TABLE OF CONTENTS

TOPICS Introduction of the textile industry Historical Development of the textile industry Industrial Revolution .. time line of textile Machinery Textile Weaving Industry.. a current scenario Current Scenario Globalization of textile industry Textile and fabric producers Evolution of garments industry in Asia Recent developments and changes in global market industry Market developments Competing garment suppliers Textile and garment exports. The target market Major threat faced by textile industry Global shake-up. A threat Another threat..double edged sword deregulation Textile industry in Pakistan Introduction Growth of textile industry Textile weaving industry of Pakistan.a current scenario Pakistan textile.problem and threats Background problem of SMEs APTPMA PRGTTI Performance measures of some Pakistan textile units Benchmarking Pakistan textile and Clothing exports Dynamism and Flexibility of textile Sophistication of textile and clothing Some final thoughts WTO and its impact Review of last years trade policy initiatives EXPO Pakistan Challenges for Pakistan textile industry Three Star Hosiery Mill pvt Limited History of the firm Introduction of the firm PAGE NO.s

In-house facilities Processing of the firm Environmental analysis (PEST analysis) Industry Attractiveness model Industry life cycle model Industrial competitiveness model Future strategy of OVERALL textile industries in Pakistan Other strategies Recommendations

INTRODUCTION OF TEXTILE INDUSTRY:

The garmnets industry is one of the most globally dispersed of all industries across both developed and developing countries, with some garments companies having their goods produced simultaneously in as many as forty countries around the world (Bonacich, 1994). It is an organisationally complex industry, containing elements of both very new and very old organizational practices, and changing constantly in its organisation and geography (Dicken, 1998). As noted already garments manufacturing has been employed by many LDCs as an engine for export oriented industrialization and employment creation. The sector has received more systematic and persistent protection than any other (Cline, 1987, Douglas, 1989) and has been the subject of trade tensions between developing and developed nations. Trade barriers continue to have a profound impact on the geography of production and distribution and the possibilities for incorporation and advancement of LDCs in global chains..

HISTORICAL DEVELOPMENT OF THE TEXTILE INDUSTRY:

Whilst farmers were developing new and better methods of agriculture, life in other areas of work had changed little for hundreds of years. Early in the 18th century, most of the population still lived in small, rural settlements. Few people lived in towns, as we now know them. Many people worked as producers of woollen and cotton cloth. They cleaned, combed, spun, dyed and Many people worked as producers of woollen cloth. They cleaned, combed, spun, dyed and wove the raw material into cloth. They did this work in their own houses. This type of production has become known by the general term of the Domestic (or Cottage) Industry. Work within the Cottage Industry was usually divided up between the members of one family. The women and girls were responsible for cleaning the sheep fleeces, carding the wool and spinning it. The process of weaving was physically hard work and, traditionally, it was the men who were responsible for it. Generally, at regular intervals, each hand loom weaver's cottage was visited by a cloth merchant. He would bring the raw material and take away the finished cloth to sell at the cloth hall. As soon as the new wool arrived, it was washed to clean out all the dirt and natural oil. After this, it was dyed with colour and carded. This was the process of combing the wool between two parallel pads of nails, until all the fibres were lying the same way.

Next, the carded wool was taken by the spinner and, using a spinning wheel, the thread was wound onto a bobbin. This part of the process was often performed by the unmarried daughters of the household who were called spinsters. The term spinster still exists in English to mean an unmarried lady. The spun yarn was then taken to the loom to be woven. In a weaver's cottage, the loom was often to be found on an upper floor. There were large windows in the room to let in plenty of daylight. The loom was worked by both hand and foot movements. Working the loom was quite strenuous work, which is why it was traditionally the work of the men of the household.

Industrial Revolution - Timeline of Textile Machinery

Several inventions in textile machinery occurred in a relatively short time period during the industrial revolution. These are as follows:

1733 Flying shuttle invented by John Kay - an improvement to looms that enabled weavers to weave faster. 1742 Cotton mills were first opened in England. 1764 Spinning jenny invented by James Hargreaves - the first machine to improve upon the spinning wheel. 1764 Water frame invented by Richard Arkwright - the first powered textile machine. 1769 Arkwright patented the water frame. 1770 Hargreaves patented the Spinning Jenny. 1773 The first all-cotton textiles were produced in factories. 1779 Crompton invented the spinning mule that allowed for greater control over the weaving process. 1785 Cartwright patented the power loom. It was improved upon by William Horrocks, known for his invention of the variable speed batton in 1813. 1787 Cotton goods production had increased 10 fold since 1770. 1789 Samuel Slater brought textile machinery design to the US. 1790 Arkwright built the first steam powered textile factory in Nottingham, England. 1792 Eli Whitney invented the cotton gin - a machine that automated the separation of cottonseed from the short-staple cotton fiber. 1804 Joseph Marie Jacquard invented the Jacquard Loom that weaved complex designs. Jacquard invented a way of automatically controlling the warp and weft threads on a silk loom by recording patterns of holes in a string of cards*. 1813 William Horrocks invented the variable speed batton (for an improved power loom). 1856 William Perkin invented the first synthetic dye.

TEXTILE WEAVING IDUSTRY AN ANALYSIS OF CURRENT SITUATION Worlds Textile Scenario:

Textile industry world over has experienced highly significant and irreversible changes in recent years. These changes have been both on the demand as well as on the supply side. Market demand has altered e.g. in terms of product types segmentation and particularly in over all volume terms whilst the supply side has countered with a concentration and rapid expansion of the industry is new textile producing countries as well as adaptations of the many new technologies and cost effective equipments. The Garment Sector which is the principal driving force for the textile industry still remains labour intensive and therefore is attracted to countries with cheap labor force. The recent concentration of Garment industry in Far East, Asian region and South East Asia has increased the demand of high quality fabrics and initiated investment in the weaving-finishing operations to match the demand. The emergence of major exporting industries in countries with indigenous cotton fiber such as Pakistan Turkey India and China offer the best opportunities for such investments. The opportunity for the worlds buyers to select their requirements from an increasing number of global supplies, according to price quality and service, has given rise to a six-fold increase in global foreign trade since 1973. However, the ongoing expansion of the industry in the new textile countries and their inaugural concentration on standard products has resulted in an over supply position in the basic items. This has necessitated the more established producers to upgrade their products with higher value added content or to generate market niches. According to an assessment made by I.F.C the world textile demand is projected to increase from 39 M.tons in 1989 to 44 .6 M.tons in 1995 and upwards to 5.6 M. tons in the year 2000.

