analysis of textile industry of pakistan

Research Paperon

Analysis of Textile Industry of Pakistan – A Comparative Advantage

By

Ch. Azhar HayatFayyaz AhmedSohrab KhanIrfan Ahmed

MBA-II SECTION- B

Analysis of Textile Industry of Pakistan

Table of Contents

Introduction – Textile Industry and Pakistan

o Historical Background

o Current Situation

Competitive Advantage

o Diamond Porter Model

Literature Review

o Competitive factors Confronting Pakistan’s Textile Industry

Conclusion

o SWOT Analysis of Pakistan’s Textile Industry

Policy Implications

Reference

Introduction

Over the years, Pakistan is said to be the single crop economy i.e. cotton and

textile that claims the lion's share in terms of the contribution in the national

economy of Pakistan.

Despite efforts to bring in diversification in country's overall economic get-up

the textile sector continues to be the most important segment of the national

economy. Its share in the economy, in terms of GDP, exports, employment,

foreign exchange earnings, investment and revenue generation altogether

placed the textile industry as the single largest determinant of the economic

growth of the country.

Despite harsh international economic conditions, Pakistan's textile industry

has weathered the storm by coming out of the international crisis in a very

positive manner. During the year 2006-2007 exports were controlled from

225


falling and significant investment was made in value-added expansion and in

Balancing-Modernization- Replacement (BMR) (Latif, 2000).

About 10 percent of the world cotton crop is produced in Pakistan, making it

the fourth largest producer in the world. The textile industry currently

accounts for almost 67% of Pakistan's exports, 20% of value-added

production and employs 35% of manufacturing labor.

Made of premium quality Cotton, the textile fabrics of Pakistan are

distinguished for their quality, texture, lustrous colour and rich combination

of superior designs and competitive prices.

That is why this sector have been chosen to analyze what are the obstacles

that are affecting the textile industry of Pakistan in achieving competitive

edge over other economies of the world.

Textile Industry and Pakistan – The innate relation:

Textiles, all fabrics made by weaving, felting, knitting, braiding, or netting,

from the various textile fibres. Textiles are classified according to their

component fibers into silk, wool, linen, cotton, such synthetic fibers as rayon,

nylon, and polyesters, and some inorganic fibers, such as cloth of gold, glass

fiber, and asbestos cloth. They are also classified as to their structure or

weave, according to the manner in which warp and weft cross each other in

the loom. Value or quality in textiles depends on several factors, such as the

quality of the raw material used and the character of the yarn spun from the

fibers, whether clean, smooth, fine, or coarse and whether hard, soft, or

medium twisted. Density of weave and finishing processes are also

important elements in determining the quality of fabrics. The weaving of

carpet and rugs is a special branch of the textile industry1.

Since its inception, Pakistan has its roots in being an agrarian state with

indigenous cotton supply. In 1947, two textile mills were established in the

country as a colonial heritage. However, the Pakistani textile industry has

1 ‘Textile Industry of Pakistan – An Overview’325

http://www.answers.com/main/ntquery;jsessionid=2e6fvt4uwc6io?method=4&dsid=2040&dekey=carpet&curtab=2040_1&sbid=lc04b


played a crucial role in the country’s industrial development. Pakistan’s

Industrialization began in 1950 with the textile industry at its centre2.

Over the time, textile industry have depleted due to various complexities.

The difficulties faced by textile industry were partly due to limited focus of

the players and partly due to globalization. (Meier, 2007) During 1984-1990

many of the spinning mills did not go for upward integration as raw cotton

suppliers were adamant in bringing down the prices. And so with the

globalization and ease of trading these intermediaries find it more profitable

for themselves to export primary goods. Having a look at the exports

composition of that time we can see it mainly comprised of yarn, unbleached

fabrics, and low quality made-ups that did not create much demand in the

international market. Ideally, Globalization was a mean to reallocate units

and resources, get maximum advantage, and highest value addition, to

attain competitive edge. Nevertheless, Pakistan failed to attract much

investment while other countries reallocated their units to cheaper countries

such as Indonesia and Thailand.

