1.

0 Introduction
1.1 Glimpse of the Pakistan’s textile sector
The importance of textile sector is the mainstay of our economy and exports. This sector is
providing livelihood to more than 10 million farming families. It also accounts for 40% of
the industrial employment. Despite the recent downturn in the global demand, the textiles
and garments exports accounted for more than 50 per cent of our exports during the financial
year (2008-09). The textile industry being the 4th largest producer of cotton and 3rd largest
user of cotton, yet it is still the 12th in terms of international trade, which means much of the
advantage is lost in low value added semi-manufactured exports.

There is great potential within this sector, but due to several reasons, our country has been
unable to capitalize on this great economic contributor. Pakistan is one of few countries in
the world which has advantage having complete supply chain within the country. We have
the raw material to the finished products each and every thing is available within our country.

Pakistan has the potential to produce quality products with low cost, because of availability
of cheap labor and low transportation cost. The availability of raw material (cotton) within
country helps us reduce the total cost of the production, had it not been available in the
country, the total cost of production would have increased due to the transportation and taxes
paid for importing the raw material. Hence these two factors i.e. availability of cheap labor
and availability of raw material results in producing quality goods at lower price.

1.2 Importance of Textile Sector:

Textile sector is the backbone of Pakistan economy; exports of the country mainly depend on
textile industry. Textiles and clothing continue to represent the most important manufacturing
sector of Pakistan. Pakistan is fourth biggest grower of cotton in the world and is the 8th
largest exporter of textile products is Asia. The increase in export earnings has been directly
proportionate to the growth of this sector. The contribution of this industry to the total GDP
is 8.5percent (Table 1). Investment incentives and export facilitation has also focused on this
sector. The industry is dominantly export based and its growth totally dependent on exports
outlets. Cotton based textiles contribute more than 60 percent to the country’s total exports
(around 6.6 billion US dollars), accounts for 46 percent of the total manufacturing sector of
the country.

Source Pakistan Economic Survey 2007-08

The share of textile industry in the economy along with its contribution to exports,
employment, foreign exchange earnings, investment and value added makes it the single
largest manufacturing sector for Pakistan. Textile sector provides employment to 39 percent
labor force which is around 15 million).The availability of cheap labor force and raw
material for textile industry has played the principal role in the growth of the cotton textile
industry of the country.
1.3 Categories of Textile Sector:
Product Mix of Pakistan 2008-09

The textiles Sector is the major contributor of Pakistan`s Exports. It is the backbone of our
economy & exports, since more than half of our country`s total exports consists of textiles,
which is 54% of the total exports. The total amount contributed by textiles for exports is $
1,737,409,000.

The chart above depicts the contribution made by each category/branch of textiles sector.
Amongst all these categories KNITWEAR was on top, whose share in total exports was 11%,
where as cotton fabric is 10% of the total exports.

The finished products such as readymade garments, bed ware also contributed adequate
percentage for the exports. The very important element that should be taken into account is
that high percentage exports of the under process /unfurnished/raw goods such as Cotton
yarn. This is the only category which should have minimum percentage of exports, because it
can further be used within our own country to manufacture finished/readymade products. The
Textiles mills will have more material to process & manufacture the final products, which
will result in higher demand of workers (labor) & machinery. Hence employment will be
created & our own people will get more chance to earn. It will not only provide an
opportunity for employment, but rather the export of finished products will result in the
higher amount of textiles export, since the value of finished product is more than the value of
the raw material.

1.4 Export Performance:

1.4.1 Growth of Pakistan Textile Export

This Graph demonstrate the growth of pakistan textile exports from year 2004 to 2007.
Export of pakistan textiles has shown a declining growth in last 2 years. Several reasons have
contributed in declining growth of textile export i.e surging raw material prices, energy crisis,
financial costs and global recession. Changing government policies, increases in input costs,
and the global recession have changed the scenario for textile exports from Pakistan. Now
the textile industry in the country is passing through a very critical period with number of
closers and shutdowns. Furthermore, shortage of energy also affected the textile industry and
exports from Pakistan.

Government used to pay 6% Research and Development (R&D) subsidy on exports of woven
and knitted garments, 5% on dyed and printed home textiles, and 3% on dyed and printed
fabrics but now government have suspended these payments.
2.0 Challenges faced by the Textile Sector of Pakistan

Unavailability of cotton yarn cripples downstream textile sector

During 2009, textile sector faced several challenges and accused the government of failing to
overcome their problems and challenges, which have negatively impacted on the sector.
Country’s textile sector is facing a shortage of raw cotton and cotton yarn due to exports of
raw cotton and yarn negatively affecting value-added knitwear garments, sportswear and
other products. An increase in demand for Pakistani cotton and cotton yarn by China,
Bangladesh and other countries as well as a higher international price for the product are the
main reasons for an escalation in exports.

Cotton exporters have purchased about 661,000 bales of cotton during the cotton season
2009-10 whereas, last year they had purchased about 225,000 bales. According to the
sources, this quantity is the biggest quantity of cotton bales purchased by the exporters
during the last ten years. Export of raw cotton is constantly on rise since July 2008 and as per
the official statistics, the country exported raw cotton worth US $40.451 million during July-
September of FY10 as compared to US $29.051 million during the same period of FY09,
thus showing an increase of 39%.

High competition in international market

While Pakistan’s textile industry could not compete in international market in high priced
high quality bracket, despite and perhaps due to the abundant availability of local cotton and
yarn the present predicament of the industry can be considered as a significant opportunity
for improvement. On the other hand, long hours of electricity and gas supply suspension as
well as its high cost has slowed down the pace of industrial growth and eroded the natural
advantage our industry has enjoyed so far of cheap raw material and reasonably priced
energy to run mills efficiently.

