Textile Industry of Pakistan at Cross Roads Dr.

Muhammad Mushtaq Mangat1

Introduction
Many views about the contribution of Pakistan Textile Industry (PTI) for the economy of Pakistan have been presented so far. Most of these views are based on the facts provided by the government and the textile industry. More than 60% national exports are textile products. It is one of those industries, which provides employment opportunities to a large labor force in Pakistan. According to a recent report of APTMA, Pakistan Textile Industry contributes 8.5% to the total GDP and employs 40% of industrial workforce. Pakistan Textile Industry caters to all sorts of textile and clothing demands of Pakistan. Moreover, it is also exporting goods of worth more than US $ 14 billion. Since the total international market size is more than US $ 800 billion, it also shows that the share of Pakistan Textile Industry in international trade is only 1.75%. Pakistan Textile Industry is one of the biggest industries of Pakistan. Government of Pakistan supports this sector, which is obvious from the rebate on exports given in 1990. Government of Pakistan announced many incentives for this sector. In spite of all such supports, role of this sector on international scenario is not considerable. This fact is obvious from the comparison of textile and clothing exports of Pakistan with neighboring countries (Table 1). Table 1 shows the clothing export trend from 1981-2010. It is obvious that there was a big opportunity in the last 20 years. The share of China rose significantly because statistics show that China only had 4.19% share in the international clothing market and in 2010, its share increased to 36.94%. If we include market share of Hong Kong in the market share of China, the total share of China is 42.7%, which is close to half of the total international clothing exports.
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mushtaq.mangat@gmail.com Woven garments are noted as readymade garments in reports by TDAP http://www.technicaltextile.net/about-technical-textile.aspx

Second remarkable change has been observed in the share of Bangladesh and Turkey. Bangladesh had negligible share in 1981 (0.013%), which rose to 3.2% in 2010. Turkey had 0.8% share in 1981 and in 2010, it became 4.5%. On the other hand, we can observe decline in clothing exports of developed countries. For example, Italy had 10.899% share in 1981 while it became 6.68% in 2010. In 1981, France had a share of 4.89% and in 2010, it became 3.08%. However, we can observe that despite severe competition from developing countries, developed countries still have a significant share in clothing exports. There is no significant change in the performance of Pakistan and India in clothing exports. Pakistan had 0.346 % share in 1981 and it was only 1.12% in 2010. India had 1.923% share in 1981 and it was 3.631% in 2010. Still, the growth rate of the textile sector of India is higher than Pakistan. Table 1 depicts that among developing countries, Bangladesh is one of those countries, which has the highest growth rate. The progress of Bangladesh is linked with the easy availability of workers in large numbers for clothing manufacturing. It is supported by the fact that major exported items are basic products, which need more labor and less technological and capital input. Following table provides a comparison of textile and clothing exports of South Asian countries. Importing countries have given a special status to Bangladesh of most poor nation, which increased sympathies and helped in boosting its exports.

Table 1 Clothing Export from 1981-2010

Country 1981 Amount [Million US$] 39,261 1930 Kong, 5424 4279 2501 314 755 5 1920 5 274 95 1707 1305 5 344 136 160 327 578 386 2851 Share % 100 4.92 13.82 10.90 6.37 0.80 1.92 0.01 4.89 0.01 0.70 0.24 4.35 3.32 0.01 0.88 0.35 0.41 0.83 1.47 0.98 7.26 2458 722 1070 776 1452 1474 4735 478 1146 2362 2211 1989 Amount [Million US$] 93,324 8165 13994 9441 5632 2741 2060 440 3626 Share % 100 8.75 15.00 10.12 6.04 2.94 2.21 0.47 3.89 0.00 0.51 1.23 2.53 2.37 0.00 2.63 0.77 1.15 0.83 1.56 1.58 5.07 1997 Amount [Million US$] 185,779 31803 23108 15017 7508 6697 4343 2688 5316 1384 1353 2904 5180 8672 5636 3686 1810 2337 1504 2319 1953 3404 Share % 100 17.12 12.44 8.08 4.04 3.61 2.34 1.45 2.86 0.75 0.73 1.56 2.79 4.67 3.03 1.98 0.97 1.26 0.81 1.25 1.05 1.83 2010 Amount [Million US$] 351,464 129,838 24,049 19,977 16,978 15,660 12,760 11,246 10,839 9,954 7,145 6,820 5,472 4,694 4,363 4,300 3,930 3,880 3,043 1,764 1,045 963 Share % 100 36.942 6.843 5.68 4.83 4.46 3.63 3.20 3.08 2.83 2.03 1.94 1.56 1.34 1.24 1.22 1.12 1.10 0.87 0.50 0.30 0.27 32.03 -6.97 -5.21 -1.54 3.66 1.71 3.19 -1.81 2.82 1.34 1.7 -2.79 -1.99 1.23 0.35 0.77 0.7 0.03 -0.97 -0.69 -6.99 Change in Share

