Karachi, State Bank of Pakistan SBP firmly believes in rehabilitation of textile sector which is largest export earner, one of largest employment provider and largest investor in the country.
This was stated by SBP Governor Yaseen Anwar in meeting with office bearers, members of All Pakistan Textile Mills Association APTMA at APTMA House, Karachi. A special committee will be formed to look into textile industry’s problems to make it viable, competitive in world market, APTMA press release said Thursday. He said textile sector is second to none and even in present challenging economic scenario achieving export value of around $12.4 billion is commendable as price of cotton and cotton products declined more than total decrease in value of textile exports as compared to last year.
On reduction in discount rate, SBP Governor said “we reduced 200 basis points during first two quarters of last fiscal year but due to demanding reserve position, escalating inflationary rate in last two quarters we were unable to reduce it further. However, as soon as above situations improve we will reduce discount rate further. We are fully aware that high interest rate is one of reasons behind drastic decline in domestic and foreign direct investment.”
He assured SBP will issue notification in respect of Technology Up-gradation Fund as soon as advise received from Ministry of Textile Industry.
Earlier, APTMA Chairman Mohsin Aziz said although in year 2010-11 exports reached new bench mark of $14 billion which “we expected to take up to $16 billion in fiscal 2011-12 but unfortunately we will just be barely crossing $12.4 billion which is 11% lower in value terms but in fact 30-32% lower in quantitative terms. India and Bangladesh crossed $32 and $25 billion respectively due to enabling environment specially designed by their governments for exports oriented industry, providing competitive cost of doing business mainly interest rates, availability of all amenities like water, electricity and gas through out the year at affordable and cheap rates.”
He said regional competitors enjoy lower and preferential interest rate provided by their respective governments to support textile industry but in Pakistan discount rate is in double digit which is extra burden on already ailing industry. If SBP and Finance Ministry do not come to its rescue by providing preferential, lower interest rate, textile industry set up after lot of hard work and achievement of many generations is now on verge of collapse.
Aziz said during years 2003 to 2006 when interest rates were kept low i.e. in single digit, inflation interestingly was at its lowest, growth, investment in textile sector ranged between $600- $800 million per annum and in year 2004-05 when interest rate was around 7.5% investment of more than $1.2 billion in textile sector alone was witnessed. These were years when trash hold of $5 billion exports remained for many years crossed $10 billion.
Chairman APTMA said total NPLs in June 2009 was Rs 412 billion and rose to Rs 609 Billion in March 2012, increase in NPL portfolio by 47% in less than three years out of which total NPLs share of textile sector is 33%. Government should take some urgent measures like rescheduling, restructuring outstanding loans, relaxing Prudential Regulations, bring discount rate in single digit otherwise portfolio of NPLs will increase, industry will doom, precious assets lost and hard earned export markets taken over by regional competitors where governments, Central Bank pursuing policy of incentives, realized thoroughly difficulties faced by their exporting industries specially textile. He urged reducing interest rate to save bleeding industry. He urged government to issue notification for technology up-gradation Fund, release pending payments of Textile Policy Initiatives under DLTL, R&D Facility etc. He called for providing level playing field so that largest export earning industry of Pakistan could compete with regional competitors and export products in recession hit market of Europe and United States.
Former Chairman APTMA Gohar Ejaz said due to increasing financial imbalances and rising inflation capital is driving out of country, weakening investor’s confidence, affecting exports. In present scenario Pakistan needs investment, growth oriented policy for export-oriented sectors by reducing interest rate otherwise there will be no investment and ultimately economy not grow. He said 33% of capacity of textile sector is not working due to excessive load shedding of gas and 8 to 10 hours closure of electricity supply. Government should come up with specific proposal for revival of this sector.