Vous êtes sur la page 1sur 38

107

CHAPTER 5
PAKISTAN COTTON-TEXTILE AND APPAREL SECTOR
The Cotton-Textile is a very complex industry. It begins with agriculture, fiber
production of cotton and processed into yarn through different industrial stages and
through different weaving and knitting processes; it is converted into the finished cloths.
And every facet of the textile industry is a field itself, (Bernard, 1983). Textiles are very
important in our every day live, and even from the ancient times, textiles have been used
in a variety of ways. Industrial sector is also an important consumer of textiles.
International trade in textiles and clothing has played a very important role in the
development process of many countries. It has helped their integration into the world
economy, (World Trade Report 2006). A major part of merchandise exports of low and
middle income countries comprises of cotton- textile and clothing sector.
5.1

International Trade of Cotton-Textile and Apparels


Developing countries in 2004 accounted for more than one-half of world exports

of textiles and clothing. In no other category of manufactured goods developing


countries have such a large net-exporting position.
Thus liberalization of trade in textiles and clothing is of major significant for
many developing countries for the simple reason; it improves market access for them in
the area of their comparative advantage. However, increased competition from further
liberalization is a matter of concern for developing countries.
The quota restrictions of Agreement on Textiles and Clothing (ATC) were
essentially for imports of Canada, the European Union and the Unites States. These
three markets account for more than one-half of world textiles and clothing imports. The
end of the ATC quota regime did eliminate the quota completely for protection in these
markets. It is understandable that the removal of quotas have a significant impact on
global trade flows. The end of a special trade regime that had existed for more than 40
years for textiles and clothing is a remarkable step both in terms of trade liberalization

108
and the elimination of negotiated trade arrangements in breach of WTO rules, (World
Trade Report 2005).
5.1.1 Trends in Clothing and Textile International Trade
For the Textile and Clothing trade, 2006 was a significant year as it was the
second year after the phasing out of the Agreement on Textile and Clothing (ATC),
which replaced the Multi-Fiber Arrangement (MFA) in 1995. This shift was to affect
exports of many countries producing winners and losers from the additional
liberalization, (World Trade Report 2006). The termination of the ATC affected the
patterns and flows of trade in 2005, and even in 2006. The structural changes in world
trade of textiles and clothing went on unabatedly, (World Trade Report 2007).
Chinas exports continued to increase the market share in all major developed
import markets. The combined textiles imports of the three economies: Canada, the
United States and the EU from China rose by 41 per cent in 2005. There was an increase
of 15 per cent in 2006. However, the market shares declined for major traditional
suppliers like Turkey, Romania, Morocco and Tunisia. Advanced developing economies
in East Asia also lost market shares.
Interestingly, some smaller suppliers expanded their textiles and clothing exports
even faster than China and the share of least developed countries in imports of the United
States and the European Union went up in 2006. Imports of textiles and clothing have
increased by 5.5 per cent, to about $350 billion in 2006 for the four major developed
markets. The increase was slightly faster than the preceding year. However, intraNAFTA textiles and clothing trade declined, and intra-EU trade did not have any
significant change in 2006, (World Trade Report, 2007).
The US imports from CAFTA, the Dominican Republic, and Sub-Saharan Africa,
went down by 7 to 10 per cent. The decrease in US imports from Asian economies such
as Hong Kong, China; Chinese Taipei and the Republic of Korea was 14 percent. US
imports from the EU declined by 2.5 per cent in 2006.
Imports from China increased by 15 per cent and it were nearly 30 per cent of
total US imports of textiles and clothing. There was a rise in imports from Indonesia,
Viet Nam, Bangladesh and Cambodia. Imports from India, rose 12 per cent in 2006.

109
In the US market, China gained as a leading supplier, but at the same time
imports from smaller Asian suppliers also rose rather faster than those from China. There
was a sharp rise of EU clothing imports from Hong Kong and China in 2006. Among the
developed markets Japans textiles and clothing imports are mainly concentrated on
China because of geographic proximity and the absence of import quotas in the past.
More than three-quarters of Japans textiles and clothing imports came from China in
2006. Most significantly, the share of imports of clothing was more than 80 per cent.
Amongst the four major developed markets, Canada was on the top in textiles
and clothing imports in 2006. Its imports from China went up by more than 20 per cent.
As a whole 2006 was a very favorable one for the textile trade of the developing
countries.
Table 15: Imports of Textile and Clothing in to Major Markets by Origin (2006)
(Billion dollars and percentage change)
United States
EU (25)
Japan
Canada
106.4
197.5
30.0
11.2
Annual Growth
World
4
6
6
9
China
15
13
8
22
India
8
13
12
6
Pakistan
12
12
-7
9
Bangladesh
22
31
4
19
Cambodia
25
17
21
Indonesia
25
17
4
18
Philippines
9
20
5
Viet Nam
18
48
6
33
Thailand
1
9
-2
0
Sri Lanka
2
21
12
East Asia (4)
-14
22
-5
-12
Sub-Saharan Africa
-10
9
Egypt
32
13
Morocco
69
4
Tunisia
1
29
CAFTA
-7
64
Mexico
-10
13
6
7
Canada
-7
6
-7
United States
11
-3
-1
EU (25)
-3
1
-2
2
Romania
15
1
Bulgaria
-18
13
Turkey
-17
4
20
Memorandum items:
Least-developed countries
14
27
27
17
Hong Kong, China
44
Note: East Asia (4) Comprises Chinese Taipei; Macao, China and the Republic of Korea. EU (25) imports
include intera-trade.
Source: Global Trade Atlas and Euro stat, COMEXT
World (Value)

110
5.2

Pakistan Trade of Textile and Clothing


Textile trade that thrives on Cotton as basic raw material is the back bone of the

Pakistans economy. Cotton manufactures contribute around 60 percent of total export


earnings. Moreover, it accounts for 46 percent of the total manufacturing and gives
employment to 38 percent of the manufacturing work force. Cotton production and
quality plays the central role in the growth of the industry.
Pakistan Cotton-Textile manufacture export consists of Cotton Yarn, Cotton
Cloth, Knit wear, Bed wear, Towels, Tents, Canvas and Tarpaulin, Ready made
Garments, Synthetic Textiles and Made up Articles.
Cotton and cotton related products are the most significant industrial and
agriculture products for Pakistan. Altaf (2007) believes, what happens to the economy
in Pakistan is very much dependent on the cotton-yarn- textile- apparel complex.
Figure 14: Export of Textile Manufactures (2005-06)

Cotton Yarn
Cotton Cloth

Made up Articles,
4.3
Syenthetic
Textiles, 2
Readymade
Garments, 13.9

Knitw ear

Other, 0.1
Bedw ear
Cotton Yarn, 13.7
Tow els

Tents,Canvas and
tarpaulin, 0.3
Tow els, 5.8

Cotton Cloth, 21.6

Tents,Canvas and
tarpaulin
Readymade
Garments
Syenthetic Textiles

Bedw ear, 20.8

Made up Articles
Knitw ear, 17.6
Other

111
Table 16: Pakistan Export of Textile Products
Million US $

1990
1991

1991
1992

1992
1993

1993
1994

1994
1995
4,646

1995
1996
5,008

1996
1997

1997
1998

1998

1999

1999

2000

2000
2001

2001
2002

2002
2003

2003
2004

2004
2005

5,022

4,889

4,559

5,111

5,225

5,404

6,668

7,572

8,099

Cotton
Manufacturers

3,274

3,648

3,746

3,792

Cotton Yarn

1,183

1,173

1,122

1,259

1,528

1,540

1,412

1,160

945

1,072

1,077

942

928

1,127

1,057

Cotton Cloth

676

819

863

821

1,081

1,267

1,262

1,250

1,115

1,096

1,035

1,133

1,346

1,711

1,863

Tents & Canvas

80

51

40

29

38

40

36

58

41

53

50

47

73

75

67

Cotton Bags

21

32

24

17

19

25

28

23

21

19

19

18

18

Towels

129

137

139

129

145

174

194

200

178

196

243

270

375

404

520

Bed Wear

246

284

352

286

340

422

456

59

611

710

735

919

1,329

1,383

1,420

Other Madcup

109

114

126

129

164

179

209

246

255

308

328

351

360

420

420

Garments

497

614

618

612

642

649

736

747

651

772

828

882

1,093

993

1,088

Hosiery

334

425

464

509

689

703

689

697

742

887

910

842

1,147

1,459

1,635

Cotton

467

578

320

142

125

564

73

168

30

109

177

66

94

234

302

Raw Cotton

412

518

271

80

62

507

31

126

73

138

25

49

48

111

56

60

49

62

63

57

42

42

28

36

39

42

45

187

193

All Cotton

3,741

4,246

4,066

3,933

4,771

5,572

5,095

5,057

4,590

5,220

5,402

5,470

6,761

7,806

8,402

Total
Export(Pakistan)

