The ADB's assessment is based on 11 months' data since the advent of WTO regime.
Here is what the ADO says: The elimination of quantitative restrictions on textile and clothing exports since December 31, 2004 has significant implications for the economy.
With T&C accounting for more than two-thirds of total exports, approximately 10 percent of value-added in gross domestic product (GDP) and almost 40 percent of industrial employment, the opening of the global T&C market will have substantial repercussions on Pakistan exports and the economy.
In terms of policy developments, substantial progress in privatisation made in recent years in banking telecom, and oil and gas has started lifting these sectors' performance levels.
Pakistan's policy of free trade in cotton, the liberal import policy for textile machinery and other inputs, and the gradual deregulation of investment approval procedures, all resulted in substantial investment in modernisation of the country's T&C sector over the past few years.
It was generally thought that the T&C sector was well-positioned to benefit when developed countries would open their markets for these exports and, in fact, export data for 11 months from January 2005 bear this out.
T&C exports rose by over 20 percent year-on-year. Bedlinen emerged as the leading contributor to the increase, with receipts surging by 45 percent to $1.7 billion year-on-year.
Volume growth was even more impressive, at 48 percent. This was achieved despite the 13.1 percent anti-dumping duty imposed by the European Union. The second largest contributor was cotton cloth, with exports climbing by 30 percent to 2.1 billion dollars.
Exports of readymade garments, the third largest contributor to higher T&C exports, jumped by 54 percent to 1.3 billion dollars. Exports of knitwear and synthetic textiles, however, fell.
IMPEDIMENTS Notwithstanding the increase in the country's T&C exports, Pakistan's share in the EU, the largest market for the country's T&C exports, declined by 0.6 percentage points to 3.0 percent in 2005.
Its share in the United States market, which is the second largest market for the country's T&C exports, increased only marginally by 0.2 percentage points.
Among competitor exporters of T&C, the PRC's share rose by 7.6 percentage points in the EU and by 6.7 percentage points in the US-India gained 0.7 percentage points and 0.8 percentage points, respectively.
Imposition of anti-dumping duty on imports of bedlinen, as well as the loss of preferential access to the EU market under Generalised System of Preference (GSP), may have disadvantaged Pakistan's T&C exports to the EU. High business costs, coupled with low labour productivity, also seem to have undermined the country's competitiveness in the international export market.
While the action by the EU to reduce anti-dumping duty is expected to boost bedlinen exports, the ineligibility of the country's T&C exports to the EU's 'GSP+', together with the fact that Bangladesh, Sri Lanka and Vietnam have been given this concession, will continue to hurt Pakistan's exports.
Free trade agreements between the US and many of Pakistan's competitors in clothing exports, as well as the trade diversion effect of the May 2005 inclusion of 10 East European countries in the EU (itself one of the top 3 T&C exporters) could also affect the country's potential gains in exports.