The textile industry of Pakistan is going through a difficult phase following the elimination of quota regime in 2005.  Two years have passed and the our industry invested heavily in the previous four years to meet the apparent global challenges faced mainly from China, India and other Asian countries, who have been establishing a solid base in value added textile sectors in the last few years.   Despite investing more than $5.5 billion in up-to-date textile technology our textile industry is feeling the crunch of the global competition.  Let us examine where the crux of the problem lies  and how our industry can expect to successfully pull out of the extremely difficult scenario.

The traditional spinning and weaving sectors are surviving with their exports growing.  They basically provide the raw material for the value added global textile sector.  The spinners and weavers who are complaining are those who chose to remain in the commodity of 20 count yarn business and basic fabrics.  On the other hand, the progressive spinning mills, who invested in value added yarns like mélange yarn or compact yarn, are reaping the benefits of the appropriate investments they have made.  On the whole, the spinning sector is running at full capacity and have to import about 2 million cotton bales every year to meet the demand of yarn.

The value added sectors of knitwear, woven apparel and even home textiles, however, are not faring so well.  Particularly the knitwear sector is severely affected by  low priced, high quality products from China, Bangladesh, India and even countries like Vietnam and Cambodia.  The knitwear sector exports amounted to $1.75 billion during 2005-2006 which is 12% of the total export earning from Pakistan. This is by far one of the important sub sectors of our textile industry that was until a few years ago thriving and investing in the most modern units with the latest machinery and technology.  Sadly, quite a number of units have stopped their production because of intense competition from other countries like India and Bangladesh.  Pakistan’s knitwear industry exported low price mass market products to department stores in the US and Europe.  Their business is highly dependent on the centralized buying houses.  One of the recent phenomenon has been the opening of the regional offices of the department stores like Walmart in India and other countries.  Indian manufacturers have a natural advantage because of the presence of these buying houses in India.
 
While there is still no dearth of export orders but the prices offered are not feasible for Pakistani manufacturers due to high unit cost of production resulting from higher labour cost, higher utility costs and also higher financial costs as compared with India, China and Bangladesh.  The Chinese government gives very high export rebates to their manufacturers. In India the financial cost is lower than in Pakistan and very attractive terms are available for new capital investment. The knitwear units in Pakistan, that were heavily leveraged, could not sustain the escalation in the cost of production.

The woven apparel is faring relatively better, particularly the denim subsector.  The manufacturers in this field, like Artistic Denim, are progressive companies who have made correct decisions at the right time.  However, several denim plants are in the pipeline in Bangladesh at present.  This is a moment of concern for Pakistan.  Our manufacturers in the knitting sector cannot meet the lower labour cost, lower utility rates and also lower  import duties in the key markets where Pakistan competes with Bangladesh.  Are our denim garment producers ready to meet  Bangladesh as a viable competition in the near future?

There is a severe shortage of qualified professionals in the apparel and knit sectors. Our  trained professionals are going to Bangladesh and Russia to run their factories. Furthermore, the quality professionals from Srilanka are not available for our industry as in the past, because Srilanka’s apparel industry can no longer spare its highly qualified and skillful professionals.

Pakistan’s textile industry for long had relied on quotas and rebates, resulting in a severely handicapped outlook.  The marketing was deficient as the manufacturers were guaranteed a certain market share due to quotas.  The margins were high and comfortable.  Our exporters did not invest enough in developing brands and producing unique high quality textile goods that could have fetched much higher returns.  Although our exports have shown an increase over the years, the unit costs of our exports have declined significantly, reflecting  lower margins and a highly competitive global environment. Those manufacturers who produce goods with high value addition, are up-to-date with the latest trends and fashions and who manage to carve a niche for themselves in the cut throat competitive world of today will be the ones to survive in the coming years.

2007 should start with a resolution on part of all the players including manufacturers, exporters and also the government to work collectively to change the present scenario for the textile industry as millions of jobs are at stake.  The industry certainly  needs to increase the productivity, efficiency and its marketing skills, but the government should also help our industry attain a level playing field against global competition. The industry needs low cost abundant energy and an efficient infrastructure with clean water and good roads to remain viable. These are the basics which any government should provide to an  indusry that accounts for 60% of all the exports of the country.  The time of subsidies and duty drawbacks may be over but as our good friend Majyd Aziz, a most progressive industrialist and the present dynamic President of Karachi Chamber of Commerce in a recent  guest editorial in Pakistan Textile Journal has aptly mentioned, “Our industry still needs pampering.”