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High costs affect Pakistan’s denim exporters

Pakistan’s denim exports to the United States fell by 3.3 per cent in 2016. One reason, say manufacturers, is the high cost of production. While a number of countries provide zero-rated facilities to their exporters, in Pakistan exporters have to face taxes such as the export development surcharge and the withholding tax. China provides free electricity for the first three years to new units.

Denim manufacturers in Pakistan face hard pricing pressures due to capacity additions and cancellation of a few orders. Pakistan is the second largest exporter of denim in the world after China. Exports of cotton denim fabrics from Pakistan stood at around 51 million square meters worth Rs 39 billion in 2016.

Turkish denim exports increased from 3.9 million meters to 46 million meters in five years. Chinese denim exports to the United States grew up from 6.9 million meters to 87 million meters in the same period. World trade in denim fabric averages 6, 70,000 tons a year. The global market for denim is forecast to reach 64.2 billion dollars by 2020, driven by increasing disposable income. Europe represents the largest market worldwide. The market situation does not allow global denim players to increase consumer prices and therefore, they have to absorb the price increases from denim fabric producers worldwide.