Earlier this week, Pakistan Bureau of Statistics seems to have gone out of its way to quietly revise monthly export datasheets called “Advance Releases on Foreign Trade statistics”, all the way back to June 2020. It appears no press release has been issued explaining the deletion of quantity data for readymade garments exports, subject of much controversy recently in the media and policy circles. In the interest of institutional autonomy, PBS must issue a clarification forthwith, as the conspicuous absence of data shall not go unnoticed for too long in the analyst community.
But it may be worthwhile to recall how PBS may have landed here. In the past few months, textile exporters have come under criticism based on the hypothesis that the increase in exports is primarily driven by increase in prices. For FY21, trade data by PBS (at the time) indicated volume decline across several major categories such as readymade garments, cotton yarn, and cotton cloth – when compared against peak volumes last achieved in FY18. (For more, read “Textile output: flat-lined”, published on 16 July 2021”).
Later, citing the example of denim exporting segment, BR Research noted that volume decline in low-value export such as fabric need not necessarily raise alarm, except that the contraction has not been accompanied by rise in value-added garment (denimwear) export quantity; (For more, read “Denim: under weather”, published on 27 October 2021)”, a worrying development which at least warrants an explanation.
That analysis attracted sharp rebuke from All Pakistan Textile Mills Association (APTMA), arguably the largest and most influential industry association. APTMA officials noted that the quantity data published by PBS is erroneous and that PBS also uses incorrect units of measurement (UoM) for “cotton cloth” – square meters, instead of metric tons. Never mind that PBS had been using sq meters for “cotton cloth” export volume as far back as January 2011, and that the UoM is same as one used for cotton cloth output for Large Scale Manufacturing Index (dating back 2005). And that the ‘error’ had not been highlighted by any textile organization until only last month!
The conversation has been further lit on fire after the disconnection of gas to textile industry, with many among the analyst community and policymaking circles labelling the industry “rent-seeking” for demanding concessions on energy tariffs. Some have gone to the extent of noting that the country needs to support IT - and withdraw support from textile - as the lifeline for future export growth!
Unfortunately, the complete absence of nuance from the conversation surrounding concessions to textile, and industry’s (perceived) uncompetitive behaviour is both troublesome and tiring. In less than three years, policymakers have gone from lamenting the ‘anti-export biases of past regimes that retarded the growth of textile exports, to chiding the industry for failing to grow exports ‘fast enough’ in a post-pandemic world.
Almost on cue, it appears, commentators have recognized the inefficacy and abuse of concessionary financing facilities to the industry. Never mind that as far back as 2007, a working paper by Nadeem ul Haque and Ali Kemal had identified that refinance schemes “have an insignificant impact on exports in the long run” and are “prone to rent-seeking”. Never also mind that a wonderful – and more recent – study by Gonzalo Varela et al (2020) show that of the 14,500 exporting firms from Pakistan, no more than 850 firms benefit from EFS every year on average.
But critics would also do well to appreciate that textile industry is neither homogenous in size nor behaviour. APTMA may be its most loud voice, but it is only one of at least 17 other trade associations representing varying interests, ranging from spinning, weaving, dyeing, finishing, home textiles, denim terry towels, hosiery, apparel, and readymade garments etc. According to one study by Clean Clothes Campaign (2014), Pakistan has as many as 5,000 production units for garments, mostly cottage, small, and mid-sized. In contrast, APTMA has no more than 400 members, mostly large-sized units concentrated in spinning, weaving, or composite segments.
Unsurprisingly, most of the beneficiaries of GoP’s largesse in the form of TERF, LTFF and other concessionary finance facilities are the large-scale industrial units. Small and mid-sized units rarely succeed in availing these facilities, even though their working capital requirements are similarly hamstrung due to delays in GST/duties rebates and refunds. Similarly, while gas-fired boilers may well be inefficient, it is unrealistic to expect that an entire industry should forgo billion of rupees in fixed assets investment, simply because the policymakers cannot decide whether they wish to incentivize expansion of spinning segment, or move the industry towards low-energy intensive, apparel manufacturing.
For its part, APTMA and other industry associations must also develop a thicker skin, and offer explanations where data is missing or incomplete. Little to no clarity exists over share of local sales and exports in industry’s sales mix, and the industry makes no attempt to release data on the same. If readymade garment exports have indeed grown – contrary to PBS data which indicates opposite to be true – APTMA and other industry associations are very well placed to collate and release periodic data, the way auto association (PAMA), and cement association (APCMA) do.
To date, textile associations have failed to map Pakistan’s total cloth/fabric production, which remains the root cause of undocumented/under-reported local sales in the sector. If concessionary finance schemes, and competitive energy pricing pre-dominantly benefits select few in the spinning or composite segments, it is for APTMA and other trade associations to share relevant data to conduct effective advocacy and expand scope/number of beneficiary firms. If knitwear units have demonstrated much higher efficiency turnover for concessionary finance facilities than readymade garments or home textiles, it is for the trade organization to explain the discrepancy. (For more, read “Measuring the impact of concessionary finance to exporters” published on 21 October 2021)
Whether Pakistan’s policymakers intend to nurture country’s textile base by encouraging a vertically integrated industry, or move it to an open-trade regime requires data driven nuanced conversation, not accusations or name-calling. Analysts and commentators must also address the bi-polar disorder which forces them to lament textile as victim of policymaker’s anti-export bias for three years, and then blame the industry for all conceivable challenges faced by Pakistan’s stagnant exports. But that would require research and open-exchange of data, while the recent actions by PBS seem to indicate we may be moving in the opposite direction altogether!