Wednesday, November 17, 2021

Musharraf Era Textile Boom Returning to Pakistan?

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 FY 2006-2021. Source: APTMA

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: Business Recorder

History of Pakistan Textile Machinery Imports 2004-2021 in Millions of US$. Source: Ali Khizar

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. 

Related Links:

Haq's Musings

South Asia Investor Review

Pakistan's Debt Crisis

Declining Investment Hurting Pakistan's Economic Growth

Brief History of Pakistan Economy 

Can Pakistan Avoid Recurring IMF Bailouts?

Pakistan's Lost Decade 2010-20

CPEC Financing: Is China Ripping Off Pakistan?

Information Tech Jobs Moving From India to Pakistan

Pakistan is 5th Largest Motorcycle Market

"Failed State" Pakistan Saw 22% Growth in Per Capita Income in Last 5 Years

CPEC Transforming Pakistan

Pakistan's $20 Billion Tourism Industry Boom

Home Appliance Ownership in Pakistani Households

Riaz Haq's YouTube Channel

PakAlumni Social Network


Salman said...

This year cotton got bumper crop with 6.8 M bails.

Moreover, 100 new Textile related Factories worth 5 B USD are under construction (which will impact a handsome amount in our export)

Tanveer K. said...

Is it true $5 B investment will create 5 mil jobs?

Riaz Haq said...

TK: "Is it true $5 B investment will create 5 mil jobs?"

It will be in millions but I’m not sure about the exact number of jobs that will be created with new advanced textile machinery now being purchased by Pakistan’s industry as part of its modernization and expansion

Riaz Haq said...

From Twitter:

Samiullah Tariq
Cotton arrivals are up by 70% YoY to reach 6.8mn bales compared to 4mn bales last year. Higher production plus higher prices should support farm income, industrial activity and exports

Tanveer K. said...

As per Gohar Ijaz (APTMA) it does.

Billion produces a mil job and they are pumping $5B in the textile industry.

Riaz Haq said...

A Mitchell
Replying to
Last year I benchmarked PK's leading law firms vrs textile houses. Lawyers all use .COMs, which allows them to rank and be found globally on Google search.

The textile houses all use .PKs, which only guarantees they'll be found inside PK - unless they pay for Google Adsense ads.

Riaz Haq said...

Production of home appliances soars

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.

Shafaat Hussain said...

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؟


samir sardana said...

Mr Haq says "Unfortunately, the textile industry has stagnated in the last 12 years. Textile boom is good news for the country's economy"

The textile industry has stagnated - BUT the assets have been sweated to the maximum, and the management has innovated,to cut costs,and just survive competition,in the last 10 years

The Textile boom ,s due to COVID and the supply chain disruptions,across the world,and the COVID resurgence,across the US and EU - and there are many more CVOIDs,in the pipeline. Pakistan is integrated across the cotton supply and value chain,over a limited land mass, and so,is not impacted by supply chain shocks,INSIDE Pakistan

So this is the right time to invest in Technology ! Low cost of capital (just before the rate hikes),easy credit in global markets,limited orders with technology suppliers and the BOOM IN THE TEXTILE SECTOR.

Top that with the USD/PKR,and so,Pakistan has never had it better,and the exponential improvement in the credibility and brand,of the Pakistani nation and Pakistani managers and engineers,in the West and the USA,and the personal credibility of IMK.

Happy Days are here again ! dindooohindoo

Jiye Jiye Pakistan !

Riaz Haq said...

Pakistan Receives $635 Million by Exporting the Information Technology Services

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

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

Riaz Haq said...

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 said...

#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 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.

samir sardana said...

SBP should not use the TERF,to make capital goods imports,of textiles.

This is the time to use the Nuclear financing option,wherein the payments to the vendors, are paid over 15-30 years

US/EU have several schemes for Export financing,forfaiting and Credit risk mitigation, on exports.Textile machine suppliers,should obtain deferred financing,from US/EU institutions, which are secured and risk mitigated, by BG or LC or letters of comfort,from Pakistani banks (in turn confirmed by foreign banks)

Thus,the capital goods imports,will be paid from the INCREMENTAL TEXTILE EXPORTS,from the said technology - which will make it FX neutral,and have no impact on the USD/PKR.

This is also the time to open up the textile sector,to FDI/FPI/FIIs,with full repatriation of profits and tax holidays.The benefits of the flow of USD,into and out of Pakistan,is the biggest gain,and then comes,the dissemination of international best practices,and the culture and environ,of creativity and enterprise.

