September 2004 Edition - Textile News & Updates Newsletter

Drawback Rates on Polyester Staple Fiber Goods to Be Reviewed
Textile Exports to Bangladesh up by 134%
Government to Set up Five Testing Labs
Imports of Bed Linen Subjected To 13.1 Percent Anti-Dumping Duty
Textile Exporters Will Have To Accept Low Prices
Trading Corp of Pakistan to Implement 'Cotton Support Policy'
PTA Proposed By Turkey
Cotton Prices Move Up
European Union-Import Prices Would Fall 15% in 2005-2006
Rejects Textile Safeguard against China
Made In S.A. Labels Demanded
US-Cotton Trousers Imports Declined
Imports of Raw Cotton to Be Permitted
Textile Industry to Get Rs 16 Billion Relief
Customs Serve Notices On Top Textile Exporters
Textile Sector May Show Finer Result Next Year
Joint Ventures in Textile Stressed
Textile Sector Needs Govt Support
Us Investors to Inject Money in Pak Textile Sector
Textile Trade Improved After Abolition of Quota
Govt Allocates Rs 214 Million for Cotton Research
Quota Phase-Out Rate Stands At 25%-30%
EU Agrees To Review Duty on Bed Linen
Us May Abolish Textile Quotas for Pakistan

Textile Exports to Bangladesh up by 134%
Pakistan’s textile products exports to Bangladesh increased on an average by 134 per cent in 2003-04. The cotton yarn, cotton fabrics (woven) and synthetic fabrics...

Drawback Rates on Polyester Staple Fiber Goods to Be Reviewed
The Economic Coordination Committee (ECC) of the Cabinet was due to take up the issue of duty drawback on polyester staple fiber (PSF) products. The ECC meeting, chaired by Shaukat Aziz, federal Finance Minister, would take up the issue of duty drawback on around 44 PSF-based products.
The rates of duty drawback were reduced by almost 40 to 50 per cent effective from July 1, but the industry raised much hue and cry and is demanding that the rates should be reversed as of June 30. Among other agenda items, the ECC would discuss and review the provision of additional urea production for Rabi season.
The meeting would also take up the issue of refund of deposits made by Islamabad New City Project as moved by the Ministry of Housing and Works. The ECC is also likely to consider tariff protection to Chemi Viscofiber (Pvt) Limited.

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Government to Set up Five Testing Labs The government has planned to set up five fiber testing laboratories along with high volume instruments (HVI) for the evaluation of cotton. M. Ismail Qureshi, Federal Secretary, ministry of food, agriculture and livestock, announced in a meeting with the board of directors of the Pakistan Cotton Standards Institute on August 16. The first phase of the project will involve setting up of two laboratories this year for which an allocation of Rs20 million had been made in the PSDP for 2004-05. All this was being done to provide facilities to the stakeholders The board also discussed the implementation status of the cotton grading and classification system and the possible role of private sector stakeholders in ensuring the qualitative improvement in cotton. The secretary stressed upon producing high quality and contamination-free cotton and reiterated the government's intention to closely and actively associate the private sector in all such endeavors. Besides, he said a network of private inspection companies would be encouraged. He also suggested the provincial governments to expedite the necessary amendments in the Cotton Control Act in order to implement the cotton grading system at the grass-roots level. The board deliberating upon the administrative and financial matters of the Pakistan Cotton Standards Institute, observed that it had to play an important role in introducing and implementing the cotton standardization and grading system in the country and, therefore, further develop the proficiency in that discipline. While referring to the recent meeting of the WTO held in Geneva, Qureshi further suggested the stakeholders to meet obligations on their part in order to realize the maximum benefits from the forthcoming withdrawal of quotas in textiles and the subsidy in agriculture.	Imports of Bed Linen Subjected To 13.1 Percent Anti-Dumping Duty A questionnaire for interim partial review of the anti-dumping duty imposed on the imports of bed linen from Pakistan has been by the European Commission (EC)...
