When it comes to manufacturing and exports, the aim for any country should be to eventually focus on those industries and sectors where high value-addition can take place. Countries including Bangladesh, China and Vietnam have followed this path and their resultant economic growth affirms this policy. 
The case could not have been more different for Pakistan where value-addition is still limited, especially so in the case of the textile sector. There are many issues plaguing the industry, but it is also a question of the mindset particularly of the larger players. Be it in spinning or weaving, fiber or yarn production certain influential players are able to lobby effectively to have customized policies implemented for their own gains.
Recall that this column recently wrote upon APTMA’s move to try to limit the import of cotton yarn by requesting FBR to make it compulsory for all consignments of imported yarn from India and China to be subjected to independent inspections at three stages in order to curb yarn import.
The Pakistan Textile Exporters Association (PTEA) is strongly against the move and believes there will be a severely negative impact on the entire textile value chain and points out that only 3 percent of total yarn consumption is being imported.
Well it seems something similar is taking place in the polyester filament yarn (PFY) fabric manufacturing sector. The Pakistan Yarn Merchants Association (PYMA) has over the past few weeks tried to bring the government’s attention to what it believes to be unjustified imposition of anti-dumping duty on imported PFY.
According to Mr. Danish Hanif, PYMA Chairman (Sindh Balochistan Zone) the polyester fabric manufacturing industry is already subject to an 11 percent customs duty, which is highest amongst the entire polyester value chain. Then there is the 5 percent regulatory duty (RD) on imported PFY.
On top of that, the National Tariff Commission (NTC) has recently imposed an average anti-dumping duty of roughly 7 percent on PFY exporters from Malaysia and China with the duty ranging from 3-11 percent. There are two major producers of PMY in Pakistan based out of Punjab and PYMA believes lobbying efforts on behalf of these groups has resulted in this unfortunate outcome.
PYMA believes that for polyester FDY yarn (HS. Code 5402.4700) the local production amounts to only 3 percent and the remaining is imported. Similarly, polyester DTY’s (HS Code 5402.3300) local production amounts to only 25 percent of the required needs of the weaving industry whereas the rest again needs to be imported. This raises some important questions.
Firstly, if the local supply is unable to meet the required demand what is the purpose imposing an anti-dumping duty? Secondly, if after adding all these duties and tariff barriers together the cost of the locally manufactured PFY fabric is expensive than imported fabric, will the SMEs operating in this area be forced to close out eventually? The answer to the latter seems a likely yes.
According to Danish an anti-dumping duty was previously imposed in 2005 in order to facilitate development of the local industry. But there has been little investment from the side of these major players, and they are nowhere near close to be able to fulfill the majority of the PFY required by fabric manufacturers.
On the whole, it seems illogical to use protectionist measures in case of a product whose local production amounts to only a paltry contribution to overall consumption.
PYMA believes that coupled with other issues like load-shedding, high energy tariffs, refund issues, the imposition of this anti-dumping duty might very well be the final nail in the coffin for the majority of SMEs operating in this sector.
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