Research Paper

on

Analysis of Textile Industry of Pakistan

– A Comparative Advantage

By

Ch. Azhar Hayat

Fayyaz Ahmed
Sohrab Khan
Irfan Ahmed
MBA-II
SECTION- B
 Analysis of Textile Industry of Pakistan

Table of Contents

 Introduction – Textile Industry and Pakistan

o Historical Background

o Current Situation

 Competitive Advantage

o Diamond Porter Model

 Literature Review

o Competitive factors Confronting Pakistan’s Textile Industry

 Conclusion

o SWOT Analysis of Pakistan’s Textile Industry

 Policy Implications

 Reference

Introduction

Over the years, Pakistan is said to be the single crop economy i.e. cotton and
textile that claims the lion's share in terms of the contribution in the national
economy of Pakistan.

Despite efforts to bring in diversification in country's overall economic get-up

the textile sector continues to be the most important segment of the national
economy. Its share in the economy, in terms of GDP, exports, employment,
foreign exchange earnings, investment and revenue generation altogether
placed the textile industry as the single largest determinant of the economic
growth of the country.

Despite harsh international economic conditions, Pakistan's textile industry

has weathered the storm by coming out of the international crisis in a very

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 Analysis of Textile Industry of Pakistan

positive manner. During the year 2006-2007 exports were controlled from
falling and significant investment was made in value-added expansion and in
Balancing-Modernization- Replacement (BMR) (Latif, 2000).

About 10 percent of the world cotton crop is produced in Pakistan, making it

the fourth largest producer in the world. The textile industry currently
accounts for almost 67% of Pakistan's exports, 20% of value-added
production and employs 35% of manufacturing labor.

Made of premium quality Cotton, the textile fabrics of Pakistan are

distinguished for their quality, texture, lustrous colour and rich combination
of superior designs and competitive prices.

That is why this sector have been chosen to analyze what are the obstacles
that are affecting the textile industry of Pakistan in achieving competitive
edge over other economies of the world.

Textile Industry and Pakistan – The innate relation:

Textiles, all fabrics made by weaving, felting, knitting, braiding, or netting,

from the various textile fibres. Textiles are classified according to their
component fibers into silk, wool, linen, cotton, such synthetic fibers as rayon,
nylon, and polyesters, and some inorganic fibers, such as cloth of gold, glass
fiber, and asbestos cloth. They are also classified as to their structure or
weave, according to the manner in which warp and weft cross each other in
the loom. Value or quality in textiles depends on several factors, such as the
quality of the raw material used and the character of the yarn spun from the
fibers, whether clean, smooth, fine, or coarse and whether hard, soft, or
medium twisted. Density of weave and finishing processes are also
important elements in determining the quality of fabrics. The weaving of
carpet and rugs is a special branch of the textile industry1.

Since its inception, Pakistan has its roots in being an agrarian state with
indigenous cotton supply. In 1947, two textile mills were established in the
country as a colonial heritage. However, the Pakistani textile industry has

1
‘Textile Industry of Pakistan – An Overview’
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 Analysis of Textile Industry of Pakistan

played a crucial role in the country’s industrial development. Pakistan’s

Industrialization began in 1950 with the textile industry at its centre2.

Over the time, textile industry have depleted due to various complexities.
The difficulties faced by textile industry were partly due to limited focus of
the players and partly due to globalization. (Meier, 2007) During 1984-1990
many of the spinning mills did not go for upward integration as raw cotton
suppliers were adamant in bringing down the prices. And so with the
globalization and ease of trading these intermediaries find it more profitable
for themselves to export primary goods. Having a look at the exports
composition of that time we can see it mainly comprised of yarn, unbleached
fabrics, and low quality made-ups that did not create much demand in the
international market. Ideally, Globalization was a mean to reallocate units
and resources, get maximum advantage, and highest value addition, to
attain competitive edge. Nevertheless, Pakistan failed to attract much
investment while other countries reallocated their units to cheaper countries
such as Indonesia and Thailand.

