Table of Contents

Abstract.............................................................................................................................................i

Introduction......................................................................................................................................1

Research Question........................................................................................................................3

Problem Statement.......................................................................................................................3

Objectives.....................................................................................................................................3

Literature Review............................................................................................................................4

Theoretical Framework....................................................................................................................5

Theoretical Model............................................................................................................................6

Brief Description of Variables.........................................................................................................7

Pakistan Textile Industry.................................................................................................................7

Performance of Pakistan Textile Industry.......................................................................................7

Opportunities of Pakistan Textile Industry......................................................................................8

Success & failure of Textile industry in Pakistan............................................................................8

1. Nationalization....................................................................................................................10

2. The Shift of Textile Industrial Setup..................................................................................10

3. Low level of technical innovation & high competition......................................................11

4. Lack Of Resources & Political Uncertainty.......................................................................11

5. Globalization & Technological Advancements..................................................................12

Recommendations..........................................................................................................................13

Conclusion.....................................................................................................................................14

References......................................................................................................................................16
 Strategic Analysis of Pakistan Textile Industry -

Successes, Failures in the last thirty years

By: Shamshad Haider (LBS)

Abstract

Textile industry is the main sector that helps to boost up the economic conditions of the

developing countries of the world. Pakistan is also one of the developing countries and textile

industry of Pakistan plays significant role in the economy of the country. After independence of

Pakistan it’s economic and textile sector was sluggish but after time it recovers give better

contribution to the economics of the country. In early 1990 s it contributes 9.5% to the GDP, and

this improvement continue and contributes 7.0% and 7.5% annually during 2003-07. But further

there is need of improving the textile sector of the country and create better opportunities and to

achieve them well, while overcoming the domestic problems and as well as international trading

barriers of the country.

Key Words: Textile industry, Pakistan, opportunities in textile industry, success & failure factors

of textile industry

i
Introduction

Textile is the main engine of the growth of developing countries in the World. It includes

agriculture, production of cotton and conversion into yarn through various manufacturing

processes like threading and knitting processes which transferred into final cloths. Industries are

main customers of textiles. Textile and clothing have considerable role in both employment and

contribution in their countries GDP (Taplin, 2006). Textile industry played an important role in

our daily life and also it has main role in the development of economy of developing countries

(Taplin, 2006).

Textile industry in Pakistan has made huge contribution in term of GDP, employment, domestic

and global market. Pakistan is head of textile sector and it is World's fourth cotton producer and

third biggest user of cotton. Textile sector is the major factor of international trade incomes and

formation of domestic jobs from last fifty years. Textile industry is backbone of Pakistan

economy and there is no any substitute of this sector. The availability of huge pool of

experienced and un-experienced and low cost labor and raw material are main advantages of

Pakistan textile industry which make it more profitable. For Pakistan Cotton and cotton related

goods are important industrial and agricultural goods. Cotton textile manufacture exports of

Pakistan include cotton yarn, cotton cloth, bed wear, towels, tents, and readymade garments

(Sohail & Aamar, 2012). Pakistan is totally dependent on cotton yarn, textile and apparel sector

(Ahsan, 2008).

Before 1950 there was no industrial system in Pakistan but later on businessmen of Pakistan

bought mechanism of textile and they launched textile enterprises in Multan, Kohinoor at

Rawalpindi, Nishat and Crescent textile in Faisalabad, Star textile and Gul Ahmed textile mills

1
limited in Karachi. Despite this, textile sector faces challenges like lack of light and gas energy

(Abbas, Tahi, and Parvaiz).

The main purpose of this study is to analyze the textile industry of Pakistan and its performance

from last thirty years and to explore opportunities for Pakistan textile industry.

2
Research Question

Why textile industry in Pakistan, after being well established in past, facing difficulties now days

and what are the opportunities in Pakistani textile industry in future?

