Pakistani textile makers seek help as exports fall
Source: CCPIT TEX Date: 2006-11-28
It is reported by Reuters that Pakistan's textile industry, struggling with stiff competition, fears a further erosion of its global market share unless the government provides subsidies to help offset production costs.
Textiles are the mainstay of Pakistan's economy, accounting for about 60 percent of the country's total exports in 2005/06, and contributing 8.5 percent to its gross domestic product (GDP).
The industry employed 38 percent of the total manufacturing work force.
But textile exports fell 9.11 percent year-on-year to $3.23 billion in the first four months of the 2006/07 fiscal (July-June), and analysts say the trend could hurt overall growth.
The sector has been struggling to compete with Chinese, Indian and Bangladeshi products that are eating into its market share, primarily because of lower prices.
"Our production costs have become very high compared with others due to high energy costs, rising interest rates as well as an increase in wages," said Mian Mohammad Latif, chairman of Chenab Ltd.
"Governments around the globe support their export industries by providing relief. If we don't support our industry, we will be left uncompetitive," said Latif.
Chenab is one of Pakistan's main textile producers, with annual exports worth more than $100 million. It employs about 15,000 people in the southern city of Faisalabad, Pakistan's main textile city.
Pakistan's export industries, of which textiles are the main one, have suffered because of the international war on terrorism. Many foreign buyers have shunned the country because of fears of militant violence.
Nevertheless, most analysts are hopeful the Pakistani textile industry, which has seen investment of more than $6 billion in recent years on modernisation, can flourish in the quota-free regime in place since 2005.
PROBLEMS, REMEDIES
Rising interest rates and high energy costs are a heavy burden but Anwar Sajjad, director of the Arshad Group, another Pakistani textile exporter, said the industry was not seeking subsidies.
"What we want is relief on energy prices, as that's about 20 percent of costs, as well as soft interest rates," he said.
"We took bank loans to import machinery and invest at about 4 percent, and that now stands at over 12 percent, making it a very high cost."
A flood of Chinese fabrics into the domestic market is alarming some Pakistani producers. But bigger manufacturers say the Chinese imports are mainly silk and polyester, not cotton, so the threat is not so serious.
The government says it is concerned.
"We are aware of the issues facing the industry and have already formed a committee to look into the problems and suggest remedies," said Textile Industries Minister Mushtaq Cheema.
Cheema, a textile mill owner, said he had requested a meeting with the prime minister to discuss the findings.
"We're hopeful the prime minister will look favourably at the suggestions and some relief measures will be announced."
Time was of the essence, said Chenab's Latif.
"We're already very late and don't have time. Any steps taken today are positive but if we delay further they'll be no use," he said.
"The base of Pakistan's economy is textiles, and if that is failing, all government policies, fiscal or monetary, are bound to fail as well."
