Pakistan and its textile sector have been facing challenging times in recent years, owed in part to costs of production increasing at a pace faster than its neighboring competitors, but a new infusion of funds could help get the country back on better footing.
The All Pakistan Textile Mills Association (APTMA) announced that its members have a plan to increase investment in Pakistan’s textile industry by establishing 1,000 garment manufacturing plants with a total of $7 billion in investments, according to Pakistan’s The Express Tribune.
The plan is to set up garment plants near major textile producing cities like Lahore, Sheikhupura, Faisalabad, Kasur, Multan, Sialkot, Rawalpindi, Karachi and Peshawar, with the plants installing half a million stitching machines, which will boost annual production to 3 billion pieces.
Pakistan’s textile industry has experienced decreasing investments over the last decade, as potential investors have been hesitant to make new investment due to high business costs. This has caused the sector to miss out on technological advantages to its competitors.
New investments dropped to more than half a billion rupees ($4.52 million) in 2016-17, compared to 1 billion rupees ($9 million) in 2005-06, the Tribune said citing APTMA. Further, currently about 35 percent of the textile industry’s production capacity was damaged, causing loss of approximately $4.14 billion worth of potential exports.
Once the proposal is implemented, the industry will need an additional 10.3 million bales of raw cotton, 345 million kilograms of manmade fiber, 1.98 billion kilograms of additional yarn and an additional 7.93 billion square meters of processed fiber. However, cotton-producing area and cotton production have decreased 30 percent and 38 percent, respectively, in Punjab since 2011.
Although the textile sector performed poorly overall, readymade garments did show reasonable growth. According to the Pakistan Bureau of Statistics, exports of readymade garments registered 5.55% year-on-year growth against the overall flat growth of the textile sector, which stood at $12.45 billion in 2016-17.
APTMA members has reportedly provided the government with a long list of corrective and conducive policy measure demands in return for their investments, including implementation of long-term policies, like consistent nationwide energy prices, removal of 3.50 rupees (3 cents) per kilowatt hour surcharge on electricity tariff, an extension of the duty drawback scheme for five years and drawbacks to be increased every year by 1 percent for garments (up to 12 percent) and made-ups (up to 10 percent) against realization of export proceeds.
The proposal also suggested the government allow LTFF (long-term financing facility) to indirect exports, Islamic financing and building of infrastructure for garment plants.