NEWS & VIEWS

Textile policy to be approved by August: Dawood

During a media briefing the advisor to the prime minister for commerce and Investment Abul Razak Dawood mentioned that the government is set to unveil an ambitious Textile and Apparel Policy 2020-25 by the following month.

The proposed policy is aimed at increasing the textile and clothing exports between $15.7bn to $20.8bn by the end of the year 2025. Revenue implications of tariff concessions, energy rates brought delays to this problem. One crucial requirement of the textile division is the restoration of the zero-rated regime for the five export-oriented sectors which had been previously withdrawn in the year 2019.

However the adviser claimed that the technical hurdles were addressed and the consultation process with stakeholders was also completed. He mentions that the textile industry had performed remarkably this year and is investing heavily in new technology and capacity expansion taking advantage of the cheap credit made available under the SBP’s Temporary Economic Recovery Facility (TERF).

In reply to a query, the adviser also claimed that another long awaited new trade policy, the draft policy on Strategic Trade Policy Framework (STPF) 2020-25, has also been submitted to ECC for approval. The ECC would also approve the policy soon, he said. Under the proposed STPF, a three-tier institutional mechanism is proposed for the resolution of sector-specific problems. It is believed that new mechanisms will help facilitate exporters to overcome their problems.

Earlier while briefing about the historic growth in exports, the adviser informed that export of goods grew by 18 % to $ 25.3 billion during FY 2020-21 which is the highest ever in the history of Pakistan. The exports in June 2021 were also the highest in any month in our past, at $ 2.7 billion. The exports of Services for the year is projected to be $ 5.9 billion. The cumulative exports of Goods and Services during FY 2021 will therefore cross $ 31 billion.

The Adviser to Prime Minister on Commerce and Investment, Mr. Abdul Razak Dawood said that “This is a remarkable achievement by our exporters considering the difficulties created by COVID-19 at home and resultant contractions in our major markets”. It was not an easy task as many countries went into lockdown, and severely affected the business. Not only our exports survived the crisis but also we have enhanced it in many sectors. I salute our exporters on achieving the milestone.”

The Ministry of Commerce (MOC)’s Tariff Policy Board was formed under the National Tariff Policy with the major objective to improve the competitiveness of the Industry through gradual reduction of Customs Duty (CD), Additional Customs Duty (ACD), Regulatory Duty (RD), time bound tariff protection to strategic & import substitution industries and simplification of tariff structure and procedures.

In the current budget 2021-22, major rationalization in textile value chain, iron & steel raw materials for all kind of flat products, pharmaceutical raw materials, machinery & equipment, inputs for footwear, glass, poultry, food processing industry would further lead not only to revival of industrialization in the country but also enhanced exports. With the current measures exports are expected to grow by 5% in the next two years.

Abdul Razak Dawood, Advisor for Commerce, Textile, Industry and Production, and Investment of Pakistan.

The untapped potential of the Pakistan apparel industry

Mian Tariq Misbah, president of the Lahore Chamber of Commerce and Industry (LCCI) Spoke at a seminar on the ‘Latest trends and collaboration in fashion and textile industry’, where he explained Pakistan is the eighthlargest exporter of textile products in Asia, the fourth-largest producer, and the third-largest consumer of cotton.

The Pakistan textile and apparel sector holds a 60% share in total exports and contributes 8.5% to the gross domestic product (GDP), he told delegates, according to statistics. The country’s textile industry makes up 46% of the total manufacturing sector and provides employment for 40% of the total labour force, Misbah said.

He also pointed out Pakistan could take a more significant share in fashion industry exports by attracting the attention of foreign buyers, underlining the need to focus on value addition to help enhance profit margins in the export market. He also believes in enhancing collaboration and liaison between the textile sector and the fashion industry can achieve the desired results.

LCCI vice president Tahir Manzoor Chaudhry added Pakistan’s fashion industry entrepreneurs should remain up-to-date with modern requirements and be aware of the constantly evolving trends within the global market.

Textile, clothing exports soar to $13.7bn

Pakistan’s exports of textile and clothing sectors posted nearly 19 per cent growth in the 11 months of the current fiscal year (11MFY21) compared to the same period a year ago, data released by the Pakistan Bureau of Statistics.

The growth in exports of value-added sectors contributed to an increase in overall exports from the sectors. One of the reasons for growth in these sectors is due to low-base of last year when export-oriented industries remained closed due to the Covid-19 lockdown and cancellation of orders from international buyers.

Total exports of textile and clothing were up 18.85pc to $13.748 billion between July and May this year against $11.567bn over the corresponding period in FY20. On a monthly basis, export proceeds posted a growth of 41.14pc on a year-on-year basis to $1.06bn in May 2021.

