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Wednesday, May 22, 2024

No economic revival without reviving exports: APTMA

The sustained decline in year-on-year monthly exports throughout the fiscal year is alarming. 50% of the existing production capacity is currently inactive or idle.

All Pakistan Textile Mills Association (APTMA) Patron-in-Chief Dr Gohar Ejaz has written to Prime Minister Shehbaz Sharif, bringint attention to the critical challenges faced by Pakistan’s textile sector, which contributes more than 60% of total exports.

The textile sector has significant potential to contribute to economic revival, through its dominant position in Pakistan’s export palette. To realize this potential, it is crucial to adopt and implement appropriate policies. The textile industry which has the installed capacity and potential, commits to support Pakistan’s Economic Revival through realizing the additional $10 billion installed export capacity.

Read more: APTMA calls for reinstating regionally competitive energy tariff

It is extremely disheartening to note that the country’s exports have fallen significantly. The total export of goods and services decreased from $ 39.595 billion in FY 22 to $ 35.21 billion in FY 23, a 11% drop. Market share of the international trade in Textiles declined to 1.76% from 2.2% in FY22 while our competitors have taken up the space vacated. This sustained decline in year-on-year monthly exports throughout the fiscal year is alarming. 50% of the existing production capacity is currently inactive or idle and as a consequence of non-continuation of RCET, another 25% is on the way to shutting down.

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“Sir, our exporters are no longer able to book or canvass for orders as they are unsure of cost and ability to deliver at competitive rates while neighbouring countries of India and Bangladesh have been making remarkable progress in their textile exports,” Dr Gohar Ejaz said in the letter.

India’s exports of goods and services for FY2022-23 surpassed its target, reaching $770 billion. They are now aiming to achieve at least $900 billion worth of exports for FY2023-24 and have set a long-term goal of $2 trillion by 2030. India’s Integrated and Sustainable Textile Policy FY2023-2028 has provided export-oriented manufacturers with significant incentives, such as government equity, low-interest financing, and electricity subsidies. The power tariff of 6 cents/kWh offered to Indian textile manufacturers in Maharashtra* due to subsidies is significantly lower than Pakistan’s rate of 16 cents/KWh. Additionally, Indian manufacturers enjoy subsidized credit at 5-7% interest, while Pakistani manufacturers face interest rates of over 22%.

Read more: APTMA urges govt. to continue RCET for export industry

Similarly, Bangladesh has set a target of $72 billion for exports in FY2023-24, an increase from $64 billion in the previous fiscal year. Their progressive policies, including tax reductions, access to low-interest financing, and the establishment of ancillary industries and infrastructure, have contributed to their success. Bangladesh offers power at 10 cents/kWh and provides export rebates of up to 8% on most items and interest rate of 6%. Bangladesh also operates zero rating on exports where by no issue of refunds arise.

In contrast, Pakistan’s Textiles and Apparel Policy 2020-25, which emphasized market-driven exchange rates, tariff rationalization, and provision of stable energy supplies at regional competitive rates, has faced significant implementation challenges. The withdrawal of the Regionally Competitive Energy Tariff (RECT) earlier this year has severely curtailed the competitiveness of our exporters. Additionally, high interest rates of 22%, the withdrawal of zero-rating facility (SRO 1125), non-functioning of the FASTER system, and delays in sales tax refunds have caused a severe liquidity crunch in the textile sector.

It is evident that immediate action is needed to revive Pakistan’s export sector and restore its confidence and competitiveness. It is requested to intervene through addressing the following issues:

  1. A Cost of Service based tariff for electricity be extended to export sector, as per actual NEPRA determination. This tariff should exclude cross subsidy, stranded costs and excess T&D losses, as these cannot be exported.
  2. A comprehensive review be undertaken of the Textiles and Apparel Policy 2020-25 to identify and address implementation challenges, ensuring policy continuity and foster a favourable investment climate.

For any economic revival, exports will necessarily play a key role, and the Pakistan’s textile industry holds the potential to make a substantial contribution (60% of the total exports) to this revival. By implementing appropriate policies as discussed above, we are confident that the textile industry will generate an additional $10 billion in exports, within the next financial year.

Read more: APTMA reveals steps for textile sector’s growth at first ever EconFest

Urgent and decisive policy measures are required to tackle the above-mentioned challenges; neglecting them is likely to result in a further decline in exports, of about $4 – $5 billion which the country can ill afford.