Lahore, June 17, 2015 (PPI-OT): The Zonal Managing Committee (North Zone) PRGMEA met under the Vice Chairman Mr. Muhammad Naseer Malik on 10th June, 2015 to discuss and analyze the impact of the budget 2015/16 on the garment sector specially exports under the backdrop of the GSP plus scheme granted by the European Union. Following were the unanimous concerns raised by the managing committee.
1.) The budget should have done much more to stimulate investment in the garment sector as this is a sector that can generate enormous employment. For example as per the industry demand the importation of fabrics for re-exports as garments should have been made easier as the current DTRE scheme is too cumbersome for the factories to use it and enhance exports and diversify their product range. The Chinese manufacturers are shying away from investing in Pakistan as they wish to import their own fabrics and make products for export for which fabrics are not available in Pakistan. For example men’s suiting.
2.) The growth of this sector is greatly hampered by the huge amount of GST refunds stuck with the ministry of Finance. PRGMEA study shows that 20 to 30 percent of the working capital of most of its members are stuck in refunds. This has severely curtailed growth and many companies have shelved their capacity enhancement projects. Further many have had to resort to bank borrowing to plug the gap in cash flows.
3.) Even though the DLTL scheme has been retained for garments at 4%. Many PRGMEA members who qualified with at least ten percent growth last year have not been able to maintain their growth this year. Hence the objective of this scheme has not been realized thus far. Many cite the lack of funds to fuel growth.
4.) The ZMC spent quite some time to analyze the strategies of our competing countries. Due to the excessive support of their Governments countries like Bangladesh and Vietnam have moved quite far ahead even for the sake of comparison. India with its latest scheme of duty free trade-able import vouchers for exporters has also declared their intentions of not letting their exporters out to hang dry. The only country that Pakistan can try to compare itself to is Cambodia. In less than a decade the country has reached USD 6 billion in exports of garments equal to that of Pakistan. The inputs to the garment sector are rated at zero VAT. This should send a signal to our policy makers that the Cambodian government is keen on letting the exporters free up cash for growth. So there is a very high chance that we will see further movement of buyers from Pakistan.
The meeting ended with the note that there is a lack of top political support for this sector. The ministry of Textile is in a state of confusion and the Ministry of Commerce feels powerless to influence policies that can help exports. The interaction with industry is very poor. The reconstitution of the EDF board has further alienated the exporters. Hence the targets of exports set after the GSP plus status now seem out of reach.
For more information, contact:
Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA)
18-A, Shaheen View Building,
Block-VI, P.E.C.H.S., Shahrah-e-Faisal,
Tel: +92-21-34549073, +92-21-34547912