The 1 industry,which can be viable in Afghanistan, and which can employ women, is knitwear and towels.Leveraging the consolidated textile supply chain of Pakistan and Afghanistan - to engineer a COO,in Afghanistan - should provide a negative duty access,to the EU.

Providence is with Pakistan ! dindooohindoo

Jiye Jiye Pakistan !

Riaz Haq said...

From Twitter:

Arif Habib Limited

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.





#Pakistan #Economy #AHL

Riaz Haq said...

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

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.”

samir sardana said...

Riaz Haq 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.”

As a basic principle of international law,goods imported for exports and raw materials imported for manufactured exports - cannot be taxed - at any entry port.But some nations tax it,on account of the following:

Working capital for the state (id.est., the importer nation,taxes the import and refunds it, after 12 months - once the item is exported - also called duty drawback and terminal duty refund)
Revenue - The Importer nation,taxes the imports to earn revenue
Local prices of imports - Where the gap between the CIF rates,of the imports and the local import nation prices,are huge - there is an import tax,by the import nation,to ensure that the importer does not dump the imported item,in the local markets
Credibility of exporters - Wherein the industry - which has imported the item - has a credibility of such a low order,that the state does not want to provide the said industry,with the right of duty free imports

However,to save the time and cost in exports and logistics,and obviate corruption and crash the cost of tax administration,EXPORTERS SHOULD BE ALLOWED DUTY FREE IMPORTS - with LUT AND BG,and the State should MAKE FRAUDULENT MISUSE AND DIVERSION OF DUTY FREE ITEMS - A NON BAILABLE OFFENCE.

Burdening the entire export supply chain and costing,due to the fraud or the possibility of fraud by a few exporters,and thus,imposing duties and TBT on imports,destroys exports competitiveness.dindooohindoo

And that is what Mr Dawood means,in the context of taxes on imports,at ports.And the same thought process,is required for all exports, across the export supply chain.

samir sardana said...

Mr Haq said "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%"

EU is a economic,fiscal and monetary union.Central Asia,the Caspian and the Russian Federation,is NOT,and geopolitics makes it unlikely,for a long time - unless there is a tectonic economic or military event or accident

The lack of that union,is an OPPORTUNITY for exports,from Pakistan to Central Asia,as the import and transaction costs,for those nations,within that region,are high due to the inefficiencies,in trade and commerce and taxation.But these opportunities will be transient - as no nation's export strategy,can be predicated on the inefficiences and arbitrage,of a target market.Also that region is rich in gas and hydrocarbons,and so energy costs are much lower than in Pakistan.

Pakistani companies can set up units in the Caspian,to export to Pakistan,the import requirements of Pakistan, thereby leveraging on the lower energy costs in the Caspian. Also, for Pakistani exporters,having an export unit in Cent Asia,reduces the risk of supply chain disruptions,in export orders,from Pakistan,due to gas and electricity issues,in Pakistan.

The REAL target for Pakistan exports,has to be US/EU.

Stand alone and Multi Modal logistics costs - especially in trucking - across Central Asia and the Caspian,will always be a problem.The Biggest problem is the local logistics providers.In small nations with limited logistics services - there is no threat perceived by local providers - but in Pakistan - the local transporters will NOT allow foreign plates,to toll the roads - let alone,take backhaul cargo,on the way out of Pakistan.

There is also the risk,that the foreign plated trucker,provides a ultra low discounted rate, to take cargo from Pakistan to Uzbek (as there is no backhaul from Torkham)- which will wipe out the Pakistani truckers.That is the opportunity for Global Logistics companies, in case of regional trade.Such synergies will make road costs,cheaper than rakes, especially for palletised and containerised cargos.

Once Central Asian and Caspian trade accelerates,then Rakes will be cheaper than roads - and that will blow a hole,into road logistics.Rakes are owned by the state,and the Road transport logistics,is owned and controlled by POLITICIANS - and that is why,all RAKE LINKAGES ACROSS NATIONS,ARE DELIBERATELY SCUTTLED,and that also,SCUTTLES THE OPPORTUNITIES IN MULTIMODAL LOGISTICS - leaving enterprise,at the mercy of road logistics.

That is where the CPEC cones in.It will force the build up and streamlining and integration of the regional logistics value chain from Persia,Pakistan to Central Asia, powered by rakes,run on low cost power,across the regional power surplus grids of Central Asia.That will change the international trade dynamics,forever.dindooohindoo

samir sardana said...

