Pakistan is one of the largest cotton-producing countries of the world.

Both directly and indirectly, textile sector employs the largest number of the human resource. The industry contributes more than 60 % (US $ 9.6 billion) to the countrys total exports and contributes approximately 46 %t to the total output i.e 8.5%of the country GDP. In Asia, Pakistan is the 8th largest exporter of textile products, catering for 38% employment. Currently, major losses are being incurred by this industry with foreclosure looming around. The reasons of this decline are largely contributed by the high cost of production due to increase in the energy costs. Cost of import has risen due to a depreciating Rupee. Rise in inflation rate and high cost of financing has also effected seriously the growth in the textile industry. The sector recorded a 10.2 percent decline in output in the first four months, July-October of FY2011. The overall growth of textile industry is noteworthy and appreciable, and regardless of some hiccups general progress and development of Pakistani textile sector is really good. The performance of this sector could have been even better if some of the existing policies and practices get revised and critically reviewed. The industry's overall contribution of taxes in 2011-12 is expected to reach Rs. 23.5 billion, including payments of withholding taxes and applicability of lower rate of sales tax of 4% - 6% on local supplies. Textile exports stood at $12.5 billion from July 2010 to May 2011. During the last fiscal year, the tax department collected Rs. 10.5 billion as 1.0% withholding tax. Similarly, textile industry contributed Rs. 2.5 billion at the rate of 0.25% as Export Development Fund (EDF). Break-up shows that the applicability of lower rate of 4%-6% sales tax on local supplies would contribute an additional amount of Rs. 11 billion, annually, to the national exchequer. Moreover, the collection of withholding tax amounted to Rs. 10.5 billion during ongoing fiscal year. A leading textile exporter said that the Ministry of Textile had issued three notifications to facilitate the industry in the past. Textile manufacturers will receive 3% drawback on garments, 2% on home textile and 1% on fabrics. The government has yet to issue any notification in the extension for these facilities. Financial year 2011-2011 recorded a decent ratio of textile exports to many of the European, American and Middle Eastern markets. Not only the raw material, Pakistan also managed to export hundreds and thousands of finished products to these global markets, showing the real potential lying in our textiles and garments sectors. Following tables show the growth of cotton textile industry in Pakistan: The previous fiscal period starting from June 2010 to June 2011 experienced severe blows as a result of massive destruction of cotton crops due to massive floods and heavier rains throughout the country. Despite such positive figures and statistics, textile and garment industries in Pakistan have not shown any considerable progress in producing valued-added items. Our neighbouring countries like India and China, on the other hand, have achieved the largest share in the global market by exporting value-added textiles and garments products, while local manufacturers in Pakistan are way behind in this. Another mistake we have already made is that we tend to export raw materials to the global textile buyers, and the same raw material comes back to the Pakistani market in form of finished value-added textile products and fashion accessories on higher prices. According to Mr. Abdul Saboor, one of the leading experts from the textile sectors, "On a domestic front, Pakistan has hardly any cotton left in the fields and stocks at ginners are not that much to feed the mills till the next crop comes. From price perspective Rs. 12000 to 13000/maund or $ 1.68/lb has now become a usual norm. These prices are driven from NY futures, World A index and India's restriction on

