Pakistan's textile sector has been struggling to stay afloat as it battles high costs and high electricity surcharges. The country could lose billions in export orders if moves aren’t made to reverse the downward trend.
Pakistan’s exports for July have declined 17 per cent. The Pakistan rupee is overvalued, and that, coupled with a harsh tax regime (electricity surcharges alone can run as much as 45 per cent more than regional competitors pay), has what has killed the country’s competitiveness. A gas infrastructure development tax plus taxation on export-oriented goods has added to the burden.
The government has the option to either devalue the rupee by 12 per cent to 15 per cent or remove the additional taxes on export industries to make them zero-rated.
The government has promised to remove the bottlenecks in the way of exports. It would address the high costs and surcharges by the end of this month.
The textile sector in Pakistan has an overwhelming impact on the economy, contributing 57 per cent to the country’s exports. In today’s highly competitive global environment, the textile sector needs to upgrade its supply chain, improve productivity, and maximise value addition to be able to survive.