World China Hong China Italy Germany Turkey India Bangladesh France Viet Nam Spain Indonesia United Kingdom United States Mexico Thailand Pakistan Malaysia Tunisia Philippines Greece Taipei, Chinese

Moreover, it is obvious that during the last 20 years, many developed countries succeeded in maintaining their position and the most prominent among them are Italy and France. Although, we can observe a decline but still, their share is more than developing countries including Bangladesh, India and Pakistan etc. These developed countries do not have cheap labor. High exports of developed countries show that these countries are exporting high value products manufactured by using latest technology. Two examples mentioned above show that both models can be adapted to achieve high targets of growth either producing cheap products by using cheap labor like Bangladesh or producing high value products in lesser quantities like Italy, France etc.

Pakistan at cross roads

Where Pakistan stands? This question needs to be answered. Can we follow Bangladesh model or model of developed countries? Bangladesh gained this position by developing less capital but through its labor-intensive and labor-abundant industry whereas developed countries adopted modern technology and capital-intensive industry for producing hi-tech products. By doing so, they succeeded in maintaining their share to some extent. The dynamics of both the models are quite diverse because both of these models require different resources and planning. This report is an effort to provide a real picture of the resources required for the above-mentioned production techniques. It is essential to review our current exports. Table 2 shows that textile and clothing sector has 55.06 % share in the total exports of Pakistan. Interestingly, share of raw goods, which are used as raw materials for clothing manufacturing and other finished goods is significant. Share of such items is 21.1% in total exports. Export share of clothing (knitted and woven garments2) is only 16.4%. These products can be considered as most value added items in the whole list. Value of bed ware and towels is 11.49 %, which are considered as least value added products among clothing exports. This discussion shows that around 50% textile and clothing exports of Pakistan are mainly raw materials. Average unit price of woven garments is US $4.27 and the price of knitted garments per unit is only US $ 1.47 as published by Trade Development Authority of Pakistan. These low prices show that producing woven garments can be more profitable than selling raw materials. Unit prices mentioned above show that Pakistan is exporting clothing for cheaper and competitive international markets. Because of competition in these markets, Pakistani companies are exporting clothes for thin margin. In these markets, success depends upon low cost of production, which is possible only when a producer produces in bulk.

Woven garments are noted as readymade garments in reports by TDAP

Bangladesh made a significant progress due to bulk production. Developed countries maintained their share in international market by adopting latest technology and producing high tech finished products. Moreover, developed countries have initiated technical textile and functional clothing. Such products are quite costly and provide an edge to manufacturers of developed countries over the manufacturers of developing countries. Table 2 Textile and Clothing Exports from Pakistan Commodity Grand Total Total Textile Commodities Cotton Fabrics Cotton Yarn Yarn Other than Cotton Yarn Raw Cotton Ready Made Garments Towels Textile Made-up (Excl.B.Ware & Towels) Synthetic Textiles Carpets & Rugs Knitted/Croached Fabrics Tents & Canvas Knitwear (Hosiery) Bed Ware Value Million Share in Total US $ Exports 24,810 100 13,661 55.06 2,623 10.57 2,201 8.87 48 365 1,774 762 625 608 132 81 47 2,306 2,089 0.19 1.47 7.15 3.07 2.52 2.45 0.53 0.33 0.19 9.29 8.42

Where Pakistan stands and what model it should follow?

