Textiles is the most important manufacturing sector of Pakistan and has the longest production chain, with natural potential for value addition at each stage of processing, from cotton to ginning, spinning, fabric, dyeing and finishing, made-ups and garments. The sector contributes nearly one-fourth of industrial value-added, provides employment to about 40%
of industrial labor force, consumes about 40% of banking credit to manufacturing sector and accounts for 8% of GDP. Barring seasonal and repeated fluctuations, textiles products have maintained an average share of about 57% in national exports. However, despite being the fourth largest producer and third largest consumer of cotton globally, Pakistan’s comparative advantage weakens because of exporting low value added textile products.
A report mentioned the textile sector of Pakistan as the provider of 9% of the international textile needs and so it is the 8th largest exporter of textile products. But the country is facing much stronger competition not only from the regisonal competitors (Asian—China, India, Bangladesh etc.) but from the global level competitors from American and European textile players with the support of much advanced infrastructure and improved systematic operations.
Pakistan ‘Textile Policy 2014-19’
To become a leading country in the field of export of value-added textile products, Pakistan announced a policy, called ‘Textile Policy 2014-19’. The policy gives actionable plans to make the textiles sector competitive and sustainable. The Government is trying to make sure that the benefits of Textiles Policy 2014-19 are spread at the national level and have a positive impact on small and medium enterprises through various measures including development of clusters. The main theme of the current Policy is to increase dependence on special factors which give comparative advantage and to increase the use of new technologies especially ICT options, for improving competitiveness of the entire textiles value chain.
Abbas Khan Afridy, Minister for textile industry, said in a message, “The Policy not only addresses the complete value chain but also aims to develop the industry and make the sector self reliant. Converting more primary raw materials in to value added product, increased productivity and quality will be the prime focus. Policy measures taken by the Government are interlinked, developing fibre base through installment of capacities and tariff rationalization will promote value addition and thus creating new jobs for the emerging generation.”
There are 15 goals in the policy including one to double textiles exports from $13 billion per annum to $26 billion per annum in next five years.
Joint venture with China and Turkey
Commerce Ministry officials of China’s Eastern port city of Weihai and the All Pakistan Textile Mills Association have signed a Memorandum of Understanding to explore the potential of joint ventures and investment opportunities in textile sector of the two nations. On the other hand, Turkey’s commercial counselor has signaled his country’s interest in joint ventures with Pakistan in printing, security systems, building materials, construction services and textiles.
Foreign Direct Investment (FDI) trends
According to State Bank of Pakistan (SBP)’ data, the inflow of FDI into the country has declined by 45.2 percent to $459.8 million during first five months of current fiscal year as compared with $839.7 million in the corresponding months of the last fiscal year. However, in textile sector the FDI was increased, in July-December 2016, the FDI was $23.7 million where the amount was $21.0 million in previous year.
Installed capacity, working and production of yarns
In spinning sector, the installed capacity increased significantly and the production of yarn increased from 3.01 billion kg in 2012-13 to 3.08 billion kg in 2014-15, thus showing an average growth of 2% per annum. The production of yarn share in coarse counts is 47.1%, medium counts 23.7%, whereas fine and super counts 5.4% and mixed polyester 23.8% in that order. Production of yarn is not increasing significantly, as Pakistan is now fast losing its cotton spun yarn markets to the much cheaper Vietnam. Pakistan’s cotton yarn exports, have been on the decline for the last couple of years due to surging cost of production on account of sharp spikes in energy prices and shortages.
Table 1: Installed Working Capacity and Production of Yarn (000 Spindles)
|Year||Installed Capacity||Working Capacity||Production of Yarn (million g)|
|Source: i) All Pakistan Textile Mills Association.
ii) State Bank of Pakistan Annual Reports.
Exports of cotton yarn
|Table 2: Export of cotton yarn|
|Year||Quantity (000Kg)||Value (000 US$)||Unit Value ($/ Kg)|
|Source: Trade Development Authority of Pakistan.|
Pakistan’s leading buyers of cotton yarn are China, Hong Kong, Bangladesh, Korea Republic, Turkey, Japan and Portugal. According to table-2, export of cotton yarn decreased from US$ 2.25 billion in 2012-13 to US$ 1.85 billion in 2014-15, showing decline of 18%. Average unit price awareness of Pakistani cotton yarn in the international markets is also very low compared to that of its competitors. Average unit price of cotton yarn reduced from US$ 4.10/kg in 2010-11 to $ 2.74/kg in 2014-s15.
Imports of spinning machinery
In 1947, there were only six spinning factories in Pakistan, but now there are approximately 503 spinning mills and it has been a major Asian market for major textile machinery manufacturing nations where China, Italy, Germany and Switzerland have been among top exporter of textile machinery to the country. The flow in spinning machinery import is increased, though the spinning industry is facing acute power and energy shortage.
|Table 3: Import of Textile Spinning Machines and Parts
(Value Rs. in Millions)
|Spindle flyer ring travelers||533||595||616|
|Textile spinning machines||427||487||406|
|Source: Pakistan Federal Bureau of Statistics.|
Pakistan is said to be the single crop economy i.e. cotton and textile claims the biggest share in terms of the contribution in the national economy of the country. However, there have not been enough efforts from the country’s government in the matter of energy crisis, which is responsible for many factories closed down. “Unless the government honors its promises of reducing the energy prices, facilitates the buyers’ travel to Pakistan, returns the stuck-up refunds, plugs inflow of smuggled and under-invoiced textiles, and actually zero-rates exports, the reversal of declining trend will remain a distant dream,” Ahmed Kamal, Leader of the Faisalabad-based Pakistan Textile Exporters Association (PTEA), said a few days ago.