According to a Business
Recorder exclusive, textile exports from Faisalabad, Pakistan's textile
industry's capital, witnessed a whopping 50 percent decline attributed to a
range of troubling factors that have been the hallmark of the last two and a
half years: continuing gas and energy shortage, a massive increase in input
costs, inclusive of energy and cost of borrowing, as well as a host of other
unfavorable conditions like law and order problems.
It is pertinent to note in this context that only those units possessing captive
power plants, have been able to insulate their output levels from the heavy
loadshedding schedule that continues into the third year running. Mian Ajmal
Farooq, Acting Regional Chairman of the All Pakistan Textile Mills Association (APTMA)
highlighted the disruption of the supply chain of the value added textile sector
with the closure of hundreds of weaving, knitting and dyeing units due to these
troubling factors that continue to impede the ability of the textile sector to
produce at capacity.
The association further urged the government to declare cotton yarn and
polyester yarn as essential items and recover their huge stocks held by
speculators and hoarders. Government policy has been to let the free market
forces operate in the cotton trade. But earlier in the year the government did
impose quota restrictions on yarn export to benefit the local value-added
sector. Governmental policy to refrain from direct intervention needs to be
supplemented by fiscal incentives in favour of the garment sector - the highest
earner within the textile chain.
General Manager Faisalabad Dry Port revealed that textile exports in 2009
consisted of 80 to 86 containers every day, while in 2010 around 40 to 42
containers are being processed for exports. There is ample evidence to suggest
that recession in the economies of our major buyers has dampened demand for
consumer products, including textiles. However the domestic reasons cited for
the massive decline in our textile exports need to be taken seriously by the
government in an effort to forestall deepening stagflation, declining
productivity coupled with rising prices, and lifting the overall economy out of
its poor macroeconomic performance.
In this context it is necessary not only to acknowledge that there are several
critical impediments to bringing textile exports at par with last year's
figures, but also to accept that the government's successful strategy to
convince the European Community to grant special status to our textile sector,
among others, in an effort to raise exports and the country's foreign exchange
revenue would be meaningless if the decline in textile productivity continues.
The business environment remains inferior in this country. The government's
continued failure to focus on improving this environment, which has the capacity
to lift the country out of its current macroeconomic logjam is difficult to
comprehend. In other words, there appears to be no well-defined strategy, backed
by appropriate policies in place today that are targeted towards increasing
productivity. In this context it is necessary to point out that the
International Monetary Fund (IMF) supported policies to reduce the budget
deficit and sustain the high cost of borrowing are specifically designed to
contract the economy, which may reduce inflationary pressures but, disturbingly,
also automatically have negative repercussions on output.
A balance between the two objectives, ie reducing deficit and inflation as well
as supporting productive activity needs to be the priority of our economic
managers. This balance has been lacking to date and the inordinate emphasis is
on contraction alone. The government needs reminding that output growth can take
a stagnating economy out of its morass and hence, there is an urgent need to
take measures that would encourage domestic productivity.