Research Paper on

Analysis of Textile Industry of Pakistan A Comparative Advantage

By
Ch. Azhar Hayat Fayyaz Ahmed ohra! "han Irfan Ahmed #$A%II &CTI'(% $

Analysis of Textile Industry of Pakistan

Table of Contents
Introduction Textile Industry and Pakistan o o

Historical Background Current Situation

Competitive Advantage o

iamond Porter !odel

"iterature Revie# o

Competitive $actors Con$ronting Pakistan%s Textile Industry

Conclusion o S&'T Analysis o$ Pakistan%s Textile Industry

Policy Implications

Re$erence

Introduction
'ver the years( Pakistan is said to )e the single crop economy i*e* cotton and textile that claims the lion+s share in terms o$ the contri)ution in the national economy o$ Pakistan* espite e$$orts to )ring in diversi$ication in country+s overall economic get,up the textile sector continues to )e the most important segment o$ the national economy* Its share in the economy( in terms o$ - P( exports( employment( $oreign exchange earnings( investment and revenue generation altogether placed the textile industry as the single largest determinant o$ the economic gro#th o$ the country* espite harsh international economic conditions( Pakistan+s textile industry has #eathered the storm )y coming out o$ the international crisis in a very
../

Analysis of Textile Industry of Pakistan

positive manner*

uring the year .001,.002 exports #ere controlled $rom

$alling and signi$icant investment #as made in value,added expansion and in Balancing,!oderni3ation, Replacement 4B!R5 4"ati$( .0005* A)out 60 percent o$ the #orld cotton crop is produced in Pakistan( making it the $ourth largest producer in the #orld* The textile industry currently accounts $or almost 127 o$ Pakistan+s exports( .07 o$ value,added production and employs 8/7 o$ manu$acturing la)or* !ade o$ premium 9uality Cotton( the textile $a)rics o$ Pakistan are distinguished $or their 9uality( texture( lustrous colour and rich com)ination o$ superior designs and competitive prices* That is #hy this sector have )een chosen to analy3e #hat are the o)stacles that are a$$ecting the textile industry o$ Pakistan in achieving competitive edge over other economies o$ the #orld* Textile Industry and Pakistan The innate relation: Textiles( all $a)rics made )y #eaving( $elting( knitting( )raiding( or netting( $rom the various textile $i)res* Textiles are classi$ied according to their component $i)ers into silk( #ool( linen( cotton( such synthetic $i)ers as rayon( nylon( and polyesters( and some inorganic $i)ers( such as cloth o$ gold( glass $i)er( and as)estos cloth* They are also classi$ied as to their structure or #eave( according to the manner in #hich #arp and #e$t cross each other in the loom* :alue or 9uality in textiles depends on several $actors( such as the 9uality o$ the ra# material used and the character o$ the yarn spun $rom the $i)ers( #hether clean( smooth( $ine( or coarse and #hether hard( so$t( or medium t#isted* ensity o$ #eave and $inishing processes are also important elements in determining the 9uality o$ $a)rics* The #eaving o$ carpet and rugs is a special )ranch o$ the textile industry6* Since its inception( Pakistan has its roots in )eing an agrarian state #ith indigenous cotton supply* In 6;<2( t#o textile mills #ere esta)lished in the country as a colonial heritage* Ho#ever( the Pakistani textile industry has

=Textile Industry o$ Pakistan An 'vervie#%

8./

Analysis of Textile Industry of Pakistan

played a crucial role in the country%s industrial development* Pakistan%s Industriali3ation )egan in 6;/0 #ith the textile industry at its centre.* 'ver the time( textile industry have depleted due to various complexities* The di$$iculties $aced )y textile industry #ere partly due to limited $ocus o$ the players and partly due to glo)ali3ation* 4!eier( .0025 uring 6;><,6;;0 many o$ the spinning mills did not go $or up#ard integration as ra# cotton suppliers #ere adamant in )ringing do#n the prices* And so #ith the glo)ali3ation and ease o$ trading these intermediaries $ind it more pro$ita)le $or themselves to export primary goods* Having a look at the exports composition o$ that time #e can see it mainly comprised o$ yarn( un)leached $a)rics( and lo# 9uality made,ups that did not create much demand in the international market* Ideally( -lo)ali3ation #as a mean to reallocate units and resources( get maximum advantage( and highest value addition( to attain competitive edge* ?evertheless( Pakistan $ailed to attract much investment #hile other countries reallocated their units to cheaper countries such as Indonesia and Thailand* Current Situation3: Pakistan is the #orld%s <th largest producer and 8rd largest consumer o$ cotton* The Textile and Clothing Industry has )een the main driver o$ the economy $or the last /0 years in terms o$ $oreign currency earnings and @o)s creation* The Textile and Clothing Industry #ill continue to )e an important engine $or $uture gro#th o$ the economyA there is no alternative industry or service sector that has the potential to )ene$it the economy #ith $oreign currency earnings and ne# @o) creation( especially i$ synergy is developed amongst di$$erent su)Bsectors and e$$orts are made to aggressively gro# the ReadyB!ade Clothing Sector* Pakistan%s Textile Industry had proved its strength in glo)al market during the last $our decades* It has proved its strength even in post 9uota era )y not only sustaining its position )ut( also sho#ing gro#th during .00/ to .002( )ut declined to C66*6 )illion in .00> due to $inancial and economic meltBdo#n glo)ally* The -arment Sector D especially the Enit -arment Sector need special $ocus in $uture policies*
.

