Jan 10, 2017
Energy supply hampers Pakistan's efforts to win back textile exports
Jan 10, 2017
Pakistan, a global heavyweight in cotton production, has long suffered from an erratic electricity supply. The situation is now improving and the textile industry is reviving, but the country is still struggling to relaunch its exports.
Owing to payment arrears, corruption, inefficiency and lack of investment, the level of energy production has remained well below the country's demand in the last ten years.
This has severely hindered the textile industry, employing 30% of Pakistan's active population and accounting for the majority of its exports. The country is in fact the world's fourth-largest cotton producer, behind India, China and the USA.
Half of the time "we needed to power up factories with diesel generators, which was very costly, so we preferred to close them down rather than lose money on a daily basis," said Rehan Bharara, formerly owner of several weaving workshops, now the director of a public project that promotes the textile infrastructure.
In a few years, one third of the industry's output capacity was lost, thousands of workshops closed down and the majority of the remaining ones are working at reduced capacity, added Rehan Bharara.
Endless electricity black-outs and gas supply shortages are preventing Pakistani factories from being competitive and fulfilling orders in time, losing customers to Vietnamese and Bangladeshi ones.
Investing in energy to survive
Some factories have invested heavily in energy production, such as the Sadaqat plants, suppliers of home linen to some fifty Western mass market retailers, among them Intermarché, Auchan and Leclerc.
Energy supply in their huge workshops varies depending on the time of day. The companies mainly rely on less expensive gas but switch to public electricity company Wapda if gas fails. In case of a black-out, they resort to oil-fired generators, explained owner Mukhtar Ahmed. However, smaller factories, dependent on the public electricity grid, grind to a halt with every black-out.
This is a problem for workers too, as they are paid only if there is electricity to power up the machines, not an unusual practice in Pakistan.
The Pakistani government has pledged to put an end to the black-outs by the end of 2018, and has redoubled its efforts to prioritise manufacturing. Last December, the country switched on its fourth nuclear power plant.
Black-outs are significantly fewer now, and Wahid Raamay, President of the weavers association in Faisalabad (northern Pakistan), said that if this trend continues, more investment will bolster the sector. "The crucial issue is to have a power supply 24/7” he stressed.
Despite such improvements, textile manufacturers still have their share of problems. The rush to expand the power grid and the use of liquefied natural gas have made energy more expensive.
The cost of grid-produced electricity has nearly doubled in eight years, according to Rehan Bharara. It is still cheaper than energy produced with a diesel generator, but it is more expensive than that available in competitor countries.
Pakistan is at least benefiting from a more reliable power supply, and hopes over time to lower energy costs by operating the solar energy, hydroelectric and coal-fired power plants the government has promised to deliver.
The Asian Development Bank (ADB) is less optimistic. Werner Liepach, representing the ADB in Pakistan, fears that electricity supplied by the increasing number of plants built by Chinese companies might be more expensive, due to a lack of transparency in the tendering process.
It looks as if Pakistan is still facing an uphill battle to recover the export market share it has lost. In fact, its exports are currently decreasing (-13% in the first nine months of 2016), a sign that the textile industry has not yet recovered.
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