Bangladesh hotspot for Pakistani textile sector

Source: Fibre2fashion News Desk - India
April 30, 2012 (Pakistan)
 
Could be there one particular reason or multiple reasons for the Pakistani textile sector investing in Bangladesh - a country which has emerged as the second biggest exporter of apparel to the US.

The number-1 reason is the rampant shortage of electricity and industrial gas, due to which units stay shut for long hours each day, unless they have captive generation, which again is expensive.

Secondly, Bangladesh-made clothing has been given duty-free access by 37 countries, which include the member states of the European Union, Australia and Canada.

There is also a distinct possibility that Bangladeshi apparel exports to the US could receive the same treatment from its biggest garment buyer in the near future, as garments cannot avail this facility right now.

However, the current Textile Minister – Mr Makhdoom Shahabuddin has been quoted as saying “Pakistani textile industry has not shifted to Bangladesh because of electricity and gas outages.

“But, because Bangladeshi goods, mainly apparels have been provided duty-free access by a number of developed countries, due to its status as a least developed country (LDC)”.

He went to add, “40 percent of the Pakistani textile industry and over 200,000 powerlooms have shifted to Bangladesh in the last five years, creating unemployment for hundreds of thousands of workers.

To add to the woes of the Pakistani industrial sector, the garment sector too has chosen Cambodia as an alternative destination for relocating their manufacturing units.

This was revealed to fibre2fashion recently by Mr Ijaz Khokhar who is Chief Coordinator of Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA), owing to continued electricity and gas supply problems in the country.

Incidentally, the Bangladeshi garment industry has proved to be crucial growth driver for the industrial sector in that country, thriving on the vast amount of cheap and unskilled labour, available.

Bangladesh has also achieved a GDP growth rate of 6.3 percent in 2011, when many countries experienced negative or sub-four percent growth rates, including the US and EU.

That apart, there are similarities in the culture of both countries as well, as both were once part of undivided India prior to 1947.

All these factors have mainly contributed, to Pakistani investments flowing in to Bangladesh. 

Reviving the dying garments industry

Pakistan Today
22 December 2011
Farakh Shahzad

The effects of unprecedented energy crisis have started appearing on the export horizons of Pakistan. The readymade garments export industry that was growing at a rapid pace until the recent years, is reported to be continuously nosediving since 2008-2009. The importance of the garment sector in the overall economic perspective is two fold. On the one hand the sector has the potential to be the engine of Pakistan textile export growth, while on the other the sector is the largest source of creating low cost employment in the country at all levels.

Dying export

Due to the obvious reasons, the garments sector has lost export orders worth $800 million so far in the current fiscal year and if the situation continued unabated it is feared that the exports would further decline in months to come. The last quarter of the year has always been a busy period for Pakistani manufacturers and exporters due to more than usual Christmas and New Year orders coming from EU and America. But this year the garments industry registered a decline of 15-20 per cent in terms of export orders due to uncertainty of shipments which are delayed due to electricity and gas load shedding.


Lateral impact

The garments industry that is a source of daily bread and butter to six million workers is unable to grant a job security to its manpower thus jeopardising the lives of more than one millions families depending on it. Pakistan is fast losing its share in the global garment market because of high cost of production. Garments exports from Pakistan’s traditional competitors in the region - Bangladesh, Sri Lanka, China and India - have picked up dramatically because the exporters of those countries are getting hidden subsidies from their respective governments. Export of readymade garments from Pakistan decreased form 42 million dozens worth $1.59 billion in 2007-08 to only 30 million dozens worth $1.23 billion in 2008-09, thus showing decline of 23 per cent in term of value.

Global factor

Apart from the domestic problems of Pakistan, there is yet another misfortune waiting for Pakistani exports in EU and American markets: the global crisis. It is significant to note that the key global markets are coping with the economic turmoil.

It is due to the compounded reasons that Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) is anticipating a sharp decline in apparel exports nearly to $3 billion this fiscal year by about 30 per cent for the big economic downturn both EU and US undergo at present.

The US, and Germany, UK, France and Spain in the EU bloc are all in the deep economic recessions these days, implicating the Pakistan’s conventional textile exports decline. Therefore, the country’s garments export is expected to remain $3 billion or just below as compared to $4.1 billion last year.

So far Pakistani exporters have ruled out disintegration of EU economic zone because it has consumed huge efforts of the member states and financial sacrifices by Germany and France at utmost level. They believed the EU economic zone crisis would have never hit Europe, if there had a comprehensive system of fiscal management in place.

