Musharraf Era Textile Boom Returning to Pakistan?

[Riaz Haq]

Pakistan textile industry is booming with exports soaring 27% to more than $6 billion in the first four months (July-October) of the current fiscal year. “We believe that $5 billion investment (in textile industry) in the Musharraf era would be matched in the next six to eight months”  says Zubair Motiwala, a leading textile industrialist and chairman of Businessmen Group (BMG), as quoted in the Pakistani media reports. Pakistan textile exports more than doubled from $5.2 billion to more than $11 billion during Musharraf years. Exports soared 19.43% in 2001, 20% in 2004, 24.5% in 2005 and 11.23% in 2006, all on President Musharraf's watch, according to "The Rise and Fall of Pakistan's Textile Industry: An Analytical View" published by Javed Memon, Abdul Aziz and Muhammad Qayyum.     

Pakistan Textile Exports Growth. Source: Javed Memon

Pakistani government officials report that the textile sector has invested $3-3.5 billion on modernization and expansion in the last 2-3 years and the investment is likely to match the $5 billion that was witnessed during Musharraf era when the sector was undergoing major modernization, balancing and replacement (BMR). Textile machinery imports jumped 110% in the last four months, according to the Pakistan Bureau of Statistics (PBS). Capital equipment imports are contributing to Pakistan's widening trade gap. 

Pakistan Textile Exports Boom. Source: Bloomberg

All sectors of the textile industry from yarn to fabric to ready-made garments are experiencing double digit growth.  Ready-made garments exports jumped 22.34% during July-Oct 2021,  knitwear exports soared 35.45%, bed-wear posted positive growth of 21.30%, towel exports were up by 14.17%, cotton cloth rose 18.54%. Among primary commodities, cotton yarn exports surged by 71.39%, while yarn other than cotton by 114%. The export of made-up articles — excluding towels — rose by 11.55%, and tents, canvas and tarpaulin dipped by a massive 23.98% during the 4-month period.

International Comparison of Textile Machinery Imports. Source: Busi...

History of Pakistan Textile Machinery Imports 2004-2021 in Millions...

The textile industry is very important for Pakistan's economy. It is a very large employer and contributes nearly 10% of GDP.  Textile exports account for more than half of Pakistan's exports.  Unfortunately, the textile industry has stagnated in the last 12 years. Textile boom is good news for the country's economy. 

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[Riaz Haq]

Production of home appliances soars

https://www.dawn.com/news/1629800

KARACHI: Easing of lockdown and rising heatwave have caused a sharp rise in production of home appliances with refrigerators hitting a 32-month high in April, followed by 19-month high in air conditioners and 22-month in deep freezers.

Production of refrigerators during April soared to 131,953 units from 6,996 units in April 2020 while in March the production was 119,535 units, showed Large-Scale Manufacturing (LSM) data.

Production of air-conditioners soared to 62,953 units in April as compared to 5,246 units in April 2020 while in March the production stood at 35,418 units, showing a jump of 78pc MoM.

Deep freezers sales also saw a strong rebound, rising to 11,732 units in April 2021 from 1,048 units in April 2020 while March 2021 production stood at 7,236 units.

According to a financial analyst at a brokerage house, demand for electrical goods is rising after tapering off the Covid-19 led lockdown which is much evident from LSM figures of April. Production of other power sector electrical goods such as electric transformers and meters production also witnessed strong rebound in April.

[Riaz Haq]

Tweet by Shafaat Hussain:

مہنگائی کے اس شور میں یاد دلاتا چلوں کہ پاکستان میں ایئر کنڈیشنر، فریج، ڈیپ فریزر اور الیکٹرک پنکھوں کی پیداوار میں اضافہ ہوا ہے۔ اس کے علاوہ گاڑیوں، موٹر سائیکل اور ٹریکٹر کی فروخت میں بھی اضافہ ہو رہا ہے.

یہ کوئی چاند سے آکر شاپنگ کر رہا ہے؟

#PakistanMovingForward

https://twitter.com/sshabdali/status/1461404359292600321?s=20

[Riaz Haq]

Pakistan Receives $635 Million by Exporting the Information Technology Services

https://www.phoneworld.com.pk/pakistan-earns-635-million-by-exporti...

