ISLAMABAD: The Pakistan Textile Council (PTC), the apex forum representing the country’s leading textile and apparel exporters, has warned that structurally high costs across energy, finance, taxation, logistics and raw materials have rendered Pakistan’s textile and apparel sector uncompetitive compared to regional peers, severely constraining export growth, employment generation and foreign exchange earnings.
In a statement, PTC said that while competing countries have aligned policies to support export-led growth, Pakistan continues to impose significantly higher cost burdens on its export industries.
PTC noted that Pakistan’s exporters face substantially higher electricity tariffs at around 13.2 cents per kWh, compared to Bangladesh (10.2 cents), Vietnam (7.0 cents), China (5.3 cents) and India (9.5 cents industrial average), in addition to unreliable power supply.
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While regional competitors offer stable, export-focused energy pricing, Pakistan’s exporters are forced to absorb inefficiencies within the energy sector, including high transmission and distribution losses, unaccounted-for gas, weak recoveries and cross-subsidies. These inefficiencies have fuelled persistent circular debt, with costs ultimately passed on to productive export sectors, undermining profitability. Access to affordable finance remains a major constraint, PTC said, noting that Pakistan’s policy rate stands at 11 percent, compared to 10 percent in Bangladesh, 4.5 percent in Vietnam and 3 percent in China, making borrowing significantly more expensive for exporters.
The discontinuation of the State Bank of Pakistan’s long-term financing facilities, coupled with transition-related delays in export financing mechanisms and limited working capital access, has restricted investment in technology upgradation and capacity expansion, particularly for micro, small and medium enterprises (MSMEs).
PTC further pointed out that Pakistan’s requirement to realise export proceeds within 120 days places exporters at a disadvantage compared to competitor countries that operate on 180-day letter of credit tenors. This regulatory constraint weakens exporters’ negotiating position with international buyers and results in diversion of orders to competing sourcing destinations.
The Council expressed serious concern over Pakistan’s high and cascading tax burden. Pakistan’s standard corporate tax rate stands at 29 percent, in addition to a super tax ranging from 1 percent to 10 percent, compared with China’s 25 percent rate (5 percent for SMEs and 15 percent for high-tech enterprises) and Vietnam’s 20 percent standard rate, with preferential rates of 10 percent for high-tech and garment industries.
Bangladesh, it added, offers some of the most competitive tax incentives, including zero corporate tax for SMEs, 10–12 percent for LEED-certified and garment exporters, and concessional rates for value-added textile segments.
In contrast, Pakistani exporters also face 18 percent sales tax, a 1 percent minimum turnover tax, advance income tax on export proceeds, and multiple federal and provincial levies, while persistent refund delays further strain liquidity. PTC warned that domestic cotton production—once Pakistan’s primary comparative advantage—has continued to decline, forcing the industry to rely increasingly on imports. Rising input costs, climate-induced yield losses and quality constraints have heightened vulnerability to global price volatility.
Logistics inefficiencies further erode competitiveness, PTC said, noting that Pakistan ranked 122 out of 160 countries in the World Bank’s Logistics Performance Index (2018) and was absent from the 2023 index, while regional competitors continue to improve their rankings.
Pakistan transports around 94 percent of its freight by road, compared with India’s modal mix of approximately 66 percent road and 31 percent rail, resulting in higher costs and delays. Limited rail connectivity, outdated logistics infrastructure and reliance on transshipment hubs due to the absence of mother vessels at Pakistani ports further add to lead times and shipping costs.
PTC observed that since 2004, regional competitors have made significantly higher investments in imported textile and apparel machinery, enabling scale, efficiency and deeper integration into global supply chains.
Pakistan, however, has lagged due to policy uncertainty, macroeconomic instability, energy constraints and regulatory complexity, resulting in lower productivity. The country’s Human Development Index ranking of 165 out of 193 countries also reflects challenges in skills development, labour productivity and innovation capacity.
PTC urged the government to urgently realign policies with regional benchmarks to restore export competitiveness, including reducing industrial energy tariffs to levels comparable with Bangladesh, Vietnam and China, lowering interest rates to narrow the gap with competitors, rationalising taxation—particularly turnover-based and cascading taxes—and ensuring timely refunds.
The Council also called for aligning the exchange rate with market fundamentals, reviving domestic cotton production, modernising logistics and boosting investment in productivity and skills. PTC emphasised that export-led growth remains Pakistan’s most viable path to economic stability, and restoring the competitiveness of the textile and apparel sector is central to achieving sustainable growth, employment generation and foreign exchange resilience.
Copyright Business Recorder, 2025