Exports of ready-made garments were up by 14.35pc to $2.706bn in 11MFY21 against $2.367bn over the corresponding months of last year. Knitwear exports were up 32.70pc to $3.414bn against $2.572bn over the corresponding months of last year. Exports of bedwear increased by 24.60pc to

Mian Tariq Misbah, President The Lahore Chamber of Commerce & Industry

$2.472bn this year against 1.984bn in FY20.

A growth of 28.54pc was seen in export of towels to $838.507m in 11MFY21 against $652.351m over the last year. Similarly, in the value-added leather sector, exports of leather garments up by 9.92pc, and leather gloves 19.08pc respectively. Exports of raw leather declined by over 17pc during these months.

In the non-value added sector, exports of cotton cloth posted a paltry growth of 0.97pc in 11MFY21 from a year ago. Similarly, exports of cotton yarn declined by 1.60pc and raw cotton 96.51pc. It clearly indicates that these raw materials were consumed mostly by the value-added sector as the government allowed duty-free import of these products.

Exports of cotton carded were up by 3.17pc and yarn other than cotton yarn by 20.24pc during the period under review.

Export proceeds of tents, canvas and tarpaulin are up by 15.54pc, artificial, silk and synthetic textile saw an increase of 12.26pc and made up articles excluding towels, bedwear went up by 23.43pc during the months under review.

Pakistan is one of the main suppliers of global surgical instruments. However, these instruments are re-marketed from western countries with famous brands. As a result, the export value of these products remains very low.

To bridge the shortfall in the domestic sector, the industry imported 775,428 tonnes of raw cotton between July to May against 472,015 tonnes last year, showing an increase of 69.52pc. Similarly, the import of synthetic fibre posted growth of 43.24pc as industry imports 419,459 tonnes this year as against 269,881 tonnes.

Textile exporters plan to shift industries to other countries

Perturbed from gas load-shedding, textile exporters have threatened to move their industries to other countries due to the unviable business environment.

During a meeting of prominent textile exporters of Pakistan, it was mentioned that since June 11 2021 there was zero gas pressure, which has crippled industries and halted export production.

“During fiscal year 2020-21, some 99 days out of 320 working days, gas pressure was zero or low,” he added.

Furthermore, textile exporters having RLNG connections and paying the amounts with great difficulty, to meet export orders at a rate of Rs1,533 per mmbtu, are not provided gas.

The exporters questioned how industries would work without the basic raw material. They voiced concerns that there is no chance that the textile export industries will get the required gas smoothly with adequate pressure in future.

Textile industry is one of the leading export industries of Pakistan, said a textile sector research analyst. Exports clockedin at $13.8 billion in the first 11 months of the outgoing fiscal year 2020-21 alone.

“This is more than twice the International Monetary Fund (IMF) facility of $6 billion,” the analyst said, adding that depriving the industry of gas will hurt exports of the country.

Similarly, non-export industries are also not getting gas as per their requirement. These industries also play a vital role in the manufacturing of valueadded products for export industries, and also produce products for meeting local demand, said North Karachi Association of Trade and Industry (NKATI) President Faisal Moiz Khan.

“Therefore, non-export industries are as important as export industries and they should be ignored,” he maintained. Bilwani added that amid the continuous gas crisis in the country, especially in Karachi, and given contradictory moves by the government towards its business policies by depriving the exporters of a level-playing field and viable business environment, the textile exporters have constituted a committee for due diligence

to shift textile export industries elsewhere, on the exporters demand, to correspond and negotiate with those countries which have much better business and export-friendly policies and are offering most attractive incentives to their foreign investors as well as their local industries.

Khan urged Prime Minister Imran Khan to restore Karachi’s industries and save them from destruction so that production activities can resume as usual and workers can be saved from becoming unemployed.

Mr. Imran Khan, Prime Minister of Pakistan

Cotton industry unprepared for climate change threat to crop, farmers

Climate change impacts, from hotter temperatures to more droughts and floods, threaten much of the world’s cotton production, risking worsening shortages, higher prices and financial woes for growers, researchers have warned.

Protecting the $12-billion market — in countries such as India, the United States, Brazil and China — will require both slashing emissions to limit planetary heating and stepped-up efforts by farmers to adapt to the new risks.

By 2040, 40 percent of cottonproducing regions are likely to see their growing seasons shortened by rising heat, while drought could hit half of the global crop, according to a report produced by Cotton 2040, an initiative working for a more sustainable and climate-resilient cotton industry.

Eventually, if efforts to cut emissions fail and warming ramps up in line with the harshest scientific projections, cotton could be dramatically reduced as a crop, leaving the industry “a shadow of what it is today”, said Sally Uren, chief executive of Forum for the Future, an international nonprofit that backs Cotton 2040.

But even with less warming, crop losses are likely to occur even as global cotton demand rises due to population increases and an expanding middle class in some developing nations. While growers are rapidly becoming aware of rising climate risks, few companies that rely on cotton for their products know much about those threats, and consumers even less, Uren said. The new analysis should serve as “a wake-up call for the cotton industry”, she added.