Current Situation3:

Pakistan is the world’s 4th largest producer and 3rd largest consumer of

cotton. The Textile and Clothing Industry has been the main driver of the

economy for the last 50 years in terms of foreign currency earnings and jobs

creation. The Textile and Clothing Industry will continue to be an important

engine for future growth of the economy; there is no alternative industry or

service sector that has the potential to benefit the economy with foreign

currency earnings and new job creation, especially if synergy is developed

amongst different sub‐sectors and efforts are made to aggressively grow the

Ready‐Made Clothing Sector. Pakistan’s Textile Industry had proved its

strength in global market during the last four decades. It has proved its

strength even in post quota era by not only sustaining its position but, also

showing growth during 2005 to 2007, but declined to $11.1 billion in 2008

2

3 Economic Survey of Pakistan (2010)425


due to financial and economic melt‐down globally. The Garment Sector &

especially the Knit Garment Sector need special focus in future policies.

It has an overall integrated structure with an important indigenous cotton

crop, increasing man-Made Fibre production, large spinning, weaving, and

knitting, dyeing/printing and finishing capacities as well as expanding

garment and home textile industries.

Structure of Textile Industry of Pakistan Source: Textile Commissioner Organization (July 2006)

The Textile & Clothing trade has increased, from US$ 212 Billion in 1990 to

US$ 612.1 Billion in 2008. The clothing trade is growing at a faster rate.

Pakistan exported textiles worth $7.19 Billion and clothing worth $3.9 Billion

in 2008. The year 2009 was dismal period. The industry was confronted with

problems of multiple natures. The global economic crisis in Oct. 2007 had

impacted the trade badly. Weaker demand in the developed economies

limited the expansion of global trade. The 12% drop in the volume of world

trade in 2009 was larger than most economists had predicted. World trade

and output are currently in a recovery phase. The WTO Secretariat estimates

525


that in year 2010 world exports in volume terms will grow by 9.5%,

developed economies’ exports will expand 7.5%. The current decline in

exports of all manufactured goods including Textile & Clothing is visible in

the quarterly data.

Source: Economic Survey of

Pakistan (2010)

US imports of textiles and clothing fell for the second year in succession in

2009, by 7.5% to 46.6 billion square meters equivalent (SME), following a

5.2% drop in 2008—which was the first decline since 2001. Within the 2009

total, fabric imports fell by 5.4%, imports of apparel by 6.1%, imports of

made‐up textiles by 8.5% and yarn imports by 18.4%. Of these four

categories, apparel continued to account for the highest share of total

imports. The average price of US textile and clothing imports fell for the first

time in three years in 2009, to a new low of US$1.74 per SME.

The period of heavy investment boom in most Textile Industry segments

between 2003 and 2007 came to an abrupt end in 2008. This investment

boom until 2007 was due to the phase out of traditional quota regime under

WTO – Agreement on Textile and clothing and China’s integration into WTO

structures. Global yarn and fabric productions were continuously falling since

the second quarter of 2008. Despite challenges, there are fundamental

aspects that promise a bright future for the textile industry in general.

Competitive Advantage:

Theory of Competitive Advantage can be traced back to the initial

development of Economics as a separate discipline. Classical Economist such

as Adam Smith, Thomas Malthus, and specially David Ricardo gave immense

attention to producing what the nation is best at and then take advantage of

that edge through free trade.

However, all these economists talked about factor endowments (such as

Land, Labour, and Capital) and macroeconomics for the growth and

development. Using these factors effectively would give a country an edge

over others.

625


With the further development of study of Economics and overall economic

condition of the world with massive industrialization and liberalization of

trade, classical macroeconomic theory was insufficient to explain the growth

and development of some countries that lacked the availability of the

factors, of the kind mentioned in the theories. Some economists of that time

started to take into consideration other factors that could play pivotal role in

a country’s growth such as Technology, capital-labour ratio etc. Still, no one

thought about giving it a micro level look.

