Textile Crisis In Pakistan

CRISIS IN TEXTILE INDUSTRY Muhammad Rizwan Chuadhry Waqar Ahmad MBA 1st Semester

COMSATS Institute of Information Technology

CONTENTS 1. History 2. Introduction & Importance 3. Major Crisis in Industry 4. Conclusion 5. Recommendation 6. Refrences

History  Before World War I England’s merchants started developing new technology (Sewing machine) in Apparel Industry and gave England a distinct competitive advantage over other countries because its cloth was much cheaper.

 The invention of the sewing machine essentially “turned an art into an industry” and brought about the “democratization” of the apparel industry.

History  Increase in the cotton production and expansion of textile industry has been impressive in Pakistan since 1947.

 Number of mills increased from 3 to 600.

 spindles from about 177,000 to 805 million.

Introduction & Importance  Backbone of the economy

 From a most non-existence at the time of creation of Pakistan in 1947, the Textile industry has grown into the largest and most significant economic sector of Pakistan.

 Plays pivotal position in the exports of Pakistan.

 Status of being the largest industry in Pakistan

Introduction & Importance  Pakistan is the 8th largest exporter of textile products

 Has the comparative advantage of resource utilization

 Major contributor towards GDP

 50% of industrial labour force

Introduction & Importance  Earns 65% foreign exchange of total exports.

 The industry consists of large-scale organized sector and a highly fragmented cottage / small-scale sector.

 The industry consists of large-scale organized sector

and a highly fragmented cottage / small-scale sector.

 At present, there are 1,221 ginning units, 442

spinning units, 124 large spinning units and 425 small units which produce textile products.

Introduction & Importance  Manufacturing sector………. 46%  Export earnings……………... 68%

 Value addition………………. 09%

 Employment………………… 38%

Major Crisis  High interest rates

 High cost of inputs

 Non conducive government policies

 Non-guaranteed energy supplies hinder their competitiveness

Major Crisis  The industry suffers from ‘severe technological obsolescence,

 Insufficient R&D

 Falling cotton crop, and an unclear path forward

Major Crisis  Obsolete equipment and machinery.

 The inability to timely modernize the equipment and machinery has led to the decline of Pakistani textile competitiveness.

Major Crisis  Non-guaranteed supply of power by WAPDA is another problem that negatively affects the textile industry. Although, some textile units have built their own energy generating plants to cut cost (these units run on gas), small units production depends entirely on the electricity supply of WAPDA.

 The textile industry suffered heavy financial losses in Dec, Jan and Feb quarter, because of the inconsistent electricity supplies

Major Crisis  The lack of production subsequently resulted in the industry not meeting its target for the quarter, massive financial losses were borne by textile owners and sadly, it hit the most vulnerable: workers on daily wages.

 After surviving from the load-shedding scenario the industry has yet to survive the gas load shedding.

Conclusion 

Structural imbalances.



Technological gaps and lack of coordination amongst different sub-sector of textile industry.



Result into inadequate development of downstream products.



Internal weaknesses of the industry and its inability to improve quality, productivity and production efficiency to the desired level.

Conclusion 

Textile industry is feeling the pinch of increase in power interest rate, inflation and multiplicity of taxes, which have increased the production costs.



Productivity have further deteriorated due to power break down – civil riots and other disturbances and thus adding to the cost of the products.



Labour costs are amongst the lowest in the world, the benefit is being wasted through operational inefficiency.

Conclusion 

The factor of high power cost, high interest cost and high cost of inputs like Gas and Water are not accounted for rebates to facilitate industry like other countries.



Industry had been burdened with too much of taxes like Sales Tax – Excise – Income Tax – Turn over tax, which have increased the capital requirements and hence the cost of production as the interest incurred on this capital is not rebated.

Conclusion 

Due to entire situation the companies are downsizing, production units are shutting down, around 500,000 of the workers have already lost their jobs.



The textile sector is the backbone of Pakistan’s economy, the Government as well as the textile industry has kept their focus on technical textiles and knowledge-based products.

Recommendation 

Proper labour training is necessary to develop skill, required to have desired production efficiency.



Rebate needs to be rationalized and dispersed at a quicker pace.



Import duty on cotton substitutes Viscose and Acrylic which are presently not produced locally may be further reduced to promote diversification of products.

Recommendation 

To sustain the Textile Industry, the government has a tough task ahead and needs to urgently implement a suitable long-term strategy that provides a level-playing field against their regional competitors.



Exemption of duty and sales tax on power Generators may be revived again.

Recommendation 

Investments in developing human skills and knowledge essential for upgrading competitive advantages



The commercially viable units may be considered for revival by providing financial relief.



Govt must granted a number of incentives for the development of value added products.

Recommendation 

All Pakistan Textile Mills Association to pool its share for providing maximum benefits to cotton growers.



If the cotton growers received high rates of the crop than they will not think to sow other crops in their fields, he added. The minister called upon APTMA to promote the establishment of research department so that cotton growers could be aware of the latest development as well as latest varieties for achieving maximum yield per acre.



Power crisis must be resolved by Government on urgent basis.

Recommendation 

Liberalized labour laws, tax and other benefits of a Special Economic Zone need to be implemented



Access to high quality and cost-effective manpower



Excellent connectivity by road, rail air and ports



Single-window clearance

References       

www.fibre2fashion.com/news/textile-fairsnews/newsdetails.aspx?news_id=69173 - 61k www.yarnsandfibers.com/news/index_fullstory.php3? id=17433&p_type=General - 74k www.ptj.com.pk/Web%202004/03-2004/trend.html www.pdfcoke.com www.state.gov/r/pa/ei/bgn/3453.htm - 80k www.aptma.org.pk www.tco.gov.pk/webs/material%20for %20Website/Reports/Cotton%20Textile%20industry.doc

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