Global Recession, Pakistan Textile Industry Faces Crisis

Due to various factors that are not conducive to the textile industry (global and domestic),

Serious problems occurred in the textile sector.

In the southern province of Punjab alone, 30 of the 50 textile factories have been closed, and almost 100000 workers have been unemployed. Their unemployment is directly or indirectly related to the closure of textile mills.

The textile industry is a pillar of Pakistan's economy (it not only provides the largest share of employment rate, but also the main force of national exports), and tries to objectively and objectively analyze the major problems faced by this important national industry.

Now the global recession has begun to seriously impact the textile industry in Pakistan, and the situation may be even worse in the next few months, and the growth of the textile industry has been greatly hampered.

According to the latest figures released by TDAP (Pakistan Trade Development Council), the actual export level of textiles in July 2008 decreased by nearly 2% compared with the same period in 2007 in July 2008.

Ironically, during this period, the most severely affected products were those considered to be the most powerful products in Pakistan, those products considered to be healthy and promising.

For example, the export of cotton yarn decreased by 15%, the export of bedsheets decreased by 9.5%, and the ready-made garments exports decreased by 12%.

These problems are not entirely external ones.

In addition to the shrinking global market, Pakistan's own economy has shrunk (2009 is expected to decline from 2007-08's healthy growth rate of 6% to 3%).

Other serious domestic problems have exacerbated this pressure, such as insufficient electricity, high energy costs (textile industry needs electricity and natural gas), high interest rates and increasing domestic laws. Pakistan's order as a trading destination worsens.

Even with the efforts of the enterprises, their efforts have been seriously weakened due to the poor planning and low efficiency of the government.

Textile mills use natural gas to generate electricity to overcome their power supply problems, but they actually face bigger problems. They must make a choice about this huge investment because the government has introduced an unprecedented split gas load policy.

In addition, global oil prices have declined, and the government has refused to reduce domestic prices in line with international prices, thus making Pakistan's production costs even more unbalanced.

On the other hand, the international situation has led to the continuous upgrading of competitiveness. More and more other competitors are raising their turnover rate through continuous price cuts. For example, in the past six months, China has cut the average price of textiles by 33%, Indonesia has cut 35%, Turkey has cut 25%, India has cut 20%, Bangladesh has cut 18%, Sri Lanka has cut 15%.

Other countries immediately supported them in various ways.

But the Pakistan government has stubbornly refused to take action.

In China and India, in addition to lowering loan interest rates, the export subsidy / export tax rebate for industries increased by 16-20%. Even the smallest countries, such as Bangladesh and Sri Lanka, have developed various ways to reduce the operating burden and enhance the competitiveness of local manufacturing through competition and timely implementation of policies and measures through low-cost and stable energy supply.

What the Pakistan government must bear in mind is that for the domestic industry, the current crisis in the textile industry may be a period of success or failure.

Unless the government takes practical measures to support the troubled textile sector, otherwise, the textile industry is already very fragile due to the declining competitiveness of Pakistan's international market, and its impact may be extremely serious.

The crisis at this time is different from the past, because the problem of textile industry is more complicated than that of other countries at this time.

Other industries rely more on domestic demand, while Pakistan's textile industry relies more on exports, and exports account for 80% of its production capacity.

With the change of government attitude, the government has taken measures that may be necessary to curb demand and suppress peace.

But these measures have inadvertently created adverse consequences for the textile industry, causing domestic demand and global trends to diverge.

In addition, because of the credit crunch, capital fled from the textile industry.

The capital flight was encouraged by the financial authorities of the state. They encouraged or led banks to sweep away market capitals, resulting in such consequences.

In such a difficult time, the profitability of the industry has been very low. This cash crisis, coupled with high interest rates, gives them no choice to spread risk and return in the enhanced time frame.

This means that their ability to resist this dangerous trend is also weakened because of their diminished capacity to undertake losses in a longer period of time.

In the current situation, the government needs to take prompt action. Rather than giving cash subsidies or a package of monetary assistance policies, it is better to directly ensure capital pfer (at affordable rates) to the textile industry.

Companies can not generate money on their own. They need the necessary allocation of resources by the central government. Of course, such funds do not really relieve their debt burden and responsibilities.

But this alone is not enough, and can not fully achieve industrial recovery, but this will at least be a big step in the right direction, let textile enterprises know that they are not alone, time stands on their side, time will be slow, but will work hard to get them out of the current abnormal state.