Extreme weather has already led to growing volatility in cotton prices. Largescale floods in Pakistan in 2010, for example, caused global cotton prices to spike to nearly $2.50 from about $0.70 in 2009, the report noted.

Crop losses are proving particularly tough for millions of developing-world cotton farmers who make up about 90 percent of the world’s growers, the report said.

Cotton variety made with US help will benefit growers, hopes minister

Minister for National Food Security and Research Syed Fakhr Imam has said the Cotton Productivity Enhancement Programme Syed Fakhar Imam, (CPEP) helped Federal Minister for National Pakistan Food Security and Research import more than 5,000 cotton accessions from the United States for screening against the cotton leaf curl virus (CLCuV).

Speaking at the project concluding ceremony, the minister said a new cotton variety known as “IR-NIBGE-II’ — developed under the project and approved by the Punjab Seed Council in January — will help Pakistani cotton growers.

He said two virus-resistant cotton accessions were also released as a source of virus resistance in the US by Dr Jodi Scheffler of USDA Agriculture Research Services (ARS). Mr Imam thanked the US government for its cooperation in cotton research for development, and hoped this cooperation will continue in the future.

The CPEP, a decade-long project jointly implemented by the US Department of Agriculture and ICARDA with the funding from US Agency for

International Development (USAID), has been successfully completed.

CPEP helped bolster Pakistan’s cotton production and agricultural trade spanning over a decade of scientific breakthroughs in cotton breeding and developing new cotton seed resistant to viruses.

Cotton is one of Pakistan’s most important crops, yet by the mid-1990s, the prevalence of the cotton leaf curl virus (CLCuV) had seriously limited the production. The recentlyconcluded project resulted in the development of a laboratory diagnostic test to detect the virus and monitor its spread.

As part of the project, farmer field schools were held throughout the cotton growing season in smallholder farmer villages to train growers, particularly women, on best management practices to increase crop yields. Researchers also developed new cotton seeds that are resistant to CLCuV.

Dr. Scheffler said the project enabled sharing of scientific knowledge between the United States and Pakistan with the support of key scientific organisations such as ICARDA and the National Institute for Biotechnology and Genetic Engineering.

It has also strengthened the livelihoods of smallholder cotton producers in Pakistan, and will protect the US cotton crop against potential outbreaks of CLCuV, the scientist said.

A major success achieved through the CPEP project is that Pakistani farmers now have access to seeds that are resistant to CLCuV with the promise of even more varieties available on the market once they receive government approval.

Cotton imports rise by 44pc in 11MFY21

The country’s cotton imports hit $2.3 billion - an increase of 44 per cent during July 2020-May 2021 (11MFY21) compared to the same period in the previous fiscal year.

The country produced barely 5.6 million bales in FY21. Despite higher orders and a number of incentives provided by the government to boost exports, poor cotton production and imported lint nullified the efforts of the textile sector.

However, instead of providing additional help to the cotton producing sector, Finance Minister Shaukat Tarin has increased sales tax on cotton to 17pc from the earlier 10pc. Cotton seed oil or banola, which earlier had zero tax, has been slapped with 17pc tax.

The increase in taxes and low cotton production has created a serious situation for farmers and ginners who are planning to go on a strike if the government does not accept their demand for abolishing taxes.

“We are going to decide about the actions against the new taxes on Sunday in Bahawalpur,” Chairman Pakistan Cotton Ginners Association Dr Jasomal told the media.

The cotton sector has a great impact on the economy as it produces lint for textiles as well as byproducts including cotton seed oil and cotton cakes. The sector helps create jobs for millions of workers across the country.

“We have not decided to call a strike but the Sunday meeting we might decide as the government has shown no sympathy towards farmers and ginners,” he said.

“It is strange that while the government is trying to boost textile exports, it has left the cotton crop in crisis and imposed more taxes,” said Dr Jasomal.

He also disclosed that instead of an increase, the area of cultivation has declined by 20pc compared to previous year, which reflects a serious threat to cotton as a cash crop. Cultivation areas in Punjab fell to 3.1 million acres from the target of 4m acres. Cultivation area in Sindh also fell to 1.3m acres.

Meanwhile, Chairman Cotton Brokers Forum Nasim Usman said the cotton import bill will further increase when June figures are added. Total figures would easily cross $2.273bn during July-May to $3bn as large textile millers keep stocks for three months, he said. Cotton price in the domestic market is currently higher than in the US, showing higher demand and lesser supply. The cotton season has just begun in Sindh from July1. The season will peak in September for Punjab.

“Low cotton production led to the shutdown of 850 ginning factories during the previous season. Out of 1,300, only 450 ginning factories were working during the previous season which means thousands of people lost their jobs,” said Dr Jasomal.

Despite low cotton production, exports witnessed a growth of 18.2pc to $25.294bn in FY21 compared to $21.394bn in FY20. This increase of 3.9bn export proceeds could reduce the trade deficit if cotton was not imported.