Textile exports have carried the flag rather well in trying times. The only thing separating 4M exports in FY21 and in FY20 is the second decimal in billions of dollars. Textile’s share at 63.3 percent in total exports is the highest in over a decade, clear by 6 percentage points to the previous 10-year average. The drop in food exports has been and by and large made up by the textile exports.
It must be remembered, Pakistan’s textile export story had started to be built by massive growth in quantities, as the sector was liberated from many of its ills. The start of FY20 saw consistent increase in export quantities, in some of the major exporting categories such as readymade garments and bedwear. Readymade garments had posted a stellar 2QFY20 with highest ever quantity exported. Bedwear had achieved the feat in the previous quarter and continued posting impressive numbers even after.
But the export value hardly moved a needle, as the other side of the equation i.e. the pricing was on the lower side. That meant the values stayed flattish across categories. But there are always benefits of operating at near full throttle with low prices, then the other way round, as it tests the capacity to deliver higher quantities, for possibly large number of clients, which could always come handy in business.
Then came the coronavirus. Apr-Jun was a disaster and there is no point drawing any year-on-year or sequential comparisons, given the unprecedented scale of demand slide it brought around the globe. The Q3 demand for garments is still 70 percent of what it was in pre-pandemic days. Q4 could be even lower given how quickly the virus has gripped the Western world in the ongoing deadly wave.
But Pakistan meanwhile has made some progress on textile export front. Knitwear segment has run with the show, posting double digit growth in value and quantity terms, despite overall reduced demand, signaling Pakistani exporters have surely managed to tap new markets and buyers. Whether this is because of being available at the time of need, as Pakistan opened early, remains to be seen.
The most intriguing is the readymade garments sector. Just a 5 percent increase in export value year-on-year itself does not inspire much. Nor does a rather 45 percent year-on-year drop in volumes. But an 83 percent year-on-year increase in unit price sure gets the pulse going. From $3.8 per piece of readymade garment, to (at least) a decade high of $7 per piece is worth digging deep into. So, what does Pakistan mostly sell as readymade garments? Primarily “men’s or boys’ ensembles of cotton” or HS code 620322 if you are one for finer details. This is an HS code that Pakistan almost singlehandedly bosses in the world. The latest available global market share in the category for Pakistan stood at 89 percent.
Now, the drop in textile export volumes for Pakistan is largely in line with the drop in imports of its usual partners, in the USA and Europe. It is not that Pakistan has tapped a newer market that explains such high jump in unit price.
Detailed HS code data by country is released with a considerable lag by the PBS, but available global import data by ITC for HS code 6203 and 620322 both show that the unit prices for major importing countries have stayed flattish, with negligible gains witnessed by two countries. It so appears that the unit price increase is a result of Pakistan gaining market share outside of the broad 6203 category. Whether this is because of or despite Covid, it sure is a heartening sign.
The textile sector may well be facing the headwinds in the form of revised energy prices, cotton imports etc. But being able to keep the boat afloat operating at significantly under full throttle, inspires confidence that there is more room on the upside. More importantly, since some of the recent performance seems to be driven from new categories and higher end segments, this spells good news for Pakistan in a (hopefully) likely scenario of a post-pandemic world.