Top three export commdities of Pakistan

Program: MBA (Evening)
Submitted To:
Sir Abdul Qayyum Qureshi
Submitted By:
Muhammad Tayyab
Roll # 111405
Pak-AIMS (Institute of Management Science
Top Three Export
Commodities of Pakistan

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Top Three Export Commodities of Pakistan
Rice:
Rice Export in 2012-13:
PAKISTAN‟S basmati rice exports are showing signs of an upswing after suffering a
plunge in the first six months of this fiscal year because of domestic higher prices, poor
marketing and lower prices of India‟s basmati.
In January 2013, basmati exports were up by 15 per cent, reaching 43,718 metric tonnes
compared to 38,294 tonnes in January 2012. Traders are optimistic that the commodity
would regain normal levels before the end of the current fiscal year as the price gap
between Indian and Pakistani basmati rice has started narrowing. India has been selling
rice at a price lower than Pakistan‟s – at $100 per tonne against Pakistan‟s $1,100-1,150
per tonne.
According to Rice Exporters Association of Pakistan (Reap) Pakistan exported 21,000
metric tonnes basmati rice during the first week of March 2013. Total rice exports during
July 2012 to February 2013 have already touched more than $1 billion mark, and during
the July-March period, the country exported around 350,000 tonnes, and two million
tonnes non-basmati rice. Meanwhile, China has become a major market for Pakistani non-
basmati rice, and a record sale of 72,623 tonnes, worth $30 million, took place in January
2013 alone. Besides, another country buying Pakistani rice is Tanzania.
Basmati exports, according to figures of Pakistan Bureau of Statistics (PBS), have been on
the downward trail earlier, and during the July-December 2012 period, declined by 31 per
cent to 239,765 tonnes from 349,970 tonnes exported during the same period in the
previous year. But Reap put the decline at 60 per cent during July 1 to November 28, after
India lifted a ban on its rice exports last year and sold the commodity at lower prices. India
kept basmati exports banned for two years, and keeps doing so from time to time to
protect domestic market.
Pakistan‟s non-basmati rice exports also dropped by 39 per cent during July-October
period. One reason for basmati‟s poor performance abroad has been its high price in the
domestic market because of hoarders and profiteers. The price of basmati in wholesale
market has seen a rise of 30 per cent since March 2012. Some exporters have felt so
depressed that they tried to seek subsidies from the government in their efforts to revive
falling exports.
President of the Basmati Growers Association of Pakistan (BGA) says research is almost
non-existent as no new high-yield variety has been evolved in the past decade that could
replace the Super Basmati introduced in 1996, which is still planted in more than 90 per
cent of the basmati growing area. In contrast, India has been very active and doing a lot of
research and introducing new varieties.
Besides, another setback that Pakistani basmati has suffered is the continuous depletion
of the area under cultivation, as growers are finding the crop unprofitable and are shifting
to other crops. According to official figures, area under cultivation in Punjab, which has so
far been producing over 90 per cent of the country‟s total yield, has declined by 34.5 per
cent to 1.89 million acres in 2012-13 from 2.89 million acres planted in 2008-09. It is a loss
of one million acres of basmati area in just five years.
India‟s total rice exports in the current fiscal year (April 2012 to March 2013) are expected
to cross 10 million tonnes for the first time in history, increasing by 30 per cent from

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previous year‟s export figure following strong demand for its rice in West Asia, Africa and
South East Asian countries.
Although being rivals in the rice export market, Pakistan and India have also been seeking
each other‟s cooperation to protect their precious rice variety which is unique for its aroma,
taste and texture. Pakistan has asked India to work out a joint strategy on marketing the
premium basmati rice to counter the non-tariff barriers imposed by other countries.
Trade Development Authority of Pakistan‟s (TDAP) chief executive, who was on a visit to
the neighbouring country in April 2012 while heading a delegation, told Indians in bilateral
discussions that it was high time the two countries, which share a common heritage of
basmati, worked together to formulate a strategy for marketing the much sought-after rice
variety to other parts of the world. He also talked about registering basmati as a
Geographical Indication (GI) of the two countries under WTO‟s Trips regime. Several
attempts had been made in the past for that but without much success, because Pakistan
has no GI law.
Basmati rice exporters in Pakistan feel frustrated over the government‟s indifference and
delay in enacting the law of geographical indication. Unless it is done, basmati cannot be
protected, nor a joint strategy worked out with India to jointly protect the unique rice
variety. The current Trade Marks Ordinance for basmati rice is inadequate, and may cause
long-term harm to its exports. According to media reports, a draft of the GI law prepared by
TDAP is lying buried in the files of the ministry of law despite repeated appeals by the
exporters to get it passed by the parliament.
The proposed law has to be first approved by the ministry of law before it is placed before
the cabinet for consideration and approval. The varieties of basmati rice, which are
countless and grown in several countries, can harm basmati exports. So, there is need for
legislative measures to protect country‟s rice industry. The only other country that
produces basmati and is Pakistan‟s competitor, India, has already passed a GI Act.
The urgency to protect basmati rice comes in the wake of two recent developments.
Firstly, Philippines had earlier announced that it will begin basmati rice cultivation soon and
start exporting it in 2013. And secondly, Bangladesh rice exporters have said that
Bangladesh must also be registered for geographical indication (GI) for basmati rice since
this rice variety is being grown and consumed in the country for centuries. But officials in
Pakistan say they are opposed to countries other than India and Pakistan for growing or
exporting rice under the basmati label. They insist that basmati is a common heritage of
Pakistan and India only, and they should adopt a joint strategy for the registration of
basmati rice as a geographical indication in the international market.—Ashfak Bokhari
TDAP support can up rice export to $3b:
The rice exporters are eying to achieve $3 billion export target annually with the support of
TDAP, as the authority‟s role is vital to boost export and earn foreign exchange.Ch Samee
Ullah, Vice Chairman REAP, hoped that TDAP will solve the problems instead for creating
hurdles in the way of exports. “We also hope that in future TDAP will sit together with the
stakeholders whenever need so as to ensure growth of exports.
In a statement, he appreciated the dynamic role of Abid Javaid Akbar, Chief Executive
Trade Development Authority of Pakistan (TDAP), for boosting up Pakistani rice exports
across the world.
He informed that TDAP Chief Executive has announced to develop comprehensive