The Pakistan Bureau of Statistics is a federal agency of the Government of Pakistan tasked with providing reliable and comprehensive statistical research as well as commissioning national statistics services. According to figures from the Pakistan Bureau of Statistics (PBS), the exportation of Information Technology services increased by 40.90 percent between July and September 2021, rising from $348.4 million in the previous financial year to $490.89 million this year. During the first quarter of the financial year 2021-22, Pakistan earned more than $635 million by supplying various IT services to different countries

-------------
Ovais
@Sabbandkardo
·
2h
Pakistan IT Exports in OCT 2021 were 195 M$
The momentum of IT exports persisted and IT exports are projected to reach around 2.5 B$ by FY end .
Pakistan should aim to reach 5 B$ soon
#PakistanMovingForward

https://twitter.com/Sabbandkardo/status/1461707968664285188?s=20

[Riaz Haq]

Baqir projects sustainable growth

https://tribune.com.pk/story/2321444/baqir-projects-sustainable-growth

Contrary to previous years, Pakistan’s economic growth will be sustainable this time around due to a persistent uptrend in remittances, robust inflows through Roshan Digital Accounts (RDAs) and expected rise in exports owing to the refinance facility, said State Bank of Pakistan (SBP) Governor Reza Baqir.

Speaking at a session titled “The Future of Pakistan’s Economy” at the Leaders in Islamabad Business Summit on Wednesday, Baqir said that the textile sector was aiming to enhance exports by $5 billion after the modern machinery imported with the help of Temporary Economic Refinance Facility (TERF) was installed.

He added that the foreign exchange reserves were climbing due to the receipt of robust remittances and hefty inflows via RDAs. He cherished that on average 1,000 RDAs were being opened every day.

The governor expected the economic growth to consolidate further following capacity expansion of the export-oriented industry as businessmen were upgrading their units with state-of-the-art equipment imported under TERF.

Talking about how monetary and fiscal policies would aid the ongoing growth momentum, the SBP governor pointed out that SBP’s policies had begun responding immediately to the deterioration in macroeconomic indicators.

“The current account deficit has been rising since June 2021 and the exchange rate began adjusting in May, therefore, our policies are responding in a timely manner,” he said. “We now have a market-based exchange rate and it acts as a natural shock absorber.”

He lamented that macroeconomic policies were delayed in previous years whenever imports rose and the current account deficit widened and as a result, the government had to devalue the rupee.

“When imbalances increase and corrective decisions are delayed, difficult measures need to be taken,” he said.

He was of the view that immediate and timely responsive measures would aid the sustainability of growth.

[Riaz Haq]

#Pakistan providing subsidies, incentivizing #construction industry. #imrankhanPTI: Rs 35 billion allocated for low income buyers. Rs. 300,000 subsidy on every house for the first 100,000 homes. #NayaPakistan #economy https://www.pakistantoday.com.pk/2021/11/19/govt-providing-subsidie... via @ePakistanToday

While visiting Naya Pakistan Housing Authority’s project Farash Town Apartments in Islamabad on Friday, Prime Minister Imran Khan expressed the government is providing subsidy and incentivising construction industry to help low income people to have their own houses.

The prime minister said thirty-five billion rupees have been allocated for subsidy on construction of houses by the low income people. He said the government will provide three hundred thousand rupees subsidy on every house for the first one hundred thousand units.

He said while one hundred thousand apartments are under construction, the process will now speedily move forward as the structure of the system has been finalised.

He said the construction industry has been incentivised in different ways including tax relief. He said One Window Operation has also been started to facilitate the construction sector.

Regarding Farash Town, the prime minister said of the total 4400 apartments, 2000 each have been allocated for low income people and middle income people and four hundred apartments will be provided to slum dwellers.

The premier, while chairing a separate meeting, said Ravi Urban Development Authority and Central Business District projects will promote modern, self-sustained, clean and green residential and business facilities in the country.

The PM said these projects are very crucial for attracting foreign direct investment in housing and construction sectors in the country. The prime minister directed the authorities to win over maximum investment for both the projects.