	Textile Exporters Will Have To Accept Low Prices In recent years, Pakistan had emerged as one of the major cotton textile exporters in the world market, with a share of about 30 percent in the world yarn trade and 8 percent in the trade of cotton cloth. The share of textiles in the country's export earnings was around 68 per cent, with a value of approximately $7 billion, at present. However, with the phasing out of the quota, exporters are likely to find themselves in grave dilemma. Textile exports are expected to come down initially in the post-quota period because of the confusion over a number of issues. Overseas buyers were now reportedly asking for reduction in lead time by 30 days from the 90-120 days prevalent, at present. The dilemma for the Textile exporters is that on one hand lower prices was creating uncertainty among the exporters and, on the other hand, export orders from overseas buyers were expected to increase manifold. In order to take advantage of this opportunity, exporters will have to accept a price, nearly 10 percent lower than current prices. The year 2003-04 had witnessed massive investment in the expansion of value added and BMR in the textile sector. According to an estimate, the textile sector had received $4 billion worth of investment during the last 4 years and an encouraging feature of this investment was that modernization and higher value-addition had received the highest priority in the aforesaid investment.
Trading Corp of Pakistan to Implement 'Cotton Support Policy' Trading Corporation of Pakistan will purchase 100,000 bales of cotton, informed the Cabinet on August 4. The Finance Ministry will ensure adequate credit line for the same. The Ministry is also likely to augment the credit line in case the market forces demand. The decision was taken in a meeting between the Cabinet met and Prime Minister Shujaat Hussain. It was decided that Trading Corporation of Pakistan will provide an institutional framework for implementation of 'Cotton Support Policy'. The Cabinet has already approved the enhanced support price of seed-cotton (phutti) at Rs 925 (US$15.81) per 40 kg for the 2004-05 crops. With the Cabinet’s approval for the Third Generation agreement between Pakistan and European Union, new avenues of trade and commerce will emerge resulting in billions of dollars of exports from Pakistan. In order to further strengthen bilateral economic relations between Pakistan and Saudi Arabia, the Cabinet approved the convention for the avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income.	PTA Proposed By Turkey Turkey, in its negotiations with Pakistan has proposed Preferential Trading Arrangements (PTA). According to PTA, 25 percent duty has been planned for woven fabrics, synthetic yarn and sewing thread, 20 percent duty for synthetic filament, synthetic staple and 10 percent for gimped yarn. Amongst other items, 25 percent duty has been planned for carpets. The tariff structure has been circulated among the trade bodies by the Small and Medium Enterprise Development Authority (SMEDA), which is actively engaged in uplifting the small and medium enterprise (SME) sector as a vital organ of Pakistan economy. Mohammad Sajjad Moghal, Planning and Advocacy Policy Manager for SMEDA, said in a letter to the trade bodies that the authority was trying to enhance performance of that sector by identifying structural, regulatory and legal impediments that continued to stifle the growth of the SMEs.
Cotton Prices Move Up After hitting the all time low, ginners have finally refused to lower their price further. The market on August saw ginners asking high prices...	European Union-Import Prices Would Fall 15% in 2005-2006 Import prices would be down 15% in the European Union in 2005-2006, following the removal in textile and apparel quotas. EU's imports in most sensitive categories would rise 66% in volume terms at the same time, with China taking substantial market shares, according to the 384- page study conducted by the Paris-based I.F.M. According to a model run by experts, the removal in quotas by the end of the current year will result in a 17% decline in EU's import prices in 2005 and 2006, partly due to the elimination of quota costs in exporting countries and most importantly in China. The impact of quotas' removal will focus on categories where fill rates exceed 80%, the report explains. Such categories account for a quarter of all EU's textile and apparel imports in volume terms (tones) and 37% in value terms. In these categories, EU's imports would rise 66% in volume terms and 10% in value terms in the 2005-2006 periods, reflecting a sharp decrease in prices.
Rejects Textile Safeguard against China The European Union will not re-impose quotas on imports of filament fabrics from China, EU trade officials made it clear before announcing a "China-EU textiles trade dialogue" aimed at avoiding a surge in shipments from China in post-quota period. The European Union will not use in the short term a textile specific safeguard aimed at limiting imports from China in already liberalized categories. Under strong pressure from US textile lobbies, Washington last fall re-imposed limits in three categories of textile and apparel products from China. EU's trade administration made it clear that no textile safeguard would be decided in the short terms, obviously for political reasons.
