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LAHORE, Pakistan — Renewed interest in manufacturing here from brands in the European market has been sparked by the World Trade Organization’s waiver allowing 75 Pakistani products duty free access to markets in Europe for two years, retroactive to Jan. 1, though formal approval by the EU Parliament is pending.
This story first appeared in the March 27, 2012 issue of WWD. Subscribe Today.
To help Pakistan’s economy recover from the devastating floods in 2010, the EU duty waiver includes 10 products in the woven garment category, 13 in the knitted garment category, 27 in cotton yarns and fabric and six in synthetic-polyester yarn and fabric. There is a ceiling imposed on some of the products.
According to government estimates, Pakistan’s textile exports are expected to rise by about $500 million this year due to the concession, as announced by the Prime Minister’s textile adviser Mirza Iktiar Baig.
Pakistani textiles are currently levied duties of 5 to 9.6 percent in the EU, depending on the product.
Zaki Slaleemi, managing director of Integrated Sourcing in Lahore, which specializes in denim jeans sourcing, said it is expected that there will be 10 percent growth in this year’s exports to the EU over 2011 in this category and in 2013 a further 10 percent increase. The growth in imports of Pakistan-made women’s denim trousers to the EU in the first three quarters of 2011 over 2010 was 10.4 percent, while the increase in just the third quarter over the aggregate first three quarters is 4 percent, according to Eurostat.
“Pakistan is gravitating toward a Turkish grade product in denim jeans, but at a median range price,” Saleemi said. “Now with a further 9.6 percent saving in women’s jeans, this category is generating buzz. It’s a win-win scenario for buyers.”
More cautiously, Fahid Hussain, group brand manager of Crescent Bahuman, a denim mill in Pindi Bhattian, said that after the final draft of the duty concessions was released, the level of interest it had initially generated abated.
“We were expecting no duty on children’s and women’s garments (women’s denim trouser exports to the EU are a major category for Pakistan), but there is a quota that has been set of 13.4 million women’s garments and 3.5 million of children’s,” Hussain said. “To put this in perspective, just our mill produces 10 million denim units per year, so four mills can easily fill this quota. Since it’s on a first-come basis, European importers are pressuring mills to send their shipments as soon as possible.”
Azfar Hassan, chief executive officer of Matrix Sourcing in Lahore, which works with major global apparel brands and retailers, said, “There is more intense buying from European importers after the WTO announced the concessions. Moreover, garment prices in Pakistan have decreased by 20 percent year on year from 2011, with 50 percent of the garment price being fabric cost and the cost of fabric decreasing by 40 percent.”