6,133

6,904

6,814

6,803

8,137

8,770

8,320

8,628

7,779

8,569

9,225

9,124

11,16
0

12,31
3

14,39
1

All Cotton Total


Export Pakistan

61.0

61.2

59.7

57.8

58.6

64.0

61.2

58.6

59.0

60.9

58.6

60.0

60.6

63.4

58.4

Cotton/All Cotton

12.5

13.7

7.9

3.6

2.6

10.1

1.4

3.3

0.7

2.1

3.3

1.2

1.4

3.0

3.6

Cotton
Manufacturers/All
Cotton

87.5

86.3

92.1

96.4

97.4

89.9

98.6

96.7

99.3

97.9

96.7

98.8

98.6

97.0

96.4

Cotton Waste

Ratios.%

Cotton Yarn

31.6

27.7

27.6

32.0

32.0

27.6

27.7

22.9

20.6

20.5

19.9

17.2

13.7

14.4

12.6

Cotton Cloth

18.1

19.4

21.2

20.9

22.7

22.9

24.8

24.7

24.3

21.0

19.2

20.7

19.9

21.9

22.2

1.0

0.8

Tents & Canvas

2.1

1.2

1.0

0.7

0.8

0.7

0.7

1.1

0.9

1.0

0.9

0.9

1.1

Cotton Bags

0.1

0.8

0.6

0.4

0.4

0.4

0.5

0.5

0.5

0.4

0.4

0.3

0.3

Towels

3.5

3.2

3.4

3.3

3.0

3.1

3.8

4.0

3.9

3.7

4.5

4.9

5.5

5.2

6.2

Bed Wear

6.6

6.7

8.6

7.3

7.1

7.6

9.0

10.1

13.3

13.6

13.6

16.8

19.7

17.7

17.3

Other Madcup
Garments
Hosiery

2.9

2.7

3.1

3.3

3.4

3.2

4.1

4.9

5.6

5.9

6.1

6.4

5.3

5.4

5.0

13.3

14.5

15.2

15.6

13.5

11.6

14.5

14.8

14.2

14.8

15.3

16.1

16.2

12.7

12.9

8.9

10.1

11.4

12.9

14.4

12.6

13.5

13.8

16.2

17.0

16.9

15.4

17.0

18.7

19.5

Source: Textile Commissions Organization

5.3

Global Cotton Market

Trends in Production and Consumption


Cotton is the most useful textile fiber in the world and its market share is 56
percent in all the fibers used for apparel both home and industrial furnishing (Textile
Vision 2005). The global cotton production was 26 and 25 million metric tons in 200405 and 2005-06. (APTMA) or 116.3 million bales in 2006 and 113.31 million bales in
2005-06 (Pakistan Economic Survey, 2006)

112
Global cotton consumption was 23 and 24 million metric tons in 2004-05 and
2005-06 respectively (APTMA). The global production is in harmony with consumption.
The export trend shows that the largest producers are also the largest consumer of cotton
and also importer of cotton.
Major Sources of Cotton Production
There are 75 cotton producing countries in the world but the top five countries
(China, 6324, 5770 MT, USA, 5062, 5201 MT, India, 4121, 4148 MT Pakistan 2482,
2089 in 2004-05 and 2005-06 respectively) produce more than 70 percent of the total
cotton. Pakistan is the 4th largest producer with 12 percent share in the world (Vision
2005).
Figure 15: Share of Cotton Production
Pakistan
Uzbekistan 12%

India
20%
Others
3%

8%

USA
29%

China
28%

Source: SMEDA

Global Cotton Trade


Cotton is a major component of international trade. Total exports in 2004-05
were 7738 million metric tons and in 2005-06 were 9609 million metric tons
respectively. The global imports were 2754 and 4536 million metric tons in 2004-5 and
2005-06 respectively.
International cotton price are highly inconsistent. COTLOOK A and B Indices
and U.S. price all these indicators generally move in the same direction. These indices
are shown in the following Figure to show the trends in international cotton prices,
(Salam, 2007).

113
Figure 16: Nominal Cotton Price: Cotlook a and b Indices and U.S Price

Source: Cotton and Wool Situation and Outlook Yearbook, Economic Research Service, USDA number
converted from 480-lb bale to metric tons

5.4

Analyzing Opportunities for Pakistan Cotton-Textile and Apparel Sector

5.4.1 Revealed Comparative Advantage

The concept of revealed comparative advantage has been explained in model-I (Chapter
3).

The ratio is defined as:

Here export of cotton and cotton manufacturing for Pakistan (Xih) is $13.46 billion and
total export of Pakistan (Xit) during the same period was remained at $22.43 billions.
Similarly total world export of cotton and cotton manufacturing (Xwh) was nearly $388
billion during 2005-06 and world totals export (Xwt) was remained at $ 11926 billions
during the same period.

Putting values in the above model (Rih = (13.46/22.43)/ (388.3/11926) = 18


Rih = 18 which is very high than unity. This value reveals that Pakistan has great
opportunities in the export of cotton and cotton manufacturing.

114
5.4.2 Itemized Trade Performance of Cotton and Cotton Manufacturing
The itemized cotton trade performance was also calculated through Balasa or
RCA index as given in table 17.
Table 17: Itemized Trade Performance of Cotton and Cotton Manufacturing (2006)
Item

Export
(000 US$)

Share (country
total export)

Share in
world export

Balasa/RCA
Index

Lafay
Index

Cotton
Textile articles, sets,
worn clothing
Articles of apparel,
accessories, knit
Articles of apparel,
accessories, not knit

3,601,009
3,242,514

21.26
19.15

7.23
8.97

51.2
63.5

33.0
32.0

1,902,212

11.24

1.31

9.2

19.0

1,348,321

7.96

0.85

6.0

13.0

The balasa and Lafay index for all cotton and cotton products is very high which reveal
that Pakistan has trade competitiveness in the cotton and cotton manufacturing.
5.4.3 Relative Comparative Advantage

An improved version of revealed comparative advantage is the Relative Revealed


Comparative Trade Advantage (RTA) index, which reflects both imports and exports, as
shown in Model II in Chapter 3 and is reproduced as:

X (M) refer to exports (imports), with the subscripts i and k denoting the product
categories, while j and 1 denote the country categories. The numerator is equal to a
countrys export (imports) of a specific product category relative to the export (import)
of this product from all other countries. The denominator reveals the exports (imports) of
all products but the considered commodity from the respective country as a percentage of
all other countries exports (imports) of all other products. The level of these indicators
shows the degree of revealed export competitiveness and import penetration. Values

115
below (above) zero point to a competitive trade disadvantage (advantage). The RTA
considers both export and import activities and this seems to be an advantage from the
viewpoint of trade theory. The ratio reflects the market share for specific product here
cotton (Table 18).
Table 18: Competitive advantage of Cotton Products based on the RTA Index
Product
RXA
RMP
RTA = (RXA-RMP)
Cotton seed
Oil of cotton seed
Cake of cotton seed
Cotton lint
Cotton linter

0.552
4.277
0
0.0613
1.100

0.297
13.686
0.010
0.031429
0.00

0.255
-9.459
-0.010
0.030
1.100

Values below (above) zero point to a competitive trade disadvantage (advantage). Thus,
the Pakistan cotton chain is internationally competitive. The primary products, cotton
seed, cake of cotton seed and cotton linter, are highly competitive, while oil of cotton
seed and cake of cotton seed are uncompetitive.
5.4.4 Trade Complementarities

Trade complementarities as given in Model-III of chapter 3 measures the compatibility


of imports of country i with exports of country j , as defined below.

