By  on June 23, 2009

LAHORE, Pakistan — Pakistan is set to give its struggling textile industry a major financial boost.

A comprehensive textile industry policy has been formulated by the federal government for the first time and will be introduced next month, Pakistan’s federal minister for textiles, Rana Muhammad Farooq Saeed Khan, told WWD in an exclusive interview.

“In the budget of 2009-10, 40 billion rupees [about $500 million at current exchange] has been allocated for the development of industry here, and a significant portion of this has been earmarked specifically to help the textile industry,” Rana Farooq said. “This is because the year-on-year figure of the country’s textile exports has dipped from $11.01 billion in July 2006 to June 2007 to $10.3 billion in 2008 to 2009.”

Pakistan is the world’s fourth largest producer of cotton, but is only the 12th largest exporter of cotton products. Fifty percent of the country’s cotton exports are value-added products, but most are at the lower end of the price spectrum, while the rest is raw cotton, yarn or greige fabric, he noted.

Looking at how much the governments of other regional competitors fund their textile industries — China gives a 17 percent rebate on textile exports and India gives an estimated 8 to 9 percent in the form of disguised subsidies — the government has prioritized the textile industry in the budget of 2009-10, said Rana Farooq, and set an ambitious target of $25 billion in annual textile exports within five years.

From research and development aimed at creating better strains of cotton to ensuring the provision of clean, graded cotton to lowering the cost of operating mills to help attain greater access to the U.S. and European markets, short-term and long-term goals are included in the new policy, Rana Farooq noted.

Under the plan to be unveiled next month, premium payments will be given to growers of high-grade, clean cotton. Setting up of new ginning mills will be encouraged by the government by giving cash subsidies, similar to India’s technology upgrade fund. For example, it costs about $65,000 to set up an average-size ginning mill here and the government will make a cash transfer to the mill once it is established.

Similarly, investment in new textile machinery has declined drastically since last year because of higher financing costs, the lack of reliable energy supplies and the recession. The goal is to reverse the trend by lowering financing costs and providing capital subsidies.

Noneconomic costs of infrastructure and skilled workers also figure in the plan. In the short term, subsidies for gas and electricity provided to household consumers at the expense of industrial users are being removed. In the long term, adequate supplies of power will be guaranteed by the government.

Furthermore, benchmarks have been developed by employing the consultancy firms Gerzi and Werner International for each subsector of the industry and the goal is to raise standards throughout the production cycle. At the moment, there are substantial productivity gaps.

According to a Werner report, Pakistan’s productivity figures are about half the global averages. To improve on this, optimal machinery configurations and processes will begin to be developed. In addition, 100,000 stitchers will be trained each year over the next five years with the help of vocational programs designed by the United Nations Development Program and conducted in partnership with existing mills, Rana Farooq explained.

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