Export numbers for the full year are here and they spell out more or less the same story; textile continues to suffer, with FY15 exports showing a decline of around 1 percent year-on-year to $13.5 billion, as per SBP data.
The numbers reveal that value-added textile exports (knitwear, bed wear, towels, and readymade garments) increased by nearly 6 percent year-on-year. However, this improvement was more than offset by the 11 percent decline in the non-value added items (raw cotton, cotton yarn, cotton cloth, cotton carded or combed).
Non-value added textile exports have been relatively lower owing to lackluster demand from our largest market, China. Moreover, cotton prices - and commodity prices in general - have remained depressed throughout FY15, with cotton hitting multi-year lows over this period. Yarn prices have also been lower and exports have been unable to fetch enough returns.
On the other hand, the value-added segment is far more lucrative. The fact that value-added textile exports have shown an increase over last year comes as a huge plus and saved what would have otherwise been an enormous decline in exports. Value-added goods offer greater margins; an industry source once told BR Research that value-added items can fetch up to 6-8 times more than the basic textile exports.
Pakistans textile industry is teetering on the verge of collapse, with high cost of doing business being complemented by an artificially maintained exchange rate and regional players like India flooding the market with cheaply produced products. Load shedding and non-zero rating on exports, in addition to taxes, high tariffs, and WHTs are making survival of the industry questionable. Reportedly, 30 percent of textile mills in Pakistan have been closed, and more are likely to follow.
As of FY15, textile accounts for 56 percent of total exports, and 29 percent of large-scale manufacturing. It is quite evidently one of the pillars of this economy and needs rescuing immediately.
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