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program focused on promoting rice export to Central Asian States. Exhibition would be
arranged with collaboration of rice exporters to showcase Pakistani rice. It is a good sign
by TDAP for rice exporters and we always stand by TDAP. Central Asian states have huge
potential of export and Pakistani Basmati is an integral part of Turkish cuisine.
It would help exporters to earn more foreign exchange for the country. He said that Punjab
Government would soon hand over 5 acres of land for the establishment of Rice Technical
Training Institute, where we would produce skilled manpower for the rice industry. We
expect that TDAP would give our due share from EDF for the establishment of Technical
Training Institute.
He stated that TDAP has promised involvement of REAP into EDF Board of administrators
and also given his due support for release of funds of Rs200 million, as asked by REAP,
for the construction of Rice Technical Training Institute.
Pakistan’s MY 2011/2012 rice production:
Pakistan‟s MY 2011/2012 rice production is estimated at 6.5 million tonnes, 30 per cent
higher than the 2010/11 flood affected production level of 5 million tonnes. MY 2012/13
production is forecast at 6.8 million tonnes.Rice exports in MY 2012/13 are projected at 4
million tonnes based on the expectation of a good harvest.
Pakistan expects orders from Indonesia for rice soon:
Pakistan expects Indonesia to place orders for its rice in
coming days, said Irfan Ahmed Sheikh, the outgoing
chairman of the Rice Exporters Association of Pakistan
(REAP), as the Southeast Asian country seeks alternative
sources of the grain.
“There will be a potential for Pakistan in coming days. We are expecting orders from Indonesia,”
Sheikh told Reuters on Thursday, but added that the Indonesian side has not approached them
yet. “We are one of the cheapest sources
and we have a natural edge. Our IRRI-6
prices on average are less than $500 a
tonne, FOB.” The price of Thailand‟s
benchmark export-grade rice was $627 a
tonne this week, up from $619 last week,
exporters said on Thursday, ahead of a
government intervention scheme likely to
push the price further up from next month.
And Vietnam‟s rice export prices rose
nearly 1 per cent on Thursday, with the 5
per cent broken grade hitting $575 a tonne
and heading towards $580, the highest in

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more than three years.
Indonesian Trade Minister Mari Pangestu said on Wednesday the country has alternative sources
of rice from Pakistan, India and Vietnam, even as it tries to iron out the reported cancellation of a
proposed Thai government sale to Indonesia.
Sheikh said Indonesian officials had approached Pakistani commerce ministry about three months
ago for a government-to-government deal but were told to go to the private sector.
Commerce Ministry officials were not immediately available for comment. REAP handles the bulk
of rice exports from the South Asian country.
Heavy monsoon rains have caused little damage to Pakistan‟s rice crop and traders are expecting
output of up to 6.5 million tonnes. Pakistan, the world‟s fifth-largest rice exporter, is hoping to
export 4.5 million tonnes of rice in the 2011/12 (July-June) fiscal year.
Pakistan to export up to 4.5 MT of rice in FY11/12-trade:
Pakistan is likely to export up to 4.5 million tonnes of rice in the 2011/12 fiscal year on an
expected bumper crop, traders said on Thursday, adding to an amply supplied rice market.
The world‟s fifth largest exporter of rice, Pakistan‟s rice exports fell to about 3.7 million
tonnes in the fiscal year to June 2011, from 4.6 million in the year before, after it was
lashed by devastating floods in summer 2010.But farmers and traders are expecting a
bumper crop of six million to 6.5 million tonnes this year. Harvesting of non-basmati rice
begins in late September and basmati a month later. “So far things are going in the right
direction and we are expecting a bumper crop … We should be able to export between
four million and 4.5 million tonnes this year,” Taufeeq Ahmed Khan, vice chairman of the
Rice Exporters‟ Association of Pakistan (REAP), told Reuters. The country also has a
carryover stock of more than one million tonnes, according to traders. Annual consumption
is about 2.3 million tonnes.
Pakistani rice will enter a market already well-supplied by Vietnam, which is expected to
export up to 7.3 million tonnes; India, which is lifting an export ban in place since 2008 and
Thailand, which expects to export more than 10 million tonnes. Khan expected “decent
prices” for this year on expectations of Thailand, the world‟s largest rice exporter, boosting
its prices. “Thailand has increased their prices and chances are that with the new
government there, prices will go up further,” he said. Thai prices have started rising in
recent weeks with the new government in Bangkok, which promised higher prices to
farmers. On Wednesday, the benchmark 100 per cent B grade Thai white rice which has
jumped nearly four per cent from last month because of hoarding on speculation about
aggressive intervention by the incoming government, was steady from last week at $550
per tonne.
Vietnam‟s five per cent broken rice stood at $505-$510 a tonne on Wednesday, which was
up from $495 last week but still well below the same grade of Thai rice, offered at $530.
Pakistani traders see enough market for their grains. Pakistani basmati goes mainly to the
Middle East, Europe and the United States. Non-basmati is sold all over the world.
In 2010/11, Pakistan sold about 2.6 million tonnes of non-basmati rice and 1.1 million
tonnes of basmati, according to REAP‟s provisional data. Rice is Pakistan‟s third biggest
crop after wheat and cotton, and accounts for about eight per cent of Pakistani exports. It
contributes about 1.6 per cent to the country‟s gross domestic product.

