Top Three Export Commodities of PakistanRice:Rice Export in 2012-13:PAKISTAN‟S basmati rice exports are showing signs of an upswing after suffering aplunge in the first six months of this fiscal year because of domestic higher prices,poor marketing and lower prices of India‟s basmati.In January 2013, basmati exports were up by 15 per cent, reaching 43,718 metrictonnes compared to 38,294 tonnes in January 2012. Traders are optimistic that thecommodity would regain normal levels before the end of the current fiscal year asthe price gap between Indian and Pakistani basmati rice has started narrowing. Indiahas been selling rice at a price lower than Pakistan‟s – at $100 per tonne againstPakistan‟s $1,100-1,150 per tonne.According to Rice Exporters Association of Pakistan (Reap) Pakistan exported21,000 metric tonnes basmati rice during the first week of March 2013. Total riceexports during July 2012 to February 2013 have already touched more than $1billion mark, and during the July-March period, the country exported around 350,000tonnes, and two million tonnes non-basmati rice. Meanwhile, China has become amajor market for Pakistani non-basmati rice, and a record sale of 72,623 tonnes,worth $30 million, took place in January 2013 alone. Besides, another country buyingPakistani rice is Tanzania.Basmati exports, according to figures of Pakistan Bureau of Statistics (PBS), havebeen on the downward trail earlier, and during the July-December 2012 period,declined by 31 per cent to 239,765 tonnes from 349,970 tonnes exported during thesame period in the previous year. But Reap put the decline at 60 per cent during July1 to November 28, after India lifted a ban on its rice exports last year and sold thecommodity at lower prices. India kept basmati exports banned for two years, andkeeps doing so from time to time to protect domestic market.Pakistan‟s non-basmati rice exports also dropped by 39 per cent during July-Octoberperiod. One reason for basmati‟s poor performance abroad has been its high price inthe domestic market because of hoarders and profiteers. The price of basmati inwholesale market has seen a rise of 30 per cent since March 2012. Some exportershave felt so depressed that they tried to seek subsidies from the government in theirefforts to revive falling exports.President of the Basmati Growers Association of Pakistan (BGA) says research isalmost non-existent as no new high-yield variety has been evolved in the pastdecade that could replace the Super Basmati introduced in 1996, which is stillplanted in more than 90 per cent of the basmati growing area. In contrast, India hasbeen very active and doing a lot of research and introducing new varieties.Besides, another setback that Pakistani basmati has suffered is the continuousdepletion of the area under cultivation, as growers are finding the crop unprofitableand are shifting to other crops. According to official figures, area under cultivation inPunjab, which has so far been producing over 90 per cent of the country‟s total yield,has declined by 34.5 per cent to 1.89 million acres in 2012-13 from 2.89 million acresplanted in 2008-09. It is a loss of one million acres of basmati area in just five years.India‟s total rice exports in the current fiscal year (April 2012 to March 2013) areexpected to cross 10 million tonnes for the first time in history, increasing by 30 percent from previous year‟s export figure following strong demand for its rice in WestAsia, Africa and South East Asian countries.
Although being rivals in the rice export market, Pakistan and India have also beenseeking each other‟s cooperation to protect their precious rice variety which isunique for its aroma, taste and texture. Pakistan has asked India to work out a jointstrategy on marketing the premium basmati rice to counter the non-tariff barriersimposed by other countries.Trade Development Authority of Pakistan‟s (TDAP) chief executive, who was on avisit to the neighbouring country in April 2012 while heading a delegation, toldIndians in bilateral discussions that it was high time the two countries, which share acommon heritage of basmati, worked together to formulate a strategy for marketingthe much sought-after rice variety to other parts of the world. He also talked aboutregistering basmati as a Geographical Indication (GI) of the two countries underWTO‟s Trips regime. Several attempts had been made in the past for that but withoutmuch success, because Pakistan has no GI law.Basmati rice exporters in Pakistan feel frustrated over the government‟s indifferenceand delay in enacting the law of geographical indication. Unless it is done, basmaticannot be protected, nor a joint strategy worked out with India to jointly protect theunique rice variety. The current Trade Marks Ordinance for basmati rice isinadequate, and may cause long-term harm to its exports. According to mediareports, a draft of the GI law prepared by TDAP is lying buried in the files of theministry of law despite repeated appeals by the exporters to get it passed by theparliament.The proposed law has to be first approved by the ministry of law before it is placedbefore the cabinet for consideration and approval. The varieties of basmati rice,which are countless and grown in several countries, can harm basmati exports. So,there is need for legislative measures to protect country‟s rice industry. The onlyother country that produces basmati and is Pakistan‟s competitor, India, has alreadypassed a GI Act.The urgency to protect basmati rice comes in the wake of two recent developments.Firstly, Philippines had earlier announced that it will begin basmati rice cultivationsoon and start exporting it in 2013. And secondly, Bangladesh rice exporters havesaid that Bangladesh must also be registered for geographical indication (GI) forbasmati rice since this rice variety is being grown and consumed in the country forcenturies. But officials in Pakistan say they are opposed to countries other than Indiaand Pakistan for growing or exporting rice under the basmati label. They insist thatbasmati is a common heritage of Pakistan and India only, and they should adopt ajoint strategy for the registration of basmati rice as a geographical indication in theinternational market.—Ashfak BokhariTDAP support can up rice export to $3b:The rice exporters are eying to achieve $3 billion export target annually with thesupport of TDAP, as the authority‟s role is vital to boost export and earn foreignexchange.Ch Samee Ullah, Vice Chairman REAP, hoped that TDAP will solve theproblems instead for creating hurdles in the way of exports. “We also hope that infuture TDAP will sit together with the stakeholders whenever need so as to ensuregrowth of exports.In a statement, he appreciated the dynamic role of Abid Javaid Akbar, ChiefExecutive Trade Development Authority of Pakistan (TDAP), for boosting upPakistani rice exports across the world.He informed that TDAP Chief Executive has announced to develop comprehensiveprogram focused on promoting rice export to Central Asian States. Exhibition would
