The News on Sunday: How does the textiles industry plan to benefit from this decision?
Aamir Fayyaz Sheikh: We are determined to make the best of this opportunity and intend to double our global exports from $13 billion to $26 billion over the next four years. Though our immediate target is the EU, we will be finding new markets on the way. The industry believes in product development and it is an ongoing process. The industry is prepared to enhance the production capacity of items that hold promise in the EU market. Normally, the principle is that the greater the value-addition the better it is. With this in mind, our focus will be on developing our capability and competitiveness in clothing in the same way that we are internationally competitive in textiles.
TNS: What were the factors which helped Pakistan in its case for GSP status?
AFS: One of the basic reasons that justify preferential access to western markets is compensation for the impairment of Pakistan’s infrastructure that suffered on account of its frontline role in the war against terrorism. Besides, Pakistan qualified on technical grounds as its total exports to EU were less than the threshold set for this purpose. Ratification of international conventions and show of seriousness in complying with them also helped the country. However, the way the government and the industry persuaded the case was exceptionally good. Punjab governor Sarwar Chaudhry played a leading role and lobbied with members of the European Parliament. The textile industry, which has a big buyer in the EU also lobbied for them. In fact, it was a collected and concerted effort which paid in the end.
TNS: There was opposition by some European Parliament members as well? What were the reasons cited for this?
AFS: Though some quarters are saying that a few competitors of Pakistan lobbied against it, my opinion is that some southern EU states, such as Spain and Portugal opposed the idea. The reason simply was that these countries still manufacture raw materials and face losing to cheaper imports from Pakistan. We convinced them that we will not harm their businesses. Instead, we will be replacing some of their imports coming from countries like China and Bangladesh.
TNS: Is GSP plus status just a favour or would it lead to a win-win situation for the EU and Pakistan?
AFS: No doubt, it is an encouraging move taken by the EU. But we strongly believe that consumers in the EU will benefit from our products due to their competitive prices and high quality. They are already buying our products. Now these products will be cheaper due to subtraction of duties. Pakistani cotton products are one of the best in the world. They have no match and are liked in the EU.
TNS: How do you plan to cope with energy, labour, foreign exchange rate, and other issues?
AFS: Energy crisis is the biggest threat to industry’s growth. We are discussing plans with the government. We need power on 24/7 basis at reasonable rates. There are different options which we are discussing with the government and hope there will be positive developments. Labour is no issue at all. We have sufficient human resource. All that is required is to train them professionally and impart them modern skills. Coming to foreign exchange, I would say it helps exports as the cost of production comes down in dollar terms. I will give you the example of China whose currency has appreciated 30 per cent against US dollar during the period, ranging from September 2006 to July 2013. Pakistani rupee during the same period has depreciated 41 per cent against the US dollar during the same period. The devaluation of Pakistani currency against Chinese currency comes to 71 per cent in dollar terms over this period. This devaluation leads to decrease in the cost of production for Pakistan. However, this devaluation has a negative effect when the industry wants to make capital investments or import machinery and raw material as all these payments have to be made in dollars.
TNS: The GSP status comes with conditions, such as compliance with 27 different international conventions at state level. What is APTMA doing at its level to honour these commitments?
AFS: On our part, we are doing several things. For example, we are working on the concept of sustainable manufacturing. We are using methods to conserve energy and water at our manufacturing concerns. Besides, APTMA members are investing in Corporate Social Responsibility (CSR) initiatives and education and healthcare are the bedrock of our CSR footprint. We encourage employment of women and give them ideal working environment. An interesting development is that Pakistan has become world leader in Better Cotton Initiative (BCI). The concept is that cotton is ethically grown, it consumes minimal water and pesticides, its carbon footprint is less, the farmers and pickers earn well and work in healthy conditions. This is important as leading brands are encouraging this trend. Their products carry tags with traceability feature. A buyer will be able to trace how and where the cotton was produced and which inputs went into its production. I am sure Pakistan will be able to capture a niche market due to its expertise in producing BCI cotton.
TNS: Does award of GSP plus status mean smooth sailing for Pakistan or does it still face challenges?
AFS: There are several challenges and we will have to tackle them. I have already talked about energy crisis so I will focus on a few others. First of all, to cater to increased demand, capacity enhancement, and product diversification will have to be brought about. Our textile industry requires investment of at least $ 1 billion per annum to enhance production and modernise its machinery. We request the government to offer loans at low rates for this purpose. The interest rate in our country is 15 per cent whereas in many competing countries it is in single digits and, in some cases, as low as 5 per cent. India has set up a Technology Upgradation Fund for this and offers finance at nominal interest rate.
Country’s image and security situation are challenges as well. We are planning road shows in the US and EU, etc, to improve the image of Pakistan as a dependable supply source to the international market. We will tell the potential buyers that not even a single shipment from Pakistan has suffered due to terrorism. We will ask them not to think like tourists whose considerations are different and think simply like a businessman who always capitalises on opportunity. Shortage of indigenous raw material is also a challenge. At the moment, our cotton production is 13 million bales per year, which will have to be taken to 20 million bales in a couple of years. For this, we need to focus on improved seed, better cultivation practices, and agricultural technology up-gradation. Our appeal to the government is to provide an enabling framework to the industry which can help the latter overcome all these challenges.