Overview of Textile Sector of Pakistan

Last Updated on 03/03/2022

Overview of Textile Sector of Pakistan

Muhammad Umair Aslam Arain
Department of Textile Engineering
Balochistan University of Information Technology and Management Sciences
Quetta, Pakistan
Email: engr.umair_text@ymail.com


Textile sector of Pakistan is a major contributor to the national economy in terms of exports and employment. Pakistan holds the distinction of being the world’s 4th largest producer of cotton as well as the 3rd largest consumer in the world.

Textile Sector of Pakistan
Fig: Textile Sector of Pakistan

Textile sector is considered as the backbone of the economy. On the other hand, it is facing tough competition in the international market due to increase in cost of production, which is making it less competitive than the neighboring countries India, Bangladesh & China.

According to Pakistan Textile Journal, Pakistan is among top 10 textile exporters of the world. Textile export of world over is about $400 billion out of which China tops the list with present export of $55 billion, followed by Hong Kong $38 billion, Korea $35 billion, Taiwan $16 billion and Indonesia, India, Bangladesh and Pakistan $11billion each.

top 10 exporters of textile

During FY 2010-2011 textile exports of Pakistan have continued to grow in the first nine months. According to the Federal Bureau of Statistics (FBS) and the Trade Development Authority of Pakistan TDAP, textile exports grew by 30.38% from July 2010 to March 2011. It showed a positive sign in the constant dwindling textile industry of Pakistan and Exports during July-June (2012-13) were recorded at $24.518 billion against the exports of $23.624 billion recorded during July-June (2011-12), showing positive growth of 3.78 percent.; however this increase can be attributed to the rise in the price of cotton and other inputs along with a significant increase in terms of quantity as well.

Textile Industry’s Economic Contribution

  1. Exports 60%
  2. Manufacturing 46%
  3. Employment 38%

Source: Economic Survey of Pakistan

Textile Exports Vision 2020:
A newly elected Chairman of All Pakistan textile Mills Association (APTMA) Yasin Sadique has announced to unveil vision APTMA 2020 under which the textile exports would be projected to fetch $26 billion by year 2020 from present leavel of $13 billion. Yasin said despite fact that the country’s largest foreign exchange earning sector was facing several hardships; the textile exporters were firm to combat all obstacles in their way. Though exporters are not getting any relief/concessions from the government, they would continue to their efforts for not only the survival of the export-oriented industry but strive for achieving new goals in the greater interest of the country and its economic sovereignty. He pointed out besides many acute problems and energy crises, the spinning industry was vying for enhanced production in cotton crop as the crop remained stagnant for the last two to three years at 12 to 13 million bales. He said for this purpose spinners would along with the government would re-visit the Monsanto option as well as the effort to make the Pakistan Cotton Research Institute would be made more effective. He said about frequent increases in taxes and levies and utilities’ prices, the association would take up these issues with the government and ask the power corridors to extend at least some breathing space for the industry’s survival.

Electricity rate in Pakistan is highest with 15 cents per unit while it costs 12 cents in India, 10 cents in Sri Lanka and 9 cents in Bangladesh while gas per MMBTU in Pakistan is $4.94, $4.20 in India and $2.05 is in Sri Lanka. Similarly markup rate in Pakistan is highest as compared to other countries in the region with 10.50 percent and it is feared to increase further whereas it is charged at 6.56 percent in China, 7.74 percent in Bangladesh and 7.75 percent in Sri Lanka. He said APTMA would speed up its efforts for the Generalized System of Preferences Plus by the European Union as Pakistan becomes eligible for the preferential tariff in January next year.

Growth Trend During Last 5 Years
Pakistan’s textile industry is going through one of the toughest periods in last 5 years.

The global recession which has hit the global textile really hard is not the only cause for concern. Serious internal issues also affected

Pakistan’s textile industry very badly. The high cost of production resulting from an instant rise in the energy costs has been the primary cause of concern for the industry. Depreciation of Pakistani rupee during last year has significantly raised the cost of imported inputs. Furthermore, double digit inflation and energy crises have affected the over all textile sector.

