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All Pakistan Textile Mills Association (APTMA)
is one of the largest trade association of Pakistan was founded
in 1952 and since then has been the foremost association concerning
the textile business in Pakistan.
The textile industry of Pakistan contributes 8.5% of the
GDP and employs 38% of the workforce in the manufacturing
sector. It is responsible for about 55% of total exports.
Exports statistics show our progress in the last 5 to 6 years
and how we foresee huge challenges under the new rules of
international trade.
Export of textile products has reached $ 10.62 billion in
the year 2007-08 from $ 5.5 billion in the year 2003-04 i.e.
an increase of $ 5.12 billion in value term or by 93% and
it still have the potential to beat this rate of growth in
future.
The question is what we need to do to maintain or improve
the growth of this industry?
The way international trade is evolving is neither free nor
fair. There is continued downward pressure of unit prices
of textile goods, while the raw material prices and cost of
doing business are increasing drastically.
Even though, Textile Industry of Pakistan is indeed passing
through a very crucial juncture due to the prevailing socio-economic
and political climate. In particular, the Textile sector is
exposed to extreme competition after the phasing out of quota
besides facing resistance from developed countries in the
name of Social Compliance, Environmental & Effluent Treatment
Plants, Anti-Dumping, Counter-Veiling and Safeguard Accusations.
To increase competitiveness and quality of products, textile
industry requires investment in technology for meeting the
new challenges. Over the last few years the textile sector
has invested about US$ 6.0 billion in modernization and higher
value addition, but due to continuous rise in cost of doing
business resulting from enhancement in the cotton prices,
utilities, inflation and bank refinancing rate on exports,
Pakistan is becoming uncompetitive and loosing share in the
international market.
I strongly feel that the time now is to address questions
like why our Industry is vulnerable to these cyclical downturns,
why can't we sustain growth and economic performance on a
sustainable basis. We need to chalk down a strategy to diagnose
and solve issues with a long-term perspective to meet the
challenging tasks of the textile sector.
When we talk about issues and evaluate them, we see that
these are not new, they have been in existence since a very
long time now and relates to fundamentals of the textile business.
As the premier industry association of the country, APTMA
is very well aware of its commitment to act as a partner in
national development. We have helped to set up and support
two institutions of technical excellence in textile engineering
and design namely National Textile University & Textile
Institute of Pakistan and also contribute towards agricultural
research vis-à-vis cotton.
Furthermore, APTMA being the largest and well organized institution
has the ultimate responsibility to help facilitate an environment
and socio-economic climate necessary for the positive performance
and viability of our member mills. The need of the hour for
APTMA is to address these issues.
COTTON
Cotton is the largest exportable crop of Pakistan's economy
as exports of cotton and cotton made products earn 55 percent
of total annual export earnings. As such, promotion of cotton
means promotion of exports while failure of cotton crop tantamount
to heavy damage to Pakistan economy. It would be difficult
for our textile industry to compete with textile giants like
China, India, Bangladesh, Vietnam and Sri Lanka in export
of textiles when we have to import a larger amount of cotton
to meet shortfall of our cotton requirements.
Recommendations to Curb Import and Increase Dependency on
Local Cotton
1. To adopt better-managed cotton by adapting latest technology
in seed breeding to produce hybrid seeds particularly Bt seed
varieties and immediate arrangements be made to replace the
present poor quality deteriorated seed by new and promising
varieties of seed. An arrangement needs to be finalized on
a war footing basis to introduce culture of Bt Cotton Seed
in Pakistan with the target to increase production of Cotton
up to 20 million bales in next 3-5 years.
2. Join world cotton producers effort (spearheaded by ICA)
to standardize Cotton Grading on the basis of Instrumentation.
3. To participate and actively promote Better Cotton Program
Certification now demanded by top Apparel buyers.
4. Pursue production of organic, Long and Extra Long Cottons
in Pakistan if possible.
