KARACHI: Country’s overall textile sector exports declined 5.32 percent to $1.19 billion in August 2019 compared with exports of $1.25 billion recorded in the same period last year, data issued by Pakistan Bureau of Statistics suggest.
“Lower prices obtained by exporters during the month was the key reason for declining textile exports, which was presumably due to slowing demand in the global market whereas quantities exported generally increased probably on account of the devalued rupee,” a report issued by JS Global Capital.
During 2MFY20 (July-August), textile exports inched up 2.3 percent to $2.303 billion, where the value added segments were the prime contributors towards the increase.
“With government withdrawing zero-rated status of the five export-oriented sectors along with hefty amount of refunds yet to be distributed by Federal Board of Revenue (FBR), growth in exports is anticipated to remain modest despite hefty rupee devaluation. However, we highlight recently negotiated CPFTA-II with China as an important development which has the potential to enhance country’s exports over the course of next year,” an analyst at Pearl Securities said.
Exporters said uncertainty in exchange rate and budgetary measures negatively impacted the exports, as the cost of raw material surged while non-issuance of stuck-up refunds aggravated the liquidity crunch.
Knitwear exports declined 0.16 percent to $178.68 million in August as compared to $279.12 million in August last year. Export of readymade garments exhibited 4.98 percent growth to $235.71 million as against $224.52 million in the preceding year.
The export of raw cotton and cotton year witnessed increase 73.75 percent and 2.36 percent during the comparative months, respectively. However, export of bead wear declined 10.63 percent to $205.9 million in August 2019.
Except for yarn, export values of all these major products suffered from a drop in unit prices, as quantum exports grew appreciably. The drop in dollar-based unit prices was mainly owed to exchange rate adjustments, as exports rose significantly in Pak Rupee terms, analysts said.
Going forward, efforts by the government to incentivize cotton production and improve yields could result in more competitive prices for textile manufacturers across the value chain and ultimately lead to increased exports.
“In our view, higher taxes on domestic retail sales might lead to lower demand for textile products in the local market, with higher production directed towards textile exports. Once again, in order to bring about a meaningful change in textile exports, efforts need to be placed towards resolving the core issues of textile exporters i.e. providing tax incentives towards exports and increasing cotton production as well as improving women labour participation to drive down labour prices and make them regionally competitive,” JS Global Capital report noted.
Edited by Javed Mirza