Fconomic Survey o$ Pakistan 4.0605

<./

Analysis of Textile Industry of Pakistan

It has an overall integrated structure #ith an important indigenous cotton crop( increasing man,!ade Gi)re production( large spinning( #eaving( and knitting( dyeingHprinting and $inishing capacities as #ell as expanding garment and home textile industries* Structure of Textile Industry of Pakistan Source: Textile Commissioner Organization (July 2

!"

The Textile D Clothing trade has increased( $rom ISC .6. Billion in 6;;0 to ISC 16.*6 Billion in .00>* The clothing trade is gro#ing at a $aster rate* Pakistan exported textiles #orth C2*6; Billion and clothing #orth C8*; Billion in .00>* The year .00; #as dismal period* The industry #as con$ronted #ith pro)lems o$ multiple natures* The glo)al economic crisis in 'ct* .002 had impacted the trade )adly* &eaker demand in the developed economies limited the expansion o$ glo)al trade* The 6.7 drop in the volume o$ #orld trade in .00; #as larger than most economists had predicted* &orld trade

and output are currently in a recovery phase* The &T' Secretariat estimates that in year .060 #orld exports in volume terms #ill gro# )y ;*/7( developed economies% exports #ill expand 2*/7* The current decline in exports o$ all manu$actured goods including Textile D Clothing is visi)le in the 9uarterly data*

/./

Analysis of Textile Industry of Pakistan

Source: #conomic Sur$ey of Pakistan (2 % " IS imports o$ textiles and clothing $ell $or the second year in succession in .00;( )y 2*/7 to <1*1 )illion s9uare meters e9uivalent 4S!F5( $ollo#ing a /*.7 drop in .00>J#hich #as the $irst decline since .006* &ithin the .00; total( $a)ric imports $ell )y /*<7( imports o$ apparel )y 1*67( imports o$ madeBup textiles )y >*/7 and yarn imports )y 6>*<7* '$ these $our categories( apparel continued to account $or the highest share o$ total imports* The average price o$ IS textile and clothing imports $ell $or the $irst time in three years in .00;( to a ne# lo# o$ ISC6*2< per S!F* The period o$ heavy investment )oom in most Textile Industry segments )et#een .008 and .002 came to an a)rupt end in .00>* This investment )oom until .002 #as due to the phase out o$ traditional 9uota regime under &T' Agreement on Textile and clothing and China%s integration into &T' structures* -lo)al yarn and $a)ric productions #ere continuously $alling since the second 9uarter o$ .00>* espite challenges( there are $undamental aspects that promise a )right $uture $or the textile industry in general* Competitive Advanta e: Theory o$ Competitive Advantage can )e traced )ack to the initial development o$ Fconomics as a separate discipline* Classical Fconomist such as Adam Smith( Thomas !althus( and specially that edge through $ree trade* Ho#ever( all these economists talked a)out $actor endo#ments 4such as "and( "a)our( and Capital5 and macroeconomics $or the gro#th and development* Ising these $actors e$$ectively #ould give a country an edge over others* &ith the $urther development o$ study o$ Fconomics and overall economic condition o$ the #orld #ith massive industriali3ation and li)erali3ation o$ trade( classical macroeconomic theory #as insu$$icient to explain the gro#th and development o$ some countries that lacked the availa)ility o$ the
1./