Due to these current and pressing issues, textile exports fell 3.21 percent during the first five
months of the current financial year against the same period last year. Exports during July-
 November (2009-10) were recorded at $4.20 billion against exports of $4.34 billion during
July-November (2008-09), according to the Federal Bureau of Statistics (FBS).

Performance of Asian Countries

Comparison with Asian Competitors for Textiles and clothing Exports, 1990-2008
(Million dollars and percentage)
Share in economy's
total merchandise
Value exports

1990 2000 2006 2007 2008 2000 2008 a

World 104354 157295 220367 240364 250198 2.5 1.6
China 7219 16135 48678 55961 65256 6.5 4.6
India 2180 5570 8909 9667 10267 13.1 5.8
Pakistan 2663 4532 7469 7371 7186 50.2 35.4
Banglades
h 343 393 1494 884 1090 6.2 7.1

Source: WTO

According to WTO Statistics, year 2006 proved to be the best year for the textile industry in
Pakistan. After the year 2006, there has been a declining growth rate for Pakistan, hence
decreasing the market share as compared to the world. If we analyze the growth of China and
India, there exports are been increasing by millions of dollars and is capturing the world
market share. On the other hand, growth of Bangladesh has been slowly increasing. We can
analyze from the table that the other major competitors are increasing their share in the world
market, while Pakistan is losing its share constantly from the past three years which has
badly affected the textile sector of our economy.
3.0 Measures needed to promote the textile sector

With the mentioned problems and difficulties faced by the Pakistani textile industry, it is
imminent that exports would definitely fall down and cause much of the unnecessary loss
that the textile industry currently faces. The present elected government, much made
according to the will of the people of Pakistan, must take steps to ensure that the economy
prospers and play a vital role to improve the lives of common people and those working on
daily wages, living in the country in hope for better future.

The government, in its budget last year, made very vital promises that showed a prosperous
and happening textile industry that could help the economy prosper better. However, much to
the dismay of everyone, the textile industry has much detracted from the much advancement
it had achieved in terms of performance and contribution to the GDP of Pakistan’s economy
back in the era of President Musharraf.

Pakistan is one of the most blessed countries that has a domestic raw material base for textile
industry. However, inefficient use of the raw material has been one of the most disappointing
reasons for lack of leadership role of the sector contribution towards the economy.

Another most important problem is that of the energy crises. The most crippling challenge
loom operators and garment makers have had to face since the end of last year is the
phenomenon of load-shedding, as electricity grid companies regularly cut service because of
an acute lack of generating capacity. This problems, again, has caused wide spread gap of
demand and supply on time to international market, causing cancellation of orders and wide
spread disorders in payment schedules. The image of the textile industry has also been deeply
affected by this never ending problem that has lead everyone to suffer heavily. Even though
we have an excess of cheap labor, workable at the textile industry for its needs for high
demand production, the problem of energy has been causing mishaps.
Moving on to other important problems, we find that it is not only the fault of the
government at present for the lack of improvement of the textile industry. The textile owners,
much of the them belonging to elite class, are reluctant to display their true earnings to the
government. The reason for them not showing the correct earnings is to avoid taxation. This
has been one of the major problems of the Pakistan, where taxes have been inadequately
received and the government has been reluctant to take measures to avoid tax theft done by
majority of the textile mill owners. This has in turn, affected the government in terms of
weak performance and control over policies as the government has no place to earn revenues
and is forced to ask the IMF for loans and grants in order to run the country and pay its short
term debts. The western agents such as the IMF and World Bank thus implement their own
agendas in the form of financial policies, which results in much despair for the poor citizens
of Pakistan. The recent statement by Ms. Clinton, asking the elite to pay taxes is rather a
shame for the country, and a direct involvement by the United States in domestic affairs of
Pakistan, considering the Pakistani people as ineligible or rather incompetent to rule their
own country by themselves.

Despite all problems that the Pakistani textile industry faces, some measures seems to be a
opportunity at hand in present that could change the outlook of the countrys economy with
textile playing the just role it should play as one of the most important sectors of Pakistan.

Firstly, the Pakistani textile industry should focus its domestic demand more importantly
than previous. Economics and research agencies have applauded the role of the domestic
economy of Pakistan as a major contributor to the GDP and a source of protection/ cushion
against the global economic meltdown. This would tremendously improve the earnings of the
industry.
Secondly, the Pakistan Textile City, which would be completed in 2011, would promote the
industry in the foreign market with much needed back of the government. The industry, thus
should make the most out of it in terms of making it self competent and self sufficient in
energy requirements. The need for marketing is highly important to promote the industry to
skilled professionals willing to invest in Pakistan. The industry should, thus, keeping in mind
the cost-benefit analysis make sure that skilled labor is hired with due diligence so that the
industry is better able to make the most out of the process.

Thirdly, making high value added products should be the top most priority of the industry.
Finished goods are one of the most valued in the international market, and Pakistan, being
blessed domestic raw material, and cheap labor could make the most out of it by providing
competitive rates on value added products. Thus, the industry needs idea generation for
product development. The industry also needs to diversify from cotton to other products to
make the most out of the international demand.

Lastly, to make highly valuable products, the need for highly updated machinery is
important. The role of the IT has been surpassing the imaginations of the industry and
success today can only be achieved when equipments are up-to-date and competitive. It is no
wonder that investment is high, but the fruits leading to success would out-weight the
investment expense. Once the investment is done, there is no way the international market
denial in terms quality and competency.