Institute of business Administration Karachi Date 24 March 2021

Kintwear-Sector

24 March 2020 Analysis of Pakistan

Textile sector is one of the largest and oldest sectors in Pakistan. The textile chain starts with
production of cotton, after that this cotton is spun into Yarn and synthetic fibers. Yarn is then
Knits into fibric which is used in Garment’s productions. It has also a major share in exports.
It contributes 8.7% to Gross Domestic Product (GDP) and employ 45% of the labor force.
[ CITATION Afs20 \l 1033 ].

Knitwear is the top exported Commodity having a growth Rate of 10% for the year 2020.
Readymade garments remain on second positions in terms of exports. ([ CITATION Naw20 \l
1033 ]

Pakistan is the 17th Largest exporter of knitwear in the world with an average export of 2.54
billion yearly. Apart from the internal problem faced by this sector including Power shortage,
gas Supply, government Policies and technological advancement ,there are several other
factors that affect This Sector in international market. Although Pakistan knitwear exports
has increased over the years, but the sector is under-performing with respect to its potential
and it competitors in international market. This sector exports have low range in Variety and
are leveled at low value-added products which fetch Low price in international market. The
main 6 Products of knitwear exported during 2017 represents 52% of total exports of
Garments but only 20% in the garment’s exports of world, which show that Pakistan exports
basket is skewed toward low value-added Products including cotton yarn, Fabric and
intermediated products.[ CITATION KHA20 \l 1033 ]
The growth of knitwear exports is increasing with a high competition due to competitors like
china, Bangladesh, Vietnam And Cambodia. This increases the Exports Gap between and
exports shares between Pakistan and its competitors. The following Graph show the
comparison of Pakistan with it competitors in terms of Kint RMG exports.

1Soures:Pbc.org.pk
Pakistan is At 42nd no out of 172 based on competitiveness of garments sector. Bangladesh is
a major competitor to Pakistan in the Knitwear sector. Us, Germany, UK, Spain, and France
are the top exporting partners of Bangladesh textile and clothing. Total Kintwear exports of
Bangladesh in 2018-2019 were 16.88 Billion out of the 38.4 billion of total textile exports
which make it the third largest exporters of textile and second largest in Kint RMG. [CITATION
Kni19 \l 1033 ]. The reason why Bangladesh is a major competitor to Pakistan is because they
both are huge exporter of Kintwear to the same markets i.e. US and EU which create
competition in both price and quality. As a result of high energy and labor cost and the lack
of technology the cost of production in Pakistan is high which makes price of Pakistan’s
Kintwear higher in international market. Bangladesh has shown a significant development in
this sector. The major reasons for development is plenty of resources, beneficial government
policies and low labour cost where in case of Pakistan we faces challenges of high production
cost due to increase in energy cost, moreover, the cost of imported goods has increased due to
the depreciation of rupee. The Bangladesh government government has made policies to
encourage use of local fabrics and yarn production by adding tax on imported yarn.
Furthermore, the in new policies by the government there is no tariffs on this sector. In
additions to these the quota free textile rule introduces in 2005 has helped to improve this
sector substantially. The US-China tariff war has also given Bangladesh an opportunity as
buyers shifted it demands from china to Bangladesh which pushed its Kintwear
exports. .Bangladesh Right know enjoys duty-free, quota-free access for all Items aside arms
and ammunition in the EU market as a least developed country under the EBA (Everything
but Arms) facility. But the government policies of Pakistan has not shown a major impact on
this sector. The two major policies of textile 2009-2014 and 2014-2019 allocated a budget of
88billion and 65 billion but only half of this amount was actually spent[ CITATION jam21 \l
1033 ]. Due to which this sector is stuck around 13 billion a year from the two decades while
competitors like Bangladesh and Vietnam has increased their market share rapidly then
Pakistan. The following graph shows the market gap between Bangladesh and Pakistan which
has become widen since 2007-2018.
Furthermore, Due to being a Least development Country (LDC), Bangladesh is getting duty
free market access or reduced tariff rate which helps to exports to different developed and
developing countries.
Among the other major competitors of knitwear sector Vietnam is also one. With a share of
6% in the world textile market, Vietnam ranks at 4rth number in terms of textile
exports[CITATION Sha \l 1033 ].. In comparison to it Pakistan Is not even among top 10 textile
exports. But the historical data shows a different side of the picture. In 1980s, Pakistan was
richer than Vietnam in terms of per capita income but today Vietnam’s per capita income is
300% that of Pakistan[CITATION Jal \l 1033 ]So, how did Vietnam progress with such sharpness
during these years?
The road to prosperity of Vietnam is hidden in the development of its textile sector. Before
1980s, Vietnam was in war with US but the Doi Moi 1986 economic reforms changed
policymaking mindset of Vietnam, like the withdrawal of troops from Cambodia,
normalization of relations with china, strengthening of relations with US which lifted trade
sanctions from Vietnam[CITATION 202 \l 1033 ] result of such normalization brought foreign
and domestic investment, infrastructure development, establishment of economic zones,
liberalization of trade and increase in power generation. To promote textile industry, Vietnam
has removed all the duties on importation of capital machinery and equipment for textile and
garments industries, Vietnam has also passed the bill that supports the refund of value added
tax on local garments and textile industries. All these positive factors boosted up the textile
industry and the industry kept performing better each year and today it ranks 4rth in the
world. The following graph is a good representation of Vietnam’s textile industry
performance.