avid Ricardo gave immense

attention to producing #hat the nation is )est at and then take advantage o$

Analysis of Textile Industry of Pakistan

$actors( o$ the kind mentioned in the theories* Some economists o$ that time started to take into consideration other $actors that could play pivotal role in a country%s gro#th such as Technology( capital,la)our ratio etc* Still( no one thought a)out giving it a micro level look* This is #hat !ichael Porter discovered and came up #ith the six $orces model( through #hich any country can determine its strengths( #eaknesses( opportunities and threats 4S&'T5 and then put these into consideration )e$ore making any decision* The #here it is standing* !iamond"Porter #odel: iamond Porter !odel is presented )y !ichael Porter in his )ook =The Competitive Advantage o$ ?ations%* It helps in understanding the competitive position o$ a nation in the glo)al #orld* !ichael Porter integrated some kno#ledge o$ industrial economics and )usiness strategy to come up #ith a comprehensive solution to complex pro)lems in competitiveness* He )elieved that macroeconomic sta)ility itsel$ does not guarantee prosperity and so tried to give competitiveness a constantly evolving micro $rame#ork unlike macro overvie# o$ traditional theories* He clearly distinguished )et#een the competitiveness o$ the $irms $rom that o$ nations* In contrast to traditional theories o$ comparative advantage #hich $ocuses on country%s $actor endo#ments o$ land( la)our and capital( the diamond porter theory attempts to look at $actors a$$ecting immediate )usiness environment and productive capacity o$ $irmsA $actor input conditions( demand conditions( $irm strategy and rivalry( and the presence o$ related and supporting industries* According to this theory( the process o$ economic development is a)out improving this diamond so as to achieve higher and sustaina)le productivity* iamond Porter !odel so called )ecause the six $actors colla)oratively #ork together to give a country a picture o$

2./

Analysis of Textile Industry of Pakistan

The traditional theories talk a)out la)our speciali3ation and e$$icient use o$ availa)le sources and economies o$ scale through large scale productionA ho#ever in vie# o$ diamond porter model the process o$ speciali3ation cannot )e done #ith one $irm( a cluster is needed that results in e$$iciency gains* He gave examples o$ many cluster initiatives that has driven competitiveness to a ne# level including Silicon :alley( Ginancial Services in ?e# Kork( and the Holly#ood entertainment cluster* Regarding the role o$ government in this model is to act as a catalyst( esta)lishing macroeconomic sta)ility and providing sta)le political( legal and social institutions to help companies improve their competitive position* To measure level o$ competitiveness( Porter introduced Business

Competitiveness Index 4BCI5 and -ro#th Competitiveness Index 4-CI5* BCI captures a country%s standard o$ living and a )road perspective a)out 9uality o$ microeconomic environment #here as -CI sketch out economic dynamism pointing to#ards 9uality o$ pu)lic institutions and macroeconomic environment* Both indices though highly correlated are individually critical to the measure o$ 9uality o$ micro and macro dimension o$ the economy*

>./

Analysis of Textile Industry of Pakistan

Hence $rom the diagram it can )e clearly seen #hat six $orces have comprised the iamond Porter !odelL

i5 Gactor Conditions Gactors o$ Production such as physical resources(

human

resources(

capital

resources

and

In$rastructure

4Special

resources can )e created to compensate $or $actor disadvantages5

ii5

emand Conditions )oth in the domestic and $oreign market

iii5 Related and Supporting Industries Supply chain industries 4Ip#ard

and

o#n#ard linkages e*g* providers o$ ra# material( distri)utors etc5

iv5 Girm Strategy( Structure( and Rivalry 'rgani3ational goal and

presence o$ intense rivalry v5 -overnment -overnment interventions can a$$ect all o$ the a)ove $actors at local( regional( national and supranational or international level vi5 Chance $actors that are outside the control o$ a $irm

&A firm is 'rofita(le if t)e $alue it commands exceeds t)e costs in$ol$ed in creating t)e 'roduct* Creating $alue for (uyers t)at exceeds t)e cost of doing so is t)e goal of any generic strategy* +alue, instead of cost, must (e used in analyzing com'etiti$e 'osition ***- 4I)id5

To attain the competitive advantage( !ichael Porter has catalogued three types o$ generic strategies through #hich competitive advantage can )e pursued* These strategies areL
a5 Cost "eadership Girm sets out to )ecome the lo#est cost producer in

the particular industry 4price #ars5

)5

i$$erentiation Girm seeks to )e the )est per$ormer in the industry 4having a special attri)ute in the product or service that others do not o$$er5

;./

Analysis of Textile Industry of Pakistan c5 Initiative Gocus Girm looks to exploit a niche market 4targeting a

group #ithin the market o$ that industry and create loyalty5 The strategies vary according to the position o$ the industry in the diamond analysis )esides its organi3ational structure and culture* Gor example i$ a country%s industry is lying in the $actor conditions that is it has advantage over $actors o$ production( then cost minimi3ing strategy proposed )y the Porter #ould )e the plan to maintain its competitive edge*

