Big apparel export houses close, leaving thousands jobless

[LRE]

Big apparel export houses close, leaving thousands jobless



Thursday, July 10, 2008
By Mansoor Ahmad

LAHORE: Some renowned export companies in the apparel sector have closed down in recent months, rendering about 50,000 skilled workers jobless while the survival of remaining manufacturers hinges on continuation of research and development support.

The News has found that some big names like Needle Point, Style Textiles, Navina, Highnoon, Angora, Klaas, Ammar, Sarah and one unit of Irfan Textiles have been forced to shut down their operations. Each of these employed a minimum of 3,000 workers. In addition, scores of smaller units have also been closed down due to their inability to match the prices offered by exporters in competing economies.

Apparel exporters point out that the closure of so many big units came when the government was providing 6 per cent R&D grant. They say credit goes to surviving units which have accepted the challenge of competing suppliers as they have achieved maximum efficiency to remain in the business.

They say it was in fact the R&D support that helped the surviving exporters to cover their losses and achieve 3 to 4 per cent profit. However, these units would also succumb to the pressure without the R&D facility. Any reduction in the support would be equally devastating for them, they point out.

What puzzles the apparel exporters is that the National Assembly has approved Rs20 billion for this purpose in the Finance Bill. This is 15 per cent higher than the R&D grant provided by the government to the textile sector in 2007-08. The exporters are surprised over the reluctance of the government to announce a clear R&D policy. They are equally bewildered by the government’s apparent tilt towards low-value fabric and printed fabric exporters.

One leading knitwear exporter, commenting on the situation, says he has five knitwear units established at a cost of Rs500 million, employing over 5,000 workers. He also owns a spinning mill established at a cost of Rs750 million but it employees only 500 workers. He says spinning and fabric are capital-intensive industries which need few workers and if a medium-sized apparel industry is closed down 2,000 to 3,000 workers would lose their jobs.

The apparel sector, he adds, has no problem if the government wants to reward any other sector with higher R&D facility. However, this should not be done at the expense of apparel exporters who are demanding continuation of the facility as granted to them in 2004-05.

According to statistics available with the Ministry of Textile, the government provided Rs5.754 billion R&D grant to the garment sector in 2004-05. Home textile sector was included in the R&D programme in 2006-07 when it was provided Rs4.618 billion while the garment industry got Rs9.305 billion. Cumulative support provided to the textile sector during the first nine months of the last fiscal amounted to Rs12.806 billion. Out of these, the garment sector got Rs6.774 billion and home textile Rs6.032 billion.

If the support for next three months is calculated on the basis of the average of first nine months, the entire support for 2007-08 would come to Rs17.074 billion.

The amount allocated for the R&D support this year is Rs20 billion. Textile experts say textile exports would grow by 3 per cent this year and the balance amount could be used to reward the companies with higher exports.

http://www.thenews.com.pk/daily_detail.asp?id=123160