Deciding the textile production model is an issue, which needs to be addressed. Many people believe that Pakistan should enter in value added market. Some people think that Pakistan is unable to cater to the demands of world's specialized market. This paper is an effort to describe the dynamics and requirements of both models mentioned above. Considering these facts, Pakistan can decide to opt for the most suitable and appropriate manufacturing strategy.

Value added production and its Dynamics

Production of high value products is not easy because it needs specialized market knowledge, specific knowledge of varieties of raw material, production techniques, high investment, specialized and educated labor force, and market research. There are basic four requirements for value added products: 1. Market for such products 2. Specialist human resources for production 3. High tech production facilities 4. Testing equipments for quality assurance, research, and development. In the following lines, we will review the availability of such facilities in Pakistan.

Needs of specialized market

We can divide this market into two main segments: 1. Fashion and design clothing 2. Functional clothing or technical textile As reported by Technical Textile Net3, China has announced double incentive scheme for technical textile exporters. It shows the future plan of China. China is shifting from commodity to functional textile. It is further reported that USA has launched a 25 years project for the manufacturing of military clothing. Technical Textile Net estimated US $ 140 billion as the net worth of technical textile market in 2010. Average estimated growth rate is more than 3.5%. Synthetic fiber is a major raw material for technical textiles. Pakistan is among those countries, which are using more than 60% cotton for the production of textile and clothing products. Share of synthetic fibers is less than 40%. In addition to that, many technical textile products are produced on non-woven machines. These machines are rare in Pakistan. Pakistan needs to import machines and raw materials for the manufacturing of technical textiles. Cost of labor is very low in Pakistan as compared
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http://www.technicaltextile.net/about-technical-textile.aspx

to the capital and raw material costs. It is a capital-intensive industry and does not required large labor force. Keeping all above in view, we need to assure the availability of synthetic fibers and machinery for manufacturing technical textiles.

Textile Education in Pakistan

Second important factor is lack of technical people, who are capable of handling the end-to-end process of technical textiles. In Pakistan, universities provide technical education, which does not fully cope with the requirements of practical manufacturing. University graduates are unable to handle sophisticated manufacturing machinery and they are even unable to maintain the manufacturing machinery. Most of Pakistani universities provide basic training and students have to invest years for on-the-job trainings for gaining technical expertise. There are textile departments in the following universities: 1. National Textile University4 Faisalabad 2. Mehran University of Engineering and Technology Sindh 3. Baluchistan University of Information Technology, Engineering and Management Sciences Quota 4. Bahauddin Zakariya University, Multan, Pakistan 5. NED University Karachi 6. Synthetic Fibre Development & Application Centre Karachi

7. University of Management and Technology Lahore 8. University of Faisalabad 9. Hajveri University Lahore In all these universities, a few universities are offering postgraduate courses in textile engineering. Most of these courses are undergraduate courses. It is obvious that the purpose of under graduate courses is to produce engineers for the floor, who are only
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It was founded only for textile engineering but now more than 50% of its students

are studying management courses.

capable of supervising the production flow. No intensive research activities are conducted at undergraduate or graduate level. Only MS courses are partially research oriented. A student has to study 16 years in order to get admission in MS courses and after that he or she gets introduced to the research process. The above mentioned universities are serving the nation very well and since the last many decades, they are fulfilling the industry demands. But for the production of technical textiles, their graduates do not have knowledge, expertise and experience. To enter in technical textiles production, we should introduce such courses in our universities. Without such effort, it would be difficult to get any reasonable share in the international market of technical textiles.

Research and Development Institutes

It is a hard-to-accept fact that there is no specialized textile research and development institute in Pakistan for conducting researches on nation's major industry. There is just one cotton research institute in Pakistan. It is mainly serving agriculture for better cotton crop. It has nothing to do with the textile industry. There is no possibility to enter the high technology market without any plan. It is the responsibility of the government to facilitate industry. R&D activities are high-cost activities and the private sector cannot afford it. Keeping this fact in view, we should not expect the industry to produce high-tech products. There is no lab in Pakistan for testing thermal parameters of textile products. Pakistan only has basic textile quality testing facilities. There are numerous R&D institutes in India and Sri Lanka while Pakistan lags behind because of lack of R&D facilities. Keeping these facts in view, there is practically no possibility of the production of technical textiles and high value products in Pakistan in the near future.