be arranged with collaboration of rice exporters to showcase Pakistani rice. It is agood sign by TDAP for rice exporters and we always stand by TDAP. Central Asianstates have huge potential of export and Pakistani Basmati is an integral part ofTurkish cuisine.It would help exporters to earn more foreign exchange for the country. He said thatPunjab Government would soon hand over 5 acres of land for the establishment ofRice Technical Training Institute, where we would produce skilled manpower for therice industry. We expect that TDAP would give our due share from EDF for theestablishment of Technical Training Institute.He stated that TDAP has promised involvement of REAP into EDF Board ofadministrators and also given his due support for release of funds of Rs200 million,as asked by REAP, for the construction of Rice Technical Training Institute.Pakistan’s MY 2011/2012 rice production:Pakistan‟s MY 2011/2012 rice production is estimated at 6.5 million tonnes, 30 percent higher than the 2010/11 flood affected production level of 5 million tonnes. MY2012/13 production is forecast at 6.8 million tonnes.Rice exports in MY 2012/13 areprojected at 4 million tonnes based on the expectation of a good harvest.Pakistan expects orders from Indonesia for rice soon:Pakistan expects Indonesia to place orders for its rice incoming days, said Irfan Ahmed Sheikh, the outgoingchairman of the Rice Exporters Association of Pakistan(REAP), as the Southeast Asian country seeks alternativesources of the grain.“There will be a potential for Pakistan in coming days. We are expecting orders fromIndonesia,” Sheikh told Reuters on Thursday, but added that the Indonesian side has notapproached them yet. “We are one of the cheapest sources and we have a natural edge.Our IRRI-6 prices on average are less than $500 a tonne, FOB.” The price of Thailand‟sbenchmark export-grade rice was $627 a tonne this week, up from $619 last week, exporterssaid on Thursday, ahead of a government intervention scheme likely to push the pricefurther up from next month.And Vietnam‟s rice export prices rose nearly 1 per cent on Thursday, with the 5 per centbroken grade hitting $575 a tonne and heading towards $580, the highest in more than threeyears.Indonesian Trade Minister MariPangestu said on Wednesday thecountry has alternative sources of ricefrom Pakistan, India and Vietnam,even as it tries to iron out the reportedcancellation of a proposed Thaigovernment sale to Indonesia.Sheikh said Indonesian officials hadapproached Pakistani commerce
ministry about three months ago for a government-to-government deal but were told to go tothe private sector.Commerce Ministry officials were not immediately available for comment. REAP handles thebulk of rice exports from the South Asian country.Heavy monsoon rains have caused little damage to Pakistan‟s rice crop and traders areexpecting output of up to 6.5 million tonnes. Pakistan, the world‟s fifth-largest rice exporter,is hoping to export 4.5 million tonnes of rice in the 2011/12 (July-June) fiscal year.Pakistan to export up to 4.5 MT of rice in FY11/12-trade:Pakistan is likely to export up to 4.5 million tonnes of rice in the 2011/12 fiscal yearon an expected bumper crop, traders said on Thursday, adding to an amply suppliedrice market.The world‟s fifth largest exporter of rice, Pakistan‟s rice exports fell to about 3.7million tonnes in the fiscal year to June 2011, from 4.6 million in the year before,after it was lashed by devastating floods in summer 2010.But farmers and tradersare expecting a bumper crop of six million to 6.5 million tonnes this year. Harvestingof non-basmati rice begins in late September and basmati a month later. “So farthings are going in the right direction and we are expecting a bumper crop … Weshould be able to export between four million and 4.5 million tonnes this year,”Taufeeq Ahmed Khan, vice chairman of the Rice Exporters‟ Association of Pakistan(REAP), told Reuters. The country also has a carryover stock of more than onemillion tonnes, according to traders. Annual consumption is about 2.3 million tonnes.Pakistani rice will enter a market already well-supplied by Vietnam, which isexpected to export up to 7.3 million tonnes; India, which is lifting an export ban inplace since 2008 and Thailand, which expects to export more than 10 million tonnes.Khan expected “decent prices” for this year on expectations of Thailand, the world‟slargest rice exporter, boosting its prices. “Thailand has increased their prices andchances are that with the new government there, prices will go up further,” he said.Thai prices have started rising in recent weeks with the new government in Bangkok,which promised higher prices to farmers. On Wednesday, the benchmark 100 percent B grade Thai white rice which has jumped nearly four per cent from last monthbecause of hoarding on speculation about aggressive intervention by the incominggovernment, was steady from last week at $550 per tonne.Vietnam‟s five per cent broken rice stood at $505-$510 a tonne on Wednesday,which was up from $495 last week but still well below the same grade of Thai rice,offered at $530.Pakistani traders see enough market for their grains. Pakistani basmati goes mainlyto the Middle East, Europe and the United States. Non-basmati is sold all over theworld.In 2010/11, Pakistan sold about 2.6 million tonnes of non-basmati rice and 1.1 milliontonnes of basmati, according to REAP‟s provisional data. Rice is Pakistan‟s thirdbiggest crop after wheat and cotton, and accounts for about eight per cent ofPakistani exports. It contributes about 1.6 per cent to the country‟s gross domesticproduct.
