Textile industry sees challenge to avail benefits of EU package
February 10, 2012
Pakistan’s textile industry is optimistic to avail the package of European Union (EU) -- one of the biggest markets of the world—and it is willing to prove its efficiencies and varieties through exports of finished value added products.
Textile magnets all set to produce textile products for buyers under tough given conditions and raise it bars for the local economy in terms of productions, revenue earning and employment generation.
The trade package is expected to improve EU relations with Pakistan at a time when the country’s ties with the US are at their lowest ebb following the November 26 air attack on a Pakistani post near the Afghanistan border that killed 24 Pakistani soldiers.
Under the package, the country would be able to export some 75 items to the 27-nation bloc of the EU at zero percent or reduced duty rates for next two years. The total export value of the 75 tariff lines is estimated at US$1.03 billion and the average tariff on these products is around 8.86%, or less than a quarter of the $3.80 billion value of the country’s total global exports.
It is hoped that the package will get green signal to Pakistani textile producers who are seeking to start their exports of allowed products by next months
The package would help the country to keep its trade and current account deficits under the manageable proportions.” FurqanPunjani, an analyst at BMA Capital, said
As initial estimates, this package would increase Pakistan’s exports by approximately $150 million to $175 million per annum with major benefits expected to flow to low-end products as high end products would attract a ceiling.
The package is believed to provide a breather to falling textile exports of Pakistan, which were downed by five percent on yearly basis in December 2012, posing a positive earnings trigger for local textile sector of Pakistan, he added.
Though it is a biggest opportunity for textile industrialists to enhance their exports in EU but it seems an arduous task in the scenario of prevailing slow down in the exporting region.
Power and gas cuts have taken a heavy toll of the textile industry – which accounts for more than half of the country’s exports. These factors prevent Pakistani exporters of value-added textiles shipping orders on time and cause huge production losses to the entire textile chain, from spinning to finished goods, particularly in Punjab province.
Majyd Aziz, a textile tycoon and past president of Karachi Chamber of Commerce and Industry (KCCI), said that Pakistan will be struggling to avail the given opportunity in the situation where textile sector is facing difficult challenges and energy crisis.
He said that package was not beneficial as it is supposed to be as it mainstream products were not included in the package
The package includes 33 products of non-value added textiles, 23 products of textile garments, eight products of home textiles, four products of value added leather, three products of footwear, two products of raw leather, one product of ethanol and one product of vegetables.
Among them, 15 of these products, mainly high-end, will be subject to tariff rate quota in which Pakistan will be able to export these items with a cap of 20 percent over and above the last three years average exports of these items.
The main items of the textiles sector bedwear, ready-made garments and cotton fabrics, which holds 38 percent, 20 percent and 12 percent respective share in textile exports to the EU are not included in the concession package.
After the concession from the EU, the sub-textile sectors of dishcloth, duster, knitted tracksuits-making units, weaving industry, towel, gloves and socks-making units will benefit.
It will be a great success of Pakistan and its textile producers if they succeed to meet 50 percent of the trade under the given package, Aziz said and added EU countries have been facing economic slowdown therefore building high expectation about the high exports’ earning is not pragmatic approach.
The World Trade Organization (WTO) approved the much-delayed package covering 75 items at a meeting of its Council for Trade in Goods (CTG) in Geneva. The deal was scheduled to come into effect in January last year, but it was delayed after countries such as Argentina, Brazil, India, Bangladesh and Indonesia raised objections. The tariff changes will enter into force after formal approval by the WTO General Council in March.
The EU package for two years, extendable for third year, was offered last year. The country should start lobbying for the third year in order to explore the EU market further with a status of GPS, past KCCI president said.
The EU is Pakistan’s most important trading partner, receiving 27.4% of the country’s exports and providing 17% of its total imports. Pakistan’s exports to the EU are mainly composed of textiles and clothing products, which account for over 60%, followed by leather products, which account for 13%.