Problem Statement

The textile and clothing sector is the main source of growth for many developing countries in

Asia. Pakistan has a very low share of the international textile market and due to the economic

slowdown in US and Europe, because of dependence on these two markets, Pakistan's textile

exports are also decline. Pakistan's textile exports are declined by 20 percent during FY 2008.

The textile companies are also facing troubles regarding the shortage of electricity and gas, and

they also suffer from international market access, and global economic slowdown. This paper

analyze the weaknesses of the textile industry and to find out the alternative solutions as to make

the textile industry efficient and competitive in facing the challengers India and China and

against the emerging markets such as Bangladesh and Vietnam.

Objectives

 To evaluate the causes of success and failures in Textile Industry of Pakistan

 To evaluate the performance of Pakistan Textile Industry in last thirty years

 To explore the opportunities for Pakistan Textile industry

3
Literature Review

The textile industry of Pakistan utilizes locally grown cotton as a raw material for further

processing. At the time of independence of the country in 1947, there were few spinning and

composite units working in their individual capacity. Over the time the Government of Pakistan

announced a number of incentives for textile sector which motivated the investors to install new

spinning and weaving units. Therefore the textile sector has developed rapidly in the form of

various industrial hubs, currently the textile sector is considered as a back bone of Pakistan’s

economy (Majid, Yasir & Abdullah, 2010).

Textile sector of Pakistan consists of large scale organized and small scale fragmented sub-sectors in

which there are approximately 80% small workshops, 15% medium engineering units and 5% large

engineering units Large scale units are established mostly in spinning sub-sector, while small scale units

work in weaving, ginning, hosiery, towel, finishing, and garments manufacturing sub-sectors. According

to Economic Survey of Pakistan 2008-09, textile sector of Pakistan is comprises of 1221 ginning units,

458 spinning units, 600 weaving units, 50 composite units and 1500 finishing units (Majid, Yasir &

Abdullah, 2010).

Pakistan is the 8th largest developing country in the export of textile products in Asia. This

sector contributes 9.5% to the GDP and provides employment to about 15 million people that are

30% of the 49 million work forces of the country. Pakistan’s share is less than one percent in the

volume of total world textile trade of about US$ 18 trillion annually. Pakistan is the 4th largest

producer of cotton, with the third largest spinning capacity in Asia after China and India, and

contributes 5% to the global spinning capacity. After independence, Since the founding of

Pakistan, the development in Manufacturing Sector has been given the highest priority with

4
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 have been a priority area towards industrialization. Furthermore, Pakistan is

currently produce 1,221 ginning units, 442 spinning units, 124 large spinning units and 425 small

units which produce textile products (Rizwan, et al, n.d).

The textile industry total export is around 10.2 billion US dollars. The textile industry contributes

approximately 9.5 percent of the country’s GDP and continues to be the mainstay of Pakistan’s

exports comprising ~52% of total exports and also represents the principal employment-

generating avenue in the organized and large scale industrial segment (Rizwan, et al, n.d).

It has been a dilemma that Textile industry of Pakistan, after being well established, facing a lot

of problems now days, and more convincingly, this sector is dying in Pakistan. Lot of major

textile industries are either closed or shifted to Bangladesh, leaving there workers unemployed,

there by contributing towards unemployment of the country. Attempts were made to correct the

situation by an increased inflow of aid. Further, the support price for agricultural products was

increased, though still below market prices (Ahsan, June 2008). In the following section(s), we

will explore the major success and failure factors of Textile industry, in the line of which we

attempt to find the obstacles faced by textile industry and suggest recommendations for revival

of textile industry in Pakistan.

Theoretical Framework

The theory of industrial location by Alfred Weber (1868-1958) explains that an industry is

located where the transportation costs of raw materials and final product is a minimum. The

researcher explained two cases, Weight Losing case in which the weight of final goods less than

the weight of raw material, and the other is weight gaining case in which the final product is

5
heavier than raw material and the availability of raw material at low cost. On the basis of this

research our study explains successes and failures of Pakistan textile industry and its

opportunities and performance of textile industry.

