Knitwear Industry: Exports recorded double digit during 2006-07
by Dr. Noor Ahmed Memon

Textile and clothing industry is the most important sector of the Pakistan economy. These sectors are the main force behind exports and employment. The knitwear is playing essential role in value addition in textile sector. During the year 2006-07 Knitwear was the only major sector item whose exports recorded double digit growth. The growth in knitwear exports accelerated from 7.1% during 2005-06 to 12.2% during 2006-07. The remarkable growth in the high value added knitwear was contributed by an increase in prices as well in volume. China, India, Sri Lanka, Vietnam, Bangladesh, Korea, Bangladesh, Jordan and Kenya are among the country’s major competitors in the industry.

Pakistan’s knitwear industry is almost totally export-oriented, however domestic use of garments such as vests and underwear are common in all urban groups. The organized sector exports almost all its products, with the local consumption standing at only around 15%. Often these are brought into the local market because they have either been rejected quality controllers of the firm, for which they are manufacturing or, because orders have been cancelled or due to over-production.

The share of this industry in the value-added in the manufacturing sector is obviously small although it earns far more foreign exchange compared to per kilogram cotton, after being converted into finished garments. Hundreds of hosiery units are working in unorganized sector, especially in the cities like Karachi and Faisalabad. The unorganized sector is fulfilling Pakistan’s local requirements, especially dealing in under garments that are made from the leftover of the export industry; all the units in Lahore are 100% export-oriented.

EU and US markets remained the major destinations for Pakistan’s knitwear exports. During the year 2006-07, the knitwear exports to US and EU markets recorded remarkable growth of 13.3% and 13.1% respectively. However, with the abolition of China specific safeguards measures by EU and US in 2008, it would be challenging task for Pakistani knitwear exports to maintain their market in the world’s major markets. The use of knitwear has increased largely due to its low price as compared to cotton and blended cloth shirts. It is a convenient wearing apparel and easy to wash.

Growth

The knitwear industry has developed rapidly in recent years. At the start of the 2000’s there have been new investments in the knitwear sector especially in and around Lahore. Ammar, Klass textile, Ibex, Irfan, Style, Azam, Disco, Crescent Group, Regent and Saigol Groups, based in Lahore, have set up most modern production units for knitwear with state of the art technology. Some high quality machine manufacturers have also imported soft flow dyeing machines and tension-free dryers.

Limits of shrinkage have also been narrowed. These advancements together with availability and use of soft twisted spliced yarn have resulted in the upsurge of world-wide consumption of knitted fabrics.

According to estimates of Pakistan Hosiery Manufacturers Association there are about 1,300 knitwear units with 1,5000 knitting machines are working in the country.

The production of garments and made-ups in Pakistan is concerted mainly in Lahore, Faisalabad and Karachi. In Lahore all major units are vertically integrated and are involved in knitting, dyeing, finishing & stitching. Major reasons to set up vertically integrated units are the desire of the manufacturers to have full control over all the processes involved and to ensure that right products are delivered at the right time. Specialized and commercial units have not been successful to position themselves to cater to the needs of the export oriented garment industry.

During the last three years more than Rs 22 billion have been invested in the value-added sectors in stitching, knitting, finishing and knitting processing. Pakistan imported large numbers of automatic flat knitting machines of different brands. Import of various flat knitting machines into Pakistan decreased from 2,235 numbers valued Rs 212.4 million in 2004-05 to 592 numbers valued Rs 120.7 million in 2006-2007, thus showing decline of 43% in terms of value. Import of flat knitting machines into Pakistan is given in Table-1 and country-wise import of knitting machines is given in Table-2.

Exports

Knitwear goods exported from Pakistan are known for their fine quality in European and American markets. It is highly value-added, earning much valuable foreign exchange per kg cotton converted into finished garments. A series of new finishing processes have been incorporated with improved shades, texture and lustre. Some of the bulk export items, which have gained popularity, are 100% cotton T-shirts, vests, slips, children's pajama suits, sports shirts, undergarments, bathing suits, knitted garments and knitted tabulator or flat fabrics. Manufacturers follow international sizes and specifications. They also welcome buyer's samples, specifications and designs.

USA and the European Union are the two largest markets for garments and knitwear products. Apparel is a rapidly changing business with very short product life cycles and consumer preferences. The major thrust of garments and made-ups exports from Pakistan is on the US market. The European Union is the second largest market for garment manufacturers from Pakistan.

Export of Knitwear (Hosiery) increased from 71 million dozens worth $1,635 million in 2004-05 to 93 million dozens worth $1,961 million in 2006-07. Export of knitwear is given in Table-3.  In the international market the USA is the major buyer, followed by UK, the Netherlands, Italy and Germany. Country-wise export of knitwear is given in Table-4.