The value of Cij can easily be calculated for different countries/blocs. For example using
this value can be calculated for USA, EU, Japan, Canada etc. as in table 19.
Table 19: Trade complementarities
Country/
Region
USA
EU25
Canada
UAE
SAARC
Japan

Share of import of
cotton & cotton
manufacturing
7
9
8
3
4
6

Share of export of
cotton & cotton
manufacturing
12
16
10
5
3
4

Cij = 1-( | Mhi Xhj |) 2


2.0
4.5
2.0
2.0
0.5
2.0

116
The above values for all trading countries are greater than unity except SAARC
countries. This means that trading with SAARC countries in cotton and cotton products
is less profitable as compared to other countries where cotton trading is highly profitable.
5.5 Pakistan Cotton-Textile and Apparel Sector- The Value Chain
Cotton and cotton based products and textile is a very significant part of
Pakistans agriculture and industrial sector. The industry faced the major competitive
challenges after phasing out the MFA quota regime. To appreciate the challenges ahead,
it is important to understand economics and political economy of the entire value
chain, from growing raw cotton, ginning into lint, spinning into yarn, weaving into
fabric, production of cotton made up, non- apparel, and apparel production and
marketing, (Altaf, 2007)
5.5.1 Pakistan Cotton Situation
Pakistan is one of the largest producer and consumer of cotton in the world. It
contributes 8.6 percent of the value added in agriculture and around 1.8 percent to GDP.
Cotton is the principal cash crop of Pakistan, second to wheat, the countrys staple
food. According to Salam (2007) increased cotton production in the recent past has
helped in curtailing imports of edible oils as cotton seed is a valuable source of
vegetable oil for the domestic industry, and provides feed for livestock and dairy
farming. He further highlights the significance of cotton by stating that cotton picking,
a highly labor intensive activity is an important source of employment and income
generation for rural women folk.
Due to its forward and backward linkages, cotton crop not only holds a unique
position in the rural economy of Pakistan but also its performance is crucial for the
growth and development of agriculture sector and overall economy. A good cotton
crop is imperative for the sustainable development of agriculture, food security and
success of poverty alleviation efforts at the micro and macro levels, he further
emphasized

117
Production
The Cotton crop the source of silver fiber, was sown on the area of 3075
thousand hectares in 2006-07, 0.9 percent less than last year (3103 thousand
hectares). The production of cotton is provisionally estimated at 13.0 million bales
for 2006-07, lower by 0.1 percent over the last years production of 13.019 million
bales. Lower production was primarily due to decline in area sown in Sindh due
to excessive rains and floods. The crop yield in some areas was also affected by the
cotton leaf curl virus and late wheat harvesting. There are two major cotton producing
provinces in Pakistan, namely Sindh and the Punjab. The province of Punjab accounts
for around 80 percent of total cotton producing area and production as well. The Sindh
province produces only 20 percent. (Economic Survey, 2006-07).
The challenges and opportunities for cottontextile value chain in the wake of
increased international trade and globalization are immense. The capacity of the
industry to face these challenges and get hold of the opportunities is largely depends on
it competitiveness. How to develop that competitiveness largely depends on looking
deep into the issues that have persistently retarded the growth of the sector.
Issues in Cotton
Cotton crop is highly vulnerable to pest and plant diseases during various
growing stages of its life cycle. According to Salam, cotton production and farming in
Pakistan is a high risk proposition as it involves huge expenditures on pest control and
moreover substantial economic losses takes place due to pest.
The cotton yield and production is marked by fluctuations due to many factors
such as uncertain weather and climatic conditions, the hall mark of agriculture
production activities. Moreover, the domestic prices also get affected by variations in the
international market prices as happen in other commodity trading.
Altaf (2007) gives some historical perspective on Raw Cotton Policy that helps in
understanding the present issues and challenges faced by the industry. Cotton trade was
in the private sector till 1974. After the nationalization of industry by the Government of
Pakistan Peoples Party, Cotton Export Corporation (CEC) was established and the free
market operations came to a halt. The function of CEC was at two levels; 1) purchase of

118
cotton from the farmers and 2) export to international markets at government regulated
prices. In 1970s to provide low cost inputs to domestic spinning industry, an export tax
of 30 to 35 percent was imposed. Resultantly, quality of ginned cotton suffered and
farmers did not get the due prices.
After denationalization, Minimum Export Price (MEP) was introduced on the
exports to check the under invoicing. Meanwhile, Karachi Cotton Exchange (KCA)
started buying directly from the ginners. The procedures became bureaucratic, and
malpractices took its roots. In the end the farmer suffered and the local market went into
isolation.
The favorable policies made domestic industry inefficient and complacent. The
imbalances in the supply and demand situation came up and forced the trader to carry
over the stock. In 1993-94, the country imported cotton as production fell due to curl leaf
cotton virus, (Salam, 2007).
Historically yarn spinning industry has been the favored investment area. Yarn
of low quality was exported. Spinning industry had no desire to improve as the selected
private sector players were favored by the government policies tools. Though the
domestic price policies were not very favorable for cotton, yet production went up. In
1994-97 the export duty on cotton was removed and there was a free flow of trade with
international prices. Since 2000, efforts are under way to improve the quality of cotton.
Pakistan Cotton Standards Institute (PCSI) was set up for standardization, however, the
powerful lobby with self interest again played their tactics, and bidding for raw cotton
through e-commerce was stopped. When PCSI tried to develop a training institute for
cotton ginning sector, the powerful players jumped in. All this made the farmers suffer.
A certain powerful lobby kept enjoying the gains at the cost of the farmer, and the sector
at large.

The government became a buyer in cotton trade through Trading Corporation of


Pakistan (TCP). The cotton support price was in operations with the make belief that it
would enhance productivity, create exportable surplus and preserve the interest of the
farmer, however, it did little for the farmers. The cotton market in Pakistan has
experienced fluctuations due to political economy of the markets and the players both in
public and private sector. All this was done at the expense of the sector and the farmer.

119
5.5.2 Ginning Sector
Ginning industry was concentrated in a few hands in 1986-87, and was regulated
by the cotton acts of Punjab and Sindh. Though some 800 units are actually working,
the number of ginning units installed exceeds 1220. Ginning is a seasonal operation and
a ginning factory that processes more than 10,000 bales is a large unit, while the average
factory processes 5,000 bales in a season. However, the maximum bales produced in one
season were 14 million bales in 2005, and capacity with full utilization of three shifts per
day is over 36 million bales.
Issues in Ginning
The cottonseed transportation and storage is done at a minimal cost and there
are no established procedures or standards for storage. The cottonseed is kept in the open
where it gathers dust, dirt and trash while waiting to be processed. Weather also takes
its toil. The cost to industry due to contaminated cotton is very high.
Table 20: Number of Ginning Factories and Machines
Location

Number of factories

Punjab

1,075

Sindh

146

Total
Machine Type

1,221
Number of Installed
Machines

Capacity per Machine


(bales per 8-hour shift)

Total capacity
(bales per day
per shift)
2,863

80 saws

229

12.5

90 saws

3,500

18.5

59,235

100 saws

132

31

4,092

Total

5,488

Source: Pakistan Cotton Ginners Association

120
Table 21: Industry Losses due to Cotton Contamination, 2004-05
Product/Category

Value ($)

Cotton Yarn

55,370

Cotton fabrics

104,604

Ready made garments

61,425

Knit wear

99,786

Bed wear

321,185

Towels

586,999

Other textile products

1069,394

Total

2,298,763

Source: Textile Commissions Organization

The sector is suffering from lack of technology. Generally the local craftsmen are
running the factories. The technology in all the machines needs improvement as the old
technology affects the quality of output. The sector also lacks overall standardization
from cleaning process to storage facilities. Another basic issue for the ginning sector is
shortage of working capital.
5.5.3

Spinning Sector
Next step in the chain is spinning of yarn. Over the years the number of units

increased from 70 in the late 1950s to 503 in 1995-96.