5. Have all constrains and bottlenecks removed to make Wahga
an efficient point for cotton imports from India.
6. Commission a study to ensure judicious use of Cotton Cess
paid by APTMA members (in excess of Rs.300 Million annually)
to Pakistan Cotton Committee.
7. Initiate a formal program for regular interaction with
Growers and Ginners, particularly to improve the spin ability
and quality of cotton.
8. Adoption of modern technology for harvesting of cotton
crop to minimize losses.
9. All ginning units should be updated and modernized to improve
quality and to standardize ginning system. Cotton Standardization
should be introduced immediately at ginning stage to improve
lint quality to international standards.
B. ENERGY
Pakistan is passing through the most difficult phase of its
history due to the energy crisis that is a threat to its export-oriented
textile units. During the last few years, the textile exporters
have faced serious power crisis in the industrial areas, which
caused million of rupees losses to every year especially from
December to July as these months are considered the peak seasons
of textile export. The Country's energy demand has grown at
an annual consumption growth rate of 4.8% that is expected
to grow at 8 to 10% per annum till 2010. Therefore, there
is dire need to have a sustained growth in energy supply and
infrastructure capacity of 7 - 8% per annum to support the
steady growth in the Country's GDP.
Recommendations
1. To privatize Public Sector Power Units so that these entities
could be managed efficiently.
2. The gas tariffs for textiles units should be freezed at
the current level for atleast next 3-5 years.
3. The import of electricity is an option even for short/medium
term, to meet the high growth rates of demand in the country.
4. The government should announce the financial packages for
the textile industry so that the modern technology be imported
to lessen the cost of production viz a viz power generation.
Possibility of passing the low interest cost offered by various
International Organizations to Government of Pakistan for
power projects?
5. Thermal efficiency of WAPDA and other Public Sector Units
be enhanced to atleast 60% to 70% so the ultimate savings
can be passed on in the form of lower KWH price to the Industry.
6. Coal based power generation to be explored on a priority
basis, utilizing the abundant availability of coal reserves.
C. MARKET ACCESS
Market access is critical for economic survival and growth,
especially for nations that have small internal markets, limited
domestic resources, and/or rely heavily on intl. trade for
economic survival and growth.
Once in a lifetime history provides a window of opportunity,
which if availed, can change the destiny of nations. The window,
available today, is to capture the outposts which are being
abandoned by the Western textiles and which our regional competitors
have already marshaled their forces to capture. Once lodged,
it will be almost impossible to overthrow them. We are positioned
to capture them ourselves provided the required strategies
and technical support is in place.
We should focus to retain our position as a leading textile
producer and to get greater market share in the coming years.
We have concerns over our ability to continue with the present
rate of growth as long as the region does not provide an even
playing field.
We are trying to seek advantages in the quality of our market
and access to the leading consumers of textiles and apparel.
In the post quota era, we must use the World Trade Organization
regulations to our benefit and ensure that measures other
countries are taking to boost their respective industries
are WTO compliant. Pakistan operates under some of the lowest
tariffs in the region but we must continue to develop bilateral
trade agreements to give us preferential market access. 60%
of the world trade is still conducted under bilateral arrangements.
Recommendations
1. Pursue the concept of Reconstruction Opportunity Zones
(ROZs) with the United States.
2. Free Trade Agreement (FTA) with the European Union, USA
and other Markets.
3. Anti Dumping Duty and other Countervailing Measures to
be tackled with a long-term perspective.
4. New & Non-Traditional Markets to be tapped.
5. Establishment of Warehouses and Display Centres
6. Preferential Treatment to Regional Competitors
7. Trade Instead of Aid
8. Creation of the Post of Trade Negotiator.
9. GSP Plus issue to be pursued with the European Commission.
D. MERGER & ACQUISITION
International trade is getting increasingly competitive in
phenomenon of globalization paradigm shift. For new demanding
world, textile sector has stepped in when it has also reached
at its maturity. Maturity promises optimum productivity but
it also requires that the productive system must have been
grown in full. Merger and acquisition is the indication of
same economic reality that brings together scattered parts
for collective survival and to exploit the opportunity with
the greater strength.