International trade of Rice:International rice trade is estimated between 25 and 27 million tons per year, whichcorresponds to only 5-6 percent of world production. It makes the international ricemarket one of the smallest in the world compared to other grain markets such aswheat (113 million tons) and corn (80 million tons).Besides the traditional main exporters (Thailand, Vietnam, India and Pakistan), arelatively important but still limited part of rice traded worldwide comes fromdeveloped countries in Mediterranean Europe and the United States. There are twomajor forces behind this: new food habits in developed countries and new marketniches in developing countries.Worlds main importers of rice (all types), average from 1998 to 2002, in millions of tonsSource : UNCTAD Secretariat from the Food and Agriculture Organization of the United Nations (FAO) dataWorlds main exporters of rice (all types), average from 1998 to 2002, in millionsof tonsSource : UNCTAD Secretariat from the Food andAgriculture Organization of the United Nations (FAO)dataThe Middle East is the leading import andexport region, accounting for 35 percent ofthe worlds rice imports and about 75 percent of total exports.
It is projected that the global market will increase 3 percent per year over the mid tolong term. However, there are uncertainties about this projection because importers,normally low to lower-middle income countries, have vulnerable economies.The map below shows the main importersand their suppliers. Each color representsan importer (either a country or a group).The values correspond to imports ofdifferent types of rice (paddy, brown,white, broken), in thousands of dollars.The major importers are Indonesia,Bangladesh, Nigeria, the Philippines, Iraqand Brazil.TextilePakistan‟s textile exports grow 7% in first three quartersTextile exports from Pakistan jumped 7.09 percent year-on-year during the first threequarters of the ongoing financial year that started on July 1, 2012.According to the figures released by the Pakistan Bureau of Statistics (PBS), thecountry exported US$ 9.63 billion worth of textiles in the first three quarters of thecurrent fiscal, against exports worth US$ 8.993 billion made during correspondingperiod of last fiscal year.Posting a 29.17 percent year-on-year growth, cotton yarn stood to be the biggestcontributor to textile export growth during the nine-month period.Other textile items that registered positive growth include cotton cloth, whose exportsgrew by 11.56 percent year-on-year, knitwear by 2.84 percent year-on-year and yarnother than cotton yarn by 13.79 percent year-on-year.Towel exports grew by 18.11 percent year-on-year during July-March 2012-13, whileexports of made-up articles except towels and bedwear grew by 6.31 percent year-on-year; tents, canvas and tarpaulin by 30.89 percent y-o-y; bedwear by 0.09percent y-o-y; and other textile materials by 44.83 percent y-o-y.Items with negative export growth include raw cotton, whose exports dipped by65.07 percent y-o-y, synthetic textile by 25.33 percent y-o-y and cotton carded orcombed by 93.86 percent y-o-y.During March 2013, Pakistan‟s textile sector exports posted a 13.21 percent year-on-year and 17.77 percent month-on-month growth.Exports of Pakistani textiles are vulnerable to a few world economies. Thecountry exports 70 percent of its cotton yarn to China and Hong Kong, whileUnited States and European Union account for 78.5 percent of its bed wear
exports, 83.3 percent of knitwear and 79 per cent of readymade garmentsexports.“We will have to expand our export markets to ensure a sustained and shock freetextile exports,” said Gohar Ejaz group leader of All Pakistan Textile MillsAssociation. He said cotton yarn, cotton cloth, knitwear, bed wear and garments arethe five categories in textiles that earn more than one billion dollar foreign exchangea year.“Together these four categories accounted for $9.606 billion (78 percent) out of$12.357 billion textiles exports in 2011-12,” he said. Baring cotton cloth whereexports are evenly distributed exports in other four categories are concentrated tofew economies.He said in cotton yarn out of total exports of $1.79 billion in 2011-12 China and itscontrolled territory Hong Kong accounted for yarn exports worth $1.27 billion, whichwas 70 percent of total yarn export from Pakistan.He said after Pakistan‟s inability to fulfill China‟s demand for yarn it is increasinglyimporting Indian yarn. Gohar said that currently we enjoy competitive advantage overIndia and are preferred the world over in the type of yarn we produce. However, hewarned that the Indians are catching up fast in efficiency and technology and thecompetition would be tough in coming years.“We simply have to increase exports to other countries like Indonesia, Vietnam andTurkey,” he added.In cotton cloth, Pakistani exports are better spread as out of $2.454 billion exportsmade last fiscal Bangladesh was the largest buyer with imports of $350 million (14.8percent). The other major buyers of Pakistani cotton cloth were China 11 percent,Turkey and Italy 5.6 percent each and remaining was destined to 20 differentcountries. “In fabric, there is no dependence of Pakistani exporters on US, China orEU,” said Mian Anjum Nisar, a textile miller.“Pakistan‟s bed wear exports in 2011-12 were $1.748 billion. Out of which, $1.363billion went to European Union and United States,” said A Siddiqui, a bed wearexporter. He said despite frequent no tariff barriers imposed from time to time onPakistan bed wear the exports by EU were $850.91 million last fiscal equivalent to49.5 percent of total bed wear exports. He said United States accounted for 29percent of $551.7 million of bed wear exports.He said Pakistan enjoys competitive advantage in bed wear world over but Pakistaniexporters are shy of moving south. All they have to do is to find out designs andneeds of market in China and Asia Pacific and they could triple their exports of thiscategory.In knitwear, the US market alone accounted for 51.3 percent of total knitwear withexports of $1.092 billion out of $1.974 billion in 2011-12,” said Adil Butt, chairman ofPakistan Hosiery Manufacturers Association Punjab. He said 32 percent of knitwearexports went to EU, while the share of rest of the world was only 17 percent. He saidany economic downturn in these two economies impacts knitwear exports badly. Hesaid Latin America, Canada, Australia and New Zealand are lucrative economiesthat remain unexplored to date.In readymade garments, the largest market is EU having a share of 54 percentequivalent to $884.5 million in total exports of $1.634 billion in this category in 2011-
