High tariffs hurting textile exports

All Pakistan Textile Mills Association (APTMA) is a leading national trade organisation comprising various components of textile manufacturing that includes spinning, weaving, and composite mills. The textile sector is obviously the major source of foreign exchange through its exports. APTMA has emerged as the largest association of the country as it represents 396 textile mills out of which 315 are spinning, 44 weaving and 37 composite units.

About APTMA

The association based in Karachi, having Regional offices in Lahore, Faisalabad and Peshawar, is playing a significant role in textile industry which is the mainstay of our national economy. Textile accounts for around 9 per cent of GDP, over 50 per cent of merchandise exports and around 38 per cent of the manufacturing sector workforce. Approximately 3.5 million direct labour force is employed by the textile industry. Indirect employment and unorganised sector employment is not accounted for. The textile sector employs nearly 40 per cent of Pakistan’s industrial labour force and accounts for 60 per cent of its exports. The textile sector has repeatedly offered the governments that the exports can be doubled to $20 billion if the authorities restore energy to the industry.
APTMA, working under the administrative control of the Chairman and Central Executive Committee deals with the affairs related with textile trade and industry affecting the members relating to Federal Government. The matters pertaining to Provincial Governments are dealt by the Regional Offices under the direction of Regional Chairmen. The Chairman and Vice-Chairmen from Regional Offices are elected by the members annually and are charged with implementing the policies and programme directives decided by the Central Executive Committees. The Chief Operating Officer and Secretaries are responsible for carrying out day-to-day affairs and programmes of the Association. The Central Executive Committee continuously reviews the policies and programs of the Association and establishes priorities accordingly.

Problems of the
Textile sector

Profit, has launched a fact-finding campaign to have first hand knowledge of the potentials and problems of the textile sector. The campaign includes interviews of all the stake holders involved in the various components of textile industry including cotton yarn, spinning, sizing, weaving, processing (dying and printing), stitching, garments, textile export, hosiery and power looms. During an exclusive interview, APTMA’s Chairman Faisalabad Region, Naveed Gulzar who is also Director Crescent Sugar Mills Faisalabad has expressed his viewpoint on the vital issues of textile industry.
“Bangladesh’s textile exports have catapulted from $2 billion to $22 billion over a period of few years due to basic facilities such as electricity, cheap labour and government trade friendly policies”, says Mr. Naveed Gulzar. “It is to be remembered that Bangladesh is a non-cotton producing country that has emerged as a major textile exporter of Asia purely due to its infrastructure advancement”, he said. Naveed Gulzar who has recently returned from his visit to Dhaka says that American and EU importers are flocking to Bangladesh for their textile requirements and queues of foreigners can be seen at airport and luxury hotels. “There was a time when Bangladeshi Taka was lower in value than Pakistan Rupee but the situation has been reversed due to continuous devaluation of our currency in the International markets”, he observed. APTMA Regional Chairman is of the view that Bangladesh’s business environments have tempted a number of reputed textile manufacturing groups to set up their units in Bangladesh. The sources say that three major companies of Faisalabad have opened their production units in Bangladesh and a number of more companies are preparing to follow them.
During his lengthy discussion on textile crisis, Naveed Gulzar elaborated in minute details the various problems faced by the textile manufacturers. These include energy crisis, law and order situation, high mark up rates, low market accessibility due to terrorism and high tariff rates. “When we talk about these issues and evaluate them in today’s perspective, we see that these are not new, they have been in existence since a very long time now and relates to fundamentals of the textile business”, he declared.

Energy Crisis

“The energy crisis has deteriorated the situation to such an extent that traders are forced to close their business and auction the expensive imported machinery to scrap dealers in Faisalabad that is producing 65 per cent of the total textile of Pakistan”, he said. “This is a no win situation for all as the closure of factories is leading to unemployment of thousands of workers”, he added. He warned that these unemployed people will obviously resort to crime to earn their living causing serious chaos in the socio economic structure of the society. Independent sources says that unemployment in textile city of Faisalabad have reached 35-40 per cent due to gas and electricity shortages. The local industry is running 40 per cent below its production capacity. Speaking about the high mark up rates Naveed Gulzar said that this is one of the highest rates in the world. Industrialists have to pay an overall interest rate ranging between 16-18 % including hidden charges. “This has tremendously increased the cost of doing business in Pakistan and due to high cost of production Pakistani goods are loosing their competitiveness in the International markets”, he concluded. “It is a great dilemma that there is continued downward pressure of unit prices of textile goods, while the raw material prices and cost of doing business are increasing drastically”, he protested.
Speaking about the aims and objectives of APTMA, Naveed Gulzar said, “Its primary objective is to facilitate Pakistan’s textile industry to obtain and sustain a global standing”. He was confident that APTMA was endeavouring to promote efficient business system at micro and macro levels for supporting integrated commerce. “From the prestigious platform of APTMA, we are planning to integrate all sectors to promote harmony and coordination”, he said. We have a strong coordination with farmers associations and cotton ginners association which are our natural partners in the path to development. He revealed that APTMA’s Regional office at Faisalabad is pursuing the Punjab government and city government authorities to facilitate the business activity in the region. “We have made a number of coordination committees to deal with other textile sectors like power looms, hosiery, sizing, towel and bedding, processing and all other related categories”, he explained.

Impact of Floods

Commenting on the impact of recent floods in Sindh, he said that the cotton yield will definitely be affected as a result of this catastrophe. “The prices of raw cotton may go up as a result of flooding but so far it is premature to say anything about it”, said.
Mr Naveed Gulzar expressed his strong resentment over the high tariff rates charged by US at Pakistani exports and termed it as a stumbling block towards export promotion. Pakistani exporters pay as high as 22 per cent tariff on some textile exports to the United States of America, he protested. “If the United States lifts trade restrictions and gives free access to Pakistani textile products, it would result in a $4-6 billion increase in textile exports”, he challenged. He said that this gives an edge to Indian and Bangladeshi products in the US markets that become cheaper due to their low tariff rates which are becoming a significant strain on exports. “We are losing a sense of competitiveness to our Asian contenders”, he added. It is to be noted that US is one of the biggest buyers of Pakistani textile products. As a cross reference to high tariff rates, it is particular to read Bruce Ridel’s article in Newsweek (8 July edition) who says that Washington has placed tariffs on Pakistani textiles that are three times higher than the rate applied to most countries. Bruce Riedel, a former CIA officer and senior fellow at Brookings institution, Washington DC, also says, “A level playing filed for Pakistani products is a national security imperative for the United States.”

Pak-EU trade deal

Regional Chairman urged the government to use diplomatic channels to step up efforts to win GSP plus status for Pakistan. Generalised System of Preferences (GSP) is a preferential tariff system extended by developed countries (also known as preference giving or donor countries) to developing countries (also known as preference receiving or beneficiary countries). It involves reduced tariffs or duty-free entry of eligible products exported by beneficiary countries to the markets of donor countries. Naveed Gulzar says that Pakistani exporters may benefit from GSP plus in three ways. “Firstly, Pakistani exporters will benefit indirectly – through the benefit to the importer by way of reduced tariff or duty free entry of eligible Pakistani products that will become cheaper than the products from other competitors. Secondly, reduction or removal of import duty on Pakistani products will surely make them more competitive to the importer keeping other aspects (e.g. quality) equal. Lastly, this tariff preference helps new exporters to penetrate the market in the donor country and established exporters to increase their market share and improve upon profit margins”.