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Pakistan’s Energy Sector Shows Improvement; Fuels Textile Growth

Energy shortages have long been a drag on Pakistan’s promising apparel and textile manufacturing sector but, recently, there have been positive signs of improvement. Chairman of the All Pakistan Textile Mills Association (APTMA), S.M. Tanveer, said increased productivity and a restoration of production capacity generated impressive growth in December.

Tanzeer said that clothing and textile imports in Pakistan were up 21 percent for December in comparison to the same month in 2012. Value-added exports swelled by 17 percent, and yarn and cotton cloth exports dropped by 9 percent and 13 percent, respectively. Tanzeer attributed much of Pakistan’s growth to new government initiatives to improve an energy sector that, historically, has always suffered infrastructural inadequacies and delivery inefficiencies. For the first time ever, the government made preparations in advance of the winter season in expectation of energy supply problems. Tanzeer hypothesized that Pakistan’s textile industry could earn as much as an additional $3 billion in revenue annually if its ongoing energy crisis could be resolved.

Chronic energy shortages often undermine manufacturing across the nation, especially in Punjab, where many of the captive power plants are expected to be deprived of natural gas for the duration of the winter season. And more than 50 percent of the factories in Faisalabad have been shut down due to electricity shortages.

Sheikh Mohammad Ilyas, chairman of the Pakistan Textile Exporters Association (PTEA), said, “The EU trade concessions can push our textile exports and generate significant economic activity. But much will depend on regular availability of regular supply of gas and electricity to operate factories.” An estimated 40 percent of Punjab’s textile manufacturing capacity is expected to be stymied by the gas shortages. This is especially worrisome since nearly 80 percent of the industry’s overall capacity is located in Punjab.

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Despite the progressive growth of its textile industry, Pakistan’s faltering energy sector has been a ceiling on growth. A steep rise in gas and electricity prices will likely consume much of the additional revenue textile exportation produces. The gas tariff for captive power plants has risen by 17.4% and electricity rates for industrial units has skyrocketed 57 percent in recent months. And Pakistan’s stalwart regional competitor, India, is anticipating a big year as well, forecasting $17 billion in textile exports.

Many believe Pakistan is redoubling its efforts to improve energy supply to ensure that it can properly capitalize on its new status under the E.U.’s Generalized System of Preferences (GSP Plus). Now, more than 20 percent of Pakistan’s exports will enter the E.U. market tariff-free, and more than 70 percent will enjoy dramatically reduced tariffs.