Textile industry, the largest sector having a 65% share in the country's exports, shows a dismal performance by registering only 2% growth during the first quarter of the current fiscal year as compared to the 14.3% growth during the same period of the previous year. The poor export performance of textile products during the current financial year brought down the share of textiles in total exports to 61%, which used to be over 65%.

The reasons behind the decline in the growth are said to be high cost of doing business and a shortfall in cotton crop during the current fiscal. Textile is an important sector of large scale manufacturing (LSM), accounting for about one-third of aggregate LSM, but it is apprehended that the LSM target for the current fiscal year might be missed.

The SBP also confirmed that a lacklustre performance of textile sub-group was disappointing, mainly due to a shortfall in cotton production as well as a weak external demand. Moreover, weakness in the production of ginned cotton and cotton cloth also reflects the smaller crop; shift to production of synthetic fabrics also affected the growth.

The current weakness in textile sector appears to be a continuation of the pattern prevailing in the industry that a good year of performance is followed by a relatively poor performance, at least during the initial months of fiscal years.

The Government has fixed $ 11.40 textile export target for 2007-08 as compared to $ 10.40 billion of last fiscal year, but due to severe energy crisis, shortage of cotton, political uncertainty and deteriorating law and order situation have badly undermined the textile sector’s capability of increasing exports to over and above the last financial year’s benchmark.

During the first six months (July-December) of 2007-08, textile exports stood at $5.228 billion as compared to the corresponding period of 2006-07 that accounted for the total textile exports of $5.489 billion, showing a decline of 5%. About 10 major textile categories recorded a steep fall during the period July-December with yarn and towels registering highest fall of 19.61% and 14.80%, respectively.

Textile sector has been provided cash incentives and subsidies worth billion of rupees since the last fiscal year, however, the export of these products could not be picked up. Exporters attributed this situation to high cost of production, which is soaring with each passing day due to rising rates of utilities especially gas prices.

After enjoying Rs 30 billion as cash subsidy as well as concessions on bank loan rates and export refinance in the last two and half years, the export could not be enhanced, which means that fault lies somewhere else that should be sorted out to reverse the trend.

However, textile exporters termed the incentives too short to revive the sector because of major problem of cost of production, which is soaring due to high rates of utilities, especially they resent the recent price hike which got effective from the 1st January 2008, bringing more burden on the sector.

To achieve the export target of $11.40 billion set for the current fiscal year, textile sector is required to export goods worth $1 billion each month, however, it appears to be missed in view of the current situation and would be second consecutive year when textile exports would be failing to achieve the target.

Country’s textile sector is struggling hard since the last financial year to compete in the international markets, where its regional competitors are penetrating by registering substantive growth in export since the discontinuation of quota regime. Sources in the textile sector were of the view that in 2007-08 the industry even would not be able to reach the level of $ 10.40 billion exports achieved in last fiscal year.