History of Pakistan Textile Industry

History of Pakistan Textile Industry
Increase in the cotton production and expansion of textile industry has been impressive in Pakistan since 1947. Cotton – bales increase from 1.1 million bales in 1947 to ten million bales by 2000. Number of mills increased from 3 to 600 and spindles from about 177,000 to 805 million similarly looms and finishing units increased but not in the same proportion. It employs 50% of industrial labour force and earns 65% foreign exchange of total exports. Pakistan’s textile industry experts feel that Pakistan has fairly large size textile industry and 60-70% of machines need replacement for the economic and quality production of products for a highly competitive market. But unfortunately it does not have any facility for manufacturing of textile machinery of balancing modernization and replacement (BMR) in the textile mills which need to think about joint ventures for the production of complete spinning units with china, Italy and production of shuttle less looms (Projectile) with Korea, Taiwan and Italy. Cotton textile industry has been premier industry in Pakistan and a major source of export earning and employment. It also helps in value addition to the manufacturing sector of the economy. During the six years between 1993 and 1998, production of yarn (in quantity terms) registered a steady annual growth rate of 302% in Bangladesh and 405% in India. On the contrary, Pakistan registered a growth rate of 101% per annum in yarn production although it ranked third after China and India in the global yarn production during the same six years. In exports, while Taiwan, India and the republic of Korea registered an annual increase of 18.1%, 27.7% and 5.4% respectively during 1993-1998, Pakistan registered a negative growth of 4.8% one important development was that till 1997, Pakistan was the world’s largest exporter yarn followed by India. However, in 1998, India gained the NO 1 position, leaving Pakistan at NO 2 In the case of cotton cloth production, a number of Asian countries have been emerging in the international market to compete with Pakistan. These countries are Bangladesh, India, Taiwan, Indonesia, Thailand, Turkey, Sri Lanka and Iran. The latest available date on overall export performance of Pakistan comported with some regional countries is given in table 1: The above-mentioned presentation in the context of international scenario highlights the adverse position of Pakistan’s textile industry when is likely to continue further following the full implementation of WTO agreement from 2005 onwards when an era of free trade will start globally. Notwithstanding the above fact, current stagnation in the local textile industry can be overcome through efforts, consistent with charges occurring in the international

market. It must be appreciated that all successive governments since the birth of cotton textile industry in Pakistan have been encouraging the textile exporters to penetrate into new market and also to broaden the base of exportable commodities by including value added textile goods so that reliance on exports of cotton, cotton yarn and coarse fabrics gradually become minimal. Reflecting on the state of affairs, Abid Chinoy, Pakistan cloth merchants Association (PCMA) Chairman, Appreciated government’s efforts to encourage new exports and finding new markets, which need aggressive export marketing. The steps taken on the monetary front, such as the frequent devaluation of Pak rupee in terms of dollar could not improve the cost competitiveness of exportable products due to increase in prices of the local and imported inputs of the local textile industry, and also due to inelastic demand for the Pakistan’s exports. It has been rightly mentioned in the latest stage bank of Pakistan’s annual report (FY01) that, “Over the years Pakistan’s exports receipts have been vulnerable on account of the narrow base of exportable items, concentrated markets and low value addition ‘this indicated that the growth in the country’s overall exports, including textile products which contributed more then 60% of total export receipts each year, could to be related some cosmetic and ad hoc measure like devaluation of Pak rupee and concession export credits. The first textile commission, which was constituted by the first material law government in 1960 had, inter-alia, recommended that an economic size textile unit should preferably have 25,000 spindles and 500 looms. No new mill with only 12,500 spindles and without looms should be sanctioned. However, no need was paid to the advice by the sanctioning authorities with the result that an excess capacity had tented to build up in the spinning sector. During the period 1973 to December 1992, some 71 spinning units with 1,136, 835 spindles, 6,600 rotors ands 7,329 looms were closed down. In 1992, a foreign consultant form was hired by the government to look into the stagnating conditions in the local textile industry. One of the observations of the foreign consultant was “Pakistan has failed to make real progress in the international market and is being over taken by many of the neighboring competitor countries. The spinning sector, traditionally the core of the industry, is already in the crisis with many spindles lying idle and mills being forced to close. Worse still, this sector will be hit by the projected decline of its major markets in Japan and Hong Kong in the coming years.” Another important strategic recommendation given by the foreign consultant very much relevant to the current

