960407

Pak knitwear exports

may loose Rs 1000m

RECORDER REPORT

LAHORE: Pakistan's knitwear exports may face a big dent of Rs. 1000 million as the famous international brand Levis, have cut their orders to local manufacturers by 65 percent following black marketing of textile quota, rise in yarn prices and other problems Levis have diverted their orders to Indian, Israeli, Mexican, Turkish industries.

Pakistan's knitwear exports which rose to the level of US$690 million during 1994-95 are expected to get a setback as a result of extremely high quota prices, especially in the USA category 338 and 339, because of manipulation and hoarding by the quota barons and complete failure of Ministry of Commerce to provide timely relief to the knitwear exporters, Azfar Hasan Chief Executive of Nabila-ABS group, Pakistan's largest knitwear buying house, told local newsmen.

Azfar Hasan whose company buys over Rs. 1000 million worth of knitwear from Pakistan on behalf of such internationally renowned names as Chaps Ralph Lauren, Polo, Timberland, Nike, Hagar etc sounded very concerned at the plight of the exporters at the hands of quota hoarders whose speculations in this very important item of export has virtually strangled the genuine exporters.

Hasan pointed out that Pakistan is fortunate enough to hold the largest ceiling in the world in the US Cat 338. This is a very valuable national asset and every effort should be made to curb anything that undermines maximum earning of foreign exchange in this category. He pointed out that in order to avoid the replay of 1995 quota crisis, in which the US importers lost money as many exporters from Pakistan defaulted on their shipments due to exorbitant quota prices, the orders this year have been slashed by 30 percent, in the second half of 1996, especially in Cat 338. In fact, in the last quarter of the year, most buyers have avoided placing any orders for Cat 338. In this year Nabila-ABS, as well as other major buying houses, have diversified their product base to non-traditional quota items in order to reduce the reliance on Cat 338. For Cat 338, his company has placed orders with factories that already have quota in their books to cover all their exports for 1996. The rest of the orders are being placed in countries like India, Bangladesh, Sri Lanka and the UAE.

Hasan said that in view of the quota hoarders manipulation, due to which the quota price of Cat 338 has risen to Rs. 750 per dozens, the government can provide immediate relief by adopting the following measures: (a) allocation of balance 30 percent quota by TQMD immediately (b) announce the flexibilities, which in Cat 338 alone, amount to almost 1.57 million dozens or 25 percent in excess of Pakistan's total quota ceiling (c) auction of growth quota before June 30, 1996, and (d) the TQMD should educate the exporters regarding the flexibilities available in a timely and transparent manner so that they can plan their booking and avoid panic buying of quota which is created due to the misinformation spread by the quota hoarders.

"For instance, in Cat 338, if all flexibilities are taken into account, the total utilization upto March 31, 1996, is actually not more than 5 percent. The 30 percent utilisation shown in the US Customs records gives the appearance of rapid utilisation, whereas in real terms it only represents the percentage of our quota ceiling minus the flexibilities allowed to us. This percentage would naturally alarm the ill-informed exporters, causing panic buying of quota and thus creating an unnatural price hike", he said.

Azfar said the best way for the exporters to combat their problems is for them not to book orders in excess of their quota holdings.

He said that Pakistan has great potential to double its export receipts from the same quota holding with the support of the government in the shape of policies designed to support quota allocation against value addition.

In order to buy quota at such high prices, the manufacturers have to divert their funds from investing in modern plant and machinery towards this unproductive capital outlay.

However, he was happy to note that as a result of efforts by the exporters and their meetings with the Secretary Commerce, Salman Farooqi, the government has been receptive by announcing a 25 percent allocation of quota on value basis in 1997 with an increase every year in this percentage.