Current Situation3:

Pakistan is the world’s 4th largest producer and 3rd largest consumer of
cotton. The Textile and Clothing Industry has been the main driver of the
economy for the last 50 years in terms of foreign currency earnings and jobs
creation. The Textile and Clothing Industry will continue to be an important
engine for future growth of the economy; there is no alternative industry or
service sector that has the potential to benefit the economy with foreign
currency earnings and new job creation, especially if synergy is developed
amongst different sub‐sectors and efforts are made to aggressively grow the
Ready‐Made Clothing Sector. Pakistan’s Textile Industry had proved its
strength in global market during the last four decades. It has proved its
strength even in post quota era by not only sustaining its position but, also
showing growth during 2005 to 2007, but declined to $11.1 billion in 2008
due to financial and economic melt‐down globally. The Garment Sector &
especially the Knit Garment Sector need special focus in future policies.
2

3
Economic Survey of Pakistan (2010)
425
 Analysis of Textile Industry of Pakistan

It has an overall integrated structure with an important indigenous cotton

crop, increasing man-Made Fibre production, large spinning, weaving, and
knitting, dyeing/printing and finishing capacities as well as expanding
garment and home textile industries.

Structure of Textile Industry of Pakistan

Source: Textile Commissioner Organization (July 2006)

The Textile & Clothing trade has increased, from US$ 212 Billion in 1990 to
US$ 612.1 Billion in 2008. The clothing trade is growing at a faster rate.
Pakistan exported textiles worth $7.19 Billion and clothing worth $3.9 Billion
in 2008. The year 2009 was dismal period. The industry was confronted with
problems of multiple natures. The global economic crisis in Oct. 2007 had
impacted the trade badly. Weaker demand in the developed economies
limited the expansion of global trade. The 12% drop in the volume of world
trade in 2009 was larger than most economists had predicted. World trade

and output are currently in a recovery phase. The WTO Secretariat estimates
that in year 2010 world exports in volume terms will grow by 9.5%,
developed economies’ exports will expand 7.5%. The current decline in
exports of all manufactured goods including Textile & Clothing is visible in
the quarterly data.

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 Analysis of Textile Industry of Pakistan

Source: Economic Survey of

Pakistan (2010)

US imports of textiles and clothing fell for the second year in succession in
2009, by 7.5% to 46.6 billion square meters equivalent (SME), following a
5.2% drop in 2008—which was the first decline since 2001. Within the 2009
total, fabric imports fell by 5.4%, imports of apparel by 6.1%, imports of
made‐up textiles by 8.5% and yarn imports by 18.4%. Of these four
categories, apparel continued to account for the highest share of total
imports. The average price of US textile and clothing imports fell for the first
time in three years in 2009, to a new low of US$1.74 per SME.

The period of heavy investment boom in most Textile Industry segments

between 2003 and 2007 came to an abrupt end in 2008. This investment
boom until 2007 was due to the phase out of traditional quota regime under
WTO – Agreement on Textile and clothing and China’s integration into WTO
structures. Global yarn and fabric productions were continuously falling since
the second quarter of 2008. Despite challenges, there are fundamental
aspects that promise a bright future for the textile industry in general.

Competitive Advantage:

Theory of Competitive Advantage can be traced back to the initial

development of Economics as a separate discipline. Classical Economist such
as Adam Smith, Thomas Malthus, and specially David Ricardo gave immense
attention to producing what the nation is best at and then take advantage of
that edge through free trade.

However, all these economists talked about factor endowments (such as

Land, Labour, and Capital) and macroeconomics for the growth and
development. Using these factors effectively would give a country an edge
over others.

With the further development of study of Economics and overall economic

condition of the world with massive industrialization and liberalization of
trade, classical macroeconomic theory was insufficient to explain the growth
and development of some countries that lacked the availability of the

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 Analysis of Textile Industry of Pakistan

factors, of the kind mentioned in the theories. Some economists of that time
started to take into consideration other factors that could play pivotal role in
a country’s growth such as Technology, capital-labour ratio etc. Still, no one
thought about giving it a micro level look.