cotton exports. Pakistani mills are still short of their minimum consumption requirements and more and more players are finding it difficult to make decisions about buying raw material at these skyrocketing prices with yarn fabric demand showing the resistance and receivable issues from the clients. Credit limits have burst for many as cotton has reached over 150% of price since start of this season. Another interesting point is the ratio of raw material price and conversion cost in total cost of product as today raw material price makes for almost 90% of the total cost of the product, as compared to 60% a year back". Additionally, there is more focus upon supplying raw material to global textile manufacturers. Though this helps us earn much-needed foreign revenues but also eliminates the possibilities to turn the same raw material into value-added finish products locally. Lack of Research & Development (R&D) in Cotton Sector Low research & development (R&D) in the cotton sector resulted in low quality of cotton in comparison to rest of Asia. As a resultant low profitability in cotton crops, many farmers are shifting to other cash crops, such as sugar cane. Lack of R&D is the primary cause. Lack of Modernize Equipment It is argued that the textile industry has obsolete equipment and machinery. The inability to timely modernize the equipment and machinery has led to the decline of Pakistani textile competitiveness. Due to obsolete technology the cost of production is higher in Pakistan as compared to other countries like India, Bangladesh & china. Increasing Cost of Production Production cost of textile has risen due to increasing interest rate, double digit inflation & decreasing value of Pakistani rupee. All this is creating problem for the textile industry to compete in international market. Internal issues The global recession which has hit the global textile really hard is not the only cause for concern. The high cost of production resulting from an instant rise in the energy costs has been the primary cause of concern for the industry. Depreciation of Pakistani rupee during last year raised the cost of imported inputs. In addition, double digit inflation and high cost of financing has seriously affected the growth in the textile industry. Pakistan's textile exports have gone down during last three years as exporters cannot effectively market their products since buyers are not visiting Pakistan due to adverse travel advisory and it is getting more and more difficult for the exporters to travel abroad years. Slowdown in the textile sector has to be revived. High cost of doing business is because of intensive increase in the rate of interest which has increased the problems of the industry. Record increase in mark-up rates is one of the major cause of defaults in servicing the loans availed by the industry, hence, the volume of non-performing loans has reached to an alarming situation. He said that power shut downs may result in massive unemployment resulting in law & order situation. Energy Crisis As a consequence of load-shedding the textile production capacity of various sub-sectors has been reduced by more than 30 per cent. The load-shedding of electricity cause a rapid decrease in production which also reduced the export order. The cost of production has also risen due to instant increase in electricity tariff. Due to load shedding some mill owner uses alternative source of energy like generator which increase their cost of production further. Such dramatic issues have decreased competitiveness of

this industry in international market. The industry had gradually adapted to the shortfall of electricity in the country by installation of power plants running on natural gas. Almost 80% of the textile industry in Punjab alone shifted to natural gas to meet the energy shortfall. This added capacity helped meet the demand for power for the industry quite effectively for a number of years. However, in the last couple of years the supply of natural gas to the industry has been severely curtailed due to the increased demand by the domestic consumers and the transportation sector. Furthermore the fertiliser industry has been subsidized at the cost of other industries particularly the textile sector. The textile industry is now facing a challenge to meet its global commitments in spite of severe curtailment of natural gas and power load shedding in the country. The gas is now curtailed for a number of days every week. Projected demand/supply position of natural gas in 2011-12 supply is 4,172 mmcfd against demand of 5,777 mmcfd, showing a shortfall of 1,605 mmcfd. In 2012-13, supply will be around 4,372 mmcfd whereas demand will be 5,995 mmcfd indicating a shortfall of 1,622 mmcfd. A spokesman for the All Pakistan Textile Mills Association (APTMA) claimed that 60 to 70 per cent of the industry had been affected and was unable to accept export orders coming in from around the globe. He said the textile industry had already endured over 45 days of gas disconnection over a period of four months, causing extraordinary production losses and badly affecting capability of the industry. In Punjab, energy supply disruption only was causing an estimated loss of Rs1 billion per day. In the larger interest of the economy and exports, he suggested, the government should ensure utility companies provide smooth electricity and gas supply to the textile industry. Tight Monetary Policy The continuity of tight monetary policy causes an intensive increase in cost of production. Due to high interest rate financing cost increases which cause a severe effect on production. The withholding tax of 1% also effects the production badly. The high cost of doing business is because of intensive increase in the rate of interest which has increased the problems of the industry. The government should take immediate measures to remove slowdown in the textile sector. Lack of new investment Pakistan textile industry is facing problem of Low productivity due to its obsolete textile machineries. To overcome this problem and to stand in competition, Pakistan Textile Industry will require high investments. There is a continuous trend of investing in spinning since many years. Pakistan is facing externally as well as internally problems which restricts the new investment. The unpredictable internal condition of Pakistan causes a rapid decrease in foreign investment that affected all industries but especially textile industry. Raw material Prices Prices of cotton & other raw material used in textile industry fluctuate rapidly in Pakistan. The rapid increase in the price of raw material effects the cost of production badly. The increase in raw material prices fluctuate rapidly due to double digit inflation & instable internal condition of Pakistan. Due to increase in the cost of production the demand for export & home as well decreased which result in terms of downsizing of a firm. Hence the unemployment level will also increase. Govt should take serious step to survive the textile industry. In order to decrease the price raw material for textile we need to increase our production capability. Simultaneously, the government should make arrangement for introducing international system of Cotton Standardization in Pakistan to enhance quality and value