This is what Michael Porter discovered and came up with the six forces

model, through which any country can determine its strengths, weaknesses,

opportunities and threats (SWOT) and then put these into consideration

before making any decision. The Diamond Porter Model so called because

the six factors collaboratively work together to give a country a picture of

where it is standing.

Diamond-Porter Model:

Diamond Porter Model is presented by Michael Porter in his book ‘The

Competitive Advantage of Nations’. It helps in understanding the competitive

position of a nation in the global world.

Michael Porter integrated some knowledge of industrial economics and

business strategy to come up with a comprehensive solution to complex

problems in competitiveness. He believed that macroeconomic stability itself

does not guarantee prosperity and so tried to give competitiveness a

constantly evolving micro framework unlike macro overview of traditional

theories. He clearly distinguished between the competitiveness of the firms

from that of nations. In contrast to traditional theories of comparative

advantage which focuses on country’s factor endowments of land, labour

and capital, the diamond porter theory attempts to look at factors affecting

immediate business environment and productive capacity of firms; factor

input conditions, demand conditions, firm strategy and rivalry, and the

presence of related and supporting industries. According to this theory, the

process of economic development is about improving this diamond so as to

achieve higher and sustainable productivity.

725


The traditional theories talk about labour specialization and efficient use of

available sources and economies of scale through large scale production;

however in view of diamond porter model the process of specialization

cannot be done with one firm, a cluster is needed that results in efficiency

gains. He gave examples of many cluster initiatives that has driven

competitiveness to a new level including Silicon Valley, Financial Services in

New York, and the Hollywood entertainment cluster. Regarding the role of

government in this model is to act as a catalyst, establishing macroeconomic

stability and providing stable political, legal and social institutions to help

companies improve their competitive position.

To measure level of competitiveness, Porter introduced Business

Competitiveness Index (BCI) and Growth Competitiveness Index (GCI). BCI

captures a country’s standard of living and a broad perspective about quality

of microeconomic environment where as GCI sketch out economic dynamism

pointing towards quality of public institutions and macroeconomic

environment. Both indices though highly correlated are individually critical to

the measure of quality of micro and macro dimension of the economy.

825


Hence from the diagram it can be clearly seen what six forces have

comprised the Diamond Porter Model:

i) Factor Conditions – Factors of Production such as physical resources,

human resources, capital resources and Infrastructure (Special

resources can be created to compensate for factor disadvantages)

ii) Demand Conditions – both in the domestic and foreign market

iii) Related and Supporting Industries – Supply chain industries (Upward

and Downward linkages e.g. providers of raw material, distributors etc)

iv) Firm Strategy, Structure, and Rivalry – Organizational goal and

presence of intense rivalry

v) Government – Government interventions can affect all of the above

factors at local, regional, national and supranational or international

level

vi) Chance – factors that are outside the control of a firm

“A firm is profitable if the value it commands exceeds the costs involved in

creating the product. Creating value for buyers that exceeds the cost of

doing so is the goal of any generic strategy. Value, instead of cost, must be

used in analyzing competitive position ...” (Ibid)

To attain the competitive advantage, Michael Porter has catalogued three

types of generic strategies through which competitive advantage can be

pursued. These strategies are:

a) Cost Leadership – Firm sets out to become the lowest cost producer in

the particular industry (price wars)

b) Differentiation – Firm seeks to be the best performer in the industry

(having a special attribute in the product or service that others do not

offer)

925


c) Initiative Focus – Firm looks to exploit a niche market (targeting a

group within the market of that industry and create loyalty)

The strategies vary according to the position of the industry in the diamond

analysis besides its organizational structure and culture. For example if a

country’s industry is lying in the factor conditions that is it has advantage

over factors of production, then cost minimizing strategy proposed by the

Porter would be the plan to maintain its competitive edge.

