Daily Times

The State Bank of Pakistan (SBP) said Pakistani manufacturers should penetrate aggressively in the global synthetics products market which has long surpassed the cotton market. Though starting late, Pakistan’s exporters can still sail through if allowed to access essential raw materials at competitive prices.

The Central Bank said local industry would benefit and tariff-based policy measures to enhance the use of man-made fibers in domestic textile industry will become effective, only if the influx of smuggled goods is contained.

The share of cotton in global fiber consumption has fallen from nearly 70 percent back in 1960, to only 27 percent by end 2016. Its place has now been captured by synthetic or man-made fibers (MMF) – especially polyester. Synthetic polymers are popular with respect to travel and sportswear, mostly due to their superior resistance to wrinkling and moisture compared to conventional cotton counterparts. Despite its growing appeal, however, Pakistan’s textile industry is advancing into synthetics at a snail’s pace, at best: the fiber mix still stands at 80:20 in our garment exports with only 25 percent of Pakistan’s spinning machines currently using MMF to produce blended yarn.

Moreover, the country’s share in MMF apparel market is almost negligible (only 0.4 percent in the US market). More than 80 percent of the world’s production of polyester staple fiber (PSF) takes place in China, India and Southeast Asian countries. Therefore, it is not surprising that these countries are also the dominant exporters of synthetic textiles, the SBP stated in its State of Pakistan’s Economy – third quarterly report 2017-8.

Vietnam, Bangladesh, and Cambodia import man-made fibers, yarns and fabric from other countries to produce and export synthetic garments. In fact, Vietnam is the second biggest exporter of synthetic textile to the US (with China being the biggest), followed by Bangladesh and Cambodia at 7th and 11th positions, respectively.

This implies that with adequate availability of raw materials in the country, Pakistan too could have excelled in global synthetic textiles market. However, domestic policies and market conditions have hindered the country’s foray into this emerging market.

In January 2017, the government (upon recommendation from the Ministry of Textiles) exempted customs duty on the import of a number of synthetic fibers (acrylic, viscose and nylon), which are not produced locally. The import of these items posted a sharp increase during July-March FY18.

However, for other (and probably more commonly used) fibers like polyester, the government has kept the customs duty at 7 percent as part of protectionist policy in favor of local manufacturers.

To give some relief to garment exporters, the government allowed duty drawback on the use of imported as well as domestically produced synthetic fiber on deemed import basis.

While the duty exemptions granted on the import of various fibers are yielding positive results, there is a room to broaden their scope. The government can reconsider protectionist policies for polyester fiber and filaments, if a meaningful change in the fiber mix is to be achieved in the country, added SBP.

Published in Daily Times, July 18^th 2018.