Entrepreneurs dominate textile value-addition sector

LAHORE: Small and medium exporters dominate the textile value-addition in Pakistan while large scale manufacturers are content with revenue generated from raw and semi-finished textile goods, industry experts observed.
“The apparel sector was first ignored, but in late 90’s it caught the attention of small entrepreneurs,” recalled veteran apparel exporter M I Khurram.
“They started marketing their unbranded garments and knitwear products to developed economies,” Khurram said.
He said they managed to attract famous brands through hard work, “which guided the small entrepreneurs in maintaining quality and efficiencies.”
“In the 90’s, textile exports were subject to quotas and the brand owners were obliged to procure their needed quantities from all the countries according to their quotas,” he said.
“By the time the quota regime was abolished in 2005, most of the entrepreneurs had made name in apparel export with many famous brands under their belt.”
Khurram said later they had more orders than they could execute, “with a lack of resources to scale up production to the required level.”
“Some like me went for reverse integration by adding weaving and knitting abilities and then acquiring closed spinning capabilities,” he said. “But, those who continued adding weaving and spinning capacities are under severe pressure now.”
Industry leaders agreed that until the start of the current century selling lowest value yarn and grey cloth was a lucrative business as it required no marketing and profits were handsome.
Therefore, they said spinners and weavers continued investing in basic textiles.
Some weavers entered bed wear making but the value addition when compared with garments was very low, they added.
Besides, Khurram said India, China, Bangladesh, Vietnam and Indonesia could have been the potential buyers of basic

textiles.
“However, they heavily invested in spinning and weaving and the demand for Pakistan yarn and fabric started waning in those countries,” he said.
“Though our players cut prices, yet they couldn’t do more as cost of doing business escalated resulting in piling of huge yarn and fabric stocks in the country.”
He witnessed an unhealthy competition in the subsequent days as local spinners and weavers lowered prices to clear their backlogs.
“You know half of the processing capacities came to a sudden halt and yarn and fabric player endured at least 40 percent reduction in their size,” he said.
Another textile businessman said the sector is suffering from multiple issues.
“Globally, 80 percent of the textile products are made from man-made fibers blended with 20 percent cotton,” he said. “It is almost reverse in Pakistan as the use of cotton in textile products is 75 percent while 25 percent man-made fiber is used in textile articles in the country.”
Another imbalance, he said is only 20 percent of textile products produced in Pakistan are consumed locally while the rest are exported.
“So, we largely depend on the global economy,” he said. “When foreign demand of textile products declined during the last two years the local textile sector came under stress.”
He said value-added apparel sector is operating at its peak.
“Remember, increasing capacities require time and capital that medium-sized entrepreneurs lack,” he added.
The businessman further said there is also a shortage of skilled workers in the garments sector.
“Even if basic textile entrepreneurs want to enter the value-added arena they cannot immediately cope up with the shortages of skilled labor,” he said.
He said basic textile sector exported 25 percent of the yarn produced in the country before the start of textile crisis while 75 percent was consumed locally to produce products meant for exports.
Similarly, he said 25 percent of fabric was exported. “If converted into garments it could fetch additional $15 billion in exports,” he added. “This yarn and fabric surplus is now increasing.”