CURRENT SCENARIO: Globalisation of the Garments Industry: Global Shift and International Division of Labour:
As part of restructuring processes in the industrialised countries, from the late 1950s onwards, an unprecedented shift of industrial production towards LDCs took place, most notably in labour intensive industries, such as the garments industry, which were in search of lower labour cost. This shift dramatically changed the global economic landscape, and is clearly demonstrated by garments trade flows as the shift of production from the core to the periphery was accompanied by a massive rise in imports from LDCs into the core economies, competing with local manufacturers in the latter, often displacing companies and whole garments manufacturing industries in some regions. By the mid 1990 this had resulted in substantial trade deficits for most developed countries, with the exception of Italy. What emerged was an international division of labour, as

industrial restructuring processes in the core increased the subdivision of value chain activities into a number of partial operations at different sites throughout the world. While initially only garments assembly, the most labour intensive production activity in garments manufacturing, was shifted out (often to EPZsin LDCs), in later stages an increasing number of activities, including pre-assembly, finishing, packing etc. were shifted out as well, eventually leading to a division of labour where production as a whole was relocated. Earlier than in other industries the vertical disintegration of value chain activities, became the norm (Dooren, 2003). With ongoing developments in clothing demand and markets, this deverticalisation has only become more pronounced and a large number of functionally specialized participants, such as designers, wholesalers, agents, manufacturers, jobbers, contractors and retailers are currently involved in the apparel commodity chain, each having their own specific (location) requirements. With continuing internationalization and globalization of the industry, the geographical pattern became more complex, with different locations performing different functions or roles, instead of the initial almost dichotomous division of labour between the core and periphery as suggested in for instance the New International Division of Labor (NIDL) theory (Frbel, Heinrichs & Kreye, 1980). What became clear was that a cheap labour hypothesis (Elson, 1988) alone could not account for these patterns. States and governments, distributors of garments (i.e. the lead-firms in the chain); international trade regulations and individual company strategies all played an important role in the geographical spread of the industry and its complex international division of labour. Global shifts in production, but most notably in trade patterns, are reflected in the figures presented.. Global, regional and local dynamics (corporate and political) all contributed to the trade patterns as they are discernible today The actual organization and global geography of the industry, can be best understood in terms of global production networks and the global apparel commodity chain (GACC), in which different functions and nodes can be identified, each with their own geography. These chains are driven by large retailers, manufacturers and marketers from the USA and Europe, commonly referred to as (global/international) buyers. Before taking a closer look at the geographical patterns of the GACC, first the structure and organization of the industry, and the configuration of the GACC, are considered. Structure and Organization of the Global Garment Industry: The Global Apparel Commodity Chain What had emerged by the mid 1990s in the garment industry was a detailed dis-aggregation of stages of production and consumption across national boundaries, under the organizational structure of densely networked firms or enterprises (Gereffi & Korzeniewicz, 1994), which in turn form (organisational) nodes in the GACC. The GACC connects synthetic and natural fibre production networks to textile and fabric production networks, then to garments production networks, export and distribution networks and finally marketing and retailing networks. These activities are design,

marketing and retailing. Consequently lead-firms are found at the end of the chain in the marketing and retailing networks, from where they exercise governance over almost all other parts of the chain. In the context of the garments industry lead-firms are often referred to as 'buyers', as most of them are not, or no longer directly involved in production. They buy or source their products from specialized garments producers/ manufacturers, which in turn are not involved in marketing or retailing. An intermediate or transition group is formed by the so-called brand-named garments companies. Originally manufacturers, over the years many have substantially reduced their involvement in actual production, farming most of it out and concentrating instead on marketing and sometimes even directly on retailing through their own retail outlets. A good example is Levi Strauss Company. This group is shown in the upper right part. Both manufacturers and buyers form a heterogeneous group of companies, each with specific characteristics, roles and relationships within the GACC. Garments Manufacturers and Garments Production Networks in the GACC The garments manufacturing industry is characterized by a fragmented structure - i.e. a large number of relatively small companies - and geographical dispersion. As a group, garments manufacturers are heterogeneous, and the position and relationships in networks and the GACC of a garments producer are related to the range of production activities (stages of production and handlings) the company performs. Although in principle the design stage is part of the production process, this stage is usually taken care of by the buyers, as it constitutes a main strategic asset within the chain. Thus, not all of the stages of the production process as depicted in figure 1.2 actually take part within the production networks, depicted in figure 1.1. A direct consequence of the deverticalisation process referred to earlier. Although marketing and retailing of the final product (to the consumer) is taken care of by the buyer, producers will have to market themselves with buyers (finding and acquiring new buyers or negotiating with existing buyers) and therefore will often have a separate sales and marketing department. Based on the production stages and activities illustrated in, it is possible to identify the different firm roles and functions of garments manufacturers within production and distribution networks A greater number of activities and responsibilities make a producer less dispensable as these more sophisticated roles require more capabilities and therefore entry barriers are higher. Thus (industrial) subcontractors perform a limited number of core production activities, such as assembly and trimming and are dependent on other actors in the chain for procurement of inputs, design, marketing, etc. They have little leverage for independent decision making and perform the most volatile roles in a chain, being relatively easily replaced by newcomers, as their activities do not require a high degree of capabilities. Entry barriers to these roles are low. Subcontractors are sometimes linked directly to manufacturers in developed countries,more often they form a second tier of producers and are dependent on other manufacturers (first tier) that are involved in contract manufacturing for retailers (OEM). OEM suppliers are capable of performing or organising a much broader range of production and value chain activities, including all

procurement, pre-assembly, assembly and finishing activities (see figure 1.2) and distribution services. While still dependent on lead-firms for design and specifications, the dependency relationship is less one-sided. The added activities and responsibilities often involve investments and learning and arent as easily copied as the basic production activities performed by subcontractors. OEM producers are still more dependent on other actors in the chain (most notably buyers) and more easily replaced than OEM+/ODM/OIM producers. Finally, the producer role with he highest entry barriers and capability requirements is OBM. Essentially OBM suppliers have started assuming driving roles (lead-firm) in chains and may become buyers in their own right as they start concentrating more on non-production activities, or even completely phase out involvement in actual production. It must be noted that next to these 'intra-chain' roles, 'extra-chain' positions may be identified as well. These include for instance producers for the domestic market, often also producing to the order of local buyers such as local department stores or brands, and producers with their own local or regional brands and labels sold to wholesalers, in local department stores, or even own outlets. Surprisingly such producers are often not, or hardly considered in studies of the clothing industry in LDCs, yet they may follow alternative routes to internationalisation, establish regional and even international production networks, and become like OBM suppliers (see e.g. Hassler, 2003). They are interesting from the perspective of development trajectories, as we will discuss in more detail later. In the current study, and particularly in the empirical chapters, these producers will be considered as well. Producers relationships with buyers are influenced by the segment for which they produce or the type of chains in which they are incorporated. Taking a closer look at buyers, the lead-firms in the GACC, will help clarify these relationships. The numbers between brackets in the first column denote market segments in which these buyers generally market their products, referring to quality, image and price. These range from low-end (1), low to middle-end (2), middle-end (3), middle to highend (4), to high-end(5). Similar types of buyers may operate in different segments. For instance, Hennes & Mauritz and Liz Claiborne are both retail chains, yet the former positions itself in the low to medium quality and price range, targeting mostly teenagers and young adults, while the latter positions itself in higher quality and price segments and targets the 30+ age groups. The extent and type of involvement as well as the power to exercise governance differ substantially per (type of) buyer. Some factors influencing the strategies and relative bargaining power of buyers, and their level of involvement in the chains are: Textiles and fabrics producers Although the textile and garments industries have often been amalgamated in analyses and statistics, they have little in common, both in nature of final products and nature of production processes, even if both industries are linked via transactions and ownership relations (Scheffer, 1992). Compared to the garments industry, the textile industry is more automated and capital intensive and less fragmented, consists of relatively large production units, operating sophisticated technology and employing relatively few workers (Dicken, 1998). Production is often large scale (although this holds true more for

