Textile Industry Report

Muhammad Sarmad Naeem - 14269

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Contents
Contents.....................................................................................................................................................2
Significance of the Industry:.....................................................................................................................3
Issues faced by the Industry:....................................................................................................................4
Reasons for lack of Diversification:............................................................................................................7
Issues for Quality of Raw Materials:...........................................................................................................9
Research & Development:.........................................................................................................................11

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 Significance of the Industry:

The textile sector of Pakistan plays a vital role, as a backbone of country’s economy – its
significance stemming mainly from its huge cotton production capacity. The development and
affluence of the economy depends mostly on the development of this sector. The textile industry
of Pakistan plays a major role to boost the economy and is the most lucrative sector, generating
around 57-60% exports for the country. Therefore, it has high competition internally. The
country currently ranks as the 4th largest producer of cotton in the world, providing 9% of the
total textile needs. The textile Ministry has duly capitalized on this capability by developing and
promoting its textile sector. Consequently, Pakistan now also has the third largest spinning
capacity in all of Asia.
It is one of the most protected industries worldwide. Textile products are produced by third
world countries like Pakistan, Bangladesh, Nepal, etc. and these countries start their
industrialization process with textile. The industry has strong linkages with the rural population,
and it provides employment to about 40% of the total industrial labor force. Moreover, the
contribution of this industry to the total GDP is 8.5%. Textile Industry has been the major driver
of the economy for the last 50 years in terms of foreign currency earnings and jobs creation.
The basic raw material for the industry is domestically available, indicating favorable factor
conditions. The type of technology used is standardized, which suits a developing nation and no
constant upgrading is required. Pakistan’s unskilled and semiskilled labor can easily be utilized
in this industry.
Pakistan is known for manufacturing thread. The world recognizes our ability to produce good
quality coarse yarn. 5% of all thread in the world comes from Pakistan. Pakistan is the 2nd
largest supplier of cotton yarn through 26% share of the international market. Economies of scale
is not very evident in this industry; small or large production does not make much of a difference
in cost. This suits the developing nations, who have financial constraints and can produce
manufactured goods in small cottage industries. The developing nations don’t become
competitive as textile is a labor-intensive industry.

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 Issues faced by the Industry:

The major economic objective of any country is to widen the sector which is contributing such a
large proportion to its GDP, exports and employment. The textile industry is the perfect example
of such a sector in Pakistan. However, the country faces several issues and challenges in further
development of its textile sector.

Poor Infrastructure:

The textile sector depends heavily on the resources of infrastructure which include supply of
water, continuous supply of power, efficient logistics and transportation, tax structure, and raw
material supply. The load-shedding of electricity and gas causes a precipitous decline in
production which also reduces the export order. The cost of production also rises due to instant
increase in electricity tariff. Due to load shedding some mill owners use alternate source of
energy which further lift their cost of production. Moreover, rising costs of power due to
inefficiency in the power sector have led to increased cost of production and is also making it
difficult to the industry to compete with rivals. Due to such dramatic situation the capability of
competitiveness of this industry in the international market gets badly affected.

Low Productivity and Poor-Quality Standards:

The machinery used in Pakistan is of cheap and poor quality, and there are several factors
responsible for it. Since the economy of Pakistan is largely dependent on this industry, the
currency is devalued every time a demand is made by the textile manufacturers. Once the
currency is devalued, the people working in this industry buy second-hand machinery from
China, , Korea, India and Taiwan where no focus is given to the quality but only to the costs
associated with acquisition, which gives them a short-term advantage. There is no focus on
increasing efficiency as we are using 40-50 years old machinery, thus the cost of production is
higher. Bangladesh has a relatively newer sector, thus they have new machinery, and their cost of
production is low. There are very serious internal issues present, and a lot of disparity within the
industry. The medium and small enterprises are unable to maintain quality standards. This ends
in the production of poor-quality products. Pakistan’s textile industry should concentrate on
latest material management techniques and should train workers. The inability to modernize the
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equipment, machinery and labor timely has led to the deterioration of Pakistani textile
competitiveness.

One of the major contributing factors to this low productivity and poor quality is non-adoption of
modern planting techniques such as furrow planting which is currently only 6-7%. At the
ginning, spinning and weaving stages, reliance on outdated and less efficient technology is
seriously impeding the productivity rates. If we look at the power loom sector, we have around
20,600 power looms in which around 60% are more than 10 years old while 20% are 1-10 years
old and the remaining 20% are 1-5 years old.