Literature Review

In this section, the reviews have been organized according to the factor

forces of the Diamond Porter Model.

Diamond Competitive factors Confronting Pakistan’s Textile

Industry:

i) Factor Conditions:

As Textiles and Apparel cluster involves diverse set of activities

requiring different of inputs, a detailed analysis of factors conditions

across the value chain is required.

The recently announced increase in the minimum wages of the workers has

left the industries with higher cost of production. Once having an edge over

cheap availability of labour, Pakistan no longer holds this competitive

advantage since labour in Bangladesh and Vietnam are more low-priced

1025


(Hoekman & Winters, 2005). And so the costs faced by the industry have

largely offset the advantage of cheap labour. The following diagram4 pictures

the factor conditions over the value-chain.

According to a study of Pakistani textile and apparel sector (Raptis,

2009) some of the garment units were over-staffed by 57 per cent.

That was an internal negative factor whereas external factors included

no duty-free market access to the EU and negative image and

perception of Pakistan abroad.

“Labour productivity is very low. Our regional competitors take 75

minutes to complete and produce one piece of cloth whereas we take

133 minutes for the same work. We also waste 30 percent in finishing

and 12 percent in washing.” (Mirza Ikhtiar Baig)

Moreover, the textile looms and other equipments have become

obsolete due to insufficient timely investment and modernization. One

of major reason might be the rising interest rate which has crippled the

small investors and made them risk-averse (Mukhtar, 2008). So, with

inadequate capital, textile industry is unable to equip efficient

machineries for effective production. Although in the current fiscal

year, investments in the import of new textile machineries have shown

a gradual increase5 (14.2%), showing better trend for future.

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 load shedding scenario. LESCO has informed the

industry that it would not supply power for the additional load and only

the sanctioned load will be supplied during the winter months (Fayyaz,

2008). According to Pakistan textile industry association, 90 percent of

Pakistan's textile industry is losing money losses and facing closure.

More than two months of production has been lost due to power cuts

and gas shortages.

4

5Economic Survey of Pakistan (2010)1125


The lack of Research and Development in the cotton sector of Pakistan

has resulted in low quality of cotton as compared to rest of the South

Asia (Mehta, 1996). Subsequently, due to low profitability in cotton

crops, farmers are shifting to other high return cash crops such as

Sugarcane. In Punjab alone, the cotton sown in 2008 was less by 1.14

percent relative to that of last year.

Gaps in skill set of labour force only add to the problem of low

productivity. Informal apprenticeship mechanism (Shagirdi) is the

dominant form of skill transfer which eventually leads to

inconsistencies in product quality. Ultimately, these inhibiting factor

conditions, such as low quality of raw material, poor technology and

insufficient skills, lead to low value addition and high defect rates. For

example, 40% of exported fabric was grey in 2000—an indicator of low

value addition. Similarly, the defect rate at the processing/printing

stage was 10% (SMEDA, 2000).

ii) Demand Conditions:

Due to higher costs of production in Pakistan relative to Bangladesh

and India, Pakistan has lost much of its market since it was unable to

provide good quality cheaper raw material. Yet, Pakistan has cheaper

inputs of production as compared to other countries of the world.

Owing to the undiversified value added textile goods, Pakistan does

not have a vast network of trading partners. Only a limited number of

markets have been explored with limited number of customers. Some

of its trading partners are: USA, European countries, Middle-East,

Hong-Kong, Singapore, and Thailand etc.

Pakistan has a very low share of the international textile market. China

tops the US market with a share of 36 percent followed by Bangladesh

21 percent, India 18 percent, and Pakistan 13 percent. Additionally, in

the European market, China tops again with a share of 29 percent,

Vietnam 28 percent, India 19 percent, and Pakistan only 1.5 percent

(Baig, 2009).

