Export orders for textile fabrics, made-ups, bed sheets and knit garments from European markets have dwindled sharply in the recent months as Pakistan's heavily burdened exports are losing competitiveness versus Bangladesh, India and China in the post-quota open competition international trade regime. This was shown in a survey conducted by exporters to assess the impact of WTO in the first four months after Pakistan's textile quota phase-out.
Pakistan's textile exports are reeling under exorbitant anti-dumping barriers, prohibitive credit finance rates, heavy and galloping costs of manufacturing inputs and overheads, said Faiq Jawed, chairman of Pakistan Textile Exporters Association (PTEA).
He said that it should not be surprising to see that national textile exports, initially showing respectable growth rate of 13 percent in the beginning of the tear, had plummeted to one percent average by the end of February 2005.
Dr Khurram Tariq, a former chairman of Pakistan Hosiery Manufacturers Association (PHMA), expressed grave concern over the erosion of "traditional edge" of Pakistan's knitted shirts, T-shirts and jerseys in EU market as now Bangladesh, with its comparatively cheaper exports, is briskly capturing the EU markets, replacing the 'costly' Pakistani exports.
Bangladesh has established its own knit fabric and woven fabric facilities on crash basis and is taking advantage of huge demand surge to back up its manufacturing facilities, he said. He apprehended that if Pakistan's exports continued to remain uncompetitive, Pakistan would be ousted from European market.
Textile exporters were replenishing and modernising their machinery in a big way to meet the challenges of WTO but the government imposed 5 percent duty on machinery import, which was hitherto free of duty. This regulatory measure has discouraged the pace of modernisation process in the industry, said Wasim Latif, a textile exporter and senior vice-chairman of PTEA.
Another dampening feature on export front is the hike in the credit finance rate, which has gone up from 3 percent to 8 percent over the last 6 months. The commercial banks have in turn raised their credit margin to 12 percent, making the credit line costly for the exporters. With huge amounts blocked in sales tax refund regime, exporters are constrained to rely on commercial credit for their turnover and export expansion, but with this high mark-up rate they are unable to sustain their competitiveness against their rivals, said Asim-ul-Haq, a leading knitwear exporter and executive member of PHMA.
Mukhtar Ahmad Sheikh, a former chairman of Faisalabad Dry Port and PTEA, said that exporters are being subjected to one percent income tax deduction on gross export receipts, which is tantamount to charging income tax on gross sales, and not on net income. This negates the spirit and concept of income tax laws.
Anti-dumping duty, coupled with GSP concession withdrawal by European Union, totalling 25 percent, was the biggest obstacle in exports to EU. Pakistan's exporters are confronted with a handicap of 25 percent in price of quotations compared to India, China, Sri Lanka and Bangladesh. "How can you compete with your rivals with 25 percent difference in price factor," said Khurram Iftikhar, a leading made-ups exporter to Europe and chief executive of Faisalabad Value-Addition City.
"Over the last four months there has been very poor response to our price quotations by European buyers," he added.
Access to American markets has been repeatedly denied to Pakistan's exporters. American industry lobbies have been very active in pulling strings at concerned quarters for demolishing high duty barriers against Pakistan's textiles, said Azhar Majeed Sheikh, a regular textile exporter to USA and a former chairman of PTEA.
Cost of doing business in Pakistan is escalating day-by-day with increase in prices of petroleum products and inputs like electricity and gas. These inputs and overhead expenses in turn increase cost of manufacturing exportable textiles and make Pakistan's goods uncompetitive in international markets versus the rival countries, said Ahmad Kamal, a former chairman of PTEA.
The government should realise the gravity of the situation and should immediately take measures to counteract the negative impact of the adverse factors impacting the exports growth, was the common consensus among the exporters. They warned that the situation has already taken a high turn and any further delay or indecision would result in irreparable loss of foreign markets and collapse of textile exports.
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