For Pakistan,it is key to ELIMINATE India,from Central Asia.The pipedream of the Chaiwala, of the gas and energy corridor,from Central Asia and Russia,is now blown,to smithreens - but the Bania will not give up !

What the Indian vermin will do next,is to tap the energy,and convert it to power (as gas corridors are unviable) - which is easy,and several Indian PSUs like NTPC etc and PGC can set up power plants and grids in Central Asia.

Then the Chaiwala will set up industries in Central Asia,to use that power to OBVIATE IMPORTS INTO CENTRAL ASIA,AND ALSO MAKE IT AN EXPORT HUB - using the entire matrix of SEZs etc.Chaiwala might also set up industries,in Central Asia,to target the export market of Pakistan.

Which is Y Chaiwala and India has to be eliminated.

Therefore,the plan of Chaiwala can be replicated by PRC and CPEC,whereby the Power capacities and Grid capacity and efficiency, is raised exponentially in Central Asia,to make consumer Goods for Central Asians,fed by intermediate inputs supplied by CPEC and transported,by the electric grid.

Similarly,energy intensive intermediates required by CPEC,to make export goods for US/EU, can be imported from the PRC funded Central Asian SEZs

The PRC Central Asian SEZ,can also feed the Russian Federation.

So we have a natrix of SEZs and Rakes (E-powered) across Central Asia.Once the gas is used up - Chaiwala will have no gas,to build a gas corridor.

Pakistan and PRC,have to erase the Indian entity,from the map.Jiye Jiye Pakistan !

Indians have to make toilets for their people - as a first step - that is the 1st verse of the Book of Genesis !

Chaiwala is the largest gas producer in the world - he had gassed all his life - from the Rs 15 lacs,for every dumb Indian ! Indians still vote for this gaspot - whose place was in the shit pot (where he was born - as a result of a prolapsed uterus)

samir sardana said...

With COVID relapse in Germany,the next frontier for Pakistan is AU.In the 1st step,the Pakistan manufacturers can set up down stream manufacturing units,in AU,for the local market - which is an import substitution product.

The import duty rates in AU can be modified,to lower import rates of intermediates,to make manufacturing viable,in the AU nation.

Once the synthesis of the local labour,quality and management stabilises - then the next step is to shift the Pakistan manufacturing export value chain,to select AU nations,with no shortage of energy,at a low cost.That unit can be stand by export unit for exports to EU.

Therefore,once a Pakistan EOU in Karachi has made its dent and brand in the US and EU - but cannot serve the potential market,due to energy and other bottlenecks in Pakistan,it needs AN ALTERNATE EOU BASE OR A MANUFACTURING BASE.

THAT BASE IS AU - which might also provide fiscal and monetary subsidies for export to EU from AU.

There is 1 more strategic advantage of an AU base.When oil prices crash - most AU nations FX crashes - and that will drastically lower the USD costs,in AU (As wages etc., will be in local FX),and increase the NSR on exports (due to FX depreciation).In Pakistan,when Oil falls, PKR rises,and THUS DENTS the NSR ON EXPORTS,especially as the imported content,was booked at higher FX rates !

So the Pakistani corporates,can maximise the treasury and NSR,as an integrated unit,spread from Pakistan to the AU.

The ideal combo is PRC funds + Pakistan management and engineers + AU labour. Africans find it difficult to work with the Chinese,as the Chinese work ethic and efficiency standards, are too stiff.

PRC can build the basic materials and infra sector,as that involves,huge political risk.

The PRC and Pakistan combo,can be the ideal formula,for investments in the AU - and that will also wipe out the Indians,from the AU and South Africa.

Indians are a race of shopkeepers - bania vermin - and soon the people of the AU will realise the worth of these vermin - AFTER Indian INDUSTRIALISTS IN AU,are WIPED OUT,by the PRC-Pakistan combo.

There is a limited awakening in South Africa and will accelerate soon

In the last 5000 - there was only 1 man born in India,who set up a Non-bania operation outside India.That man is called LN Mittal - and even HIS SON,HAS REALISED THE WORTH OF HIS NATION ! HE SAYS THAT HE IS NOT AN INDIAN MNC HEAD !






Anonymous said...

Exports are riding everywhere because of covid end shopping in US.

Riaz Haq said...

Interloop divests from Bangladesh operations

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 said...

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.

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 said...

If you walk into a clothing store in any shopping mall in a major Chinese city – whether it is an international or a local brand – “Country of Origin: Pakistan” hang tag is not uncommon.

