Textile output: flat? – BR research

0

In a recent editorial for this newspaper, Tahir Jahangir – former president of the Pakistan Towel Manufacturers Association, noted that the ongoing export boom may not last long, as the 13% increase in revenue from Textile export in FY21 is largely driven by higher world cotton prices. In fact, world cotton prices – as tracked by the Cotton A Index – in FY21 were 15% higher than in FY20 (12-month averages). Which begs the question: is the volume of textile exports increasing?

In recent years, the share of value-added products in textile export earnings has increased, while yarn and fabric export earnings have declined significantly. As the overall value of exports has increased, it may mean that the country is exporting more value-added goods, a welcome sign. However, two competing trends have emerged which lend credence to the claim that the increase in export earnings is not due to significant growth in volume exports.

If PBS, USDA and Textile Division (MoC) are to be believed, Pakistan’s textile fiber production is static at around 3.4 million metric tonnes over the past 5 years (excluding covid year). Since yarn exports have been steadily declining since fiscal 2013, it follows that a higher amount of yarn production is kept locally. National yarn consumption increased 38 percent in the intervening years. Is the yarn consumed locally feeding a higher volume of value-added exports? Or is the textile industry consuming larger volumes of yarn to manufacture value-added products for a constantly growing local market?

While the yarn data (LSM) is considered reliable as it is mainly reported by the spinning mills in the documented sector, the production of woven fabrics mainly takes place in the weaving clusters of SMEs, which do not formally declare their production. If the cotton fabric figures reported by LSM were to be believed, cotton fabric production would also appear stable at 1.05 billion square meters. Since this figure is lower than the tissue export volume, the LSM production number cannot be used as an indicator of the total tissue production.

However, in the absence of reliable data, the export of cotton fabrics may appear to be a valid indicator. However, a quick review of trade data reveals that cotton fabric exports have fallen by almost two-thirds since FY19. This may lead to a logical conclusion that since yarn production is not increasing while fabric exports fell drastically in FY21, total fabric production (unknown) may not have registered a substantial increase either. If a larger share of yarns and fabrics is kept locally for value-added production, does this fuel a higher volume of value-added exports or local consumption of textile products?

This is where we have to get into the realm of guesswork. Since fiscal year 2019, when the volume of cotton fabric exports was at its peak, fabric exports have declined by 63%. Meanwhile, the largest quantum increase in exports occurred in knitwear, where the volume increased by 35% (FY21 over FY19). The quantity of bed clothes and towels exported saw only a modest increase of 10 percent. In fact, towel exports in FY21 are still 7% below their peak levels (FY18). Even more surprisingly, the volume of ready-to-wear clothing exports has fallen by a third since the record levels of fiscal year 19 (volumes for the year Covid were intentionally excluded).

Here, several caveats should be emphasized. Making comparisons of the percentage change in the exported volume of different product categories can lead to erroneous conclusions as the unit of measurement varies widely. While fabric is measured in square meters, bed clothes and towels are measured in metric tons, while knits and garments are measured in tens. Moreover, given that the volume exported in some product categories increases while it decreases in others, the data can at best be considered inconclusive. But consider the following:

In fiscal year 2019, when cotton fabric exports were at their peak, denim fabric exports accounted for the largest share of woven fabric exports (HS codes 5208 to 5212), both by volume (22%) and in value (29%). If more of the previously exported fabrics / fabrics are kept in the country for the manufacturing of value-added exports – in this case, denim pants, shouldn’t the amount of ready-made clothes increase? Consequently ?

In addition, the greatest increase in volume was observed in knits, which by definition do not consume woven fabric. Is the 10 percent increase in the volume of bedwear exports enough to explain the 63 percent drop in fabric exports? Has Pakistan diversified into exports of finer sheets, which consume more yarn? Has overall local fabric production declined significantly to support higher yarn consumption through knitwear exports? To answer it, you have to look at the last piece of the puzzle.

What is the yarn production in the direction of counting. According to data provided by the Textile Commissioner’s Organization, the counting build-up of local yarn production has remained broadly unchanged over the past decade. Note that total cotton yarn production also includes blended yarns such as poly / cotton and poly / viscose, thus the LSM yarn statistic represents overall yarn production including artificial filaments.

In addition, according to the TCO, the consumption of synthetic fibers for yarn production has also remained unchanged since at least fiscal 2014, indicating that the production of non-cotton fibers has also not seen any decline. substantial increase. Is it then possible to produce a higher volume of finer bed sheets and other finished products for export when the overall volume of finer yarns (fine and superfine) has remained virtually unchanged?

Here it must be emphasized again that unless exports of higher value-added products are converted to the equivalent of yarn or fabric consumed (in the production of these products), it is impossible to categorically state whether the volume of exports increased, decreased or remained unchanged.

But it is hard to imagine the same being the case, given that the textile sector has active and independent industry associations for every step of the value chain, from filaments to woven fabrics, to denim, to clothing. upholstery, hosiery, bedding, towels, fashion clothes and ready-to-wear clothes. Industry associations must certainly have put in place mechanisms to collect data by product, both for total production and exports, which could help determine whether the volume of textile exports is increasing along with profits.

Here, it should be emphasized that – if the volume of exports is indeed declining – it is not a reflection on the quality of exports. A hundred dozen T-shirts made and sold at Ralph Lauren are, of course, better than five hundred dozen T-shirts sold at Gap Inc. or Walmart. If the quality of exports increases, this should be reflected in higher average unit prices. But at a time when the higher unit price of exports is simultaneously driven by rising world raw cotton prices, is it fair to conclude that the quality of exports has irreversibly improved (or improved at all)? ?

The questions raised here are not insoluble mysteries because the answers must be found with various associations of the textile industry. And it is crucial to answer these questions, because it is hard to imagine that value-added production could increase significantly when raw cotton consumption, yarn production, and fabric production have all (perhaps) stagnated. .

Thus, if the domestic production of yarn has remained unchanged since FY16, then the size of the domestic market has arguably increased, as indicated by the growth of mushrooms in retail brands (or at least organically alongside the increase in per capita income), can the volume of textile exports really increase?

Which leads to a farewell reflection: Since 2016, the national textile industry has borrowed 126 billion rupees in long-term concessional credit under the export-oriented LTFF scheme for fixed investment (post-TERF , the amount increased to 224 billion rupees). If textile production (as indicated by yarn and fabric production) and export volume have not increased substantially (if at all), who exactly is concessional subsidized credit?


Source link

Share.

About Author

Leave A Reply