This is what Michael Porter discovered and came up with the six forces
model, through which any country can determine its strengths, weaknesses,
opportunities and threats (SWOT) and then put these into consideration
before making any decision. The Diamond Porter Model so called because
the six factors collaboratively work together to give a country a picture of
where it is standing.

Diamond-Porter Model:

Diamond Porter Model is presented by Michael Porter in his book ‘The

Competitive Advantage of Nations’. It helps in understanding the competitive
position of a nation in the global world.

Michael Porter integrated some knowledge of industrial economics and

business strategy to come up with a comprehensive solution to complex
problems in competitiveness. He believed that macroeconomic stability itself
does not guarantee prosperity and so tried to give competitiveness a
constantly evolving micro framework unlike macro overview of traditional
theories. He clearly distinguished between the competitiveness of the firms
from that of nations. In contrast to traditional theories of comparative
advantage which focuses on country’s factor endowments of land, labour
and capital, the diamond porter theory attempts to look at factors affecting
immediate business environment and productive capacity of firms; factor
input conditions, demand conditions, firm strategy and rivalry, and the
presence of related and supporting industries. According to this theory, the
process of economic development is about improving this diamond so as to
achieve higher and sustainable productivity.

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 Analysis of Textile Industry of Pakistan

The traditional theories talk about labour specialization and efficient use of
available sources and economies of scale through large scale production;
however in view of diamond porter model the process of specialization
cannot be done with one firm, a cluster is needed that results in efficiency
gains. He gave examples of many cluster initiatives that has driven
competitiveness to a new level including Silicon Valley, Financial Services in
New York, and the Hollywood entertainment cluster. Regarding the role of
government in this model is to act as a catalyst, establishing macroeconomic
stability and providing stable political, legal and social institutions to help
companies improve their competitive position.

To measure level of competitiveness, Porter introduced Business

Competitiveness Index (BCI) and Growth Competitiveness Index (GCI). BCI
captures a country’s standard of living and a broad perspective about quality
of microeconomic environment where as GCI sketch out economic dynamism
pointing towards quality of public institutions and macroeconomic
environment. Both indices though highly correlated are individually critical to
the measure of quality of micro and macro dimension of the economy.

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 Analysis of Textile Industry of Pakistan

Hence from the diagram it can be clearly seen what six forces have
comprised the Diamond Porter Model:

i) Factor Conditions – Factors of Production such as physical resources,

human resources, capital resources and Infrastructure (Special
resources can be created to compensate for factor disadvantages)

ii) Demand Conditions – both in the domestic and foreign market

iii) Related and Supporting Industries – Supply chain industries (Upward

and Downward linkages e.g. providers of raw material, distributors etc)

iv) Firm Strategy, Structure, and Rivalry – Organizational goal and

presence of intense rivalry

v) Government – Government interventions can affect all of the above

factors at local, regional, national and supranational or international
level

vi) Chance – factors that are outside the control of a firm

“A firm is profitable if the value it commands exceeds the costs involved in

creating the product. Creating value for buyers that exceeds the cost of
doing so is the goal of any generic strategy. Value, instead of cost, must be
used in analyzing competitive position ...” (Ibid)

To attain the competitive advantage, Michael Porter has catalogued three

types of generic strategies through which competitive advantage can be
pursued. These strategies are:

a) Cost Leadership – Firm sets out to become the lowest cost producer in
the particular industry (price wars)

b) Differentiation – Firm seeks to be the best performer in the industry

(having a special attribute in the product or service that others do not
offer)

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 Analysis of Textile Industry of Pakistan

c) Initiative Focus – Firm looks to exploit a niche market (targeting a

group within the market of that industry and create loyalty)

The strategies vary according to the position of the industry in the diamond
analysis besides its organizational structure and culture. For example if a
country’s industry is lying in the factor conditions that is it has advantage
over factors of production, then cost minimizing strategy proposed by the
Porter would be the plan to maintain its competitive edge.