In this context, the US economic crisis had also hit Pakistan’s textile exports this fiscal year as much as the EU had impacted them. Shelves at big chain stores in the US are vacant for financial decline, and buyers stopped placing orders with Pakistan’s exporters. Buyers of the EU are also reluctant to place their orders; rather they reduced their buying by half as uncertain economic crisis which at present looms large.


Inevitable option

Finding a solution to a global fiscal downturn is more difficult than overcoming our domestic energy crisis. Yet there is a light at the end of the dark economic tunnel. In this whole perspective, there is an only way out left for Pakistan to save its export industry: GSP Plus status. Generalized System of Preferences (GSP) is a preferential tariff system extended by developed countries (also known as preference giving countries or donor countries) to developing countries (also known as preference receiving countries or beneficiary countries). It involves reduced tariffs or duty free entry of eligible products exported by beneficiary countries to the markets of donor countries.


Deficits

It is ironical to note that Pakistan is an important economic and political partner of the EU but ranks at 52nd trading partners despite being 6th largest nation of the world. At present 49 countries are getting GSP Plus including several African countries but Pakistan is facing tough competition from Bangladesh and Cambodia. Their objections are based on the assumptions that in the event of granting the similar status to Pakistan, they will lose their market shares. It is to be remembered here that GSP-plus is not an international convention but a bilateral arrangement which could be also said to be a gift of the European Union to poor and needy nations.


Ratification

The analysts say that the European Union is currently working on a proposal for widening its scope by easing economic criterion, and it may help Pakistan upgrade itself from GSP to GSP-plus, but not before ratifying all the key international conventions. So far, Pakistan has been lagging behind and lot many key international conventions are not ratified or partially ratified. However, once they are ratified by Pakistan, it could qualify for GSP-plus by the year 2014.

Pakistan’s trade with EU mainly comprises textiles that are 55 per cent, followed by leather products. EU remains Pakistan’s largest trading partner receiving 18 per cent of Pakistan’s exports and providing nine per cent of its total imports. The overall volume of trade between the EU and Pakistan is worth $8,256 million with a trade surplus of $729 million in Pakistan’s favour.

European Union (EU) head of South Asia David Tirr during his recent visit to Pakistan said that Friends of Democratic Pakistan (FDP) during meeting in Brussels last year came out with a strategy message of fiscal, economic and tax reforms. Similarly, a lot more is needed to be done on the energy sector reforms, he added. The EU director of South Asia further said that Pakistan does need assistance but the question is how to go about it at a time when EU members are also faced with cash flow problem. As a preliminary homework to get the things in right direction, the dialogues are being held between Pakistan and EU on politics, security, proliferation, human rights, trade and investment and it is assumed that the procedure will be completed by the first half of next year. Pakistan was struck with devastating floods twice during 2010 and again in 2011, causing huge losses to agricultural and industrial sectors. Seeing the severity of the affects, the European Council presented a proposal to unilaterally suspend, for a limited period of time, duties on 75 items of important imports from Pakistan.


Unexpected stumbling

However, the proposed EU trade preferences for Pakistani textile products were opposed by India and it was considered the only stumbling point. Afterwards, the objection was withdrawn by India at the recent meeting of the Commerce Ministers of both countries. But unexpectedly, an objection from Bangladesh has effectively halted progress yet again. These trade benefits need to be cleared from the World Trade Organisation (WTO), where Bangladesh has raised objection, fearing Pakistan may capture its market. The fact of the matter is that hat Pakistan could never be a threat to the Bangladesh textile industry in the EU market. Bangladesh exports to the EU have reached $16 billion in the textile sector today from merely $2billion a few years back whereas Pakistan has a mere $1.5 billion in a market of $80 billion in total. Over the years, Bangladesh has developed strong inroads to the EU due to its Least Developed Country (LDC) status and therefore enjoys a favourable environment and market access.


Bottom line

Bangladesh and Pakistan have close history. We are SAARC and OIC members, and both countries are involved in various bilateral treaties and have supported each other on various occasions. Prime Minister and Foreign Minister of Pakistan have already taken up this matter at SAARC Conference in Maldives in their sideline meetings. It is hoped that Bangladesh will eventually withdraw their objection at WTO and the duty free exports of 75 items to EU would benefit Pakistan exports in the next 2-3 years.

Value-added textile industry threatens strike

thenews.com.pk

Demands ban on yarn export By our correspondent

Tuesday, January 05, 2010
KARACHI: The value added textile sector has announced it will close all factories in the country from Saturday (January 9) if a ban on yarn export is not slapped.