Made In S.A. Labels Demanded Manufacturers of clothing and textile, Seardel Investment Corporation is demanding the trade and industry department to urgently implement the "country of origin" labeling system and to increase tariffs on imported clothing from 40% to about 60%. This would give the local industry time to restructure. Most retailers have signed up to the proudly South African concept and have agreed to obtain at least 75% of their products from South African manufacturers, but once goods are labeled “Made in S.A." it will encourage consumers to support local industry. Seardel said SA's average labor cost was $600 a month, against China's $100 and India's $60, and the big US retailers could source their goods from anywhere in the world. He said the group would normally spend R100 million on capital projects in a year but this year would be spending only about R40 million.	USA-Cotton Trousers Imports Declined A dramatic change may be expected in US imports of cotton trousers in the post-quota era, with China for the first time in direct competition with other Asian suppliers, including Taiwanese and Korean plants in Nicaragua and Guatemala. Fearing US embargoes, importers this year focused on sources benefiting from US quota-free and duty-free entry before probably shifting to other countries in 2005. US imports of cotton trousers in categories 347 (men and boys) and 348 (women and girls) declined 11.34% in the first two months of the year after rising 10.49% and 10.40% in 2002 and 2003, respectively. With the current rebound in the US economy and US apparel consumption as a consequence, shipments to the United States could recover in the coming months.
Imports of Raw Cotton to Be Permitted The US Department of Agriculture (USDA) has announced it will permit textile mills to import a limited amount of raw cotton under the program designed to help make US textile manufacturers competitive in world markets. This is the third time this year the USDA has announced special import quotas in the 2003-04 marketing year. The special import quota will cover purchases made between May 20 and August 17 and entered into the US not later than Nov. 15. Despite some of the earlier import quotas, the USDA reports that only 2,600 bales of upland cotton have been imported since August 2003.	Textile Industry to Get Rs 16 Billion Relief Local textile industry would get an Rs16 billion relief in the payment of sales tax in the fiscal year 2004-05 as the Federal government has withdrawn 15% tax on ginned cotton, a Senior Official at the Central Board of Revenue (CBR) said. He said textile sector consumes about 80% of the ginned cotton every year to produce value added textile items for export. The industry used to pay around Rs 16 billion sales tax a year on the purchase of ginned cotton from the ginners. In 2004-05 budget proposals, the CBR had recommended the withdrawal of this tax on the ginned cotton with the aim to relieve the export- oriented textile industry from this tax burden and to put an end to malpractices in the refund process. He said that by abolishing sales tax on ginned cotton the Federal government has provided a major relief to the textile industry and added that the move would now strengthen the financial position of the manufacturers and enable them to expand their industry and exports in future.
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Customs Serve Notices On Top Textile Exporters The Pakistan Customs (Export Collect orate) has served notices on top textile exporters of the country for allegedly resorting to under-invoicing in the export of bed wear and fabrics. Customs sources said that the cases of these exporters have been referred to the Price Check Committee (PCC). Sources said that 23 top exporting firms were the pioneers and leaders in developing and exploring new export markets for Pakistani bed wear and fabrics during eighties and nineties and have so far invested billions of dollars in balancing, modernization and replacement (BMR) of their plants and secured both the European and American markets for their products. These exporting units are of the opinion that since the rate of duty drawback is almost half of the rate of anti-dumping duty charged by the European Union countries, so logically they would not resort to under-invoicing. Since the European Union charges anti-dumping duty on export consignments at the rate of 13.1%, so the exporters would have no monetary advantage to resort to under-invoicing of their commodities.	Textile Sector May Show Finer Result Next Year Textile sector can look up to finer financial results next year, backed by BMR/expansion activities undertaken by mills. Contrary to market expectations, textile companies had managed to produce favorable financial results for the first quarter of 2004 (October-December 2003). Analysts attributed the better-than- expected profit or lower losses from the textile companies. More help has now come from budgetary announcements. Improved cash flows and BMR/expansion activities would respectively result from the sales tax removal/reduction in inputs and slash in import tariffs on plant and machinery. Moreover, measures such as reduction in industrial power rates would serve to improve the competitiveness of the sector, commented Tanvir Abid. He said reduction in import duty on machinery imports will also benefit as companies have been aggressively expanding their capacities to prepare for post-2005 quota regime.
Joint Ventures in Textile Stressed Bangladesh's Deputy High Commissioner Abdul Hannan has suggested that Pakistan and Bangladesh should create complementarily in the textile sector by setting up joint ventures to minimize the cost of production. In a meeting with members of the Federation of Pakistan Chambers of Commerce and Industry, he says that today Bangladesh's exports of garments are more than that of Pakistan but if the quota system is abolished from January 2005 under the WTO conditionality, Bangladesh will be in problems. FPCCI President Riaz Tata said that he was considering taking a business delegation to Bangladesh in October this year. Pakistan's exports to Bangladesh amounted to $114.356 million and imports stood at $32.638 million in 2002-03. The major items of exports from Pakistan include textile yarn, fabrics and rice, while major imports are raw jute, tea, jute cutting and betel leaves.	Textile Sector Needs Govt Support Federal Finance Minister Shaukat Aziz took the WTO threat lightly at recent budget seminar informing the businessmen that in 2005 only the textile quotas would be abolished under multi-fiber agreement. He conveniently ignored the fact that textiles account for 65% of country's exports. He said that WTO is now a decade old reality and it has not pounced upon Pakistan suddenly. However, for majority of exporters the abolition of quota from January 1, 2005 is the real impact that WTO regime is going to have on them. They would for the first time face the challenges and threats of WTO from 2005. The government must realize that most of the local industry became inefficient on the strength of past discriminative government policies. They need government encouragement and facilitation now to catch up with competitive international industries.