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International trade of Rice:
International rice trade is estimated between 25 and 27 million tons per year, which
corresponds to only 5-6 percent of world production. It makes the international rice market
one of the smallest in the world compared to other grain markets such as wheat (113
million tons) and corn (80 million tons).
Besides the traditional main exporters (Thailand, Vietnam, India and Pakistan), a relatively
important but still limited part of rice traded worldwide comes from developed countries in
Mediterranean Europe and the United States. There are two major forces behind this: new
food habits in developed countries and new market niches in developing countries.
World's main importers of rice (all types),
average from 1998 to 2002, in millions of tons
Source : UNCTAD Secretariat from the Food and
Agriculture Organization of the United Nations (FAO) data
World's main exporters of rice (all types),
average from 1998 to 2002, in millions of
tons
Source : UNCTAD Secretariat from the Food and Agriculture Organization of the United Nations (FAO) data
The Middle East is the leading import and
export region, accounting for 35 percent of the
world's rice imports and about 75 percent of
total exports.
It is projected that the global market will
increase 3 percent per year over the mid to

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long term. However, there are uncertainties about this projection because importers,
normally low to lower-middle income countries, have vulnerable economies.
The map below shows the main importers and their suppliers. Each color represents an
importer (either a country or a group). The values correspond to imports of different types
of rice (paddy, brown, white, broken), in thousands of dollars. The major importers are
Indonesia, Bangladesh, Nigeria, the Philippines, Iraq and Brazil.
Textile
Pakistan‟s textile exports grow 7% in first three quarters
Textile exports from Pakistan jumped 7.09 percent year-on-year during the first three
quarters of the ongoing financial year that started on July 1, 2012.
According to the figures released by the Pakistan Bureau of Statistics (PBS), the country
exported US$ 9.63 billion worth of textiles in the first three quarters of the current fiscal,
against exports worth US$ 8.993 billion made during corresponding period of last fiscal
year.
Posting a 29.17 percent year-on-year growth, cotton yarn stood to be the biggest
contributor to textile export growth during the nine-month period.
Other textile items that registered positive growth include cotton cloth, whose exports grew
by 11.56 percent year-on-year, knitwear by 2.84 percent year-on-year and yarn other than
cotton yarn by 13.79 percent year-on-year.
Towel exports grew by 18.11 percent year-on-year during July-March 2012-13, while
exports of made-up articles except towels and bedwear grew by 6.31 percent year-on-
year; tents, canvas and tarpaulin by 30.89 percent y-o-y; bedwear by 0.09 percent y-o-y;
and other textile materials by 44.83 percent y-o-y.
Items with negative export growth include raw cotton, whose exports dipped by 65.07
percent y-o-y, synthetic textile by 25.33 percent y-o-y and cotton carded or combed by
93.86 percent y-o-y.
During March 2013, Pakistan‟s textile sector exports posted a 13.21 percent year-on-year
and 17.77 percent month-on-month growth.
Exports of Pakistani textiles are vulnerable to a few world economies. The country
exports 70 percent of its cotton yarn to China and Hong Kong, while United States
and European Union account for 78.5 percent of its bed wear exports, 83.3 percent
of knitwear and 79 per cent of readymade garments exports.
“We will have to expand our export markets to ensure a sustained and shock free textile
exports,” said Gohar Ejaz group leader of All Pakistan Textile Mills Association. He said
cotton yarn, cotton cloth, knitwear, bed wear and garments are the five categories in
textiles that earn more than one billion dollar foreign exchange a year.

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“Together these four categories accounted for $9.606 billion (78 percent) out of $12.357
billion textiles exports in 2011-12,” he said. Baring cotton cloth where exports are evenly
distributed exports in other four categories are concentrated to few economies.
He said in cotton yarn out of total exports of $1.79 billion in 2011-12 China and its
controlled territory Hong Kong accounted for yarn exports worth $1.27 billion, which was
70 percent of total yarn export from Pakistan.
He said after Pakistan‟s inability to fulfill China‟s demand for yarn it is increasingly
importing Indian yarn. Gohar said that currently we enjoy competitive advantage over India
and are preferred the world over in the type of yarn we produce. However, he warned that
the Indians are catching up fast in efficiency and technology and the competition would be
tough in coming years.
“We simply have to increase exports to other countries like Indonesia, Vietnam and
Turkey,” he added.
In cotton cloth, Pakistani exports are better spread as out of $2.454 billion exports made
last fiscal Bangladesh was the largest buyer with imports of $350 million (14.8 percent).
The other major buyers of Pakistani cotton cloth were China 11 percent, Turkey and Italy
5.6 percent each and remaining was destined to 20 different countries. “In fabric, there is
no dependence of Pakistani exporters on US, China or EU,” said Mian Anjum Nisar, a
textile miller.
“Pakistan‟s bed wear exports in 2011-12 were $1.748 billion. Out of which, $1.363 billion
went to European Union and United States,” said A Siddiqui, a bed wear exporter. He said
despite frequent no tariff barriers imposed from time to time on Pakistan bed wear the
exports by EU were $850.91 million last fiscal equivalent to 49.5 percent of total bed wear
exports. He said United States accounted for 29 percent of $551.7 million of bed wear
exports.
He said Pakistan enjoys competitive advantage in bed wear world over but Pakistani
exporters are shy of moving south. All they have to do is to find out designs and needs of
market in China and Asia Pacific and they could triple their exports of this category.
In knitwear, the US market alone accounted for 51.3 percent of total knitwear with exports
of $1.092 billion out of $1.974 billion in 2011-12,” said Adil Butt, chairman of Pakistan
Hosiery Manufacturers Association Punjab. He said 32 percent of knitwear exports went to
EU, while the share of rest of the world was only 17 percent. He said any economic
downturn in these two economies impacts knitwear exports badly. He said Latin America,
Canada, Australia and New Zealand are lucrative economies that remain unexplored to
date.
In readymade garments, the largest market is EU having a share of 54 percent equivalent
to $884.5 million in total exports of $1.634 billion in this category in 2011-12. The United
States was the next largest market with exports of $409.4 million, or 25 percent, of total
knitwear exports in 2011-12.
Cotton yarn, cotton fabric, bed wear, knitwear and readymade garments together
accounted for $9.606 billion out of total textile exports of $12.357 billion in 2011-12. The
share of rest of textile exports is only 22 percent.

