Shifting focus on industries other than textiles necessary for growth

LAHORE: The state planners need to realise that industrialisation, in most of the countries, in the last 60 years, started from textiles. Barring Pakistan, textiles helped these economies mature, which then shifted to different sectors of engineering.

England’s economy flourished on textiles before graduating to other more productive industries. In Asia, Japan and Malaysia went into auto and electronics.

Korea went into ship building, auto and electronics, India went into defence, auto, IT, pharmaceutical, gems and jewellery and consumer goods. China went into auto, consumer goods and some electronics and now high-tech artificial intelligence, Taiwan went into auto parts, moulds and dies, computers etc.

The underlying strength developed by of all of these countries was capital goods and machinery manufacturing. All these are knowledge-based economies now, and their driver is the engineering sector.

Their capability is to design and manufacture cost-effective machinery, using appropriate technologies. Textile industry did grow everywhere on government support, but for a decade or two. After that the growth was subjected to efficiency, innovation and constant improvement in technology. In recent decades, Bangladesh and now Vietnam surged ahead in textiles on same lines and their governments are gradually withdrawing undue support and subsidies. The planners in Pakistan should take cue from competitors and think beyond textiles.

Instead of keeping the inefficient industries afloat through government subsidies, they should be encouraged to go for value-addition and technology upgrade. At the same time they should make the engineering sector as the corner stone of their industrial policy.

It is unfortunate that in Pakistan the industry grew in the 60s under bonus vouchers and high protection tariffs regime. The 70s and 80s was the time when a lot of expansion took place.

Unfortunately, most of the projects were over-invoiced and people made lots of money on government sponsored loans. Survival of these industries, despite milking of money through over-invoicing was possible because the industry was heavily protected.

Even the most incompetent entrepreneurs that could not survive handed their assets to the banks as they already had taken back all their investment or even more through over-invoicing. In late eighties, the tariff was brought to zero for textile sector and export duty was levied on cotton. A lot of junk was imported during this period, while farmers were dependent on local millers for disposal of their cotton at dirt cheap rate. At that time, huge difference that existed between official currency rates and the market rates helped inefficient textile producers. The expansion of credit helped and billions were made. Now that cotton is available on world prices, and machines are expensive, money is being made from far smarter means. Taxpayers money is being diverted to this sector, as government support and lower interest rates.

An interesting point to note is that textile machines we have are capable of manufacturing high-end textiles, but we position ourselves as the least cost producers of low grade textiles. Pakistan focuses on grey and low quality textiles and garments.

Pakistan is not visible in industrial textiles, medical textiles, special purpose textiles like fire retardant etc. We have no capacity for non-woven textiles and other value-added textiles.

No wonder we are sick. Textile value is added through design and development or marketing and branding. We lack all these virtues. The textile industries are sick, because they are either inefficient, have bad management, don't have balanced facilities or are unviable due to heavy debts. They will eat the subsidies and still go down the tube if they do not reform. If taxpayer money is to be spent, it must be spent on skill development, institutions of learning, technology acquisition, centres for machinery development and manufacture, and acquiring brand names etc. The money spent will be far less than the money being doled out now with far greater impact to the economy.

Subsidising textiles is a futile exercise. If machines are imported from Switzerland, Germany and Japan, raw material is at the same price as the world, and electricity is expensive, automation negates any benefit from cheap labour. Thus, our cost of production would not be less than the production price of competing economies.

One way out of the current dilemma faced by our textile sector is to reduce the investments required by the industry for upgrade, so that Return on Investments is improved and debt burden is reduced. China and India have done just that and indigenised machinery and equipment for the sector, reduced their investments and have taken over the global markets.