Daily Times

KARACHI: The textile sector is showing some early signs of recovery as better performance of value added sector pushed country’s textile exports up by 9.7 percent to $10.5 billion for the second consecutive month in November 2016.

This has restricted decline in five months of Fiscal Year 2106-17 (FY17) to 1.9 percent year on year (YoY) as the growth in November 2016 primarily comes from better performance of value added, whereas basic textile continues to struggle.

Analysts said that lower exportable surplus along with weak demand from China remains a drag on basic textile. The sector is showing some early signs of recovery and a favourable textile package will provide further impetus. Enhanced Drawback of Local Taxes and Levies (DLTL) on FOB prices, if it becomes a part of the package, would be a game changer.

Analyst at JS Research Syed Atif Zafar said, “While it’s a bit early to say that textile exports have turned the tide, however we believe an encouraging trend is emerging during the last two months”. Cotton Yarn exports shot up by 47.8 percent YoY in November 2016, where he believes the improvement is largely due to weakening dynamics of Vietnam as the country is currently suffering from higher material costs due to its reliance on import of cotton. Earlier in the year, Vietnam had replaced Pakistan and India as the largest exporter of Cotton Yarn to China, when international cotton prices were almost half to what had been a few years back. But during the past six months, international cotton prices have shot up by almost 25percent. “We also expect improvement in Pakistan’s value-added sector as the Trans-Pacific

Partnership (TPP) trade deal now seems all but dead after the US president-elect Donald Trump declared that withdrawing the US from the pact would be one of his first actions in office’. Vietnam was set to be one of the major beneficiaries of the trade deal, giving it duty-free access to the US market in the future. Resultantly, Chinese investors could also refrain from relocating their industries to Vietnam,’ said Zafar.

Zeeshan Azhar of Foundation Securities said that the government will likely announce a package for exporters that may range from Rs20 billion to 170 billion. Needless to say, the major beneficiary of the package would be the textile sector. “The blue print of the package is still sketchy and gauging the exact quantum would be premature in our view,” he added. He said that the package could go some way in making the textile sector competitive internationally but core issues like uncompetitive exchange rate, higher electricity and gas prices, poor power supply, undiversified product base and low cotton quality will continue to hamper a full scale recovery of the sector.

Sequentially, textile exports declined by 0.5 percent in November 2016 due to a decline in cotton cloth and bed wear. Exports of basic textile fell by 1.9 percent YoY during first five months of current fiscal primarily attributed to a decline in exports of cotton yarn (down 8 percent YoY) and cotton cloth (down 3 percent YoY). This is primarily due to reduced demand from China, and lower cotton yarn export prices which went down 13 percent YoY. Quantity exported of cotton cloth decreased by 14 percent YoY whereas cotton yarn increased by 6 percentYoY.

In period of July-November, exports of readymade garments increased by 5 percent YoY whereas quantity exported went down by 1 percent YoY. Despite a 4 percent YoY decline in prices, bed wear exports increased by 4 percent YoY (quantity up by 8% YoY). Knit wear exports remained flat YoY with an 18 percent increase in quantity being offset by a 15 percent decline in prices.