According to newspaper reports, at least 30 percent textile units have been closed down, over 10,000 workers have lost their jobs and the annual exports of textile products have declined by $3 billion during the last three years of the Pakistan Muslim League-Nawaz government. The All Pakistan Textile Mills Association blames the government for the crisis. Prime Minister Nawaz Sharif had announced a Rs180 billion subsidy and bailout package last year to raise the production capacity of major export-oriented industries, but only Rs4 billion have been earmarked for disbursement during the next one and half years. Earlier, the government had failed to disburse Rs200 billion withholding tax to textile exporters, blocking up to 40 percent of their working capital in the cycle of tax refunds. This has created liquidity crunch in the textile sector. Textile industry is one of the major dollar earning sectors of the country, but it is not only facing challenges at home but also from its competitors in the international market. The country’s annual exports remained $20 billion but had to pay an import bill of $50 billion, thus the current account deficit has crossed $32 billion in the outgoing fiscal year.
The irony is that the government has raised duties and taxes at various levels but is reluctant to repay the tax refunds to the exporters. The country is not only losing export markets to growing foreign competitors such as China, India and Vietnam, but also to non-cotton-growing country like Bangladesh. The export sector of the country is also facing the challenges of high cost of production, irrational increase in tax rates, high markup of bank credits and high cost of electricity. Most of the textile units use old machinery, which is imported as scrap and has long been discarded in Europe and the United States. The procedure of refund is also difficult to follow. It requires the exporters to pay all their taxes, get a certificate from the State Bank as well as a confirmation letter that the relevant goods have actually been exported and payments against the goods are received from abroad in the form of foreign exchange. The whole process does not take days or weeks, but months and years before reaching the stage of maturity.
At a time when 100 textile mills have been closed down and many others are on the verge of closure, sooner the government addresses the problems, the better. The announcement of the bailout package is not enough until it is implemented in letter and spirit.
