Pakistan textile sector eyes boost from EU export deal
(KARACHI) - Pakistan's textile sector Friday welcomed a European Union move that will cut duties on the country's exports, saying it would provide a boost to the economy, but it warned an energy crisis could prevent firms from benefiting from the windfall.
The EU on Thursday signed a law granting Pakistan generalised system of preference (GSP) status meaning firms will pay no tax on goods exported to the 27-nation bloc for 10 years from January.
"Hopefully, we will see an increase of $1 billion in the present levels of exports for the first year of GSP," Yasin Siddique, the chairman of Pakistan Textile Mills Association (APTMA) told AFP.
With the new cash that could flow in thanks to Pakistan's GSP status, Islamabad hopes for a boost to job opportunities for textile workers and other upstream sectors.
"We expect to generate two million jobs in the textile sector with the additional work likely to be generated," said S.M. Tanveer, the APTMA president of the Punjab province, which accounted for $9.7 billion of the country's $13.2 billion textile exports in the fiscal year to June.
The textile industry is the backbone of Pakistan's exports, making up more than 50 percent of the country's total overseas shipments.
However, the industry watchers fear a grinding energy crisis in the country hamper their efforts to exploit the full potential GSP
"Non-availability of gas to the industry has reduced its capacity to one third," Tanveer said.
Pakistan's economy has been hit by a perilous fuel crisis as its domestic gas supplies are insufficient to meet demand, while mismanagement and corruption have left the energy sector in dire straits, with hours-long blackouts a daily reality in the summer months.
Meanwhile an over-reliance on imported fuel has lead sharp price rises for goods across the impoverished country.
Prime Minister Nawaz Sharif's government has struggled to woo investment in the energy sector to boost the economy which has averaged growth of about three percent over the past five years, insufficient to significantly improve living standards or fully absorb a growing labour force.
Among projects the government is planning are an energy park along the Arabian Sea coast west of Karachi, offering 6,600 megawatts of coal-fired power and a $7.5-billion pipeline that would bring gas from Iran.
However, the latter has drawn threats of US sanctions owing to its links with Tehran while Islamabad is also having trouble paying for its own 780-kilometre (485-mile) section.
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