weaving mills than for knitting factories). Profitability is driven to a much greater extent by product innovations. Many product innovations in garments in fact are based on new types of textiles and fabrics. Due to these characteristics their relative bargaining position within the chain is often stronger than that of garments producers. Although many garments producers have forged closer relationships with their textiles suppliers in order to jointly cut back lead-times, very few garments producers have managed to forge closer relationships in terms of product development and innovation. Besides technological and product innovations, textile manufacturers competitiveness strategies have included forming alliances with buyers rather than garmnets producers for joint product development and acquiring nomination (preferred supplier status); developing and patenting new products and/or specialisation in small quantity, high quality/high price production for niche markets. For garments producers the image that has often been portrayed is of being sandwiched between textile producers on the one hand and buyers on the other.

Textile and fabric producers

As a consequence of the relatively higher capital intensity and automation of textile and fabric production, the global shift in this industry has been less dramatic and several developed country producers (e.g. Italian producers) have been able to more or less maintain positions as competitive producers of higher end products In addition, the shift that has taken place is mostly towards the more advanced new industrialisers in Asia (the NIEs) and the shift to the lesser developed countries or second generation NIEs is not as obvious as in garments (yet), with the exception of China. The Asian region has played and continues to play an important role in the internationalisation and globalisation of the garments industry. Although the regions position has been declining in the last decade, it still occupies the most dominant position in the global garments industry, both in terms of production, employment and trade (Dicken, 1998). Within Asia the picture has changed dramatically though and we will therefore take a brief look at these changes.

Evolution of the Garments industry in Asia

The Shift Towards the East Asian NIEs
Hong Kong, South Korea and Taiwan were the first Asian countries outside Japan to which a noticeable shift of garments production took place. Not only were labour cost here low at the time, but governments in these countries also offered incentives and kept their labor force subordinated (Bonacich, 1994). In the first phase the Asian NIEs served mostly as low cost assembly sites. Contract manufacturing often took place in EPZs and involved outward processing trade (OPT) Many East Asian garments manufacturers managed to develop the required competencies and capabilities for such contract manufacturing (on a CMT basis) at an early stage, which put them in a favoured position as to the sourcing by garment companies from the USA and Europe, that included not just garmnets manufacturers, but more and more non-manufacturing companies, such as retailers, branded marketers,

merchandisers and discounters. The key to success of the Asian NIE producers in capturing and producing for non-manufacturing buyers as well, lay in their capacity to move from mere assembly to full-package or OEM supply. Non-manufacturing buyers were more prone to outsource other value chain activities as well in the areas of design and product development. In general producers were required to take on more responsibilities and Asian producers managed to adequately full-fill these. Some more recently even managed to move beyond the OEM export role towards OEM+ and ODM roles, whereby they were actively involved in the design and development of garments collections for their buyers or had started developing and marketing their own brands (OBM) (Gereffi, 1999). Key in these processes of moving to more rewarding export roles was the ability to establish close linkages with a diverse array of lead-firms in the evolving global apparel commodity chain, as they constituted the primary sources of material inputs, technology transfer and knowledge in these organisational networks (Gereffi, 1999). Doing so provided producers in the NIEs with extensive knowledge of buyers requirements and standards, which turned out to be a valuable asset, as became clear in the 1980s, when the East Asian producers saw their initial comparative advantage (i.e. cost advantage) rapidly decline and their exports limited by restrictive trade measures in the West.

Recent Developments and Changes in the Global Garments industry, Markets and Buyer Strategies: Effects on LDC Producers and Locational
Outcomes Garments producers are faced with continuous changes in their production environment, most notably changing consumer demand, market developments and consequent changing buyer strategies, technological developments, changes in the international regulatory framework and socio-political developments. All these factors impinge on their competitiveness in global networks and chains after their initial incorporation, although effects differ per country or region. Generally changes in these areas have affected the competitiveness of producers in LDCs in terms of their profitability (increased cost incurred, pressure on prices, etc.), their capabilities (increased production, product and organisational capabilities required to stay in the network) and the general attractiveness of their location. The next section presents a brief consideration of the most important developments producers in the industry have been confronted with, and their (sometimes differential) effects. Market Developments Since the late 1960s, the market for garments in the USA and Europe has changed substantially, due mainly to the qualitative and quantitative changes in consumer demand and the reactions to these changes by the main marketers and retailers. Retail prices have been stagnant or even decreasing over the past few years. This has been attributed mostly to market saturation (Piore & Sabel, 1984) and increased production.. On the other hand consumer demand has changed and is increasingly for higher quality, more differentiated, fashion and branded garments, which explains the rise of specialist

clothing retailers such as The GAP, Hennes & Mauritz and Liz Claiborne and brands and designer labels such as DKNY and Yves Saint Laurent. Some have argued that fashion and differentiation was supply rather than demand/consumer driven, as a reaction to market saturation and stagnating prices (Harvey, 1989). In any case, what has taken place is a shift in value added from the product to the image (thus to the marketing end of the commodity chain), hence a shift in power from producers to buyers/retailers, also referred to as the Retail Revolution (Scheffer, 1992).

LDC producers have been affected by these market developments both directly and indirectly, through the strategies of buyers and the attractiveness of their location, impacting their competitiveness within the chain. As a consequence of stagnant prices and fiercer competition, a consolidation and concentration in the retail segment has taken place (Gereffi, 1997b ; Scheffer, 1995). This has substantially diminished the bargaining power of producers and most have become price-takers. Subsequently, as Appelbaum & Gereffi (1994) note, a downward profit squeeze in the GACC has taken place, where market pressures on retailers profits are diverted to manufacturers by reducing prices or holding them at price point. The manufacturer reduces the margin paid to his contractors and these are then forced to reduce cost, often through squeezing labour, achieved through (further) subcontracting to lower wage countries. This has stimulated a further tiering of production networks and deepening of the international division of labour. In order to cut cost, buyers have placed greater emphasis on inventory control. The major implication has been that retailers no longer want to hold large stocks and either expect their producers to take care of this (hence shifting the cost and risk to the producers) or force them to deliver on a 'just-in-time' basis. The latter requires the development of new capabilities by producers, in order to produce smaller batches, be flexible in mid-season re-orders or adjust rapidly to orders, etc. Again, the burden of this cost cutting by buyers is shifted to the producers. Quality control has become increasingly strict, to reduce rejects and increase efficiency. Buyers have placed a larger part of the responsibility for this control with their producers, according to standards and rules set by them. One of the common measures in this respect is the nomination of input suppliers To capture niches and new markets, buyers have placed more emphasis on segmentation, which usually means an increased emphasis on fashion and design, demands for smaller batch sizes and more frequent style changes. This has implied increased demands for quality and flexibility from the producers, thus the development of new and enhanced capabilities. With increasing emphasis on rapid fashion and style changes, lead-time considerations are becoming ever more important. On the one hand this has led to an