Literature Review

In this section, the reviews have been organized according to the factor
forces of the Diamond Porter Model.

Diamond Competitive factors Confronting Pakistan’s Textile

Industry:

i) Factor Conditions:

As Textiles and Apparel cluster involves diverse set of activities

requiring different of inputs, a detailed analysis of factors conditions
across the value chain is required.

The recently announced increase in the minimum wages of the workers has
left the industries with higher cost of production. Once having an edge over
cheap availability of labour, Pakistan no longer holds this competitive
advantage since labour in Bangladesh and Vietnam are more low-priced

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 Analysis of Textile Industry of Pakistan

(Hoekman & Winters, 2005). And so the costs faced by the industry have
largely offset the advantage of cheap labour. The following diagram4 pictures
the factor conditions over the value-chain.

According to a study of Pakistani textile and apparel sector (Raptis,

2009) some of the garment units were over-staffed by 57 per cent.
That was an internal negative factor whereas external factors included
no duty-free market access to the EU and negative image and
perception of Pakistan abroad.

“Labour productivity is very low. Our regional competitors take 75

minutes to complete and produce one piece of cloth whereas we take
133 minutes for the same work. We also waste 30 percent in finishing
and 12 percent in washing.” (Mirza Ikhtiar Baig)

Moreover, the textile looms and other equipments have become

obsolete due to insufficient timely investment and modernization. One
of major reason might be the rising interest rate which has crippled the
small investors and made them risk-averse (Mukhtar, 2008). So, with
inadequate capital, textile industry is unable to equip efficient
machineries for effective production. Although in the current fiscal
year, investments in the import of new textile machineries have shown
a gradual increase5 (14.2%), showing better trend for future.

The companies are downsizing, production units are shutting down;

around 500,000 of the workers have already lost their jobs. After
surviving from the load-shedding scenario the industry has yet to
survive the gas load shedding scenario. LESCO has informed the
industry that it would not supply power for the additional load and only
the sanctioned load will be supplied during the winter months (Fayyaz,
2008). According to Pakistan textile industry association, 90 percent of
Pakistan's textile industry is losing money losses and facing closure.
More than two months of production has been lost due to power cuts
and gas shortages.

5
Economic Survey of Pakistan (2010)
1125
 Analysis of Textile Industry of Pakistan

The lack of Research and Development in the cotton sector of Pakistan

has resulted in low quality of cotton as compared to rest of the South
Asia (Mehta, 1996). Subsequently, due to low profitability in cotton
crops, farmers are shifting to other high return cash crops such as
Sugarcane. In Punjab alone, the cotton sown in 2008 was less by 1.14
percent relative to that of last year.

Gaps in skill set of labour force only add to the problem of low
productivity. Informal apprenticeship mechanism (Shagirdi) is the
dominant form of skill transfer which eventually leads to
inconsistencies in product quality. Ultimately, these inhibiting factor
conditions, such as low quality of raw material, poor technology and
insufficient skills, lead to low value addition and high defect rates. For
example, 40% of exported fabric was grey in 2000—an indicator of low
value addition. Similarly, the defect rate at the processing/printing
stage was 10% (SMEDA, 2000).

ii) Demand Conditions:

Due to higher costs of production in Pakistan relative to Bangladesh

and India, Pakistan has lost much of its market since it was unable to
provide good quality cheaper raw material. Yet, Pakistan has cheaper
inputs of production as compared to other countries of the world.
Owing to the undiversified value added textile goods, Pakistan does
not have a vast network of trading partners. Only a limited number of
markets have been explored with limited number of customers. Some
of its trading partners are: USA, European countries, Middle-East,
Hong-Kong, Singapore, and Thailand etc.