12. The United States was the next largest market with exports of $409.4 million, or25 percent, of total knitwear exports in 2011-12.Cotton yarn, cotton fabric, bed wear, knitwear and readymade garments togetheraccounted for $9.606 billion out of total textile exports of $12.357 billion in 2011-12.The share of rest of textile exports is only 22 percent.Pakistan fetches $10.2 billion of its $12.5 billion textile export revenue from 20countries. However, it accounts for merely 5.7 percent of their total textileimports, suggested an analysis of the trade statistics of last fiscal year.United States is the largest importer of textiles and clothing from Pakistan, importing$2.98 billion worth of textiles in 2011-12, which was 24.1 percent of total Pakistan‟stextile exports. However, these exports were equivalent to only 2.98 percent of totalUS textile imports of $100.93 billion.Industry players point out that Pakistan‟s share in the US textile market has beencontinuing to decline in recent years. “We lost many corporate US buyers duringrecent years and the exports were maintained at past level by luring new buyers,”said Adil Butt, chairman of Pakistan Hosiery Manufacturers Association, Punjab. Hesaid if we could lure back buyers lost due to bad image of the country and traveladvisories issued by the US government we could simply double our exports to theUS market.Further, China is the second largest buyer of Pakistani textiles, importing $1.527billion of textiles last fiscal. Unlike US where mostly value added textiles areimported, Chinese buy only cotton yarn and cotton fabric from Pakistan.“The textile exports to China could be tripled with better understanding of Chinesemarket,” said Gohar Ejaz, group leader of All Pakistan Textile Mills Association. Hesaid under free trade agreement the Chinese government provides severalconcessions to Pakistan that our entrepreneurs have failed to avail.He said for instance there is no duty levied by China on Pakistani bed wear. Pakistanis the cheapest supplier of cotton bed wear in the world but “we have not exportedeven a single bed sheet to China”.“Pakistani entrepreneurs have never explored the Chinese bed wear and hometextiles market,” he said, adding that they have no idea about designs, sizes andcolours popular in China in home textiles. He said China could be a big market forour home textiles if entrepreneurs overcome language barriers and do proper homework. As far as cotton yarn and fabric are concerned, the demand in China isunlimited. “Our production is limited due to energy shortages and orders that wecannot execute are being diverted to India,” he added.He said Pakistan‟s textiles account for only 12.4 percent of total Chinese textileimports of $37.19 billion. European Union as a block accounts for $3.6 billion textileexports from Pakistan led by the United Kingdom that imports $951 million worth oftextiles and clothing from Pakistan, which is 7.7 percent of total textile exports ofPakistan but only 3.03 percent of $32.39 billion textile imports of U.K.Similarly, Pakistan‟s textile exports to Germany are worth $809 million, being 6.5percent of total textile exports from Pakistan and 1.6 percent of $55.14 billion textileimports of Germany.Leading knitwear exporter M I Khurram said that Pakistani exports to EU are limiteddue to high duties imposed by the trading block on Pakistani textiles.
He hoped that Pakistan would get generalised system of preferences (GSP) plusstatus in 2014 after which there would be an appreciable surge in value-added textileexports from Pakistan.In fact, developed economies have lucrative value-added textile markets, whiledemand for yarn and fabric in these markets is waning.Bangladesh imports $520 million (4.2 percent) of Pakistani textiles, which is $2.57billion (5.53 percent) of Bangladesh‟s textile imports. Other top importers includeBelgium, Spain, Italy, Netherlands, UAE, France, Turkey, South Africa, Vietnam,Korea, Saudi Arabia, Sri Lanka, India and Kenya.Interestingly, India is the 19th largest importer of Pakistani textiles worth $88.8million in FY12, 0.7 percent of Pakistani textile exports and 0.8 percent of India‟stotal textile imports of $4.155 billion.Though the year 2012, which is about to end, like past few years confoundedthe problems of the industries with severe energy crisis, textile sector is stilloptimistic at the prospect of the opportunities knocking boisterously at thedoor.One such is the inability of Chinese textile manufacturers to produce efficiently basictextiles, while the GSP Plus status from European Union is another. The propensityto add value was also a positive sign in 2012.Gohar Ejaz Group Leader All Pakistan Textile Mills Association (APTMA) said yarnexports from Pakistan to China are growing at an astonishing pace. “Two yearsback, our average monthly yarn exports were 40,000 tonnes, while average exportsduring last three months stood at 65,000 tonnes per month. The growth was mainlybecause of growing appetite for yarn in China,” he added.“This is just beginning since yarn and fabric demand in China will continue to scaleup because of closure of basic textiles,” he said and added the labor costs in Chinaare very high, making it unviable to produce low value added textiles.He said in order to meet the Chinese demand the industry will have to invest in newmachines. However, „at 13-14 percent markup, it would not be possible to add newmachinery,” he added. He said the energy crisis is another drawback. He warnedthat if the planners failed to resolve these two issues, India would replace Pakistanas main yarn supplier. In fact, he added, India is already making inroads intoChinese yarn market, as the Pakistani spinners are working on reduced capacitiesdue to energy and power shortages.“Yes the textile sector is buoyant,” he admitted, saying but buoyancy is limited to therelatively larger mills that have resolved their energy issues through investment inalternate energy resources. However, smaller units of 25,000-30,000 spindles do nothave resources to invest in alternate energy, he added. “Thirty percent of theproduction capacity is closed due to energy shortages,” he regretted. He said mostof the close units are otherwise highly efficient but they cannot run without power.There is a need to revive these units urgently, he added.A spinner and knitwear exporter M I Khurram said that besides Chinese demand theindustry is also expecting higher market share in the EU block at the start of 2014when we are expected to be granted the GSP plus status. “We will have to plan nowto avail that golden opportunity. We will need more yarn for local production and the
