Showing posts with label Brexist. Show all posts
Showing posts with label Brexist. Show all posts

Thursday 22 December 2016

Pakistan textile sector performance far from satisfactory

In continuation of the previous month's positive performance, external trade shows improvement in November 2016 exports amounting to US$1.76 billion, exhibiting reversal from the consistent monthly downward trend seen this year. Textiles and clothing sector, which constitutes more than 60% of country's exports also picked pace, rising 9.7%YoY to US$1.05 billion during the month under review. This growth was broad-based recovery in both low value (+15.6%YoY) and value-added segments (+7.6%YoY). However, on a cumulative basis, 5MFY17 textile exports were still lower at US$5.13 billion.
Going forward, analysts expect textile exports to largely remain under pressure due to: 1) demand side bottlenecks with weak Chinese demand outlook and economic slowdown in the EU following Brexit, 2) lower currency competitiveness amid sharp depreciation in regional currencies and 3) low commodity prices. That said, sector anxiously await yet to be announced incentive package estimated around Rs75 billion by the Government of Pakistan (GoP). This aimed at enhancing export competitiveness over regional countries and providing relief to the textile sector. Moreover, encouraging cotton arrivals to date for MY17 (up 12.33%YoY to 10.14 million bales) is expected to reduce cotton shortfall next year.
Performance of the value added sector posted growth with Knitwear, Readymade garments and Bedwear registering double digit growth. Moreover, the low valued added segment depicted commendable recovery after a consistent decline this year, where exports of cotton yarn increased by 42.1%YoY/10.3%MoM. However, on a cumulative basis, textile exports after recovery still remain unimpressive with 5MFY17 exports recording a decline of 2.0%YoY.
According to the fortnightly cotton arrivals report of PCGA, a total of 10.14 million bales arrived in the country by Mid December this year as against 9.03 million bales last year, up 12.33%YoY. Arrivals from Punjab increased by 19.38%YoY to 6.44 million bales, while flows from Sindh increased marginally by 1.86%YoY to 3.70 million. Initially the GoP had fixed the target of cotton for MY17 around 14 million bales, which was later slashed to less than 11 million bales. In an attempt to ensure ample availability of cotton in the country, the GoP has also lifted ban on cotton from India.
Going forward, any substantial increase in the export of textiles and clothing seems unlikely amid emerging: 1) concerns on low currency competitiveness following sharp decline in regional currencies, 2) risk of potential decline in exports to European Union post Brexist and 3) sluggish Chinese demand. The added irritants are disruption in supply of electricity and gas despite high tariffs. Ministry of Textiles, Ministry of Commerce and Trade Development Authority of Pakistan (TDAP) seems to have gone into complete hibernation.