Incentives fail to improve textile export

Incentives fail to improve textile export

Pakistan’s textile industry, despite benefiting from incentives related to duties and taxes, has failed to achieve significant improvements in exports.

Data released by the Pakistan Bureau of Statistics (PBS) on Wednesday revealed that textile exports saw minimal growth, remaining almost flat at just 0.6 percent during the first half of the current fiscal year.

During the period of July to December of the fiscal year 2018/2019, textile exports reached $6.645 billion, a marginal increase compared to the $6.641 billion in the corresponding period of the previous fiscal year. Although the figures remained largely unchanged, it’s important to note that the significant depreciation of the local currency against the US dollar over the past year contributed to a substantial growth of 22 percent when measured in Pakistani Rupees.

The previous government had introduced measures to support the textile sector, such as the restoration of zero-rating for sales tax on the export sector. Additionally, incentive schemes were implemented to boost exports, with a focus on promoting growth based on the previous year’s export performance.

Among the textile segments, some managed to post growth during this period. Knitwear exports increased by 10.5 percent, reaching $1.47 billion, up from $1.33 billion. Bedwear exports also saw a modest growth of 3.27 percent, totaling $1.16 billion, compared to $1.12 billion in the previous fiscal year.

In a move to further support the textile industry, the Economic Coordination Committee of the Cabinet recently approved the withdrawal of customs duty, additional customs duty, and sales tax on cotton imports. This policy, effective from February 1, 2019, to June 30, 2019, aims to ensure an adequate supply of cotton for the textile industry, especially for the export sector.

The ECC also approved the clearance of outstanding claims of drawback of local taxes and levies (DLTL) under the exports incentive scheme announced by the government in the Finance Act of 2014-15. This decision will address cases that were submitted on time but had been pending due to a lack of funds.

The textile industry is a crucial component of Pakistan’s economy, and its performance directly impacts the country’s export revenue and employment opportunities. The government’s ongoing efforts to incentivize and support the sector reflect a commitment to promoting growth and stability within the industry. However, challenges persist, and further reforms may be required to unleash the full potential of Pakistan’s textile exports on the global stage.