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Pakistan fetches $10.2 billion of its $12.5 billion textile export revenue from 20
countries. However, it accounts for merely 5.7 percent of their total textile imports,
suggested an analysis of the trade statistics of last fiscal year.
United States is the largest importer of textiles and clothing from Pakistan, importing $2.98
billion worth of textiles in 2011-12, which was 24.1 percent of total Pakistan‟s textile
exports. However, these exports were equivalent to only 2.98 percent of total US textile
imports of $100.93 billion.
Industry players point out that Pakistan‟s share in the US textile market has been
continuing to decline in recent years. “We lost many corporate US buyers during recent
years and the exports were maintained at past level by luring new buyers,” said Adil Butt,
chairman of Pakistan Hosiery Manufacturers Association, Punjab. He said if we could lure
back buyers lost due to bad image of the country and travel advisories issued by the US
government we could simply double our exports to the US market.
Further, China is the second largest buyer of Pakistani textiles, importing $1.527 billion of
textiles last fiscal. Unlike US where mostly value added textiles are imported, Chinese buy
only cotton yarn and cotton fabric from Pakistan.
“The textile exports to China could be tripled with better understanding of Chinese market,”
said Gohar Ejaz, group leader of All Pakistan Textile Mills Association. He said under free
trade agreement the Chinese government provides several concessions to Pakistan that
our entrepreneurs have failed to avail.
He said for instance there is no duty levied by China on Pakistani bed wear. Pakistan is
the cheapest supplier of cotton bed wear in the world but “we have not exported even a
single bed sheet to China”.
“Pakistani entrepreneurs have never explored the Chinese bed wear and home textiles
market,” he said, adding that they have no idea about designs, sizes and colours popular
in China in home textiles. He said China could be a big market for our home textiles if
entrepreneurs overcome language barriers and do proper home work. As far as cotton
yarn and fabric are concerned, the demand in China is unlimited. “Our production is limited
due to energy shortages and orders that we cannot execute are being diverted to India,”
he added.
He said Pakistan‟s textiles account for only 12.4 percent of total Chinese textile imports of
$37.19 billion. European Union as a block accounts for $3.6 billion textile exports from
Pakistan led by the United Kingdom that imports $951 million worth of textiles and clothing
from Pakistan, which is 7.7 percent of total textile exports of Pakistan but only 3.03 percent
of $32.39 billion textile imports of U.K.
Similarly, Pakistan‟s textile exports to Germany are worth $809 million, being 6.5 percent
of total textile exports from Pakistan and 1.6 percent of $55.14 billion textile imports of
Germany.
Leading knitwear exporter M I Khurram said that Pakistani exports to EU are limited due to
high duties imposed by the trading block on Pakistani textiles.

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He hoped that Pakistan would get generalised system of preferences (GSP) plus status in
2014 after which there would be an appreciable surge in value-added textile exports from
Pakistan.
In fact, developed economies have lucrative value-added textile markets, while demand for
yarn and fabric in these markets is waning.
Bangladesh imports $520 million (4.2 percent) of Pakistani textiles, which is $2.57 billion
(5.53 percent) of Bangladesh‟s textile imports. Other top importers include Belgium, Spain,
Italy, Netherlands, UAE, France, Turkey, South Africa, Vietnam, Korea, Saudi Arabia, Sri
Lanka, India and Kenya.
Interestingly, India is the 19th largest importer of Pakistani textiles worth $88.8 million in
FY12, 0.7 percent of Pakistani textile exports and 0.8 percent of India‟s total textile imports
of $4.155 billion.
Though the year 2012, which is about to end, like past few years confounded the
problems of the industries with severe energy crisis, textile sector is still optimistic
at the prospect of the opportunities knocking boisterously at the door.
One such is the inability of Chinese textile manufacturers to produce efficiently basic
textiles, while the GSP Plus status from European Union is another. The propensity to add
value was also a positive sign in 2012.
Gohar Ejaz Group Leader All Pakistan Textile Mills Association (APTMA) said yarn exports
from Pakistan to China are growing at an astonishing pace. “Two years back, our average
monthly yarn exports were 40,000 tonnes, while average exports during last three months
stood at 65,000 tonnes per month. The growth was mainly because of growing appetite for
yarn in China,” he added.
“This is just beginning since yarn and fabric demand in China will continue to scale up
because of closure of basic textiles,” he said and added the labor costs in China are very
high, making it unviable to produce low value added textiles.
He said in order to meet the Chinese demand the industry will have to invest in new
machines. However, „at 13-14 percent markup, it would not be possible to add new
machinery,” he added. He said the energy crisis is another drawback. He warned that if the
planners failed to resolve these two issues, India would replace Pakistan as main yarn
supplier. In fact, he added, India is already making inroads into Chinese yarn market, as
the Pakistani spinners are working on reduced capacities due to energy and power
shortages.
“Yes the textile sector is buoyant,” he admitted, saying but buoyancy is limited to the
relatively larger mills that have resolved their energy issues through investment in alternate
energy resources. However, smaller units of 25,000-30,000 spindles do not have
resources to invest in alternate energy, he added. “Thirty percent of the production
capacity is closed due to energy shortages,” he regretted. He said most of the close units
are otherwise highly efficient but they cannot run without power. There is a need to revive
these units urgently, he added.

