The textile sector’s performance for FY17 was described as marginally better in the central bank’s recently released annual report. However, a growth of 0.8 percent and 0.4 percent for the past two years can hardly be called “better” and is reflective of the stagnant state the sector has settled in.
Most of the issues plaguing the sector have persisted for quite some time now. Therefore, SBP’s recommendations for sufficient investment by textile players in BMR activities, value-addition and increasing production efficiency for enhancing a stagnant export base, although accurate are not novel.
Stakeholders in the textile industry have complained of the patchy implementation of the export package that was announced by the government to incentivise a rapidly shrinking export base. The central bank has also noted that the impact of that has been slower than expected although the Bank refrains from pointing out the specific reasons for it.
Taking a closer look at the figures, textile exports grew by 1.9 percent in the second half of FY17 after dropping by 1.8 percent in the 1HFY17. The SBP cites a pick-up in consumer spending in European countries as a factor in helping exports rise in the latter part of the year.
This led to the EU’s overall clothing and textile imports increasing by 3.5 percent in FY17 as compared to the previous year. Out of this, the growth in EU’s imports from Pakistan in the clothing and home textiles category was the highest among Asian countries.
Encouraging as this news might be, the SBP goes on to flag a decrease in Pakistan textile exports to the US. This column strongly agrees with the bank’s assessment of Pakistani textile players being still “excessively focused on cotton-based textile and apparel products.” The situation is exacerbated by the absence of a strong domestic polyester industry, with demand for man-made fibres by exporters being largely met by imports.
International apparel market trends are evolving at a rapid pace. This is evident from the changing preference of consumers in markets such as the US where the share of cotton products in total US textiles has decreased from 40 percent in FY10 to 29.7 percent in FY17. This column hopes to analyse these trends in more detail in the coming days.
The central bank goes on to highlight the case of Vietnam, which has managed to capitalise on its relatively low-cost production of man-made fiber into producing synthetic garments that have shown increased demand in the US. A unit value of clothing at 3.2 $/SME in Vietnam as compared to 3.4 $/SME for the rest of the world has made the share of Vietnam’s textile exports rise from 9 percent in FY12 to 12.4 percent in FY16.
Textile sector stakeholders need to come together to work on aligning their product base according to international consumer preferences. Players involved in value addition segments such as readymade garments have been complaining of the dearth of quality fabric for some time now.
The absence of a strong domestic polyester industry in Pakistan means demand for man-made fibres is mostly met by imports. Therefore, imposition of regulatory duties and cumbersome inspection checks which lead to problems for value added segments need to be reconsidered.
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