakistans largest industry has gathered pace in the light of a supportive international environment and favorable local conditions. A supportive agriculture policy coupled with rising labor cost in China has pulled up cotton prices in that country significantly higher than international prices.
Chinese weavers are prompted to import cotton yarn. Chinas yarn imports have enhanced year on year by 118 percent and 26 percent month on month for the country in July this year.
The EU parliament has granted autonomous trade preferences (ATPs) to Pakistan, allowing tariff free export of 75 Pakistani product lines, mostly textile till December 31, 2013. The ATPs are expected to come in effect at the end of October, 2012 following completion of administrative procedures.
Furthermore, the sector will also find gain in the likely approval of Generalized Systems of Preferences Plus (GSP+) in 2014. Come January 2014 with GSP+ approval in place the countrys exports will have duty free access to the EU.
With local cotton growers receiving far lower prices than the Rs3119 per maund suggested by the Punjab government in March, cotton growers are averaging Rs1950 on their produce. With downward pressure on costs, the spinning mills are well placed to benefit from both ends.
Factoring in the monetary easing element, the SBP has reduced the Export Finance Scheme (EFS) and Long Term Financing Facility (LTFF), hence the abridged cost of capital will support the industry in terms of both finance cost and expansion.
The weakening of the local currency against the US Dollar will also boost exporters competitiveness in coming months.
With the sector gaining speed favored scripts include Nishat Chunian Limited and Nishat Mills Limited, given the companies interests in the international market. Nishat Chunian exports 12 percent of its output to EU nations.
However, correspondence with Zubair Motiwala, advisor to CM Sindh on Industries, painted a blea]k picture. He pointed to the lack of infrastructure present in the country with regard to shortage in gas, which he termed as a crucial requirement for the textile industry.
Motiwala also highlighted the possibility that the material produced locally for textile industry may be exported to foreign countries given the depreciating PKR and low local prices.
He also pointed to the decline in textile exports of 13 percent and the prominence Bangladesh has gained in the international market, as that countrys annual exports came in at around $19 billion with a target of $25 billion in 2015, whereas Pakistans exports only stood between $10-12 billion for textile.
GSP+ would go on to enhance the international market for Pakistan; however hopes of expansion by mill owners will be constrained due to the lack of infrastructure and the law and order situation in the country.