GSP Plus & Textile Sector Of Pakistan

Textile Sector is the backbone of Pakistan’s economy. Pakistan is the 8th largest exporter of textile products in Asia. This sector contributes 9.5% to the GDP and provides employment to about 15 million people i-e directly or indirectly. Pakistan is the 4th largest producer of cotton with the third largest spinning capacity in Asia after China and India, and contributes 5% to the global spinning capacity. The textile industry contributes approximately 9.5 percent of the country’s GDP and continues to be the mainstay of Pakistan’s exports. 

Energy crises in Pakistan badly affected the growing sector of textile as due to this the ability of meeting timelines suffered badly resulting in losing export orders and increasing unemployment. Due to such dramatic situation the capability and of competitiveness of this industry in international market has been affected badly.

As a result of continuous efforts and will of business and political community of Pakistan the European Union (EU) accommodated Pakistan in the Generalized System of Preferences (GSP) Plus effective from 1st January, 2014. Chaudhry Sarwer ex- Governor Punjab and German ambassador in Pakistan Dr Cyrill Nunn played leading role in the extension of this incentive to Pakistan.  

There is a dire need for a strategy for optimizing the GSP Plus opportunity. Major challenge to the government is compliance & implementation of 27 UN Conventions which have been signed by Pakistan. It is important to note that Sri Lanka lost its GSP Plus status in 2010 on the ground of its failure to comply with conventions related to human and labor rights. The real challenge for Pakistan is to ensure full utilization of its capacities and resources and its diversion towards value addition.

APTMA has initiated serious steps to oversee the implementation of 27 conventions between Pakistan and EU in regard of GSP+. APTMA is planning to streamline local cotton production to manufacture Textile products under best practices. Consumption of basic textiles of yarn presently exported, can raise garment export up to $ 15 billion to create exportable surplus. APTMA has signed MoUs with a German NGO, GIZ to fast track Implementation of social standards compliance. It also has implemented dialog approach methodology for improvisation of productivity. Road Shows conveying the message “Pakistan- A Sourcing Destination” have also being arranged in different countries. APTMA also considers the role of media especially the local media very important to project and portray a positive image of Pakistan. Need of a national strategy is inevitable for building soft image of Pakistan globally. Role of civil society, private sector is pivotal to make this move successful.

The major components of the proposed optimization strategy can be:

1. Government, industry and other stakeholders including political parties in Pakistan need to ensure that the Country complies with the requirements of the 27 conventions that are an essential condition under which GSP Plus has been extended.

2. Each industry in the ‘high potential’ sectors needs to do a competitive analysis and benchmark itself against the industry’s major competitors in the EU markets.

3. Government and industry bodies need a joint strategy to inform exporters of the opportunities that are available to Pakistan under the GSP Plus scheme as well as making them aware of the obstacles.

4. Government needs to facilitate buyers from the EU to visit Pakistan. Face to face interactions between buyers and sellers can potentially help buyers in placing orders according to their requirements as well as follow up during production and later. 

5. Both public and private sector needs to emphasize on improvement in work ethics and skill development.

6. Small and Medium Enterprises (SMEs) need to be encouraged to work more effectively and be a part of the value chain of larger companies.

7. Value added sector needs to have access to raw materials on internationally competitive prices. Government needs to understand that in order to compete at a global level, industry needs to have access to competitively priced inputs including raw materials and utilities especially energy.

8. Since compliance is a major element, Government may consider providing matching grants for industries wanting to put in place infrastructure needed for meeting buyers’ compliance requirements.