The recently released textile export numbers provide room for some cautious optimism regarding the future trajectory of the sector. Textile exports for Aug-17 amounted to $1.17 billion, which is a 9 percent increase on a year-on-year basis.
Similarly, a healthy boost was witnessed on a month-on-month on basis with textile exports picking up by 16 percent as compared to Jul-17. So far for the 2MFY18 there has been a 6 percent increase as compared to the corresponding period in the previous year.
A closer look at the figures reveals that yarn exports were down by 13 percent, while cotton cloth exports dipped by 8 percent on a year-on-year basis. Falling cotton prices as well as slowing demand in neighbouring China have resulted in lower volume as well as value growth.
However, there was a boost in the value-added segments including readymade garments, knitwear, towels and bedwear. The highest growth was witnessed in knitwear at 21 percent whereas bedwear and towels grew by 15 and 12 percent on a year-on-year basis respectively.
There are a host of challenges currently being faced by the textile sector and while government assurances and packages have been doled out, sustainable recovery still remains elusive. Over the past year, this column has repeatedly advocated for reducing the cost of inputs that are used in higher value added segments such as readymade garments and knitwear.
On the one hand, rising cost of doing business has clawed away at Pakistan’s global cost competitiveness; and on the other hand, an overvalued rupee has aggravated the matter further. When compared with regional competitors such as Bangladesh, Vietnam, India and China, the country’s electricity and gas tariffs are almost 30 percent on the higher side according to the Pakistan Textile Exporters Association (PTEA).
Meanwhile, the textile package has not really had a major impact although that may be because of lack of implementation rather than faults with the package led incentives.
For example, even though there has been some improvement in pending refunds, players across the textile value chain have complained of being liquidity strapped due to extreme delays in refund processing by the government.
It is a healthy indicator that value added segments have started to pick up but more efforts need to be directed towards establishing new market linkages so that new avenues can be tapped instead of reliance on saturated markets left with little room for growth.
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