June 22, 2023
Textile is the mainstay of Pakistan exports, about 60% of the total in 2021-22. Pakistan’s share in global textile trade, however, has been declining. In order to protect and enhance it, apart from correcting macro factors, Pakistan needs to appreciate the importance of ensuring compliance with international standards pertaining to labour rights, working conditions, safety etc. and the steep costs of falling on the wrong side of this mandate.
Since textiles are the largest chunk of exports and are beneficiaries under EU’s GSP+ program, they are the natural candidate, and are thus in the vanguard, to start work on streamlining of the entire compliance process with a mind to be 100% compliant.
There is thus an urgent need for a comprehensive, dynamic and internationally acceptable solution or platform which should ideally be solely responsible for establishing standards and administering audits through auditors of acceptable repute. Call it a Textile Compliance Center (TCC), under the aegis of the recently unveiled National Compliance center (NCC), a much appreciated initiative of the Ministry of Commerce (MoC) to streamline compliance processes, reduce costs, and enhance overall efficiency.
The NCC has been warmly embraced by industry leaders and associations. Timing is just about right and, ceteris paribus, and if implemented right, it can help shift gears of our export economy. Currently, compliance enforcement means a host of audit regimes and battalions of auditors milling around. It is costly and confusing.
The exporter just wants to be compliant under a simple, efficient and predictable order. The situation on the ground is anything but. In order to settle the wild west of the compliance frontier, there is no other way but to first centralize and standardize compliance standards and thus bring clarity, efficiency and predictability to the entire compliance process. By consolidating various audits and such requirements under one umbrella, the NCC/TCC can potentially reduce or even eliminate the need for multiple audits thus reducing costs and minimizing disruptions. This centralized approach will provide manufacturers, exporters and buyers with a clear framework to adhere to, fostering transparency and trust throughout the supply chain.
Importers’ increasingly complex compliance requirements mandate exporters to dynamically live up to environmental, social, health, and quality standards and prove it through audits. Compliance with these requirements are costly and challenging, particularly as standards continue to expand horizontally and vertically. The NCC can serve as a comprehensive platform in this regard. Its establishment is just the end of the beginning.
However, before they set out to design NCC/TCC, it is important to understand what is the product that the exporter wants? For the exporter the compliance process starts with compliance standards themselves, there could be more than one standard for one subject and the compliance cycle is completed only with audits, audit grievances and remediations, etc. Anything less than the capture of this entire process under NCC/TCC will add to confusion and not help the exporter.
Ideally speaking, the textile leadership should have stepped forward and assumed a leadership role to own and design NCC/TCC or at least the TCC. The reality is that the textile sector has a fractured front and that too on top of a devolved federation with many levels of legislative centers, adding to the chaos.
In order to steer clear of these twin minefields, any compliance regime under NCC/TCC or some other platform has to have a public-private footing. Textile leadership is fissiparous and there are too many rules-writing district governments. The MoC and the sector leadership(s) need to sit together under the guidance of the MoC to develop a PPP-based dynamic structure. PSW is one such example. On its own, the GoP could end up with an NCC which falls short of the customers’ needs. Similarly, the textile leaderships, who on their own cannot even get into a room, let alone build a dynamic compliance engine. Exports are too serious a business to be left to the exporters.
In addition to the above considerations and in order for the results to be acceptable to the buyers, the audit/operations dimension of the NCC/TCC should be under the operational control of the private sector with a rich presence of buyers themselves-an important takeaway from competing economies’ compliance journey. It is thus imperative that the GoP remains involved and that the private sector runs TCC.
NCC will also help in identifying gaps between existing laws and international standards and propose necessary changes to align local legislation with global requirements, providing a pipeline to federal and local jurisdictions to update laws and regulations. NCC’s role in addressing the concerns of global buyers and investors cannot be overstated. This will help build confidence in the textile industry and in time in other sectors also, attract investments, and strengthen business relationships with international partners.
NCC was unveiled in April 2023 and we understand is in the process of capacity building. The GoP’s initiative in the concept is heartening. Finally, something which the market wanted. However, the key is its implementation. Let us, GoP and the private sector work together to build something which our exporters, our workers, increasingly women now, deserve and our buyers want.