The textile and apparel sector of Pakistan is experiencing a longtime nightmare in the export growth that never going to end. The catastrophe in the export is not going to over quite soon rather overall synopsis is not also favorable for Pakistan.
But the textile sector in Pakistan has an overwhelming impact on their economy, contributing 60% to the country’s exports. So, to obtain a prospective growth in the Textile and Apparel they should have to fact-finding of the challenges and opportunities of the future business.
Present situation of textile and apparel export
In 2018-2019, Pakistan’s largest export industry was the textile industry, with hosiery and readymade garments contributing 544 billion PKR/3.47 billion USD to total trade. Textile exports during 2MFY20 increased 2.3 percent year on year against a growth of 3 percent in total exports during the period.
The textile group accounted for 61 percent of total exports during the first two months of FY20 as opposed to 62 percent during the same period last year—not too major a difference. In fact, despite a loss in percentage shares, the balance of trade within the textile group actually improved by 10 percent.
Growth has been seen in textile exports that are typically higher on the value chain mentionable knitwear, bedwear and ready-made garments. These three together constitute more than 50 percent weight within the textile group and a 38 % share in total exports
Experts of the Pakistan textile sector think that the readymade garment industry has emerged as one of the siring sector for the country though the rise is on a very small scale. The demand for readymade garments for the local and outside is very significant. Most of the local requirement met by this industry and machines are also domestically made or assembled.
Pakistan’s opportunities to grow
GSP+ status: Pakistan received the GSP+ status in 2014 and then the country’s exports to the EU have increased by 62%. According to Pakistani media reports in the early years of the status Pakistan’s exports to the EU raised significantly but later it remains stagnated at €5.514 billion for the last three years.
The reasons behind the stagnant situation are due to insecure political stability and the relocation of trading houses and buying house of major retailers and brands to other competing countries.
Experts opined that Pakistan can boost up its exports to the EU by 15 times and not just in textiles rather to another sector also. Since Pakistan became a beneficiary in 2014 that enjoy GSP Plus concessions to 28 European countries, its exports to the EU have averaged 32%, against 25% in the period prior to this status. Actually GSP+ status is the most potential and greater opportunity for Pakistan to beef its Textile and Apparel sector.
EU to help Pakistan boost textile exports: The European Union (EU) and the Pakistani textile industry recently joined hands to work for the sustainable growth of the country’s textile sector. According to the EU ambassador-designate to Pakistan Androulla Kaminara, if the government and the industry leaders can act with proper perception management, the country can double its exports to the EU bloc.
“Pakistan needs to prepare itself to meet the challenges of sustaining generalized system of preferences plus (GSP+) status so as to avail the opportunities of increasing exports to the EU,” Kaminara told while meeting a delegation of the All Pakistan Textile Mills Association (APTMA).
Egypt, Pakistan agree to promote trade: Pakistan’s commerce ministry and the Egyptian Commercial Service agreed to work together and a memorandum of understanding (MoU) recently to set up the JWG on trade focusing ‘Look Africa Policy Initiative’ of the ministry.
Both sides agreed to enhance trade in key sectors, including textiles and leather products, agricultural products, engineering industries (electrical apparatuses and power appliances), construction and building materials, fertilizers and chemicals, medical and surgical instruments and pharmaceuticals, according to Pakistani media reports.
The new block ‘Look Africa Policy Initiative’ if actively interact then it can give Pakistan to source raw materials for manufacturing and boost up its international trade.
The China–Pakistan Economic Corridor (CPEC): China Pakistan Economic Corridor is a framework of regional connectivity. CPEC will not only benefit China and Pakistan but will have a positive impact on Iran, Afghanistan, India, Central Asian countries. This initiative had opened huge investment opportunities in Pakistan and cooperation between the two countries. The corridor is helping to grow due to the grant of extended access for Pakistani products to the Chinese market.
Prime Minister Imran Khan at Investment Forum Saudi Arabia said, “CPEC is a great opportunity for Pakistan. CPEC connects us to China which is one of the biggest markets. Because of CPEC we are developing Special Economic Zones (SEZs) which invite investment across the globe. China is a huge market and the CPEC route will connect China and Pakistan located at the strategic position of the world.”
Xi Jinping, President of China said in an Official Message, “Friendship between China and Pakistan is based on trust and mutual support, and we have been devoted friends through both good and hard times. Our friendship is a pacesetter for amicable relations between countries.”
Improving law and order situations in the country
Once stands at number six in a list of ‘world’s most dangerous cities’ the financial capital and major city of the country is now considered as a relatively peaceful and safe city. So, Pakistan is included in the list of safe cities due to political stability and peaceful democratic governance. The role and sacrifices of Law Enforcing Agencies (LEAs) is maintaining proper law and order situation in the City.
Pakistan’s challenges to grow
Less expertise in man-made fiber: Pakistan’s Textile and apparel industries are less focused on synthetic fiber and less innovative of these kinds of products. Their entire apparel supply chain still based on cotton and so this could not attract the EU and the US market. As now world demand has been shifting to man-made fiber from cotton and which Pakistan has been unable to exploit so they are standing behind in the global trade.
Power and energy crisis: Uninterrupted energy supply is most essential for the manufacturing process and for smooth industrial growth. But due to poor energy management, Pakistan’s energy resources have been used inefficiently for decades.
According to a survey by the World Bank, 66.7 % of the businesses in Pakistan city electricity shortages as a more significant obstacle to business than corruption (11.7 %) and crime/terrorism (5.5 %).
Increasing raw material prices: Along with the power crisis, Pakistan’s industrial calamity deepen because of Increasing yarn and raw material prices. The main cause of increasing raw material prices like cotton, the grower of cotton or farmers of raw material unable to get fair price due to middle man obstacle and for the inappropriate supply chain management. The mismanagement and lace of policy from the government are also accountable for the raw material prices.
Lack of R&D institutions: Experts of the sector think Pakistan has lack of effective links between research organizations and industry to develop a new product. The lack of research & development (R&D) in the cotton sector of Pakistan has resulted in a low quality of cotton in comparison to the rest of Asia.
Resulting in low profitability in cotton crops, farmers are shifting to other cash crops in Pakistan. There are also lack of supplementing R&D efforts in fabric to compete with the existing and emerging competitor.
Lack of new investments: Due to disruptive political circumstances in Pakistan nobody is interested to invest there. Though foreign investment in Pakistan increases as the security situation improves but this is not sufficient to turn up its overall textile and apparel industry to see as prospective.
According to a World Bank index ranking countries according to the ease of doing business, Pakistan moved up 11 places last year to number 136. The previous year, it was ranked 147th among the 190 nations surveyed.
So, this is a positive sign that Pakistan could take it an opportunity to secure future business.
Lack of modern equipment and machinery: As Pakistan does not see adequate investment flow in the country so its textile and apparel industry remain unchanged, not timely modernize the equipment and machinery.
There is not any new heavy investment in this sector for a long time. So, Pakistan’s textile has loosened its competitiveness as compared to other countries like India, Bangladesh and China.
Increasing cost of production: Due to the devaluation of rupee the cost of inputs in the industry soring and make Pakistani products uncompetitive in the world market. Because most textile and apparel raw materials used by their industry and export are imported.
In conclusion, to optimize the textile and apparel business in the global platform Pakistan should meet more and more customer’s needs. The government’s policy is highly important to create a comfortable atmosphere in the trade and business for foreign investment as well as to electrify the local entrepreneur.