1225


However, on the bright side of current events, because of a global

shortage in availability of cotton, largely due to a shortfall in Chinese

crop, the foreign demand for Pakistan’s cotton yarn has risen

exceptionally in the current fiscal year of 2009-10. Chinese, in

particular, have procured huge quantities of yarn from Pakistan, even

though they are the fiercest competitor of Pakistan in the world

market. Textiles are exported in the form of Yarn, Fabric, Readymade

Garments, and Bed Wear & Made Ups. Past Global Export performance

of Pakistan’s textile can be viewed in following table.

Export of Textile and Clothing (Us $ millions)

1990 2000 2004 2005 2006 2007 2008

World Textile104,35

4

157,29

5

195,54

1

202,65

7

220,36

7

240,36

4

250,19

8

World

Clothing

108,12

9

197,72

2

260,56

9

276,80

2

309,14

2

345,83

0

361,88

8

Total212,48

3

355,01

7

456,11

0

479,47

9

529,50

9

586,19

4

613,08

6

Pakistan

Textile2,663 4,532 6,125 7,087 7,469 7,371 7,186

Pakistan

Clothing1,014 2,144 3,026 3,604 3,907 3,806 3,906

Total 3,677 6,676 9,151 10,691 11,376 11,177 11,092

% of World

Trade1.73% 1.88% 2.01% 2.23% 2.15% 1.91% 1.81%

Source: Ministry of Textile

1325


After the reduction in the quota in March 2010, local production and

demand has been improved but that has not contributed in the windfall

gain due to rising costs of production and loss of production units due

to laying-off of workers and load shedding.

iii) Related and Supporting Industries:

The growth of related industries in the textile cluster has largely taken

place in the informal sector in a very haphazard manner. There are

examples of organic clustering but a conscious effort on the part of

industry players or government to promote a cluster based approach

have always lacked. Generally, the capacity of related and supporting

industries is often weak with some exceptions. Such as, Faisalabad—

one of the largest textile producing cities in Pakistan gives a good

examples of organic clustering and interconnection amongst the

members. The upward and downward linkages of the textile firms

come under this caption. Spinners, weavers, looming sector, jute etc

are examples of the downward linkages of the firms that provide raw

materials to the firms; whereas Apparels Garment, Towels, Hosiery etc

are all examples of the upstream (textile made-ups) industries that add

value to the yarn. These industries play a vital role in providing

1425


employment opportunities for minority (women). Some of these

ancillary industries are operational at both large scale, and small and

medium scale level (Rehman, 2010).

Source: (Islam, 2006)

A few of these industries can be briefly discussed as follows:

a. Cotton Spinning Sector: The Spinning Sector is the most

important segment in the hierarchy of textile production. At

present, it is comprised of 521 textile units (50 composite units

and 471 spinning units) with 10.1 Million spindles and 114

thousand rotors in operation with capacity utilization of 89

percent and 60 percent respectively, during July – March, 2008‐

09.

b. Cloth Sector: The objective is to convert yarn into grey cloth that

can be later dyed according to the demand. However, this often

has resulted in weaving of low quality cloth due to variety of

problems including poor technology, scarcity of quality yarn, lack

of communication facilities, and lack of institutional financing for

its development from unorganized sector to an organized one.

c. Textile Made-up Sector: This is the most dynamic segment of

Textile Industry. The major product groups are Towels, Tents &

Canvas, Cotton Bags, Bed‐Wear, Carpets and Hosiery & Knitwear

& Readymade Garments including Fashion Apparels. If efficiently

functioned, this sector can earn huge profits for Pakistan through

value addition.

iv)Firm Strategy, Structure, and Rivalry:

Most of the firms are operating at small and medium level also termed

as cottage industries, making the textile industry highly fragmented.