The growth of the spinning industry has been steady. The number of spindles
increased from 1.5 million in the 1950s to 10.5 million in 2004-05. The economies of
scale that was 12,500 spindles per unit increased to 18,000 per unit by 1998. Similar
trend followed in the rotor sector. From 16 thousand rotors in 1979-80, the number
increased up to 155 thousand in 2004-05.

121
Table 22: Installed and Working Capacity in the Spinning Sector, all Pakistan
Installed Capacity (000) Working Capacity (000)
Year
1958-59
1979-80
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05

Units
70
187
266
277
307
334
471
494
503
440
442
442
443
444
450
453
456
458

Spindles
1,581
3,781
5,271
5,568
6,216
6,860
8,419
8,610
8,717
8,230
8,368
8,392
8,477
8,601
9,060
9,260
9,592
10,485

Rotors
0
16
72
75
81
95
138
132
143
143
150
166
150
146
141
148
146
155

Spindles
1,488
2,701
4,489
4,827
5,333
5,520
6,205
6,262
6,548
6,538
6,631
6,671
6,825
6,913
7,740
7,676
8,009
8,492

Capacity Utilization (%)


Rotors
0
14
64
67
67
79
84
74
80
87
80
66
66
70
66
70
66
79

Spindles

Rotors

0.90 /a/
0.74 /b/
087
0.87
0.86
0.80
0.73
0.73
0.75
0.79
0.79
0.79
0.81
0.80
0.82
0.83
0.83

0.59
0.83
0.89
0.89
0.83
0.83
0.61
0.56
0.56
0.61
0.53
0.40
0.44
0.48
0.47
0.47
0.45

Source: Textile Commissions Organization


/a/ average capacity utilization for period 1958-79 (spindles and rotors)
/b/ average capacity utilization for period 1980-90 (spindles and rotors)

Issues in Spinning
There are gaps between installed and working capacity. The capacity utilization
in 1990 in the spindle and rotor sectors was 80 percent. However, in1990s, the capacity
utilization dropped, the reason was a steady increase in the number of spindles and
rotors despite a bad cotton crop in 1993 and 1994. Though the installed capacity
increased in 1997-99, the working capacity of the rotors declined.
Figure 17: Capacity Utilization in Spinning Sector

Source: Cotton Report APTMA

122
5.5.4 The Textile Sector
The textile industry in Pakistan is based on cotton fibers; however it started using
man-made fibers in the 1980s. From an average share of 8.7 percent to total fiber
consumption in the 1980s, it went up to 22 percent in 1998-99, and in 2004-05, it was
19 percent. The local production of man-made fibers has resulted in higher
production of yarn blended with man-made fibers.
The important categories of man-made fibers are Polyester/Cotton (PC) and
Polyester/Viscose (PV). There are five domestic man-made fibers manufacturing units
but they are relatively uncompetitive to world standards. The spinners are in difficulties
with these manufacturers as the cost of local yarn for local mills is extremely high.
The commercial banks also do not extend credit facilities. Weavers take advantage of the
situation. Moreover, the blended yarn manufacturers pay a duty of 6.5 percent on
import of raw material. Modernization of the textile industry requires increased use of
man-made fibers in yarn production.
In the 1970s, half of total yarn production came from the Punjab province. The
trend still persists and now more than 70 percent of yarn production comes for the Punjab.
The share of total yarn production from Sindh has declined from 43 percent in the 1970s
to around 20 percent. This was the result of the relocation of installed capacity to the
Punjab province. The other provinces produce less than 10 percent of yarn. The yarn
industry in the Baluchistan province is closed since 1983.
The production of yarn in Pakistan (cotton and man-made) has increased at an
average annual rate of 4.7 percent since 1990-05. The share of exports of yarn increased
from 29 percent in the 1970s to 47.5 percent in 1991-92. The share of exports of yarn
declined to 26.5 percent in 2004-05. The major international markets for Pakistan cotton
yarn include Hong Kong, China, United States, and South Korea. Pakistan is a major
producer of cotton yarn and its share in the world production has increased from 7.2
percent in 1994 to 9.1 percent in 2004. This is lower than India (9.7 percent) and greater
than US (5.8 percent). Mainland China has a share of 46.8 percent.

123
5.5.5 Issues in Yarn Production
The spinning industry of Pakistan produces low counts yarn (22 counts), and
low value yarn. There is higher profitability in production of higher counts, but the
entrepreneurs are not willing to take any risk.
There are a number of reasons for this behavior. According to Altaf (2007), the
industry has been historically operating in a protected market. Pricing of raw cotton
favored the domestic processing industries until the early 1990s. He mentionsthe
most basic reason, seems to be the creation of entrepreneurs by government fiat and
these were people who were not risk takers. Altaf (1983) provides ample evidence to that
affect. He argues that for key industries like textile, cement, sugar, edible oil, and flour
mills, granting permission to operate was the responsibility of the President/Prime
Minister. According to him the issuance of textile permissions was used as
political bribes.
The spinning sector has always been receiving more support from the
government than the weaving industry. A large number of non-performing spindles
points towards the various soft packages given by government to the sector. The
MFA quota regime also added to non-competitiveness of Pakistans spinning industry.
Altaf (2007) puts forward an other reason for inefficacy of the sector; availability
of a captive market in shape of former East Pakistan, now Bangladesh, where all kinds
of poor quality yarn were exported by the West Pakistan exporter.
5.5.6

Production of Cloth and Fabric


Pakistan faces sharp international competition in this segment of the value chain

that processes yarn into value-added products of cloth/fabrics and textile made-ups
such as towels, bed wear, and linen.
The average annual growth in production of cloth in Pakistan from 1990 to 2005
is 5.6 percent. Only 10 percent of production comes from mills, and the rest 90 percent
comes from non-mills. About two-thirds of output goes to the domestic market, and the
rest goes to the world market.

124
There were 25 thousand looms available in 187 textile units in the country in
1979-81, which further declined to 15 thousand after ten years and further went down to
9 thousand in 2004-05. The reason of small production share coming from mills can
be thus due to the declining number of looms in the integrated textile mills, more over,
out of the installed capacity, only about 50 percent is operative. About 50 percent of
capacity is in Punjab, and about 60 percent of cloth produced comes from Punjab. Out of
the rest, 45 percent capacity is in Sindh and the rest in other provinces. Production of
cloth type includes more than 50 percent grey cloth, and blended cloth accounts for
more than 10 percent, whereas the share of dyed and printed cloth, in 2004-05 was 31.7
percent.
Table 23: Quality of Cloth Production, Mill Sector (% distribution)
Quality
Fine
Grey
Bleached
Dyed &
Printed
Medium
Grey
Bleached
Dyed &
Printed
Coarse
Grey
Bleached
Dyed &
Printed
Total

1997-98
42.3
36.5
1.8
4.0
26.0
10.8
2.1
13.1
31.7
27.3
0.6
3.8
100.0

1998-99
30.0
18.2
4.8
7.0
41.0
21.0
2.1
17.8
29.1
22.8
0.9
5.4
100.0

1999-00
19.9
17.4
0.6
2.0
56.4
33.1
2.5
20.8
23.7
18.3
0.3
5.0
100.0

2000-01
20.7
18.4
0.3
2.1
57.2
31.8
3.3
22.1
22.0
14.1
0.9
7.1
100.0

2001-02
24.6
22.5
0.2
1.9
54.4
27.1
3.0
24.3
21.0
14.6
0.7
5.7
100.0

Source: Costistics

The share of fine quality cloth has gradually declined from 42.3 percent in
1997-98 to 24.6 percent in 2001-02. The bulk of the cloth is in grey form. Altaf (2007)
attributes the high share of fine cloth in 1997-98 to policy initiatives by the government
and the elimination of export subsidies and the benchmark price system.
In the form of grey, dyed and printed cloth, the share of medium quality increased
from 26 percent to 54.4 percent over the same period. However, the share of coarse
quality cloth decreased gradually from 31.7 to 21 percent.
The weaving industry has concentrated on the unprocessed cloth. It also lacks
marketing abilities to go for more specialized products. The weaving mills have very

125
basic marketing wings. Despite massive investment at subsidized rates, there is no quality
improvement.

