Textile Industry - Performance During 1999-2000
by
Dr. Noor Ahmed Memon

Cotton and cotton textile industry is the backbone of Pakistan's economy. It continues to enjoy the status of the largest industry and commands comparative advantages in resource utilisation. It accommodates largest number of employment of the industrial labour force (38%) and is largest source of foreign exchange earnings (60%). It also accounts for 27% of value addition in the manufacturing sector.
Spinning: The spinning sector is one of the most important sectors. At present, 358 mills are working out of 442 textile mills in the country (50 composite units and 392 spinning units) with 8.46 million spindles and 149 thousand rotors installed. Out of these 6.80 million spindles and 70 thousand rotors are working. The capacity utilisation increased to 80.4% in spindles and 46.3% in rotors during the year 1999-2000.
The Production of cotton yarn increased to 1,675 thousand tonnes in 1999-2000 as against 1,495 thousand tonnes in 1995-96, thereby registering a growth of 9.5%. Export of cotton yarn also witnessed a hefty increase of 21% during 1999-2000 by moving to 5.1 million tonnes from 4.2 million tonnes in the previous year. But in terms of value the increase was only 12%, due to 7% fall in the unit value in the international market. The textile sector is preparing itself for imminent competition and trying to expand conventional market for textile products. The cost of cotton constitutes about 75% of the total cost of yarn production and lower lint cotton prices helped in reviving of yarn production. This has enhanced the competitiveness of the spinning sector against the cheaper suppliers of yarn from Central Asia, China and India. Installed and working capacity of textile industry is given in Table-1.

Weaving and Finishing: There are three different sub-sectors in weaving viz. integrated, independent weaving units and powerloom units. The addition of the independent weaving units have modernised the textile industry and registered a phenomenal growth in last few years. However, the problems of the powerloom sector revolve mainly around the poor technology, scarcity of quality yarn and lack of institutional financing for its development from the formal sector. Hence, the sector is production comparatively low value added gray cloth of mostly inferior quality.
On the weaving side in the mill sector, the country is producing 29% fine and super fine cloth, 28% medium quality and 25% coarse cloth. The share of blended cloth is 17%. Production in the unorganised loom sector consists mostly of coarse and medium quality cloth.
There are 106 finishing textile mills in the organised sector and 625 units in the small scale sector with a total dyeing/bleaching/printing/finishing capacity of 2,700 million sq. meters. The export of cotton cloth increased from 1.3 billion sq. meters in 1998-99 to 1.5 billion sq. meters in 1999-2000, thus showing an increase of 11.5%. Production of cotton cloth (mill sector) increased from 327 million sq. meters in 1995-96 to 437 million sq. meters in 1999-2000. Categories-wise production of cotton cloth is given in Table-2.

Art Silk and Synthetic: The Art Silk and Synthetic Weaving Industry is mainly cottage industry and based on powerlooms units comprising of 8 to 10 looms. There are approximately 90,000 powerlooms in operation to prepare yarn in the country. About 30,000 looms are engaged in production of blended yarn and 60,000 looms are producing filament yarn. The export of synthetic textile increased by 21.1% in terms of quantity and 11.5% in terms of value during the year 1999-2000 over previous year. Export of textile and textiles products are given in Table-3.
Since the textile industry is running without BMR for more than a decade it requires at least Rs. 40 billion for the current fiscal and an aggregated amount of Rs. 333 billion during next five years. These funds are said to be required to meet with the pressures of quota free market and demands of the choosy international market.
Keeping in view the past record of various segments of the manufacturing sector regarding utilisation of bank funds, the situation demands for evolving of a mechanism to keep an eye over utilisation of the public money under BMR financing allowed by the government. There were some very bad instances in the past that the financial facilities were misused by a number of manufacturing units on various pretexts. They generally transfer the funds to their sister organisations, which were original meant for BMR purposes.
The Banks or DFIs, which are being assigned to provide BMR financing, are the custodians of the depositors’ money. Spending of these finances on any project, which does not pay back properly, deprive the depositors of the actual return on their hard earned money. Hence the situation demands that a fool-proof mechanism is required to protect depositors and the shareholders of the financing sector as the financing is actually provided by the public and not by the government or any financial institution from its own resources. The immaculate credit worthiness is the key to the growth of economy. Hence, any provision for allowing investors’ money to any sector requires extra prudential banking whatever and whosoever the sector requiring the funds.
According to the State Bank's Annual Report 1998-99 out of the total stuck-up loans of the banking sector the largest amount of the defaulted loan was held by the textile sector. It is generally alleged that those who had the access to the bank loans never bothered to think about repayment of the loans and that was the reason why they did not mind about the high mark of the loans. The huge loans allowed to the textile sector were neither used for the establishment of any new unit or expansion of the projects. It may be mentioned that not a single new unit has been set up in the country for the last 10 years.
According to a careful assessment, currently 345 large-scale units are in operation, most of them are spinning units. The average age of these units is estimated between 17-18 years. With a few exceptions, no Balancing, Modernisation and Replacement (BMR) have taken place in these units at least for the last 10 years. The reason for this stagnation is stated to be non-availability of financing for BMR purposes.
Despite all odds and evens, the textile sector still enjoys the most important position in the national economy. It has been placed under special focus through Vision 2005 by the present team of economic managers. In order to make the textile industry internationally competitive, it deserves a special place in our economic policies. The much publicised programme i.e. Textile Vision 2005 covers improvement of cotton quality, project finance, promotional measures, marketing strategies and quota policy.
According to initial projections of textile vision 2005 the textile sector would need at least Rs. 333 billion in the next five years of which Rs. 40 billion is needed in 2001.