Another important characteristic of the textile industry is that firms are

largely dominated by family owned businesses which although may

ensure trust and cost minimization but it also adheres that government

supports may rest in the hands of selected few who has the power to

control major part of the textile products (Islam, 2006). Additionally,

1525


some lobbyists exist in the current systems, who are engaged in

practises that would give them discretionary power to control input

prices, making it expensive for the firms. They can deliberately form a

cartel to create artificial shortages to raise the prices for higher

windfall gains. Firms do not only face competition from rival firms,

rather rivals also include smuggled goods. Most firms in the textile

industry of Pakistan have adopted cost cutting strategies so that they

could charge competent prices. Major players6 of the textile industry of

Pakistan are as follows:

a. Pakistan Major Textile Industries –

Abdullah Apparels (Pvt.) Ltd

Gul Ahmed Textile (Pvt.) Ltd

Lucky Fashion industries (Pvt.) Ltd

Afroze Textile Industries (Pvt.) Ltd

Al-Karam Textile Mills (Pvt.) Ltd

Kohenoor Textile Industries (Pvt.) Ltd

Crescent Garment Industries (Pvt.) Ltd

Baig Spinning Mills Ltd

Dawood Cotton Mills Ltd

Dewaan Textile Mills Ltd

Al-Ameen Denim Mills (Pvt.) Ltd

Ishaq Towel Factor

Feroze Textile Mills (Pvt.) Ltd

b. Textile Industry Associations –

All Pakistan Textile Mills Association-APTMA

Pakistan Cotton Ginners Association

All Pakistan Cloth Exporters Association

Towel Manufacturers Association

Pakistan Readymade Garments Manufacturers and

Exporters Association

c. Agriculture Universities and Colleges –

Pakistan Agricultural Research Council/ National

6 Extracted from the website of APTMA (www.aptma.org.pk)1625


Agricultural Research Centre

Nuclear Institute for Agriculture and Biology

Central Cotton Research Institute Multan

National Textile University

Textile Institute of Pakistan

Pakistan Institute of Fashion Design

Garment Weaving and Finishing Institute

d. Textile specific Research and Development Institutes –

Pakistan Central Cotton Committee

Textiles Commissioners Organization

Pakistan Cotton Standards Institute

v) Government:

Due to imposition of high duties, Pakistan’s textile has no choice but to

raise its prices. Pakistan is purchasing cotton at higher prices with the

additional 15% duty on its import. And then along with the rising costs

of production and government’s contemplation, to charge export duty

to ensure local availability of yarn, have made it impossible for

Pakistan to compete against other major players of textile in the global

market such as China, Nepal, Bangladesh and India. As a result of this,

50 textile units have been shut down because of the declining and

negative profits of the textile firms (Ahmed, 2010).

Despite of this, the tightening on monetary policy and corresponding

expansion of the fiscal policy have drastically increased the interest

rates, due to which firms are lacking the availability of capital and

credit. And for up gradation of the obsolete textile units, more capital

investment is needed.

Subsidies provided by the government are inefficient to bring a

trickledown effect to the lower level workers. This could be the reason

of inefficient, un-willing and un-authoritative role of government, and

high levels of corruption.

1725


According to the current status, government has taken some initiatives

to reduce the cost of doing business by introducing export loan

scheme by the name of Long Term Financing of Export Oriented

Projects (LTF-EOP); marketing and business facilitation through Expo

centre and exhibitions by Export Promotion Bureau to attract potential

buyers from all over the world; and for infrastructural development

Special Export Zone has been setup in Karachi called as Textile City,

Garment city has been established in Lahore, Faisalabad and Karachi,

and Skill development institute have been initiated to train workers in

the production of contamination free cotton (Meier, 2007).

vi)Chance:

Pakistan’s textile industry has had many opportunities to explore new

markets and penetrate into largest market segments than the current

concentrated one. However, what seems to be lacking is the will power

of the firm owners. They always have this opinion that government

should provide them tax credits and subsidies so that they could have

more capital at hand for re-investments. By improvising on the quality

of cotton yarn and fabric, Pakistan can reduce its costs, improve its

exports and gain its comparative advantage over other countries.