APTMA as a figurehead of textile sector of Pakistan urgently
need to build a strategy where we combine together smaller
or weaker units lest they die their own.
Benefits / Challenges
1. Synergy: To avoid duplication and increase profit margin.
2. Increased Market Share: To absorb a major competitor and
thus increase its power to set prices.
3. Cross Selling: A manufacturer can sell complementary products
to the same customer.
4. Economies of Scale: Geographically contiguous industries
can avail the benefits of economies.
5. Taxes: A profitable company can buy a loss maker to use
it for reducing their tax liability.
6. Resource Transfer: Resources can create value through either
overcoming information asymmetry or by combining scarce resources.
7. Diversification: This may hedge a company against a downturn
and investment in other sectors.
8. Empire Building: Managers have larger companies to manage
and hence more power.
9. Vertical Integration: The supplier may find more difficulty
in supplying to competitors of its acquirer because the competition
would not want to support the new conglomerate.
E. COST OF DOING BUSINESS
Cost of doing business specifically for textiles is subject
to a very high operating and financial leverage. It accounts
for 18 per cent of the total credit disbursed in the economy.
During the last recent years, our Country's economic scenario
has adversely affected the viability of the textile industry
and retarded its growth and sustainability. The investment
made during the past 5 - 7 years by all sub sectors in textiles
ranging from spinning, weaving, finishing and fabrication
is under serious threat.
It is to be noticed that there has been reduction of 12.86%
in investment in Textile Machinery in terms of US Dollar this
year as compared to the corresponding period last year. If
inflation is also factored in, the drop in fresh investment
in Machinery will be in the vicinity of 11% to 12%.
This has all resulted because of the slow down in further
investment in the Textile Industry due to high cost of capital
borrowing and increased pressure from regional competition.
The financial viability of the textile sector relies on the
following factors:
1. Self-sufficiency in better-managed cotton crop.
2. Viable financial cost for working capital and long-term
financing.
3. Protection mechanism for Pakistani exporters against the
new payment terms being dictated by Western Customers like
D/A, DP and open terms.
F. HUMAN RESOURCE DEVELOPMENT
Development of Human Resource be considered as an asset for
the organization because lesser number of skilled and trained
employees are more beneficial for a company rather than number
of un-skilled and illiterate workers. Following measures should
be adopted to enhance the productivity of the company as well
its employees:
1. Human Resource Development: Focus on education, training
and skill development.
2. Respect for human Rights, gender balance, and eradication
of child, bonded labour and promote dignity of labour.
3. Harmonized labour management relations.
4. Productivity and development based work culture.
5. Vocational training outside all industrial estates.
CONCLUSION
Textile trade in the world is estimated to be around US$
300 billion currently. Industry experts predict that by 2014
when the facilities in the West will close down and they will
source their textiles from more efficient areas of the world
resulting in the trade volume of around US$ 800 billion. Pakistan's
share of the current trade volume is around 3.5%. If we are
to maintain our current share of this larger pie, our textile
exports alone are potentially targeted to reach US$ 28 billion.
We are willing to be the best in the region and anxious to
have the highest rate of growth in the region but for that
we have to ensure ways to keep our competitive edge as compared
to key regional players.
With a growing exportable surplus, our existing road and
rail infrastructure will soon be inadequate to transport our
exportable surplus from upcountry industry clusters. We also
need to streamline passage to our ports. We look to the democratic
government of Pakistan in ensuring that our trade corridor
is developed as soon as possible and as efficiently as possible.
I would like to assure you that we at APTMA are committed
to the growth and strengthening of Pakistan. APTMA stands
for employment, exports and value addition. We are proud of
our contribution to the Pakistani economy and will continue
to play a part in the achievement of Pakistan's goal and ideals.
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