Earlier, the prime minister was informed that work on the development of basic infrastructure including roads, sewerage and drainage in the Central Business District is in full swing and is likely to be completed ahead of schedule. The construction work on Bab-e-Pakistan Project will also start soon.

The prime minister was apprised that the Ravi Urban project is all set to develop its Saphire Bay Project. A state of the art industrial estate, powered by renewable energy, is also ready to be launched very soon.

[Riaz Haq]

From Twitter:

Arif Habib Limited
@ArifHabibLtd

During Oct’21, technology exports was up 29% YoY to $ 195mn. During 4MFY22, technology recorded exports worth $ 830mn contributing 39% to the overall services’ export and marking a 39% YoY jump.

@StateBank_Pak

@Hammad_Azhar

@aliya_hamza

@MuzzammilAslam3

#Pakistan #Economy #AHL

https://twitter.com/ArifHabibLtd/status/1461747220114550791?s=20

[Riaz Haq]

Pakistan needs to create export culture: Dawood
Emphasises all departments should facilitate exporters to boost exports

https://tribune.com.pk/story/2329944/pakistan-needs-to-create-expor...

KARACHI:
Although Pakistan’s exports are rising due to favourable government policies, the country needs to create an export culture to give it a further boost, said Adviser to Prime Minister on Commerce and Investment Abdul Razaq Dawood.

Speaking at a press conference on Wednesday, Dawood said that the creation of export culture was a major task for the Ministry of Commerce.

To achieve the desired objective, all departments like the Federal Board of Revenue (FBR), ports as well as the government should facilitate the exporters, he said.

“Again and again, we go to the IMF to get dollars as we are short of foreign exchange,” he lamented.

Last year, Pakistan’s exports increased 30% year-on-year while information technology exports registered a rise of 47%, Dawood said. This year, IT exports have surged 45% year-on-year so far.

Pakistan’s overall export target for FY22 is $38.7 billion including $20 billion in textile exports.

He voiced hope that the country would make $38 billion worth of exports, with $31 billion in goods shipments and $7 billion in services exports.

He underlined that under the diversification policy, Pakistan witnessed a 77% surge in exports of non-traditional products to the unconventional markets.

However, the increase was not phenomenal in the traditional markets, he said, adding that it would take up to five years to reap full benefits of the policy.

“We are exactly on target,” Dawood remarked and emphasised the need to instill export culture in every sector so “everybody should have export in their mind, right from the FBR to the people working in farms.”

Stressing the importance of export diversification, Dawood said that Pakistan was targeting new markets such as Central Asia, Kenya and Nigeria.

“We had been to Nairobi, but could not follow up due to Covid-19,” he said.

The adviser revealed that around 115 businessmen from textile, engineering, IT and other sectors would be visiting Nigeria, where a series of business-to-business meetings had been arranged along with a conference and an exhibition.

Pakistan needed regional connectivity like the European Union, where member countries had 80-90% regional trade, he said, adding that Pakistan’s regional trade stood at only 5%.

Dawood highlighted that currently cargo trucks went through numerous loading and unloading phases at the borders.

Quoting an example, he said that cargo trucks from Uzbekistan arrived in Afghanistan and from there the goods were loaded on to Pakistani trucks.

He was of the view that cargo trucks should travel directly to their destinations in order to save time and the hassle of loading/unloading.

“In the next five to six months, we will streamline this,” he remarked.

Recently, two cargo trucks travelled from Karachi to Turkey and Azerbaijan, while one truck reached Moscow directly, he revealed.

Around 40% of the raw material was being imported at zero duty “but it is less than what we need”, he said.

Dawood highlighted that Pakistan collected 47% of duties at ports, while Bangladesh and India collected 27% of duties at ports. “The more you collect duties at the import stage, the more there is a bias against export.”

Answering a question about the prevailing gas crisis, he said “no doubt gas is a big issue.”

The supply of gas to any industrial unit that had a captive power plant would not be discontinued, he said. “Those working purely on electricity may face gas load-shedding.”

[Riaz Haq]

Interloop divests from Bangladesh operations

https://profit.pakistantoday.com.pk/2020/11/28/interloop-divests-fr...