Theoretical Model

This theoretical model about the strategic analysis of the Pakistan textile industry and its

successes and failures in last thirty years helps to clarify, what to determine and what to evaluate

and what kind of variables taken for study the Pakistan textile industry, its opportunities and

performance. This model gives the applicable assessment of the textile industry about its

strategic analysis and to study the Pakistan textile industry, its performance and opportunities.

This assessment covers all the beneficiaries related to the textile industry.

Figure: Conceptual Model of Research Paper

6
This research paper plays a significant role in evaluating and exploring the strategies of textile

industry and the successes and failures. It also plays an important role in exploring the textile

industry of Pakistan, its performance and the opportunities of the textile industry of Pakistan.

This research paper is very important for all the beneficiaries who either directly or indirectly

benefited from the textile industry of Pakistan within country or from outside of the country. For

boosting up the performance of the textile industry there is an assessment that is to overcome the

domestic problems that facing the textile companies such as the short fall of electricity and gas,

and improving the accessibility to the international textile market. This research paper is also

help full for the textile companies and as well as to government in their operation related to

textile goods, to improve the exports of textile goods and maximize the contribution to textile in

the economy of the country, while overcome the problems regarding the access to international

market and increasing their exports of textile goods.

Brief Description of Variables

Pakistan Textile Industry

This variable describes the textile industry of Pakistan since last thirty year that its contribution

in the economy of the country and in GDP. It also explains the successes and failures of textile

industry domestically and in international market.

Performance of Pakistan Textile Industry

This performance variable states the performance of the Pakistan textile industry in export of

textile goods and contribution to the economy of the country. It also describes the performance

of textile industry of Pakistan in access of international market, and as well as it describes the

failure of the textile industry domestically and internationally.

7
Opportunities of Pakistan Textile Industry

The opportunities variable for the textile industry of Pakistan explains the strategic that need to

develop to boost up the production of textile goods that it met the domestic demands and as well

as met with the demand of foreign countries, that it can contribute in the GDP and economy of

the country. Its further explain the problems that textile companies facing and suffering in

producing textile goods and how to reduce and solve those problems that it increase the

production of textile industry and met with the domestic and international demand and also get

access to the international market smoothly.

Success & failure of Textile industry in Pakistan

Pakistan is one of the fastest growing economies in the region along with China, India and

Vietnam, The good performance was a combination of sound economic policies, ongoing

structural reforms, and a benign International economic environment. He mentions that the

average real GDP growth during 2003-07 was the best performance since many decades. With

economic growth at 7.0 % in 2006-07, Pakistan’s real GDP has grown at an average rate of 7.0

% per annum during the last five years and over 7.5% in the last four years (2004-07). The size

of economy has reached $145 billion with per capita income at $ 1000. All the three major

sectors; agriculture, industry and services have provided support to strong economic growth. The

commodity-producing sectors (agriculture and industry) contributed 2/5th and services sectors

contributed remaining 3/5th to GDP growth. Within the commodity-producing sectors, the

contribution of agriculture alone has been 15 percent that is 1.1 percent, while 25 percent that is

1.8 percentage contributions came from industry. Services sectors contributed almost 60 percent

(Ahsan, June 2008).

8
The industrial sector of Pakistan and he describe that long considered a sunset industry in

industrial societies, the textile and clothing industries nonetheless continues to maintain a

significant presence in the European Union (EU) both in terms of employment (more than 2

million people) and their contribution to GDP (Eurostat, 2003). Since, they are dominated by

large number of small- and medium-sized enterprises that typically are concentrated in particular

regions; they also assume a cultural and social cohesiveness function (Taplin, 2006).

Pakistan’s textile industry is a major contributor to the national economy in terms of exports and

employment. Pakistan holds the distinction of being the world’s 4 thlargest producer of cotton as

well as the 3rd largest consumer in the world (Ahmed, n.d).

