The textile sector, which contributes 67% of Pakistan exports, would in 2005 face severest competition from other major suppliers like China, Hong Kong, Thailand, India, and Bangladesh. Pakistan has made some progress in facing post-quota era to take the production of textile goods upwards in the value chain.

From January 2005 onwards, the textile business will be governed under the Agreement on Textiles and Clothing (ATC) signed under the auspices of World Trade Organization. Textile Monitoring Board (TMB) is now monitoring the implementation of new rules of the trade that offers both challenges and opportunities to countries like Pakistan. To enhance the credibility of Pakistani products it needs to adopt international quality standards. Pakistan still has a long way to go in obtaining certifications of ISO-9000, ISO 14000, and other Standards.

The textile industry has a major role to play in the economic development of the country as it has an edge over other industries in indigenous raw material (Pakistan is fourth largest cotton producer) of reasonable quality and a large labour force with one of the lowest wages in the world. The spinning sector of textile is one of the most important sectors. At present, it is comprised on 453 textile mills in the country with 9.3 million spindles and 148 thousand rotors. Out of this, nearly 7.6 million spindles and 69 thousand rotors are in operation. The capacity utilisation has stagnated at 81.7% in spindles and 46.6% in rotors.

Yarn is the primary product of the textile industry. The production and export of the value-added goods in textile sector depend upon the supply of yarn. One of the interesting aspects of textile sector is that the primary products are the output of the capital-incentive industry, while value-added goods might be produced in small-scale sector and even in the cottage industry.

The textile industry has evolved through numerous stages over the last five decades. During the 1960's the spinning sector grew at only a modest rate. During the political uncertainties of the early 1970s through to 1984, the cotton industry was stagnant with only a meagre expansion or modernisation. Despite several comparative advantages, Pakistan continued to produce below standard products.

From 1985 through to 2000 with the combined efforts of private and public sector, the textile industry made a rapid development and became the catalyst for industrial growth.
Total investment in textile industry during the last three years is now being estimated at $4 billion which has led to improvement in productivity, both in terms of quality and quantity, in yarn, fabrics, home textiles and garments.

In the last three years, the textile operators imported more than $1 billion worth of machinery. The spinning sector has obviously received the highest attention and resources followed by weaving and then various sub-sectors of value added segments. Besides revival of 190,000 spindles, more than 783,000 spindles have also been added to the capacity during the last three years. This has resulted in increased demand for raw cotton and polyester staple fibers.

However, the weaving capacity did not increase in the same proportion and over production of yarn could not be absorbed local consumption. The growth of textile spinning sector is given in Table-1.

More than 70% of yarn exports belong to the lower (less than 30) counts. It will not be out of place to mention that developed countries have concentrated on open-end (O/E) rotors. This is

very significant, because our spinning sector must either move to higher counts or compete with O/E coarse yarn. Both ways, new market has to be developed with better technical strategies. The depressed economic activity in Southeast countries and global economic recession has severely affected the export of yarn from Pakistan. Presently, our dependence on Hong Kong, Korea, China and Japan, show a very narrow market spectrum. Country-wise export of yarn is given in Table-5. However, Pakistan's share in world export of yarn decreased from 35.1% in 1992 to only 28% in 2001. Pakistan's share in world export of cotton yarn is given in Table-6.

Pakistan would be one of the three world leaders including China and India following the planned lifting of quota restrictions in 2005 by the World Trade Organisation. The industry also feels that its cotton consumption will rise to 15 million bales from the existing 10.2 million bales.

Textile exports have increased by 25% in the last three years and a total investment of $4 billion has been made in the sector, including $1.2 billion for new projects. The industry feels it would further need $3 billion to $5 billion investments. Textiles are Pakistan's biggest export, bringing in around $7 billion every year. Yarn sales account for about 13% of exports, and towels, raw cotton, bed sheets, garments and fabrics contribute the remainder.

According to the World Trade Organization (WTO) China was the fifth largest merchandize exporter, with $325.6 billion in 2002. A Chinese public source states that China will become the world's fourth largest trading nation before the end of 2005, following the USA, Japan and Germany.

A study by Goldman-Sachs predicts China will overtake Germany in economic output by 2008, Japan by 2015 and the United States by 2040. If the Chinese keep up with the pace of growth, they are bound to overtake Britain and France to become the world's fourth biggest economy much before the end of 2005.

The production and delivery, performance in quality, quantity, price, proficiency and competency are appearing at the level of acceptance in the variety of textile and clothing products. The share retained by the developing countries in the international market of textile and clothing trade prior to January 1, 2005, will not be in the same position in future.
The less competitive exporters are likely to lose the market, or at least, a reduction in export, provided they are not the preferential exporter through any other agreement. Identification and overcoming the weaknesses in trading, technology, quality, marketing and management should be addressed prior to 2005, and strengthening the business relationship with the major international buyers.

There was a great possibility that Pakistan would gain and capture more markets in the quota-free era as it was producing high quality textile products and ensured prompt supply owing to indigenous raw cotton. On the other hand schemes of technological up-gradation, textile cities and freight subsidies could also assist textile exports to face the WTO regime challenges.