RIZWAN BHATTI
KARACHI: The State Bank of Pakistan (SBP) has urged the textile industry to invest more in upgrading physical and human capital to produce high-quality products at competitive prices.
The SBP in its recent report said that decline in textile exports is mainly explained by lower quantum exports of low value-added products like cotton and fabric, as global cotton prices rebounded in the period under review.
Exports of some high value-added items, such as bedwear and readymade garments, increased in Jul-Mar FY17; encouragingly, their better performance was largely a result of higher quantum, mainly due to a recovery in demand from the key EU market.
According to SBP, nonetheless, in terms of price factor, the gains in export values are still not appearing. In fact, Pakistan’s high value-added exports to advanced economies face tough competition from regional competitors. Therefore, to make products more attractive, exporters slash their prices and in this way, exporters tend to maintain their product share in the international market.
In the EU market as well, Pakistani exporters have received lower unit prices for clothing items (both knitted and woven clothes), as compared to their regional competitors.
Textile sector performance is despite ample policy support available to the textile industry, which includes the Drawback of Local Tax and Levies (DLTL), tax rebates, and export finance schemes, etc.
In fact, the textile industry has been making good use of record-low interest rates and other policy incentives this year: imports of textile machinery and fixed investment borrowing by the sector have both recorded healthy increases during this fiscal year.
More recently, the federal government has announced an export incentive package of Rs 180 billion to support the five key exporting industries. However, these measures have yet to translate into a broad-based improvement in textile exports, the SBP said.
“The real benefits of this financial support will be realized when the exporters make the required efforts to increase their efficiency, improve product quality, explore new markets and keep track of changing customer preferences in their key markets. Also, they have to invest more in upgrading physical and human capital so that they could offer high-quality products at competitive prices,” the SBP concluded.
