Pakistan can potentially increase its textile exports to $35 billion over the next five years if the country maintains consistent policies. Regionally Competitive Electricity Tariffs (RCET) have enabled the textile sector to achieve exceptional performance. All political parties have recognized the performance of the textile sector in recent years. Textiles is the only sector with real potential for accelerated growth since there is already a solid base and we have an export surplus; however, balanced and sustainable policies are needed. However, many potential and existing obstacles impede the growth of textile exports.
The energy is eeconomy
The continuity of Regionally Competitive Electricity Tariffs (RCET), the reform of the entire electricity sector and the elimination of cross-subsidies are essential for the growth of the textile sector. The entire industrial sector has been burdened with inefficiencies; the textile sector has a consumption of 70% through tariff B3, which is dedicated feeders, so no technical loss, 100% recovery of industry bills plus three months of security deposit with distribution companies . However, the two main characteristics of rate determination are losses and T&D recovery. This is charged to the sector when the average tariff is determined. In the case of gas, 8.5% of UFG is attributed to the sector, while the textile sector has no more than 0.5% losses. Gas distribution companies have a real-time surplus of their TBS consumer SMS. They can monitor volume and pressure in real time. Even then, industrial consumers are burdened with high UFG.
In addition, a uniform tariff is required throughout the country. The private sector must improve energy efficiency through heat recovery and waste reduction. The Ministry of Energy should assess the energy consumption of each segment, bringing us closer to the SDGs.
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Long-term financing and working capital, Pakistani entrepreneurs only have access to commercial banks for their financing needs. It has become difficult for them to go public for reasons known to all. Due to current economic constraints, the sector cannot bring in FDI or incur debt by issuing commercial paper on the international market. Currently, 16% of sales are subject to the reimbursement scheme, while the profitability of the sector is 4 to 5%.
Textile subiquity myths
There is a myth that the government subsidizes textile export working capital. Furthermore, only 18% of total advances from the banking sector are at subsidized rates. In fact, 490.4 billion PKR under EFS out of a total of 2717 billion and 68.875 billion under LTF-EOP, while 143.51 billion PKR comes from own financing based on Kibor.
if we analyze carefully, the subsidized advances to the textile sector are less than what the government owes to the sector under various repayment schemes. The sector pays the cost of this locked-in working capital.
The FASTER sales tax rebate program, which has brought some relief to the industry, is also faltering for one reason or another. The sector also absorbs the inefficiencies of the energy sector and pays the burden of other consumers.
The key to success is competitiveness. We will continue to grow and prosper as long as Pakistan is competitive. Ease of doing business can improve our competitiveness; deficient areas are not identified and therefore a long term plan is not available – Pakistan ranks 110th globally on the competitiveness index with 51.36 points. Digitizing multiple regions could not only reduce our costs, but will also bring transparency. We cannot compete globally with an inefficient supply chain.
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National Logistics Policy
National logistics policy should be considered with the objective of seamless multimodal transport and modern connectivity, as it will shift the stress of transport from roads to other modes (railways). Paperless supply chain initiative, enhanced cooperative federalism, ease of logistic service portal (e-log) and standardization of warehousing industry will help Pakistan to a great extent. This will help the sector achieve ESG objectives and focus on a better cost structure.
Coaching & Ddevelopment
The corporate sector has taken initiatives by having its training centers for skills development; however, a well-coordinated strategy must be adopted by federal and provincial governments, including the private sector, which lacks a coherent strategy and works in isolation.
Sustainability is the most crucial topic. Manufacturing processes must be optimized and water consumption during the processing of textile products must be optimised. The world has moved towards sustainable materials, and the use of sustainable materials has also increased in Pakistan; however, it requires more concentration. To increase women’s participation in the mainstream, biodiversity should also be a focus. There is a huge opportunity for Pakistan on this front. The MoC and Textile Division should conduct a detailed survey of each company and a database should be maintained. Carbon benchmarking is the need of the hour. Integrated sustainability reporting by the sector should be encouraged. Pakistan is one of the biggest victims of climate change in the world. These initiatives are in our interest.
Read more: The battle of Pakistan’s textile industry in the face of global environmental challenges
from pakistan Dilemma on 100% polyester and other artificial Ffibers
Pakistan has somehow not developed a 100% polyester and other man-made fiber supply chain; Domestic polyester fiber manufacturers enjoy approximately 20% protection through policy interventions. The use of polyester and other synthetic fibers has increased globally over the past two decades; the opportunity for Pakistan is enormous.
There is an urgent need for a comprehensive plan; all stakeholders need to agree on a 10-year plan outlining how and where to increase our market share in the $900 billion global textile trade. Without strategic planning, the country’s goal may not be achieved, even though Pakistan has all the ingredients; one of the best infrastructures, a young workforce, expertise in the manufacture of finished products since the early 1990s, world-class factories and productivity each time textile exports resumed growth. The GOP gets jealous and bites the industry in one form or another.
The sale of finished goods is very quickly converting to a digital spectrum, where many existing players and start-ups are adapting to the new normal. It’s not that the classic relational or purchasing approach will disappear tomorrow but sooner or later, with an increase in price pressure, it will increasingly happen in a digital medium. The global industry has realized that the cost of RFP, sampling, travel, meetings, etc., can be eliminated. A measured paradigm shift will occur across the trade with more emphasis on faster sample turnover. Speed to market and faster turnover of finished products. Pakistani entrepreneurs must have state-of-the-art teams and tools to compete globally. The earliest would be best!
Read more: Textile factories close as a government. fails to restore RCET: APTMA
We conclude that the textile sector can play a pivotal role in overcoming Pakistan’s severe balance of payments challenge, creating new employment opportunities and improving economic activity if policymakers take concrete steps to bring about the necessary reforms and continuously monitor targets and objectives.
Khurram Mukhtar is Patron, Head of Pakistan Textile Exporters Association (PTEA) and CEO of Sadaqat Limited, a vertical manufacturing facility specializing in the export of home textiles, knitted and woven garments..