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Export of textile manufacturers fall during first half of 2000-2001

A substantial decrease in the contribution of textile manufacturers and a slight increase in that of the primary commodities marked the exports performance of the country during the first half of 2000-2001. Textile manufacturers accounted for 65.02% of total exports, down 3.31% from July-December 1999.

The official figures for the period July-December 2000 indicate that increase in exports turned out to be only 8.5% at US$ 4.47 billion as compared US$ 4.13 billion in the corresponding period of 1999. The export target for July-December 2000 was set at $ 5.5 billion. Thus, there was a short fall about $ 1 billion, giving a dismal signal that the full year's target of $ 10 billion is going to be an impossible fear to accomplish.

During the period under review, export of textile manufacturers went up by 2.91%. In absolute terms, the textile manufacturers exports amounted to US$ 2.76 billion. Within this group too, the share of cotton yarn declined. It was 18.1% in July-December, 1999; this year it has slid to 17.9% due to continues drop in unit prices of textile manufacturers. The quantity of cotton yarn exported during the first six months of the year was 254,655 tonnes 9.66% more than last year. But the foreign exchange that accrued from this export went up by only 1.49%.

Volume-wise, the increase, reported in export of cotton fabrics was of 8.32%. But the foreign exchange earning plummeted by a sharp 9.15%. Similarly, the exports, volume-wise, of knitwear, towels and tule, lace, embroidery etc increased significantly, by 4.51%, 11.62%, 29.81% and 27.80%, while in dollars terms the earnings went up by 4.11%, 22.46% and 15.32% respectively.

The items, which registered a negative trend were: cotton bags/sacks, tarpaulin and canvas goods and waste material of textile fibres and fabrics.

The first half of the year was marked by about 6% decline in export earnings for the month of December 2000, which reveals the disturbing aspect that the tempo of growth in exports could not be sustained despite overriding emphasis of the government, especially of the Chief Executive, on the task of accelerating the pace of foreign exchange earnings, which alone can lead the country towards self-reliance and viable economic recovery. The reasons for the failure of the Commerce Ministry’s strategy to inject the desired vigour into export growth, as spelt out in the Trade Policy, were reportedly analysed at a meeting of the Federal Export Promotion Board. Blame was laid on the injurious impact of SRO’s No. 319,417 and 818 against which the export industries and exporters in general have been agitating for the last few months to no avail. The CBR has refused to budge from its stand to keep intact these SRO's without amendments.
One of these SROs was instrumental in imposition of a high rate of duty at 35% and sales tax at 15% on these imported inputs, which are used in the manufacture of higher value-added leather garments. Other SROs are said to have prescribed complicated procedures for the refund of sales tax and rebates. As a result, the exporters have been facing hardships due to liquidity crunch caused by long delays in the refund of sales tax and duty draw-backs. On the other hand Mr. Abid Farooq, the newly elected Chairman of All Pakistan Textile Mills Association (APTMA) has demanded immediate withdrawal of the controversial SRO-417, is blamed which for inordinate delays in the clearance of sales tax refund claims filed by exporters. According to the Order, the exporters have to provide at least 90% of the sales tax invoices to the CBR to claim refund of the sales tax on input used for their exported goods.

The Chairman said it was difficult, rather impossible, to produce all the invoices because some sectors, like powerlooms, in "their chain of production, were still out of the ambit of sales tax". The implementation of this SRO should be deferred till such time when the "whole chain is brought under the sales tax regime”.

The Chairman also objected to the amendments in the SRO-818 allowing temporary, duty free importation of raw materials for re-exporting. The amendments call for encashment of the indemnity bond provided by the exporters on his failure to re-export his goods within a specific period of time.

The export target for the current year fixed at 10 billion dollars has seemingly become rather difficult to achieve in view of the performance of the export sector in the first half of 2000-2001. The government naturally is concerned and is seemingly making efforts not only to regain the lost ground but also to remain on target during the remaining six months.
The Chief Executive is reportedly to have taken a serious view of the damaging impact of these SROs on the growth of exports and has directed the CBR officials to make necessary amendments with a view to streamlining export-friendly policies in all possible respects. It is, however, yet to be seen whether the directives of the Chief Executive would evoke due compliance from the CBR in the larger interest of giving an impetus to export growth of the country.

It appears that the two important economic goals, namely increasing tax collections and accelerating the pace of export earnings, have come into conflict. The CBR, which is understandably seized of the difficult task of increasing tax revenue substantially, seemingly gives little attention to the adverse impact of its tax levies on the national effort to make the country dynamic on the export front. In the context of growing competition in the world market and emphasis on the principle of globalisation, the domestic policies must be made friendlier to export efforts. The short-sighted policies of imposing high rates of duties and sales tax on imports of raw materials, used by export industries, can hardly be endorsed as a feasible approach. It may further be emphasised here that rapid growth of export industries through export-friendly taxation policies, may, in fact, contribute significantly to expansion in employment opportunities in the export-led industrial sector, which would further add to the number of direct and indirect tax payers. As such, the need to remove genuine grievances of the exporters can hardly be overlooked.