The economic situation of the country is becoming unsustainable and posing national security risks, and the government can only avoid total collapse by adopting exports-led growth policy, said Chairman All Pakistan Textile Mills Association (APTMA) Amir Fayaz.
The APTMA delegation to be led by its chairman is scheduled to meet Prime Minister Shahid Khaqan Abbasi on Friday (today) to raise the industry's challenges and would table demands including (i) reduction in power prices, (ii) rationalization of gas prices, (iii) early releases for the implementation of exports package, (iv) release of sales tax refunds to the tune of Rs 200 billion, (vi) developing a mechanism to stop smuggling and under-invoicing to turn around the country exports.
Amir Fayaz, flanked by Vice Chairman APTMA Ali Pervaiz Malik stated this, while addressing a press conference here on Thursday. He said the government needs to incentivize exports sectors to increase exports and reduce trade deficit. The Prime Minister would be apprised about the high cost of doing business and requested for urgent measures for the revival of the industry.
Fayaz said the country's trade deficit is projected to soar to $36 billion by the end of current fiscal year compared to the $33 billion in the last fiscal year, which is becoming unsustainable and posing serious national security risk. He said that local currency is overvalued by 15 percent, managed by the government but it is feared that it will not be manageable if once it started to depreciate. He further said due to smuggling and under -invoicing, dumping of around $10 billion including $6 billion from China and $2-3 billion from India is reported, which is hurting the domestic market.
He further said that 62 percent of the exports of the country are textile-related exports. The government has been proposed to come up with an exports-led growth policy. Pakistan's exports declined by 20 percent from $25 billion to $20 billion in the last four years, he added.
Currently, the biggest challenge to the country is trade deficit which the government is filling through borrowings. If the government wants sustainable economic development, it needs to focus on exports growth, the chairman added.
He said that about 35 percent production capacity of textile value chain is impaired/ closed due to high cost of doing business. Energy cost is more than 35 percent of the total conversion cost in spinning, weaving and processing industries. Industrial gas tariff in Pakistan is 100 percent, whereas electricity tariff is about 50 percent higher than the regional competitors. Pakistan textile's share in global market has declined.
The APTMA had a membership of 430 textile mills/units which decreased to 320, while 70 more are on the verge of closure, rendering thousands of people jobless due to high input cost including gas and electricity prices and stuck up refunds claims. He said that industry would not be able to perform any more under such circumstances.
Electricity is available at Rs 11/kwh for industry in Pakistan against generation cost of Rs 5, while gas is available at Rs 1000 /MMBTU in Pakistan against Rs 400 in the other competing countries. In such circumstances, the industry cannot compete in the international market, hence it is losing customers.
He further said the government has released only Rs 9 billion under the PM's package in nine months so far.
The APTMA representatives appreciated the initiative and decision of Economic Co-ordination Committee (ECC) of the Cabinet to revise the PM Package, but said that a notification in this regard is yet to be issued.
Under the revised package, 50% of the incentives will be offered to eligible textile and non-textile exporters on the same terms as given for the period January to June 2017 without the condition of 10% increase in shipments. The remaining 50% of the incentive will be provided if an exporter achieves an increase of 10% or more in shipments compared to the corresponding period of previous year.
Copyright Business Recorder, 2017