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News & Views PCMA'S FIRST EXPORT TROPHY AWARDS Prime Minister's Adviser on Finance and Economic Affairs Shaukat Aziz has said that the government has provided $ 1.5 billion in cash to the textile exporters to help them import modern machinery to upgrade their production. The government's initiative was aimed to prepare the textile industry for the quota-free period commencing from 2005. Addressing the first Export Trophy Awards ceremony of Pakistan Cloth Merchants Association (PCMA), he said that modernisation of the textile industry with the induction of new plants was a proof that the industry enjoyed a great competitive edge and could compete with the rivals by producing quality products. He was confident that Pakistani textile exporters would prove to be the leaders in the race to capture quota-free markets. Shaukat Aziz exhorted the exporters to take the era of globalisation and quota-free period as an opportunity rather than a challenge and take on the competition courageously. They would find the government, which has already taken several measures to upgrade the industry, will actively support the industry’s efforts to capture markets. The government has reduced the mark-up rates to help the exporters, which was their long outstanding demand. "We did not do it through artificial means but by reducing fiscal deficit, which has led to durable low mark-up rates". He said the country has achieved economic sovereignty because of the appreciation of rupee and enhancement of foreign reserves level. TEXTILE INDUSTRY PINNING HIGH HOPES Pakistan's textile industry is predicting good times during the fourth quarter of the current fiscal year as the prices of yarn and fabric have improved significantly worldwide. The entire textile industry is going to benefit from the bullish trends in the international market, said Chairman All Pakistan Textile Mills Association (APTMA), Anjum M Saleem. He said that the upward sentiments in the world market would help country's industry to overcome the problems. Mr Saleem said that the APTMA had requested the government to revise upwardly the duty draw back to help textile industry carry out its activities in a viable manner. He said that the APTMA had communicated the problems regarding the prices of the Polyester Staple Fibre (PSF) to the Ministry of Commerce. He said that there was no problem related to the availability of cotton for the textile sector. PERU ASKS ISLAMABAD FOR ANTI-DUMPING PROBE Pakistan has received a notice for investigation into the alleged dumping of poplin polyester/cotton products in the local market in Peru. The notice has been issued by the Commission of Supervision of Dumping and Subsidies of the Peruvian government, which has led to the start of proceedings for investigation against alleged practices of dumping. The investigation has been initiated on a complaint made by a Peru company, Peru Pimo S.A. against the import of poplin polyester/cotton with width larger than 2.20 meters from Pakistan. The notice has been sent through Pakistan Embassy in Buenos Aires, Argentina. The notice says that the Commission of Supervision of Dumping and Subsidies has initiated investigation, INDECOPI (National Institute for the Defence of Competition and the Protection of Intellectual Property). This procedure is followed by the company Peru Pimo S.A. against the imports of poplin polyester/cotton with width larger than 2.20 meters. from Pakistan. GOVERNMENT URGED TO REVISE DRAWBACK RATES All Pakistan Textile Mills Association (APTMA) has demanded of the government to immediately announce revised rates of duty drawback on polyester-based products so that the impact of high prices of polyester staple fibre (PSF) could be compensated. Mr. Anjum M. Saleem, Chairman APTMA, said that recent increase in polyester staple fibre prices have increased the difficulties of the textile exporters. He was of the view that if PSF prices keep on rising, it will be difficult for the Pakistani exporters of textile products to compete in the international markets. This situation can reverse the trend of increase in textile exports. He averred that cotton prices are already high in the market, and increase in PSF prices will create problems for the textile industrialists, as it will not be possible for them to fulfil export orders. The delay in the revision of duty drawbacks can further affect our exports and the export targets set by the Government of Pakistan. EU DUTY-FREE STATUS Pakistan's Economic Minister in Brussels Suleman Ghani has exhorted the textile exporters to maximise their exports to the European Union (EU) member countries as the increased market access and duty-free status will apply to 14 Eastern European countries, likely to join the European community (EC) next year. He was addressing a seminar on "Exports to European Union - issues and trends", organised by the Export Promotion Bureau (EPB). He said the analysis of the last five years quota exports to the EU,
carried out by the Pakistani Mission in Brussels, showed that "traditionally, we have
been slow in several categories, especially in women’s apparel, which has a large
