ISLAMABAD: All Pakistan Textile Mills Association (APTMA) has shared a policy road-map with newly-appointed Commerce Minister Jam Kamal. It envisages taking textile sector exports to $50 billion by 2029 subject to energy tariffs at par with regional competitors.
In a letter to Jam Kamal, APTMA stated that given that the economy and external sector are highly vulnerable with Pakistan’s gross external financing requirements projected at over $25 billion annually for the next 5 years, export-led growth represents the only sustainable path forward.
In line with this, APTMA shared its Policy Roadmap for the new elected government for achieving $50 billion in textile and apparel exports by 2029.
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This blueprint lays down a strategic foundation to harness the full potential of Pakistan’s textile sector, contributing substantially to economic revitalization and job creation.
Given that the sector’s exports are currently stagnant around $1.4 billion a month - around $600 million below the installed capacity of approx. $2 billion/month- implementation of this roadmap with key policy corrections can bring in an additional $8-9 billion in annual export earnings over the short-term, while also building capacity for an additional $25 billion per annum over the next 5 years.
The policy roadmap is centered around 3 key pillars, ie, diversification, expansion, and competition. First, the government must incentivize product diversification to increase the range and variety of exportable products. Crucially, this requires rationalizing import and other duties on MMF inputs like purified terephthalic acid and polyester staple fiber that have created opportunities for rent-seeking in the domestic market and resulted in a strong anti-export bias. It must also create structures to incentivize investment in MMF manufacturing capacity as well as a shift towards higher value- added original brand and design manufacturing.
Second, investment needs to be made in upgradation and expansion of manufacturing capacity. APTMA’s ambitious initiative to establish 1000 new garment plants is a bold step in this direction. This project is not merely about scaling up production it represents a strategic reorientation of our industry towards higher value-added manufacturing.
The sector currently has an annual export capacity of around $25 billion but by boosting it to over $50 billion per year, APTMA aims to diversify export portfolio and enhance competitiveness on the global stage. This expansion is a testament to textile sector’s commitment to growth, innovation, and resilience in the face of global economic shifts, and an investment in the very fabric of our nation-our workforce, our economic stability, and our future. By creating up to 1.5 million jobs, both directly and indirectly, Asif Inam, Chairman APTMA and Executive Director APTMA, Shahid Sattar, in their joint letter to Commerce Minister wrote “we are not just bolstering the industry but also nurturing a future that promises prosperity and opportunity for the people of Pakistan.”
APTMA argued that establishment of specialized industrial and export processing zones with developed factory sites and plug and play facilities is of utmost importance to facilitate this investment and create an ecosystem conducive to growth and innovation. These zones will significantly lower entry barriers for new ventures and catalyze the expansion of exports by attracting domestic and foreign investment in export-oriented activities. Finally, the government must foster a business environment that is conducive to competition, growth and ease of doing business. This encompasses policy interventions related to energy, taxation, investment and financing, export marketing, supply chain traceability, environmental and social sustainability and compliance and reviving domestic cotton production.
APTMA has maintained that the issue of energy is critical for the sector’s competiveness, adding that power tariffs for industrial consumers in Pakistan currently stand at around 17.6 cents/kWh, while the most recent hike in gas prices and abolition of the preferential gas tariff category for export-oriented industries has increased gas prices by 223 per cent since January 2023. This is over twice the power tariff faced by competing firms in regional economies like Bangladesh, India and Vietnam and such a high input differential results in Pakistan’s exports getting priced out of the international market.
APTMA advocated the following solutions to the confronting issues: (i) reduce power tariff for industrial consumers to a regionally competitive level of cents 9/kWh by removing the cross subsidy to nonproductive sectors of the economy that is an inefficient form of taxation and cannot be exported; (ii) operationalise the CTBCM to allow B2B power contracts with a use of system/wheeling charge of 1-1.5 cents/kWh, excluding cross subsidies and stranded costs. This will allow industry to procure green energy at competitive end-used price through captive generation from geothermal plants in depleted oil fields and hybrid solar/wind plants or from other green power producers; (iii) increase the cap on solar net-metering for industrial consumers from 1 MW up 5 MW. This will further facilitate the transition towards net zero by adding over 3,000 MW of clean energy at the point of usage with no investment or guarantee from the government; (iv) ensure adequate gas supply to cogeneration units and treat them as industrial consumer given that their efficiency is over 60 per cent and gas supply is used for steam and hot water related processes in addition to power generation; and (v) reestablish the separate gas tariff category for export-oriented consumers and supply them with a gas/RLNG blend with a higher proportion of indigenous gas that is currently 25:75 but has traditionally been 50:50 for March through October.
Copyright Business Recorder, 2024