conditions: “It is vital that companies play very positive role in the markets, which each one having its own marketing activity, whose job is to understand the need of the customers and the ever changing competitive dynamics of the markets. In order to improve exports, Pakistan’s Readymade Garments Manufacturers and Exporters Association (PRGMEA) has urged the commerce minister Abdul Razzak Dawood to set up an Apparel Board for the promotion of export of woven and kit garments which fetch US$ 2.5 billion foreign exchange for the country. The industry experts are of the opinion that in the order to have a strong industrial base, Pakistan economy need investment upswing. Pakistan’s economic growth performance during recent years has been dismal: as against the average growth rate of 6.1% in the 1980s, the half and 4.0% in the 2nd half of the 1990s. The major micro-economic instability factors like high inflation rate, budgetary deficit, continuous depreciation of rupee, economic sanctions, etc. could not help the investment process. Such an environment cannot be conducive to investment and growth. Exporters of textile products have found the target of US$ 10.4 billion set by the government for the year 2002-2003, as achievable and termed it a realistic approach. The textile sector which constituted 69% of total export during 2001-2002, believes that enhanced quota by the European Union and Turkey would make this possible to fetch another US$1 billion this year. The rise in export of value-added products from Pakistan was another point of encouragement for the textile sector. “The export of value-added products rose to 57.4% from 53.9% last year-a clear sign that we are moving in the right direction, “said the Chairman of all Pakistan textile mills association. The trade policy is considered an acceptable paper, but in the industry does not fine anything that could lead to a high level exports achievement and remove trade imbalance. Pakistan’s textile sector earned US$5.77 billion during the outgoing year, compared with US$5.577 BILLION OF 2000-2001 indicating a growth of 0.69%. “Textile vision 2005” has identified the present status and opportunities to make in roads in conventional and hew markets and has developed sectoral recommendations, hence the sectoral committees set up by the federal textile Board (FTB) would play an important role be ensuring the availability of quality raw materials on competitive prices and improvement in designing, and would adopt quality standards and increase productivity levels. It would attract foreign brands and promote Pakistani brands with world-class standers.

With such a positive trend, Pakistan’s textile sector is getting rid of old impediments and gearing itself up for the new opportunities in the new trade regime. Overview of textile industry
Arshiya Fayyaz Roll No 528 Overview of the textile Industry:

