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Export Bubble

26 May, 2011

By Dr. Mirza Ikhtiar Baig


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Some economists believe that an over all increase in the country’s export due to 30% increase in the textile export in the current financial year may turn out to be merely an ‘export bubble’. They base their arguments on the fact that this export growth has neither resulted in any improvement in our GDP nor has created any new investment and job opportunities in the country. Therefore, it is feared that this export bubble may fizzle out.

According to a research during the first seven months of the current fiscal year GDP has registered a growth of only 0.6 per cent whereas during the first eight months of the same period our export increased by 47%, out of which textile export contributed 23.6%. In actual term yarn production only increased 1.5% whereas its export increased by 20.7% ($956 Million). Knitwear export increased by 32.71%, bed linen by 22.28%, readymade garments by 37.75%, cotton 22.4% and Towels 17.25%. In all these cases the increases in production do not match with increase in export of these items.

A comprehensive study reveals that due to the recent flood we lost two million cotton bales and the situation further aggravated due to short supply of cotton in the international market which resulted in a threefold increase in the cotton prices in our country taking it to its peak -- Rs.13000/= per maund. As a result the finish textile products made from this expensive cotton fetched high prices in the international market which obviously swelled our export bill. But now the foreign buyers are not ready to pay such a high price which has created a pause in the market resulting gradual fall in the prices. From July to March our total exports reached $17.8 billion whereas during the last fiscal year it was $14billion. It is expected that by the end of this current fiscal year our textile export would touch $11billion and over all export $22billion.

These statistics show that during the first nine months of the current fiscal year import of textile machinery also increased by 80%. During the last two years profits of textile companies and demand of Pakistan textile in the international market increased substantially. Recently I inaugurated three-days ‘8th Textile Asia 2011’ at Expo Centre on 16th April which was attended by 259 foreign delegates. 122 exhibitors from 40 countries exhibited 357 international renowned brands of textile machinery. CEO TDAP and a number of foreign diplomats who were present with me termed it a highly successful exhibition. I visited all the stalls to find out their views about our textile industry and all of them expressed their confidence about the growth potentials of our textile sector. Almost all the textile companies of Pakistan showed their interest in buying the latest textile machinery. E-commerce Gateway, the organizers of this exhibition deserves commendation for putting up such a grand show.

It is pertinent to add here that Pakistan is the 2nd biggest producer of cotton yarn, 3rd biggest of fabric and 4th biggest of cotton. Pakistani yarn contributes 30% and fabric 8% to the total international market. Pakistan is among top 10 textile exporters of the world. Textile export world over is about $400 billion out of which China tops the list with present export of $55billion, followed by Hong Kong $38billion, Korea $35billion, Taiwan $16 billion and Indonesia, India, Bangladesh and Pakistan $11billion.

On my advise to organize an exclusive exhibition of Pakistani textile products namely Fabric, Garments, Home Textile, Hosiery, Towels, and Technical Textile on regular basis. The organizer of Textile Asia has announced Clothing, Fabric & Textile Asia 2012, an international exhibition of Pakistani textile products to be held from 7th to 9th April, 2012 at Expo Centre Karachi. More than 300 Pakistani companies are expected to showcase their textile products to international buyers representing renowned textile brands. I have requested Ms. Gail Strickler, Head of US Trade Representatives (USTR), a good friend of mine, to persuade all big American brands and stores like Jordache, Kohl, South Pole, Levi’s, VF, Wall Mart, K Mart, Jesse Penney, Target and etc. to attend this exhibition. Ms. Gail has already introduced more than 90 American top brand buyers to Pakistani exporters during the TexWorld Exhibition last year in New York.

Let us admit the fact that our product and market base for export is too small and we depend on few countries. Now is the time to look for new markets for export of our products. Central Asian Countries and Africa have great potential but not yet explored by our exporters. It is encouraging to note that on the invitation of the President of Tajikistan, TDAP in collaboration with FPCCI are taking 100 businessmen delegation to Dushanbe from 30th May to 3rd June 2011. There is a lot of trade potential in the field of textile, leather, food stuff, sport goods, oil & gas and various other sectors between the two countries and its now time to focus Central Asian countries to enhance our trade.

We have already seen 30% to 35% fall in cotton and yarn prices in the international markets resulting crash in the prices of our textile products and eventually to our exports. We have to actually improve our production capacity to have exportable surplus to sustain our export growth otherwise it will barely an export bubble.

 

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