Industry in a predicament

LAHORE: Pakistan’s textile predicament is surprising, as textiles have always been the most pampered sector of our economic policy. The Prime Minister himself has termed textiles as the backbone of our economy, and its failure is a backache for the economy.

The Asian region leads global textile trade. China, Bangladesh, Vietnam, and India account for over 60% of global textile trade. Indonesia, Cambodia, Thailand, Sri Lanka, and Pakistan account for 10 percent of global textile trade.

India, China, Pakistan, and Sri Lanka have been in the textile field for over 60 years. Vietnam entered the field two decades ago, and Bangladesh three decades earlier. These two countries export textiles and clothing almost double the amount of textiles and clothing exported from India, Pakistan, and Sri Lanka. The textile trade gap between Vietnam and Bangladesh and textile exports from India, Pakistan, and Sri Lanka is constantly widening.

The stagnant or slow textile growth taxes the Pakistani economy more than any other textile exporting country except Bangladesh. Textiles account for over 60 percent of Pakistan’s total exports, and the share of textile exports in Bangladesh is equal to 80 percent of its total exports.

If we look at the textile policies in Pakistan and India, we see that these countries protect their locally produced raw materials (yarn) and intermediate raw material (fabric). These two raw materials are the lowest value-added products in the textile value chain.

They are consumed by garment and knitwear exporters. The apparel is the highest value-added segment of the textile value chain. Our spinners and weavers produce a limited range of yarn and fabric. Since there is a general protective duty on all types of yarns and fabrics, the Pakistani apparel producers cannot produce products that are in demand in the global market.

The basic difference in the policies pursued by Bangladesh, Vietnam, and Cambodia (fast emerging textile players) is that their garmenting industry has liberal access to all types of yarns and fabrics.

The apparel producers in these countries offer a wide variety of garments at competitive rates as they buy raw materials at globally competitive rates. As their exports gradually increased, some entrepreneurs in these economies started producing those raw materials locally that could compete with global suppliers.

These textile economies are galloping as they commissioned updated machinery because they knew that if they could not produce raw materials at competitive rates, the garmenting sector would import it without any duty.

Unfortunately, we started the textile industry from top producing yarn and fabrics. In the early years, most of the yarn and raw fabric were exported. Then they started finishing fabric to fetch better prices. But none of the spinners and the weavers tried to establish garmenting units until they saw small entrepreneurs emerging in apparel exports and their yarn and fabric exports started dwindling. Since they were used to executing bulk yarn and fabric orders, the initial small garment exports annoyed them.

In the meantime, the small entrepreneurs graduated to medium and large enterprises. Now the apparel exporters fetch more foreign exchange than spinners and weavers. Still, the spinners and weavers have greater access in the corridors of power where they manipulate textile policies. Knitwear, the largest export sector, is grossly underrepresented, and so are the readymade garment producers that come second in textile exports. They need free access to basic raw materials irrespective of whether a part of that material is consumed for making garments for local markets.

This would be in line with the practice in vogue in Bangladesh, Vietnam, and Cambodia. Over time, the basic textile sector would be constrained to improve technology and compete with imports. It may be noted that though the apparel exports from Pakistan account for less than 60 percent of total textile exports, 2/3rd of the textile workforce is employed in the apparel sector.