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Textile industry caught in whirlpool of quicksand
Jan '09
The textile and garment industry in Pakistan contributes nearly 60 percent to the basket of exports from the country. But due to reasons both, within its ambit and beyond, the sector is going through a very difficult phase, not seen in the last few years and the current economic crisis has only helped in aggravating the crisis to a higher level.

To a plethora of demands put forth by the industry, the government is able to consider only a few, due to the financial constraints it is in. Among the many demands put forth by the industry are easing of credit to the sector, reducing interest rates, restructuring outstanding loans, relaxing prudential norms and many others to help the industry survive the crisis.

The other biggest stumbling point for the sector is the erratic supply of the two most important utility services; electricity and gas supplies. The industry has been troubled to a very large extent by the 8-12 hour electric power cuts which are sending production schedules haywire and non-availability of gas is also hampering the operating rates of the units.

According to experts, nearly 90 percent of the industry is incurring cash losses, except for those who operate in niche segments. The other main reason which experts put forward is the rise in interest rates and bank spreads in the last few years. KIBOR has shot up by 261 percent while the bank spread on a weighted average basis has grown from 2 percent to 7.75 percent.

The industry provides employment to around 3 million and indirect employment to an equal number of people. With the economic crisis, expected to worsen in 2009, it is the jobs of these people which will be put at stake. According to experts, if the government does not intervene with policies favourable to the industry, the economy could suffer and also lead to large scale unemployment.

Fibre2fashion News Desk - India

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Courtesy: Commonwealth Bank of Australia

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