increased importance of producers proximity to markets for certain (fashion sensitive) market segments. On the other hand buyers prefer to source from locations where material inputs are readily available, hence where large parts of the apparel commodity chain are present. Thus countries/regions, which are relatively far from the main markets but have a strong and flexible material supply base, can still retain an advantage. Many buyers have pushed for capability enhancement of producers world wide (i.e. regardless of their location), through upgrading and teaching. This has led to an ever greater number of producers (no longer solely Asian ones) being able to supply on a full-package basis and meet buyers more stringent quality and delivery times requirements. Competition among core (OEM) producers has therefore increased substantially, as is reflected in the shifts of sourcing from Asia to countries in Latin America. A number of non-market developments have guided consumer behaviour and thus the strategies of buyers as well and these have particularly affected producers in developing countries. Consumer Awareness, Codes of Conduct and Standard Setting In recent years consumer awareness in the area of human rights, working conditions and environmental issues with regards to production (sourcing) from LDCs has increased. Many buyers have experienced the consequences as through the actions of NGOs mal-practices in factories of their contractors in LDCs received extensive media publicity. This directly affects their image and sales, and many buyers have therefore become mindful of where and how their goods are produced. Many have implemented corporate codes of conduct, which deal with production circumstances and environment (William, 2000). The main consequences for LDC producers have been on the one hand further pressure on cost (compliance cost) and on the other hand organisational and locational limitations: buyers are no longer willing to source from countries with a bad reputation in terms of human rights violations and labour standards. This is reinforced by Governments imposing trade restrictions on these grounds, often pressured by special interest groups Buyers limit further outsourcing of production by main producers, as further subcontracting by main producers may cause the lead-firm to lose sight of what is going on in factories, while they are the ones held responsible for labour standards and human rights issues throughout the chain. networks, sourcing for new vendors and educating new producers, there is a tendency for lead-firms to work closely with a smaller number of established, core producers, i.e. to consolidate their sourcing networks. Instead of taking the risk and cost of looking for new suppliers themselves, in many cases buyers prefer to press, encourage and help their existing suppliers adjust and upgrade e.g. through relocation, automation and quick response systems, training and standard setting, etc. Thus lead-firms invest in the relationships within the networks and these sunk costs increasingly prevent them from switching to new producers. The international, regional and local institutional context in which garments producers in LDCs operate, have also had a profound impact on the competitiveness of companies, countries and in

turn on the global geography of production and distribution. With the accession of China into the WTO there is fear, especially among the smaller Asian countries, that most production and sourcing will end up in China. Others have argued that Pakistan and India will profit from trade liberalisation, as both countries not only have abundant labour resources, but also important local material inputs, most notably cotton and supplying industries (Hiebert, 2003). Despite the planned phasing out of the quota system, there is some skepticism as to how free garments trade will really be. The most difficult liberalisation within the ATC is left to the very end of the transition period and although tariffs will also be lowered, some will remain, even after completion of the ATC. Generally it remains to be seen, whether claims of domestic industries suffering damage will serve as a reason to place new or other restrictions on import. There is a possibility that developed countries will use other, non-tariff and non- quota barriers (quality and phytosanitary requirements, labour issues, environmental standards etc.), to stem the inflow of garment imports from LDCs. Next to the international regulatory framework, the establishment of free trade agreements and preferential treatment of certain countries and/or regions in terms of their access to developed countries markets, have profoundly affected producers in LDCs in recent years. Examples of such agreements are the North American Free Trade Agreement (NAFTA) between Canada, the United States and Mexico, the Caribbean Basin Trade Partnership Act (CBTPA) and the Africa Growth and Opportunity Act (AGOA) for Sub-Sahara Africa. These agreements have all given the involved countries trade advantages over non included countries, of which the Asian NIEs and late industrializes were the major affected group.

FINALLY:
The developments in the global garments industry and particularly of the globalization of the industry and the complex international production and distribution networks that have evolved in the past four decades. These are a consequence of the specific characteristics of the industry (most notably its vertical disintegration and high labor intensity), market and technological developments, trade related issues and dynamics within late industrializing countries, particularly in Asia. The consequent international division of labor patterns in the industry are best captured in the global apparel commodity chain, which illustrates how actors in different countries and regions, operate in distinct networks and perform specialized operations and services, and are linked together through a variety of sourcing, contracting and ownership arrangements. The specific geographies of the different elements of the GACC revealed distinct locational patterns tied to specific export roles, ranging from simple assembly to brand manufacturing. Regional dynamics within Asia, driven to a large extent by (companies in) the Asian NIEs, have led to a distinct regional division of labor and production hierarchy, that buy now span virtually all of East, Southeast and South Asia. Such dynamics have in fact enabled the region as a whole to maintain a dominant export role within the GACC, despite increasing pressures from other countries and regions entering this chain. As argued, the industry is a very relevant case for the study of globalization and local industry development in LDCs. In the next chapter we will first turn to the

some of the main theoretical notions on the broader issue of the relation between firms and industries in LDCs operating in global networks and chains, and local industry development. Subsequently, in chapter three these theoretical considerations will be linked more specifically to the case of the global garments industry and its specific dynamics and characteristics - as presented in this chapter - and to developments in the East Asian NIEs. This results in the presentation of a framework for analysis in chapter 3, which forms the conceptual basis for the empirical part of the study.

COMPETING GARMENT SUPPLIERS: ASIA

Bangladesh Cambodia, China Hong Kong, India Indonesia, Laos Macau (Malaysia) Philippines (S.Korea), Sri Lanka (Taiwan) Thailand, Vietnam

E. EUROPE
Hungary Poland Romania Turkey

MAGREB
Morocco Tunisia

CENTRAL AMERICA/ CARIBBEAN

Dominican Rep El Salvador Guatemala Honduras (Mexico)

Caribbean

AGOA
34 Sub-Saharan African countries.

OTHERS
Brazil Russia Egypt

TEXTILE and GARMENT EXPORTS: TARGET MARKETS YARNS:

China Bangladesh Mauritius Madagascar Vietnam EU (reducing) Mexico Morocco Russia others

GREY FABRICS:
China Hong Kong Bangladesh Mexico Malaysia Russia Canada Poland Korea others

Major Threat:
At the end of the year, the global economy will face restructuring in its textile sector as the Multifiber Agreement is abolished. Formalized in 1974, the Multifiber Agreement established a system of production quotes originally designed to safeguard jobs in developed nations from being shipped overseas. The principal aim of the

agreement was achieved, but at a cost of 35 lost jobs in the developing world for every one job saved in the developed world. An additional ramification of the agreement was a spreading of the textile industry to many countries so as to remain under the production quotas for any specific country. Now that the agreement is facing termination, however, many poorer countries that are on the periphery of global textiles, such as Mauritius and Bangladesh, are campaigning to have the agreement extended out of fear that larger producers, such as China and India, will benefit by gaining business at their expense.