The textile sector enjoys a pivotal position in the exports of Pakistan. In Asia, Pakistan is the 8th largest exporter of textile products. The contribution of this industry to the total GDP is 8.5%. It provides employment to about 15 million people, 30% of the country work force of about 49 million. The annual volume of total world textile trade is US$18 trillion which is growing at 2.5 percent. Out of it, Pakistan’s share is less than one per cent. The development of the Manufacturing Sector has been given the highest priority since Pakistan’s founding with major stress on Agro-Based Industries. For Pakistan which was one of the leading producer of cotton in the world, the development of a Textile Industry making full use of its abundant resources of cotton has been a priority area towards industrialization. At present, there are 1,221 ginning units, 442 spinning units, 124 large spinning units and 425 small units which produce textile products. The industry consists of large-scale organized sector and a highly fragmented cottage / small-scale sector. The various sectors that are a part of the textile value chain are: Spinning, most of the spinning industry operates in an organized manner with in-house weaving, dying and finishing facilities. Weaving comprises of small and medium sized entities. The processing sector, comprising dyeing, printing and finishing sub-sectors, only a part of this sector is operating in an organized state, able to process large quantities while the rest of the units operate as small and medium sized units. The printing segment dominates the overall processing industry followed by textile dyeing and fabric bleaching. The garments manufacturing segment generates the highest employment within the textile value chain. Over 75% of the units comprise small sized units. The knitwear industry mostly consists of factories operating as integrated units (knitting + processing + making up facilities). The clothing sectors both woven and knits are mainly clustering in Karachi– Lahore and Faisalabad where sufficient ladies labor is available. High value added products i.e. garments and textile made-ups have over the years progressively increased their share in the textile export portfolio. Currently these products constitute 57% of the total textile exports. During early nineties the textile exports were dominated by yarn and greige fabric which had a share of almost 56% in the total exports. As far as the markets are concerned 60% -70% of the merchandise is exported to the USA and the EU. Problems Faced by the textile industry: The Textile Industry in Pakistan is fast loosing the price benefit in raw material prices while the energy cost and the credit cost has increased considerably. Harvest failure has made Pakistan’s dependence to importing cotton. Pakistani import of cotton increased by 107 % The Pakistan Textile Industry is facing an uncertain environment. The increase in input cost of minimum wage by 50 percent, increasing interest rates,

non-guaranteed energy supplies, lack of R&D and reduction in cotton production has had a negative impact on the industry’s competitiveness internationally. Because of the entire situation the companies are downsizing, production units are shutting down; around 500,000 of the workers have already lost their jobs. After surviving from the load-shedding scenario the industry has yet to survive the gas loadshedding scenario as on 6th Nov, LESCO has informed the industry that it would not be to supply power for the additional load and only the sanctioned load will be supplied during the winter months. The government is stressing upon the industry for the consolidation of the sector through mergers & acquisitions in order to effectively face tough international trading environment, as the international and regional competitive pressures are going to further build up and it will be large corporate that are more likely to survive. To deal with this scenario government has approved the textile package, including different measures including relief in the interest rate for loan to spinning sector and Research and Development (R&D) support to textile and clothing industry. Although the textile sector is the backbone of Pakistan’s economy, the Government as well as the textile industry has kept their focus on conventional textiles, ignoring technical textiles and knowledge-based products. In many industrialized countries, technical textiles account for over 50% of the total textile activity, while this figure for China is 20%. Advice for New Merchandiser: Merchandisers are social scientists; they deal with people, their wants, desires, and reactions under certain conditions. This job requires a person to be on the job, on the spot to crack the right deals. It involves a lot of determination, patience and an eye for detail. In today's competitive marketplace, a textile merchandiser must have more than just the basic information to survive. Anew merchandiser should have the passion to learn and should have proactive approach towards work. For any merchandiser the knowledge about the business is very necessary. He should learn all about the business or it would be difficult to survive. The areas he need to concentrate on as a new entrant is the knowledge of Company and its Processes, Products offered by the Company, Related Products, International Markets & Business Trends/Events, Buyers, Buyer’s Standards, Competitors. With this information the merchandiser will be able to make informed decisions and it would also be help in negotiations. One of the merchandiser's most important responsibilities is maintaining proper communication both inside and outside the company. For that the merchandiser should try to sharpen his abilities to establish and build productive relationships, both internal and external, and it can be prove as to be a plus a point if he manages to establish key contacts early on. Other than that strong computer skills are really essential, as all the work is done on spreadsheets and databases. A merchandiser should have sound knowledge about all the technical aspects of the product. A new merchandiser should keep a log of all the developments and tasks otherwise it would be very difficult to coordinate and manage work. Time management is really vital in merchandizing or it can cost the job. Pressure handling is another important aspect, instead of panicking a merchandiser should look for best possible solutions to