Why is it that if one looks at the tags of clothes bought in Europe, they will invariably say ‘Made in Bangladesh’? Entirely European fast fashion brands like Zara (which is a Spanish retailer) will manufacture their clothes in Bangladesh.

There is a specific reason for this, and not just the usual developing world cliches of ‘cheap labour’ and ‘advantage in cotton’. Technically speaking, Bangladesh has been part of the World Trade Organisation since 1995. But in 2001, it would make a decision that would alter its fortunes for the better. That year, the country signed the ‘EU-Bangladesh Cooperation Agreement’ with the European Union. That agreement provides broad scope for cooperation, extending to trade and economic development, human rights, good governance and the environment.

But the real benefit, of course, was trade. Bangladesh was to receive duty-free access to EU markets under a programme known as the globalised scheme of preferences (GSP), designed to help developing countries grow through trade. The country has the most generous level of GSP, aimed at least-developed countries.

And it worked. For instance, in 2015, the EU accounted for 24% of Bangladesh’s total trade. Over 90% of the EU’s total imports from Bangladesh were in clothing. More impressively, between 2008 and 2015, EU imports from Bangladesh trebled from €5,464 million to €15,145 million, which represented nearly half of Bangladesh’s total exports.

One textile company in Pakistan took notice: the sock moguls, Interloop. The company is one of Pakistan’s fastest-growing and most exciting textile companies, and let us explain why.

--------------

The natural conclusion from this expansion was to look at who had favourable relations with Europe. Enter Bangladesh. That is why in 2010, the company set up IL Bangla Ltd, a vertically integrated hosiery plant with a monthly production of 3 million pairs of socks.

This made Interloop one of the first Pakistani companies to set up operations in Bangladesh to take advantage of the tariff-free access to the EU that Bangladesh got.

Incidentally, the government of Pakistan has been trying for the past two decades to get that same GSP Plus access to the European Union’s market, without success. Part of that has to do with the fact that the EU demands changes in legal structures to protect human rights, including the abolition of the death penalty.

Under the Zardari Administration, from 2008 through 2013, Pakistan had a moratorium on the death penalty, but did not actually abolish it. The EU came close to considering offering GSP Plus status to Pakistan, but then, when Pakistan started executing people again after the 2014 attack on the Army Public School in Peshawar, the EU withdrew that offer.

And all of this is becoming relevant now, because in a notice sent to the PSX on November 18, Interloop said it would divest from the operations.

Apparently, whatever magic advantage they thought would appear from investing in Bangladesh had simply not appeared. In fact, for the last few years, “market conditions had made its ongoing operations untenable, and the unit is in losses for quite some considerable time, and as a consequence it is imperative the company divest its investment, and use that resource in some profitable venture.”

Currently, Interloop holds 31.61% of IL Bangla’s shares. The sale of assets and winding up process will be according to the laws of Bangladesh.

It turns out that despite Interloop’s track record, and high expectations of its Bangladeshi venture, it simply could not reap the regional promises it thought it could. No more made in Bangladesh socks then; simple made in Pakistan socks (with all the not so nice duties), for now.

[Riaz Haq]

The European Commission has retained Pakistan in its preferential trade access scheme while finding no grounds to exclude the country on demand of the European Parliament that passed two resolutions to review the Generalised Scheme of Preference-Plus (GSP+) status.

https://tribune.com.pk/story/2321501/gsp-status-for-pakistan-extended

The extension will provide a relief to Pakistan, as the reduced rates of duties and taxes by the European countries under the preferential treatment has helped Pakistan to secure additional exports in the range of 1 billion to 1.5 billion euros a year since 2014.

The announcement was made by the European Commission (EC) on Wednesday from Brussels, Belgium. The commission has extended the Generalised Scheme of Preferences-Plus (GSP+) status to Pakistan till 2024, it said.

Media reports suggested that the commission attached six new conventions, mostly related to greater accessibility for people with physical disability, eradication of child labour and environmental safety.

Pakistan was granted GSP+ in 2014 and has shown commitment to maintaining ratifications and meeting reporting obligations to the United Nations Treaty Bodies for the 27 UN conventions.

