The present Global Scenario of Textile Industry with particular
reference to the position of Pakistan in the International Textile
Market is given here for the interest of our readers. The demand
for textiles in the world is around $18 trillion, which is likely
to be increased by 6.5% in 2005. China is the leading Textile
exporter of the world's total exports of US$ 400 billion in
2002. Country wise major market shares of the textile exporting
countries are: China: $ 55 billion, Hong Kong:$ 38 billion,
Korea: $ 35 billion, Taiwan:$ 16 billion, Indonesia:$ 9 billion.
Though Pakistan has emerged as one of the major cotton textile
product suppliers in the world market with a share of world
yarn trade of about 30% and cotton fabric about 8%, having total
export of $ 7.4 billion which accounts for only 1.2% of the
over all share. Out of this Cotton fabric is 0.02%, Made-ups
is 0.18% and Garments is 0.15%.
This is mainly due to the laxity towards the promotion of value
added sector. Pakistan should learn a lesson from Bangladesh,
which, by importing yarn and fabrics from Pakistan and other
countries, has increased the export volume of Textiles made
ups. If we desire to achieve the target of Textile Exports as
envisaged in Textile Vision 2005, we will have to promote Value
added sector in Textiles.
Role of textile industry in national economy
Textile products are a basic human requirement next only
to food. This industrial sector in Pakistan has been playing
a pivotal role in the national economy. Its share in the economy,
in terms of GDP, exports, employment, foreign exchange earnings,
investment and contribution to the value added industry; make
it the single largest determinant of the growth in manufacturing
sector. Textile share of over all manufacturing activity is
46%, export earning is 68%, value addition is 9% of GDP and
as a provider of employment 38%.
In spite of the government's efforts to diversify exports as
well as industrial base, the textile sector remains the backbone
of industrial activity in the country.
Textile Vision 2005
Textile Vision-2005 has been directed towards an open, market-driven,
innovative and dynamic textile sector, which is internationally
integrated, globally competitive and fully equipped to exploit
the opportunities created by the Multi Fibre Arrangement (MFA).
Pakistan, at present, holds 8th position in textile exports
in Asia. Pakistan can achieve the 5th position in Asia in the
textile exports as has been targeted in the Textile Vision-2005.
The future of textile exports
After nearly four decades of derogation in GATT and imposition
of quotas, unilaterally, bilaterally, multilaterally and voluntarily,
the trade in textiles will be integrated into GATT on 1/1/2005
, meaning there will be no quota restraints on textile products,
except possibly in some categories for China's exports to the
USA and EU as a result of China's terms of accession to the
|Strengths and weaknesses of Pakistan?
The global export of textiles and clothing, accounting
for 6% of global exports is estimated at $370 billion for
2003 of which the share of clothing is $210 billion or 57%.
This compares with 67% of
Pakistan's exports being accounted for by textiles and clothing
valued at $7.4 billion for 2002-2003, having only 30% share
for clothing. Yarn and cotton and MMF fabric alone accounted
for 34% .
The major players, vis-a vis quota are EU and the USA. How
will Pakistan and other competing countries fare post-quota
regime depends on the attitude, mainly of USA and the EU.
The 15 EU member states are to take in additional 10 members
on 1st May 2004. These countries are also relatively cheap textile
manufacturers where the EU companies have traditionally sub-contracted
or relocated their units. While the EU 15 accounts for 20% of
world's import (second only to USA at 24% ) it is also the world's
second largest textile and clothing exporter accounting for
11% and second only to China.
The EU textile and clothing sector accounts for 4% of EU manufacturing
and accounts for 7% of manufacturing employment in mainly 177,000
SMEs. With the enlargement, the EU's employment in this sector
will touch 2.5 million people.
Another potential threat to Pakistani exporters in 2006 or
earlier if the EU looses its case in the WTO is the withdrawal
of 0% duty presently granted under the EU's GSP Scheme.
In the USA around one million people are employed in 5117 textile
companies and 6134 textile plants. The Southern States, particularly
North and South Carolina, Georgia, Virginia and Alabama are
strongly lobbying for protection of textile sector in USA. Since
the Asian crisis and WTO's ATC, over 250 textile plants shut
down and the USA lost around 200,000 jobs with 30,000 jobs lost
since January 2002, mainly in the 5 states mentioned above.
Thus one can not expect easy ride into the USA after 2005 without
resistance. The major likely trend for USA for 2004 can be summed
Net yarn exports and imports may be approximately $1.3 and
$1.7 billion respectively; in fabric imports may be $8 billion
with exports less than $6 billion; in made-up articles, $9.5
billion may be imported, with less than $2 billion exports and
in apparel, $7 billion of exports against more than $63 billion
Like the EU, the USA will also concentrate on high tech textile
products like non-woven, particularly hygiene products like
diapers, wipes, feminine hygiene and adult incontinence and
high end fashion, particularly for women's wear.
There is every likelihood that quotas on safeguard categories
will be in force beyond 2005 for China and Vietnam. This will
provide a breathing space to exporters in other developing countries
as well. For Pakistan, the competitor will not only be China
and Vietnam but also countries whom USA has given preferential
treatment like NAFTA, CBI, AGOA, etc. The USA has signed TIFA
with Pakistan but it will not translate into preferential duties
for Pakistani textiles in the near future.
The USA and the EU will, on the one hand, demand better market
access for their textiles and also the implementation of WTO
bindings, particularly in tariffs and intellectual property
rights and enforce strict rules of origin, while on the other
hand the buyers will make more demands for compliances. Pakistani
exporters will have to be ready particularly on account of chemicals
and dyes, labour and environment compliance issues.