deal with the situation. The merchandiser should happily put up with the buyers attitude, as it can result as an increment in his salary. Merchandiser should also keep an eye on new developments like Categories of New Developments, New Season Shades, Styles & Designs, Marketing Research, R&D in Manufacturing Facilities. All these factors combined will enable a new merchandiser to establishhis repute and impression in the industry he is working and that will set the tone for his future. Textiles The Textile Industry is dominated by Punjab. For example, only 1.5 million people from NWFP are employed in the Industry. 3% of United States imports regarding clothing and other form of textiles is covered by Pakistan. Textile exports in 1999 were $5.2 billion and rose to become $10.5 billion by 2007. Textile exports managed to increase at a very decent growth of 16% in 2006. In the period July 2007 – June 2008, textile exports were US$10.62 billion. Textile exports share in total export of Pakistan has declined from 67% in 1997 to 55% in 2008, as exports of other textile sectors grew.

Textile industry still waiting for policy implementation
KARACHI: Exporters of value-added textile goods face severe liquidity crunch due to non-fulfillment of assurances of benefits and relief package announced in the textile policy last year.

The 5-year policy was widely praised by the exporters about five months back as it painted a rosy picture promising lot of benefits and relief for the value added sector. But as of today exporters of textile goods find themselves into deeper financial crisis not only because they had been deprived of the incentives and relief announced in the new policy but due to non-payment of routine sales tax refunds and duty drawback. Exporters complain that instead of getting the much-needed relief and incentives they are presently being even deprived of their routine benefits, which have badly damaged their liquidity position and working capital.

“Exports of most of value-added textile goods are declining and our competitors are capturing our share in the world market but there seems to be no realisation or any sort of concern amongst the policymakers,” Shabir Ahmed, chairman Pakistan Bedwear Exporters Association (PBEA) remarked. The much-appreciated textile policy had not been implemented in letter and spirit, while routine nature of benefits of the past policies such as payment against duty drawback or refunds against sales tax or income tax claims are also being withheld, he added. Shabir Ahmed said as a result exporters are faced with liquidity crunch and are unable to even meet export orders fast diminishing. The enhanced rates of duty drawback are not being made effective, while the difference against reduced rate of export refinance as committed in the new policy had not been paid so far. Another major benefit announced in the new policy was with regard to government contribution towards EOBI against women workers and deferment of payment of mark-up and loans taken by the industry under Long Term Financing (LTF), Mr Shabir maintained. After getting identification (ID) from the ministry of textile, he said, exporters submit their duty drawback and refund claims with banks for onward clearance from the State Bank. But unfortunately, the SBP had been asking under which account these payments have to be made. Mohsin Ayub Mirza, chairman Pakistan Readymade Garment Exporters and Manufacturers Association (Prgmea) said that presently, the industry is on the verge of collapse and many medium and small size units have already closed down. He said as the process of merger of sales tax, federal excise duty with income tax department is under way along with reshuffle and transfer of officers within the Federal Board of Revenue, even the normal payments against refunds and drawback are being held back. Mr Mohsin further said that yarn crisis had deepened but there seems to be no government functionary, who is least bothered about this issue of national importance. “The negligence on part of policymakers tantamount to destroying country’s economy because when the current fiscal closes on June 30, 2010, exports of most value-added textile goods will be down,” he asserted. When value-added textile sector is not getting yarn for onward processing to meet its export commitments, the industry would ultimately close down resulting in large scale unemployment in the country, he added.

Problems inside facing

Insight into the Problems Facing Pakistan’s Textile IndustryAbida Mukhtar
April 17, 2008 by Kalsoom There are currently a multitude of major issues facing Pakistan. Of these issues, the economic crises are perhaps the most palpable to the average Pakistani. Below, Abida Mukhtar, a consultant currently based in Lahore, Pakistan, discusses the current problems with the Pakistani textile industry: The Pakistan textile industry contributes more than 60 percent to the country’s total exports that sum around 5.2 billion US dollars. The industry contributes approximately 46 percent to the total output produced in the country. In Asia, Pakistan is the 8th largest exporter of textile products. The contribution of this industry to the total GDP is 8.5 percent. Moreover, it provides employment to 38 percent of the work force in the country, which amounts to a figure of 15 million.

