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Pakistan: Textile and Clothing Exports

  • ID: 836927
  • Report
  • March 2015
  • Region: Pakistan
  • Textile Support Organisation
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Pakistan's textile and clothing exports fell in the first eight months of the current fiscal year, due to surging raw material prices, energy crisis, financial costs and global recession.

Shipments to foreign countries were down 6 percent in value terms during the first eight months of the current fiscal year compared with the same period last year.

Pakistan's textile and clothing exports fell in the first eight months of the current fiscal year, due to surging raw material prices, energy crisis, financial costs and global recession.

Shipments to foreign countries were down 6 percent in value terms during the first eight months of the current fiscal year compared with the same period last year.

Cotton yarn, the primary export earning category went down by 15%, woven readymade garments by 12%, bed wear by 10%, knit wear garments by 3% during the period.

However, exports of cotton cloth and Towels went up by 6% and 10% respectively.

2006-07 (July-June) was the best year for Pakistan’s textile and clothing industry when the industry managed to export US$ 10.8 billion with the support of friendly government policies, international propitious environment, and lower cotton prices.

The shift in government policies, increases in input costs, and the global recession have changed the scenario for textile exports from Pakistan. Now the textile industry in the country is passing through a very critical period with number of closers and shutdowns.

On the domestic front, Interest rate has gone up by 20%, during the last six months and inflation in the country has reached 21%.

Since 2004, diesel prices in Pakistan has gone up by 150 percent, petrol prices by 71 percent, gas prices by 91 percent, electricity cost by 60 percent, minimum wage of unskilled workers by 140 percent.

Furthermore, shortage of energy also affected the textile industry and exports from Pakistan. During the summer season electricity shortfall is about 2,500 megawatts which results in around four to six hours of daily power cuts.

The textile industry in Pakistan invested US$6.4 billion during the period 1999-2007, when interest rates were extremely low. Textile machinery imports, as a result reached the highest level of US$928 million during the fiscal year 2004-05. This was US$438 million in the last fiscal year, reflecting the lack of modernization in the industry.

Cotton remains a primary raw material for the textile industry in Pakistan, accounting for over 70 percent of the total production cost.

Cotton production in the country is stagnant at around 12 million bales of 170 kg while cotton consumption has passed the 16 million bales mark due the massive expansions in spinning sector during the last five years. Widening demand and supply gap of cotton is pushing cotton prices to higher levels.

Consumer price index (CPI) in Pakistan reached the highest level 21.1 percent (YoY) in February 09

The increase mainly came from surging food prices which recorded at 22.9 percent during February 09, mainly due to an increase in the prices of essential food items. In addition energy prices also contributed a lot to the inflation.

Soaring food and other essential items prices have resulted in labor protests in major cities. The government has taken several measures to contain the rapid rise in inflation for next year.

To counter the rising inflation in the country, the government of Pakistan has announced an increase in minimum wages of unskilled workers to PKR6000/month (US$75/month), but there is reported wide payment of the older rate still, of PKR4000/month (US$50/month).

Government Supports and Subsidies

The government of Pakistani devalued the local currency by around 27% against the US dollar in last one year.

The government of Pakistan had been paying a 6% Research and Development (R&D) subsidy on exports of woven and knitted garments, 5% on dyed and printed home textiles, and 3% on dyed and printed fabrics. These payments are now suspended since July 2008.

The government has paid some PKR 31 billion to the textile exporters against the scheme, including PKR 6.975 billion to fabrics, PKR 0.997 billion to bed wear and knitwear and PKR 21.175 billion to garments sector.

The subsidy was first announced in June 2005, but only for knitted and woven garments.
In mid-2006, home textiles and finished fabrics were included in the scheme.

State Bank of Pakistan (SBP) has also paid more than US$ 800 million to the textile sector under the Long Term Financing of Export Oriented Projects (LTF-EOP) scheme since May 2004.

Under the scheme concessionary long-term project finance to export-oriented enterprises was provided since May 2004 for import of machinery.

The interest rate is charged at around 7.5 percent -repayable in 7 years- against normal rates of 12 to 13 percent.

The scheme was announced in 2004 by the State Bank of Pakistan with the aim to bail out heavily financed textile industry.

The scheme allowed swap of loans which were taken when the interest rate was as low as 2-3 percent and subsequently jumped to double-digit figure.

Initially only value added sectors of textile chain (weaving onward) were eligible under the scheme.

In the trade policy announced on 18th July 2007, scope of the scheme was further enlarged to cover export oriented, core and developmental sectors, purchase of locally manufactured machinery and compact spinning.
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Pakistan -Textile and Apparel Exports
Volume in units, Value in US$1,000, unit Value in US$/unit
Pakistan - Production costs in Textiles Sector
Pakistan - Cost of doing Business
Pakistan - Textile Machinery Imports
Pakistan - Foreign Direct Investment in Textiles
Pakistan - Raw Cotton Prices
Pakistan - Interest Rate
Pakistan - Inflation Rate
Pakistan - Rupee exchange rate
Against US Dollar, UK Pound, Euro
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