Textile Industry: Borrowing On The Swell, Exports Shrinking

Textile industry has surprised everyone with record high loans during 2016 despite falling exports. Textile industry has been the pulse of the economy owing to export earnings, however, the industry has been facing a lot of challenges during the last few years amid changing dynamics on the global front.

According to a latest report by State Bank of Pakistan (SBP), lending to the textile sector has jumped to Rs90 billion during 2016, against debt retirement of Rs30 billion during 2015.

The sector has been the lifeline for Pakistan’s exports as the country is the fourth largest cotton producer in the world. Moreover, Pakistan also has the largest spinning capacity in Asia after China and India.

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In order to boost falling textile exports and garments, government has committed to inject Rs64.15 billion under the recent Textile Policy 2015-19. It is predicted that once the funds are injected, textile exports will surge to $26 billion by 2019 from the current figure of Rs13 billion.

Another incentive offered by the government is an additional package of Rs180 billion to uplift declining exports. In addition, the export financing rate offered to textile sector stands at 3.5 percent; the lowest in last ten years.

Challenging phase for Textile Exports: International players taking the lead

Despite several incentives, the sector’s performance has been far from impressive. SBP confirmed that this year the performance has become worse despite higher borrowing. During 2016-17, exports slumped to $6.151 billion versus $6.545 billion the preceding year. However, one has to wait to witness the results of the fresh borrowing of Rs90 billion during 2016.

One of the major reasons for poor performance of the sector is the failure to cope up with technological advancement. Conversely, other players such as Bangladesh and Taiwan have adopted state of the art technology and captured a significant chunk of the international market.

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Exports from Bangladesh to United States surged by 12 percent during 2015 amounting to Rs5.4 billion. Vietnam and India have also performed well taking apparel exports to $10.6 billion and $3.4 billion increasing by 14 percent and 8 percent respectively.

Indian ready-made garments have become very popular in Bangladesh. This opportunity was capitalized by many Indian manufacturers that have set up manufacturing units in Bangladesh due to ease of doing business in Bangladesh.

Comparing Pakistan with Bangladesh, the former has been failing to utilize its large production capacity while the latter has adopted latest technology that has resulted in a remarkable success for its export market.

Vietnam is another major competitor for Pakistan along with Bangladesh, India, and China. As per some estimates, Vietnam’s textile exports will reach a major figure of $55 billion during the period 2015-2025. Pakistan should look out for Vietnam as it is rising to become a hub for global textile manufacturers which are setting up their units in this country.

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