Garment Industry Faces a Global Shake-Up. A Threat

One of the most highly globalize industries is about to be struck by an earthquake. It is set to sweep away an international division of labor and trade patterns that has endured for decades, sending tremors through communities and entire economies in the industrialized and developing worlds. The upheaval will be triggered by abolition at the end of this year of the costly and complex import quotas that have long restricted flows of clothing and textiles principally from Asian countries, the world's main exporters, to the US and European Union, the largest markets, and to Canada. The result is expected to be a brutal and messy restructuring of a basic manufacturing activity that is estimated to employ at least 40m people worldwide, most of them in poorer countries, and generates trade worth more than $350bn (280bn) (190bn) a year. Elimination of quotas, agreed 10 years ago as part of the Uruguay world trade round, is expected to cut the prices western consumers pay for clothing. But in many poor countries - and in some rich ones - it will set off a scramble to survive in a business where trade barriers have long stunted competition. The biggest winner is widely forecast to be China. In many areas of clothing, as in other manufacturing sectors, its efficient, large-scale production and low costs are expected to give it a decisive advantage. "Everyone in the industry is talking about moving to China. We will see a huge shift after the end of the year," says Hagen Decker of Kurt Salmon Associates, a consultancy that works closely with the industry. He says demand will be so strong once the quotas end that it may temporarily swamp the country's production capacity. Clothing and textiles Estimated to employ at least 40m people worldwide Manufacturing generates trade worth at least $350bn a year More than 30 countries exports are controlled by quotas Trade barriers have cut world income by $137bn, according to the IMF and World Bank Removal of quotas is forecast to benefit China the most, followed by India Bangladesh and other poor economies that rely heavily on clothing and textiles exports will be the most vulnerable to global competition US clothing importers expect to buy most of their goods from five or six countries by 2007, down from about 50 today Indeed, China's impact is already being felt. Its clothing exports have grown to about a quarter of the world total since it joined the World Trade Organization in 2001. Some industry experts forecast that share will double in less than five years.

For producers in many of the more than 30 other countries whose exports are controlled by quotas, it will be a tough struggle. A free-for-all will pose particularly acute challenges for the dozen or so poor economies that depend heavily on clothing and textiles production. In Bangladesh, for example, the industry employs an estimated 3m people and generates more than three-quarters of exports of goods. "If clothing exports fall 20 per cent, it will be a national disaster," says one development expert. Rich economies such as the European Union, where 2.7m people work in clothing and textiles, are also in the line of fire. Research for the Institut de la Mode, a French industry body, suggests employment in the sector will fall 15 per cent in Britain and 13 per cent in Germany after quotas end. Some producers in developing nations have yet to realise what is about to hit them. "Many small companies are still unaware of the implications of ending quotas," says Matthias Knappe of the International Trade Centre, a Geneva-based organisation that gives advice and technical assistance to developing countries. Even the US garment trade has yet to adjust fully to a quota-free world. "People still don't really believe it is going to happen," says Laura Jones of the US Association of Importers of Textiles and Apparel. "They are stunned because they have lived with the system so long. It is an enormous shock to realise it is about to disappear." Protectionism in clothing and textiles is almost as old as the industry itself. But since 1974 it has been formalised and greatly expanded by a web of curbs imposed by the US, Europe and other rich countries on imports from developing country producers. The system, known as the Multifibre Arrangement (MFA), has not succeeded in its aim of stemming a steady fall in employment in the industry in the west. However, it has severely distorted trade and cost western consumers, as well as developing economies, dearly. Unlike most other sectors, the clothing industry has globalised in response to closed - not open - markets. As exports from one developing country hit their MFA ceilings, the predominantly Asian companies controlling production shifted it to others not yet covered by quotas. Such "quota-hopping" has led to clothing industries springing up in places such as Mauritius, where none existed before. The system has also fragmented the supply chain by forcing companies to spread different stages of production across plants in several countries. Quotas have inflated clothing prices by creating scarcity and "rents", price premiums that act as taxes on trade. The annual cost to US consumers has been put at $70bn and has fallen hardest on poor families, which spend a relatively large share of income on clothing. Each job saved by quotas in the US industry is estimated to have cost consumers an average of $170,000. Economists at the World Bank and International Monetary Fund say barriers to textiles and clothing trade have cut world income by $137bn annually. They estimate the cost to developing countries at $40bn in lost export revenues and 27m jobs foregone or 35 jobs for every one saved in rich nations. For many years, developing countries castigated the MFA as flagrant protectionism. Indeed, their proudest achievement in the Uruguay round was to secure a

commitment to its removal. Since then, they have repeatedly called for faster liberalisation. But with the end of quotas in sight, some have done an about-turn. Bangladesh and Mauritius have campaigned to get the MFA extended, while producers in other developing countries have joined protectionist US and EU industry lobbies and US Congress members in fighting to preserve the barriers. The reason is that, in practice, the system has suited many poor nations. By carving up the world market, it has shielded from competition weaker producers, which have often been unable to fill national quotas. With China poised to grab their business, manufacturers elsewhere are trembling. However, pleas to prolong the system appear doomed to failure. The US and EU say they will end it on schedule and would face a barrage of WTO challenges if they did not. A WTO agreement to extend the MFA looks even less likely, because all 148 members would have to approve it. Many trade experts say that once quotas finally go, the shock will be like "falling off a cliff". The transition will be particularly abrupt for two reasons. One is US and EU foot-dragging. WTO rules have obliged both trade powers to phase out some quotas over the past decade. However they have done the minimum legally required, leaving almost half their imports by volume, including most "sensitive" products, to be liberalised at the end of this year. Although Washington and Brussels have been required steadily to expand the remaining quotas, they have been allowed to use special "safeguard" restrictions to block big rises in imports. The second reason is structural change in western retailing. In the US, the world's biggest clothing market, which absorbs about a third of all imports, concentration of the trade has left Wal-Mart and a few other big chains dominating distribution. They say that once the MFA goes, they will stop shopping around in many different countries and streamline drastically their supplier networks. "Quotas have made the supply chain very complex," says Mr Decker of Kurt Salmon. "There is no good reason to buy textiles from one country, have garments cut in another and sewn in a third." Ms Jones of the US importers' association expects her members to buy most of their needs from only five or six countries by 2007, down from about 50 today. For most, China will be the supplier of choice, followed by India, which has a large, verticallyintegrated industry, and Pakistan. China does not compete just on price: indeed, it is not the lowest-cost producer of some clothing items. Its biggest advantages are its industry's rapid response, reliability, business-like attitude and keen understanding of customer demand. "It is very easy to do business there," says Ms Jones. Nonetheless, China may not sweep all before it, at least not immediately. Despite the country's formidable competitive strengths, it faces many political and commercial hurdles. First, China's WTO accession agreement entitles other countries temporarily to reimpose quotas on its exports until 2008. The curbs, which the US has already activated on some Chinese clothing products, are in addition to the anti-dumping actions used against China by many trade partners. US textiles producers are urging Washington to clamp down even harder once the MFA ends. Although employment in the industry has contracted sharply, it wields

