Pakistan’s premier industry, textiles, appears to be in trouble, according to a fact-sheet released by the Institute of Policy Reforms (IPR). If corrective measures are not taken by the government by end of August, the Pakistan Textile Mills Association (APTMA) has threatened to go on a strike.

According to the fact-sheet, though the APTMA has had privileged access to the corridors of power and enjoyed special treatment, it has failed to convince the government to take steps to revive the industry. A full-fledged Ministry of Textiles and a Textile Policy has been announced for the period, 2014 to 2019. Yet, the industry appears to be in trouble due to neglect and lack of implementation of the Policy. Over 60 per cent of the output of the textile sector is exported stated.

From 2001-02 to 2010-11, textiles exports recorded a high 10 per cent growth annually. Since then they have stagnated at under $14 billion. Pakistan, since the last four years, has been steadily losing market share to competitors. There are two policy options recommended by the IPR in its fact-sheet. The government should do away with its stubborn policy of maintaining nominal exchange rate and adjust it downwards, at least to the extent of rise in costs due to recent tax moves and pricing of electricity.

However, if the government does not want to do away with its present exchange policy, then it may opt for an export rebate scheme covering most exports, similar to the issuance of scrips in India. Depending on the extent of value-added, the rate could be varied, with the average at 4 percent of the value of exports.