Pakistans exports of fabric reflect its production pattern also. One-fifth of


fabric/cloth exports go to the U.S. market. Unbleached fabric accounts for about 40
percent of the exports which is of 22 percent of the world trade. Bleached fabric
accounts for about 15 percent of Pakistans exports.
Highly processed printed fabrics accounts for 29 percent of Pakistans exports,
which is around 15 percent of the total global market. The printed fabric suffers from
quality due to low-category technology, and many other defects. The dyed fabric
accounts for 14 percent of Pakistans exports. Total exports are around $195 million
out of total world market of $4.14 billion. Denim and calendared fabric as a quality driven
area faces competition from the United States, Italy and Hong Kong. The fabric
industry faces the challenge of producing a wider range of products and product mix
as well.
The Pakistan textile sector is heavily dependent on cotton fiber. The
international cotton market has been volatile and has more demand for blended fiber.
Pakistan produces fewer blends compared to its competitors. To tackle the challenges of
international trade, Pakistan has to over come these deficiencies along with weaknesses
in human resource.
5.5.7

Textile Made-Ups
The international market for textile made-ups has expanded by 11.7 percent.

The total world export of textile made-ups in 2005 was $30.2 billion. Major exporters
are China, Pakistan, India, Turkey and Portugal. Textile made-ups have following
major categories:

Towels and cleaning clothes

Bed wear and linen; blankets

Curtains and furnishings

Canvas products and table linen.

126
China export earnings from textile made-ups registered an increase of 178 in 2005 and
its share increased from 21.2 percent in 2001 to 33.9 percent in 2005. Pakistans
exports of these items grew by 107 percent, and its share went up from 8.6 percent in
2001 to 10.1 percent in 2005.
Table 24: Exports of Textile Made-Ups
Billion dollar

% of World

2001

2002

2003

2004

2005

2001

2002

2003

2004

2005

World

17.4

19.1

23.5

26.4

30.2

China

3.7

4.4

6.1

7.7

10.3

21.2

22.9

26.2

29.3

33.9

Pakistan

1.5

1.8

2.3

2.3

3.1

8.6

9.2

10.0

8.9

10.1

India

1.1

1.3

1.6

1.8

2.4

6.3

6.6

6.8

6.8

7.9

Turkey

1.0

1.2

1.6

1.8

2.0

6.0

6.5

6.9

7.0

6.5

Portugal

0.8

0.8

0.8

0.8

0.8

4.5

4.1

3.5

3.2

2.5

Source: International Trade Statistics (http://www.intracen.org/tradstat/site3-3d/indexpe.htm)

5.5.8

Towels and Cleaning Cloths


Pakistan stands at number second among towel exporters, and its share in the

world market increased from 7.1 percent in 2001 to 9.8 percent in 2006. Unlike other
textiles, the Pakistan towel industry is comprised of the organized sector. There are
about 325 units, and out of which 250 units are in the organized sector. Local and
imported technology is in use and there are around 9,000 locally manufactured
looms, and 250 imported auto looms. About 90 percent of production comes from
local looms and only 10 percent from the imported looms. Local looms produce 1000
kgs of towels per month, and the imported looms can produce 3500 kgs. This segment
has been able to produce quantity along with quality. Cotton towels and wash clothes are
the major export items and the United States is the major destination, accounting for
almost 50 percent of Pakistans export receipts.

127
Table 25: Major Exports of Towels and Cleaning Cloth
Billion dollar
2002

2003

% of distribution

2004

2005

2006

2002

2003

2004

2005

2006

China

797

865 1,900

989

913

23.2

23.1

37.8

23.6

23.8

Pakistan

247

321

305

346

375

7.1

8.6

6.1

8.2

9.8

Portugal

316

302

284

284

265

9.31

8.0

5.7

6.8

6.9

Turkey

148

172

251

271

251

4.3

4.6

5.0

6.5

6.5

Belgium

215

217

238

271

251

6.2

5.8

4.7

6.5

6.5

Germany

283

278

260

273

213

8.2

7.4

5.2

6.5

5.5

Brazil

161

168

181

156

156

4.6

4.5

3.6

3.7

4.1

Others

1,302 1,429 1,606 1,606 1,414

37.5

38.1

32.0

38.3

36.8

Total

3,469 3,752 5,025 4,196 3,838 100.0 100.0 100.0 100.0 100.0

Source: International Trade Statistics (http://www.intracen.org/tradstat/site3-3d/indexpe.htm)

5.5.9

Bed Wear and Linen


The world export market for bed wear and linen has grown by 8.6 percent over

the last 11 years. Pakistan has done well in these items. In 1995, Pakistan was second to
China. In 2005, Pakistan has a 28.2 percent share in the world market for bed wear
and linen, while China has only 27.1 percent. In 2000, 69 percent of Pakistans exports
earnings came from bed linen made of cotton. In the last five years this share has gone
down but the share for knitted and crochet bed linen has improved. The United States is a
major trading partner of Pakistan in this segment followed by the United Kingdom.
The issue is that Pakistan is at the lower end of the market in unit prices. The
highest average price in this segment was received by Mexico ($17.43 per kg) followed
by Germany ($14.20 per kg). Mexico has a preferential trade arrangement with the U.S.
(North American Free Trade Agreement), that certainly helps the unit prices, whereas
from German products have advantage of quality. The problem lies with quality standards
of Pakistani entrepreneurs. Better quality demands better marketing, but the segment also
lacks marketing infrastructure. The major challenges in the sector are;

Need for improved technology

Need for better human resources

128

Need to have improved design and development

Better standards and quality

Better reputation in the international market

Table 26: Composition of Pakistans Exports of Bed Wear


Type

2000

2001

2002

2003

2004

2005

Million dollar
Bed Linen,
Knit, crochet
Bed linen,
Cotton
Bed linen, other
Textiles
Total

4
515

7
581

28
808

109
1,044

179
874

203
1,116

225
745

243
831

208
1,044

226
1,380

235
1,288

607
1,926

% distribution
Bed Linen,
Knit, crochet
Bed linen,
Cotton
Bed linen, other
Textiles
Total

0.6
69.1

0.8
69.9

2.7
77.4

7.9
75.7

13.9
67.9

10.5
58.0

30.3
100.0

29.3
100.0

19.9
100.0

16.4
100.0

18.2
100.0

31.5
100.0

Source: International Trade Statistics (http://www.intracen.org/tradstat/site3-3d/indexpe.htm)

Table 27: Major Country Destination of Exports of Bed Wear from Pakistan
Countries
2003-04
2004-05
41.1
31.0
United States
10.6
15.3
United Kingdom
6.9
6.8
Germany
6.2
6.9
United Arab Emirates
5.6
6.3
France
4.8
5.1
Netherlands
3.4
2.7
Belgium
3.0
2.6
Spain
2.1
2.1
Italy
2.0
1.5
Canada
14.4
19.6
Others
100.0
100.0
Total
Source: Export Promotion Bureau

129
5.5.10 Apparels
In the entire chain, the apparel/clothing segment is the highest in value. After the
liberalization, reform and abolishing of quotas, the growth and demand has gone up.
The world trading patterns are in favor of Asian countries. The rate of growth and
quality in the developing countries is increasing faster than in the developed world.
Intra-regional trade is also on the increasing side. The developed world has imposed
non-tariff barriers such as child labor, the environmental and other social issues in order
to restrict the developing countries. Success in this competitive market largely
depends on the suppliers ability to meet the demand and to offer quality at a
competitive price, and have a unique product to sell for premium price.
The market increased at an annual growth rate of 4.1 percent in 1996-04. The
world exports of clothing were $234 billion in 2004. China captured a huge share of 26.5
percent,

and

its

share

has

grown

significantly

in

the

last

one

decade.