strong political clout in electorally important states and is expected to step up the pressure as this year's US presidential contest unfolds. US and European importers fear protectionist western lobbies will also seek to use ecolabelling schemes, labour standards rules and other regulatory devices to keep out Chinese imports. Many importers plan to hedge their bets by sourcing supplies from other countries as well. One is Vietnam, whose low labour costs and willing workforce are attracting foreign investments, even though the country faces exceptionally high trade barriers while it remains outside the WTO. In addition, steep tariffs will continue to protect many countries' markets from imports. They range as high as 12 per cent in the EU and 33 per cent in the US, and higher still in many developing nations. However, trade arrangements, such as the US African Growth and Opportunity Act (Agoa) and the EU's agreements with its Mediterranean neighbours, give many poorer countries preferential access to western markets. That may shield them, at least for a while, from the full force of Chinese competition. Producers in regions such as central America and eastern Europe that are close to large western markets should also have an edge, particularly in fashion-sensitive clothing, where fast product turnround and short delivery times are critical. In southern Europe, where much clothing is sold through small shops, fragmented distribution channels may slow China's advance. The Association of European Textiles Retailers says many of its 500,000 members are too small to source supplies far beyond the EU's borders. It is working closely with European clothing makers to improve supply chain management and tighten links between suppliers and customers. All this suggests there will still be opportunities for suppliers that cannot match China's manufacturing muscle. To exploit them profitably, however, China's rivals will need to move fast. Some developing countries have already got the message. Mexico's industry is moving up-market, while Mauritius has launched government-backed programmes to prepare clothing producers for competition and create new jobs for displaced workers. Thailand, a leading silk producer, aims to become an important Asian fashion centre by developing new design skills. Cambodia, meanwhile, hopes to woo western consumers by emphasising its industry's compliance with international labour standards. But in many developing countries, prospects look unpromising. "It is very easy to talk about diversifying, but it is very difficult to do," says a consultant to textiles and clothing producers in developing countries. Furthermore, survival will involve more than closing the gap with China's productivity and service standards and finding market niches where it does not compete. It will also depend on access to good local transport infrastructure to get goods to market quickly and advanced telecommunications systems to link suppliers and customers. Although parts of India's industry are modernising, it is handicapped by the country's congested highways, clogged ports and cumbersome bureaucracy. In many African countries, particularly landlocked ones, those problems are still more severe. Even if they can be overcome, industry experts believe a worldwide shake-out is inevitable in a sector whose competitive structure has been frozen by trade barriers.

For some countries, that is likely to be a natural development. "Clothing and textiles is the first manufacturing activity industrialising economies get into," says Sheila Page of Britain's Overseas Development Institute. "It is also the first they get out of as they grow more prosperous." But that will not make the pain of the coming adjustment any easier to bear, in rich or poor countries. It will be hardest of all for those that are stuck on the lowest rungs of the development ladder and struggling to haul themselves up.

ANOTHER THREAT: World textile industry facing doubleedged sword under deregulation
Even efficient, skilled Third World companies left uneasy about how they'll manage. Set behind high walls, away from the choking dust and traffic of this city's streets, the green, manicured campus of Nishat Mills declares that this is one of Pakistan's wealthiest, most sophisticated companies. So does its client list, for the acres of freshly woven cloth stacked in Nishat's gleaming warehouses are destined to become shirts or bedsheets on the shelves of Sears, J.C. Penney or The Gap. But as of Jan. 1, when the world effectively stopped regulating international sales of cloth and clothing, even highly efficient Third World companies - and big cottongrowing countries such as Pakistan - are uneasy about how they will manage in an uncharted era of free trade. As the world ends 30 years of controls on textile exports, the sure economic winners are few, and for the most part already are among the world's wealthy. Multinational clothing merchants, especially giants such as Wal-Mart, will be freer to seek lower prices for what they buy - and likely will pass on some of their savings to shoppers in North America and Western Europe. Prices for clothes will drop in poorer countries, too. But in the underdeveloped world, financial analysts say, the big winners are likely to emerge in China and India, the world's biggest textile-making nations. Elsewhere, uncertainty and anxiety reign. In Pakistan, Nishat is one of the companies best placed to benefit from an unleashed global market, financial analysts here say. It is expanding its plant in Lahore in hopes of winning new business, "We are going to get very tough competition from China, especially," said Faisal Naseem Kari, a marketing manager. "I can't imagine competing directly against them on a cost basis . . . Chinese workers work very hard and are much more skilled and productive" than workers here, he said. Governments from Washington to Mexico City to Cairo are under pressure to find new ways to support or subsidize their industries, he noted. Since 1974, international agreements gave each country an annual limit on the amounts of various goods it could export. Once a country had sold its allotted share of terry cloth towels or women's cotton slacks, traders had to shop from other countries. These quotas constricted sales for the biggest, cheapest cloth makers (many of them in

China or India), and drove a limited but predictable stream of buyers to smaller countries that produced at higher prices. The quota system thus served as a kind of hothouse that let poorer nations, from Sri Lanka to Honduras, grow desperately needed local industries during the 1980s and '90s. These "hothouse" industries threw economic lifelines to some of the world's most desperate people. Cambodia and El Salvador relied on cheap labor and clothes factories to ease the misery that followed wars of the 1970s and '80s. Bangladesh, a poster child for Third World poverty, has built economic growth in recent years by stitching clothing for export. Worldwide, three-quarters of textile workers are women, many with little education, according to the aid agency Oxfam. While their working conditions often are poor, "garments jobs . . . serve as an avenue for empowerment," said an Oxfam report last year. The end of quotas threatens to wreck these nascent industries. Industry and government officials say Morocco could lose a third of its textile workers and Bangladesh a quarter. The end of quotas has been planned for years, but many Third World countries prepared little. Officials in scores of countries have signed a petition for extended quotas for up to three years, arguing that no one could have foreseen the phenomenal growth of China's economy and the degree to which it would dominate an unregulated market. While Pakistan may be unprepared for the sudden new race to clothe the world, it has natural advantages. It is the world's fourth-largest cotton producer, after China, the United States and India. And its labor is very cheap - 34 cents a day for an average textile worker, versus 66 cents for a counterpart in China, according to Kari. But it's not clear how far Pakistan can capitalize on its advantages, said Shaghil Ahmed, a trade economist at a Pakistani think tank, the Social Policy Development Center. It has lost productivity since 1999, he said, because of energy shortages and poor roads from inland cotton fields to textile mills and Karachi, the main port. As in all of Pakistan's relations with the world, textile commerce is overshadowed by foreigners' fears of Islamic militant groups, including the Taliban and al-Qaida. The fears are refreshed with each periodic surge in the fighting between government and militant forces along the Afghan border, Kari said. Kari returned recently from meetings in San Francisco and lamented that his U.S. customers will not visit Pakistan. "I invite them, but they say their companies won't let them come because of the State Department's warnings" against U.S. citizens traveling here. Such fears are "lethal to any business," he said. "I have to work twice as hard to get the same results as somebody from another country."