demand for fabric would also increase,” he added. “Would we be able to grab thisopportunity or miss the bus again as we did in the past,” he questioned.“Pakistan has got inherent advantage in basic textiles. It has not been able to grabits due share in the global market,” said Shahzad Ali Khan chairman of APTMAPunjab. He said the country failed to cash in on opportunities that came its wayduring last two decades.“The first opportunity came during the East Asian crisis when the entire processingsector of Hong Kong was willing to relocate their industries in Pakistan,” he said. “Wemissed that bus as our entrepreneurs were not prepared to enter into partnershipwith foreigners. Moreover, our planners lacked the vision to lure the prospectiveinvestors to Pakistan,” he added.The second bus was missed when Pakistanis invested over $5 billion in balancingand modernisation of their units on the firm assurance of the then finance ministerthat the interest rates would remain in single digit, he said. He said the markupincreased in few years to 15 percent. The entrepreneurs that took bank loans at 4-5percent to import machines suddenly found themselves in hot water as they wereunable to service their loans at exorbitant mark-up. So, instead of consuming theirenergies of growth they spent most of their time trying to save their enterprises frombank defaults, he added.Chairman APTMA Ahsan Bashir said the other regional countries shielded theirtextile sector from the financial crunch by facilitating them through subsidies onmachine import and lucrative duty drawbacks on exports. India, China andBangladesh used this period of great opportunity to strengthen their textile sector, headded.Bashir said Pakistan added 1.8 million spindles and 3,179 shuttle less looms in basictextiles since 2006 against an increasing addition of 6.2 million spindles and 21,850shuttle less looms in Bangladesh, which now has 3/4th spinning capacity and higherweaving capacity than Pakistan. He said the statistics of International TextilesManufacturers Federation reveal that in past six years during 2006-11 periods, Indiaadded 15.33 million spindles and 30,850 shuttles less looms. The statistics alsoreveal that China has added 38,290 spindles and 360,100 looms in its spinning andweaving industries, he added.It now has total of 120 million spindles and 587,500 shuttles less looms. All theseadditions in capacities were possible due to prudent policies of the competingeconomies, he said.Chairman Pakistan Hosiery Manufacturers Association Punjab Adil Butt said thatenergy and power crisis was a wakeup call for the textile sector. He said most of theindustries in textile sector improved their efficiency to global level to cut costsparticularly in 2012. In addition, they concentrated on value addition.He said though the textile exports have remained much below in quantity terms fromthe peak achieved in 2008, the exports in value jumped by over $3 billion due tohigher value addition.Pakistan added 1.8 million spindles and 3,179 shuttle-less looms in the textilesector since 2005, against 6.2 million spindles and 21,850 shuttle-less looms inBangladesh, according to official statistics.
Bangladesh now has three-fourth spinning capacity and a higher weaving capacitythan Pakistan.The drying up of investment in basic textile is playing havoc with the local textilesector, which is still the most efficient among the South Asian countries according toWerner, a globally renowned textile consultant. It is, however, slowly losing itscompetitive edge to its less efficient neighbours.According to official statistics, since 2005 installed spindles in Pakistan are 11.9million and the total number of shuttle-less looms stand at 24,000.The International Textile Manufacturers Federation (ITMF) reveal that during 2006-11 India added 15.33 million spindles and 30,850 shuttle-less looms to its textilesector, which is larger than the total size of the Pakistani textile industry. As perofficial Indian data, it now has 41.27 million spindles and around 38,000 shuttle-lesslooms.Bangladesh added 2.830 million spindles and 21,850 shuttle-less looms in the sametime period, which led to a total of 8.7 million installed spindles and more than28,000 shuttle-less looms. Thus, Bangladesh has a higher weaving capacity thanPakistan today. Statistics also reveal that in 2004, Pakistan had 24,000 shuttle-lesslooms and Bangladesh had only 3,200 shuttle-less spindles.Another interesting fact revealed by the ITMF is the huge advantage that China hasover the three South Asian countries mentioned in textile machinery. According tovarious statistics, China added 38.290 spindles and 360,100 looms to its spinningand weaving industries. It now has a total of 120 million spindles and 587,500shuttle-less looms. The spinning capacity of the Chinese is two times more than thecumulative spinning capacities of India, Pakistan and Bangladesh. It has added fourtimes more shuttle-less looms since 2006. Currently, it has six times more shuttle-less looms than the combined shuttles installed in India, Pakistan and Bangladesh.During 2000-12, Pakistan attracted the lowest foreign direct investment (FDI) of $367million in textiles among the South Asian Association for Regional Cooperationcountries, against $1.162 billion in India and over $1 billion in Bangladesh, accordingto the official FDI statistics of the three countries.Group leader All Pakistan Textile Mills Association (APTMA) Gohar Ejaz said that itis a pity that Pakistan is losing its efficiency advantage to it neighbours because ofissues that could be resolved through proper management. “The war on terror hasneither impacted our efficiency or the appetite to grow,” he said, adding that theenergy crisis has crippled the textile sector‟s productivity. “We are still the mostcompetitive sector in yarn and fabric both,” he said, revealing that Pakistan isexporting 68 million kg of yarn every month against an average of 48 million kg in2010.He added that fabric exports are also up by 25 percent as compared to 2010. “This isdespite the fact that 30 percent of the production capacity in textiles is closed,” hesaid, adding how impossible it is for the industry to expand due to energy crisis.Chairman APTMA Ahsan Bashir said that textile is the only sector that could takePakistan out of the present economic turmoil.“It could reduce trade deficit, create employment opportunities and boostdownstream value chain if its energy needs are fulfilled,” he added. Foreign investors