Us Investors to Inject Money in Pak Textile Sector Some of the leading textile groups have sent their representatives to Pakistan to explore the possibility of joint ventures and re-location of their high tech industries in Pakistan. The industries based in the US would not be able to compete in quota-free world. A US textile group with textile imports of over $11 billion was seen contacting some leading textile groups of the country. This group imports different textile products from China, India, and Pakistan. The group desires to relocate its units in Pakistan either independently or through joint venture.	Textile Trade Improved After Abolition of Quota Pakistan's textile industry will increase its volume and value of trade after the abolition of the quota regime in 2005, said Tanvir Abid, Head of Research at Jahangir Siddiqui Capital Markets (Pvt) Ltd. This analysis is based on the fact, that textile industry has been following a sound and consistent investment policy of capital investment in the state of the art machinery in spinning, weaving and more recently in the value added sector of finishing and garments. Moreover, measures such as reduction in industrial power rates in the Federal Budget 2004-05 would serve to improve the competitiveness of the sector.
Govt Allocates Rs 214 Million for Cotton Research Pakistan has allocated Rs 214 million for the development and research of cotton crop and to increase cotton standardisation and its yield in order to face competition after the rules of the World Trade Organization (WTO) come into effect after 2005. The cotton strategy 2004-2005 includes four major projects of research in the cotton field. The projects include managing Burewala strain of cotton virus, managing reddening malaise of cotton leaves, integrated pest management in Sindh and integration of agricultural research and extension activities.	Quota Phase-Out Rate Stands At 25%-30% Despite the fact that all the textile quotas would come to an end on December 31, 2004, most of the countries have so far phased out 25% to 30% quotas. Dr Manzoor Ahmad, Ambassador and Permanent Representative to the WTO, Geneva, stated this at a seminar on "Impact of WTO on Pakistan's economy." He said even a big economy like the United States for that matter has single vote and no move could be adopted without full votes from all the member states. However, he said it was being wrongly reported in the local media that WTO regime would start from January 1, 2005. He said textile quotas would come to an end from 2005, and the WTO regime based on various agreements reach between the member states was going on since 1995 when it was established to replace GATT.
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EU Agrees To Review Duty on Bed Linen The European Union has agreed to review anti-dumping duty imposed in March this year on bed linen (Category 20) imports from Pakistan, officials said. In order to review the 13.1% punitive duty imposed on bed linen, the European Commission will have to once again carry out investigations after seeking quotations from cooperative companies or exporters to the European market. The EU imposed the punitive duty on bed linen after it claimed that the investigations carried out by the European Commission had found sufficient evidence that cheap imports from Pakistan was causing an injury to the European textile industry.	Us May Abolish Textile Quotas for Pakistan The United States has indicated to abolish textile quotas from January next and terminate visa arrangements for textile and apparel trade with Pakistan. It, however, suggested that the visa offices would be maintained for the first six months of 2005 to handle shipments in transit. This was announced by the US government in a communication to the Pakistan Embassy in Washington. It referred to the bilateral textile and apparel visa arrangements that currently applied to the exports of textile and apparel goods to the US, and said that in accordance with the termination clause contained in our visa arrangement, the US hereby informs your country of our intention to terminate in whole the visa arrangement effective January 1, 2005. The US government, however, informed the Pakistan Embassy that for all shipments exported in 2004, regardless of the date of entry into the US, it would continue to require a properly completed visa, including all required information. Under the ATC, all textile and apparel products must be integrated into the General Agreement on Tariffs and Trade 1994 (GATT) on January 1, 2005. The US government further said that the shipments exported in 2004 in excess of agreed limits violated the terms of ATC and other textile agreements, and the US was prepared to deny entry or to stage entry in 2005 to textile and apparel products exported in excess of 2004 annual quota limits.