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A spinner and knitwear exporter M I Khurram said that besides Chinese demand the
industry is also expecting higher market share in the EU block at the start of 2014 when we
are expected to be granted the GSP plus status. “We will have to plan now to avail that
golden opportunity. We will need more yarn for local production and the demand for fabric
would also increase,” he added. “Would we be able to grab this opportunity or miss the bus
again as we did in the past,” he questioned.
“Pakistan has got inherent advantage in basic textiles. It has not been able to grab its due
share in the global market,” said Shahzad Ali Khan chairman of APTMA Punjab. He said
the country failed to cash in on opportunities that came its way during last two decades.
“The first opportunity came during the East Asian crisis when the entire processing sector
of Hong Kong was willing to relocate their industries in Pakistan,” he said. “We missed that
bus as our entrepreneurs were not prepared to enter into partnership with foreigners.
Moreover, our planners lacked the vision to lure the prospective investors to Pakistan,” he
added.
The second bus was missed when Pakistanis invested over $5 billion in balancing and
modernisation of their units on the firm assurance of the then finance minister that the
interest rates would remain in single digit, he said. He said the markup increased in few
years to 15 percent. The entrepreneurs that took bank loans at 4-5 percent to import
machines suddenly found themselves in hot water as they were unable to service their
loans at exorbitant mark-up. So, instead of consuming their energies of growth they spent
most of their time trying to save their enterprises from bank defaults, he added.
Chairman APTMA Ahsan Bashir said the other regional countries shielded their textile
sector from the financial crunch by facilitating them through subsidies on machine import
and lucrative duty drawbacks on exports. India, China and Bangladesh used this period of
great opportunity to strengthen their textile sector, he added.
Bashir said Pakistan added 1.8 million spindles and 3,179 shuttle less looms in basic
textiles since 2006 against an increasing addition of 6.2 million spindles and 21,850 shuttle
less looms in Bangladesh, which now has 3/4th spinning capacity and higher weaving
capacity than Pakistan. He said the statistics of International Textiles Manufacturers
Federation reveal that in past six years during 2006-11 periods, India added 15.33 million
spindles and 30,850 shuttles less looms. The statistics also reveal that China has added
38,290 spindles and 360,100 looms in its spinning and weaving industries, he added.
It now has total of 120 million spindles and 587,500 shuttles less looms. All these additions
in capacities were possible due to prudent policies of the competing economies, he said.
Chairman Pakistan Hosiery Manufacturers Association Punjab Adil Butt said that energy
and power crisis was a wakeup call for the textile sector. He said most of the industries in
textile sector improved their efficiency to global level to cut costs particularly in 2012. In
addition, they concentrated on value addition.
He said though the textile exports have remained much below in quantity terms from the
peak achieved in 2008, the exports in value jumped by over $3 billion due to higher value
addition.

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Pakistan added 1.8 million spindles and 3,179 shuttle-less looms in the textile sector
since 2005, against 6.2 million spindles and 21,850 shuttle-less looms in
Bangladesh, according to official statistics.
Bangladesh now has three-fourth spinning capacity and a higher weaving capacity than
Pakistan.
The drying up of investment in basic textile is playing havoc with the local textile sector,
which is still the most efficient among the South Asian countries according to Werner, a
globally renowned textile consultant. It is, however, slowly losing its competitive edge to its
less efficient neighbours.
According to official statistics, since 2005 installed spindles in Pakistan are 11.9 million
and the total number of shuttle-less looms stand at 24,000.
The International Textile Manufacturers Federation (ITMF) reveal that during 2006-11 India
added 15.33 million spindles and 30,850 shuttle-less looms to its textile sector, which is
larger than the total size of the Pakistani textile industry. As per official Indian data, it now
has 41.27 million spindles and around 38,000 shuttle-less looms.
Bangladesh added 2.830 million spindles and 21,850 shuttle-less looms in the same time
period, which led to a total of 8.7 million installed spindles and more than 28,000 shuttle-
less looms. Thus, Bangladesh has a higher weaving capacity than Pakistan today.
Statistics also reveal that in 2004, Pakistan had 24,000 shuttle-less looms and Bangladesh
had only 3,200 shuttle-less spindles.
Another interesting fact revealed by the ITMF is the huge advantage that China has over
the three South Asian countries mentioned in textile machinery. According to various
statistics, China added 38.290 spindles and 360,100 looms to its spinning and weaving
industries. It now has a total of 120 million spindles and 587,500 shuttle-less looms. The
spinning capacity of the Chinese is two times more than the cumulative spinning capacities
of India, Pakistan and Bangladesh. It has added four times more shuttle-less looms since
2006. Currently, it has six times more shuttle-less looms than the combined shuttles
installed in India, Pakistan and Bangladesh.
During 2000-12, Pakistan attracted the lowest foreign direct investment (FDI) of $367
million in textiles among the South Asian Association for Regional Cooperation countries,
against $1.162 billion in India and over $1 billion in Bangladesh, according to the official
FDI statistics of the three countries.
Group leader All Pakistan Textile Mills Association (APTMA) Gohar Ejaz said that it is a
pity that Pakistan is losing its efficiency advantage to it neighbours because of issues that
could be resolved through proper management. “The war on terror has neither impacted
our efficiency or the appetite to grow,” he said, adding that the energy crisis has crippled
the textile sector‟s productivity. “We are still the most competitive sector in yarn and fabric
both,” he said, revealing that Pakistan is exporting 68 million kg of yarn every month
against an average of 48 million kg in 2010.
He added that fabric exports are also up by 25 percent as compared to 2010. “This is
despite the fact that 30 percent of the production capacity in textiles is closed,” he said,
adding how impossible it is for the industry to expand due to energy crisis.