of Pakistan lint cotton by utilizing the technical services of Pakistan Cotton Standard Institute The textile policy should include the issues like duty free market access to European Union and United States as Pakistan is the largest importer of USA long staple cotton to the tune of $400 million to $500 million every year. Zero rating on import of textile machinery, zero rating exports, tariff reduction, incessant energy supply to textile units. Issues relating to the market access and quality products with timely delivery and single digit mark up and special power tariff for the textile industry has also been recommended. Foreign Direct Investment (FDI) in the textile industry would be an ideal scenario. Whether that culminates or not, depends on image building of Pakistan to. The current bleak picture which the foreign media portrays has to be fought. Focus on value addition is also very important and for that technology up-gradation & capacity building is very important. These two things can only be achieved through international exposure and strategic partnership with international firms. Human resources development in the management domain is still missing, though at the grass root level there is no dearth of skilled labor. This also includes awareness of international quality Standards, as human resources development encompasses both technical and managerial skills. This will also help in introducing efficient management techniques, as many issues like over staffing, lack of efficient systems and wastrel can be controlled through it. The concept of on-the- job-training is still missing in the industry, as it involves sufficient cost which is not bearable by small manufacturing units. Either the industry itself or the government can intervene to make on job trainings possible by providing funds as well a platform. Cost of doing business in Pakistan is increasing instead of decreasing, which is a worrying sign. The reasons are many fold as we discussed previously, but it should be controlled through reduction in indirect taxes and subsidy on fuel cost. This will improve the productivity as well as quality. To rejuvenate the industry interest rate should be lowered. Even if that is not possible for the industry in general, a special package for the textile industry should be designed so that capital is available for new plants. But, the most important issue to address is of electricity & gas tariff and supply. The gas shortage increases to 600mmcfd in Punjab at the peak of winter season. This is one of the main reasons the textile industry fell short of meeting the yearly export target. Gas load management has resulted in closure of many textile units rendering a large number of workers jobless. Conclusions This is no doubt the toughest periods for the industry in decades. The global recession which has hit the global textile really hard is not the only cause for concern. Serious internal issues also affected Pakistans textile industry very badly. The high cost of production resulting from an instant rise in the energy costs has been the primary cause of concern for the industry. Depreciation of Pakistani rupee during last year which has significantly raised the cost of imported inputs. Furthermore, double digit inflation and high cost of financing has seriously affected the growth in the textile industry. Pakistan's textile exports in turn have gone down during last three years as exporters cannot effectively market their produce since buyers are not visiting Pakistan due to adverse travel conditions and it is getting more and more difficult for the exporters to travel abroad. Pakistans textile industry is lacking in research & development (R & D).The production capability is very low due to obsolete machinery & technology. Textile and garments sector is the bone of our entire national economy that needs to be further

strengthened by applying investor-friendly policies and revised trade policies. It would be quite rational if our local textile manufacturers stop supplying raw materials to global buyers, and just focus upon manufacturing value-added items and textile products and fashion accessories. For this purpose, we will, definitely, need a technology which, once taken, enables us to produce high-quality standardised textile goods locally, without investing our money on the import of the same. Moreover, we also need a safe working environment in our textile and garments manufacturing industries where both genders are treated equally, and share equal respect and status, without any sort of discrimination or gender bias. It is high time that alternative sources of energy such as coal, solar and wind power should be should be considered without any loss of time. Pakistan is sitting on one of the richest deposits of coal in the world. According to renowned scientist Dr Samar Mubarakmand, Thar coal reserves have potential to generate 5000 MW electricity for 800 years. Incredibly, Thar has 850 trillion cubic feet coal which far greater than the total oil reserves of Saudi Arabia and Iran put together! Coal gasification is already being used successfully by some forward looking players in the textile industry. Through such ingenious and creative solutions, dependency on the gas and power companies can be curtailed significantly for the industry to meet its full potential. In the coming issues PTJ will highlight for our readers such unique and highly practical solutions to meet growing energy requirements of the industry.