share in the EU market. He said that the lucrative trade package provided by the EU to Pakistan last year provided Pakistani exporters to capture markets, which they were losting to their competitors due to stiff competition. Some of the lost markets had been already captured. Suleman said that India had launched a strong campaign in the EU to persuade it to withdraw the market access package granted to Pakistan. The Indian plea was, however, rejected by the EU after Pakistani Mission proved with figures that the package given to Pakistan did not have any adverse impact on the Indian economy, which was a very large trade partner of the EU. A new guideline for the scheme up to 2014 was being formulated and, hopefully, Pakistan would continue to benefit from the scheme. He said the import duty on the products, falling under the GSP scheme, was reduced by 3.5 percentage points. PHMA WORRIED OVER NEGATIVE IMPACT OF PRICE HIKE The Pakistan Hosiery Manufacturers Association (PHMA), North Zone, has warned the government against the negative impact of the price hike of cotton yarn and polyester fibre on the hosiery and knitwear industry, which is not only export-oriented, but also a labour intensive sector. Vice-Chairman, Mohammad Shaheen Tabassum, North Zone PHMA said that the cotton yarn and Polyester fibre was the basic item for hosiery and knotted products. The current price hike had resulted in huge addition to "production costs". He maintained that cotton production in the country, has reached up to 9.1 million bales, which could meet the domestic requirements. Shaheen Tabassum alleged that the spinners were exploiting the situation by creating artificial shortage to fetch huge profits at the cost of small-scale yarn consuming industries, which was backbone of the national economy. He said that if one kilogram cotton yarn exported, Pakistan could earn $2.5, whereas the value-added items could earn $7.5 or even more by promoting indoor employment etc. The North Zone PHMA Vice-Chairman strongly demanded of the government to pull the value-added industry out of crisis and put the cap on the prices of yarn and poly fibre without further relaxation, otherwise the exporters would be unable to fulfil commitments with the foreign buyers. ABNORMAL RISE IN YARN PRICES The abnormal increase in prices of yarn in the local market has risked export orders worth millions of dollars obtained by Pakistani exporters in the famous Heimtextil fair held in January this year. The textile exporters who had most happily booked orders at the fair were now in a fix on how to fulfil commitment without bearing losses due to 25% increase in prices of yarn in the local market. Yarn is a basic ingredient used in making of garments, towels and bed linen. They have no option except to request their buyers to increase the price or accept regrets, which would have far- reaching consequences on future business. The most affected from the inflated yarn prices would be exporters of towels and bed linen who had this year bogged 50% more export orders at the Heimtextil. The abnormal increase in prices of raw material such as yarn in the local market would also mar the bright prospects for the textile sector forecast for Pakistan during 2003 and 2004. The textile sector has witnessed a boom in investment in the textile sector ahead of the quota free phase commencing from January 1, 2005. Ghulam Ahmed Ismail, a leading textile exporter said that while the Commerce Ministry and Export Promotion Bureau (EPB) were boasting on increase in export figures the textile sector is faced with sluggish trends due to a variety of reasons mainly due to increase in process of yarn and upward trend in prices of fuel which would adversely affect production at home as well as exports. He said that foreign shipping lines were constantly increasing freight and bunker charges and exporters were compelled to pay the higher freight as the country lacks its national mercantile fleet. HIGH PSF PRICES DAMAGING TEXTILE INDUSTRY Higher prices of Polyester Staple Fibre (PSF) has started adding more cost to the cotton-based products which could be another hurdle after higher oil prices. The textile exporters and manufacturers said the prices of PSF have gone up world over, but local manufacturers have increased much more than that. The PSF manufacturers increased the prices up to Rs 75 per kg that went up sharply in the wake of higher oil prices. They said the PSF manufacturers had increased the prices by 11.1% a couple of weeks ago, and its prices went up to Rs 70 per kg from Rs 63, adding the PSF price was further increased to Rs 75 per kg. The textile millers expressed their serious concern over the new PSF prices calling it damaging for the textile industry. Since the cotton production has proved lower than the last year, the textile industry was trying to increase PSF utilisation. However, they expressed fears that the textile production would drop as the high PSF prices and low cotton production would not allow them to work with full capacity. In the wake of reports that cotton production would remain around 10 million bales, the manufacturers of man-made fibres, including PSF, filament yarn, acrylic and viscose, decided to increase their share to 32% in 2003 