Future Challenges

The country’s knitwear industry is suffering from acute problems of low productivity, poor quality, weak management and marketing skills’ and hence facing serious threat of losing its share in the international markets. With the implementation of quota free regime in 2005, around 38% of the total 1,300 knitwear export units in the country are likely to be wiped out because of their inability to meet the World Trade Organization (WTO) constraints.

Pakistan textile industry is loosing its competitiveness in international market. Electricity is one of the major issues in increasing input cost. Another major issue on part of the government is the rebate of sales tax, which should be regulated as per the rules. China, India, Sri Lanka, Vietnam, Bangladesh, Korea, Bangladesh, Jordan and Kenya are among the country’s major competitors in the industry. Small unit owners would be in hot water, as they get no facilities with regards to electricity services, financing and WTO compliance issues, so that these units would not be able to compete due to high costs.

Pakistan, which has a strong textiles industry failed to take advantage of the post 2005 quota free regime, China and India aided by their respective countries had their plans in place and have developed greatly.

The Government also acted late in providing the incentives needed to prop up the sector. Secondly, the textile industry which was smug in the belief of having an advantage in technology and quality was humbled by the modernization drive adopted by the neighboring countries.

During the past year the Pakistani rupee has depreciated against the appreciation of the Indian rupee. Coupled with the subsidies and incentives doled out Pakistan had strong advantage over other nations. However, textile industry failed to take advantage, and instead was looking for more incentives from the Government which seems unlikely at present.

If China and India can have manage to compete with other low labor cost countries, like Bangladesh and Vietnam, there was no reason why Pakistan textile industry could not have done in spite of all the advantages it enjoys versus their counterparts from other countries.

Quality is a critical success factor for all types of business, its salience is to be driven home in Pakistan's business environment in general and its export-oriented business segment in Pakistan in particular. Buyers get a low quality service which reduces their confidence to do business with Pakistani industry. As such, Pakistani industry could neither meet the lead time demand of highly profitable textile and fashion products nor could meet the low price expectation of Western markets.

Pakistani units were also acting as facility provider for foreign companies and brands. None of the Pakistani exporters have developed any brands, which is one of the major hurdles in the growth of the industry. Branding is the only way to be recognized as exporters in the true sense.

Despite having state of the art machinery and access to capital, textile industry is compelled to manufacture and export raw, non seasonal and low value textile products where high capital is required to manufacture at extremely low margins.

Challenges ahead for the industry are search for new markets and product segment is non quota countries and other unexplored areas, maintaining international quality standards, etc. China is the major threat: about 40% of its total export goes to Japan, which is a non-quota country. The two major challenges are low level of technology and modernization in textiles and clothing of Pakistan, which includes the knitwear sector. Pakistan does not have resources like research centres and fashion training schools that help the exporters understand or compete with the rapidly changing fashions in different regions and cultures of the world. Most of all, the Pakistani exporters are not financially strong enough to invest a huge amount to store their products in big warehouses and sell them after putting it on display in the shopping malls and shopping plazas etc

Global review of textile & garment industry-2007

The year 2007 proved to be an exceptional year for the textile and garment industries of some countries and tumultuous for others. On one hand countries like China and Vietnam had a very excellent year, on the other hand countries like USA and India had declining figures. According to reports from China, enterprises in the textile industry are expected to complete a total industrial output value of 3.05 trillion Yuan, up 21.9% year on year. The latest statistical reports show that China exported textile and apparel worth US $156.584 billion in the first 11 months in 2007, with 19.86% increase over the same period of last year. Of the total exports, apparel and accessories generated over $105.43 billion, a rise of 22.2%; yarn, fabric and other textile products makes up $51.152 billion, augmenting 15.3%. 

Figures released by Vietnamese MOIT currently suggest that the textile and garment industry of Vietnam earned US$ 7.8 billion exports revenue in 2007, representing a year on year increase of 32% and become the largest foreign currency earning industry for Vietnam.

Data released by the U.S. Federal Reserve showed that U.S. Textile Mill output fell sharply by 12.1% in 2007. The drop in output was the largest since the U.S. Government began publishing output data on the topic in 1972. From its peak in December 1997, U.S. Textile Mill output has plunged 44.85%.

A flood of subsidized imports, especially those from China, is crippling the U.S. textile industry. The decline in U.S. output directly is tied to the loss of market share, and the loss of market share then is directly tied to the loss of hundreds of thousands of U.S. textile and apparel manufacturing jobs.