Policy (2014-2019): Ambitious Textile Goals Unveiled
The government on Monday announced the Textile Policy (2014-19), envisaging to double textiles exports from the current level of $13 billion to $26 billion over the next five years, besides creation of 3 million new jobs. The implementation of policy requires a financial package of around Rs 65 billion in five years, said federal minister for Textile Industry Abbas Khan Afridi while addressing a press conference. The finance division will provide Rs 40.6 billion, whereas the rest of over Rs 23 billion will be arranged through Planning Commission and Export Development Fund. Afridi said that the mark-up rate for Export Refinance Scheme of State Bank of Pakistan was reduced from 9.4% to 7.5% with effect from 1st of July 2014 while discount on bank interest would be given @ 2 percent as compared to the existing rate. Textile industry in the value added sector would be provided Long Term Financing Facility (LTFF) for up-gradation of technology by SBP at 9% interest for 3 to 10 years. Schemes pertaining to Drawback of Local Taxes and Levies (DLTL) would continue under the new policy. Drawback of local taxes and levies would be given to exporters of textile products on FOB values of their enhanced exports on an incremental basis if increased beyond 10% over previous year””s exports at the following rates: garments 4%, made ups 2%; and processed fabric 1%. The incentives will be provided to the exports made in 2013-14 (calendar year 2014) compared to exports made in 2012-13 (calendar year 2013) in the year 2014-15. The support will continue for the rest of policy period; however, eligibility criteria for the above support will be properly aligned with all policy goals from budget period 2015-16 onwards. Textile sector enjoyed duty free import of machinery under textiles Policy 2009-14. This facility (SRO 809) has been extended for another two years. Technology Up-gradation Fund for areas, including SMEs, will be extended for the policy period as well. However, funding for the same will be sought from the EDF provided that the share of the textile sector is reserved by the finance division in a separate non-lapsable account. Regarding EDF, the minister said that a committee has been constituted; and it would resolve the issue in one month where textile ministry is likely to get its due share. The minister said the ministry will take measures to give priority to textiles sector for availability of energy to fully utilise the GSP+ status. For this purpose, a joint committee comprising senior officers of the Ministries of Textile Industry, Petroleum, Water & Power and Finance Division will be constituted to work out solutions on a regular basis to reduce the energy gap in textile sector. The textile minister said that Textiles Policy (2014-19) is based on actionable plans to make textile sector more competitive, robust, goal-oriented and sustainable. The Government will make sure that the Textiles Policy creates a conducive environment for small and medium enterprises to increase production of value-added items through development of clusters. The policy envisages vital measure like budgetary support to the textile sector, enabling policy environment, sectoral strategic plan, marketing initiatives, revitalising projects and capacity building of the Ministry and stakeholders, with a view to improving productivity and competitiveness of the entire textile value chain and to achieving the following goals during the next five years: He further said that under the policy value addition would be doubled from $1billion per million bales to $2 billion; facilitating an additional investment of $5 billion in machinery and technology for the machinery import. He further said that to improve fibre mixes in favour of non-cotton, ie, 14% to 30%, steps included the product mix especially in the garment sector from 28% to 45%, strengthening textile firms with a focus on SMEs by improving their level of compliance with international standards in respect of labour and environment and to enable them to adopt modern management practices. He further said that to achieve objectives and goals of the Policy, Strategic Master Plans will be developed particularly for export promotion, SME development, and technical textiles on a sectoral basis. According to the policy, clusters would be systematically developed and existing clusters will be strengthened, vocational training of workers, 0.12 million internships and different programmes for enhancement of skills and higher per capita productivity would be introduced. He further said that an expeditious refund system is being introduced and a fast track channel for manufacturers-cum-exporters is being created, whereby FBR would dispose of all their pending Sales Tax refund claims by end of the current month. The policy states that tariff structure for entire supply chain will be reviewed in line with effective protection rates. Higher tariffs provide excessive protection and increased margin for domestic sales. This situation does not provide any encouragement to exporters. In such scenario tariff rates for entire supply chain need to be rationalised while providing adequate protection. This would increase the competitiveness of the domestic industry while ensuring increased exports and reduce smuggling of finished products such as manmade finished fabrics and garments. The textiles sector value chain will be given protection as per the study carried out by The National Tariff Commission (NTC). This will provide a predictable tariff regime for the foreseeable future. To encourage use of man-made fibres, Deemed Imports Basis scheme would be introduced so that the domestic PSF industry is also protected. An authentic and accredited testing system will be established to determine the manmade fibre content in the exporting products. The drawback rates for various man-made-based exporting products will be determined by the Input-Output Coefficient Organisation (IOCO). Criteria will be developed in consultation with stakeholders and disbursements would be made by the State Bank of Pakistan. Similarly, work is in progress with the FBR to simplify Temporary Import Schemes such as DTRE in consultation with stakeholders to facilitate the value-added sectors. A GSP+ Committee has been constituted to study the export trends for which FBR is providing data from PRAL. Measures will be taken to curb the smuggling and protect the domestic manufacturing sector. Efforts would be made to widen the production base to include value-added products such as children””s wear, lingerie, beachwear, leisure wear, technical textiles, geo textiles and medical textiles. For this purpose, collaboration with foreign experts, donor agencies and international universities would be sought, and the existing bases at National Textile University, Faisalabad, and Textile Institute of Pakistan, Karachi, would be strengthened. One of the weakest links in textiles value chain is unorganised power loom sector which consists of mostly 4 to 32 power looms, classified as cottage industry, many of which are located in residential areas. Similarly, other SME sub sectors also have unorganised structures. The Ministry of Textile Industry would adopt a three-pronged strategy to address this issue. Top fifty SMEs each year in exports would be identified and would be facilitated for organisational restructuring, business development, export marketing, IT infrastructure, etc, for their growth in exports and become listed companies. The government will establish a state of the art Product Development Centre along with machinery, equipment and training facilities for vulnerable sub-sectors such as carpets and handlooms. The Ministry would also set up dedicated fibre development centers for silk, wool, jute, linen, bamboo and other natural fibres in collaboration with NFS&R and provincial governments. Special marketing funds from EDF will be allocated along with dedicated training for the hand-knotted carpets, which is one of the most value-added sub-sectors of this industry. The minister said that Ministry of Textile Industry will make efforts towards the enactment of Plant Breeders Right Act as well as amendment in the Seed Act and Quarantine to facilitate research, attract new technologies and increase the availability of certified quality seed.