Pakistans share is slightly over 1 percent of the world market, and India has a share of
about 3 percent.
Classification of this segment is based on the structure of the fabric used, and
purpose of the use like mens wear, womens wear, sportswear, hosiery etc. Pakistan
has recently made a slight shift to clothing from textiles production. Global export
trends are moving towards high street fashion market. Export products are now made of
diverse and quality fabrics and materials. Pakistan is far behind because of its inability to
convert yarns into fabrics and high value garments. The world clothing/apparel trade can
be divided into three categories

Woven garments

Knit garments

Articles of apparel / clothing accessories


In 2001-04, the share of these categories was; woven garments 40 percent, knit

garments 13.4 percent, and articles of apparel/clothing accessories 47.5 percent. About 40
percent of Pakistan export earning of clothing come from the articles of apparel,
clothing and accessories. The U.S. is the major market for Pakistans exports.

130
Table 28: Exports of Clothing
World (Million dollars)
Men/boys wear woven
Women/girls clothing woven
Men/boys wear knit/crochet
Women/girls wear knit/crochet
Articles of apparel, NES
Clothing Accessories
Articles of apparel and clothing accessories*
Pakistan (million dollars)
Men/boys wear woven
Women/girls clothing woven
Men/boys wear knit/crochet
Women/girls wear knit/crochet
Articles of apparel, NES
Clothing Accessories
Articles of apparel and clothing accessories*
Pakistan as % of World
Men/boys wear woven
Women/girls clothing woven
Men/boys wear knit/crochet
Women/girls wear knit/crochet
Articles of apparel, NES
Clothing Accessories
Articles of apparel and clothing accessories*
Clothing Exports of Pakistan (% distribution)
Men/boys wear woven
Women/girls clothing woven
Men/boys wear knit/crochet
Women/girls wear knit/crochet
Articles of apparel, NES
Clothing Accessories
Articles of apparel and clothing accessories*
Total

2001
196.7
39.1
42.6
10.0
16.6
61.7
12.4
14..2
2.14
0.51
0.14
0.54
0.09
0.27
0.18
0.40

2002
190.8
35.4
49.5
9.5
15.4
63.9
12.7
14.4
2.23
0.52
0.17
0.51
0.14
0.30
0.27
0.31

2003
217.4
39.4
44.2
10.9
18.8
72.8
14.3
17.0
2.84
0.60
0.21
0.70
0.22
0.45
0.27
0.39

2004
233.8
39.8
47.1
11.6
19.7
80.8
16.1
18.7
3.03
0.52
0.19
0.75
0.17
0.69
0.28
0.43

1.32
0.33
5.43
0.54
0.44
1.48
2.79

1.48
0.44
5.36
0.93
0.47
2.12
2.14

1.52
0.47
6.43
1.14
0.61
1.91
2.33

1.30
0.41
6.45
0.86
0.85
1.75
2.28

24.1
6.6
25.3
4.2
12.6
8.6
18.6
100.0

23.5
7.8
22.9
6.4
13.6
12.1
13.8
100.0

21.1
7.3
24.7
7.6
15.7
9.6
13.9
100.0

17.1
6.4
24.7
5.6
22.7
9.3
14.1
100.0

Source: International Trade Statistics (http://www.intracen.org/tradstat/site3-3d/indexpe.htm)


*other than textile fabrics; headgear of all materials

Production of apparel industry in 1972-73 was 9.5 million pieces, and it went up
to 685 million pieces in 2000-01. In 2000-01, the total number of units in the sector was
4,500, and out of these 80 percent were cottage industries. Out of 650,000 total
installed sewing machines only 200,000 are industrial, and the rest are domestic
machines or cottage-based small units. The majority of the units are located in Karachi
and Lahore. Other areas include Faisalabad, Gujranwala, Quetta, Sialkot and
Rawalpindi.

131
To improve the production quality, the industry needs to be reorganized as a
semi-formal sector, and the government should also facilitate quality improvements.
The apparel industry comprises knitting, dyeing, printing, finishing, stitching, trims,
accessories, and also packaging processes. The apparel industry is labor intensive and
around 700,000 people works for the sector.
5.6

Cotton Vision 2015


The Ministry of Food, Agriculture & Livestock has prepared a long term Cotton

Vision for sustained growth in cotton sector to meet the future needs of the domestic
textile sector and the international market. For the quality cotton production to match
the spinners requirements the Government is facilitating cotton research and
development processes, and provides support to stakeholders, and the farmer
community through a variety of fiscal, technological, administrative and
legislative measures.
To improve the quality and reputation of Pakistans cotton and its products in the
world market ambitious targets have been set such as:

Cotton Production 20.7 Million Bales

Cotton Yield/hectare 1,060 Kgs

Mill Consumption of cotton 20.1 Million Bales

Exportable Cotton Surplus 0.6 Mln Bales

Improved Yarn Recovery 92%

Clean/contamination free cotton production (84%), and supply of cleaner,


uniform graded and contamination free cotton for the domestic industry

5.6.1 Textile Vision 2005


Textile Vision 2005 is a long term strategy to prepare a market driven,
innovative, internationally integrated and competitive textile sector ready to take
advantage of the opportunities after the MFA regime.
The vision is to have the multi dimensional approach of sectoral analysis of the
textile value chain and sub sectors, inputs, technology, research, human resource,

132
regulation, and institutional support requirements. It also emphasizes on implementation
and monitoring arrangements.

The textile sector had shown impressive growth during the four decades after
independence, though the share of value added products was modest. However,
gradually stagnation and stalemate crept in due to certain changes in the global and
domestic environments. According to Textile Vision 2005, during the 1990s a
combination of different factors adversely affected the industry:

Removal of export duty on raw cotton

leaf curl virus attack reducing the supply and hiking the price

Frequent changes in the political governments, and inconsistency in the Policies


of the Government and Financial Institutions

Rapid expansion of the installed industry without economies of scales

Rapidly changing the global market trends and demands and shift towards man
made fibers
A number of textile units closed and defaulted on the bank loans. The State Bank

of Pakistan became strict with regulations and the banks with drew the funding facility
for expansion or BMR. The industry already short of value added products started losing
the competitive advantage mainly due to its inability to keep pace with the technological
advancements and changes around the world.
Textile Vision 2005 further states that the survival of the industry was dependent
upon the quotas and regulatory protections given by the Government. Meanwhile, efforts
were made to address the bottlenecks and problems of the industry with a view to
formulate strategies for its revival. The following steps were taken;

JICA Study on Textile Sector of Pakistan (July 1992)

Development of a Market Based Strategy for the Pakistan Textile and Clothing
Industry. (Gherzi Textile Organization 1993)

Long Term Strategy for Restructuring of Textile Industry in Pakistan, (National


Commission on Textile Industry, 1999)

The basic recommendations for the growth of textiles industry were;


improvement in research and development, up gradation of technology, quality

133
standards, market expansion, human resource development, quality service delivery to
buyers, funding for shuttle-less looms, product diversification, stronger apparel sector,
rationally modified tariff structures, and consistent policies of the government. More
over, the need to formulate a long term and dynamic textile policy was felt.
5.7

Significance of Agriculture Sector for Pakistan


The importance of the agriculture sector can not be over emphasized as it

provides the basic raw material for Cotton, Textile and clothing industry, which
contributes around 70 percent to export earnings. Pakistan is essentially an agrarian and
rural economy. Agriculture provides livelihood to 66 percent of its population that live in
the rural areas, and employs 43.4 percent of the total work force. Its contribution to GDP
is 20.9 percent, second to the services sector. Economic Survey 2006-07 has very rightly
called it a dominant driving force for growth, poverty reduction and the center of the
national economic policies.
There have been mixed trends over the last six year in agriculture growth.
Due to unprecedented drought during 2000-01 and 2001-02, agriculture registered
negative growth. From 2002-03 to 2004-05, better availability of irrigation water had a
positive affect on agricultural growth. The performance of agriculture remained weak
during 2005-06 because the major crops did not perform well. In 2006-07, it grew by
5.0 percent.
Forestry, live stock, poultry & fisheries and marine also contribute towards the
over all agriculture economy.
Crop Situation
Pakistan has two crop seasons: Kharif and Rabi, and the agriculture outputs are
closely linked to the supply of water. Kharif crops are rice, sugarcane and cotton whereas
the major Rabi crop is wheat.
Rice is a high value cash crop. It accounts for 5.7 percent of the total value added
in agriculture and 1.2 percent to GDP. Provinces of the Punjab and Sindh are famous for
production of rice. Pakistani rice is known for its quality and aroma in the world.