Many Pakistani cloth makers face deeper worries, for they work either in smaller, older plants than Nishat Mills, or at traditional, family looms, said Monem Farooqi, a business reporter for the Pakistani daily The Nation. In villages, "many people depend on cotton as a cottage industry," he said. They "grow cotton and clean, spin and weave it themselves, in the family compound," producing cheap cloth that go to make clothes for local use. Free trade means that they, too, will have to compete with China's factories, Farooqi said, "and many of them don't even realize the danger they are facing."

Textile Industry in Pakistan

INTRODUCTION:
The textile industry, for the first time, has committed to enforce self accountability process in the export sector. The accountability process will be based on three principles i.e. export price check, commitment to bring back the entire export sale proceeds to the country and improvement in the delivery efficiency. The decision to this effect was taken unanimously at a meeting with a spirit to achieve the export targets set by the government to bail out the country from economic crisis. The meeting was held in Lahore on Friday which was presided over by Jehangir Illahi, the chairman, APTMA. The objective of the export price check, is to ensure that the textile industry gets optimum price of the products produced in the country and to avoid unfair competition and under-hand price cut trend prevailing among the exporters. Khalid Amin, the chief executive of the apex textile body, when asked to comment how these export price check measures will be implemented in letter and spirit, said that APTMA has developed an effective mechanism to check underhand cutting in prices by some of the exporters to get into the deal by all means. The other decision is to ensure that entire export sale proceed has been brought back into the country and improvement in delivery efficiency in the face of highly active competitors in the export market is believed to add at least 15 per cent increase in our exports which at present stand at $5.5 billion, almost static for the last three or four years. PERFORMANCE: The textile industry, which is endowed with a strong base of raw cotton, had started its journey from almost non-existence in 1947 with a meager size of 78,000 spindles and merely 3000 looms that is too in the unorganised sector, with only one textile unit. The industry has gone through a longway and now possess 440 units, 8.4 million spindles and 143 rotors. The textile industry not only is catering to the entire local requirement but sharing over 65 per cent of the total foreign exchange earnings. This sounds a triumph like situation at a glance. There is however much more than it meets the eyes when you go into details which carry some failures also to weep on. Pakistan, being the fourth largest cotton producing country, provides a strong base for development sustenance of the textile industry. Inspite of tremendous growth in all the peripheral areas of the textile industry including Cotton, Ginning, Spinning, Processing and made-up

sectors this industry which is the main pillar of the economy, has not attained its optimum potentials so far. The traditional edge of availability of raw cotton within the country, has not been fully exploited by our economic managers. It will be interesting to note that the export value of our raw cotton which was $1.03 per KG some 45 years ago in 1951-52 while is still roving around $1.47 per KG. The value of Egyptian cotton is more than double of Pakistan cotton in the international market simply because they have been able to develop good quality staple as against the poor quality cotton produced in the country, despite the lavish spendings on R&D which runs into billions of rupees every year. The major chunk of the funds allocated for research and development go into salary bills of the white elephants hired by different governments on political considerations in the past. We failed in developing even a single variety of long staple cotton which is the major handicap of the textile industry in producing yarn of fine quality. The textile industry at present is passing through a transition phase. It is sailing smoothly under the protected cover of the quota system, however it has to face the rough waters of the open sea when globalisation of trade is implemented under WTO agreement in 2004. Three years have already gone unnoticed. The fast approaching deadline sounding a note of warning for re-structuring of all the segments of the cotton and textile industries on war footings to enable it to face the future challenges of fierce competition amongst the low cost Asian manufactuers to capture share of their higher cost European counterparts when the gates of the global economies are open. COMPETITIVENESS Inspite of enormous, distinct advantages and incentives the textile industry enjoys, the aspect of achieving competitiveness in terms of quality, quantity, value addition, price optimisation, and BMR is conspicuosly missing from our industry as well as the textile products, mainly because of half-hearted attention paid by the industry in general. It is unfortunate that the aspect of attaining competitiveness in all aspects of the performance which is crucially significant to survive in the face of future challenges was neglected and the industry opted for easy money and handsome profits from the elementary trade of raw cotton and semi-value added cotton yarn. To tell the truth the textile industry in general avoided to indulge with comparatively painstaking business of weaving process. The handsome profits earned by the textile industry through rudimentary level of production consequently created a crop of lethargic people in the industry. The textile industry generally speaks against the free export of raw cotton with the tall claims that the raw cotton is required by the local industry for value addition, but it will be interesting to note that the major export business of the raw cotton is carried out by the textile mills themselves. However, with the internationalisation of the trade and diversification in a large variety of textile products, the period of easy going is now going to be over, especially with the phasing out of the quota system. The industry is now confronted with more demanding and choosy buyers, competition and deregulated global market. The situation demands for recovery of the lost time and make all out efforts for attaining and maintaining competitiveness in all segments of the industry in view of the already improved

competitiveness in the developed world with the use of high-tech and state of the art technology. The WTO agreement, legally binds all countries of the South into a global system of product standardization specified by institutions in the North. The developed nations have far superior and advanced technologies and far greater and diversified production. Under a meticulously contrived scheme, tariff barriers are to be replaced by non-tariff ones in the shape of free trade. The newly framed technological standards will have to be required by the exports of all the developing countries to meet these standards. There are apprehensions that the textile industry in Pakistan, with all resource constraints, and outmoded technology, may got itself into trouble if the restructuring process of the industry was not undertaken without any loss of time, as the industry has already lost three precious years while the time left is running fast. It has to achieve competitiveness in terms of price, quality and delivery situation well before the deadline is over to insure its existence locally as well as globally. Serious attention is also needed to be paid on Balancing, Modernisation and Replacement of the projects. It is however unfortunate that in many cases, instead of utilising the funds on BMR, the companies were allegedly involved in lending the available funds to the associate companies. This practice not only forced them to neglect the aspect of improvement through the process of BMR but also entrapped with cash flow problems. In most of such cases they were sitting on the borrowing limits, their projects landed into serious financial problems and ultimately fell into the ranks of sick industries. The existing industry will have to opt for BMR in the interest of its own life but to foster a sense of innovation. The demand of the textile sector for duty free import of machinery for BMR is however stands valid especially to get it equipped with enough force and technology to meet with the challenges it has to face in the years to come. GROWTH OF TEXTILE INDUSTRY With the exception of a period from 1958-59 to 19974-75, the textile industry could not maintained a sustainable growth and registered its growth rate at the snail's pace in the country. In the organised sector there are 232 listed textile companies of which 153 are spinning units, 28 weaving and 51 composite units. While the total number of textile units both listed and unlisted is however around 440. The weaving capacity of the textile industry in our country is static at 10,000 shuttleless looms for past many years. The capacity of conventional looms is also around 15,000 which have no match with the quantum jump the industry has taken in the spinning sector. Instead of going for value added products, the frenzy for setting up spinning projects dictated the minds of the industry over the years which took the 4.1 million spindles in 1981 to a massive number of 8.5 million spindles in 1996-97, while the rotor capacity also jumped from 21 million to 133 million. IMPORT OF TEXTILE MACHINERY The industry imported textile machinery worth $789.2 million in 1992-93 which gradually declined to $352.7 million in 1993-94, $294.9 million in 1994-95, $187 million in 1995-96 and $129 million in 1996-97 showing a decline of 84 per cent over the years. Like automobile sector joint ventures in collaboration with world's leading textile machinery producers is the need of the hour to provide an impetus to the stagnant growth

