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December 23, 2010

‘Survival of fittest as 40pc weak apparel units face closure’


December 23, 2010

LAHORE: About 40 per cent apparel units in Pakistan are feared to have closed operations from 2008 till date due to weak economic fundamentals, inefficiency, and penalties on late delivery, industry executives said.
Former chairman Pakistan Hosiery Manufacturers Association, M I Khurram, said that only those units survived the bad patch where owners ensured their presence on the production floor.
“Only those who were glued to the office managed to cut wastage and ensure compliance to the required system controls,” he said. Only those exporters were able to deliver who took orders within their capacities, Khurram said.
The apparel sector entrepreneurs pointed out that despite the closure of about 40 per cent units, the overall export of both knitwear and garments has neither suffered in terms of quantity or value.
They said the efficient apparel units led the show and covered up the loss incurred due to closure of units.
Leading knitwear exporter Adil Butt said the knitwear and garment units closed during past three years due to high mark-ups.
The units that managed to survive, despite high financial cost, succumbed to the abrupt increase in yarn rates because they had booked orders at a lower price. The circumstances on these two counts were beyond the control of manufacturers, he added.
Most of the entrepreneurs failed to improve efficiencies when the margins were high, Butt said. The inefficiencies were covered by rapid decline in rupee value, but the industry collapsed in the crunch time as the raw material and energy costs shot up to new records, he said.
Apparel units that improved efficiencies to best global standards made handsome saving in good times and also took timely decision on energy conservation to reduce the impact of increasing energy costs.
Another leading apparel exporter, Shiekh Zafar Mehmood, said that many units faced closure after booking orders beyond their capacity. Because of delays, exporters scrambled to

ensure delivery and went for air cargo, a 15-time costlier alternative to ship service. He explained that any consignment sent by air results in net loss of up to 60 percent to the exporter.
Former chairman Pakistan Readymade Garments Manufactures and Exporters Association, Pervaiz Hanif, said that some efficient units have constantly been increasing capacities during past three years while a large number of entrepreneurs have taken on rent production facilities of the closed units to execute increasing flow of orders.
He said that the surviving units have achieved highest possible efficiency in both production processes and marketing, besides improving the energy efficiency by 25 to 30 per cent. He feared that even the most efficient units might not survive owing to the deteriorating economic fundamentals of the country.

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