Deliverable 3

Home economy situation of Pakistan

Growth of textile industry of Pakistan ‘s export declined by 10% in 2011 to 17. APTMA

president of Gohar ijaz argued that Pakistan is losing competitiveness because of energy crises.

In bangladaish energy cost is  $3 per mmbtu, in Veitnam $4.2 and in India $4.5. “But in

Pakistan the product is being supplied at a cost of $11 per mmbtu,” he regretted. In delegation

of all Pakistan textile mills association Sardar Ayaz Sadiq said textile industry is back bone of

pakistan’s economy. On the other hand Pakistan is facing tough competition from its

neighborhood countries like india, bangladaish and china.

Taxation

The Federal Textile Board (FTB) has assured textile sector that major taxation-related

issues would be addressed. The issues include stuck-up sales tax refunds and customs

duty drawback, mechanism for zero-rating policy for coal and furnace oil, withdrawal of
import duty on raw material under chapter 55 of Pakistan Customs Tariff (PCT), tariff

protection to intermediary materials and abolition of customs duty and sales tax on

cotton imports.

The secretary Textile Division gave a comprehensive presentation about the export

performance, cotton crop situation, Prime Minister Package of Incentives Phase-II and

allocation of funds for phase-I, and acknowledged the increasing trend in exports after

the announcement of Prime Minister Package and hoped for further increase in the

coming days.

The meeting discussed multitude of issues being faced by the largest export industry of

Pakistan and the facilitation given by the federal government. The representatives of

textile associations appreciated the federal government for providing policy and

budgetary facilitations to textile industry of Pakistan, which has resulted in increase of

textile exports in comparison to previous year.

The chairman AFTMA appreciated efforts of the federal minister for commerce to solve

various issues of textile industry at various forums and Prime Minister's Package of

incentives for exporters, which resulted in increase of exports. He stated that the

APTMA has been recommending export-led policy for the last few years. Current

biggest challenge of Pakistan is trade deficit. The Textile Division is working with textile
associations to come up with short and long term recommendations for viability of

textile sector, which could enhance textile exports from US $12 billion to US $32 billion.

The APTMA placed following recommendations before the meeting:

Domestic inefficiencies cannot be exported; therefore, tariff rationalization of Rs 3.10

per unit and financial surcharge of Rs0.43 per unit may be withdrawn, to bring energy

cost at par with regional competitors.

The GIDC which is Rs 100 per MMBTU for industrial gas and Rs 200 per MMBTU for

captive gas may be withdrawn. Gas price disparity among provinces is source of

concern for the textile industry. A uniform price of Rs 600 per MMBTU for natural gas

and RLNG may be offered to all textile captive and industrial users to align their costs

with those of regional competitors.

https://fp.brecorder.com/2017/12/20171229331031/

https://fp.brecorder.com/2017/11/20171105232429/

Mechanism for disbursement of claims for Phase-II of the Prime Minister's Export

Package of incentive may be finalized and circulated by the SBP on priority basis. The

cotton production this year is expected to be 12 million bales; however, there is still gap

between production and consumption. Therefore, the customs duty and sales tax on
cotton imports may be withdrawn from January 2018, on previous pattern as provided

in Phase-1 of Prime Minister's Package of Incentives.

The APTMA proposed that the mechanism for zero rating policy for coal and furnace oil

is still to be implemented by the FBR.

The import duty on raw material under chapter 55 may be withdrawn, whereas

intermediary materials may be given protection, the APTMA added.

The APTMA proposed that the textile industry and exports of Bangladesh are far ahead

of Pakistan; therefore, the policy measures may be taken to establish new garment

factories. The building infrastructure may be included in LTFF for garments and

stitching factories, as this requires huge capital as well.

Seasonal issues

Heavy rainfall, high temperatures and major pest outbreaks have taken a heavy toll on Pakistan’s
 
cotton growing districts of Punjab and Sindh province this year. The Ministry of Textile Industry
 
has expressed concern over the drop in cotton production by 28 per cent during 2015-16 caused
 
by climate change-induced phenomena.
 
The erratic weather has proved lethal for the production of cotton, one of the country’s key cash
 
crops. Last year was the hottest season in the cotton growing regions over the past decade and
 
with similar weather conditions predicted for next year, cotton production may continue to slide.
 
However, government incentives, such as lower costs for fertiliser and pesticide, will help
 
farmers compensate their losses.
 