from 25% last year of the total consumption of fibres. If the production remains around 10 million bales, there would be a gap of about 2 million bales that provides a chance to the PSF manufacturers to get maximum share in the market. The current domestic capacity of 6,18,000 tonnes in PSF is equivalent to over 4 million bales after accounting for wastage of 15% on cotton. Of this, 1.23 million bales equivalent to additional PSF capacity was added this year. CONFUSION ABOUT OVER-SHIPMENTS TO EU Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) Chief Pervez Hanif has urged Commerce Minister Humayun Akhtar Khan to take notice of confusion on the part of Quota Management Directorate regarding the over-shipments to European Union during 2001-02. In a statement, Pervez pointed out that PRGMEA has received a good number of communications from Quota Management Directorate of Export Promotion Bureau since last week of January, which are contradicting each other. In a couple of communications even Ministry of Commerce has also issued contradicting directions, causing great distress among the garment exporters. According to him, the latest directions from the Textile Quota Management to EPB offices in Karachi, Lahore and Sialkot to ask the exporters for a clarification from their EU buyers whether they have presented visas to the EU Custom authorities or not during 2001-02 has panicked the exporters. It is quite difficult for the garments' exporters to enquire from their buyers about the presentation of visa documents for such shipments that have not only been cleared by the EU customs' officials already, but the buyers have also paid outstanding amounts. He said that such exercise would annoy the buyers, which might lead to loss of future orders. He urged the Commerce Minister to take up the issue immediately and direct the concerned agencies and officials to stop threatening the exporters and instead ensure a smooth flow of garment exports. FABRICS EXPORT SLOWS DOWN DUE TO HIGH PRICES Export of fabrics has slowed down as fresh export orders are not being placed by foreign buyers in view of high prices of Pakistani textiles resultant upon 20% hike of cotton yarn and 15% raise in polyester staple fibre, major raw material components of fabric export goods, said Chairman All Pakistan Cloth Exporters Association (APCEA), Khurram Iftikhar. He said that continuously rising costs of raw material, inputs, manufacturing expenses and overheads have made the Pakistani export goods very high priced and the foreign buyers are not prepared to import these goods as they find the Indian and Chinese products more competitive and within their acceptable range. Moreover, the shippers were bent upon to impose WRS on Pakistani cargo,
notwithstanding the fact that Pakistan was neither a party in the war nor was it located
in the war zone. Arbitrary imposition of WRS would adversely affect the already heavily
burdened export. DUTY DRAWBACK GRANTED ON 14 PSF BASED ITEMS Extending duty drawback facility on export of 14 new polyester-based textile products, the Central Board of Revenue (CBR) has allowed the manufactures-cum-exporters of fabrics, made of imported polyester staple fibre (PSF), to avail duty drawback. This was one of the major demands of the textile sector. The CBR has amended standard SRO. 412(I)/2001 through two notifications SRO. 229(I)/2003 and SRO. 238(I)/2003. The exporters of polyester fusible interlining woven with LDPE or HDPE made from locally procured polyester would also be entitled to duty drawback. However, the CBR has excluded the component of locally purchased polyester to ensure rebate only on the imported raw material. Under Custom Act, 1969, the repayment of custom duty is only available on the export of goods made from the imported raw materials. There is a huge duty drawback difference of Rs 5.24 per kg on the export of 100% polyester (imported) fusible interlining woven with LDPE/ HDPE and that made from locally procured polyester. The repayment of duty on the export of the imported polyester is Rs 8.66 per kg whereas it is Rs 3.42 per kg on the locally purchased polyester. CBR officials said that duty drawback on the export of above-mentioned product made from locally purchased polyester is very less as compared to imported polyester. Other raw materials include fluorescent or optical brightener, softener, LDPE or HDPE and polythene for packing, whereas, same raw materials utilised along with 100% imported polyester would avail duty drawback at the rate of Rs 8.66 per kg. The authorities claimed that the duty drawback has only been extended on the overall product ie 100% polyester (local) fusible interlining woven with LDPE or HDPE excluding element of locally purchased polyester. TEXTILE BODIES ADVISED TO IDENTIFY TYPE OF QUOTA The Export Promotion Bureau (EPB) has advised textile associations to identify the type of quota on form IV against which an export license or visa is required by an exporter. A circular issued by the Textile Quota Management (TQM) of EPB asked the associations to also state on the said form the exact break up of quantities/types that has been aggregated if the visa is being issued for more than one type. The TQM department has informed textile associations that the condition will apply from March and in case of non-compliance of this instruction visa requests will not be entertained. PSF PRICES FURTHER RAISED BY RS 5 PER KG The local manufacturers of polyester staple fibre (PSF) have further increased the price of the fibre by Rs 5 per kg from March 1, 2003. The new price of the fibre will be Rs 75 a kg. This is the second quantum jump in the prices in just 15 days, which have been raised from Rs 60 to Rs 75 a kg. The price was increased by Rs 10 per kg on February 15, 2003. The raise in the PSF prices has been attributed to the rising oil