Lack of Research & Development (R&D):

The lack of research & development (R&D) in the cotton sector of Pakistan has caused the
quality of cotton to be quite low as compared to the rest of Asia. Due to the subsequent low
profitability in cotton crops, farmers have been seen to shift time and time again to other cash
crops, such as sugar cane. It is the paucity of proper R&D that has led to such a state.
Biotechnology and genetic engineering are being used in developed countries to increase the
quality and quantity of cotton. This allows colored cotton, organic cotton and various other
varieties to be produced all of which add to the value chain of the textile industry. Little to no
effort is being made by the APTMA in R&D as compared to very small-scale research by private
companies. Aside from this, the quality of the cotton crop is very low which decreases
profitability causing many farmers to switch to other crops. This in turn leads to reduced cotton
production.

Political Instability and the Role of Government:

After independence, there were a lot of governmental policies that directly or indirectly affected
the textile industry of Pakistan. Some of the major policies include: non devaluation of currency
(1948), Export Bonus Scheme (1959), Nationalization of the industry, devaluation of currency,
export and import policies in Zulfiqar Ali Bhutto’s era, denationalization of the industry, rebates
on exports, and expansion in the industry in Zia-Ul-Haq’s era, the formation of a ministry of
textile (2004), etc. This industry has always been strongly protected by the government in
Pakistan. Since more than 70% of our economy is dependent on textile, there have been
countless cases in the past when the government has devalued the currency to meet the demand

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of the people in textile. According to Porter, no industry can flourish as long as the government
intervention remains strong. Pakistan’s textile industry is an example of this as the industry is
highly protected and pampered by the government. Unless and until stakeholders are involved
and the hold of the government loosens, the textile industry of Pakistan hardly has any hope for
improving. Bangladesh has become a threat to us even though it has no raw materials in this
industry. Meanwhile, in Pakistan, APTMA keeps demanding devaluation of the currency and the
government has no choice but to give in. Nine different governments ruled Pakistan during the
period 1988-1999. This instability had affected all industrial sectors including the textile
industry.

Composition of the Labor Force:

The labor force is mostly made up of people who have no prior knowledge about the industry.
They are hired and then taught what they need to know. This is because the textile institutions
don’t teach what is relevant for working in the industries. Another issue is that people who
graduate from textile institutions demand more salary but are not knowledgeable enough. That’s
why the employers prefer hiring people and then teaching them what they need to know
themselves, instead of hiring graduates at a higher price. 80% of the labor force is made up of
people with no prior knowledge of the industry and only 20% is made up of actual graduates
from textile institutions. The institutions in turn say that no one wants to teach there, and hardly
anyone ever comes to study textile. The people who come to teach also leave very soon. What is
being taught in these institutions is not aligned with what the industry is looking for when hiring
people. Low labor cost can only be an advantage if it is coupled with high productivity. Low
labor cost with even lower productivity levels, cancels out the potential advantage. Moreover, the
countries we cater to have 100% participation of women in the labor force, while Pakistan has
one of the lowest participation of women in the labor force.

Taxation Structure:

Despite being such a strategically important industry, it has been subject to numerous taxes and
duties. Some of these include Corporate Income Tax, Custom Duty & Surcharge on import of
raw material and machinery, Excise Duty, Turnover tax on exports, Social Taxes, Sales Tax,
Turnover tax on local sales, Municipal Taxes.

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Anti-dumping duties:

As Pakistani goods cater to the low-end market, they tend to be cheaper. For this reason,
Pakistani textile industry was accused of conducting dumping activities in the European market
which stemmed in the European Commission imposing anti-dumping duties for five years on
grey cloth and yarn. Duties of this sort have hurt the industry and resulted in lower performance.
More than 50% of Pakistan’s fabric production is in the form of grey cloth. But the imposition of
anti-dumping duty on the export of gray cloth by the European Union has exposed the potential
for exports and export earnings by Pakistan.

Exchange rate fluctuations:

Pakistan’s currency is pegged to the dollar and its key exports are to the Far Eastern and the
European states. The government frequently devalues the currency which makes the exports
cheaper and increases the cost of production at the same time.

Sethism:

Pakistan’s textile industry is owned by a few, powerful companies. These families are either in
the government or have close ties with them. The mills are then run by family members, not
really depending upon their expertise levels and as these companies grow larger, they become
increasingly inefficient to manage.