According to the Pakistan Economic Survey 2015-16, cotton contributes one percent of
 
Pakistan’s GDP and 5% of the country’s agriculture value added. The survey shows cotton
 
production has dropped dramatically, with the industry missing its 5.5% growth target.
 
To maintain the supply of cotton to the textile industry, imports of raw cotton increased to 3,
 
45,000 tonnes, a growth of over 250 percent compared to the same period last year.
 
https://technologytimes.pk/post.php?

title=Climate+change+playing+havoc+with+cotton+production+in+Pakistan+and+affecting+its+

+economy

monetory issues

https://researchgate.net/publication/258351787_Pakistan_textile_industry_facing_new_challenge

d. Increasing Cost of Production

The cost of production of textile rises due to many reasons like increasing interest rate, double
digit

inflation & decreasing value of Pakistani rupee. The above all reason increased the cost of
production

of textile industry which create problem for a textile industry to compete in international market.

e. Internal issues Pose a Larger Threat for Pakistan’s Textile Industry

Pakistan’s textile industry is going through one of the toughest period in decades. The global
recession

which has hit the global textile really hard is not the only cause for concern. The high cost of

production resulting from an instant rise in the energy costs has been the primary cause of
concern for

the industry. Depreciation of Pakistani rupee during last year raised the cost of imported inputs.
In

addition, double digit inflation and high cost of financing has seriously effected the growth in the
textile industry. Pakistan's textile exports have gone down during last three years as exporters
cannot

effectively market their products since buyers are not visiting Pakistan due to adverse travel
advisory

and it is getting more and more difficult for the exporters to travel abroad.

Textile exporters rightfully demand reduction of Kibor rate to 8% to avoid a severe decline in

exports. A three-year comprehensive textile policy is expected to be announced before budget

2009-10.

The textile policy has been designed to enhance the exports of textile sector to $ 25 billion in
next three

years. This was stated by the Minister for Textile Industry Rana Farooq Saeed Khan. Textile
Minister

further informed that the spinning and weaving sector would get its due share from the Export

Investment Support Fund, worth Rs. 40 billion allocated in the Federal Budget 2009-10. Rana
Farooq

pointed out that he has advocated the case of immediate support to textile industry in the
Parliament

and also in the Cabinet meetings because he is confident that only textile industry was capable
enough

to bale out Pakistan from the current economic crisis. He further said that although we are 4th
largest

producer and 3rd largest consumer of cotton but unfortunately now we are at number 12 in the

international trade of textile products. Additionally, he stressed that government should take
immediate

measures to remove slowdown in the textile sector. He said that high cost of doing business is
because

of intensive increase in the rate of interest which has increased the problems of the industry. He
said

that record increase in markup rates is one of the major cause of defaults in servicing the loans
availed
by the industry, hence, the volume of non-performing loans has reached to an alarming situation.
He

said that power shut downs may result in massive unemployment resulting in law & order
situation [4].

f. Energy Crisis

• Electricity Crisis

As a consequence of load-shedding the textile production capacity of various sub-sectors has

been

reduced by up to 30 per cent. The joint meeting of APTMA & other related organization was
held at

APTMA House to formulate a joint strategy to address the alarming electricity crisis being faced
by the

textile industry. The meeting unanimously decided to constitute a joint working group of
electricity

management for the textile industry in the larger interests of the value chain of the textile
industry. The

joint working group will meet shortly to design a detailed plan to pursue the following goals;

Immediate total exemption from Electricity load shedding for the textile industry value chain;

Rationalization and reduction of electricity tariff.

(PDF) Pakistan textile industry facing new challenges. Available from:

https://www.researchgate.net/publication/258351787_Pakistan_textile_industry_facing_new_cha

llenges [accessed Jul 03 2018].

2011 to 2017: Textile, Clothing exports fall 10% in six years. The Express Tribune, reterived
from https://tribune.com.pk/story/1648782/2-2011-2017-textile-clothing-exports-fall-10-six-
years/

Searches

https://tribune.com.pk/story/1692677/2-pakistans-export-performance-correlated-cotton-prices-
concern/

https://fp.brecorder.com/2016/07/2016072468491/

http://textilelearner.blogspot.com/2014/01/overview-of-textile-sector-of-pakistan.html

http://www.rcci.org.pk/wp-content/uploads/2012/12/gtopti.pdf

http://jcrvis.com.pk/docs/Textile201611.pdf

https://www.brecorder.com/2018/03/22/406602/textile-exports-8mfy17-modest-growth/