$iterature %evie&
In this section( the revie#s have )een organi3ed according to the $actor $orces o$ the !iamond Industry: i( )actor Conditions: As Textiles and Apparel cluster involves diverse set o$ activities re9uiring di$$erent o$ inputs( a detailed analysis o$ $actors conditions across the value chain is re9uired* The recently announced increase in the minimum #ages o$ the #orkers has le$t the industries #ith higher cost o$ production* 'nce having an edge over cheap availa)ility o$ la)our( Pakistan no longer holds this competitive advantage since la)our in Bangladesh and :ietnam are more lo#,priced iamond Porter !odel* Competitive factors Confrontin Pakistan's Textile

60./

Analysis of Textile Industry of Pakistan

4Hoekman D &inters( .00/5* And so the costs $aced )y the industry have largely o$$set the advantage o$ cheap la)our* The $ollo#ing diagram< pictures the $actor conditions over the value,chain* According to a study o$ Pakistani textile and apparel sector 4Raptis( .00;5 some o$ the garment units #ere over,sta$$ed )y /2 per cent* That #as an internal negative $actor #hereas external $actors included no duty,$ree market access to the FI and negative image and perception o$ Pakistan a)road* &.a(our 'roducti$ity is $ery lo/* Our regional com'etitors take 01 minutes to com'lete and 'roduce one 'iece of clot) /)ereas /e take %22 minutes for t)e same /ork* 3e also /aste 2 and %2 'ercent in /as)ing*- 4!ir3a Ikhtiar Baig5 !oreover( the textile looms and other e9uipments have )ecome o)solete due to insu$$icient timely investment and moderni3ation* 'ne o$ ma@or reason might )e the rising interest rate #hich has crippled the small investors and made them risk,averse 4!ukhtar( .00>5* So( #ith inade9uate capital( textile industry is una)le to e9uip e$$icient machineries $or e$$ective production* Although in the current $iscal year( investments in the import o$ ne# textile machineries have sho#n a gradual increase/ 46<*.75( sho#ing )etter trend $or $uture* The companies are do#nsi3ing( production units are shutting do#nA around /00(000 o$ the #orkers have already lost their @o)s* A$ter surviving $rom the load,shedding scenario the industry has yet to survive the gas load shedding scenario* "FSC' has in$ormed the industry that it #ould not supply po#er $or the additional load and only the sanctioned load #ill )e supplied during the #inter months 4Gayya3( .00>5* According to Pakistan textile industry association( ;0 percent o$ Pakistan+s textile industry is losing money losses and $acing closure* !ore than t#o months o$ production has )een lost due to po#er cuts and gas shortages*
<

'ercent in finis)ing

Fconomic Survey o$ Pakistan 4.0605

66./

Analysis of Textile Industry of Pakistan

The lack o$ Research and

evelopment in the cotton sector o$ Pakistan

has resulted in lo# 9uality o$ cotton as compared to rest o$ the South Asia 4!ehta( 6;;15* Su)se9uently( due to lo# pro$ita)ility in cotton crops( $armers are shi$ting to other high return cash crops such as Sugarcane* In Pun@a) alone( the cotton so#n in .00> #as less )y 6*6< percent relative to that o$ last year* -aps in skill set o$ la)our $orce only add to the pro)lem o$ lo# productivity* In$ormal apprenticeship mechanism 4S)agirdi5 is the dominant $orm o$ skill trans$er #hich eventually leads to inconsistencies in product 9uality* Iltimately( these inhi)iting $actor conditions( such as lo# 9uality o$ ra# material( poor technology and insu$$icient skills( lead to lo# value addition and high de$ect rates* Gor example( <07 o$ exported $a)ric #as grey in .000Jan indicator o$ lo# value addition* Similarly( the de$ect rate at the processingHprinting stage #as 607 4S!F A( .0005* ii( !emand Conditions: ue to higher costs o$ production in Pakistan relative to Bangladesh and India( Pakistan has lost much o$ its market since it #as una)le to provide good 9uality cheaper ra# material* Ket( Pakistan has cheaper inputs o$ production as compared to other countries o$ the #orld* '#ing to the undiversi$ied value added textile goods( Pakistan does not have a vast net#ork o$ trading partners* 'nly a limited num)er o$ markets have )een explored #ith limited num)er o$ customers* Some o$ its trading partners areL ISA( Furopean countries( !iddle,Fast( Hong,Eong( Singapore( and Thailand etc* Pakistan has a very lo# share o$ the international textile market* China tops the IS market #ith a share o$ 81 percent $ollo#ed )y Bangladesh .6 percent( India 6> percent( and Pakistan 68 percent* Additionally( in the Furopean market( China tops again #ith a share o$ .; percent( :ietnam .> percent( India 6; percent( and Pakistan only 6*/ percent 4Baig( .00;5*