Reasons for lack of Diversification:

Dependence on one source:

Pakistani textile industry lacks the ability to develop, produce and market synthetic products and
fabrics which are required for the items like swimwear, skiwear and industrial apparel. This has
restricted the industry from diversification and made it heavily dependent on one single fiber i.e.
cotton and its blends. Since 1997, the government has been following an Open Policy, allowing
free trade of cotton. The primary objective is claimed to be the government’s wish to ensure
international prices to the cotton growers in Pakistan. Being an agriculture commodity, one can
never be sure of its production or quality, therefore the textile industry must lessen its
dependence on cotton. The obvious course of direction to follow is the synthetic route, because

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of its local availability as well as plenty of stocks on the world market.

Demand Conditions:

Local demand: The local demand is generated by three main sectors.

 The most important sector that generates local demand is households. The cloth they
demand can be made from coarse yarn. There is no pressure on the industry to go
towards higher price.
 The second sector is government; public sector institutes. This is the demand for police
and army uniforms, hospital beds and bandages. This can also be fulfilled by coarse
fabric.
 Third sector is the garment manufacturing sector. This is a very small part of the overall
local demand. This sector is 100% export oriented. It is not very important for the
industry because it is only a tiny portion of the overall industry. Their demand for high
priced yarn does not push the industry to do more.
 The most important elements for the spinners and weavers are the first two sectors.
There is no focus on the garment manufacturing, and the industry is not being pushed
towards this. There is no pressure on the industry to move towards value addition. Thus,
they don’t feel any need to shift their focus. The foreign demand, however, is very
different from the local demand.
 The international market we cater to demands piece dime, all greys and all blues etc. The
taste of the markets we’re catering to is very different from our local demand. We
demand printed fabrics, which can be made from coarse yarn (shorter staple length),
while piece dimes are made from longer staple length yarn.
 The international market demands blended fabric, and not purely cotton. The climatic
conditions of the US and European countries are such that this is more convenient for
them. Blended fabric is more durable, and the demand for blended fabric is going up
internationally, while Pakistan is still focused on pure cotton.
 Pakistan is known for its yarn, but there is no value addition being done. This is why the
markets we cater to only require good quality commodity products from us. They do not
buy garments from us because we don’t produce garments according to their demand.

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 We only provide them with good quality commodity products, and the industry is
satisfied with this.
 Thus, according to Porter’s model, we are currently at a factor disadvantage. We have
abundance of raw materials and we are very relaxed and confident, feeling no need to
move towards value addition.

Man-Made Fiber:

There is a huge cultural and climatic difference between Pakistan and the countries it caters to.
The climate there is such that it is more convenient for them to use blended fabric. Since
everyone has jobs, they don’t have a lot of time for pressing clothes, etc. they prefer blended
fabric. The maximum they use is 60% cotton and 40% manmade fiber. In Pakistan, the most we
get to be 80% cotton and 20% manmade fiber. Thus, the demand for blended fabric is going up,
and demand for cotton, natural fabric is reducing. The maintenance of blended fabric is easier,
and it is more durable. For international sustainability, Pakistan needs to bring itself in line with
the international demand. This can either be done by aligning ourselves with the demand of the
countries we cater to, or by diversifying our markets to include countries like Malaysia, Saudi
Arab, and Middle Eastern countries which have cultures and climatic conditions like ours. India
has started to work on manmade fibers. 40% of their spindles are making manmade fiber, while
we have only 18% of spindles making manmade fiber. China maintains top position in both
manmade fiber and pure cotton. Research needs to be done for this in Pakistan, but the garment
manufacturers aren’t given much importance. The demand for garment manufacturing in
Pakistan is going down; while it is going up in the countries we cater to.

Issues for Quality of Raw Materials:

Staple length:

A short staple length makes coarse yarn, which has a loose twist and is rather rough as compared
to longer staple length yarn, which is smooth. Longer staple length means that the yarn is tightly
twisted and is more refined, smooth and soft. Coarse yarn can be used to make low priced items,
and not high-priced items. Research and development are required for longer staple length. In
Pakistan, we have moved from short to medium staple length (1/32 inches) after a long time of

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research in the institutions. Pakistan makes good quality coarse yarn. Better R&D is required to
move further to making longer staple. Currently we are making 40-60 single staple length yarn,
which can be used to make low priced items, like bedsheets, towels, bandages and other
commodity products. However, longer staple length is required to making high priced items, like
garments. One issue is that the sector is under the control of the government and lacks pace and
dimension. Unless stakeholders are involved there will remain a lack of motivation because their
own money is not invested in the research. India has developed the ability to make longer staple
cotton after research and development. However, they are not exporting it and still import longer
staple yarn. Pakistan is an importer of cotton, even though we have it abundantly present in its
natural form. The per capita consumption of Pakistan is lesser even with high population. The
markets we cater to (US and European countries) have a higher per capita consumption. The
quality of our yarn is great, but the nature of the yarn is different. Coarse yarn is used to make
commodity products, low priced items.

