Textile policy sets $25 billion export target By Mubarak Zeb Khan

Thursday, 13 Aug, 2009 | 05:16 AM PST |
DAWN.COM; The Dawn Media Group

ISLAMABAD: A five-year textile policy unveiled on Wednesday offers about Rs87 billion cash subsidy to the textile and clothing sector to boost exports. It envisages plans to boost textile exports to $25 billion from the current $17.8 billion by 2014.

The policy, approved by a special cabinet meeting presided over by Prime Minister Yousuf Raza Gilani, was announced by Textile Minister Rana Farooq Saeed Khan.

The hefty package for the sector carries special duty-drawback rates, besides repayment of earlier research support, subsidy on long-term financing loan and development and other subsidies.

The policy focuses on export promotion measures, instead of steps to increase production and revive the ailing industry.

Without amending the rules of business, the government has issued two policies for the promotion of exports — the four-year trade policy announced in July focussed only on non-textile products.

The textile policy does not mention any specific target for sub-sectors.

There is also no mention of increasing production which has reached a saturation point and is producing low-quality products.

According to analysts, Pakistan’s textile and clothing sector sells its products cheaper than Bangladesh in the international market. ‘How come you expect foreign investment in a sector which produces low quality products?’ they said.

Under the new policy, the textile industry has been exempted from loadshedding. It will also enjoy priority in gas allocation like the fertiliser sector. An amount of Rs2.5 billion has been allocated to make export refinance available at five per cent.

An amount of Rs44 billion as special drawback rates will be provided to value-added textile exports for two years -- Rs17 billion in 2009-10 and Rs27 billion in 2010-11.

The proposed rates include one per cent of the FOB value of exports on processed fabric, two per cent of the FOB value on home textiles and three per cent of the FOB value on garments.

In addition, exporters achieving an increase of 15 per cent will get one per cent additional drawback. Another Rs5.4 billion has been earmarked for earlier refunds of research and development subsidy for the sector.

An amount of Rs4.5 billion has been allocated to continue monetisation of customs duty of PTA to offset additional cost for users for the current year. A decision about this duty will be taken by the National Tariff Commission during the year.

Another Rs5 billion has been allocated to convert long-term loans on the same pricing as applicable to the LTTF scheme together with a grace period of one year on both existing and converted facilities, without the facility of refinancing. Textile machinery will be zero rated.

In order to encourage women’s participation in the industry, the government will pick two regulatory costs to employers -- social security and EOBI. The cost of this measure is estimated at Rs2 billion for the current year.

The government plans to treat local sales of yarn and fabrics to large exporter as deemed exports. For this purpose, small producers will get one per cent drawback on levies and unadjusted taxes on sales to export houses which will cost Rs2 billion.

The government has set a target to increase the rate of conversion of cotton from $1,000 to $2,000 over the next five years. A textile investment support fund and technology upgradation fund (UTF) will be set up. An amount of Rs1.6 billion has been allocated for the UTF for the first year. However, this fund will go up to Rs17 billion by 2014.

Under UTF for capital intensive projects, the government will pick up 50 per cent of interest cost of new investment in plant and machinery with a maximum of five per cent. For small investments, government will contribute up to 20 per cent of capital cost as a grant.

An amount of Rs1 billion has been earmarked for infrastructure development for 2009-10 in public-private partnership. More industrial estates will be established, besides developing clusters.

An amount of Rs1 billion has allocated for skill development initiatives. A comprehensive training plan will be worked out.

A legal framework will be developed to specify standards and testing requirements, prescribe disclosure requirements and other matters relating to practices and methods relevant to the sector

The principle of cascading will be implemented while ensuring adequate protection to the local industry and removing anomalies. All regulatory bottlenecks will be removed. Market access will be increased through free trade agreements.

The government will provide necessary support for branding, grading, labelling and other activities that would add value to the textiles chain. An insurance scheme will be introduced to protect local exporters from unforeseen losses and help the industry in IT-related issues.

The policy will focus on certain sub-sector issues from fibre to garments, including ginning, spinning, weaving, knitting, processing, fashion designs, handloom and handicrafts, carpets, technical textiles. Specific schemes will be launched, mostly on public-private partnership basis, to upgrade and improve these sectors.

The persistent problem of contamination and trash content will be addressed through enforcement of the standards laid down in the Cotton Control Act and Cotton Standardisation Ordinance. Measures will be taken to develop other vegetable fibres (jute, flax etc.), wool and sericulture for supporting diversification within natural fibres.

A ginning institute will also be established in Multan to undertake research in improved ginning methods. Similar initiatives will be taken in other cotton growing areas.