TEXTILE INDUSTRY LEADING THE RALLY OF ECONOMIC GROWTH
SADAF AURANGZAIB, Senior Correspondent
Dec 25 - 31, 2006
Textile Industry has always been in the forefront of economic growth of Pakistan. Based on locally available raw cotton, this industry contributes the largest share in employment opportunities besides being the largest foreign exchange earner for the country.
It contributes nearly 68% of our total exports. During the last boom period Pakistan has emerged as the major supply source of cotton textiles in the world market confirming its competitive strength. Pakistan's share in world yarn trade is about 30% and the share of cloth is 8%. Textile and Garment are two of Pakistan's principal industries contributing more than 67% of total export earnings, accounting for around 46% of total manufacturing and employing over 38% of the manufacturing labor force.
Worth over $4 billion of textile and garment machinery has been imported in Pakistan in the last few years that has significantly improved the quality and productivity of the textile products.
The Government is targeting over USD 10 billion of exports and garments made ups on the successive years. Import of textile machinery has registered an impressive growth of 66.29% in the current fiscal year. The development of the Manufacturing Sector has been given the highest priority since Pakistan's founding with major stress on Agro-Based Industries. For Pakistan, which was one of the leading producers of cotton in the world, the development of a Textile Industry making full use of its abundant resources of cotton has been a priority area towards industrialization. At the time of independence there were only 6 Textile Units with 80,000 spindles and 3000 looms, which could only supply 8% of the domestic demand of its 76 Million population. The Government set the objective of promoting Textile Industry first as an import substitution industry and later as an export oriented industry. This showed positive results and spinning and weaving sector had rapid growth during 50's & 60's. It's growth was such that by the end of 50's Pakistan was virtually self sufficient in cloth requirement and then reached at the surplus stage to export yarn and cotton fabrics and had been progressing satisfactorily.
During early seventies the Industry had set back of international recession resulting into large closures and sick units. The industry however, started improving in late seventies when market economy led Industrial Policy was introduced, promoting exports and rationalization of Import Tariffs and thereafter it had progressed with market demand. Today the textile sector is internationally integrated, globally competitive and fully equipped to exploit the opportunities of post quota competition. The increase in trade within developing countries has given a new look to the international trade scenario, the industry has to develop itself strong enough to meet the rising competition from the textile goods being imported from countries of similar comparative advantage to keep its share in the local market. Presently the industry consists of a large scale organized sector and a highly fragmented cottage/small scale sector. The organized sector is essentially the integrated Textile Mills - large No of spinning units and a very small number. Of shuttle-less looms units. The downstream industry (Weaving - Finishing _ Garment - Towels & Hosiery) which has a great export potential is all in the unorganized sector.
Although Pakistan is blessed with abundant raw cotton and cheap labor, the industry has not been able to exploit the potentials in real terms and has failed to make real progress in the international markets and is under threat of being overtaken by its competitors and new entrants. In the first few months of the current financial year exports do not seem to have risen the way they were intended to by the economic managers. In the period between July and October, the textile and cotton sector exports fell by nine per cent while the non-textile/cotton exports fell by as much as 34 per cent. It seems as if the sector as a whole has hit some unexpected difficulty. Either it has failed to respond to this year's foreign trade policy of the government, which had included a heavy Rs30 billion concessional package for the textile industry. Or perhaps the government policies themselves failed to take into consideration the actual problems and the needs of the sector like rising costs of production, mismanagement, inefficiency and several other such problems. To be fair to the value-added textile sector, its complaint that domestic yarn had become dearer because of undue escalation in the commodity's export appears justified.
The government should have intervened at the right time with the right policy instruments to discourage the trend. According to an earlier report, faced with the high cost of inputs, around 300 units of readymade and knitwear industry have been shut down in Karachi alone. Also, because the government has not been able so far to either get a free trade arrangement with the US or GSP concessions from Europe, Pakistan's low value-added products are finding it almost impossible to compete with the least developed countries' exports enjoying attractive duty concessions in these markets. Above all, the manufacturing sector itself has continued to stagnate after having exhausted all the available capacities in the last couple of years. Without an expanded state-of-the art-manufacturing sector, one cannot produce higher value-added products or even large quantities to benefit from the economies of scale. Even foreign direct investment (FDI), which in recent years has increased significantly, has avoided the manufacturing sector. It has gone into sectors like telecom, real estate, physical infrastructure, oil and gas and financial sectors, none of which are export-oriented. The textile tycoons, instead of reinvesting their profits to set up facilities to improve the quality of their value-added products, have gone into speculative business looking for quick bucks.
The textile industry is facing an acute crisis and exports have fallen alarmingly. The textile industrialists are upset after making heavy investments. It is an alarming prospect. Urgent rescue measures for the textile industry are imperative so that the textile industry can compete with its rivals from India, China and Bangladesh. The fiscal and financial incentives announced earlier are not enough. Far more is needed on an urgent basis. The government has big plans of the international Textile Asia 2007 exhibition and of introducing Textile City as an industrial zone dedicated to the textile processing and related industry. The government should also look on an urgent basis the basic problems that our textile sector is facing at the moment and how to resolve them before the textile sector will also become completely stagnant in terms of its productivity and its value-added concentration.