Pakistan has a very low share of the international textile market. China
tops the US market with a share of 36 percent followed by Bangladesh
21 percent, India 18 percent, and Pakistan 13 percent. Additionally, in
the European market, China tops again with a share of 29 percent,
Vietnam 28 percent, India 19 percent, and Pakistan only 1.5 percent
(Baig, 2009).

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 Analysis of Textile Industry of Pakistan

However, on the bright side of current events, because of a global

shortage in availability of cotton, largely due to a shortfall in Chinese
crop, the foreign demand for Pakistan’s cotton yarn has risen
exceptionally in the current fiscal year of 2009-10. Chinese, in
particular, have procured huge quantities of yarn from Pakistan, even
though they are the fiercest competitor of Pakistan in the world
market. Textiles are exported in the form of Yarn, Fabric, Readymade
Garments, and Bed Wear & Made Ups. Past Global Export performance
of Pakistan’s textile can be viewed in following table.

Export of Textile and Clothing (Us $ millions)

1990 2000 2004 2005 2006 2007 2008
104,35 157,29 195,54 202,65 220,36 240,36 250,19
World Textile
4 5 1 7 7 4 8
World 108,12 197,72 260,56 276,80 309,14 345,83 361,88
Clothing 9 2 9 2 2 0 8
212,48 355,01 456,11 479,47 529,50 586,19 613,08
Total
3 7 0 9 9 4 6
Pakistan
2,663 4,532 6,125 7,087 7,469 7,371 7,186
Textile
Pakistan
1,014 2,144 3,026 3,604 3,907 3,806 3,906
Clothing
Total 3,677 6,676 9,151 10,691 11,376 11,177 11,092
% of World
1.73% 1.88% 2.01% 2.23% 2.15% 1.91% 1.81%
Trade
Source: Ministry of Textile

After the reduction in the quota in March 2010, local production and
demand has been improved but that has not contributed in the windfall
gain due to rising costs of production and loss of production units due
to laying-off of workers and load shedding.

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 Analysis of Textile Industry of Pakistan

iii) Related and Supporting Industries:

The growth of related industries in the textile cluster has largely taken
place in the informal sector in a very haphazard manner. There are
examples of organic clustering but a conscious effort on the part of
industry players or government to promote a cluster based approach
have always lacked. Generally, the capacity of related and supporting
industries is often weak with some exceptions. Such as, Faisalabad—
one of the largest textile producing cities in Pakistan gives a good
examples of organic clustering and interconnection amongst the
members. The upward and downward linkages of the textile firms
come under this caption. Spinners, weavers, looming sector, jute etc
are examples of the downward linkages of the firms that provide raw
materials to the firms; whereas Apparels Garment, Towels, Hosiery etc
are all examples of the upstream (textile made-ups) industries that add
value to the yarn. These industries play a vital role in providing
employment opportunities for minority (women). Some of these
ancillary industries are operational at both large scale, and small and
medium scale level (Rehman, 2010).

Source: (Islam, 2006)

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 Analysis of Textile Industry of Pakistan

A few of these industries can be briefly discussed as follows:

a. Cotton Spinning Sector: The Spinning Sector is the most

important segment in the hierarchy of textile production. At
present, it is comprised of 521 textile units (50 composite units
and 471 spinning units) with 10.1 Million spindles and 114
thousand rotors in operation with capacity utilization of 89
percent and 60 percent respectively, during July – March, 2008‐
09.

b. Cloth Sector: The objective is to convert yarn into grey cloth that
can be later dyed according to the demand. However, this often
has resulted in weaving of low quality cloth due to variety of
problems including poor technology, scarcity of quality yarn, lack
of communication facilities, and lack of institutional financing for
its development from unorganized sector to an organized one.

c. Textile Made-up Sector: This is the most dynamic segment of

Textile Industry. The major product groups are Towels, Tents &
Canvas, Cotton Bags, Bed‐Wear, Carpets and Hosiery & Knitwear
& Readymade Garments including Fashion Apparels. If efficiently
functioned, this sector can earn huge profits for Pakistan through
value addition.

