Textile relief: too little, too late

Textile exports managed to continue recovering in the 10MFY18 period with modest growth of 8 percent as compared to the same period last year. The segments that have contributed most to this growth in value terms have been knitwear and readymade garments, registering a decent increase of almost 15 percent and 12 percent respectively as compared to 10MFY17.

Readymade garments have also led volumetric growth, registering an increase of almost 13.5 percent. This year’s growth in textile exports has mostly been based upon a boost in the value added segments. However, the state of the overall sector remains mired with problems which continue to hamper growth.
The outgoing government has left it in some cases to the very last months of its tenure to address issues which have been red-flags for some time now. For instance, the rupee depreciation has only taken place in the last four months but going forward will be a boon for textile exports in particular.

Then there is the high cost of production which has been the most frequent complaint of textile stakeholders. Energy costs in particular have led to rapidly eroding cost competitiveness compared to regional peers such as Vietnam, Bangladesh and China. But the government has failed to address this issue as gas provision to majority of the textile industry which is based in Punjab has been R-LNG. This costs almost Rs1200/MMBTU and unless a weighted average formula is adopted by the next government, matters would become grimmer in the time to come.

Also, the government has remembered in its final days that high power tariffs for the textile sector are counter-productive and there are talks of bringing down the electricity tariff by Rs3. But one issue that has totally been ignored is the payment of pending sales tax refund and export rebates. This has resulted in a liquidity crunch for most exporters hampering them from taking additional orders or complete existing ones. According to an advert published in Business Recorder last week by the Pakistan Textile Exporters

Association (PTEA), “not even a single processed sales tax refund claim has been paid for 8 months while huge amount of sales tax RPOs is also pending payment.” Ironically, there have been talks about another textile incentive package by the government. What benefit would it translate into and whether it will even be followed by the next set-up is a big question mark. The only thing that can be ascertained for a certainty is that the PML-N government did things too little and too late for recovery of the textile sector.