Conclusion

SWOT analysis of Textile Industry of Pakistan:

It can be inferred from the literature that Pakistan is laying at the first force,

i.e. Factor Conditions with limited or insufficient focus on other forces. And

so, to attain competitive advantage the appropriate strategy according to

Porter Model would be Cost minimizing Strategy. By Cost-minimizing strategy

the textile industry of Pakistan would be in a better position to compete in

the world market and can then proceed to the next level i.e. product

differentiation strategy to increase the product and market base. For further

examination of what can be inferred from the study about the textile

industry of Pakistan, SWOT analysis is done. SWOT will draw a picture of the 1825


industry as a whole about its strengths, weaknesses, threats and

opportunities.

i) Strength

Largest foreign exchange earner

Largest employer of Labour force

Availability of low-cost Labour and Land

Abundant in raw material (particularly Cotton)

Availability of low-cost machinery

Major part of textile goods are from man-made fibre rather than

synthetic one

ii) Weakness

low-price image and reliability

Incompetent marketing

Noncompliance to Environmental and social regulation

Inadequate infrastructure, including power, water

Poor road network not able to provide foundation for a dynamic

industrial sector

Deficient technology and outdated machinery leading to low

productivity and poor quality

Lack of considerable up gradation of human resource skills

Poor coordination among cluster players

Lack of finance and capital to small enterprises

iii) Opportunities

1925


The state-of-the-art facilities at the Textile City which is being set up

at Karachi, is a good opportunity to help increase production and

competitiveness of textile products

Enhanced market accessibility for Pakistan Textile products in the

Global Market

Rising cost of China’s cotton due to excess of demand, is an

opportunity for Pakistan to take advantage of high priced world

market price

With technological advancements, the textile industry can ensure

uncontaminated good quality cotton and cloth

Pakistan is abundant in man-made cotton fibre that assures good

quality cloth. But the firm owners and investors must think of ways

synthetic textiles can be made so as to control the rising prices of

raw material

The Textile Asia Exhibition provide opportunities to SMEs, especially

who instead of having the need to go abroad and see various

markets themselves are able to interact with all foreign delegates,

industrialists present here and showcase their products

Textile engineering sector will generate employment opportunities.

There is ample scope for qualified engineers in mechanical, electric

and electronics disciplines to boost this sector

iv) Threats

Declining world share in export of textile products means Pakistan is

losing some markets in the hands of others

Limited Value Addition and low product differentiation

Endemic issue of Political and Social volatility in the country

Poor governance would repeal the Foreign Direct Investments

2025


India and China are giving hard time to Pakistan in terms of

advancements in technological innovation with strong engineering

process

Insufficient investment in infrastructure and workforce would result

in efficiency loss and create impediments in future as well

Lack of quality production would make customers switch to other

countries reducing the market segment

Rise in prices of inputs due to IMF policies, would further deteriorate

the condition

Policy Implications

The need for improving business environment cannot be overemphasized.

Without improving the country’s image, enhancing the effectiveness of legal

and regulatory institutions, and upgrading the physical infrastructure, direct

incentives to local and foreign investors are less likely to yield desirable

results. The current government is well cognizant of this need and has shown

some visible progress in the macroeconomic management to restore the

confidence of investors and businesses. However, there is need to do more

on improving the governance side.

2125

Key Challenges faced by Textile Cluster

Factor Conditions• Availability of quality raw material• Lack of skills• Poor technology

Demand Conditions• Increasing sophistication of demand e.g. product and process standards• Increasing global competition

Related and Support Industries• Gaps in the quality of local supplies• Poor coordination among cluster players• Lack of finance to small enterprises

Context for Firm Strategy & Rivalry•Highly fragmented and unorganized sector• Cumbersome regulatory procedure• Very low foreign direct investment


i) Addressing the Country Level Challenges:

Following steps are needed to address the critical issues that the

country as a whole is facing:

Restore the autonomy of legal institutions

Bring reforms in government agencies

devise and launch a global communication program with the help of

international media to improve the image of the country

Encourage private sector, increase public expenditure, and work

with international institutions such as the World Bank and Asian

Development Bank to improve the infrastructure particularly Energy

by exploiting the huge hydroelectricity and coal-power potential

available in the country

Diversify the export portfolio by facilitating the development of

multiple clusters particularly in the areas of logistics and

communication, medical devices, horticulture, and tourism

2225


ii) Addressing the Cluster Level Challenges:

As noted before, the current government has taken some very

important steps to upgrade the Textiles and Apparel cluster in

Pakistan.