prices leading to costlier raw material used in the manufacture of the fibre. They have demanded of the Government to intervene to check the increasing prices of the fibre or lower custom duty on import of polyester so that raw material needs of the value-added sector can be met through cheaper imports. COTTON PRICES MAY CROSS RS 2,700 LEVEL Cotton prices have risen fast in the last two months, due to fears that the crop has been affected by infestation and low water availability. The Minister for Food and Agriculture, Yar Muhammad Rind, has also conceded that cotton production is below the target of 10.3 million bales and may be as low as nearly 9.8 million bales by the end of the outgoing season. In the last couple of months (January-March) Ex-gin cotton prices have increased 20.7% from Rs 2,100 for 37.32 kgs in January 12, 2003 to Rs 2,535 on March 12, 2003 for the same quantity and quality. Similarly, fine quality Phuti cotton prices appreciated nearly 26.31% in two months from Rs 950 per 40 kgs on January 12, 2003 to Rs 1,200 per 40 kgs in March 9, 2003, according to official news reports. Demand is much higher against supplies, said Naseem Usman, General Secretary, cotton brokers association. And textile millers would have to vouch for imports to meet their requirements. On top of that, this low-demand situation would be more depressing for mills with low storage capacity. The total cotton crop production was expected to reach nearly 10.55 million bales in the season. Abdul Rehman, a cotton ginner, at Karachi Cotton Market, has said cotton storage is quite different from other commodities, since the higher the row of bundles becomes, higher are the chances to lose quality. He said the pressure from the bales above can compressed cotton threats and can make a difference in the count level in bundles from the same ginning factory. In contrast to the production decline, world consumption is forecasted to increase 2.6% or 2.5 million bales with increased activity in textile sector. The report also warns that prices are expected to remain high in near-term and any further upward movement would affect cost estimation to meet export orders, which may come to halt if a war starts in Iraq. PSF PRICE HIKE IRRITATES APTMA The increase in polyester staple fibre prices has irritated All Pakistan Textile Mills Association (APTMA) whose representatives termed it a step towards taking the textile industry hostage in the meeting with Secretary, Ministry of Industry and Production, Dr Akram Sheikh. Sources said that APTMA representatives told the Secretary that the increase in polyester staple fibre prices would make it difficult for the textile industry to keep production at the present pace and finally hit the financial health of this vital sector. They apprehended that the polyester staple fibre producers' decision could adversely affect the efforts made to enhance exports of textile industry products. Sources said that the APTMA delegation demanded reduction in duty on import of PSF to break the monopoly of local producers and to stabilise its prices in the local market. Polyester staple fibre prices had gone up by Rs 10 per kg. Its producers say that the increase was due to war-like situation in Middle East, which was effecting import of raw material used in PSF production. APTMA Chairman Anjum Saleem said he did not believe that war-like situation was the reason for the increase. He had raised the issue with Minister for Industries and Production, Liaqat Jatoi and Commerce Minister, Humayun Khan, through a letter and sought their intervention for forcing the polyester staple fibre producers to reverse their decision. REDUCTION IN EXPORT REFINANCE RATE HAILED The Chairman, All Pakistan Cloth Exporters Association (APCEA), Khurram Iftikhar, has welcomed the reduction by half percent in Export Refinance Rate announced by the Governor State Bank of Pakistan (SBP) Dr Ishrat Hussain for the month of March 2003. In a statement, APCEA Chief said that Export Scheme plays an important role in financing the national exports and it is highly appreciative to note that the State Bank of Pakistan is fully aware of the importance of the predominant factors which help boost the exports. Elaborating, the All Pakistan Cloth Exporters Association Chief said that Export Refinance Rate had at onetime ranged at 13% and in addition to this, 1% excise duty was also charged from the exports. Thus the exporters had to borrow the credit at a very high rate of 14% and were, therefore, un-competitive in the international markets. He took up the gauntlet and has very ably and