134
The sugar industry has a share in the value added of agriculture. Its contribution to
GDP is 3.5 percent. Wheat is the largest grain crop and the main diet of the Pakistani
people. It accounts for 14.4 percent to the value added in agriculture and 3.0 percent to
GDP. Other major crops are gram, tobacoo, bajra and jawar. The Oilseed crops include
cottonseed, mustard, sunflower and canola seed. Pakistan produces pulses as well.
For food security and export surpluses at competitive prices, Pakistan requires
development of agriculture sector and resources. Due to inefficient farming
practices and low productivity, cost of production of various crops is high, and yield
is limited. Innovation and technology is lacking, and use of out dated machinery
and tools has made the sector inefficient.
Government has taken a number of steps to make the agriculture sector
competitive. It includes; plant protection facilities and schemes, better irrigation
system, agriculture credits for farmers, production and development loans and
initiation of research and development projects.
5.8

Opinion Around the World


The comments of National Textile Association (NTA), America, on Pakistan

Textile Sector in the light of the Trade Policy Review of Pakistan (2008) by the WTO
are;

Generous SBP (State Bank of Pakistan) concessionary finance to exporters,


especially of textiles and clothing has distorted industrial incentives

Pakistan has been unable to benefit from the quota abolition due to its high costs,
low labor productivity, and inefficient production processes

Cotton- textile is Pakistans most important industry and it is based on locally


grown and imported cotton, and is concentrated in preliminary processing stages
production of cotton, textiles, clothing, synthetic & manmade fibers

The Ministry of Textile Industry formulated export goal of US$14.5 billion by


2009 which calls for raising the share of man-made fibers from 18% to 50%.

Tariffs up to 35% in 2007/08, are the main measures assisting the industry

Several assistance packages and incentives, such as income tax concessions,


gradual lowering of tariffs on imported textile machinery and parts to encourage

135
investment for balancing, modernization, and rehabilitation, and a number of
various tariff and sales tax concessions and exceptions on raw materials, research
and development fund have been introduced to help the industry

The Government is considering another major incentives package of over Rs. 29


billion on the recommendations of the National Textile Strategy Committee

Labor law amendments, 2006 have helped the industry especially fixing of
minimum labor wages on an hourly basis

Establishment of textile and garment cities, and provision of modern


infrastructure on private-public partnership basis, in Karachi, Lahore, and
Faisalabad, to promote value-added production is a major incentive for the
industry

Pakistan may gain from new quota-free regime, and textile production expands,
however, the clothing segment may contract as it faces greater overseas
competition

Unless productivity improves substantially to capture the potential benefits


arising from abolishing quotas, the real income will go down

The WTO, TPR indicates that Pakistan has not been able to benefit from the
quota abolition so far due to its high cost inputs, low labor productivity, and
inefficient production processes. Productivity enhancement by 60% to match
Chinese levels could result in annual turn over of US$1 billion

Textile Industry at Crossroads, (Dawn, January 01, 2007)

It has been pointed out that technological developments, changing protectionism


policies in the industrialized markets as well as shifting market structure of the world
textile industry are both, a source of opportunity and threat. However Pakistans
response to these changes occurring worldwide seems to be constrained by its own
structural weaknesses.
The author suggests certain measures to enhance Pakistans competitive position
in the international market, which seems to be caught in the state of arrested
development,

136

Creation of level playing fields for all the sub-sectors to stimulate competition
within the industry

Need to change the mind set of the local influential entrepreneurs who are
used to incentives and has become sluggish and inefficient

Enhancement of productivity and efficiency of the labor force is needed


which calls for technical and vocational training

Close linkages between industry and academia and public research institutes
and industry are needed

Upgrading of the technological base especially in the garment manufacturing


is badly needed

Development of specialized capital markets to accommodate the agriculture


and textile related technology fund requirements

Establishment of the research & development institutes jointly funded by the


industry and the government are important

Change in management style and separation of the ownership and


management is very crucial for required outputs

Pakistan Textile Industry - Bright Prospects Ahead: Khaleej Times Special Report
Khaleej Times in this special report on Pakistan foresees a bright future for the
textile industry of Pakistan due to rising world demand (around 2.5 per cent) for textiles.
Pakistan textile industry is currently facing several challenges especially the tough
competition from the India, Bangladesh and China. To have bright prospects, it needs to
improve the quality of its products through value addition. Obsolete technology used by
the industry needs upgrading and modernization. There should be emphasis on research
& development and skilled labor force for productivity.

Pakistan: Textile Sector Sets Productivity Targets


Asian Textile Business, (2002) reports that the government has launched a
benchmarking campaign for the textile sector to maximize its productivity, and has
selected eleven spinning mills mostly located in Punjab Province as a first step. The
National Productivity Organization (NPO), an expert agency under the Ministry of
Industries and Production, has stared a benchmarking study of the spinning industry with

137
the help of the Asian Productivity Organization, because this sector has the maximum
potential for output improvement.
To enhance the productivity standards by 5 percent, a budget of Rs 47 million
during 2002-03 has been allocated. The campaign would be extended to weaving and
knitting sector later on.
Promoting Better Environmental Practices in the Textile Processing Sector of
Pakistan
World Wild Life (WWF) and EU- Small Project Facility has launched a few

projects to sensitize cotton-textile industry on Better Environmental Practices and


Cleaner Production Processes (CPP) to equip the sector to meet the challenges of
conforming to international quality standards and to put up with the legislations and
obligations.
Though the textile processing sector is one of the most important industrial
sectors of Pakistan in terms of production, export and labor force employment yet the
industry is not capable enough to meet the international environmental considerations.
The report further mentions the inadequate capacity of the exporters to comply
with certain legislations in the importing countries, therefore, have faced cancellation
of their orders. Through out the world the consumers, businesses and respective
governments have certain preferences for ecologically friendly production and
consumption. Pakistan textile industry and exporter should try to meet these standards
to be competitive internationally.
5.9

Challenges in the Pakistan Cotton, Yarn, Textile and Apparel Sectors


Altaf (2007) articulates the importance of the whole value chain of cotton-yarn-

textile apparel sector for Pakistans economic growth and development. He points out
that the emerging trends in international and domestic markets; rising production cost
and ever increasing competition, pose serious threats to the performance and potential of
the industry as a whole.

138
He stresses upon the need of an internationally linked and globally competitive
strategy based upon the evaluation of the strengths and weaknesses, for the sector. Altaf
is an agriculture economist and has close linkages with the agriculture sector and the
farmers. He is a former Pakistan Federal Secretary of the Ministry of Food, Agriculture
and Livestock, so that way he is an insider and knows the dynamics of the industry
from field to firm level.
His analysis of the economics and political economy of the entire value chain from raw cotton, ginning, spinning, weaving, and production and marketing of cotton
made ups, and apparel is very convincing and thought provoking. He is of the view that
a collective approach to the problem is a must as the entire value chain needs
modifications. The intervention by the government should not only be for the self
interest of the eminent industrialists rather it should be across the board. Moreover, the
long term and consistent policies of the government are crucial for the sector.
Though the major strength is availability of the raw material cotton, and it is the
base of the entire industry. The price and marketing of cotton is dependent on character,
staple and grade, therefore quality of cotton is crucial for the producers and processors.
He is also skeptical about the role of powerful players in the price fluctuations of the raw
cotton, which affects the incomes of all concerned, the entire chain is substantially
affected by the powerful players in the marketing of this commodity leading to either
worsening of poverty or its alleviation.
The contaminated cotton is a major weakness. Only a limited quantity of
contamination free cotton was available from 1980 to 2007. This situation may
jeopardize the competitive supply and production of raw material if use of contaminated
cotton is not stopped, and cultivation of other varieties of cotton likes GM cotton, is not
encouraged. However, how can the producers have motivation to improve the quality if
the industry is not ready to pay? The strength of cheap labor is also turning into
weakness because of the myopic view of the entrepreneurs and lack of skilled
manpower. The humble wages (Rs. 3000 to 4000 monthly) can only demoralize the
worker. Well trained human resource through out the industry is lacking. There is a need
for workforce development.

