With elections around the corner and the state of the textile sector in doldrums, the Pakistan Tehreek-Insaf (PTI) recently came up with its textile policy for turning things around. On the whole, the policy document covers most of the issues presently hampering the growth of textile manufacturing and exports in the country.
Objectives include increasing value added exports, increasing cotton production, strengthening the role of small and medium enterprises (SMEs). PTI also wants to increase the ease of doing business while bringing about a reduction in the cost of doing business. If one compares these policy objectives with the ones in Textiles Policy 2014-19 formulated by the incumbent government, there is much overlap.
Value-addition has been emphasized in both whereas improving fibre mix in favour of man-made fibers as opposed to over-reliance on cotton has also been highlighted. Given that the two policies contain similar objectives, it is at least clear that the issues being faced by the textile sector are well documented. The tricky part is instead implementation.
High energy tariffs have been a particularly strong bone of contention for textile players in Pakistan. In its textile policy, PTI has called for electricity prices to be revised downward to USc7.5/KWh. Similarly, it also proposes for a uniform gas rate across the country at rate of $6.5/mmbtu.
However, bringing about both will require subsidies on the part of the newly elected government as well as bringing about political consensus for adoption of a weighted-average gas rate. Nepra recently allowed the re-imposition of surcharges by the federal government citing the latter’s commitment to the International Monetary Fund (IMF) as the primary reason.
If the next government does go to the IMF, of which there is a large probability of happening, then cutting down electricity and gas tariffs would be an uphill task given the fiscal constraints being faced by national exchequer. At the same time, bringing down input costs for the textile sector should rightfully be the primary objective of the next government enabling domestic firms to compete with regional competitors.
PTI’s textile policy also highlights that currency should be regulated by the State Bank of Pakistan (SBP) based on economic fundamentals rather than the Finance Ministry. This is a good step and is in stark contrast to the over-valued rupee policy adopted by the incumbent government; which textile exporters believe is also one of the major causes of reduction in textile exports over the past five years.
Both the Textile Policy 2014-19 and PTI’s textile policy also mention the need to strengthen allied industries which support value added textile manufacturers. Textile machinery manufacturing and chemical industry are particularly important here. Whereas the former is non-existent in Pakistan, the latter’s performance has been nothing to boast about either.
Finally, PTI’s policy is silent on the co-ordination mechanism of the textile ministry with other departments and ministries. A big reason for the unsuccessful implementation of earlier textile policies including the current one has been the lack of co-ordination between the textile ministry, FBR, the Ministry of Commerce and the Trade Development Authority of Pakistan (TDAP).
As mentioned earlier, the real test will be implementing these policies as most of the issues highlighted in the policy have been known for a while now. While the incumbent government also had a decent policy document, it was shoddy implementation of the same that failed to revive the textile sector.
Therefore, time alone will tell whether the PTI can turnaround the textile sector if given a chance in the coming general elections.