There were 495 textile mills in Pakistan at the end of 2003, of which 50 were composite

(vertically integrated) while 445 were spinning only units. In addition, there were 124

independent weaving plants and nearly 225,000 power looms installed in the Small and Medium

Enterprise sector around the country, mostly installed in the last five decades, the country’s

textile industry produced 1.9 million tons of cotton yarn in 2003-04 and 27.28% of which was

exported. In the same period 5650.5 million sq. meter of cloth was produced in the country,

35.49% of which was exported. Total textile related exports of Pakistan were US $12.2 billion in

2003-04 (Islam, 2006).

Pakistan's textile industry is going through one of the toughest periods in decades. The global

recession which has hit the global textile really hard is not the only cause for concern. Serious

internal issues also affected Pakistan's textile industry very badly. The high cost of production

resulting from an instant rise in the energy costs has been the primary cause of concern for the

industry (Ahmed, n.d).

9
Although textile being the major self supported private industrial sector in Pakistan, yet since

from early stages, this sector faced lot of obstacles. Some of them are mentioned below:

1. Nationalization

Nationalization of private enterprises during late 1970s was a blow to private sector participation

in economic activities. However, in early 1980s, government began a policy of greater reliance

on private enterprise to achieve economic goals. This policy continued throughout the late 1980s

and early 1990s. The GDP growth rate was 6.5 percent in the1980s, and the trade gap was $ 2.5

billion (Ahsan, June 2008).

2. The Shift of Textile Industrial Setup

The commonly accepted theories explaining the evolution of global capitalist economy,

According to this theory, factories are periodically transferred from one geographical area to

another as industrialists continuously search for countries in which lower wages apply Textile

and clothing industries, given their labor-intensive nature, follow this theory and it can be seen a

global shift of the world’s textile and clothing industries towards the less developed economies,

including Mainland China, Thailand, Indonesia and the Caribbean states According to the

classification of the countries exporting clothing China results the first exporter, with 16.2

percent, but Italy with7.1 percent and the USA with 4.4 percent closely follow, ranking the

second and respectively, the fourth place. Among the 15 leading clothing exporters, eight are

high-income economies and they altogether account for over one-third, 36.8 percent of the

world’s clothing exports. In comparison, low-income countries only contribute 20.1% (Caputo &

Palumbo, 2005).

In decade of 1970s the withdrawal of economic incentives either partially or completely, The

private sector started taking capital out of the country to invest in other third world countries, and

10
the foreign loan commitments in the public sector swelled up. The small entrepreneurs were

burdened with the liability of repayments of these extra loans, maintains. However, growth rates

indicate, “Development was emphasized” during this period (Ahsan, June 2008).

3. Low level of technical innovation & high competition

The labor intensive industries often with low levels of technical innovation and minimal capital

requirements, they have experienced considerable competitive pressure in recent decades from

low wage newly industrialized countries whose imports have penetrated western markets

(Taplin, 2006). Due to low level of technical innovation Pakistan's textile industry is facing

problem. Installation or up-gradation of old machinery is also a problem and causing a problem

in the production of products of international standard.

Textile industry of Pakistan is facing tough competition in International market due to increased

cost of production, which is making it less competitive than the neighboring countries like India,

Bangladesh, & China.

Pakistan is among top 10 textile exporters of the world. Textile exports . Textile export of world

over is about $400 billion out of which China tops the list with present export of $55 billion,

followed by Hong Kong $38 billion, Korea$35 billion, Taiwan $16 billion and Indonesia, India,

Bangladesh and Pakistan$11billion each (Ahemd, n.d).

4. Lack of Resources & Political Uncertainty

The textile industry in Pakistan presents an interesting case to explore the phenomenon of

clustering in a developing country. Though Pakistan is a transition economy, its textile industry

is globally competitive.

