ISLAMABAD - The government on Wednesday announced zero rating of textile exports and imports of textile machinery while fixing the export target at $25 billion in the first-ever textile policy for the next five years (2009-14). The policy after being formally approved by the Cabinet was announced on the state-run media by the Minister for Textile Industry Rana Farooq Saeed Khan. Farooq Saeed Khan said that the policy had been prepared with over-riding objectives to realize the true potential of the textile sector. We are converting one bale of cotton into $1000 whereas our competitors earn $4,000 from the same quantum of cotton. We aim to enhance our earning from one bale of cotton to $2000 in the next five years, the Minister said. Salient features of the policy include establishment of Textile Investment Support Fund (TISF) of Rs40 billion, which would be spent on the modernisation of the machinery and technology, removing infrastructure bottlenecks, enhancing skills, better marketing and use of information and communication technology. Under TISF, a Technology Up-gradation Fund (TUF) would be introduced under which the government would pick up 50 per cent of interest cost of new investments in plants and machinery for capital-intensive projects. Rs1.6 billion had been set aside during the current fiscal year from which the government would contribute up to 20 per cent of capital cost of small investments as grant. The amount would be increased up to Rs17 billion in next five years, the policys document reveals. In the policy, the government would allocate Rs 1 billion during the current year for skill development initiatives. The document states that no tax would be levied on export of textile products while all textile machinery imports would also be zero-rated to support new investment. The government would focus on preferential access as well as Free Trade Agreements (FTAs). It would also provide necessary support for branding, grading, labelling and such other activities that would add value to the textile chain, the Policys document further states. An insurance scheme would also be introduced to protect exporters against unforeseen losses, which might arise due to failure of the buyer, bank or problems faced by buyer country. This scheme would help remove uncertainties currently faced by the exporters, especially in the global market hit by massive financial crisis. The policy focuses on certain sub-sector issues from fibre to garments including ginning, spinning, waving, knitting, processing, fashion design, handlooms and handicrafts. A specific scheme based on public-private partnership basis would be launched to up-grade and improve the said sectors. A proper strategy would be developed to promote the technical textile, which is the emerging area of high value addition, the document states. Moreover, training and facilitation would be provided to strengthen traditional craftsmanship for production set up, sourcing raw material and marketing. The textile industry mainly relies on imports of dyes and other chemicals. The government intends to promote indigenous industries to provide homemade material required by the sector. To encourage womens participation in the industry, the government will pick two regulatory cost to employers namely social security and EOBI, which would cost Rs2 billion for the current year. The government also exempted the textile industry from loadshedding and the sector would enjoy the same priority in gas allocation as given to fertilizer sector. To mitigate the heavy burden of financing cost on existing units, the long-term loans would be converted on the same pricing as applicable to LTTF schemes, together with a grace period of one year on both existing and converted facilities, without the facility of refinancing. This would entail a support of Rs 5 billion, the policy document further states. The textile units suffering from general market slump but technically viable would be held through transitional support, i.e. in the form of loan restructuring, interest relief, relaxation of prudential regulations, additional financing and investment tax credit etc. The textile exports would be compensated for a period of two years through provision of drawback to offset the costs imposed on them directly and indirectly by a variety of government agencies and disruptions caused by law and order problems. However, the support will be linked partially to the performance of the sector. Around Rs 5.4 billion have been allocated to settle the past claims under the Research and Development schemes of 2007-08. To promote preferential trade agreement (PTA), an expenditure of Rs 4.5 billion would be incurred during current financial year. National Tariff Commission would decide the issue of this duty during the year. The federal minister in the speech was of the view that the exports target of $25 billion was ambitious but not beyond the countrys textile sectors potential. Earlier, while addressing a special cabinet meeting convened to consider the Textile Policy 2009-14 at the PM Secretariat on Wednesday, Prime Minister Syed Yousuf Raza Gilani said that the Textile Policy aimed at incorporating all the required strategies essential to address the challenges confronting the sector on a sustainable basis besides meeting the expectations of the industry. According to a statement issued on Wednesday, the Prime Minister said that for the first time in the history of the country the government was adopting a 5-year Textile Policy, which would give the vision and the policy focus needed for the textile sector. Historically, he said, the Textile Industry had its highs and lows. The beginning was promising and the growth was robust but Somehow halfway we lost the momentum and today country is only producing cheap primary products, he remarked. He said that Pakistan despite being the 4th largest producer of cotton was ranked 12th in global textile exports. This, he said, had to improve by a great deal for the benefit of our people. The Prime Minister further said that at present the textile industry was beset with energy shortages, security concerns and high cost of capital. Textile exports last year, he added, registered a negative growth of 9.5 per cent, which was a matter of serious concern. He said textile sector was plagued by inherent problems, which were historical and complex. He said, We also need to look at external factors which affect our industry seriously. The Prime Minister said quota-free trade regime had brought more challenges than opportunities while exposing the ill-preparedness of our textile industry in a competitive global grade environment. He said the recent global financial meltdown and sharp falls in trade volumes had thrown up new challenges. Last year, Pakistans total exports were down by 6.7 per cent and textile exports 9.5 per cent mainly because of global demand shrinkage, he added. The Prime Minister said that keeping both domestic and global contexts in mind, it was more necessary than ever before to come up with a comprehensive response strategy. He hoped that the textile policy 2009-14 is equipped with appropriate policy instruments. He said the ultimate goal of the textile policy was the creation of an enabling environment for the industry to grow. Textile sector, he added, had been the major provider and foreign exchange earner and must continue to be so. He said focus on the textile sector should give a clear message that the government put poverty alleviation, job generation and industrial development very high on its agenda and was taking all possible steps in that direction.