Research Analyst
Jan 9 - 15, 2012

Global textile trade is estimated to be around 300 billion dollars. It is expected that by 2014 the trade volume will scale up to 800 billion dollars with export orders rising rapidly.

Textile sector in Pakistan is going to face stiff competition from neighboring economies and it would become difficult for it to survive if there is no modernization in production process and new marketing strategies are not adopted.

During July 2011, textile accounted for 49.97 per cent of the total exports with shares of cotton fabrics standing at 11.00 per cent, knitwear 10.61 per cent, bed wear 8.50 per cent, articles of apparel and clothing accessories (excl. knitwear) 7.41 per cent, and cotton yarn 5.68 per cent.

The same month, textile group constituted 2.96 per cent of the import bills with synthetic fibre and synthetic and artificial silk yarn having 1.60 per cent and 1.35 per cent shares respectively.

Although outlook for textile was fairly positive at the beginning of FY11, the sector had to face privation with intensified power outages and gas shortages. Moreover, devastating floods also affected textile production in H1-FY11. However, during the second half of the year, surge in global cotton prices provided earning opportunities in the form of unprecedented high export prices, which in turn induced production activities.

Consequently, the textile manufacturing witnessed a growth of 10.9 per cent in H2-FY11 compared with a year on year (YoY) decline by 6.5 per cent in the first half.

Cotton prices started rising sharply in October 2010 and touched a 150-year record level in February 2011 on the back of both supply and demand factors. The crop losses in Pakistan and Australia, unfavorable weather in China, declining US inventories and export cap by India also shoved prices.

On the demand side, China's renewed commitment to build up cotton reserves, panic buying as well as speculative positions in futures contracts pushed the cotton prices up. This rise in cotton prices led to a broad based increase in textile products across the globe, which helped Pakistan earn record $13.8 billion of foreign exchange through textile exports.

The price impact was so strong that earnings from textile exports grew 44.7 per cent in H2-FY11.

There were textile products including cotton fabrics, hosiery and silk, and synthetic items that witnessed rise in both quantum and value terms driven mainly by relatively stable unit prices and competitiveness losses for Chinese products.

Despite a decline in cotton crop, spinning activities improved during FY11 on the back of fewer cotton exports, stronger cotton imports, and healthy margins.

Pakistan imported 188,000 metric tons of cotton during H2-FY11 compared with 157,000mt in H1-FY11. Cotton yarn production increased by 7.6 per cent YoY during H2-FY11 compared with 1.6 per cent YoY during H1-FY11.

A large part of fabrics export growth in FY11 was temporary and is less likely to carry on in FY12. Export data suggest the increase in fabric export during H2-FY11 was mainly to Turkey.

However, fabrics demand by Turkey may not continue going forward after imposition of safeguard restrictions on textile inputs by Turkish government in July 2011.

The fabric export to Bangladesh may continue to support this sector in Pakistan.

In January 2011, the EU eased rules of origin for textile import from Bangladesh. According to the revised rules, garment manufacturers in Bangladesh can avail generalized system of preferences (GSP) benefits even if they use Pakistani fabrics as input. This caused an increase in fabrics export to Bangladesh in H2-FY11 onward. Although Pakistan's exports of apparel increased sharply in FY11, it could not raise its share in the world markets.

The Pakistani manufacturers were struggling with energy shortages and law and order situation that could only tamp down their existing market share. Particularly, Pakistan lost its share in US market against India in bed wear category as buyers switched to import of high-end products.

Around 12 per cent of Pakistan's total fabric exports are destined for Turkey.

Bangladesh is a recipient of least developed countries' (LDC) preferential access to EU market under the GSP.


GDP 7.4 Market Capitalization 3.2
Large-scale manufacturing 32.6 Foreign direct investment 1.6
Employment 38* Private loans 20.2
Exports 55.6 Export finance scheme 62.7
*Of total manufacturing labor force.

Accordingly, textile exports from Bangladesh duty free access to EU under Everything but Arms (EBA) scheme (duty free access is available to only LDCs). This makes textile products of Bangladesh more competitive compared with non-recipients of EBA (including Pakistan). In towels category, Pakistan lost its share against low cost Bangladesh, India, and China,


Presently, textile sector faces very big challenges in terms of gas and electricity crises. Textile millers are protesting against gas suspension in the country. Non-availability of gas leads to industrial inactions. The government must resolve basic problems facing the industries if it wants to increase exports from the country and specifically achieve export target of this fiscal.