are hoping that the government would take prudent steps to take advantage of thecompetitive edge that Pakistan enjoys in the textile sector.Cement:The cement industry in Pakistan is composed of 24 players with annual productioncapacity of around 40mln MT. The sector is dominated by six major players – LuckyCement Limited, Bestway Cement Limited, D.G. Khan Cement Company Limited,Maple Leaf Cement Factory Limited, Gharibwal Cement Limited, and Kohat CementCompany Limited – constituting over 60% of the total production capacity. Theindustry maintains a positive correlation with GDP growth, which stood at around 7%during last five years. The major domestic demand drivers are Public SectorDevelopment Programs (infrastructure), real estate and industrial construction.Conducive economic environment not only fueled the local demand but alsoprovided impetus for capacity expansion. Resultantly, the industry added significantcapacity and several new production lines are scheduled to commence operations in2009. The sector is currently facing stern challenges emanating from a widespectrum of socio-economic risks including contracting domestic economic activity,slowdown in GDP growth and construction activity and heightened security risks.Due to the commodity nature of the product, differentiation and brand equity isminimal. Furthermore, manufacturers as well as major consumers in the local marketare reluctant to enter into exclusive supply contracts. Hence, the possibility ofgaining captive markets through long-term contracts is nonexistent.3. Lately, profitability of the industry came under pressure due to high energy costs(comprising around 50% of total raw material costs) and increasing financialexpenses. Although international energy prices have receded from their 2008 high,the beneficial impact on margins was largely negated by substantialdepreciation in Pak Rupee. However, with commodity prices expected to remain lowand declining trend in the interest rates anticipated, the operating margins wouldimprove in the near term. This would provide price cushion to manufacturers.Nevertheless, dwindling local demand and resultant low capacity utilization could putfurther pressure on pricing.4. During 2007 and 2008, the cement manufacturers also established exportoperations by capitalizing on the growing demand in regional economies. Cementexports predominantly targeted Afghanistan due to established trade channels.However, in recent years, exporters have established a foothold in Africa and theMiddle East as well. Clinker exports to the Middle East offers competitive margins,too. The significant export volumes, while stabilizing the local cement prices, had apositive impact on capacity utilization and the bottom line. However, sales inlucrative export markets, including India, Afghanistan and the Middle East, are likelyto be reduced due to the global slowdown. The downturn has narrowed the exportwindow, which was regarded as a limited time opportunity otherwise, too.Meanwhile, decrease in local demand coupled with the increase in capacity mayprecipitate into a price war amongst domestic cement producers. The looming supplyoverhang scenario in the sector could potentially worsen the situation. Furthermore,regional markets – mainly India, Saudi Arabia and Iran – may emerge as competitors
in the export market, following a slowdown in their domestic economies and/orenhanced production capacity.5. On the domestic front, cement demand is expected to improve (on MoM basis)with peak construction period (summers) approaching and large part of Public SectorDevelopment Programme (PSDP) still unutilized. However, with a sharp cut in PSDPexpenditure (from PKR 400bln to PKR 219bln), the allocation of these funds forinfrastructure development remains to be seen. Thus, the local demand is likely tolag its recent high growth trends.The Indian authorities are intentionally creating non-tariff barriers (NTBs) forPakistan’s cement sector, despite the fact that Pakistani cement is of betterquality as compared to Indian cement, said sources.“Discouraging the entry of cement trucks from the Wagah-Attari border to India bylimiting them to seven to eight trucks as compared to 50 trucks of gypsum – a basicraw material for cement – is also a NTB for Pakistani cement,” said Chairman AllPakistan Cement Manufacturers Association (APCMA) Aizaz Mansoor Sheikh.Highlighting another NTB, Sheikh said that the Truck Association at Attari chargesRs25 (Indian rupee) per bag to transport cement from Attari to Amritsar as comparedto Rs3 to Rs4 per bag to transport another product from the border to Amritsar.Another leading cement manufacturer also has similar observations while doingcement trade with India. He mentioned that technically, only one truck moves once aday to transport cement to India from Pakistan. “Every cement truck moving towardsIndia takes at least four hours due to multiple checks imposed by the Indian customsand border security force officials and the same amount of time is spent when trucksreturn back,” he said. He added that even though the border opening hours havebeen increased to 10 hours from eight hours a day, real time trading occurs for eighthours only.Thus, one truck can cross once in a day only. On the other hand, Indian customsofficials fully facilitate trucks carrying gypsum. No extra security checks apply to it,which is why 40 or 50 gypsum trucks enter India from Pakistan‟s side of the border.This exposes the interests of the Indian high-ups to discourage the entry of finishedgoods from Pakistan. He mentioned that the trucks loaded with gypsum cost almost$50 to Indians, inclusive of all costs of transportation, handling and customsclearance.On how to address the situation, Sheikh said that Pakistan‟s customs officials coulddiscourage gypsum exports from Pakistan so that India would automatically createspace to increase cement imports from Pakistan with pressure from their importersand to fulfill domestic needs.However, Pardeep Sehgal, vice president of Indian Importers Association, whiletalking to The News admitted half of the NTBs faced by Pakistan‟s cement exporters.He admitted that the truck union was very strong at the Attari border and no importercould confront it. However, he said that no uniformity exists in freight charges atAttari as the union defines its own rates.However, while criticising Pakistani cement exporters, Sehgal believes thatPakistan‟s cement exporters have not been doing business with direct dealers andthus, Pakistani exporters are also selling cement at almost 30 percent below themarket price, while the middleman is benefitting.