iv)Firm Strategy, Structure, and Rivalry:

Most of the firms are operating at small and medium level also termed
as cottage industries, making the textile industry highly fragmented.
Another important characteristic of the textile industry is that firms are
largely dominated by family owned businesses which although may
ensure trust and cost minimization but it also adheres that government
supports may rest in the hands of selected few who has the power to
control major part of the textile products (Islam, 2006). Additionally,
some lobbyists exist in the current systems, who are engaged in
practises that would give them discretionary power to control input
prices, making it expensive for the firms. They can deliberately form a
cartel to create artificial shortages to raise the prices for higher
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 Analysis of Textile Industry of Pakistan

windfall gains. Firms do not only face competition from rival firms,
rather rivals also include smuggled goods. Most firms in the textile
industry of Pakistan have adopted cost cutting strategies so that they
could charge competent prices. Major players6 of the textile industry of
Pakistan are as follows:

a. Pakistan Major Textile Industries –

• Abdullah Apparels (Pvt.) Ltd

• Gul Ahmed Textile (Pvt.) Ltd

• Lucky Fashion industries (Pvt.) Ltd

• Afroze Textile Industries (Pvt.) Ltd

• Al-Karam Textile Mills (Pvt.) Ltd

• Kohenoor Textile Industries (Pvt.) Ltd

• Crescent Garment Industries (Pvt.) Ltd

• Baig Spinning Mills Ltd

• Dawood Cotton Mills Ltd

• Dewaan Textile Mills Ltd

• Al-Ameen Denim Mills (Pvt.) Ltd

• Ishaq Towel Factor

• Feroze Textile Mills (Pvt.) Ltd

b. Textile Industry Associations –

• All Pakistan Textile Mills Association-APTMA

• Pakistan Cotton Ginners Association

• All Pakistan Cloth Exporters Association

• Towel Manufacturers Association

6
Extracted from the website of APTMA (www.aptma.org.pk)
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 Analysis of Textile Industry of Pakistan

• Pakistan Readymade Garments Manufacturers and

Exporters Association

c. Agriculture Universities and Colleges –

• Pakistan Agricultural Research Council/ National

• Agricultural Research Centre

• Nuclear Institute for Agriculture and Biology

• Central Cotton Research Institute Multan

• National Textile University

• Textile Institute of Pakistan

• Pakistan Institute of Fashion Design

• Garment Weaving and Finishing Institute

d. Textile specific Research and Development Institutes –

• Pakistan Central Cotton Committee

• Textiles Commissioners Organization

• Pakistan Cotton Standards Institute

v) Government:

Due to imposition of high duties, Pakistan’s textile has no choice but to

raise its prices. Pakistan is purchasing cotton at higher prices with the
additional 15% duty on its import. And then along with the rising costs
of production and government’s contemplation, to charge export duty
to ensure local availability of yarn, have made it impossible for
Pakistan to compete against other major players of textile in the global
market such as China, Nepal, Bangladesh and India. As a result of this,
50 textile units have been shut down because of the declining and
negative profits of the textile firms (Ahmed, 2010).

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 Analysis of Textile Industry of Pakistan

Despite of this, the tightening on monetary policy and corresponding

expansion of the fiscal policy have drastically increased the interest
rates, due to which firms are lacking the availability of capital and
credit. And for up gradation of the obsolete textile units, more capital
investment is needed.

Subsidies provided by the government are inefficient to bring a

trickledown effect to the lower level workers. This could be the reason
of inefficient, un-willing and un-authoritative role of government, and
high levels of corruption.