Especially in the jeans wear section, these high-quality Pakistani products are increasingly popular with Chinese consumers.

According to the Pakistani government, the textile industry contributes nearly 60% to the country’s total exports. Denim fabric, as one of Pakistan’s main garment products exported to the world, occupies a pivotal position in its garment industry chain.

According to the Pakistan Bureau of Statistics (PBS), exports of denim fabric from Pakistan reached Rs96.92 billion during the year 2017-18, a commendable performance of the denim sector.

However, whether it is jeans wear or other garment products, the impact of recent global cotton prices and other factors cannot be ignored.

Pakistani industrialists argue that the textile and garment industry of the country faces a series of challenges, including low production of cotton and difficulty in obtaining financing for new facilities.

Cotton industry: China-Pakistan cooperation

Pakistan, one of the world’s largest cotton producers, is finding it increasingly hard to meet its own needs.

“Last year, we had to import more than 50% of cotton,” said Sapphire Fibre Executive Director Muhammad Abdullah. Low production and quality force the local industry to choose imports.

“So far, the domestic consumption of cotton is 14 million bales. Nevertheless, Pakistan only harvested 5.6 million bales of cotton in the last season,” he said.

“As far as I am concerned, the seed of high quality must be the top priority. Unless we can increase the yield per unit area, the demand cannot be met,” he added.

The idea of Muhammad Abdullah was echoed by Central Cotton Research Institute Director Zahid Mehmood. “Under CPEC, we hope to see the plan between China and Pakistan in cottonseed cooperation soon,” he said.

Regarding this, Xinjiang Agricultural University Deputy Dean Chen Quanjia introduced further planning during an interview with China Economic Net.

“Local high temperature-resistant cotton varieties in Pakistan are of great use to us,” Quanjia said. “In Xinjiang, the heat resistance of cottonseed is particularly indispensable when facing the extreme high temperature. At the same time, our high-yielding cotton varieties are also needed for Pakistani farmers,” he said.

Recently, international cotton futures have remained high, and China’s domestic cotton futures prices have also risen simultaneously.

According to a survey conducted by the China Cotton Association, the country’s cotton planting area this year has dropped year-on-year, but due to favourable weather conditions, the total output remains relatively stable.

It is expected to be 5.83 million tons, down 1.5% year-on-year. Improving cotton production to maintain the stability of the futures market will be a problem, demanding prompt solutions from China and Pakistan.

Besides, the impurity, which is caused by 100% manual picking, also worsens the dilemma of Pakistan cotton.

Sapphire Fibre cotton field supervisor Kamran Razaq said that the impurity content of imported cotton is 4.5%, while the counterpart in Pakistan cotton is 8-9%, which is well below the criteria of textile mills.

Accordingly, Xinjiang Agricultural University and University of Agriculture Faisalabad (UAF) have set up experimental fields in Faisalabad and plan to test mechanical picking in Pakistan.

“In north Xinjiang, one of the biggest cotton areas in China, the mechanisation can reach 90%. We use machine picking everywhere so as to decrease the impurities,” Chen Quanjia said, adding that in future, China’s advanced cotton pickers can play a role in Pakistan as well.

Apart from raw material shortage, financing difficulty is also a restraining factor in Pakistani textiles. In this regard, China and Pakistan are seeking for a wider cooperative space.

Riaz Haq said...

"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"

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.

Riaz Haq said...

Engro Corporation
Dec 10
With the addition of new 100,000 tons PVC III Plant, inaugurated by PM
, Engro Polymer & Chemicals will now contribute around $240 million towards import substitution per annum, and fulfill export orders as well.


Prime Minister Imran Khan inaugurated on Friday a 100,000-tonne PVC III plant of Engro Polymer and Chemicals (EPCL), which will enable import substitution of polyvinyl chloride (PVC) and boost exports, a press release said.

Addressing the ceremony, Prime Minister Khan said the government supports the expansion of local businesses in order to ensure import substitution and achieve higher exports. He urged the business community to focus on import substitution and diversification of the export base to support sustainable economic growth.

A subsidiary of Engro Corporation, EPCL is the only fully integrated chlorvinyl chemical complex and producer of PVC in Pakistan.

The plant expansion took place with up to $50 million financing support from the International Finance Corporation (IFC) and leveraged global expertise in project execution with a Japanese licenser and Chinese construction team.

EPCL can now produce 295,000 tonnes of PVC per annum. The press release said EPCL will now be contributing around $240m towards import substitution.