He said that Indian Punjab‟s cement manufacturing units have also started, which isthe main reason for the reduction in Pakistani cement imports. However, he alsoadmitted that Pakistani cement is much better in quality as compared to Indian.Pakistani cement exports to Afghanistan and India declined by $20 million inthe first-half of the current fiscal after the Afghan government increased thetransit fee and Indian authorities refused to renew export licences of somePakistani manufacturers, sources in the ministry of industries said onThursday.The Afghan government increased the transit fee by 100 percent at Torkham borderfor each truck that carries cement from Pakistan, they said.Indian businessmen played a cardinal role in pursuing the Afghan government toincrease the transit fee and they succeeded in their designs, they added.The Afghan government had earlier been charging Rs9,000 transit fee on a truck,which has now been doubled to Rs18,000. The decision was taken 14 days ago andthe cement industry so far has lost $14 million worth deals.The concerned ministries of commerce and foreign affairs remain unmoved over thisdevelopment. However, the businessmen engaged in exporting cement toAfghanistan, including cement dealers, transporters and some representatives of thecement industry, are scheduled to hold talks with the Afghan authorities on Mondayto resolve the issue of transit fee.In 2008/09, Pakistan exported 3.18 million tonnes of cement worth $150 million toAfghanistan, which surged further to four million tonnes, valuing $200 million in2009/10.However, during the first six months of the current fiscal year, Pakistan‟s cementexports stood at 2.265 million tons worth $110 million.Similarly, Pakistan suffered a decline of $6 million in its exports to India because ofthe non-renewal of quality licences by the Bureau of India Standards (BIS), thesources said.An official said that in 2008/09, Pakistan exported 0.634 million tonnes cement worth$35 million to India which increased in 2009/10 to 0.723 million tonnes worth $40million. But during the first-half of the current fiscal year, the country exported only0.215 million tonnes of cement worth $12 million.The cement companies of Pakistan are required to obtain quality certification fromthe BIS. Between 2007 and 2008, BIS had granted quality licences to 22 Pakistanicement companies. Some of these licences, such as those obtained by DG KhanCement and Maple Leaf, expired.These companies, according to the All Pakistan Cement Manufacturers‟ Association(APCMA), have approached BIS for renewal, but their applications remain pendingfor the last four to five months. The BIS did not reply to an emailed query.“Pakistani cement has been well received in India. The BIS should renew licences asearly as possible after completing the formalities,” said a spokesman for APCMA.Since 2007, Pakistan has exported 2.32 million tonnes of cement to India and morelicences would expire in the coming months, he added.
According to Anudeep Singh Madan, president of the Amritsar-based CementImporters Association, the region is getting good quality cement from Pakistan at alower price.After taking into account the cost of rail transport from Wagah to Amritsar and furthertransportation within the country, the Pakistani cement is delivered to Indian buyersat Rs220 per 50kg bag, Rs30 less than the Indian cement.Diminishing local demand also remains a concern for the Pakistani cement industry,which has been particularly hit hard by few projects in public sector development.In 2008/09, Pakistan exported 6.06 million tonnes cement, earning $600 million. In2009/10, it exported 5.6 million tonnes of cement, valuing $530 million. During thefirst six months, the industry exported 2.08 million tonnes worth $230 million.The local cement consumption has surpassed 2.24 million tons, registering agrowth of 11 percent in December 2012, which is the highest-ever local cementdespatch for the month of December, said sources.However, the slump in exports continues as exports in December declined by 10.55percent to 0.580 million tons.A spokesman of All Pakistan Cement Manufacturers Association termed the cementsector‟s performance in the first half of FY2012-13 as a good omen. He said that thelocal cement despatches increased to 11.728 million tons, registering an increase of7.61 percent. However, exports remained under pressure and declined by 5.28percent to 4.22 million tons.“During the first half of FY2012-2013, cement units located in South registered agrowth of 7.98 percent in the local market but posted an even higher 16.34 percentdecline in exports,” he said. “The majority of the cement capacity, however, islocated in the northern part of the country where the industry posted a growth of 7.52percent in domestic market, while exports declined by 1.31 percent only.” He addedthat the hype created on trade with India has so far not materialised and exports tothat market stood at 0.209 million tons only during the last six months, which waswell below the expectation of the cement sector and declined by 40.41 percent.Exports to India, in fact, have been on a constant decline ever since the twocountries opened their borders for liberal bilateral trade. “The decline is not due tolack of cement demand in India but because of very stringent non-tariff barrierscreated by our neighbour,” he said, adding that Pakistan‟s cement is preferred byIndians because of better quality.Cement exporters, with a potential to export a large quantity to the Indian market,have been facing strict resistance by the Indian government as non-tariff barriershave not been removed even after having been specifically mentioned during thedifferent rounds of official and unofficial talks between the two countries.During the last six months, Afghanistan‟s market remained stable and the cementsector exported 2.41 million tons to Afghanistan. Exports to other destination throughsea, excluding India, also remained stable in comparison with the last six months of2011-2012.Pakistan can earn additional $6.5 million through cement exports toAfghanistan if it fixed the minimum export price at $55 per ton instead of