prudently brought the Export Refinance Rate down to 5%. This achievement is commensurate with the changing scenario of the international trade and has helped maintain the tempo of progress of the export of the country. QSC RECOMMENDS COMPENSATION TO EXPORTERS The Quota Supervisory Council (QSC) has proposed a method to compensate the exporters, whose shipments in certain categories are blocked due to embargo, imposed by the importing country. The QSC, in its recommendations for the amendment to the 2003-04 textile quota policy, has suggested that the balance performance or flexible quota, obtained in an exporter's Category Pass Book (CPB) due to embargo, will be deemed to have been exported and his next year's entitlement will be worked out as such. It further suggested that the performance quota, not allowed to be utilised in 2002, will, in addition to the above, be allowed as special carry over to be used one time only in 2003. In case, there was a balance of flexibility quota in the exporter's CPB, the same would be carried over into 2003 for one time use only, it suggested. In its recommendations about auction quota, the QSC proposed that it should be non-transferable to discourage speculators from coming into the market and hoarding auction quota. It is further suggested that in these categories where the Export Promotion Bureau (EPB) had been allocating more quota than was available with them, the growth quota should not be auctioned till the allocation account had been reconciled. DUTY RELIEF REJECTED The textile industry has witnessed another setback as the Central Board of Revenue (CBR) has turned down the request of the textile sector to give combined benefit of SRO. 554(I)/98 and SRO. 987(I)/99 for exemption of general sales tax (GST) and custom duty on the import of plant and machinery. The textile sector was demanding of the tax authorities to have benefit of both the hot favourite SROs. It is clarified that SRO 987 deals with the exemption of sales tax on the import of plant/machinery, apparatus and appliances and component parts of machinery after fulfilment of certain conditions. Whereas, SRO. 554(I)/98 deals with the exemption of both duties and taxes under certain conditions. While rejecting the viewpoint of textile industry, the CBR has presented the legal position to the Federal Textile Board (FTB) that there is no dispute regarding exemption of custom duty under SRO. 554(I)/98. The CBR has compared both the notifications and clarified that SRO. 554(I)/98 is a 'composite SRO' and allows exemption of sales tax also for the objectives contained in SRO. 554(I)/98. PRGMEA OFFERED COMPUTER LINK-UP FOR REFUNDS The Central Board of Revenue (CBR) has offered Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) the status of a service centre which will provide it a computer link-up with the centralised system of processing of sales tax refunds to ensure prompt payment to its members. The Member, Sales Tax, CBR, Ramzan Bhatti made the offer for the link-up, to the Chairman, Sales Tax Committee of PRGMEA, Abdul Wahid Bandukda. Under the computer link-up arrangements to be installed at PRGMEA premises, its members would be able to file application through a CD from their association. Abdul Wahid welcomed the proposal and said that processing of refund claims under the Refund Claims Preparation System (RCPS) is very fast as the centralised system for processing in Lahore have complete details of suspected units and negative list of suppliers with whom dealings are forbidden. The system is now working all right and refund cheques are being issued promptly. The PRGMEA is the largest textile value added association, which has more than 1200 members all over the country. REVIVE SICK INDUSTRIES The All Pakistan Textile Mills Association (APTMA) has lauded the efforts of the Governor of State Bank of Pakistan who played a major role in the harmonisation and galvanisation of the spirit of the BPD Circular 29. APTMA spokesman in a press statement said that State Bank guidelines would go a long way to revive the sick industry of the country. It is hoped that certain proposals put forward by the industry would be implemented to make use of maximum benefits of the BPD circular. 125 Industrial Units Revived As many as 125 sick industrial units out of 274 have been revived in the Punjab providing job to more than 37,000 industrial workers in these units. According to official sources, the Punjab Government is making strenuous efforts for the revival of remaining industrial units at the earliest possible. The government has formulated a strategy for setting up cottage and small industries in far-off and neglected parts of the province. The step is being taken for bringing industrial revolution to introduce new products as well as to create maximum job opportunities for the skilled and jobless persons in their respective areas. The Punjab Government has decided to establish Export Processing Zones (EPZs) for expanding strong industrial base and to keep the industrial wheel in full motion in the province. The proposed Export Processing Zones are being established at Lahore, Multan, Faisalabad and Rahim Yar Khan.
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