According to the current status, government has taken some initiatives

to reduce the cost of doing business by introducing export loan
scheme by the name of Long Term Financing of Export Oriented
Projects (LTF-EOP); marketing and business facilitation through Expo
centre and exhibitions by Export Promotion Bureau to attract potential
buyers from all over the world; and for infrastructural development
Special Export Zone has been setup in Karachi called as Textile City,
Garment city has been established in Lahore, Faisalabad and Karachi,
and Skill development institute have been initiated to train workers in
the production of contamination free cotton (Meier, 2007).

vi)Chance:

Pakistan’s textile industry has had many opportunities to explore new

markets and penetrate into largest market segments than the current
concentrated one. However, what seems to be lacking is the will power
of the firm owners. They always have this opinion that government
should provide them tax credits and subsidies so that they could have
more capital at hand for re-investments. By improvising on the quality
of cotton yarn and fabric, Pakistan can reduce its costs, improve its
exports and gain its comparative advantage over other countries.

Conclusion

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 Analysis of Textile Industry of Pakistan

SWOT analysis of Textile Industry of Pakistan:

It can be inferred from the literature that Pakistan is laying at the first force,
i.e. Factor Conditions with limited or insufficient focus on other forces. And
so, to attain competitive advantage the appropriate strategy according to
Porter Model would be Cost minimizing Strategy. By Cost-minimizing strategy
the textile industry of Pakistan would be in a better position to compete in
the world market and can then proceed to the next level i.e. product
differentiation strategy to increase the product and market base. For further
examination of what can be inferred from the study about the textile
industry of Pakistan, SWOT analysis is done. SWOT will draw a picture of the
industry as a whole about its strengths, weaknesses, threats and
opportunities.

i) Strength

• Largest foreign exchange earner

• Largest employer of Labour force

• Availability of low-cost Labour and Land

• Abundant in raw material (particularly Cotton)

• Availability of low-cost machinery

• Major part of textile goods are from man-made fibre rather than
synthetic one

ii) Weakness

• low-price image and reliability

• Incompetent marketing

• Noncompliance to Environmental and social regulation

• Inadequate infrastructure, including power, water

• Poor road network not able to provide foundation for a dynamic

industrial sector

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 Analysis of Textile Industry of Pakistan

• Deficient technology and outdated machinery leading to low

productivity and poor quality

• Lack of considerable up gradation of human resource skills

• Poor coordination among cluster players

• Lack of finance and capital to small enterprises

iii)Opportunities

• The state-of-the-art facilities at the Textile City which is being set up

at Karachi, is a good opportunity to help increase production and
competitiveness of textile products

• Enhanced market accessibility for Pakistan Textile products in the

Global Market

• Rising cost of China’s cotton due to excess of demand, is an

opportunity for Pakistan to take advantage of high priced world
market price

• With technological advancements, the textile industry can ensure

uncontaminated good quality cotton and cloth

• Pakistan is abundant in man-made cotton fibre that assures good

quality cloth. But the firm owners and investors must think of ways
synthetic textiles can be made so as to control the rising prices of
raw material

• The Textile Asia Exhibition provide opportunities to SMEs, especially

who instead of having the need to go abroad and see various
markets themselves are able to interact with all foreign delegates,
industrialists present here and showcase their products

• Textile engineering sector will generate employment opportunities.

There is ample scope for qualified engineers in mechanical, electric
and electronics disciplines to boost this sector

iv)Threats

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 Analysis of Textile Industry of Pakistan

• Declining world share in export of textile products means Pakistan is

losing some markets in the hands of others

• Limited Value Addition and low product differentiation

• Endemic issue of Political and Social volatility in the country

• Poor governance would repeal the Foreign Direct Investments

• India and China are giving hard time to Pakistan in terms of

advancements in technological innovation with strong engineering
process

• Insufficient investment in infrastructure and workforce would result

in efficiency loss and create impediments in future as well

• Lack of quality production would make customers switch to other

countries reducing the market segment

• Rise in prices of inputs due to IMF policies, would further deteriorate

the condition

Policy Implications

The need for improving business environment cannot be overemphasized.

Without improving the country’s image, enhancing the effectiveness of legal
and regulatory institutions, and upgrading the physical infrastructure, direct
incentives to local and foreign investors are less likely to yield desirable
results. The current government is well cognizant of this need and has shown
some visible progress in the macroeconomic management to restore the
confidence of investors and businesses. However, there is need to do more
on improving the governance side.