But Pakistan has a very different case, the graph is totally opposite to that of Vietnam. The
exports have either remained constant or have decreased but, in some years, there has been a
very small increase in the textile exports. If we compare it to Vietnam than the performance
is not even satisfying. The major causes to this sectoral turmoil are political instability,
outdated policies, energy and power shortages, high cost of production and depreciation of
Pakistani rupee.[CITATION Ala \l 1033 ]The following graph gives a major insight about how
Pakistan has been performing in the international textile industry over the year.
Bibliography
Alam, Aftab. 2010. "Pakistan textile industry facing new challenges." research gates.

Jalil, Dr. Abdul. 2020. PIDE blogs 2.

Jalil, Dr. Abdul. 2020. "What Our Textile Sector Can Learn from Vietnam’s Progress." PIDE blogs 2.

Jalil, Dr. Abdul. 2020. "What Our Textile Sector Can Learn from Vietnam’s Progress." PIDE blogs 2.

jamal, Nasir. 2021. "Time to walk on a different Path." Dawn News (Dawn News) 2.
https://www.dawn.com/news/1600798.

KHAWAR, HASSAAN , NADIA MUKHTAR, MAHEEN JAVAID, and DR. UMAIR JAVED. 2020. "Pakistan’s
Readymade." Pakistan Business Council (PBC), The Consortium for Development Policy
Research (CDPR). https://www.pbc.org.pk/wp-content/uploads/Pakistan%E2%80%99s-
Readymade-Garments-Sector-Challenges-and-Opportunities.pdf.

Nawaz, Ahsan , Mehrum Nisa , and Ali Murad . 2020. Septumber . https://www.google.com/search?
q=Trade+Development+Authority+of+Pakistan.&oq=trade+development&aqs=chrome.0.69i
59j0j69i57j0l2j46i175i199l2j69i61.5469j1j7&sourceid=chrome&ie=UTF-8.

Shahbandeh, M. 2020. statistia. https://www.statista.com/statistics/1094515/share-of-the-leading-

global-textile-clothing-by-country/#:~:text=In%202019%2C%20China%20was%20the,textile
%20exporters%20in%20the%20world.

Today, Textile. 2019. "Knitwear exports scenario of Bangladesh." Textile Today Bangladesh.
https://www.textiletoday.com.bd/knitwear-exports-scenario-bangladesh/#:~:text=Figure
%3A%20Bangladesh's%20exports%20shipment%20of,in%20the%20last%20fiscal%20year.

Uroos, Afshan. 2020. "Pakistan trade prespective." 22. Accessed July-Sep 2020.
https://tdap.gov.pk/quarterly-trade-reports/.