The decision came in a special meeting of the Pakistan Hosiery Manufacturers Association (PHMA) with all value added textile associations at the PHMA House on Monday.

Chairmen of at least 14 value added textile associations attended the meeting which included Pakistan Apparel Forum (PAF), Towel Manufacturers Association, Council of Loom Owners Association, Pakistan Textile Exporters Association, Pakistan Cloth Merchants’ Association, All Pakistan Sizing Industry Association, Pakistan Cotton Power Loom Association, All Pakistan Textile Processing Mills Association, Pakistan Knitwear and Sweater Exporters Association, Pakistan Hosiery Manufacturers Association (PHMA), Pakistan Denim Manufacturers and Exporters Association, All Pakistan Bed Sheet & Upholstery Manufacturers Association, Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) and Pakistan Cotton Fashion Apparels Manufacturers and Exporters Association (PCFA).

The meeting resolved that if a ban on export of cotton yarn up to 32 single counts was not imposed by the Cabinet Committee on Textile, which is scheduled to meet on January 8, all value added textile units would have no alternative but to resort to complete shutdown as a mark of protest.

The meeting expressed strong reservations about the government’s inactive policy, lack of concern and unrealistic and impracticable decision of the Cabinet Committee on Textile to abolish duty on the import of cotton yarn.

Production of cotton crop has declined globally, showing a shortfall of 4.8 million bales. World’s largest exporters of cotton yarn are China, India and Pakistan. Last year, the world was faced with recession while production of cotton was sufficient, the meeting noted. However this year, cotton production has declined.

Last year, local consumption of cotton yarn was 80 per cent of the production while 20 per cent was exported.

During financial year 2008-09, 480 million kgs of cotton yarn up to 32 single count was exported, meaning 40 million kgs per month, while this year export of cotton yarn is around 60 million kgs per month.

“This means almost 50 per cent of cotton yarn up to 32 single count has already been exported,” the meeting was told. “It is an irony that while cotton yarn is being sold locally to the value added textile sector at $2.35 per kg, it is exported at $1.92 per kg.”

The meeting rejected the decision of the cabinet committee to scrap duty on import of cotton yarn, calling it an eyewash as cotton yarn could be imported by value added textile exporters under the Duty and Tax Remission for Export (DTRE) Scheme.

They unanimously demanded a ban on export of cotton yarn up to 32 single count, otherwise, the industry would be shifted to Bangladesh, Jordan, Sri Lanka, Egypt and other countries.

They said the government should encourage export of cotton yarn above 32 single count as much as that could be exported. “On the one hand, the government is wooing foreign investors while doing everything possible to drive local investors away,” a meeting participant said.

Speaking to the stakeholders and media after the meeting, PAF Chairman M Jawed Bilwani said with the export of yarn the fertiliser subsidy provided by the government to the farmers was being passed on to Pakistani competitors — China and Bangladesh.

He said the spinners in a meeting with the Trade Development Authority of Pakistan (TDAP) had agreed on capping yarn export, but later they backed off, leaving the value added sector with no option but to go on strike.

Bilwani said with the closure of value added textile mills, all chains connected with that business would also be shut down.

PRGMEA Chairman Mohsin Ayub Mirza called the dispute between the spinners and the value added sector an economic massacre of 2.5 million workers who were employed in the industry.

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.

Garment-makers still waiting for remaining R&D grant

Garment-makers still waiting for remaining R&D grant

Tuesday, June 02, 2009
The International News
By our correspondent

LAHORE: The Pakistan Readymade Garments Manufacturers and Exporters Association has said the government must release the remaining 60 per cent research and development grant for 2007-08 held by the central bank and issue instructions to banks not to charge mark-up on loans in 2009.

PRGMEA Chairman Jamshaid Hanif stated this while briefing the Lahore Economic Journalists Association at the PRGMEA House here. He said the garment-making industry had come under severe stress not only due to the ‘flawed’ policies of the government but also because of its failure to honour commitments to release the unfairly held payments to exporters. Besides the R&D, he said, the government had not yet cleared sales tax dues of garment exporters for the past four years.

He said global recession had hit badly most of the labour-intensive sector of textiles and the government had remained aloof to the genuine problems of the industry. “This behaviour of the government is in sharp contrast to prompt actions taken by the Chinese, Indian and Bangladeshi governments which announced immediate incentives for their clothing sector when the global recession threatened their exports.”

He said the inaction on the part of the government had prevented Pakistan from taking advantage of its low labour cost, which was less than that in India, China, Indonesia and Sri Lanka. Only Bangladesh and Cambodia had lower wages in the garment industry than those in Pakistan.