However, the textile industry currently faces massive challenges. The All Pakistan Textile Mills Association (APTMA) needs to enhance the quality of its products, upgrade the technology used, and encourage effective Research and Development (R&D) in order to compete internationally. However, APTMA argues other factors such as high interest rates and cost of inputs, non conducive government policies, and non-guaranteed energy supplies hinder their competitiveness. Critics argue that the indolent attitude of the industrialist in the 1990s has led up to the current crisis. If the textile industrialist had worked with the government towards implementing policies that prepared for the current international scenario, Pakistan textile industry would have boomed. Instead, the industry suffers from ‘severe technological obsolescence,’ insufficient R&D, falling cotton crop, and an unclear path forward. The lack of R&D in the cotton sector of Pakistan has resulted in low quality of cotton in comparison to rest of Asia. Because of the subsequent low profitability in cotton crops, farmers are shifting to other cash crops, such as sugar cane. In Punjab alone, the cotton area sown this season was less by 1.14 percent as compared to the last year. Textile owners argue that although the Cotton Vision 2015 targets 20 million bales till 2015, it is an ambitious target as in reality cotton production is decreasing each year. It is the lack of proper R&D that has led to such a state. They further accuse cartels, especially the pesticide sector, for hindering proper R&D. The pesticide sector stands to benefit from stunting local R&D as higher yield cotton is more pesticide resistant. Moreover, critics argue 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. APTMA has highlighted that the Pakistan textile industry faces tough competition from the Indian, Bangladeshi and Chinese textile industries and local policies have resulted in Pakistani textiles facing a critical condition. For instance, Bangladesh, India and China enjoy comparatively low interest rates than Pakistan. The prevailing rates are as following, 8.5 to 9.0 per cent in Bangladesh, 5.25 per cent in India (market rate is 10.25 per cent, however exemption of 5 percent is provided to the textile industry) and 5.58 per cent in China. Meanwhile, in Pakistan, the last three to four years has seen the interest rates to have risen more than 150 percent, to 13.25 percent. The increase has essentially crippled the small time textiles owner, while seriously hindering growth of the textile tycoons. This has led to textile owners accusing the government and banks for maintaining detrimental policies. I believe that it is imperative that the new government takes actions that have a positive impact on the industry as textile provides employment to approx 38 per cent of our working class. A coherent plan should be devised by the Pakistani government that allows some sort of exemption/concession such as in India; the Export-Import Bank was set up for the purpose of financing and facilitating the industries, especially textile. Industrialists also argue that the non-guaranteed supply of power by WAPDA (Water and Power Development Authority) is another problem that negatively affects the textile industry. Although, some textile units have built their own energy generating

plants to cut cost (these units run on gas), small units production depends entirely on the electricity supply of WAPDA. The textile industry suffered heavy financial losses in Dec, Jan and Feb quarter, because of the inconsistent electricity supplies. The lack of production subsequently resulted in the industry not meeting its target for the quarter, massive financial losses were borne by textile owners and sadly, it hit the most vulnerable: workers on daily wages. Their frustration was observed recently, when the WAPDA and MEPCO (Multan Electricity Power Company)offices in Multan, were torched by daily wage workers, [see related post]. Textile owners as well as workers passionately assert that the inconsistent supplies have and are destroying business across Pakistan. They also highlight that the high cost of the utilities has making Pakistani textile uneconomical in the international market. All things considered, it is apparent that the Pakistani Textile Industry is facing an uncertain environment. The increase in input cost of minimum wage by 50 percent, increasing interest rates, non-guaranteed energy supplies, lack of R&D and reduction in cotton production has had a negative impact on the industry’s competitiveness internationally. In order to sustain the Textile Industry, the new Pakistani government has a tough task ahead and needs to urgently implement a suitable long-term strategy that provides a level-playing field against their regional competitors.

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