6../

Analysis of Textile Industry of Pakistan

Ho#ever( on the )right side o$ current events( )ecause o$ a glo)al shortage in availa)ility o$ cotton( largely due to a short$all in Chinese crop( the $oreign demand $or Pakistan%s cotton yarn has risen exceptionally in the current $iscal year o$ .00;,60* Chinese( in particular( have procured huge 9uantities o$ yarn $rom Pakistan( even though they are the $iercest competitor o$ Pakistan in the #orld market* Textiles are exported in the $orm o$ Karn( Ga)ric( Readymade -arments( and Bed &ear D !ade Ips* Past -lo)al Fxport per$ormance o$ Pakistan%s textile can )e vie#ed in $ollo#ing ta)le*

*xport of Textile and Clothin +,s - millions( 6;;0 .000 .00< .00/ 60<(8/ 6/2(.; 6;/(/< .0.(1/ &orld Textile < / 6 2 &orld 60>(6. 6;2(2. .10(/1 .21(>0 Clothing Total Pakistan Textile Pakistan ; .6.(<> 8 .(118 . 8//(06 2 <(/8. .(6<< 1(121 6*>>7 ; </1(66 0 1(6./ 8(0.1 ;(6/6 .*067 . <2;(<2 ; 2(0>2 8(10< 60(1;6 .*.87

.001 ..0(81 2 80;(6< . /.;(/0 ; 2(<1; 8(;02 66(821 .*6/7

.002 .<0(81 < 8</(>8 0 />1(6; < 2(826 8(>01 66(622 6*;67

.00> ./0(6; > 816(>> > 168(0> 1 2(6>1 8(;01 66(0;. 6*>67

6(06< Clothing Total 8(122 7 o$ &orld 6*287 Trade

Source: 4inistry of Textile A$ter the reduction in the 9uota in !arch .060( local production and demand has )een improved )ut that has not contri)uted in the #ind$all gain due to rising costs o$ production and loss o$ production units due to laying,o$$ o$ #orkers and load shedding*
68./

Analysis of Textile Industry of Pakistan iii5 %elated and Supportin

Industries:

The gro#th o$ related industries in the textile cluster has largely taken place in the in$ormal sector in a very hapha3ard manner* There are examples o$ organic clustering )ut a conscious e$$ort on the part o$ industry players or government to promote a cluster )ased approach have al#ays lacked* -enerally( the capacity o$ related and supporting industries is o$ten #eak #ith some exceptions* Such as( Gaisala)adJ one o$ the largest textile producing cities in Pakistan gives a good examples o$ organic clustering and interconnection amongst the mem)ers* The up#ard and do#n#ard linkages o$ the textile $irms come under this caption* Spinners( #eavers( looming sector( @ute etc are examples o$ the do#n#ard linkages o$ the $irms that provide ra# materials to the $irmsA #hereas Apparels -arment( To#els( Hosiery etc are all examples o$ the upstream 4textile made,ups5 industries that add value to the yarn* These industries play a vital role in providing employment opportunities $or minority 4#omen5* Some o$ these ancillary industries are operational at )oth large scale( and small and medium scale level 4Rehman( .0605* Source: (Islam, 2 !"
6<./

Analysis of Textile Industry of Pakistan

A $e# o$ these industries can )e )rie$ly discussed as $ollo#sL

a*

Cotton Spinning SectorL The Spinning Sector is the most important segment in the hierarchy o$ textile production* At present( it is comprised o$ /.6 textile units 4/0 composite units and <26 spinning units5 #ith 60*6 !illion spindles and 66< thousand rotors in operation #ith capacity utili3ation o$ >; percent and 10 percent respectively( during Muly !arch( .00>B 0;*

)*

Cloth SectorL The o)@ective is to convert yarn into grey cloth that can )e later dyed according to the demand* Ho#ever( this o$ten has resulted in #eaving o$ lo# 9uality cloth due to variety o$ pro)lems including poor technology( scarcity o$ 9uality yarn( lack o$ communication $acilities( and lack o$ institutional $inancing $or its development $rom unorgani3ed sector to an organi3ed one*

c*

Textile !ade,up SectorL This is the most dynamic segment o$ Textile Industry* The ma@or product groups are To#els( Tents D Canvas( Cotton Bags( BedB&ear( Carpets and Hosiery D Enit#ear D Readymade -arments including Gashion Apparels* I$ e$$iciently $unctioned( this sector can earn huge pro$its $or Pakistan through value addition*

iv()irm Strate y. Structure. and %ivalry: !ost o$ the $irms are operating at small and medium level also termed as cottage industries( making the textile industry highly $ragmented* Another important characteristic o$ the textile industry is that $irms are largely dominated )y $amily o#ned )usinesses #hich although may ensure trust and cost minimi3ation )ut it also adheres that government supports may rest in the hands o$ selected $e# #ho has the po#er to control ma@or part o$ the textile products 4Islam( .0015* Additionally( some lo))yists exist in the current systems( #ho are engaged in practises that #ould give them discretionary po#er to control input prices( making it expensive $or the $irms* They can deli)erately $orm a cartel to create arti$icial shortages to raise the prices $or higher
6/./

