Sustaining export growth: outlook and constraints

Article written by Dr Mirza Ikhtiar Baig

Some economists believe that an overall increase in the country’s exports due to a 30 per cent rise in textile exports during the current financial year may turn out to be merely an ‘export bubble’. They base their assertion on the fact that the export growth has neither resulted in any improvement in our GDP nor created new investment or job opportunities in the country. Therefore, it is feared that this export bubble may fizzle out soon.

According to a research during the first seven months of the current fiscal year, GDP registered a growth of only 0.6 per cent whereas in the first eight months of the same period national exports surged by 47 per cent, out of which the textile sector contributed 23.6 per cent. In actual terms, yarn production escalated by 1.5 per cent only while its export grew by 20.7 per cent ($956 million). There was a swell in exports of knitwear by 32.71 per cent, bed linen 22.28 per cent, readymade garments 37.75 per cent, cotton 22.4 per cent and towels 17.25 per cent. In all these cases, the boost in production is not equivalent to the rise in export of these items.

A comprehensive study reveals that due to the recent floods we lost almost two million cotton bales and the situation aggravated even further on account of short supply of cotton in the international market, which culminated in a threefold increase in the domestic cotton prices taking it to its peak — Rs13,000/= per maund. Subsequently, the finished textile products made from this exorbitant cotton fetched higher prices in the international market causing a rising trend in the country’s export bill. But now the foreign buyers are not ready to pay such a colossal price, which has created a hiatus in the market resulting in a steep decline in the price level. From July to March, the cumulative exports of the country reached $17.8 billion whereas during the last fiscal year, exports figure stood at $14 billion. It is anticipated that by the end of this year textile exports would hit $11 billion along with the overall exports $22 billion.

These statistics reveal that during the first nine months of the current fiscal year, import of textile machinery also augmented by 80 per cent. During the last two years, profits of textile companies and demand of Pakistani textile in the international market enlarged substantially. In a recent three-day event titled ‘8th Textile Asia 2011’, held at Expo Centre on April 16, almost 259 foreign delegates were present along with 122 exhibitors from 40 countries exhibiting 357 international renowned brands of textile machinery. Most of the people present there expressed their confidence about the growth potential of the country’s textile sector. Almost all the textile companies of Pakistan showed their interest in buying the latest textile machinery.

It is pertinent to add here that Pakistan is the 2nd biggest producer of cotton yarn, 3rd biggest of fabric and 4th biggest of cotton. Pakistani yarn contributes 30 per cent and fabric 8 per cent to the total international market. Pakistan is among the top 10 textile exporters of the world. Global textile exports stand at $400 billion, out of which China tops the list with present exports of $55 billion, followed by Hong Kong $38 billion, Korea $35 billion, Taiwan $16 billion and Indonesia, India, Bangladesh and Pakistan $11 billion.

The organiser of Textile Asia has announced Clothing, Fabric & Textile Asia 2012, an international exhibition of Pakistani textile products to be held from April 7 to 9, 2012 at the Expo Centre. More than 300 Pakistani companies are expected to showcase their textile products to international buyers representing renowned textile brands. I have requested Ms. Gail Strickler, Head of US Trade Representatives (USTR), to persuade all big American brands and stores like Jordache, Kohl, South Pole, Levi’s, VF, Wall Mart, K Mart, Jesse Penney, Target and etc. to attend this exhibition. Ms. Gail has already introduced more than 90 American top brand buyers to Pakistani exporters during the TexWorld Exhibition last year in New York.

Let us admit the fact that our product and market base for export is too small and we depend on a few countries. Now is the time to look for new markets for exporting our products. Central Asia and Africa have an immense potential but these areas are not yet explored by our exporters. It is encouraging to note that on the invitation of the President of Tajikistan, TDAP in collaboration with FPCCI are taking a 100 businessmen delegation to Dushanbe from May 30 to June 3. There is a lot of trade potential in the fields of textile, leather, food stuff, sport goods, oil & gas and various other sectors between the two countries and now is the time to focus on Central Asia to enhance our trade.

We have already seen a 30 to 35 per cent fall in cotton and yarn prices in the international markets resulting in the prices of our textile products to crash and eventually affect our exports. We have to actually improve our production capacity to have an exportable surplus to sustain our export growth, otherwise it will barely be an export bubble.

— (The writer is the Federal Advisor on Textile, Government of Pakistan.)

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