January 12, 2023 (MLN): Textile, the backbone of Pakistan’s overall exports has been in the doldrums for years as no required attention is given to this sector which will likely drag its exports to $1 billion a month in 2023, Gohar Ejaz, Patron in Chief of All Pakistan Textile Mills Association said in a letter addressed to the federal minister for Finance and Revenue Mr. Ishaq Dar on Thursday.
The textile sector last year exported goods worth $19.3bn and has further expanded capacity through an investment of $5 Billion to increase exports to $25bn. The expectation and goal were to increase our exports to at least $24bn this year. However, this could not materialize for many reasons.
Shedding light on the shortage of raw materials, he stated that the raw material of any industry is the fundamental building block without which the process of manufacturing and subsequently exporting cannot occur. Cost and ease of doing business are no longer relevant in the absence or shortage of raw materials.
The textile sector's raw material in the case of Pakistan is cotton. Unfortunately, the cotton crop for this year has clocked in at under 5 million bales.
The sector consumed 15mn bales in the last year which indicates that approximately 10mn bales would require to be imported in order to retain exports at the same level as last year of $19.3bn.
"Unfortunately, the import of cotton has been severely restricted. Banks are not opening L/Cs or retiring cotton imports through CAD. The industry is running out of cotton stocks and as a consequence, our mills have either shut down or will shut down in the very near future if decisive and urgent action is not taken," he warned.
At present banks are only willing to entertain very small and limited L/Cs for companies that are direct exporters.
This excludes 80% of the basic industry and ignores the fragmented structure of the industry. It is absolutely essential that the raw material (cotton) be available to the entire sector so that the sector which exports 80% of its product does not come to a standstill. The impact on employment of the shutdowns is already significant and would be catastrophic if the situation is not brought under control.
At present exporters are turning away orders as they are not sure of the availability of raw materials to fulfill the orders.
The damage to Pakistan would not only be lower exports this year but also the permanent shifts of the orders to other countries which would be very difficult to reverse.
While seeking the government's intervention, he revealed that every dollar spent on the import of cotton yields $3 in exports, and the estimated cost of 10mn bales of cotton at today's price is $4bn which would translate to minimum exports of $12bn, a gain of $8bn.
Copyright Mettis Link News
Posted on: 2023-01-12T12:11:50+05:00