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Chairman APTMA Ahsan Bashir said that textile is the only sector that could take Pakistan
out of the present economic turmoil.
“It could reduce trade deficit, create employment opportunities and boost downstream
value chain if its energy needs are fulfilled,” he added. Foreign investors are hoping that
the government would take prudent steps to take advantage of the competitive edge that
Pakistan enjoys in the textile sector.
Cement:
The cement industry in Pakistan:
The cement industry in Pakistan is composed of 24 players with annual production
capacity of around 40mln MT. The sector is dominated by six major players – Lucky
Cement Limited, Bestway Cement Limited, D.G. Khan Cement Company Limited, Maple
Leaf Cement Factory Limited, Gharibwal Cement Limited, and Kohat Cement Company
Limited – constituting over 60% of the total production capacity. The industry maintains a
positive correlation with GDP growth, which stood at around 7% during last five years. The
major domestic demand drivers are Public Sector Development Programs (infrastructure),
real estate and industrial construction.
Conducive economic environment not only fueled the local demand but also provided
impetus for capacity expansion. Resultantly, the industry added significant capacity and
several new production lines are scheduled to commence operations in 2009. The sector
is currently facing stern challenges emanating from a wide spectrum of socio-economic
risks including contracting domestic economic activity, slowdown in GDP growth and
construction activity and heightened security risks.
Due to the commodity nature of the product, differentiation and brand equity is minimal.
Furthermore, manufacturers as well as major consumers in the local market are reluctant
to enter into exclusive supply contracts. Hence, the possibility of gaining captive markets
through long-term contracts is nonexistent.
3. Lately, profitability of the industry came under pressure due to high energy costs
(comprising around 50% of total raw material costs) and increasing financial expenses.
Although international energy prices have receded from their 2008 high, the beneficial
impact on margins was largely negated by substantial
depreciation in Pak Rupee. However, with commodity prices expected to remain low and
declining trend in the interest rates anticipated, the operating margins would improve in the
near term. This would provide price cushion to manufacturers. Nevertheless, dwindling
local demand and resultant low capacity utilization could put further pressure on pricing.
4. During 2007 and 2008, the cement manufacturers also established export operations by
capitalizing on the growing demand in regional economies. Cement exports predominantly
targeted Afghanistan due to established trade channels. However, in recent years,
exporters have established a foothold in Africa and the Middle East as well. Clinker exports
to the Middle East offers competitive margins, too. The significant export volumes, while
stabilizing the local cement prices, had a positive impact on capacity utilization and the

14
bottom line. However, sales in lucrative export markets, including India, Afghanistan and
the Middle East, are likely to be reduced due to the global slowdown. The downturn has
narrowed the export window, which was regarded as a limited time opportunity otherwise,
too. Meanwhile, decrease in local demand coupled with the increase in capacity may
precipitate into a price war amongst domestic cement producers. The looming supply
overhang scenario in the sector could potentially worsen the situation. Furthermore,
regional markets – mainly India, Saudi Arabia and Iran – may emerge as competitors in
the export market, following a slowdown in their domestic economies and/or enhanced
production capacity.
5. On the domestic front, cement demand is expected to improve (on MoM basis) with
peak construction period (summers) approaching and large part of Public Sector
Development Programme (PSDP) still unutilized. However, with a sharp cut in PSDP
expenditure (from PKR 400bln to PKR 219bln), the allocation of these funds for
infrastructure development remains to be seen. Thus, the local demand is likely to lag its
recent high growth trends.
The Indian authorities are intentionally creating non-tariff barriers (NTBs) for
Pakistan’s cement sector, despite the fact that Pakistani cement is of better quality
as compared to Indian cement, said sources.
“Discouraging the entry of cement trucks from the Wagah-Attari border to India by limiting
them to seven to eight trucks as compared to 50 trucks of gypsum – a basic raw material
for cement – is also a NTB for Pakistani cement,” said Chairman All Pakistan Cement
Manufacturers Association (APCMA) Aizaz Mansoor Sheikh.
Highlighting another NTB, Sheikh said that the Truck Association at Attari charges Rs25
(Indian rupee) per bag to transport cement from Attari to Amritsar as compared to Rs3 to
Rs4 per bag to transport another product from the border to Amritsar.
Another leading cement manufacturer also has similar observations while doing cement
trade with India. He mentioned that technically, only one truck moves once a day to
transport cement to India from Pakistan. “Every cement truck moving towards India takes
at least four hours due to multiple checks imposed by the Indian customs and border
security force officials and the same amount of time is spent when trucks return back,” he
said. He added that even though the border opening hours have been increased to 10
hours from eight hours a day, real time trading occurs for eight hours only.
Thus, one truck can cross once in a day only. On the other hand, Indian customs officials
fully facilitate trucks carrying gypsum. No extra security checks apply to it, which is why 40
or 50 gypsum trucks enter India from Pakistan‟s side of the border. This exposes the
interests of the Indian high-ups to discourage the entry of finished goods from Pakistan. He
mentioned that the trucks loaded with gypsum cost almost $50 to Indians, inclusive of all
costs of transportation, handling and customs clearance.
On how to address the situation, Sheikh said that Pakistan‟s customs officials could
discourage gypsum exports from Pakistan so that India would automatically create space
to increase cement imports from Pakistan with pressure from their importers and to fulfill
domestic needs.

