Value-added textile: group of investors is set to relocate units to Cambodia

A group of investors of Pakistan's value-added textile sector is set to relocate manufacturing units to Cambodia because of energy crisis, besides the government's indifference towards the problems of trade and businesses, exporters said on Thursday.
The group is also in touch with Cambodia's concerned ministry to reach an agreement on setting up the first manufacturing unit, Chief Co-ordinator of Pakistan Readymade Garments Manufacturers and Exporters Association (Prgmea), Ijaz Khokhar told Business Recorder.
"Initially a multi-product manufacturing unit will be set up in Cambodia at a cost of Rs 100 million on a test basis to judge the business environment of the country," he said, adding that the Pakistani investors would visit Cambodia next month to finalise the deal.
He said a group of Prgmea is going to establish a multi-product manufacturing house to make denim, marshal arts uniforms, work wears, hospital garments and sports wears. He said the foreign buyers were now insisting on the Pakistan garments exporters to relocate their units to other countries for energy crisis and its tariffs.
"This year we (exporters) were unable to export the consignments to the EU and US markets on time because of gas shortage in winter and electricity cuts in summers," he said, adding that the soaring energy tariffs had also made future deals with international customers uncertain for local manufacturers.
He said the relocation of units to Cambodia would also help foreign buyers attain maximum financial benefits as the country had advantage of duty-free nation in the US and EU. He said the local manufacturers were now planning to shift their foreign investment focus towards Cambodia from existing Bangladesh which had saturated with no further better economic opportunities.
To a question, he said, the cluster of Prgmea investors wanted to find the unit at a place where dying industry would already exist for the garments industry needed it very much. "A study is being conducted there to know environment," he said.
Showing deep concerns, Ijaz Khokhar said the country had witnessed 66 percent decline in the foreign direct investment, which indicated a dire state of Pakistan's economy. "Even no Pakistani expatriate is willing to invest capital in Pakistan, let alone the foreigners," he said. He said the power and gas shortage badly affected the manufacturing businesses which eventually resulted in a big downsizing as the country's garments sector retrenched 70 percent of its workforce in recent years. "No manufacturing unit closed but employees are being retrenched," he pointed out.
Chief Co-ordinator, Prgmea said the group would have to spend Rs 100 million for a set-up, which would be run on a test basis between six months and one year to know the results in Cambodia. "On an individual basis such a big investment was not possible for anyone in the ailing industry," he said. However, he said, if Pakistan received a GSP plus status for its goods into the EU market then the country's declining textile industry had the hopes to resurrect and provide an ample space for investors. He said that at present there had been no sign whether the country would see such a big economic development.
"The Federal Textile and Commerce Ministers have done nothing significant for the country's economy, which resulted in textile sector's export decline," he said, adding that Commerce Minister was just wasting time on issues regarding trade with India while the country was feared to lose its existing businesses with EU and US. He said the government's excessive focus to the India trade would have negative impact on the country's existing trade as export of value-added textile sector continued to plunge while overall exports may not reach the set fiscal target.
Ijaz Khokhar said the decline in the exports would also have negative impact on the tax and revenue collections of the government, which would create fiscal problems for the country. He said the local investors were even not ready to obtain space in Lahore's garment's city which the government had established with billion of rupees investments because of the uncertain power and gas supplies and their ever soaring prices, Chief Co-ordinator, Prgmea said.
The country's garments export declined by 2 percent or 24.061 million dollars during July-March period of the current fiscal year to $1.203 billion as compared to the commodity's export of $1.228 billion during the same period of the last fiscal year, according to Pakistan Bureau of Statistics.
During March this fiscal year, Pakistan export of readymade garment plunged by 8.11 percent or 11.056 million dollars to $125.329 million as compared to the commodity's export of $136.385 million during February 2012, the statistics say. On a yearly basis, the country's readymade garments export went down to 125.329 million dollars in March this fiscal year as compared to the commodity's export of 165.094 million of the same period during the last fiscal year, depicting a slump of 24.9 percent or 39.765 million dollars, the statistics suggests.