The company also exported PVC resin worth $25m to Turkey and the Middle Eastern markets in 2021. Demand for PVC has grown at six per cent a year, with around 70pc of the consumption originating from the construction sector.

Riaz Haq said...

Pakistan exports beat half-year target

Talking to The Express Tribune, Arif Habib Limited analyst Sana Tawfik said that imports increased 63% year-on-year during July-December 2021 while exports grew 25%.

According to a statement issued by the Ministry of Commerce, exports amounted to $15.125 billion for July-December 2021 against the target of $15 billion.

The statement was issued following a consultative meeting chaired by Adviser to Prime Minister on Commerce and Investment Abdul Razak Dawood to discuss the trade trend in December 2021.

The meeting discussed that trade deficit was likely to come down if parliament passed the mini-budget as it would discourage imports following imposition of higher taxes on luxury items.

“Import growth is likely to be reduced along with import value with the resumption of International Monetary Fund (IMF) programme,” the statement added.

“Reduction in trade deficit in the coming months is imminent due to a stringent ongoing review and the checks put in place by financial support providers.”

Talking to The Express Tribune, Arif Habib Limited analyst Sana Tawfik said that imports increased 63% year-on-year during July-December 2021 while exports grew 25%.

The trade deficit almost doubled during the six months under review compared to the same period of last year.

“Imports are expected to slow down on the back of a forecast decline in international commodity prices,” she said. “Keeping in view the measures taken by the government to incentivise export-oriented sectors, we are optimistic that outward shipments will improve further in the coming months.”

She voiced hope that the country would achieve the export target for full fiscal year 2021-22.

Centre for Peace and Development Initiatives (CPDI) CEO Mukhtar Ahmad Ali stated that exports were increasing at a slow pace partly due to a significant increase in commodity prices in global markets.

Exports had remained suppressed until 2018 because of severe energy shortages and the impact of terrorism on the industry, he recalled.

“Following normalisation of energy supply and improvement in law and order situation, exports were expected to jump significantly but it seems that political uncertainty and soaring energy prices have affected investor confidence,” said Ali. “The ongoing gas supply constraints are likely to dent exports.”

He added that additional efforts were needed to increase the range, quantity and value of exportable goods and services.

Arif Habib Commodities CEO Ahsan Mehanti said that the trade deficit had doubled on a year-on-year basis in July-December 2021, therefore Pakistan’s trade performance was unsatisfactory.

However, the export target was met for the half year and the annual target was also likely to be reached due to the expected low impact of Omicron variant of coronavirus on global growth and Pakistan’s exports, he said.

Riaz Haq said...

One of the major initiatives of the government to encourage imports of raw materials also pushed up the import bill. Oil prices have also increased substantially, which pushed up the import bill because of the high demand for energy in the domestic market. A surge was noted in imports of vehicles, machinery as well as vaccines, pushing the import bill.

In FY21, the import bill surged by 25.8pc to $56.091bn from $44.574bn the previous year.

Exports posted year-on-year growth of 24.71pc to $15.102bn in July-December 2021. In December 2021, exports saw a growth of 15.8pc to $2.740bn from $2.366bn in the same month last year. On a month-on-month basis, exports declined by 5.55pc in December.

Export proceeds went up by 18.2pc to $25.294bn in FY21 from $21.394bn over the last year.

According to the commerce ministry, the exports of fish & fish products, plastics, cement, fruits & vegetables, petroleum products, natural steatite, etc increased. In terms of market diversification, there was an increase in exports to Bangladesh, Thailand, Sri Lanka, Malaysia, Kazakhstan, South Korea, etc.

In the traditional sectors, there was an increase in the exports of men’s garments, home textiles, rice, women’s garments, jerseys & cardigans and T-shirts. However, exports of fruits & vegetables, surgical instruments, electrical & electronic equipment, tractors, pearls and precious stones decreased in December 2021 as compared to the same month last year.


Arif Habib Limited
Country posted highest ever textile exports for the month of Dec.

Dec’21: $ 1.64bn, +17% YoY, -6% MoM
1HFY22: $ 9.40bn, +26% YoY

Riaz Haq said...

Shafaat Hussain
Textile exports in Dec-21 have reached $1.62bn. During Jun-Dec 2021, #Pakistan has achieved $9.38bn, that's an increase of $2.73bn compared to H1FY18 and $1.93bn compared to H1FY21.
This year we are all set to make a new all-time high of $20bn, InshaAllah.