Technology level and textile industry

Pakistani textile industry relies on import of high tech machines in all fields including ginning, spinning, weaving, wet processing and stitching. From the following data; a person can observe the trend of machinery imports. The useful life of most of machines and equipment used in textile manufacturing is not more than 5 years. After

five years, a manufacturer should replace the old technology with new one for more efficiency and productivity. Following two tables depict that against exports of worth more than US $10 billion annually, imports of Pakistan's textile industry had been only US $514 million annually during the last ten years. More than one third imports had been in spinning sector. The role of spinning sector in value addition is quite limited. The main value addition is in the wet processing and clothing-manufacturing sector. Table 3 Import of Textile Machinery in Pakistan Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Average Source: Pakistan Bureau of Statistics Value (US $ Million) 406.9 531.9 598.0 928.6 771.0 503.0 438.3 212.0 297.4 456.2 541.33

Table 4 Textile Machinery Imports (Sector wise) Sector 2008-09 Amount Spinning Weaving Knitting Finishing Others Total 88.4 46.4 32.8 36 8.4 212 Share % 41.70 21.89 15.47 16.98 3.96 100.00 2009-10 Amount 101.3 70.4 56.9 60.6 8.2 297.4 Share % 34.06 23.67 19.13 20.38 2.76 100.00 2010-11 (P) Amount 159.6 109.5 86.7 91.2 9.2 456.2 Share % 34.98 24.00 19.00 19.99 2.02 100.00

Source: Pakistan Bureau of Statistics

Conclusion & Recommendations

Pakistan is at crossroads. There is a need to develop a long-term plan for improving textile manufacturing and research facilities. Such plan should be comprehensive and based on facts because Pakistan can initiate manufacturing high value products. This needs latest technology including production machines and testing equipments. It also requires human resources with up-to-date knowledge. It is not possible without a huge investment and long term planning. It may take more than 10-20 years to initiate producing textile products for high tech clothing market. Second option is to follow China, Bangladesh, India and Sri Lanka. In this case, Pakistan has to rely on our cheap labor and producing goods for cheaper markets. In these markets, competition is more and profits are thin. In current scenario, when government is failing to provide finance and energy at competitive rates, following this labor intensive technique has less possibility for implementation. Pakistani industrialists have the capability to compete in the international market if they get un-interrupted power supply at consistently low rates. They also require financial support for upgrading obsolete machinery and improving their cash flow. It is strongly recommended that the government should assure the un-interrupted supply of power, finance manufacturing units on low interest rates and address the nation's security issue. In the meantime, Pakistan should make a comprehensive plan

to produce for technical textiles market within next 10-20 years by the support of academia and industry. The best possible plan is a mix of strategies. Initially, Pakistan should begin improving its textile sector through producing a low cost labor-intensive initiative. It should produce products for cheaper markets and this will increase Pakistan's total share. It has double-pronged advantage --- labor will be employed and closing industries will be able to survive. As soon as Pakistan successfully increases its share in the international textile exports by 1%, it should encourage its textile sector to purchase low cost machinery from China and Korea. This stage will be a take-off stage because it is semi-capital intensive stage where some specialization of labor will be needed and production processes will be better than the first stage. After this stage, Pakistan should improve relations with African, European, and Central Asian countries and start exporting to those countries. It will not only open new markets for Pakistani textiles but their demands will instigate the textile manufacturers to move towards further automation. The third stage will be a final stage because in that stage, Pakistan can move towards total automation and producing high-tech products. On that stage, Pakistan can achieve its objectives through two ways: inviting international producers to come and operate in Pakistan and also inviting the producers of high tech machinery to come and operate inside Pakistan. But for all these stages, Pakistan should provide security, cheaper credit, and good governance. The government needs to provide funds to initiate textile research facilities in order to make Pakistan a major textile exporter within the next 10-20 years.