Key Challenges faced by Textile

Cluster

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 Analysis of Textile Industry of Pakistan

Factor Conditions
• Availability of quality raw
material
• Lack of skills
• Poor technology

Demand Conditions
• Increasing sophistication of
demand e.g. product and
process standards
• Increasing global
competition

Related and Support

Industries
• Gaps in the quality of local
supplies
• Poor coordination among
cluster players
• Lack of finance to small
enterprises

Context for Firm Strategy

& Rivalry
i) Addressing the Country Level Challenges:

Following steps are needed to address the critical issues that the
country as a whole is facing:

• Restore the autonomy of legal institutions

• Bring reforms in government agencies

• devise and launch a global communication program with the help of

international media to improve the image of the country

• Encourage private sector, increase public expenditure, and work

with international institutions such as the World Bank and Asian
Development Bank to improve the infrastructure particularly Energy
by exploiting the huge hydroelectricity and coal-power potential
available in the country

• Diversify the export portfolio by facilitating the development of

multiple clusters particularly in the areas of logistics and
communication, medical devices, horticulture, and tourism

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 Analysis of Textile Industry of Pakistan

ii) Addressing the Cluster Level Challenges:

As noted before, the current government has taken some very

important steps to upgrade the Textiles and Apparel cluster in
Pakistan.

• The emphasis of newly instituted policies and programs is to

increase the productivity and unit value realization through increase
uptake of better technology

• Greater value addition and product diversification

• Need for greater involvement of other actors by developing a

shared vision such as supporting industries and IFCs to accelerate
the progress

iii) Involvement of Private Sector and other IFCs:

• A transition from the existing low-end product concentration

towards a more diversified one

• High unit value product portfolio through easy access to quality raw
material, technology up gradation, skill development, and R&D in
product and process development

• A further shift towards facilitative role of government through

enhancing its role in financing R&D in product and process
development, promoting public-private partnerships, and reducing
the barriers to trade

• As textile sector is the major foreign exchange earner, therefore we

should increase our exports by improving both the quality and
quantity to meet the challenges of the post quota era

• We must increase the quantity by increasing the capacity of the

existing mills and also by opening new textile mills. We should also
improve the quality of the existing machines

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 Analysis of Textile Industry of Pakistan

• APTMA and the government should join hands for bridging the skill
gap as there was a need to promote public-private partnership in
this regard to achieve the desired results

• Regular National Exhibitions can be very helpful in bringing out the

skills, the range of products and opportunities of group
collaboration. It will help the planners and large scale engineering
industry in defining the way for developing skills in order to make
this sector strong and viable

• The Ministry of Textiles Industry needs to be founded on active

private-public collaboration. It should be consumer-friendly and
services-oriented

• The Pakistan Government also needs to focus on the country’s

image building in the global market and Pakistan Consulate in
various countries need to play their pivotal role rather than enjoying
the Foreign Service benefits at the cost of the tax payers

• Another resolution demanded that knitwear classes should be

introduced in the National Textile Engineering College, Faisalabad,
so that hosiery products of international standard could be
produced

• Stressed is laid upon the government to direct authorities

concerned for installing master treatment plants in industrial areas
so that effluent released by factories could be utilized for irrigation
purposes

• The tariffs should be reduced to control the prices of textile goods

Reference

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 Analysis of Textile Industry of Pakistan

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Months. (T. Nation, Interviewer)

• Baig, M. I. (2009). (T. News, Editor)

• Fayyaz, A. (2008). Overview of the Textile Industry of Pakistan.

• Hoekman, B., & Winters, L. A. (2005). Trade and Employment: Stylized

Facts and Research Findings. Washington D.C.: World Bank Policy
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• Islam, F. U. (2006). Clustering in Pakistan's Textile Industry:

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potential to boost Pakistan's exports. (S. H. Kazmi, Interviewer)

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