The country is likely to miss export orders for a lucrative season of Christmas and New Year, as uncertain textile exporters have stopped finalising fresh foreign orders owing to rising cost of raw material and “unclear government’s stance whether or not it will further raise utility tariffs in the near future.”
The country’s textile exports, having over 80 percent share in overall exports, are already dwindling as during the last fiscal country not only has missed its textile export target but also exports during 2008 is less than the fiscal year 2007.
During the last fiscal year country’s textile exports declined by 2.10 per cent to 10.561 billion dollar, as compared to 10.787 billion dollar during the fiscal year 2007.
The textile sector performed poorly even in June over last month with statistics showing that its exports declined from 936 million dollar in May 2008 to 919 million dollar in June 2008 on the back of poor performance by almost all the sectors, except few.
Exporters primarily focus on this season, as foreign buyers normally demand products in huge quantity from Pakistan, India and Bangladesh, with larger sales opportunities during Christmas and New Year events in the West.
“Manufacturers and exporters cannot afford to lose this opportunity, which comes once in a year. Therefore, industrialists are trying to convince the government for either a complete withdrawal or a drastic cut in the fresh increase in gas tariffs, for captive power plants in particular.”
Exporters said that the government’s move for making gas costlier by 31 per cent in general and 68 per cent only for captive power plants is very high and unbearable.
While, increase in the prices of cotton, grey fabrics, yarn, packing material, chemicals and other raw materials also has affected the cost of production.
The recent hike in different inputs has raised the industrial cost by 30-40 per cent, while the government has not yet made an announcement about resumption of research and development (R&D) subsidy to industries. The R&D subsidy period has expired on June 30, 2008.
The abolition of R&D subsidy, increase in gas tariff, rising input costs have compelled the manufacturers-cum-exporters to avoid booking new export orders until the situation becomes clearer, they added.
“In the present circumstances when input cost comprising gas tariff, electricity tariff and raw material, is difficult for the exporters and manufacturers to be assessed for they being unsteady, how can we book new export orders.”
However, the exporters and industrialists believed that government was responsible for the whole situation by not clarifying whether it would cut gas tariffs for captive power generation or not.
“We are receiving dozens of export order inquiries for the Christmas and New Year season, however at present we are not able to quote prices for our products to international buyers because of the fluctuating gas and dollar rates,” a leading industrialist said.
The government should provide a level playing field to exporters by providing incentives, besides provision of utilities at reasonable rates.
Due to the delay in finalising of export orders, not only exporters fear losing million dollar export orders in the wake of the recent government’s move but also the country’s exports will go down.
Fears of not only losing country’s share in the world textile markets but the regional competitors including India and Bangladesh will overwhelm these markets giving little space to Pakistani products in future.
Foreign export orders are likely to be diverted to India and Bangladesh and in future it may become a constant problem for the local exporters, they added.
They urged the government to make a long-term policy for gas and power tariffs, to enable the exporters to make their deals without any hesitation.
Giving example, exporters said that if an exporter finalises a deal at 1.25 dollar per piece of a shirt for delivery in November but any increase in power or gas tariffs or petroleum prices in the next two months, would make it impossible for them to fulfil orders.
The country’s textile export already present a poor picture especially during the last fiscal year mainly due to the rising cost of doing business.
The official statistics say textile export declined by 2.50 per cent to 9.951 billion dollar, as against the export of 9.837 billion dollar in the same period of fiscal year 2007.
“We have already committed prices to our buyers for shipments to be delivered till December 2008 and will be facing severe financial problems with increase in the cost of production,” exporters said.
The Pakistan Hosiery Manufacturers Association (PHMA) has also criticised the current move of the government and demanded support and relief for harassed and over burdened Value Added Textile Exporters.
“Value Added Textile Exporters are waiting in great suspense and there is utter confusion in their minds whether to book orders and make commitments or give, up the precious and sorely needed orders in the absence of any announcement by the Government,” said M Jawed Bilwani, chairman PHMA.
He said that waiting desperately in vain for a ray of hope and urgent and positive announcement by the government, many of them, in sheer despair are running away abroad.
Presently, the cost of doing business has gone up by 15 per cent within two months and even if the government decides to continue the 6 per cent R&D support for apparel sector this will not be feasible for them in the current deteriorating situation with skyrocketing increase in cost of doing business, to accept orders, he added.
In such, a scenario today, he explained that if the government even offers 93 per cent support this would not be enough despite the 5.5 per cent on depreciation of the rupee against the dollar.
If the government truly desires to save the export of the textile sector, prevent large scale closures and mass unemployment it is imperative that the government, announce such a relief package for the textile sector that enables exporters minimum 20 per cent margin on the end product, he said.
This step would help textile sector survive in face of stiff competition from neighbouring countries in the global market, he said
He also demanded actual zero-rating for exports as well as actual EPZ states as a real level playing field in comparison to competing countries.
He stressed that the government immediately withdraw the unprecedented and exorbitant hike in gas prices and brings it back to the June 30, 2008 position, otherwise the entire sector would be ruined.
It may be mentioned here that the country’s textile exports performance remained dismal during 2007-08 with negative growth of 2.10 per cent over the same period last year.
Monthly analysis of the data showed that only tents, canvas and tarpaulin, cotton yarn, cotton corded or combed and others showed positive growth in textile in June, while all the remaining sectors recorded negative growth during the period under review.
The export of raw cotton decreased by 31.27 per cent, cotton cloth by 3.23 per cent, yarn other than cotton yarn 13.18 per cent, towels by 5.44 per cent, ready made garments by 4.39 per cent, art silk and synthetic textile 0.77 per cent, made up articles and excellent towels by 4.14 per cent and other textile material by 9.33 per cent.