Reviving the textile industry

Cotton is the main cash crop that contributes significantly to the economy particularly to the local yarn market. Last year Pakistan produced 11.9 million bales of cotton but by 2015 the production target is estimated to be at 20 million bales through advanced technology and increased cultivation area. It is nearly impossible to talk about cotton without mentioning Faisalabad, a city known as the textile valley as well as the Manchester of Pakistan due to its huge contribution to textile exports.

Outlook of the textile sector

Not very long ago, spinning yarn into cloth used to be a thriving business in the flourishing city. It was once undoubtedly a promising path for making a fortune, but a story of decline encapsulates to what extent the crippling energy crisis and rocketing inflation are suffocating the national economy. Power cuts sometimes last more than 10 hours a day and have forced factory owners in Faisalabad to switch off the lights and auction their looms for scrap, leaving tens of thousands of workers jobless. A number of flagship industrial units have been closed down after incurring heavy losses. Some of the renowned business groups have shifted their capital to Bangladesh due to availability of cheap labour, uninterrupted power supply and an overall lower cost of production.
In this gloomy scenario, Pakistan Today has launched a fact-finding campaign to have a first hand knowledge of the miseries 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.

Revising priorities

Former President Faisalabad Chamber of Commerce and Industry (FCCI) and Managing partner of Messrs. Em Que Fabrics Sheikh Abdul Qayyum, during an exclusive interview, has stirred the textile issue that has become a matter of life and death for the textile merchants and the workers as well. He was the member of the high level FCCI delegation that met President Asif Ali Zardari last year and demanded the highest authority of Pakistan to restore business activity by restoring electricity and gas to the textile sector.
“Faisalabad Yarn Market located in the heart of the city is the biggest yarn trade venue in Asia”, said Sheikh Abdul Qayyum who is renowned yarn merchant in the local market. “The rates of yarn in the Asian markets are determined by the trends prevailing in Faisalabad market”, he said. “Daily transactions made in the local market ranges between 400-500 million pounds that run into billions in terms of local currency”, he added. “We are in double-trouble due to local energy crisis and a sharp decline in cotton prices in the international markets”, said Sheikh Abdul Qayyum who is worried about the future of textile industry in Pakistan. He regretted to say that 40 per cent textile industry has already been closed in the city. “The vulnerability in the cotton prices has spurred to demoralise the traders who are already struggling hard to survive”, he said. Giving the comparison of cotton prices, he said that the current prices of 6500 per 40KG are less than half of the last year price of 14,000/40Kg. He termed the bumper cotton crop in Pakistan and other Asian countries as the possible reason for the decline.
He reminded the authorities that billions of Dollars are invested in the textile machinery and infrastructure. “The money is stuck in these projects despite the fact that restoration of electricity and gas can put a new life in dead investment capital”, he said. Consequently, the level of unemployment in Faisalabad has reached 30 per cent. “Saving the industry is a two way process in which you are also saving millions of workers from starvation”, he explained. He claimed that Faisalabad is contributing 65 per cent of the total textile export. He predicted that the coming winter will bring more difficulties for the textile sector due to gas load shedding. ‘The governments throughout the world give priority to production units over the domestic consumers in energy supplies whereas the situation is inverted in our country”, he said. “If we are serious to boost our foreign exchange and provide jobs to unemployed youth, it is essential to revise our priorities”, he emphasized.

High interest rates

Citing another serious problem Sheikh Abdul Qayyum said that double-digit mark up rate is literally sucking the blood of the textile industry. “The bank interest rate of 14 per cent is having a real-time increase of 2-4 per cent in terms of bank charges and the total amount paid is sometimes more than 18% that is highest in the world”, he protested. In this connection, he raised another valid point that is crippling the investment atmosphere. “The computation of interest is based on 365 days of the year whereas the industry is working for 180 day only”, he said. It is to be noted that throughout the last FY there has been a closure of factories due to gas load shedding ranging from 2-5 days weekly. At the time of setting up of industry, there was a single-digit interest and business was booming due to low interest rates, he said. He was disappointed that the cost of doing business is going up day by day due to increasing fuel and electricity prices which according to him is a bad omen for the industry. Citing the examples of other Asian economies he said that entrepreneurs from India, Bangladesh, China, Sri Lanka, Japan, Korea, Malaysia and Singapore are progressing due to low cost of production and friendly government policies. He rejected the recent half per cent interest rate cut by SBP and commented that it will not bring any change to the current scenario. He expressed his reservations at the discriminatory power supply policy implemented in various federating units of Pakistan. “Punjab is the most earning province for electricity supply companies as it has the lowest rate of line losses that amounts to 13 per cent whereas the ratio in Faisalabad region is 8-9 per cent”, he declared. “On the contrary, Sindh and Khyber Pakhtunkhah (KP) have line losses of 38 per cent and 50 per cent respectively”, he revealed. “Instead of being rewarded for our efficient recovery system, we are being penalised for our fairness and honesty”, he complained. Replying to a question on the importance of value added industry Sheikh Abdul Qayyum said that one pound of cotton yarn with a price of 0.5 US Dollar can fetch us 5 US Dollars if we sell it as a finished product. “Additional benefit of selling the finished goods is that the manufacturing activity move forward an overall wheel of progress through employment opportunities and demand for local agriculture produce”, he explained.

Reorientation of export policy

“To come out of the crisis, we need to have a reorientation to our export policy”. He stressed. He emphasized that the government must ensure stability to the exporters through a comprehensive policy framework. “Once the exporters feel comfortable, you will see the real change at the national horizon”, he challenged. “It is because our whole economy depends on exports which generates money for the country’s development”, he argued. “Our economic dilemma is that our national imports are always higher than the exports leading to a negative balance of payment”, he regretted.
Giving an overall picture of the economy, Sheikh Abdul Qayyum said that national economy is reeling under the heavy spell of difficulties such as growing foreign debts, hyper inflation, electricity and gas load shedding, rocketing prices and war on terror. “All these factors are sinking the economy day by day”, he warned. “It is high time that the government must address these issues to steer the country from these challenges”, he urged.
Sheikh Abdul Qayyum has not lost hope altogether. “I am an optimist and strongly believe that there is always a silver lining to the gloomy state of affairs. I can see a abeam of light at the end of the tunnel”, he said in a gleaming tone. He thinks that the plains of Punjab are ideal for solar energy projects for an optimum use of heat and sunshine which are not less than a natural treasure. “Similarly, Baluchistan can be chosen for wind energy to fulfill our needs”, he added. “Finally, the abundant deposits of Thar coal in Sindh province can provide us cheapest electricity for more than one hundred years”, he argued.
“All that we need to harness nature in our favour is the strong will and vision on the part of our top leadership”, he stressed. “For the economic prosperity of Pakistan, we have to root out corruption from our government institutions”, he added. “Our social security system of Roti Kaprra aur Makan (Food, cloth and shelter for all) can only work if there is a strong economy in place”, he said. He said that more than 40 per cent of the population is living below the poverty line.