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However, Pardeep Sehgal, vice president of Indian Importers Association, while talking to
The News admitted half of the NTBs faced by Pakistan‟s cement exporters. He admitted
that the truck union was very strong at the Attari border and no importer could confront it.
However, he said that no uniformity exists in freight charges at Attari as the union defines
its own rates.
However, while criticising Pakistani cement exporters, Sehgal believes that Pakistan‟s
cement exporters have not been doing business with direct dealers and thus, Pakistani
exporters are also selling cement at almost 30 percent below the market price, while the
middleman is benefitting.
He said that Indian Punjab‟s cement manufacturing units have also started, which is the
main reason for the reduction in Pakistani cement imports. However, he also admitted that
Pakistani cement is much better in quality as compared to Indian.
Pakistani cement exports to Afghanistan and India declined by $20 million in the
first-half of the current fiscal after the Afghan government increased the transit fee
and Indian authorities refused to renew export licences of some Pakistani
manufacturers, sources in the ministry of industries said on Thursday.
The Afghan government increased the transit fee by 100 percent at Torkham border for
each truck that carries cement from Pakistan, they said.
Indian businessmen played a cardinal role in pursuing the Afghan government to increase
the transit fee and they succeeded in their designs, they added.
The Afghan government had earlier been charging Rs9,000 transit fee on a truck, which
has now been doubled to Rs18,000. The decision was taken 14 days ago and the cement
industry so far has lost $14 million worth deals.
The concerned ministries of commerce and foreign affairs remain unmoved over this
development. However, the businessmen engaged in exporting cement to Afghanistan,
including cement dealers, transporters and some representatives of the cement industry,
are scheduled to hold talks with the Afghan authorities on Monday to resolve the issue of
transit fee.
In 2008/09, Pakistan exported 3.18 million tonnes of cement worth $150 million to
Afghanistan, which surged further to four million tonnes, valuing $200 million in 2009/10.
However, during the first six months of the current fiscal year, Pakistan‟s cement exports
stood at 2.265 million tons worth $110 million.
Similarly, Pakistan suffered a decline of $6 million in its exports to India because of the
non-renewal of quality licences by the Bureau of India Standards (BIS), the sources said.
An official said that in 2008/09, Pakistan exported 0.634 million tonnes cement worth $35
million to India which increased in 2009/10 to 0.723 million tonnes worth $40 million. But
during the first-half of the current fiscal year, the country exported only 0.215 million tonnes
of cement worth $12 million.

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The cement companies of Pakistan are required to obtain quality certification from the BIS.
Between 2007 and 2008, BIS had granted quality licences to 22 Pakistani cement
companies. Some of these licences, such as those obtained by DG Khan Cement and
Maple Leaf, expired.
These companies, according to the All Pakistan Cement Manufacturers‟ Association
(APCMA), have approached BIS for renewal, but their applications remain pending for the
last four to five months. The BIS did not reply to an emailed query.
“Pakistani cement has been well received in India. The BIS should renew licences as early
as possible after completing the formalities,” said a spokesman for APCMA.
Since 2007, Pakistan has exported 2.32 million tonnes of cement to India and more
licences would expire in the coming months, he added.
According to Anudeep Singh Madan, president of the Amritsar-based Cement Importers
Association, the region is getting good quality cement from Pakistan at a lower price.
After taking into account the cost of rail transport from Wagah to Amritsar and further
transportation within the country, the Pakistani cement is delivered to Indian buyers at
Rs220 per 50kg bag, Rs30 less than the Indian cement.
Diminishing local demand also remains a concern for the Pakistani cement industry, which
has been particularly hit hard by few projects in public sector development.
In 2008/09, Pakistan exported 6.06 million tonnes cement, earning $600 million. In
2009/10, it exported 5.6 million tonnes of cement, valuing $530 million. During the first six
months, the industry exported 2.08 million tonnes worth $230 million.
The local cement consumption has surpassed 2.24 million tons, registering a
growth of 11 percent in December 2012, which is the highest-ever local cement
despatch for the month of December, said sources.
However, the slump in exports continues as exports in December declined by 10.55
percent to 0.580 million tons.
A spokesman of All Pakistan Cement Manufacturers Association termed the cement
sector‟s performance in the first half of FY2012-13 as a good omen. He said that the local
cement despatches increased to 11.728 million tons, registering an increase of 7.61
percent. However, exports remained under pressure and declined by 5.28 percent to 4.22
million tons.
“During the first half of FY2012-2013, cement units located in South registered a growth of
7.98 percent in the local market but posted an even higher 16.34 percent decline in
exports,” he said. “The majority of the cement capacity, however, is located in the northern
part of the country where the industry posted a growth of 7.52 percent in domestic market,
while exports declined by 1.31 percent only.” He added that the hype created on trade with
India has so far not materialised and exports to that market stood at 0.209 million tons only
during the last six months, which was well below the expectation of the cement sector and
declined by 40.41 percent.

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Exports to India, in fact, have been on a constant decline ever since the two countries
opened their borders for liberal bilateral trade. “The decline is not due to lack of cement
demand in India but because of very stringent non-tariff barriers created by our neighbour,”
he said, adding that Pakistan‟s cement is preferred by Indians because of better quality.
Cement exporters, with a potential to export a large quantity to the Indian market, have
been facing strict resistance by the Indian government as non-tariff barriers have not been
removed even after having been specifically mentioned during the different rounds of
official and unofficial talks between the two countries.
During the last six months, Afghanistan‟s market remained stable and the cement sector
exported 2.41 million tons to Afghanistan. Exports to other destination through sea,
excluding India, also remained stable in comparison with the last six months of 2011-2012.
Pakistan can earn additional $6.5 million through cement exports to Afghanistan if it
fixed the minimum export price at $55 per ton instead of existing $42, which will still
be less than other countries, an official of the industry said on Thursday.
Even if the minimum export price is fixed at $55 per ton the country would earn $50-60
million additional foreign exchange annually, the official said.
In an SOS to the economic planners, he said that the cement industry is in dire need of
immediate government action.
He said cement would cost $60 per ton in Afghanistan if imported from any other country.
“We are exporting cement at $42 per ton due to competition between cement plants
situated in the Northern parts of the country,” he said.
Operational capacity of cement mills situated in the North is 34.26 million tons (2.855
million tons per month) and the operational capacity of cement units in South is 6.97
million tons (580,875 tons per month).
Saigol said that the mills in the Northern Region of the country exported 372,048 tons of
cement to Afghanistan in February, which was 13 percent of their operational monthly
capacity of 2.855 million tons. The total production of the North-based mills in February
was 1.385 million tons.
The total production of cement in the North in February was seven percent less than 1.494
million tons production recorded in the corresponding month last year.
He said declining uptake in the domestic market was the main reason for decline in
cement production in the North.
Another Cement mill-owner said that in order to maintain minimum production level, a few
North-based mills have been forced to export cement by sea though it is not a
commercially viable option due to high transportation cost.
According to APCMA, cement units situated in the South exported bulk of 337,476 tons of
cement through sea, which was over 40 percent of their monthly operational capacity of
580,875 tons.

