Analysis of Textile Industry

of Pakistan
Group Members
Vishal
Muzammil Noor Sultan
 Introduction to Industry
• Pakistan is
• Textile sectors has shown immense growth in
• 4th largest producer of cotton in the the tax collection in 2019-20 with 265% than
world, providing 9% of the total textile previous year with the tax collection of Rs. 10.4
needs billion
• Third largest spinning capacity in all of
• 1,221 ginning units, 442 turning units, 124
Asia enormous turning units and 425 little units
• 8th largest exporter of textile which produce material items
commodities in Asia – July to March
2020/21 figures are $11.35 B
• Exported Products: Ready-made garments,
knit-wear, bedwear, Towels etc.
• Above is the year-on-year growth of
• Main factors for increased exports this year:
9.06% from $10.41 B. Rupee devaluation, Lower int rate, reduction in
• Textile contributes to 60% of country’s duties/taxes, pay off of pending refunds.
exports and supports 40 allied industries
• “The government has already abolished duty
• Textile sector contributes 8.5% to the GDP of and taxes on industrial raw materials as well as
Pakistan paying off past pending refunds to exporters”
 Backward and Forward linkages

Backward
• Suppliers of Machinery
• Financial Service providers
• Agricultural
• Transportation and logistics
 Forward
• Exporters
• Wholesalers
• Leather clusters

• The rise of allied sectors in the textile cluster has mostly occurred in an unplanned way in the informal sector.
• Although there are examples of organic clustering, there has never been a concerted effort on the side of
industry participants or the government to encourage a cluster-based approach.
 Microeconomics of Industry

• Textile industry has lot of players in the market; therefore, it is said to have a monopolistic
competition.
• There are many textile mills but there are few major textile mills which are dominating the
market.
• 1. Abdullah Apparels (Pvt.) Ltd 2. Gul Ahmed Textile (Pvt.) Ltd 3. Lucky Fashion industries
(Pvt.) Ltd 4. Afroze Textile Industries (Pvt.) Ltd 5. Al-Karam Textile Mills (Pvt.) Ltd 6. Kohenoor
Textile Industries (Pvt.) Ltd 7. Crescent Garment Industries (Pvt.)
• It is the industry that is highly volatile due to interest rates - changes in interest rates affect
this industry as it is highly leveraged.
 • Poor Infrastructure
• Water supply, Energy Crisis, Logistics, Transportation etc.
• Low Productivity and low standards
• Low Quality of Fixed capital
• No consistency in quality standards of SMEs
Problems and • Lack of R&D (Cotton quality and reduced production)
Weeknesses • Political Instability
• Labor Force Composition
• Taxation Structures (GST, refunds, income tax)
• Exchange Rate Fluctuations
 SWOT Analysis

Strengths:
• Raw Material Base: Pakistan is the 4th largest producer of cotton and this abundance of cotton has
allowed the textile industry to move towards industrialization.
• Labor is cheap and abundant and has served as the backbone of the industry which employees
about 39% of the labor force.
• Increased demand in domestic level lead to set up of more manufacturing plants to cover increased
supply.
• Establishment of Fashion Houses: In order to further its efforts, the government has established
fashion houses in collaboration with renowned designers and fashion This is enhancing.
 Opportunities

The EU GSP plus Scheme: if we can keep rising production costs under control will the GSP Plus
bring many positive changes to the textile sector.
Technological Up Gradation: Upgrades are required in four main value chain segments.
Modernizing farming, enhancing fabric, garment and fashion industries and have export intensive
and pro export policies.
Leverage the Knitting Industry: Knitted apparel has emerged as the largest sub-sector within the
textile industry.
The availability of trained labor and the general macro-economic management of the economy are
two significant variables in realizing the potential of the knitting sector.
 Threats

• High manufacturing costs, energy limitations, backward technology, cotton shortages, and
marketing challenges are reported to have forced the textile sector to close.
• APTMA feels that excessive export taxes and the government's unwillingness to enact fair
trade policies are some of the challenges to the textile industry.
• The development of the textile industry is also hampered by the low use of Man-Made Fibers
(MMF) in the fiber-mix.
• The growing importance of eco-textiles in importing countries, particularly in Europe, as well
as the insistence on ISO 9000 Standards, would provide new risks and difficulties to Pakistan's
textile manufacturers and exporters.
 Majors Drivers of Cost

• Raw Material
• Energy
• Technology
• Labor
 Impact of COVID-19

• Pakistan’s textile sector was hit heavily by the coronavirus pandemic.

• Decrease in exports from USD 13.5 million to 12.7 USD million from last year as per SBP
• Most of this disturbance was due to reduced demand and suspension of transport.
• Decline in earnings due to increased procurement cost, decline in exports and increased
financial costs.
• Another reason for a lower sales turnover during the lockdown was a weaker vertical
integration in the industry.
 Government Support in COVID-19

• Covid-19 package by government.

• . The package eliminates peak power prices, reduces duties on excessive force
use, and sets the power cost at $0.07 per unit and the gas tax at $0.065mmbtu for
fare initiatives.
• In addition, the national bank has reduced financing costs by 625 basis points.
• In addition, the State Bank has set up a longdistance concessionary financing
office to increase interest in new limit extensions and higher levels of innovation.
 Recovery of the industry

• Pakistan’s textile sector has shown good recovery post-pandemic.

• According to the Pakistan-Bureau-of-Statistics, there was surge in the textile shipments of 3.8
percent, and it grew from $4.6 billion to $4.8 billion between July and October.
• . At this time Pakistan has showed significant decline in the export of commodities like yarn and
grey cloth.
• the energy package provided to certain industries by government really helped in the boast of
exports.
• Externally the orders from the west almost doubled since July as there was US-China tension was
growing and the ongoing hindrances in supply by Indian and Bangladesh due to pandemic.
 Recommendations

• Increase Capital Expenditure

• Capitalize Strategic Advantages of CPEC
• Focus on Technological advancements
• Subsidies/Import duty exemptions on Raw Material Import
• Trade Policy
• Improve agricultural practices for better cotton production
• Focus on education and better opportunities in the textile sector
Thank You