Benazir Bhutto’s assassination in Pakistan followed by unstable law and order situations,

Moving ahead in 2008 the textile sector showed record negative growth due to financial church
11
in global economy resulting in slow down in economy growth chased by soaring oil, food and

other commodity prices, softening of external demand and turmoil in the international financial

market. The economy is also going through the most terrible energy crisis affecting the

performance of the textile industry (Ahmed, n.d).

5. Globalization & Technological Advancements

The textile industry carries out a know-how-based, marked-oriented globalization; the clothing

industry has focused on a cost management strategy. Thus, in the textile industry a process

towards technical high-tech products and foreign investments can be observed. The clothing

industry developed a new type of the service enterprise, to meet the competitive needs of

globalization. Those types of enterprise combine customer requirements with know-how, as well

as creative and production potential on the international labor market. Within the framework of

globalization, in the clothing industry, local manufacturing in Germany itself has become

unimportant. Shifting production, like outward processing, now stands in the foreground (Adler,

2004).

12
Recommendations

 The textile sector is playing vital role in the development and boosting the economic

conditions of the developing countries and main of the developing countries focusing to

boost up their textile sector. So further there is need for the developing countries to focus

on their textile sectors and make strengthen it that it gives more contribution in their

GDPs and economy.

 The Pakistan textile industry is a main source of enhancing the Pakistan Economic

conditions, and its contributing too much in the GDP and economy of the country. But

there is further need of solving the problem that textile sector or the textile industry

facing such as load shedding and shortfall of gas.

 As Pakistan textile sector facing problem in accessing the international market for the

export of their textile goods, so in this regards the government of Pakistan and the textile

industry both have need to get a solution and make huge access to international market

that enhance their international trade income of the country.

 Governments should charge Minimum taxes from industrialists. Tax payer friendly tax

policies should be made to the maximum level. Too much of the additional tax should

not be imposed on the industrialists.

 Through collaboration with social and electronic media, there is dire need to conduct

trade fairs on national and international level to promote textile industry of Pakistan.

13
Conclusion

Textile industry is one of the main engines of growth of developing countries in the world. It

includes agriculture and production of textile goods/materials such as cotton and its conversion

into finish goods. This can contribute and help to enhance economic conditions of the developing

countries through enhancing the international trade income and also enhancing the employment

opportunities within country.

Pakistan is also one of developing country and the textile sector of Pakistan is the major source

that plays vital role in the economy of the country. Since independence of Pakistan 1947,

Pakistan in economic term was breakup of the customs unions and the economic conditions was

sluggish. Now Pakistan became an 8th largest country among the developing countries in Asia in

export of textile goods and the 4th largest in the production of cotton. This sector contributes

9.5% to the GDP and provides employment to about 15 million people that are 30% to the 49

million work force of the country. In the late 1980s and early 90s this sector contribution cause

the growth of GDP up to 6.5% and trade gap was $2.5 billion. Further during 2003 – 07 the GDP

growth was best performing at economic growth at 7.0% annually in last five years and over

7.5% during last four years that is 2004-07. With the passage of time this sector gradually returns

into the production of fairly high quality of textile goods, today Pakistan has highly integrated

textile industry.

So from overall it’s found that the textile industry is the huge source of development of

economic conditions of the developing countries. The textile industry of Pakistan also is the

main source of economy, from last thirty years the performance of Pakistan textile industry

gradually boosting up and contributes to the economy of the country. But still there is need of

focus to further boost up the textile sector and enhance its contributions in the economy of the

14
country, while solve the various domestic problems that facing the textile companies and also the

international trade barriers.

15
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EnvironmentalComplexity in the textile sector of Pakistan. Asian Journal of Business

Management .

Adler, U. (2004). Structural change, The dominant feature in the economic development of the

German textile and clothing industries. IFO institute for Economic Research.

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Trend during last 10 Years with Reasons & Recommendations.

Ahsan, R. (June 2008). International Trade Challenges and Opportunities for Pakistan Cotton -

Textile and Apparel sector.

Bradstreet, D. &. (n.d). Textile Industry Report.

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adapt to change. European Business Review.

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17