Pakistan’s New Textile Policy Targets 40% Increase in Exports

The proposed new Textile Policy (NTP) of Pakistan will help increase the output of textile products, improve global competitiveness and generate employment in the industry. The new policy targets a 40 percent increase in exports and meet the growing domestic demand.  It will help create 3.5 million new jobs.

The first important step is to increase domestic cotton production which puts Pakistan in an advantageous position because of its reasonable price. Other measures include - improvement in value addition, increase in the number and variety of value-added products, enhancement of productivity of manpower, stepping up efficiency of its existing plants and equipment, and extensive use of the imported machinery.

Five new model garment factories will be established. A textile park will be set up to serve as a special economic zone for tax free production and export. A weaving city will be established.

Other highlights include - formation of Pakistan Textile Research and Compliance Organisation, audit for processing industry for an efficient and economic use of costly chemicals, setting of a state-of-art textile laboratory at National Textile University Faisalabad, horizontal and vertical integration to balance textile value chain, a specialized garment training institute for women, one-window facility for providing required infrastructure and standardization of machinery and equipment.

The financing facilities include subsidized credit and refinance facilities provided by SPB through the commercial banks, Export Finance Facility (EFF) for textiles. The SBP has allowed swapping of costly long term bank credit, obtained previously by the industry, with cheaper Long Term Finance for Export Oriented Projects (LTF-EOP) for machinery and equipment. The industry is now allowed to undertake External Commercial Borrowing (ECB) for plants and machinery.

Pakistan plans to raise its overall exports to $ 40-45 billion by 2013, by expanding industrial, agricultural and services sectors, including textiles. “The government is focusing on skill development, and on reducing the cost of doing business to achieve this export target, the Prime Minister said. The Prime Minister said that it is important to build brands, working on the existing strengths and create competitive advantage internationally.

The proposed policy envisages to build a new culture, which would expedite the process of improvement in all the segments of the textile sector. The skills gap in all the entities of the textile sector as well as the concerned government organisations have to be filled by professionals to cope with the challenges and the changing environments of international marketing.

 The proposed Textile Industry Development Policy 2007 is expected to offer four tax incentives to attract foreign direct investment (FDI) in upcoming textile and garment cities in Karachi, Lahore and Faisalabad. Ministry has proposed that all import of textile machinery and raw material should be duty-free to facilitate import of the latest textile machinery, which would prove to be a big incentive for the textile sector to enhance its production capacity. At present, tax authorities are charging a minimum of five percent custom duty on the import of machinery. The proposed incentives include a general sales tax exemption on utilities to those investing in upcoming textile and garment cities. The government has already allowed general sales tax at zero rating on electricity and gas consumed in the production process of the textile sector.

Pakistan textile industry contributes 66 percent to the country’s export, 40 percent to employment and 8.5 percent of GDP. The exports of textile products have increased by 5.27 percent at $10.757 billion in 2006-07. The government has fixed a growth target of 12 percent for textile exports for the current fiscal year 2007-08.