Source: Economic Survey of Pakistan, by State Bank of Pakistan

2008-2009-0.70 %
2009-2010-1.78 %
2010-20111 %
2011-20124.8 %
2012-201313.02 %

Growth of Textile Sector 2008-2009
This table show the trend to textile sector. In starting textile growth is not more than 1.01 % the in next year growth is badly affected by energy and other crises and growth will go in negative number its done first time in Pakistan textile history. After that its move towards better side gradually and in 2011-2012 over all textile growth become 5 % after some bad period. Now according to state bank economical survey a textile growth rises at 13%.

Report by State Bank of Pakistan
Fig: Report by State Bank of Pakistan

Benazir Bhutto’s assassination followed by unstable law and order situations. Moving ahead in 2008 the textile sector showed record negative growth due to financial church in global economy resulting in slow down in economy growth chased by soaring oil, food and other commodity prices, softening of external demand and turmoil in the international financial market. The economy is also going through the most terrible energy crisis affecting the performance of the textile industry.

2008-09 Performance:
According to data by Federal Bureau of Statistics, Textile exports during the first eight months of current financial registered negative growth of 5.6% as against the exports recorded corresponding period of the last financial year. Exports during July-February (2008-09) totaled $ 6.47 billion against the exports of $6.85 billion recorded during July-February (2007-08).

During the time under review, the highest negative growth of 51.24 percent was recorded in the exports of yarn (other than cotton yarn) while exports of art, silk and synthetic textile were decreased by 23.45 percent.

Similarly, exports of cotton yarn declined by 15.28 percent, cotton (carded or combed) by 13.81 percent, knitwear by 2.66 percent, bed wear by 10.44 percent, tents, canvas and tarpaulin by 21.18 percent, ready-made garments by 12.43 percent, made up articles by 0.3 percent while the exports of other textile materials declined by 15.28 percent during the period.

However, the exports of raw cotton witnessed increase of 154.5 percent during the time under review while exports of cotton cloth increase by 5.57 percent and towels by 10.02 percent.

Reasons for Decline in Growth
Main reasons of crisis in textile industry in Pakistan are as follows:

1. Lack of Research & development (R&D):-
The lack of research & development (R&D) in the cotton sector of Pakistan has resulted in low quality of cotton in comparison to rest of Asia. Because of the subsequent low profitability in cotton crops, farmers are shifting to other cash crops, such as sugar cane.

2. Lack of modernize equipment:-
The textile industry has obsolete equipment and machinery except few major producers. The inability to timely modernize the equipment and machinery has led to the decline of Pakistani textile competitiveness. Due to obsolete technology the cost of production is higher in Pakistan as compared to other countries like India, Bangladesh & China.

3. Increasing cost of production:-
The cost of production of textile rises due to many reasons like increasing interest rate, double digit inflation & decreasing value of Pakistani rupee. The increasing interest rate caused barrier in opening new manufacturing units & also increase the production cost of existing units. The value of Pakistani rupee is continuously decreasing which increased the cost of imported raw material. The removal of subsidy & implementation of new taxes from government also increase the cost of production. The instant increase in cost of electricity also caused an increase in production. The above all reason increased the cost of production of textile industry which create problem for a textile industry to compete in international market.

4. Energy crisis:-
As a consequence of load shedding the textile production capacity of various sub-sectors has been reduced. The representatives of the all textile associations presented their serious concerns on the huge losses being incurred due to electricity & gas load shedding and the instant rise in the Electricity tariff. They said that the industry has already been crippled due to record high load shedding.

5. Raw material Prices:-
Prices of cotton & other raw material used in textile industry fluctuate rapidly in Pakistan. The rapid increase in the price raw material affects the cost of production badly. Due to increase in the cost of production the demand for export & home as well decreased which result in terms of downsizing of a firms resulting in unemployment

6. Effect of Inflation:-
The increase in inflation causes the increase in the cost of production of textile good which return in downsizing. The double digit inflation is also affecting exports of textiles.

7. United States & EU cuts imports of textile from Pakistan:-
US & EU are the major importer of Pakistan textile which creates a huge difference in export of Pakistan textile after imposing a restriction on import of Pakistani textile goods.

8. Removal of subsidy on Textile sector:-
The provisions of Finance Bill 2009-10 are not textile industry friendly at all. Provisions like reintroduction of 0.5% minimum tax on domestic sales, 1% withholding tax on import of textile and articles, 16% Federal Excise Duty on banking and insurance services besides withdrawal of exemption of 16% sales tax and 4% withholding tax on machinery and parts in the Finance Bill 2009-10 are badly affecting already crippled industry.