Impure cotton:

The pricing mechanism is not linked with the purity content, and as a result the people working
don’t understand the significance of this in the supply chain. Jute bags were used to collect
cotton before, but after efforts were made by the government of Pakistan to create awareness
about the negative effect of jute bags, there has been a significant decrease in that. The jute items
are very hard to remove from the cotton, which is done in the ginning process. The government
has provided plastic bags to use instead, and the use of jute bags has sufficiently declined. The
cotton is picked in the early hours of the morning, when the moisture content is high, and the
impurities are more. The women in the rural areas do the picking. Because of the coarse yarn,
and the fact that the cotton is not very pure, the items made are, though of very good quality, low
priced commodity products. Everyone can make commodity products, which is why Bangladesh
has become a threat to us. The picking of cotton should be done by machinery. The impurities
have a great negative impact on the supply chain management and awareness needs to be
increased about this issue Pakistan has one of the most impure cotton because of this which in
turn makes the ginning process even harder. This is a vicious circle: short staple length and
impure cotton means that there are issues in dyeing, and the finishing is not good, which leads to
production of low-priced commodity products, as the nature of the yarn is coarse yarn. This

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means that international markets only demand commodity products from us, which brings us
back to using short to medium staple length cotton and there is no development.

Research & Development:

There are 4 R&D institutions working in our country:

1. Central Cotton Research Institute in Multan.

The Central Cotton Research Institute Multan has been striving to conduct fundamental and
applied research on cotton since its establishment in 1970. The institute expanded its horizon to
encompass applied research with special focus to handle the problems faced by cotton farming
community regarding production technology and to boost cotton production through evolving
high yielding varieties with desirable fiber parameters. The research work has been focused on
the subsequent main aspects:

• Study the shrub from botanical, genetical, production, physiological, chemical, entomological,
pathological and other relevant facets in an exceedingly coordinated manner.

• Undertake research work to national importance, handle problems of inter-regional nature.

• To develop cost-effective cotton production technology.

• Provide education and training on cotton production technology to the agriculture research,
extension, teaching staff and other stakeholders.

• Identify problems of cotton growers and advocate remedial measures

• Transfer production technology to the cotton growers.

• Educate and motivate cotton growers and monitor research outcomes.

• Training manpower across the country and other cotton growing countries on “cotton research
and development.”

• Provide technical support to the Pakistan Central Cotton Committee in coordinating and
developing a national program for cotton research and development.

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 2. Central Cotton Research Institute in Nawabshah.

The Pakistan Central Cotton Committee has established the Central Cotton Research Institute,
Sakrand at District Shaheed Benazirabad (Nawabshah) in 1976 for Cotton Research with a vision
“Improving production and quality of country’s Cotton (including the event of transgenic
immune to biotic and abiotic stresses) with reduced cost to form cotton production effective and
competitive within the national and global market”. Its main mission is to develop economically
viable and eco-friendly production and protection technologies for enhancing quality cotton
production on sustainable basis for the subsequent coming years. Central Cotton Research
Institute, Sakrand is in the center of cotton growing areas of the River Indus Valley which is that
the second largest cotton producing region of Pakistan. it's a typical area with favorable climatic
and ecological conditions for cotton cultivation.

3. Pakistan Institute of cotton research and technology.

4. Textile industry R&D center.

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References:

Afridi, A. K. (2015). Ministry of Textile Industry. Government of Pakistan.

Ministry of Finance. (a.n.d.). Pakistan Economic survey 2018-2019.

https://textilelearner.blogspot.com/2015/12/textile-industry-of-pakistan-overview.html

http://www.findglocal.com/PK/Multan/401549139943422/Central-Cotton-Research-Institute-
Multan--Pakistan

https://www.ccris.org/reports/1-Introduction%20of%20Annual%20Report-2014-2015.pdf

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