Planners urged to think beyond textile

Tuesday, April 08, 2008
By Mansoor Ahmad

LAHORE: The economists have urged the planners to take cue from competitors and think beyond textiles as no inefficient industry could survive on government subsidies in the current economic scenario.

They point out that subsidising the textile sector is a futile exercise. If machinery is imported from Switzerland, Germany and Japan, raw material is at the same price as in the world market, electricity is expensive, automation negates any benefit from cheap labour and then how can the local industries’ cost of production be less than that of Germany and Switzerland.

They say the machines with the industry are capable of manufacturing high-end textiles, but it portrays itself as the least cost producer of low-grade textiles. Pakistan focuses on grey and low-quality textiles and garments. The country has no place in industrial textiles, medical textiles and special purpose textiles like fire retardant. “We have no capacity for unwoven textiles and other value-added textiles. No wonder, we are sick,” an expert said.

The economic experts remind textile entrepreneurs that value is added through design development, marketing and branding. However, Pakistan’s current thrust on production as subcontractor adds least value to the value chain. They warn that there is no light at the end of the tunnel if they continue to run the industry the way they have done in the past.

“Our government needs to understand this, so does the industry that the subsidies are not going to stay forever,” one said. The textile industries are sick because they are either inefficient, have bad management, don’t have balanced facilities and are burdened with heavy debts. They would eat up subsidies and would go down the tube if they do not reform, the experts caution.

They advise that if taxpayers’ money is to be utilised, it should be spent on skill development, institutions of learning, technology acquisition, developing centres for machinery development and manufacturing, acquiring brand names, etc. The money spent will be far less than the amount being doled out now with a far greater impact on the economy.

The experts recalled that industrialisation, in most of the countries, in the last 60 years, started from textiles. Then these economies matured and went into different sectors of engineering. Japan and Malaysia ventured into automobile and electronics’ manufacturing, Korea went into shipbuilding, auto and electronics while India entered sectors like defence, auto, information technology, gems and jewellery and consumer goods. Besides these, China went into automobile, consumer goods and some electronics while Taiwan started manufacturing auto parts, moulds and dies, computers, etc.

These countries developed strength for capital goods and machinery manufacturing. All these are knowledge-based economies now and their driver is the engineering sector. Their capability is designing and manufacturing cost-effective machinery and using appropriate technologies.

In Pakistan, the experts say, the industry grew in the 60s under the cover of bonus vouchers and high tariffs. The seventies and eighties was the time when a lot of expansion took place, but unfortunately most of the projects were over-invoiced and people made lots of money.

Till then, the industry was heavily protected. In the early nineties, tariff was brought to zero for the sector and export duty was levied on cotton, they say, adding a lot of junk was imported during the period. Every other product was taxed.

They say the huge difference between the official currency rate and market rate helped inefficient textile producers as they made billions due to credit expansion. Now, they point out, when cotton is available at international prices and machines are expensive, money is being made from far smarter means.

Taxpayers’ money is being diverted to the sector as research and development (R&D) support and lower interest rates. One way out of the current dilemma faced by the textile sector is to reduce investments so that return on them improves and debt burden eases. China and India have done just that and developed machinery and equipment locally for the sector, finally taking over the market, they point out.

http://www.thenews.com.pk/daily_detail.asp?id=105444