The emphasis of newly instituted policies and programs is to

increase the productivity and unit value realization through increase

uptake of better technology

Greater value addition and product diversification

Need for greater involvement of other actors by developing a

shared vision such as supporting industries and IFCs to accelerate

the progress

iii) Involvement of Private Sector and other IFCs:

A transition from the existing low-end product concentration

towards a more diversified one

High unit value product portfolio through easy access to quality raw

material, technology up gradation, skill development, and R&D in

product and process development

A further shift towards facilitative role of government through

enhancing its role in financing R&D in product and process

development, promoting public-private partnerships, and reducing

the barriers to trade

As textile sector is the major foreign exchange earner, therefore we

should increase our exports by improving both the quality and

quantity to meet the challenges of the post quota era

We must increase the quantity by increasing the capacity of the

existing mills and also by opening new textile mills. We should also

improve the quality of the existing machines

2325


APTMA and the government should join hands for bridging the skill

gap as there was a need to promote public-private partnership in

this regard to achieve the desired results

Regular National Exhibitions can be very helpful in bringing out the

skills, the range of products and opportunities of group

collaboration. It will help the planners and large scale engineering

industry in defining the way for developing skills in order to make

this sector strong and viable

The Ministry of Textiles Industry needs to be founded on active

private-public collaboration. It should be consumer-friendly and

services-oriented

The Pakistan Government also needs to focus on the country’s

image building in the global market and Pakistan Consulate in

various countries need to play their pivotal role rather than enjoying

the Foreign Service benefits at the cost of the tax payers

Another resolution demanded that knitwear classes should be

introduced in the National Textile Engineering College, Faisalabad,

so that hosiery products of international standard could be

produced

Stressed is laid upon the government to direct authorities

concerned for installing master treatment plants in industrial areas

so that effluent released by factories could be utilized for irrigation

purposes

The tariffs should be reduced to control the prices of textile goods

Reference

2425


Ahmed, S. (2010, July 16). Pakistan - Over 50 Textile Units closed in 2

Months. (T. Nation, Interviewer)

Baig, M. I. (2009). (T. News, Editor)

Fayyaz, A. (2008). Overview of the Textile Industry of Pakistan.

Hoekman, B., & Winters, L. A. (2005). Trade and Employment: Stylized

Facts and Research Findings. Washington D.C.: World Bank Policy

Research Working Paper no. 3676.

Islam, F. U. (2006). Clustering in Pakistan's Textile Industry: Comparative

Analysis of Clustered and Non-Clustered Firms. PhD Working Paper Series.

Latif, M. M. (2000, October 16). Textile industry has the largest potential

to boost Pakistan's exports. (S. H. Kazmi, Interviewer)

Mehta, R. (1996). Textile and Apparel Trade: Impact of 'New Regionalism'.

Economic and Political Weekly, Vol. 31, No. 23.

Meier, R. (2007, September 26). Textile Industry of Pakistan. (C. G.

Karachi, Compiler) Business Network Switzerland.

Mukhtar, A. (2008, April 17). Insight into the Problems facing Pakistan’s

Textile Industry. Lahore.

Raptis, C. (2009, January 29). International Comparison of the Hourly

Labour Cost in the Primary Textile Industry 2008. New Twist , 6.

Rehman, H.-u. (2010). Manufacturing. Economic Survey of Pakistan , pp.

43-49.

SMEDA. (2000). Draft Textile Vision 2005. Small and Medium Enterprise

Development Authority.

2525

analysis of textile industry of pakistan

Documents