Daily Times

KARACHI: The country’s total textile exports for the month of May-2017 slumped to $939 million, down 12.2 percent year-on-year (YoY) compared to $1,070 million in May-2016, Pakistan Bureau of Statistics (PBS) reported on Wednesday.

The drop in textile exports comes during a tumultuous period for textile manufacturers, where they await the promised incentives by the government, including disbursement of the Rs 180 billion export package and recovery of sales tax refunds, said analysts.

The PBS data further revealed declining textile exports across all major categories, including towels down 18.1% YoY, cotton cloth, down 15.7% YoY, bed wear down 15.5% YoY, readymade garments down 7.2% YoY and cotton yarn down 3.1% YoY.

“Given by the current situation, where textile associations are planning protests in order to receive the incentives as promised by the government, while the government seemingly remains noncommittal, we believe the current situation appears bleak for the textile industry”, said Ahmed Lakhani, an analyst at JS Research.

Moreover, the government has also confirmed that it is considering reversing the zero-rating status for the five major exporting sectors (including textiles) due to alleged misuse by certain parties, which would further compound the miseries of textile exporters, he added.

Foundation Securities’ analyst Zeeshan Azhar said exports of basic textiles declined due to lower exportable surplus and weak demand from China. Whereas exports of value added sector raised in May due to the textile package and government’s pro textile policies.

Textile industry had proposed a number of measures for the FY18 Budget which was not implemented by the government. In fact, the government increased the turnover tax from 1% to 1.25% and sales tax on retail sales was increased from 5% to 6%. The government also raised the minimum wage by Rs10000 to Rs15000.

During 11 months of FY17, a 2.0% YoY drop in exports has been caused by a decline in exports of cotton yarn (down 4% YoY) and cotton cloth (down 6% YoY). This is primarily due to reduced demand from China, and lower cotton yarn export prices (down 9% YoY). Quantity exported of cotton yarn increased by 5% YoY whereas cotton cloth decreased by 13% YoY, said Azhar.

The Rs180 billion package which was announced in January 2017 could go some way in making the textile sector competitive internationally. However, five months after the announcement of the package, only Rs 4 billion has so far been released by the government versus claims of Rs 24 billion.

“In the medium-term, we expect textile exports to pick up due to the recently announced exporter’s package. However, the government is yet to disburse the claimed amounts so the impact is yet to be felt. Our long-term prognosis of the sector remains weak given the main weaknesses of high electricity/gas prices, poor power supply, undiversified product base, out-dated technology and low cotton quality”, Azhar concluded.

Published in Daily Times, June 22nd, 2017.