9. Export Performance of the Textile Sector:-
Due to high cost of production, power shortage and stiff competition with regional players, the export performance of Pakistan textile sector is suffering badly.

10. Lack of new investment:-
Pakistan textile industry is facing problem of Low productivity due to its obsolete textile machineries. To overcome this problem and to stand in competition, Pakistan Textile Industry will require high investments.

11. Supply chain management:-
Another problem contributing in the poor performance of our textile sector is the absence of efficient supply chain management and centralized framework. Many economic and political factors limit the ability of the exporters to meet their commitment timely and may also result in losing business in future.

Recommendations for the growth of the textile sector are as follows;

Revision of Government policies is required:
There are non-conducive government policies in term of bank loans and interest rates. It is the need of the hour to develop a coherent plan by the government that allows some sort of exemption/concession to the textile sector. For example as in India; the Export-Import Bank was set up for the purpose of financing and facilitating the industries, especially textile. The government may give subsidies to share the burden of the industry.

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.

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 madeups, 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.

Technology interventions:
Sophisticated technology should be introduced to compete with the other countries (India, Bangladesh & China) in the global market in term of cost and quality.

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 labor. There is also urgent need to increase the number of such Vocational Institutions where modern technical education is provided.

Proper Energy Supply:
According to sources, it is estimated that in recent past around 800 units have closed in Punjab during electricity and gas load shedding while approx. 500,000 workers lost their jobs. In order to save the industry there must be a preferential treatment with the industry in uninterrupted energy supply.

Investment in Textile Sector:
The investment volume is not satisfactory in the textile sector as compared to the potential available. Government should take serious step to survive the textile industry. In order to decrease the price raw material for textile we need to increase our production capability.

Role of Government:
Textile industries are the backbone of a Pakistan economy and Pakistan government always taking interest in textile sector. The share of textile industry in the economy along with its contribution to exports, employment, foreign exchange earnings, investment and value added makes it the single largest manufacturing sector for Pakistan. It contributes around 8.5 percent to GDP, employs 38 percent of the total manufacturing labor force, and contributes between 60-70 percent to total merchandise exports.

So that way Government start many of project in textile sector by support of ministry of textile and some other private investors, for achieving peak position in the world.

Near about 6 to 7 textile projects are under process that will be completed in next coming years. Name lists of project are given below.

  • Export development plan implementation unit (EDPI)
  • Pak_korea Garment technology instituted (PKGTI)
  • Lahore Garment city (LGC)
  • Faisalabad Garment city (FGC)
  • Karachi Garment city (KGC)
  • Pakistan textile city limited (PTCL)

Good News For Textile Industries:
Finally Pakistan government take great imitative for reducing the problems of textile industries because they know, if they do not take strictly action on serious problem then 55 % of Pakistan economy going toward downsize. In previous couple of month’s little bit work done by CM Punjab. Some happiest news for industries are given below.

1. CM Punjab Shabaz Shareef assure a consisting of hourly and quota based gas supply for 8 hours a day to the textile industry located in Punjab in combination of gas and electricity, which has helped industry in its operations and an increase of 20 percent of exports in quantity terms from July to September 2013. “Prime Minister Nawaz Sharif has also shown concern and I am very much hopeful that gas supply to the textile industry during December will remain intact,” he said.

2. Shahbaz Sharif said the PML-N government was pursuing a solid strategy for promoting trade, economic and industrial activities. He assured that all possible steps would be taken for resolving genuine problems of industrialists. Pakistan would make tremendous progress in textile sector after getting the status of GSP Plus (Generalized System of Preferences), besides increasing job opportunities and exports.

3. Government is fully committed to solve the energy crisis as it has become a major challenge that is not only hurting the industrial activities but also badly affecting the country’s economy. Government’s economic team had fully prepared with pragmatic strategy to cope with all the challenges, which country is facing today, said Chaudhry Abid Sher Ali. He assured that he will make all efforts for immediate payment of pending refund claims of textile exporters as exporters are facing financial crunch owing to this problem. if that amounts are released, exporters can deploy that capital towards expanding their businesses, which in turn will help Pakistan’s export earnings grow. He termed approval of GSP plus status as a milestone achievement of the Pakistan government and Approval of duty free access to European markets is a good sign for the ailing value-added textile industry which is badly suffering due to various factors.

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