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Tuesday / October 16.

Trouble at the mill: Pakistan’s once-booming textiles business in crisis

ISLAMABAD: High fuel costs, unreliable utilities and a shortage of raw materials are causing a crisis in Pakistan’s textile and pharmaceutical industries, experts have told Arab News.
The country’s share of the global textile market has declined from 2.2 percent to 1.7 percent and the growth rate in the pharmaceutical industry fell from 17 percent to 2 percent after the closure of more that 5,000 industrial units in the past four years — most of them textile and pharmaceutical companies.
Among the high-profile casualties in 2013 were all five woollen and worsted fabric spinning and weaving units operated by Dawood Lawrencepur, an iconic Pakistani company and one of the most prestigious names in French and Italian fashion.
Profits fell from more than Rs350million ($350,000) to Rs2.775 million from June 2012 to July 2013 and the company was left with no option, Muhammad Saleem Farooqi, former managing director, told Arab News.
“The business was no longer feasible due to shortages of water, gas and electricity, as we could not meet the demand of exporters,” he said. “Investors and businessmen were placing their orders in India and Bangladesh for timely supply of products.”
Gohar Ejaz, chairman of the All Pakistan Textile Mills Association, said about 35 percent of the production capacity of the textile value chain had been closed, unemployment had increased by 30 percent in the past five years, and prospective investors were reluctant to make new investments.
More than 150 textile mills had closed in the past year alone because of high input costs, including gas and electricity tariffs, he said. Energy amounted to more than 30 percent of the total conversion cost in spinning, weaving and processing industries, he said.
“The industrial gas tariff in Pakistan is 100 percent higher than the regional average, and the electricity tariff is about 50 percent higher than our regional competitors,” he said.
“The textile industry cannot compete in the international market in such circumstances and many businessmen are contemplating shifting their units to neighboring countries.”
Dr. Shaikh Kaiser Waheed, chairman of the Pakistan Pharmaceutical Manufacturers Association, said: “The export-oriented sectors like pharmaceutical and textiles can compete in the international market only if the input costs are brought down immediately.”
In December 2013, Pakistan was granted GSP-plus status by the European Union, granting member states duty-free access to 96 percent of Pakistani exports to the EU, but it failed to fully exploit its benefits.
World Trade Organization data shows that Pakistan increased exports of garments by 10 percent between 2013 and 2015, but Bangladesh and India increased their garments exports in the same period by 13 percent and 17 percent respectively.
Some industrialists in Pakistan are switching to other profitable businesses; Lawrencepur has started investments in renewable energy. Tenaga Generasi, a subsidiary of Dawood Lawrencepur, completed a 49.5MW wind-power plant in October last year.
“We aim to be the leading renewable energy solutions company of Pakistan, with a turnover exceeding ten billion rupees by 2020,” said Farooqi, former managing director of its textiles operation. “Our mission now is to provide cheap electricity to the industrial units, so they can compete in the international market.”

via AN