WHILE the textile industry continues lobbying for more concessions and incentives – cash subsidies, discount-rated bank loans, cut in utility tariffs etc. – for the third consecutive year, it also wants the government to keep a check on the import of second hand clothing as it will create room for finished products in the domestic market.
Textile goods losing domestic market?“Hardly 15 per cent of finished textile products are absorbed in the domestic market,” Mr Adil Mahmood, the Chairman of All Pakistan Textiles Association (APTA), informed Dawn by telephone from Lahore. The APTA is a breakaway group of the All Pakistan Textile Mills Association (APTMA). But APTA and APTMA are convinced that their industry is not getting enough support from the domestic market as it is in India where 70 per cent finished products are absorbed by local buyers And in case of China, it is 60 per cent.
“With a population of one billion plus, India imports hardly 24,000 tons of old clothing in a year” APTMA Chairman Shafqat Elahi Sheikh said on telephone from Lahore. According to official statistics, the total quantity of import of worn clothing and other worn articles was 24.51 million tons in Pakistan worth Rs436 million. A year earlier, total import of worn clothing and other items was only 20 million tons worth Rs368.41 million. Textile industry leaders are convinced a “mafia of importers of second hand clothing and custom officials” connive to under invoice and miss-declare import consignments. The actual import of second hand clothing is much higher than the official figures. Bed sheets, curtains, tapestries and a variety of home textiles are being brought as second hand clothing, they allege.
Local textile industry leaders reckon that total market of the second hand clothing and other items is in no way less than Rs10 to 12 billion. They say more than 130 million people are hooked on to all sorts of imported stuff including second hand textile goods. An over whelming majority wear shalwar-kameez that is not imported as second hand clothing but cloth is of different varieties is coming from official channels from China, India, Indonesia, Bangladesh, Thailand and many other countries. Then people who are in Rs10,000 to Rs20,000 earning bracket also use imported curtains, bed sheets, tapestries and other decorative textile items.
In his meeting with Dr Salman Shah, Prime Minister’s Adviser on Finance early last week, the APTA Chairman Mr Adil Mahmud raised the issue of second hand clothing import with an implied request to put some sort of check on it. It was turned down as any restriction on second hand clothing in an election year is bound to evoke hard feelings among the poor. “No government would like to be blamed of depriving the poor of their clothes after causing an unprecedented hike in prices of food items for the third consecutive year”, says a local textile representative.
Pakistan’s textile products are found to be much more expensive compared to imported clothing in the market. An average imported quality shirt can be purchased from Rs100 to Rs150 as against locally made shirt at Rs300 to Rs400 a piece. A good quality trouser is sold at Rs150 to Rs200 as against locally made trousers at Rs500 and over. Not only the cloth is expensive but stitching too is costly that forces buyers to opt for imported second hand clothing. The market for expensive textile clothing shrinks because of low purchasing power of the poor. Almost 74 per cent people live on two dollars a day or less than Rs4,600 a month and quite a substantial number of remaining 26 per cent are also not enjoying a very enviable quality of life.
“We can provide jobs as well as textile products at affordable price to our people” says Mr Adil Mahmood, who wants a proper business, a low production cost environment and government support to get access and also firm foothold in the foreign markets. He questions the assertion being made in certain quarters that textile export is becoming un-feasible for people because of the cost being incurred on account of cash and subsidies on bank loans.
The State Bank of Pakistan reported $9 billion textile export during 11 months, July 06 to May 07. In May, a SBP handout informed the public of total disbursement of Rs328 billion under export finance scheme (EFS) and long-term financing for export-oriented projects (LTF-EOP). “The year 2007 reflects record high level refinancing support ever provided by the State Bank”, the handout pointed out.
The growth in refinancing (LTF-EOP) of Rs43.8 billion during July 06 to April 07 was creation of new money, the SBP reported.
The SBP paid Rs2 billion subsidy on refinancing to textiles. In addition Rs16.4 billion subsidy was paid in respect of research and development rebates offered at the rate of six per cent, five per cent and three per cent to various segments of textile.
Excessive refinancing in 2006-07 diluted the SBP’s monetary tightening stance and the excess liquidity. The State Bank called its support for textile “extensive and substantive” over the last many years.
Then as a punch line, the State Bank observed that those textile operators who have been able to develop their niche in markets and continue to compete in international markets have been able to make a mark.
In last two years, the government offered support to all segments of textile sector but spinning was left out. It was neither given research and development rebate, nor concession rated bank loans. The perception is that for last almost 50 years, spinners got cotton almost at half the rate of world price. Now that growers are also a powerful segment of political power structure, the days of export duty on cotton or fixation of a minimum benchmark price of cotton export is over. Now the spinners get cotton on market prices and find it difficult to adjust to new conditions.
The spinners now want five per cent R &D rebate and bank loans at 7.5 per cent.. “It is for the government to close down spinning in Pakistan” a local leader said who pointed out that in the event of closure of spinning, the government will export cotton at 70 to 80 cents a pound and import yarn at $1.20 to $1.40 a pound for value added sector. “Let’s see how viable this business is”, he remarked.
“We have neither cut down on rebate rates nor withdrawn the refinancing facility,” a senior official in the Federal Textile Ministry said from Islamabad. Instead of short-term solutions, the official said the government is now focussing on designing a long-term policy of 10 to 15 years. The policy will have specific projects to make all segments of textile viable on a long -term basis. “We do not want industry to be on crutches, it should be strong enough to face all weathers,” he said. The federal textiles minister and senior officials are expected to be in Karachi on Monday to hold another round of talks with top textile leaders.