THE TEXTILE SECTOR

S.M. ABBAS ZAIDI,
Research Analyst
, PAGE
Dec 29 - Jan 04, 2009

The Textile sector emerges as the largest in the country as it represents 391 textile mills out of which 309 are spinning, 45 weaving and 37 composite units. The textile sector consists of textile spinning, weaving, and composite mills representing the organized sector in Pakistan. These spinning mills have production facilities of texturing, mercerizing and dyeing of yarns; weaving mills have sizeable number of air-jet looms, and the composite mills have manufacturing facilities from spinning to finished textile products under one roof. The total installed capacity of textile mills accounts for 9,527,857 spindles, 61,256 rotors, 9,922 Shuttleless/Airjet Looms and 717 conventional Looms. This sector also produces spun and open-end yarn, grey, printed dyed fabrics and bed linen.

ROLE IN NATIONAL ECONOMY

This industrial sector in Pakistan has been playing a pivotal role in the national economy. Its share in the economy, in terms of GDP, exports, employment, foreign exchange earnings, investment and contribution to the value added industry makes it the single largest determinant of growth in manufacturing sector. Textile share of overall manufacturing activity is 46%, export earning is 68%. The textile industry contributes 11% of the GDP and employs 40% of the workforce in the manufacturing sector. It is responsible for 62% of total exports. In spite of the government's efforts to diversify exports as well as industrial base, the textile sector remains the backbone of industrial activity in the country.

INVESTMENTS

Textile Industry has made an investment of $5 bn for expanding its production capacity in the last 5 years while the interest rates were as low as 3% to 4%. However, more than 200% increase in the credit cost, which consequently increased the financial charges of the mills, has now forced the industry to stop further investment. There has been reduction of 6.4% in investment in Textile Machinery in terms of US Dollar this year as compared to the corresponding period last year. If inflation is also factored in, the drop of fresh investment in Machinery will be in the vicinity of 11% to 12%. This has all resulted because of the slow down in further investment in the Textile Industry due to high cost of capital borrowing and increased pressure from regional competition.

EXPORT RECEIPTS BY COMMODITY
COMMODITY NOV (P) OCT (R) NOV JULY-NOVEMBER JULY-JUNE
  2008 2008 2007 2008-09 (P) 2007-08 2007-08 (P) 2006-07 2005-06
Textile Group 790,405 874,483 895,907 4,431,347 4,413,316 10,354,218 10,011,350 9,141,596
Raw Cotton 9,771 14,065 7,495 49,555 26,442 86,561 75,640 99,672
Cotton Yarn 90,185 98,139 120,949 465,118 536,802 1,167,597 1,075,966 894,930
Cotton Cloth 173,779 189,598 195,537 950,330 938,576 2,172,879 2,318,481 2,259,124
Cotton Carded or Combed 15,576 8,002 23,806 59,381 93,296 212,015 275,972 284,828
Yarn Other than Cotton Yarn 4,208 4,378 7,815 32,927 41,779 80,453 141,307 111,234
Knitwear 155,562 182,394 173,388 963,008 923,637 2,134,729 2,104,198 1,917,854
Bed Wear 120,806 130,447 114,503 662,895 576,446 1,456,417 1,394,372 1,313,318
Towels 48,587 54,869 35,887 246,749 144,323 415,106 166,288 120,715
Tents, Canvas & Tarpaulin 5,272 6,030 7,714 28,517 29,883 71,063 72,334 73,321
Readymade Garments 72,710 83,997 105,723 427,777 556,604 1,204,125 1,097,732 963,856
Art, Silk & Synthetic Textile 28,833 32,892 26,126 176,524 152,660 399,233 385,991 281,674
Made up Articles(incl. Other Tex 27,869 30,060 26,507 154,061 146,350 365,718 346,840 313,689
Other Textile Materials 37,248 39,614 50,457 214,504 246,519 588,323 556,229 507,381


IMPORT PAYMENTS BY COMMODITY
COMMODITY NOV (P) OCT (R) NOV JULY-NOVEMBER JULY-JUNE
  2008 2008 2007 2008-09 (P) 2007-08 2007-08 (P) 2006-07 2005-06
Textile Group 111,378 119,548 107,179 593,731 555,232 1,820,656 1,265,554 1,090,308
Raw Cotton 67,422 50,639 45,242 275,811 279,326 1,101,670 647,187 427,586
Synthetic Fiber 15,574 29,632 23,737 137,061 94,120 265,956 214,427 238,881
Synthetic & Artificial Silk Yarn 13,890 18,640 23,864 95,173 104,510 259,900 233,853 225,165
Worn Clothing 2,851 1,888 614 7,296 2,742 7,173 7,357 9,766
Other Textile Items 11,641 18,749 13,720 78,389 74,534 185,957 162,730 188,912
Source: SBP P: provisional R: revised

TEXTILE COMPETITORS

Pakistan today faces a tough competition from China, India, Bangladesh and Turkey in the EU market for textile apparel. In the case of bed wear, its exports to EU market are rising after reduction of anti-dumping duty on this category from the previous level of 13.1% to 5.8%. However, in the US market, this category of export faces a tough competition in terms of prices, especially from China that is where the textile exports are suffering from structural issues which needs to be addressed by the industry itself. India is also weighing the option of reducing custom duty and excise duty on Furnace Oil, which is heavily consumed by the textile industry.

CONCLUSION

Textile sector contributes 40% share in employment and 60% in the export of the country and is one of the leading textile manufacturers in the world. However, our value-added sectors, particularly apparel and knitted clothing have a very small share in the world trade. These sectors are also suffering from the intense competition from China, India and Bangladesh. Unfortunately, there was no such relief given in the federal budget to this sector. Increase in the withholding tax, general sales tax and federal excise duty will result in negative impact on the overall economy of the country as well as on the textile sector. The soaring inflation has resulted in increased cost of doing business while shortage of power and gas has distracted the economic activities. Out of $18 bn export target of this year, the $10 bn were of textile sector. If this Government gives some incentives and relief, the export of textile sector may reach to $80 bn in year 2020. No doubt textile is a real growth sector of our export and Govt must support this industry so that they can multiply our export earnings and even more importantly, provide critical jobs in Pakistan.