He said escalation in oil prices, coupled with frequent load-shedding, had devastated the garment industry. Workers, who were earning a handsome amount based on their high productivity, were losing heart and were leaving the profession as they could not produce much in the face of 8 to 12 hours of load-shedding, he added.

“This is a dangerous trend as the industry is losing highly skilled workers due to power shortage.” He warned that soon the industry would face an acute shortage of skilled labour if power disruptions continued at the current levels.

In the deteriorating economic situation, he said, the industry expected the government to protect jobs by supporting the sectors under stress, adding priority in that regard should be given to the labour-intensive sectors like garments and knitwear.

“All is not lost and the government can still bolster garment industries by taking some prudent steps in line with the measures taken by competing economies.” He said the R&D grant, which was withdrawn in the last budget, should be resumed in the coming budget and the rate of export refinance should be brought down to three per cent from current seven per cent.

He said the industry had to pay 2.5 to 3 per cent service charges to banks in addition to the export refinance rate announced by the central bank. Service charges should be cut by 50 per cent as export refinance has almost 100 per cent payback record. Hanif said the garment industry was in a position to give much better performance if assured a level-playing field compared to its competitors.

Pakistan: International expo on textile & garment machinery from April 5

International expo on textile & garment machinery from April 5 January 12, 2009 (Pakistan) The International Textile Asia 2009 Exhibition, one of the most promising and enduring Event to be held for the 5th successive year at the Karachi Expo Centre from 05 - 08 April 2009 is the official event of the Federal Ministry of Textile Industry. The event is being organized at the most opportune time when the government is looking forward to modernize and upgrade the textile sector of the country for better quality products and enhanced productivity. The exhibition aims to focus on the immense buying selling potential of textile & garment machinery, accessories, raw material supplies, chemicals and allied services under one roof. Cotton is the cash crop of Pakistan. The quality of cotton and cotton related products of Pakistan are unmatched in the international markets. The ever-growing textile industry of the country has shown consistent expansion and stability over the last many years. The exports of textile and textile products of Pakistan have shown a significant increase in the recent years. The government has offered various incentives for the industry’s up gradation and modernization. Pakistan is at the center of a rapidly developing textile & garments manufacturing region. Apart from fulfilling its local requirements, Pakistan has emerged as the textile hub of the region. There exists a strong political will to modernize the textile sector and there is an increasing demand for compliance with ISO and other international quality certifications and standards. As the textile industry of Pakistan being is in the midst of industrial up gradation and the businessmen are seeking newer solutions to bring more efficiency in their production systems. Therefore, the pioneer of grasping this opportunity will be the most successful business organization in Pakistan as none of the local industry can cater this tall order. National organizations will enjoy the benefit of globalization and will witness more joint ventures and collaborations between local and international brands.

Ministry of Textiles

Govt considering incentives for textile industry

Govt considering incentives for textile industry: Farooq

The Daily Time, Thursday, January 1, 2009

* Textile minister says Bt cotton gives Pakistan’s seeds 40% higher yield per acre

ISLAMABAD: Federal Minister on Textile Industry Rana M Farooq Saeed Khan on Wednesday said that the government was preparing very lucrative working paper to consider some incentive and relief for the textile industry particularly export oriented value added units.

He said this while addressing a meeting at the residence of Rana Muhammad Mushtaq Khan Member CEC PHMA and Vice Chairman, Garment City Faisalabad, along with representatives of FCCI, PHMA, PTEA and other textile value added sector members.

Commenting over the severe gas outage and power load shedding faced by the textile industry that he said that he had advised MD, SNGPL, and WAPDA authority to arrange a meeting under his chair with representatives of the FCCI, PHMA and PTEA to work out new strategy for the continuous supply of gas and power to the textile industry especially in peek winter season.

For improvement of cotton production, the minister said that by cultivation of Bt cotton, Pakistan’s seeds are given 40 percent higher yield per acre. India had successfully acquired their technology and had improved their cotton production significantly. The participants of the meeting were of the view that in other countries of the world the exporters were given preferential treatment and provided raw material, inputs and utilities at concession rates enabling them to compete successfully in international markets.

They were also of the view that neighbouring countries like India and China were providing visible and invisible incentives to exporters. So the government of Pakistan should continue 6 percent Research and Development (R&D) supports for the garment industry, which was not a part of any subsidy.

They also said that the gas and power shutdown in Faisalabad have severely affected the textile industry and export orders were going to neighbouring countries. staff report