Analysis of Textile Industry of Pakistan

#ind$all gains* Girms do not only $ace competition $rom rival $irms( rather rivals also include smuggled goods* !ost $irms in the textile industry o$ Pakistan have adopted cost cutting strategies so that they could charge competent prices* !a@or players1 o$ the textile industry o$ Pakistan are as $ollo#sL
a*

Pakistan !a@or Textile Industries

A)dullah Apparels 4Pvt*5 "td -ul Ahmed Textile 4Pvt*5 "td "ucky Gashion industries 4Pvt*5 "td A$ro3e Textile Industries 4Pvt*5 "td Al,Earam Textile !ills 4Pvt*5 "td Eohenoor Textile Industries 4Pvt*5 "td Crescent -arment Industries 4Pvt*5 "td Baig Spinning !ills "td a#ood Cotton !ills "td e#aan Textile !ills "td Al,Ameen enim !ills 4Pvt*5 "td

Isha9 To#el Gactor Gero3e Textile !ills 4Pvt*5 "td

)*

Textile Industry Associations

All Pakistan Textile !ills Association,APT!A Pakistan Cotton -inners Association All Pakistan Cloth Fxporters Association To#el !anu$acturers Association

Fxtracted $rom the #e)site o$ APT!A 4///*a'tma*org*'k"

61./

Analysis of Textile Industry of Pakistan

Pakistan Readymade -arments !anu$acturers and Fxporters Association

c*

Agriculture Iniversities and Colleges

Pakistan Agricultural Research CouncilH ?ational Agricultural Research Centre ?uclear Institute $or Agriculture and Biology Central Cotton Research Institute !ultan ?ational Textile Iniversity Textile Institute o$ Pakistan Pakistan Institute o$ Gashion esign

-arment &eaving and Ginishing Institute evelopment Institutes

d*

Textile speci$ic Research and

Pakistan Central Cotton Committee Textiles Commissioners 'rgani3ation Pakistan Cotton Standards Institute

v( /overnment: ue to imposition o$ high duties( Pakistan%s textile has no choice )ut to raise its prices* Pakistan is purchasing cotton at higher prices #ith the additional 6/7 duty on its import* And then along #ith the rising costs o$ production and government%s contemplation( to charge export duty to ensure local availa)ility o$ yarn( have made it impossi)le $or Pakistan to compete against other ma@or players o$ textile in the glo)al market such as China( ?epal( Bangladesh and India* As a result o$ this( /0 textile units have )een shut do#n )ecause o$ the declining and negative pro$its o$ the textile $irms 4Ahmed( .0605*

62./

Analysis of Textile Industry of Pakistan

espite o$ this( the tightening on monetary policy and corresponding expansion o$ the $iscal policy have drastically increased the interest rates( due to #hich $irms are lacking the availa)ility o$ capital and credit* And $or up gradation o$ the o)solete textile units( more capital investment is needed* Su)sidies provided )y the government are ine$$icient to )ring a trickledo#n e$$ect to the lo#er level #orkers* This could )e the reason o$ ine$$icient( un,#illing and un,authoritative role o$ government( and high levels o$ corruption* According to the current status( government has taken some initiatives to reduce the cost o$ doing )usiness )y introducing export loan scheme )y the name o$ "ong Term Ginancing o$ Fxport 'riented Pro@ects 4"TG,F'P5A marketing and )usiness $acilitation through Fxpo centre and exhi)itions )y Fxport Promotion Bureau to attract potential )uyers $rom all over the #orldA and $or in$rastructural development Special Fxport None has )een setup in Earachi called as Textile City( -arment city has )een esta)lished in "ahore( Gaisala)ad and Earachi( and Skill development institute have )een initiated to train #orkers in the production o$ contamination $ree cotton 4!eier( .0025* vi(Chance: Pakistan%s textile industry has had many opportunities to explore ne# markets and penetrate into largest market segments than the current concentrated one* Ho#ever( #hat seems to )e lacking is the #ill po#er o$ the $irm o#ners* They al#ays have this opinion that government should provide them tax credits and su)sidies so that they could have more capital at hand $or re,investments* By improvising on the 9uality o$ cotton yarn and $a)ric( Pakistan can reduce its costs( improve its exports and gain its comparative advantage over other countries*

