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Gas price cut unlikely to stem decline in textile exports

KARACHI: Value-added textile exporters have warned the government that the decline in exports will continue to persist despite a recent reduction in natural gas prices for different industries.

“I don’t think textile exports will show any significant improvement in coming months despite a 33% reduction in gas price for export-oriented industries,” commented M Babar Khan, CEO of Multinational Export Bureau, a Karachi-based textile company.

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After posting a continuous decline, textile exports showed a tiny rise in October 2016. Pakistan’s textile shipments increased to $1.053 billion in October 2016, up by just 0.59% compared with $1.047 billion in October 2015, according to latest available data of the Pakistan Bureau of Statistics.

Khan cautioned that the small increase in October export numbers did not mean that textile exports had started recovering. “Fundamentals are still the same for the industry and the slight increase in numbers shows the country may have received additional support this fall,” he added.

However, Khan, whose company’s gas consumption makes up around 70% of the total monthly energy bill, acknowledged that the gas price reduction announced at the end of November would have a positive impact on its earnings.

The federal government slashed the gas price for industrial consumers to Rs500 or $4.76 per million British thermal units (mmbtu) from Rs702 or $6.68 per mmbtu. For export-oriented industries, it cut the gas price to Rs400 or $3.80 per mmbtu from Rs600 or $5.71 per mmbtu.

Textile exports account for more than 50% of total exports of Pakistan and any development related to the textile industry has a visible impact on the country’s overall exports.

In the first four months (July to October) of fiscal year 2016-17, the export value of textile and clothing products stood at $4.082 billion, down 4.4% compared with $4.268 billion in the same period of previous year.

Pakistan Apparel Forum Chairman Jawed Bilwani squarely blamed government policies for the decline in exports.

“Pakistan’s exports have dropped by 20% in the last three years and instead of identifying domestic challenges, the government is still blaming external factors,” he said.

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“Our government cannot blame external factors. If that was the case, textile exports of Bangladesh and Vietnam would not have increased in the recent past. The Ministry of Commerce and Trade Development Authority of Pakistan (TDAP) should take responsibility for the declining exports,” Bilwani added, suggesting that the minstry and TDAP should help find new markets for Pakistan’s products.

Exporters say the government has increased the cost of doing business at a time when external factors like low oil prices and global economic slowdown have significantly affected exports of many countries.

“Our cost of production has gone so high that India and Bangladesh are earning up to 10% profit by selling their products at prices equal to our production cost,” Bilwani said.

Security threat and energy crisis have caused additional problems for Pakistan’s manufacturing sector in the past one decade. Despite improvement on both fronts in the last three years, the country has recorded a massive decline in overall exports.

Courtesy : Express Tribune

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