Overall exports remained dismal in 2016: APTMA
Foreign exchange receipts on trade account are important to be revived and given a new impetus to arrest the country’s trade deficit that has swelled to an alarming and unmanageable level of $28.3 billion. This gap cannot be bridged until export-led growth policy initiatives are undertaken earnestly. He said the textile industry continued to face the handicap of being 10 percent expensive as against international competitor owing to unrealistically high energy cost.
“Since 2013, the price of energy has been higher than that of competing countries by 4 cents per Kilowatt hour,” he added. He said due to unrealistically high energy price in the province – where 70 percent of the country’s textile industry is located – the Punjab-based textile industry was exposed to a severe disparity in energy prices. Resultantly, a bulk of the textile manufacturing capacity lies under-utilised and over 70 textile mills have shut down in the last six months.
The two basic raw materials of textile industry, cotton and man-made fibres, to which the textile industry adds value for export, have to be imported as their domestic availability falls far short of the industry’s requirement. The acute domestic shortfall of cotton being procured at higher than import parity is having a crippling effect on the entire textile value chain.
The completely oblivious approach of the government to this scenario and its subjection of raw materials to increased import duty besides other levies such as sales tax and withholding tax is indeed regrettable and denies the textile industry raw material availability at competitive and viable prices.
Besides, he added, the presumptive and innovative tax regime in the country is an additional burden on the organised segment of the textile industry. As it is not possible to pass this burden on to international buyers, the presumptive tax regime weighs heavily on Pakistan’s competitiveness in the global textile market.
Furthermore, domestic commerce in textile and clothing has been swamped by dumped/subsidized imports and smuggled goods, a situation which has in part led to the closure of 70 mills in Punjab. He pointed out that the already signed and about-to-be-signed Free Trade Agreements are posing a serious challenge to the domestic industry so far as the competition in the world market is concerned.
“Manufacturing has been replaced with trading because of the shattered confidence of investors,” he added. In this backdrop, Pakistan’s currency that in dollar terms is 10 percent overvalued has an inhibiting effect on exports and adds to the already bleak picture. An urgent monetary review for correction of the aberration in currency valuation or industry-specific intervention to zero-rate increased cost-incidentals on exports is overdue. He said the time has come that the government should revisit its policies towards the textile industry and further expressed the hope that policymakers would take concrete steps in reviving the ailing textile industry in 2017.