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The South-based mills produced 393,287 tons of cement in February. The mills in South,
he said, would have caved in without exports as the demand in the local market, which
picked up in February, was still very low.
The cement units in South posted a production increase of 37 percent over 283,395 tons
they produced in February 2010.
A spokesman of APCMA said that the cement production declined by 8.49 percent during
the first eight months of this fiscal year, ending in February.
During July-Feb, the cement production was 15.073 million tons.
Cement exports declined during the same period by 14.81 percent from 6.930 tons in July-
Feb 2010 to 5.904 million tons during July-Feb 2011.
However exports during February increased by 6.22 percent that helped the industry post
a nominal growth of 0.04 percent, he added.
Cement Industry set to break records:
Acceleration in regional constructional activities and other exogenous factors like war in
Afghanistan have created unprecedented demand for rehabilitation during last 5 years.
Pakistan has come under lime light as the a major exporter of cement which has not only
fostered the industry but also earned precious foreign exchange to mitigate the budget
deficit. There are 29 cement production units in the country.
Pakistani cement sales surged 25 percent in the first ten months of the 2007/08 fiscal year.
Cement sales totalled 24.6 million tonnes, compared with 19.7 million tonnes sold in the
same period last year. Government expenditures become a major stimulator in creating
tremendous demand for cement, thus resulting in the expansion of production.
The 2007/08 budget earmarked a record 520 billion rupees for the public sector, which
meant more construction as development spending is channeled into sectors such as
health, education and infrastructure. During the July-April period, cement exports from
Pakistan jumped 142 percent to a record 5.95 million tonnes, compared with 2.45 million
tonnes shipped a year earlier. From 2003 to 2007 cement industry of Pakistan had
registered an average growth rate of 20pc. Cement export is expected to reach 6.6 million
tonnes in financial year 2008 in the light of growing regional demand for construction.
Orascom Telecom, a leading mobile telecommunications company with various
international operations, has shown intent to invest in cement sector realizing its
tremendous growth potential. This will further the production capacity of the sector in
coming years. On the other hand, cement export to Middle-East counties is in full swing.
Regional outlook has gone in favor of Pakistan in terms of ever increased demand for
cement in especially two neighboring countries, namely, India and Afghanistan. India's
exponential growth in all sectors augmented its construction
Million Tonnes 9MFY08 9MFY07 % change
Local Sales 16,610,096 15,380,297 8.0

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Export Sales 6,819,964 2,145,951 217.8
Total Sales 23,430,060 17,526,248 33.7
appetite. Faced with demand supply gap, India has to rely on Pakistan for its cement
needs for several years. This bodes well for the expansion of the industry. Likewise,
Afghanistan, having been reduced to rubble, will depend of cement imports from Pakistan
for a decade or so. The country has unprecedented thirst for infrastructural growth and
construction which will be satiated by none other than Pakistan. Apart from these two
countries, rising cement demand and high construction activity in Sri Lanka have led to a
rise in cement prices in the island nation; as a result the country is planning to import
10,000 metric tonnes of cement from Pakistan to meet its requirements. According to Sri
Lanka's Trade, Marketing Development, Co-operatives and Consumer Affairs Minister
Bandula Gunawardena, an agreement has been signed with a company in Pakistan to
import 10,000 metric tonne of cement to the island country. "A high cement demand has
been created in the country with the commencement of many construction projects,
including buildings and bridges".
Presently, the cement industry of Pakistan is heavily burdened due to levy of Federal
Excise Duty which is Rs. 750 per tonne and GST 15pc on duty paid price. In addition to
Federal Excise Duty and General Sales Tax, cement industry is also paying the provincial
levies (Royalties and Excise Duties) on acquiring of raw material for production of cement
i.e. lime stone and shall clay.
A comparison of taxation and retail prices with other regional countries revealed that
taxation in Pakistan is highest while cement retail prices are lowest. Housing sector has
been looked upon as stimulator of economic growth since there is a large estimated gap of
5.38 million housing units against annual addition of 300,000 units in the country, many tax
exemption and incentives are provided to encourage new construction activities in the
country. This will stimulate growth of cement industry. If negative factors are looked into,
we find that hike in discount rate will mar cement sector's growth. Increase in Oil prices
globally and depreciated local currency pushed forward State Bank of Pakistan to take
decision towards enhancing the discount rates from 10.50pc to 12pc per cent which will
negatively affect cement sector and construction activities. Due to bulk imports and high
expenses of fuel cost already hurting local cement manufacturers, increase in interest
rates generate new hurdles in paying their debts which have already been taken from the
local banks. During 2007 the total capacity of cement production was 32.7 million tonnes
which is now reached to 37 million tonnes and in future it will reach up to 42 million tonnes
per annum. To achieve these expansion targets, cement companies have taken huge
loans from the local and foreign banks and according to our valuations and company
reports, companies are to pay Rs. 26 billion to banks till 2012.
In the budget 2007-08, government has also made the outlay of Rs. 1,847 billion where the
target on PSDP at Rs. 520 billion with current expenditure at Rs. 1,353 billion where
revenue is set at Rs. 1,475 billion will enforce it to avail credit from the banks.

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Increase in interest rates may hamper already sanctioned loans for the expansions plans
in the existing industry. It is in the view that most of the companies already facing losses
due to augmented fuel costs, and secondly, the step taken by the government to help
enhance the finance costs of the companies which is to be paid over KIBOR.
Reference:
www. Slideshare.com
www.google.com/vikepedia
www.dawn/articals/cement/textile/rice
Ashfak Bokhari Articles
Chamber of commerce
www.finance.gov.pk
www.pakistan.gov.pk
Thank you!!

Top three export commdities of Pakistan

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