139
The use of obsolete second hand machinery by the yarn industry has
compromised the quality of processing of textiles and apparel sector. The industry needs
to use man-made fiber (mmf) as man-made staple and filament are in demand
internationally.
Up beat about the achievement of the industry in terms of its rapid growth of yarn
and textile production, he is critical of the industry for not having sufficient
entrepreneurial spirits, and always asking for bailouts from the government. He is of the
view that industry has developed in the protected market environment that goes beyond
not only the MFA quota regime. The policies of 1950s and early 1960s also made the
textile industry filthy rich. He also criticizes the benefit seeking role of the All
Pakistan Textiles Mills Association (APTMA) from the successive governments by
blackmail, thus compromising the competitive ability of the industry. He analyzed the
financial position of the textile units and lamented;

If one were to examine the par value of the shares at the moment, the majority
of these shares are well below the par value. How they have been surviving and why
these units have not been liquidated is something of a mystery. One view is that
although these are public limited companies, they are all within the extended family and
the units are not operating. There are no transactions of the shares and therefore these
units will always have spindles and looms that are not operating. This is wasteful and the
investment is not adding to the growth or industrial output of the country. A policy
intervention would be needed to make these units productive.
5.10

Concessions

Concerns of the Industry are:

The cost of doing business has gone up due to increase in the minimum wages and
the power tariff and energy costs. It has raised the cost in the spinning
industry alone by Rs. 75 million per annum

Monopolized buying by selected international brands has

reduced the

margins

Obsolete inventories, window dressing of balance sheets, and anti-dumping


actions by the EU are major problems

140

Effective and informed industry-specific research to be done by the


government and its various institutes

Removal of the import duty on textile machinery and spare parts

Modification of eligibility criteria for SBPs long term financing and export

Swapping of the loans from high cost of capital to a lower cost of capital and other
forms of concessions

Availability of short term loans at reduced rates of interest effective from


October 2006 so that the industry could compete in the international market

Importation of polyester staple fiber, a banned item under the temporary


scheme

Eligibility for SBPs LTF-EOP schemes for the outstanding loans of the entire
spinning and weaving industry irrespective of the period to make entire industry
viable

A Technology Up-gradation Fund (TUF) like India where the industry is allowed
a rebate of 5 percent on the interest rate to encourage capital formation.

5.11

Politics of Concessions and Rebates


Historically the industry has received various forms of support and

concessions. Rs. 25 to Rs. 40 billion under 6 percent R&D rebates to garments and
knitwear during the fiscal year 2006-07 have been paid. More over, fabrics and home
textiles also get 3 percent and 5 percent rebates for R&D, respectively. A total of
nearly Rs. 12 billion have been provided of which 34 percent went to the spinning
industry.
Bank loans are being swapped with long term finance facility for export-oriented
industries and textile exporters enjoy financing at 7 percent. Refinance is also provided
at 7 percent. A senior bank official shares the following information on loans
disbursement and then written off.

141
Table 29: Loans to Textile Sector
Textile Sector

up to 2003

2004

2005

Rs. Billion
2006

Disbursement Disbursement Disbursement Disbursement


Total

133.77

45.42

19.84

95.36

Textile (million rupees)


Dec, 2007

Loans

NPLs

All Banks & DFIs

587,029

63,078

10.75

All Banks

581,813

62,501

10.74

All Commercial Banks

578,944

59,748

10.32

Altaf (2007) arguesthe root cause of all this was the creating of robber barons in
the 1960s. They have become a powerful mafia.
5.12

Opportunities and Future


After elimination of trade restrictions in 2005, Pakistan has lost its preferential

status with the E.U and exports are facing a price war in its established markets (U.S.
and E.U). In the home market cheap Chinese and Thai products have gained ground.
Industry has been exporting large quantities at a lower price which has reduced the profit
margins. At the same time China has got 30 percent, India 5 percent and Pakistan 3
percent only in the U.S. market.
In 2007, industry is seeking concessions package with the promise of exports
worth $20 billion and creation of six million new jobs. Industry needs productivity
enhancement to touch $ 20 billion exports. How that would be done, Altaf (2007) argues.
There are over 500 textile units and only 20 percent of the total textile mills are ISO
9000/ 2000 certified. In such a situation where is the quail. The management style needs a
big change. Family affair management should be replaced by managers hired from the
market on the basis of required skills and competencies. Other wise unit value of the textile
units keeps reflecting negativities.

142

Regional trade and preferential agreements also pose a big challenge as the
least developed countries have preferential treatment. Pakistan has bilateral
agreements and FTA with Sri Lanka and China. With China and India there are 48
complimentary products. All three countries could gain from expanded regional trade. A
big challenge and opportunity!
Government needs to devise competitive, uniform and consistent polices to
remain competitive in the international markets. A big challenge for the state and the
policy makers!
Presently industry is managed by the industrialists who are not ready to take
the challenges. The industry needs entrepreneurs who can take the risks and initiatives
and cash the opportunities with ingenuity. Altaf, (2007) is of the view that the strategy
for progress for the Pakistan Cotton-Textile and Apparel industrymust encompass both
private and public dimensions. Private sector should think beyond the installation of latest
machinery and work on production plan and proper marketing and management for
productivity enhancement Public sector should provide road infrastructure, and storage
facilities to reduce transitional cost. An integrated supply chain leads to value added in
production.

143
References
All Pakistan Textile Mills Association, (APTMA): http:// www.aptma.org.pk
Altaf Zafar, Dr, (1983) : Pakistani Entrepreneurs; Their Development,
Characteristics and Attitudes, Croom Helm Ltd, Provident House, Burrell Row,
Beckenham, Kent BR3 1AT, Australia
Altaf Zafar, Dr, (2007): Challenges in the Pakistan Cotton, Yarn, Textile and
Apparel Sectors, Chapter Five: Studies of the Cotton-Textile Apparel Industries in
Pakistan and India: Cotton Trade Policy and Poverty Study
Asian Textile Business: http://www.allbusiness.com/asia/980338-1.html, Date:
Tuesday, October 1 2002: Retrieved on 2008-04-23
Caesar Cororation and David Orden, (2007), Studies of the Cotton-Textile
Apparel Industries in Pakistan and India: Cotton Trade Policy and Poverty Study. EWP091261-ESW-TF055329, Cambridge, MA 02138
Corbman P. Bernard, (1983): Textiles Fiber to Fabric: McGraw- Hill
International Editions 1983, McGraw- Hill Book Co. Singapore
International Trade Statistics (http://www.intracen.org/tradstat/site33d/indexpe.htm)
National Textile Association (NTA), America, Free Daily Textile News Blog:
http://www.nationaltextile.org
Pakistan Economic Survey, (2006-07), Finance Division, Government of
Pakistan, Islamabad

Pakistan News Service - PakTribune : http://www.paktribune.com; Retrieved on


2007-05-27
Pakistan; Khaleej Times Special Report: Textile Industry - Bright Prospects
Ahead, (Aneela Batool): http://khaleejetimes.com; Retrieved on 2008-03-10

144
Salam Abdul, (2007), (Chapter Three), Studies of the Cotton-Textile Apparel
Industries in Pakistan and India: Cotton Trade Policy and Poverty Study. EW-P091261ESW-TF055329
The Daily Dawn; Textile Industry at Crossroads, (Dr. Bari): Dawn, January, 01,
2007), http://www.dawn.com/2007/01/01: Retrieved on 2008-04-23
World Trade Report, (2006): exploring the links between Subsidies, Trade, and
the WTO. World Trade Organization, Switzerland
World Trade Report, (2007): World Trade Organization, Geneva, Switzerland
WWF: Promoting Better Environmental Practices in the Textile Processing
Sector of Pakistan: http://www.wwfpak.org/toxics_bettertextileprocessing.php: Retrieved
on 2008-04-23