Pakistan’s Textile Exports Witnessed A Sharp Decline In 2016

Market News

Pakistan’s Textile Exports Witnessed A Sharp Decline In 2016

The financial year 2016-17 has witnessed a continuation of the downward slide of Pakistan’s textile exports. The country is plagued with power outages, insecurity and worsening business climate. In addition, the International Monetary Fund (IMF), which recently concluded its US $ 6.6 billion loan program, pointed out that the Pakistani currency was overvalued by 20 percent.

Among the external factors cited for Pakistan’s continued decline in exports is the fall in international prices of cotton and other textile commodities. The problem is compounded by the dissatisfaction over the real effective exchange rate.

The decline is accentuated by the fact that nearly 40 percent of total exports from Pakistan are primary commodities including cotton yarn. Lack of diversification too is a factor as nearly 50 percent of Pakistan’s exports are dispatched to six countries.

Very recently, the nation’s textile exports took a US $ 909 million dip during the financial year 2015-16. The main reason for this fall was attributed to the decline in cotton production and slowdown in economic growth of China.

In textile made commodities alone, Pakistan had exported goods worth US$ 11.5 billion during July-May period of the fiscal year 2015-16 as against US$ 12.4 billion of the corresponding period of the previous year. This indicates a sharp fall of 7.34 percent in exports. The most recent data of the Pakistan Bureau of Statistics (PBS) indicated that that the country’s textile exports had reduced by 3.53 percent to US$ 1.07 billion during May 2016.

The country’s marred security image has made buyers turn to Pakistan’s competitors for making purchases. Years of insurgency, violence and bombing has resulted in the tarnishing of Pakistan’s image as a safe country for doing business.

Trade sources informed Textile Excellence that “If we can make our purchases from India or Vietnam or Bangladesh instead of Pakistan, it’s a much safer bet as our purchasing managers have no fears in going to these places and the prices are much the same.”

Looking at the domestic output for the year 2016 alone, it’s a significant development that many of Pakistan’s textile mills have registered heavy losses due to the uncertainty in the air. The uncertainty signaled by the security concerns also raises issues like slump in exports, decline in value of textile products and load shedding of gas and electricity.

Pakistani mill owners who used to generate a turnover to the tune of US $ 100 million are now by and large disappointed with the lackadaisical government approach. In their opinion, “We want to get our mills up and running again. However, we are being hounded by banks and Pakistan’s anti-graft agency. We are unable to repay our loans we took from the bank for purchase of our milling machines.”

Barring readymade garments, all other major textile commodities witnessed a downward spiral for Pakistan’s exports. In the readymade garment sector, Pakistani exports registered an increase of 4.24 percent. This is however, a small consolation as the export of raw cotton declined to US $ 76 million during July-May 2015-16 period from US$ 146.3 million of the same period of the previous financial year. This reflects a decline of 48.04 percent.

The decline in cotton yarn exports to US $ 1.17 billion was also significant as compared to the previous year’s US $ 1.73 billion. It indicated a decrease of 32.05 percent. Likewise, the cotton cloth export marginally fell to US$ 2.1 billion from US$ 2.3 billion. This indicated a fall of 9.25 percent. Exports of yarns other than cotton too declined significantly by a margin of 23.92 percent. Figures indicated that they fell to US$ 30.7 million during July-May 2015-16 from US$ 40.31 million of the previous year.

Knitwear export during the same period declined to US$ 2.15 billion from US$ 2.19 billion in the previous year. Similarly, bed linen export declined to US$ 1.86 billion from US$ 1.93 billion. Other items registering a similar decline in the same period included, canvas, tarpaulins, art, silk and synthetic textiles.

The fall in textile exports created a significant dent in the country’s overall exports which fell from US$ 21.9 billion to US$ 19.6 billion during 2015-16. In terms of proportion, it was a 12.37 percent decline in overall exports.

In response to the continuing decline and closure of various mills, the All Pakistan Textile Mills Association (APTMA) Chairman Aamir Fayyaz urged the Pakistan Prime Minister Nawaz Sharif to come out with a Textile Industry Revival Package immediately. “This will give us a much needed impetus to increase exports, create jobs and attract investment in the country,” he said.

The Pakistan Bureau of Statistics summed up the latest figures for the first half of fiscal year 2016-17, stating, “The textile sector has witnessed a decline of 1.65 percent to US $ 6.156 billion during this period.” The most worrying part is that the textile industry is the largest foreign exchange earning sector for Pakistan.