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Monday, June 3, 2024

Textile industry is closing due to supply chain disruptions, warns APTMA

At present exporters are turning away orders as they are not sure of the availability of raw materials to fulfill the orders. The damage to Pakistan would not only be lower exports this year but also the permanent shifts of the orders to other countries which would be very difficult to reverse.

All Pakistan Textile Mills Association (APTMA) Patron-In-Chief Dr. Gohar Ejaz wrote a letter to Minister of Finance Mr. Ishaq Dar revealing that Pakistan’s economy largely depends on textile exports for foreign currency and employment. The dicey international economic situation and the floods have pushed Pakistan’s economy to the brink.

The textile sector last year exported goods worth $19.3 Billion and has further expanded capacity through an investment of $5 Billion to increase exports to $25 Billion. The expectation and goal were to increase our exports to at least $24 Billion this year. However, this could not materialize for many reasons (Annex A).

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Pakistan’s textile exports have started declining and as stated in our earlier communications will clock in at below $1 Billion per month for the rest of the year. The official data for textile exports are:

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The raw material of any industry is the fundamental building block without which the process of manufacturing and subsequently exporting cannot occur. Cost and ease of doing business are no longer relevant in the absence or shortage of raw materials.

The textile industry conundrum

The textile sector’s raw material in the case of Pakistan is cotton. Unfortunately, the cotton crop for this year has clocked in at under 5 million bales (Annex B).

The textile sector consumed 15 million Bales in the last year which indicates that approximately 10 million Bales would require to be imported in order to retain exports at the same level as last year of $19.3 Billion.

Unfortunately, the import of cotton has been severely restricted. Banks are not opening L/Cs or retiring cotton imports through CAD. The industry is running out of cotton stocks and as a consequence, our mills have either shut down or will shut down in the very near future if decisive and urgent action is not taken.

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At present banks are only willing to entertain very small and limited L/Cs for companies that are direct exporters. This excludes 80% of the basic industry and ignores the fragmented structure of the industry. It is absolutely essential that the raw material (cotton) be available to the entire sector so that the sector which exports 80% of its product does not come to a standstill. The impact on employment of the shutdowns is already significant and would be catastrophic if the situation is not brought under control.

At present exporters are turning away orders as they are not sure of the availability of raw materials to fulfil the orders. The damage to Pakistan would not only be lower exports this year but also the permanent shifts of the orders to other countries which would be very difficult to reverse.

Every dollar spent on the import of cotton yields $3 in exports. The estimated cost of 10 million Bales of cotton at today’s price is $4 Billion which would translate to minimum exports of $12 Billion, a gain of $8 Billion. Sir, import compression of exporting sectors which adds value and re-exports at a much higher value is counterproductive.

We seek an urgent appointment to apprise you of the critical severity of the situation and seek your direct intervention to correct the situation.