In case of USA, the security compliance may also put Pakistani
exporters at a disadvantage. The opportunities for Pakistan
will be quota on China and Vietnam beyond 2005, closure of some
EU and US companies dealing in basic textile, disadvantage to
countries like Bangladesh and Sri Lanka who thrived due to quota
regime and finally, the biggest advantage to Pakistan will be
its vertically integrated cotton textile industry.
Pakistan's export of textile and clothing is expected to cross
the $8 billion mark in 2003-2004 from previous year's nearly
$7.5 billion exports, present high price of cotton notwithstanding.
If the Pakistan government and the private sector cooperate,
the net balance is in favour of Pakistan. Supply of yarn and
fabric to exporters, both within and outside the purview of
DTRE should be treated as deemed exports for all purposes, production
of MMF/Synthetic should be encouraged, private sector be encouraged
to stock-pile and have buffer stock of cotton. The govt on the
other hand should agree in the WTO to lowering of duties as
it is difficult for Pakistan to have FTAs/RTAs with any relevant
countries and blocs.
Pakistan will also have to concentrate on lowering of its cost
of doing business for which the Ministry of Commerce and the
State Bank has reportedly undertaken studies. Finally, the three
weakest links in Pakistan's textile chain, viz, ginning and
dyeing and marketing initiatives will have to be improved to
take maximum advantage of it's potentials.
Bottlenecks & deregulation strategy for investment
1. Poor infrastructure
2. Over governed and over monitored regime of different 27 Government
Agencies, harassing the industry virtually every day.
3. Delay in sales tax refund causing serious cash flow / liquidity
problem to the industry.
4. Pakistan's bad image portraited by the international media.
5. Adverse travelling advice by the foreign countries to their
citizens discouraging travel to Pakistan.
6. Pakistan to sign international agreements, providing protection
to intellectual property rights and international arbitration
7. Lack of infrastructure required to meet challenges of the
requirement of social compliances after 2004.
8. Non-availability of good quality soft water for the textile
9. Negative impact of SRO's culture.
10. Not providing our industrialists and exporters level playing
field to procure raw material at the international rates viz-a-viz
our regional competitors. Our utilities rates are the highest
in the region.
11. Arrangements to provide Insurance guarantees to U.S. investors
on their investment in Pakistan
Some Specific Recommendations
1- Remedy though FDI
As the result of measures taken under vision 2005, the fiscal
year 2002-03 witnessed tremendous inflow of investment in value
added expansion and BMR. FDI in textile sector during last four
years has reached to US$4 billion which has led to improvement
in productivity, both in terms of quality and quantity, in yarn,
fabrics, home textiles and garments, besides generating more
than 300,000 new jobs. However, the investment volume is not
satisfactory as compared with the potential available in our
Textile Sector. There is also an urgent need to set benchmark
investment requirements for the creation of new capacity and
up-gradation of the existing production base.
2- Image Building of Pakistan to Attract FDI
The Ministry of Commerce, Ministry of Foreign Affairs and The
Board of Investment should launch Joint Campaign to build positive
image of Pakistan as a quality textile product supplier and
to facilitate the international buyers in Pakistan
3- Focus on Value Addition
Pakistan is a leading exporting nation in raw yarn, cotton,
and fabrics. If we emphasis on the value added products like
garments, Hosiery, knitwear and other textile made-ups, the
export volume of textiles can be increased by manifolds. In
this respect top priority should be given to stitching industry
that leads to highest value addition and employment generation.
4- Creation of Ministry of Textiles instead of Textile Board
The Government of Pakistan has established a high powered Textile
Board for the promotion of Textile Industry as envisaged in
Textile Vision 2005 but its performance is not up to the mark.
It will be quite productive if the long-awaited demand of Private
Sector regarding the creation of a Ministry of Textile is met
on priority basis.
5- Technology Up-gradation & capacity building
The establishment of Textile Cities in major Cities of the country
is an appreciable move. Government should either set up joint
ventures in textile related areas or should provide subsidized
credit to textile manufacturers to upgrade their technology
and capacity building through 'Technology Upgradation Fund'.
(TUF). It is also suggested that smaller units of power looms
(up to 50 looms) should be upgraded to auto looms and power
loom units larger than 50 looms into air jet looms.
6- Human Resources Development
The Textile Board should establish a separate training wing
as a Center of Human Resource Development where training courses
should be conducted for the capacity building of labour. There
is also urgent need to increase the number of such Vocational
Institutions where modern technical education is provided.
7- Accreditation and Certification
We are fast approaching an era of Free Trade Regime, which requires
standadization complied with WTO regulations. At present due
to non-availability of testing laboratories, Pakistani exporters
have to spend huge money to get certification from abroad. If
WTO recommended Labs were established in Pakistan a lot of valuable
foreign exchange could be saved. Ministry of Commerce and BOI
should set up such laboratories so that the exporters can get
these standards at comparatively competitive prices.
8- Reducing the cost of doing Business in Pakistan
At present cost of doing business in Pakistan is higher as compared
to the regional countries, which has resulted in bitter competitiveness
to Pakistani Products in Foreign Markets. China and India are
the bigger competitors of Pakistan. We fear if cost of doing
business in Pakistan is not brought at par with other Asian
countries, our products would find no place in Market both in
terms of quality and price. In the context of future trade,
there is an urgent need to bring all the utility charges and
levy of taxes down to the minimum level.
9- Need For Improving Textile Production
There is an urgent need to bring improvement in textile production,
especially in blended sector. Blended products made from a combination
of natural and man-made fabrics, are preferred in clothing the
world over. In Pakistan 20% protective duty on the import of
Polyester Fibre is levied on account of which 25% polyester
fabrics is blended with man-made fabrics, while a country like
Bangladesh blend 35% Polyester. This scarcity has resulted the
poor contribution by Pakistan in this sector.