Conclusion

6>./

Analysis of Textile Industry of Pakistan

S01T analysis of Textile Industry of Pakistan: It can )e in$erred $rom the literature that Pakistan is laying at the $irst $orce( i*e* Gactor Conditions #ith limited or insu$$icient $ocus on other $orces* And so( to attain competitive advantage the appropriate strategy according to Porter !odel #ould )e Cost minimi3ing Strategy* By Cost,minimi3ing strategy the textile industry o$ Pakistan #ould )e in a )etter position to compete in the #orld market and can then proceed to the next level i*e* product di$$erentiation strategy to increase the product and market )ase* Gor $urther examination o$ #hat can )e in$erred $rom the study a)out the textile industry o$ Pakistan( S&'T analysis is done* S&'T #ill dra# a picture o$ the industry as a #hole a)out its strengths( #eaknesses( threats and opportunities* i( Stren th

"argest $oreign exchange earner "argest employer o$ "a)our $orce Availa)ility o$ lo#,cost "a)our and "and A)undant in ra# material 4particularly Cotton5 Availa)ility o$ lo#,cost machinery !a@or part o$ textile goods are $rom man,made $i)re rather than synthetic one

ii( 0eakness

lo#,price image and relia)ility Incompetent marketing ?oncompliance to Fnvironmental and social regulation Inade9uate in$rastructure( including po#er( #ater Poor road net#ork not a)le to provide $oundation $or a dynamic industrial sector
6;./

Analysis of Textile Industry of Pakistan

e$icient technology and outdated machinery leading to lo# productivity and poor 9uality

"ack o$ considera)le up gradation o$ human resource skills Poor coordination among cluster players "ack o$ $inance and capital to small enterprises

iii(1pportunities

The state,o$,the,art $acilities at the Textile City #hich is )eing set up at Earachi( is a good opportunity to help increase production and competitiveness o$ textile products

Fnhanced market accessi)ility $or Pakistan Textile products in the -lo)al !arket

Rising cost o$ China%s cotton due to excess o$ demand( is an opportunity $or Pakistan to take advantage o$ high priced #orld market price

&ith technological advancements( the textile industry can ensure uncontaminated good 9uality cotton and cloth

Pakistan is a)undant in man,made cotton $i)re that assures good 9uality cloth* But the $irm o#ners and investors must think o$ #ays synthetic textiles can )e made so as to control the rising prices o$ ra# material

The Textile Asia Fxhi)ition provide opportunities to S!Fs( especially #ho instead o$ having the need to go a)road and see various markets themselves are a)le to interact #ith all $oreign delegates( industrialists present here and sho#case their products

Textile engineering sector #ill generate employment opportunities* There is ample scope $or 9uali$ied engineers in mechanical( electric and electronics disciplines to )oost this sector

iv(Threats
.0./

Analysis of Textile Industry of Pakistan

eclining #orld share in export o$ textile products means Pakistan is losing some markets in the hands o$ others

"imited :alue Addition and lo# product di$$erentiation Fndemic issue o$ Political and Social volatility in the country Poor governance #ould repeal the Goreign irect Investments

India and China are giving hard time to Pakistan in terms o$ advancements in technological innovation #ith strong engineering process

Insu$$icient investment in in$rastructure and #ork$orce #ould result in e$$iciency loss and create impediments in $uture as #ell

"ack o$ 9uality production #ould make customers s#itch to other countries reducing the market segment

Rise in prices o$ inputs due to I!G policies( #ould $urther deteriorate the condition

Policy Implications
The need $or improving )usiness environment cannot )e overemphasi3ed* &ithout improving the country%s image( enhancing the e$$ectiveness o$ legal and regulatory institutions( and upgrading the physical in$rastructure( direct incentives to local and $oreign investors are less likely to yield desira)le results* The current government is #ell cogni3ant o$ this need and has sho#n some visi)le progress in the macroeconomic management to restore the con$idence o$ investors and )usinesses* Ho#ever( there is need to do more on improving the governance side*

2ey Challen es faced by Textile Cluster

.6./

Analysis of Textile Industry of Pakistan

)actor Conditions O Availa)ility o$ 9uality ra# material O "ack o$ skills O Poor technology !emand Conditions O Increasing sophistication o$ demand e*g* product and process standards O Increasing glo)al competition %elated and Support Industries O -aps in the 9uality o$ local supplies O Poor coordination among cluster players O "ack o$ $inance to small enterprises Context for )irm Strate y 3 %ivalry i( Addressin the Country $evel Challen es:

Gollo#ing steps are needed to address the critical issues that the country as a #hole is $acingL

Restore the autonomy o$ legal institutions Bring re$orms in government agencies devise and launch a glo)al communication program #ith the help o$ international media to improve the image o$ the country

