LAHORE: There’s no sign of the much-hyped Chinese investment that was
expected to end up in the basic textile sector of Pakistan, which,
being the fourth largest cotton producer and home to low-cost skilled
labour, should be the most ideal country for the relocation of that
industry.
The Chinese, on the face of it, are adhering to a wait
and see policy as Pakistan’s basic textiles are under severe stress and
in all likelihood they may be waiting for more units to die so that they
could acquire them for peanuts.
In Punjab alone the number All Pakistan Textile Mills Association members has dropped to 204 from 296 a year back.
More
than 115 textile mills have closed for good and many have disposed of
their machines at junk rates. Still their deserted sites are ideal for
establishing modern textile units. They closed because they were
operating on obsolete technology and lacked resources to bring in the
new one. Apart from that they have the basic infrastructure to operate a
modern unit.
They have sheds and storage space and gas, power,
and water connections. If interested, the Chinese can enter into joint
ventures with the sponsors of the closed mills.
The infrastructure
and the facilities available could be assessed by any reputable
financial consultant and be considered the share of Pakistani partner in
the joint venture. The Chinese could chip in with the state-of-the-art
spindles. The average cost of 25,000 spindles would be Rs2 billion that
Pakistan spinners do not have.
The mills could be started within
six months of investment and would be viable from day one. This is
because the modern spindles consume 40 percent less power and require
only one-third of the workforce than that working in most of the
existing spinning mills in Pakistan. It makes business sense for Chinese
to start spinning yarn in Pakistan.
It is indeed strange that
they have entered into joint ventures in spinning in Vietnam their Far
Eastern neighbor that lacks skilled basic textile workers, does not grow
cotton and wages in Vietnam are three to four times higher than
Pakistan.
Many Pakistani basic textile entrepreneurs including the
close mills have shown keenness to enter into joint venture with the
scores Chinese entrepreneurs that have been visiting Pakistan for this
purpose.
Why are the Chinese stalling on a lucrative opportunity?
They seem to be in no hurry. They are perhaps waiting for Islamabad to
grant concessions to the textile sector particularly for power tariff.
The Chinese know that if the basic textile industry is not provided this
support then it would not be possible for the mills that are still
operating to go on for long.
They are perhaps waiting for few more
closures and then start making low offers to the sponsors of closed
mills. Instead of entering into joint ventures they would try to buy the
entire facilities minus obsolete machines at very low rates and then
install modern spindles as sole owners of the facility.
The
Chinese know that Pakistan is the only destination where they could
establish low value-added basic textile units, but they are practising
patience as they do not want to increase the value of existing basic
textile facilities. They have investment in hand.
They would
demand concessions from the government to bring it in, but they would
first want the state to spell out its concessions for the existing place
so that they could ask over and above those concessions.
It would
be prudent for the planners to make it absolutely clear that no
foreigner including the Chinese would get any additional concession that
is not available to the local investors.
Pakistan is the only
destination available to the Chinese for investment in textile including
basic textiles. Pakistani entrepreneurs should woo investors from
developed economies for joint ventures in basic textiles. The day we
entered into one joint venture we would see scores of Chinese companies
following the suit within a week.
Source: Business Recorder, Pakistan Friday, 20 April 2018