The EU is Pakistan’s first export destination, absorbing over a third (34%) of Pakistan’s total exports to the world in 2018, followed by the US.

According to the media reports, the EC reviewed the status of several countries for the extension of the preferential status. However, it added that Pakistan’s individual status was not discussed.

According to a statement on Wednesday, the EC proposed that developing countries wishing to prosper from access to EU markets should uphold environmental and governance standards and adhere to extra commitments on human and labour rights.

The statement said that GSP+, with zero tariffs on two-thirds of products, was offered to a group of countries, including Pakistan and The Philippines that implement 27 international conventions on human and labour rights, the environment and good governance.

Pakistan’s exports to EU decreased in 2020 by over 9% but the extension has provided an opportunity to Islamabad to take maximum benefit from the scheme in the remaining period.

Under the commission’s new proposal, which covers a 10-year period from 2024, six new conventions will be added, including the Paris climate change agreement and ones covering rights for people with disabilities and trans-national organised crime.

Pakistan has been showing greater commitment to climate change and its recent drive can facilitate the new EC conditions.

In March 2020, the EU had extended Pakistan’s GSP plus status till 2022. The commission noted that Pakistan had made considerable progress when it came to labour laws and tackling climate change — two important conditions for the continental bloc to grant or extend a GSP+ status.

Since April this year, the European Parliament has passed two resolutions with an overwhelming majority to review Pakistan’s GSP+ status. However, the resolutions could not convince the European Commission to suspend its GSP+ status for Pakistan.

The European Parliament resolution of September 16, 2021 on the situation in Afghanistan gave more direct warning. The September resolution questions Pakistan’s role in “provision of safe havens for Taliban” and instructed the European External Action Service (EEAS) to consider if there was reason to immediately review Pakistan’s eligibility for GSP+ status in the light of current events.

The European Parliament had expressed its concern about the safety of Afghan nationals at high risk and those crossing to the neighbouring countries over land borders, in particular to Pakistan; and regretted the lack of coordination by the international community.

[Riaz Haq]

"Pakistan’s ..demonstrated access to external financing...offset rising external risks from a widening current-account deficit..reforms...could create positive momentum for the sovereign’s ‘B-’ rating, which we affirmed in May 2021 with a Stable Outlook"
https://www.fitchratings.com/research/sovereigns/reforms-financial-...

Fitch Ratings-Hong Kong-24 November 2021: Fitch Ratings believes Pakistan’s recent policy adjustments and demonstrated access to external financing, as well as its commitment to a market-determined exchange rate, offset rising external risks from a widening current-account deficit. Ongoing reforms, if sustained, could create positive momentum for the sovereign’s ‘B-’ rating, which we affirmed in May 2021 with a Stable Outlook.

Increases in global energy prices and a strong domestic recovery from the initial Covid-19 pandemic shock have put additional strains on Pakistan’s external position. The current-account deficit in the fiscal year to June 2022 is set to be wider than our previous forecast of 2.2%. The State Bank of Pakistan (SBP) on 19 November 2021 raised its policy rate by a significant 150bp to 8.75%, pointing to rising risks related to the balance of payments and inflation.

We think external liquidity pressures should be manageable in the near term, despite the wider current-account deficit, given Pakistan’s adequate foreign-exchange reserves and success in accessing financing.

Official reserve assets nearly doubled to USD24.1 billion by end-September 2021 from USD12.6 billion two years ago. However, liquid foreign-exchange reserves have dropped since mid-September, which we believe may partly reflect debt repayment.

Pakistan’s near-term financing efforts have been supported by Saudi Arabia, which plans to place USD3 billion on deposit with the SBP and provide an additional USD1.2 billion oil-financing facility under a one-year support package. Its foreign reserves also received a USD2.8 billion boost in August from the IMF’s one-off global allocation of Special Drawing Rights.

Funding from these sources followed Pakistan’s successful international debt issuance through a USD2.5 billion bond in March 2021 and a follow-on USD1 billion bond as part of its global medium-term note programme. Pakistan aims to tap debt markets more regularly through the scheme, which could reduce the costs of coming to market. The authorities also plan new sukuk issuance in 2021.