KARACHI: The country’s largest export-oriented textile industry is facing a severe crisis of raw material and the industry is closing due to supply chain disruptions.
In a letter sent to Muhammad Ishaq Dar, Minister of Finance, Dr Gohar Ejaz Patron-in-Chief, All Pakistan Textile Mills Association (APTMA) has warned of further decline in the textile exports, if supply chain disruption issues are not addressed on top priority basis. Dr Gohar, in the letter, briefed about the ongoing crisis of raw material in the textile industry and also requested for an urgent meeting with the Minister of Finance to apprise the critical severity of the situation and.
“At present exporters are turning away orders as they are not sure of the availability of raw materials to fulfill the orders. The damage to Pakistan would not only be lower exports this year but also the permanent shifts of the orders to other countries which would be very difficult to reverse,” he mentioned.
He said that the raw material of any industry is the fundamental building block without which the process of manufacturing and subsequently exporting cannot occur. Cost and ease of doing business are no longer relevant in the absence or shortage of raw materials.
The textile sector’s raw material in the case of Pakistan is cotton and unfortunately, the cotton crop for this year has clocked in at under 5 million bales, Dr Gohar informed.
Cotton import restrictions: APTMA seeks Dar’s intervention
The textile sector consumed 15 million cotton bales in the last year which indicates that approximately 10 million bales would need to be imported in order to retain exports at the same level as last year of $19.3 billion.
“Unfortunately, the import of cotton has been severely restricted as banks are not opening LCs or retiring cotton imports and currently, the industry is running out of cotton stocks and as a consequence, textile mills have either shut down or will shut down in the very near future if decisive and urgent action is not taken,” he warned.
According to APTMA, at present banks are only willing to entertain very small and limited LCs for companies which are direct exporters and this excludes 80 percent of the basic industry and ignores the fragmented structure of the industry.
In order to keep the mills operational and maintain the export growth it is essential that the raw material particularly cotton must be available to the entire sector so that the sector which exports 80 percent of its product does not come to a standstill.
He said that the impact on employment of the shutdowns is already significant and would be catastrophic if the situation is not brought under control.
APTMA Patron-in-Chief mentioned that every dollar spent on the import of cotton yields $3 in exports. The estimated cost of 10 million bales of cotton at today’s price is $4 billion which would translate to minimum exports of $12 Billion, a gain of $8 billion.
Import compression of exporting sectors which adds value and re-exports at a much higher value is counterproductive, he added.
He said that Pakistan’s economy largely depends on textile exports for foreign currency and employment. The dicey international economic situation and the floods have pushed Pakistan’s economy to the brink. The textile sector last year exported goods worth $19.3 billion and has further expanded capacity through an investment of $5 billion to increase exports to $25 billion.
The expectation and goal were to increase our exports to at least $24 billion this year. However, this could not materialize for many reasons. Pakistan’s textile exports have started declining and will clock in at below $1 billion per month for the rest of the year. Dr Gohar has requested the Minister of Finance for direct intervention to correct the situation and resolve the issues.
Copyright Business Recorder, 2023
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