IMF study says textile & clothing exports grow post MFA era
08 Dec '06
2 min read
Textile and Clothing industry (T&C) is Pakistan's main export revenue earner industry. Its share in total exports has been around 60 percent for the last 10 years, up from 50 percent in the early 1990s. Only Bangladesh and Cambodia have a larger share of T&C in their respective country's total exports.
Pakistan performed relatively well in the wake of removal (in January 2005) of quotas restricting T&C exports to developed countries under the MFA.
T&C export growth started to rise in 2002 (up to a sample-peak of 23 percent in mid-2003) reflecting both, expanding production capacity and improving trade regime.
T&C export growth fell below 10 percent in the first quarter of 2005, but ratcheted up to nearly 20 percent by the end of the year.
Scope for sustained market share gains in a post-MFA environment has become more uncertain. Pakistan's T&C export base is relatively concentrated on low value-added products: yarn and bedwear/towels account for 45 percent of T&C exports, while exports of ready-made garments account for only 15 percent.
Increases in input costs (i.e., minimum wages, interest rates and energy) during 2005/06 may have reduced Pakistan's T&C competitiveness.
Pakistani exporters argue that their foreign competitors benefit from export subsidies and protection from similar cost increases.
To allay such concerns, the government has recently granted T&C exporters a research and development subsidy of 5 percent as well as loan-refinancing schemes at below market terms.
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