TEXT: The textile industry is an ever-growing market worldwide; likewise, it is considered one of the most vital sectors for Pakistan's economic growth. It is a significant contributor to its industrial exports. Over the years, this sector has seen cyclical results due to various reasons. The sector has struggled due to high manufacturing expenses, energy shortages, faulty strategies, and lack of support policies from the Government. A worldwide recession and quality competence are also significant threats to the sector. The main segments of this sector are clothing and garments, readymade fabrics, weaved apparel and processing sector. Even though most textile sales are made overseas to developed countries, the sector is still behind its South Asian regional competitors and has not performed to its full potential, particularly in recent years. The rapid industrialization and evolving technology in other countries are helping their textile industry have modern installations capable of highly efficient fabric production, which allows industry to record more revenues.
Road bumps towards growth:
However, the journey of the textile industry in Pakistan has not been a smooth road. The emergence of the worldwide economic crisis was an instant setback, coupled with rising manufacturing expenses, escalating energy tariffs, rising prices & shortage of raw material, frail infrastructure, obsolete technology, and lack of investment were among various factors considered for the downfall of the textile industry. The major irritant in textile export growth is consistent low cotton production in the country.
Pakistan stood fourth in cotton production in 2012 13 with 11 million bales. Before that, the period between 1980 90 is considered the golden era for Pakistan regarding cotton production, when rapid growth was achieved. In 2014 15 the production increased 11 percent and held the record of 15 million bales. However, cotton outputs in Pakistan in 2020 21 have plunged to a 21-year low to 5.3 million bales, whereas the textile sector's requirement is 15 16 million bales. It has left the textile sector with no option but to import raw cotton from the US, Brazil, and Egypt.
The reasons behind this tragic drop are low pro tability, poor seed quality, and lack of technology and innovations, all threatening the livelihoods of growers and the textile sector's viability. The textile export industry, which constitutes nearly 60 percent of the country's total overseas shipments, is dependent on locally grown cotton. The massive fall in cotton production has led the textile industry to import 857,373 metric tons of cotton worth US$ 1,489.6 million in FY 2020 21 compared with the previous year's imports of 536,707 tons valuing at US$ 880.1 million.
Silver lining to Covid
The textile sector is on its way to recovery following the removal of Covid-19 restrictions witnessing a sharp surge in exports in FY 2020 21. However, the growth is being achieved through imports of cotton and man-made yarn. Current conditions for Pakistan's textile industry are very favorable. Covid-19 has turned out to be a blessing in disguise for the textile industry as global buyers are increasingly turning towards Pakistan by cutting orders to regional players, resulting in 100 percent utilization of available production capacity. Almost all the major players in the country are expanding their capacity to create room for the growing number of export orders, especially for home textile.
Textile orders have shifted to Pakistan because of the Covid-19 pandemic on regional countries. This has given Pakistani exporters, particularly the key market players, an opportunity to quote competitive prices and offer better quality products so that the new buyers could become their customers permanently.
The demand for textiles collapsed during the first wave of Covid-19, but it recovered in the outgoing fiscal year. Exports of textiles posted a 22.94% growth in FY 2020 21 compared to the same period a year ago; in absolute terms, the total exports of textile remained US$ 15.4 billion in 2020 21 against US$12.526 billion of the previous year.
Exports of 13 sectors, including value-added textiles, posted double-digit growth in FY 2020 21 compared to corresponding year. Growth in exports of value-added sectors contributed to an increase in overall exports from the sectors. One of the reasons for growth in these sectors is the low base of last year when export-oriented industries remained closed due to the Covid-19 lockdown and cancellation of orders from international buyers.
The breakdown shows exports of readymade garments went up by 18.83% to US$ 3.032 billion in FY21 against US$ 2.552 billion over the corresponding year. The exports of knitwear increased by 36.57% to US$ 3.816 billion against US$ 2.794 billion over the corresponding year. Exports of bedwear went up by 28.87% to US$ 2.771 billion against US$ 2.150 billion of the last year. A growth of 31.81% was seen in export of towels to US$ 937.536 million against US$ 711.265 million of the last year. The export of leather garments was up by 14.02% and leather gloves by 22.26%; whereas, the exports of raw leather declined by over 12.04%.
The cotton cloth export posted a growth of 4.98% in FY21 to US$ 1.921 billion, while the export of cotton yarn went up by 3.26% to US$1.016 billion on a year on year basis. The export of raw cotton declined by 95.27% this year over the last year. It indicates that these raw materials were consumed maximum in the value-added sector.
Progressive initiatives of the Government supported textile sector in bouncing back:
The Government has drastically reduced duty and taxes on imports of several hundred raw materials to bring down the input cost of exportable products. Moreover, the liquidity issues are also resolved to a large extent by timely releasing refunds. In the budget 2021 22, several measures, including reduction in duty on raw materials to promote exports of pharmaceutical, plastic, chemicals, engineering, and valueadded textile products, had been proposed.
Amazon: A new window of opportunity for Pakistan
Pakistan's addition to Amazon's sellers' list has created vast opportunities for Pakistani entrepreneurs to sell their products through the platform. The move will help promote more businesses, and online buyers get access to Pakistani brands, which can now reach all significant markets through Amazon. Global trade opportunities for Pakistani textiles are wide open now.
With growth predicted to exceed 5% in this fiscal year accompanied with high dependency on imports, the resultant trade deficit is likely to shatter records this year. It is important to ensure that exports of both goods and services continue to increase so that the pressure on the current account deficit can be alleviated and the vicious cycle involving an ever so ominous balance of payment crisis averted.
It is very important that the Government has focused on improving the capabilities of exporters by improving market access and availability of important inputs and increasing the level of competition and innovation within the industry. However, it is imperative to review current policies that promote low value addition, which neither involves the transfer of technology into Pakistan nor involves spillover effects that can contribute and drive desired economic growth across different industries. Free trade agreements can play an important role to boost trade, particularly if they are designed to increase the participation in global and regional value chains. It is imperative for policymakers to focus on export growth rather than on curtailing imports to avert a balance of payment crisis.
The textile industry is envisaging to invest US$ 5 billion across the textile chain to double its exports by 2025. The new orders are a windfall for Pakistan's industry. It can sustain for years to come; it all depends on how we steer this industry into the future. Pakistan can be con dent that the growth momentum will continue allowing the country and its exports to scale new heights.
Secretary General Pakistan Textile Exporters Association
Copyright Business Recorder, 2021