existing $42, which will still be less than other countries, an official of theindustry said on Thursday.Even if the minimum export price is fixed at $55 per ton the country would earn $50-60 million additional foreign exchange annually, the official said.In an SOS to the economic planners, he said that the cement industry is in dire needof immediate government action.He said cement would cost $60 per ton in Afghanistan if imported from any othercountry. “We are exporting cement at $42 per ton due to competition betweencement plants situated in the Northern parts of the country,” he said.Operational capacity of cement mills situated in the North is 34.26 million tons (2.855million tons per month) and the operational capacity of cement units in South is 6.97million tons (580,875 tons per month).Saigol said that the mills in the Northern Region of the country exported 372,048tons of cement to Afghanistan in February, which was 13 percent of their operationalmonthly capacity of 2.855 million tons. The total production of the North-based millsin February was 1.385 million tons.The total production of cement in the North in February was seven percent less than1.494 million tons production recorded in the corresponding month last year.He said declining uptake in the domestic market was the main reason for decline incement production in the North.Another Cement mill-owner said that in order to maintain minimum production level,a few North-based mills have been forced to export cement by sea though it is not acommercially viable option due to high transportation cost.According to APCMA, cement units situated in the South exported bulk of 337,476tons of cement through sea, which was over 40 percent of their monthly operationalcapacity of 580,875 tons.The South-based mills produced 393,287 tons of cement in February. The mills inSouth, he said, would have caved in without exports as the demand in the localmarket, which picked up in February, was still very low.The cement units in South posted a production increase of 37 percent over 283,395tons they produced in February 2010.A spokesman of APCMA said that the cement production declined by 8.49 percentduring the first eight months of this fiscal year, ending in February.During July-Feb, the cement production was 15.073 million tons.Cement exports declined during the same period by 14.81 percent from 6.930 tons inJuly-Feb 2010 to 5.904 million tons during July-Feb 2011.However exports during February increased by 6.22 percent that helped the industrypost a nominal growth of 0.04 percent, he added.Cement Industry set to break records:
Acceleration in regional constructional activities and other exogenous factors like warin Afghanistan have created unprecedented demand for rehabilitation during last 5years. Pakistan has come under lime light as the a major exporter of cement whichhas not only fostered the industry but also earned precious foreign exchange tomitigate the budget deficit. There are 29 cement production units in the country.Pakistani cement sales surged 25 percent in the first ten months of the 2007/08fiscal year. Cement sales totalled 24.6 million tonnes, compared with 19.7 milliontonnes sold in the same period last year. Government expenditures become a majorstimulator in creating tremendous demand for cement, thus resulting in theexpansion of production.The 2007/08 budget earmarked a record 520 billion rupees for the public sector,which meant more construction as development spending is channeled into sectorssuch as health, education and infrastructure. During the July-April period, cementexports from Pakistan jumped 142 percent to a record 5.95 million tonnes, comparedwith 2.45 million tonnes shipped a year earlier. From 2003 to 2007 cement industryof Pakistan had registered an average growth rate of 20pc. Cement export isexpected to reach 6.6 million tonnes in financial year 2008 in the light of growingregional demand for construction.Orascom Telecom, a leading mobile telecommunications company with variousinternational operations, has shown intent to invest in cement sector realizing itstremendous growth potential. This will further the production capacity of the sector incoming years. On the other hand, cement export to Middle-East counties is in fullswing. Regional outlook has gone in favor of Pakistan in terms of ever increaseddemand for cement in especially two neighboring countries, namely, India andAfghanistan. Indias exponential growth in all sectors augmented its constructionMillion Tonnes 9MFY08 9MFY07 % changeLocal Sales 16,610,096 15,380,297 8.0Export Sales 6,819,964 2,145,951 217.8Total Sales 23,430,060 17,526,248 33.7appetite. Faced with demand supply gap, India has to rely on Pakistan for its cementneeds for several years. This bodes well for the expansion of the industry. Likewise,Afghanistan, having been reduced to rubble, will depend of cement imports fromPakistan for a decade or so. The country has unprecedented thirst for infrastructuralgrowth and construction which will be satiated by none other than Pakistan. Apartfrom these two countries, rising cement demand and high construction activity in SriLanka have led to a rise in cement prices in the island nation; as a result the countryis planning to import 10,000 metric tonnes of cement from Pakistan to meet itsrequirements. According to Sri Lankas Trade, Marketing Development, Co-operatives and Consumer Affairs Minister Bandula Gunawardena, an agreement hasbeen signed with a company in Pakistan to import 10,000 metric tonne of cement tothe island country. "A high cement demand has been created in the country with thecommencement of many construction projects, including buildings and bridges".Presently, the cement industry of Pakistan is heavily burdened due to levy of FederalExcise Duty which is Rs. 750 per tonne and GST 15pc on duty paid price. In addition
to Federal Excise Duty and General Sales Tax, cement industry is also paying theprovincial levies (Royalties and Excise Duties) on acquiring of raw material forproduction of cement i.e. lime stone and shall clay.A comparison of taxation and retail prices with other regional countries revealed thattaxation in Pakistan is highest while cement retail prices are lowest. Housing sectorhas been looked upon as stimulator of economic growth since there is a largeestimated gap of 5.38 million housing units against annual addition of 300,000 unitsin the country, many tax exemption and incentives are provided to encourage newconstruction activities in the country. This will stimulate growth of cement industry. Ifnegative factors are looked into, we find that hike in discount rate will mar cementsectors growth. Increase in Oil prices globally and depreciated local currencypushed forward State Bank of Pakistan to take decision towards enhancing thediscount rates from 10.50pc to 12pc per cent which will negatively affect cementsector and construction activities. Due to bulk imports and high expenses of fuel costalready hurting local cement manufacturers, increase in interest rates generate newhurdles in paying their debts which have already been taken from the local banks.During 2007 the total capacity of cement production was 32.7 million tonnes which isnow reached to 37 million tonnes and in future it will reach up to 42 million tonnesper annum. To achieve these expansion targets, cement companies have takenhuge loans from the local and foreign banks and according to our valuations andcompany reports, companies are to pay Rs. 26 billion to banks till 2012.In the budget 2007-08, government has also made the outlay of Rs. 1,847 billionwhere the target on PSDP at Rs. 520 billion with current expenditure at Rs. 1,353billion where revenue is set at Rs. 1,475 billion will enforce it to avail credit from thebanks.Increase in interest rates may hamper already sanctioned loans for the expansionsplans in the existing industry. It is in the view that most of the companies alreadyfacing losses due to augmented fuel costs, and secondly, the step taken by thegovernment to help enhance the finance costs of the companies which is to be paidover KIBOR.