Fncourage private sector( increase pu)lic expenditure( and #ork #ith international institutions such as the &orld Bank and Asian evelopment Bank to improve the in$rastructure particularly Fnergy )y exploiting the huge hydroelectricity and coal,po#er potential availa)le in the country

iversi$y the export port$olio )y $acilitating the development o$ multiple clusters particularly in the areas o$ logistics and communication( medical devices( horticulture( and tourism
.../

Analysis of Textile Industry of Pakistan ii( Addressin

the Cluster $evel Challen es:

As noted )e$ore( the current government has taken some very important steps to upgrade the Textiles and Apparel cluster in Pakistan*

The emphasis o$ ne#ly instituted policies and programs is to increase the productivity and unit value reali3ation through increase uptake o$ )etter technology

-reater value addition and product diversi$ication ?eed $or greater involvement o$ other actors )y developing a shared vision such as supporting industries and IGCs to accelerate the progress

iii( Involvement of Private Sector and other I)Cs:

A transition $rom the existing lo#,end product concentration to#ards a more diversi$ied one

High unit value product port$olio through easy access to 9uality ra# material( technology up gradation( skill development( and RD product and process development in

A $urther shi$t to#ards $acilitative role o$ government through enhancing its role in $inancing RD the )arriers to trade in product and process development( promoting pu)lic,private partnerships( and reducing

As textile sector is the ma@or $oreign exchange earner( there$ore #e should increase our exports )y improving )oth the 9uality and 9uantity to meet the challenges o$ the post 9uota era

&e must increase the 9uantity )y increasing the capacity o$ the existing mills and also )y opening ne# textile mills* &e should also improve the 9uality o$ the existing machines

.8./

Analysis of Textile Industry of Pakistan

APT!A and the government should @oin hands $or )ridging the skill gap as there #as a need to promote pu)lic,private partnership in this regard to achieve the desired results

Regular ?ational Fxhi)itions can )e very help$ul in )ringing out the skills( the range o$ products and opportunities o$ group colla)oration* It #ill help the planners and large scale engineering industry in de$ining the #ay $or developing skills in order to make this sector strong and via)le

The !inistry o$ Textiles Industry needs to )e $ounded on active private,pu)lic colla)oration* It should )e consumer,$riendly and services,oriented

The Pakistan -overnment also needs to $ocus on the country%s image )uilding in the glo)al market and Pakistan Consulate in various countries need to play their pivotal role rather than en@oying the Goreign Service )ene$its at the cost o$ the tax payers

Another resolution demanded that knit#ear classes should )e introduced in the ?ational Textile Fngineering College( Gaisala)ad( so that hosiery products o$ international standard could )e produced

Stressed is

laid upon

the

government

to

direct

authorities

concerned $or installing master treatment plants in industrial areas so that e$$luent released )y $actories could )e utili3ed $or irrigation purposes

The tari$$s should )e reduced to control the prices o$ textile goods

%eference

.<./

Analysis of Textile Industry of Pakistan

Ahmed( S* 4.060( Muly 615* Pakistan , 'ver /0 Textile Inits closed in .

!onths* 4T* ?ation( Intervie#er5

Baig( !* I* 4.00;5* 4T* ?e#s( Fditor5 Gayya3( A* 4.00>5* 'vervie# o$ the Textile Industry o$ Pakistan* Hoekman( B*( D &inters( "* A* 4.00/5* Trade and #m'loyment: Stylized *C*L &orld Bank Policy

5acts and 6esearc) 5indings* &ashington Research &orking Paper no* 8121*

Islam(

G*

I*

4.0015*

Clustering

in

Pakistan+s

Textile

IndustryL &orking

Comparative Analysis o$ Clustered and ?on,Clustered Girms* Ph Paper Series*

"ati$( !* !* 4.000( 'cto)er 615* Textile industry has the largest

potential to )oost Pakistan+s exports* 4S* H* Ea3mi( Intervie#er5

!ehta( R* 46;;15* Textile and A''arel Trade: Im'act of 78e/

6egionalism7* Fconomic and Political &eekly( :ol* 86( ?o* .8*

!eier( R* 4.002( Septem)er .15* Textile Industry o$ Pakistan* 4C* -*

Earachi( Compiler5 Business ?et#ork S#it3erland*

!ukhtar( A* 4.00>( April 625* Insight into the Pro)lems $acing Pakistan%s

Textile Industry* "ahore*

Raptis( C* 4.00;( Manuary .;5* International Comparison o$ the Hourly

"a)our Cost in the Primary Textile Industry .00>* 8e/ T/ist , !*

Rehman( H*,u* 4.0605* !anu$acturing* #conomic Sur$ey of Pakistan (

pp* <8,<;*

S!F A* 4.0005* 9raft Textile +ision 2 evelopment Authority*

1* Small and !edium Fnterprise

././