In the last two years, as many as 100 factories have shuttered and more than 500,000 jobs have been lost in the textile sector as a result, The All Pakistan Textile Mills Association told Bloomberg.
Pakistan has been plagued by electricity tariffs that are among the highest in the region, a gas infrastructure tax and ongoing energy shortages that have curbed its competitiveness against neighboring nations like Bangladesh and Vietnam.
As a result, its exports have been on a downward trend. According to the Pakistan Bureau of Statistics, total exports for the country were down 7.33% in August over the same period last year. Ready-made garment exports fell more than 10 percent to 19.3 billion rupees ($288 million).
Total textile and apparel exports destined for the U.S. alone fell nearly 7 percent in July over the same month in 2105.
“The continued decline in exports is a cause for concern, to a good extent that’s due to a fall in international prices for cotton and other commodities,” Harald Finger, the International Monetary Fund’s (IMF) Pakistan mission chief told Bloomberg. Domestically, he added, “there are security issues, there are continued power outages, even though they are declining now, that’s still a factor.”
Small and medium size factories have been the hardest hit as they can’t withstand the added costs that come with sustained power outages and many have had to close. Some larger factories have invested in their own power to help with the country’s electricity shortage, but the added cost there doesn’t likely bode well for competitive advantage.
Pakistan’s Prime Minister Nawaz Sharif has said improving the country’s exports is a top priority and has already said stopping the daily power blackouts would be high on his agenda if re-elected in 2018.
In March Pakistan signed a memorandum of understanding (MoU) with China, to help strengthen the textile sector, whereby Chinese companies will set up factories in special economic zones in Pakistan and both countries will help each other with business development.
Pakistan also proposed a zero-rated sales tax plan for textile exporters, offered a lower borrowing rate on loans and arranged to import five million bales of cotton duty-free this year to help with a domestic shortage.
“Economic growth and exports are interlinked,” Sharif told Bloomberg. “We cannot afford to ignore our exports.”
The prime minister is expected to announce relief measures for Pakistan’s textile sector in short order.