in the the textile sector. Since the textile machines of hi-tech are much expensive and beyond the reach of smaller and medium size units, they generally depend on buying used machines. The locally produced shuttle less looms and other textile machines and accessories in collaboration with the internationally recognized manufacturers is the answer to the stagnant growth of the weaving sector and to enhance competitiveness of the textile industry in terms of quality, quantity and cost optimization too. EXPORTS The textile exports projections in the trade policy 1997-98 worth $ 5.5 billion of the major textile products include cotton yarn with a target of $1590 million, Cotton cloth $1485 million, Readymade Garments $750 million, Tent & Canvas $35million, Knit wears $750 million and Made-ups $940 million. The industry has to achieve these targets in the face of difficult trading conditions especially the disturbed economies of the Asian countries, threat of imposition of anti-dumping duties on our grey cloth by EU countries, cotton yarn of 20/s in Japan and constant decrease in imports from South Korea, altogether posing an uphill task of achieving the export targets for the textile industry during the next financial year. According to an assessment made by APTMA, although the policy for 1997-98 attempts to address the country's worsening trade deficit, emphases upon the need for diversification in exportable products, the traditional items like raw cotton, yarn and textile will contribute $815 million to a targeted increase in export earnings of $1.3 billion. Power problems Like other industrial sectors, the textile industry is also confronted with the problems of electricity like frequent shutdowns and load-sheddings which is affecting the productivity of the units. In view of the chronic nature of the problem, most of the textile units are installing their own power plants. Since huge amount of funds are being shifted for acquiring self reliance in power production, the cash flow situation has been affected, however this would increase the assets of these projects. PERFORMANCE RESULTS The competent managers in the industry have, however, adopted a costeffective approach and have produced handsome results. These units have already stressed upon diversification in quality products to remain fit to survive in the world market and to get better returns. However, the overall industry in general showing in their balance sheets that they are incurring huge losses over the past few years. The insiders, however, suspect the genuineness of these losses as they feel them as engineered ones. The market operators are attributing the loss making trend in the textile industry to the factors including high and unpredictable inflation, higher interest rates, inconsistent fiscal policies and a unmanageable balance of payments. The cumulative effect of this situation, the active industry operators said, emerged in the form of credit problems and liquidity crunch restraining the industry from bringing new units and revival of the sick industries.

TEXTILE WEAVING INDUSTRY OF PAKISTAN AN ANALYSIS OF CURRENT SCENERIO:

Although Pakistan is blessed with abundant raw cotton and cheap labor, the industry has not been in a position to exploit the potentials in real terms and has failed to make real progress in the international markets and is under threat of being over taken by many of the competitors and new entrants. The recent increase the prices of raw cotton domestically and inability of the industry to compete internationally has made the fundamental weaknesses of the industry quite apparent. The spinning sector is already in crisis with many spindles lying idle. The weaving sector the finishing sector and the downstream value added sectors all are exposed of their weaknesses. Although exports grew in the period 1982-95 but are stagnating. COTTON CLOTH PRODUCTION: The pattern and development of cloth production sector is different from Spinning Industry. Weaving commenced in Pakistan mainly as an integrated operation and Mill Sector production dominated up to late 1960s. Thereafter the capacity in Mill Sector had been declining and increasing in Power Looms Sector to match the demand growth. It has now become so strong that it produces about 90% of total cloth production. CAPACITY: (COTTON TEXTILLES) The weaving capacity is largely distributed in the following three sub sectors: Integrated Textile Mills. Independent Weaving Units. Power Loom Sector (Non Mills Sector). INTEGRATED TEXTILE MILLS: These are composite units spinning & weaving operation in one unit. There are about 53 integrated textile units with an installed capacity of about 14,130 looms of which 6,211 are working. There is up to date statistics on looms installed and worked, cloth produced and exported. This data is available on monthly/annual basis. The looms installed are old and obsolete and machine utilization is about 52% Recent phenomenon is induction of Shuttleless loom Viz Projectile & Airject Loom in this sector a healthy sign. As the pace of investment increases the No. of modern looms in this sector is on increase. However preference is for setting up an independent weaving unit rather than integrated one. INDEPENDENT WEAVING UNITS: This is a new segment of independent weaving units which is in the process of coming up on the same pattern as independent spinning units. Motivated by market demand and Government incentives as well as shift toward high quality fabrics, the entrepreneurs are establishing independent weaving units with shuttleless looms. These looms are both secondhand as well as new and embrace latest technology of Rapier Looms, Projectile Looms and Airject Looms. Based on a recent survey conducted by

the T.C.O. and the information gathered from different sources, it is noted that approx 13340 shuttleless looms are installed in this sector. This includes both new and secondhand shuttleless looms. POWER LOOM SECTOR: The Power Loom Sector have also modernized and registered a phenomenal growth over the last two decades. New automatic cop-change looms of local origin are being added. The trend is to add wider width looms to produce cloth for exports. The growth of power loom sector is due to favourable Government policies as well as market forces. This sector is producing comparatively low value added gray cloth of mostly inferior quality of the power loom sector revolves mainly around the power technology, scarcity of quality yarn and lack of institutional financing for its development from unorganized sector to an organized one. . On the other hand its cottage size, multiplicity and scatteredness has made it difficult to apply quality control measure and is restricting it to low segments of market. And Rendered it rather difficult the enumeration and / or precise estimation of the total loomage in this sector. . While there are up to date statistics on No. of loom installed and cloth produced in the mill sector, there are no accurate statistic on the No. of looms in the power looms sector. The information is based on the Associations of Power Loomers who had been always giving will estimates. A detailed survey was conducted in 1987 by D. I. & M. D. Punjab which identified 81,808 looms installed in 19,809 units- with major concentration in Faisalabad. Textile Commissioners Organisation (TCO) had been making sample survey from time to time alongwith the two trade Associations and refining the estimates on No. of loom in the Power Loom Sector as well as Independent Weaving Sector as and when required. According to Textile Commissioners Organization the capacity of looms in all the three sectors is as under:UNITS Integrated Textile Mills: Independent Weaving Units: Independent Weaving Units: Small Units (Shuttleless Looms): Power Loom Sector Total: 12. No. of Units 53 112 Installed Looms 14,130 8,340 Effective/ Worked 6211

400 30,000 30,565

5,000 13,340 a 201,540 b 229,010

12000 165000 c 183211

Annexure-11 describe the installed and working position in Mill sector.

13340 Shuttleless Looms equivalent to approx. 93300 Shuttle Looms. As per Power Loom Association. Estimated effective Capacity. IMPORT REGULATION FOR WEAVING SECTOR: Investment remained neglected in the weaving sector in the past. Capacity of locally produced looms had been increasing to match market demand but investment in modern/shuttleless looms was lacking. Government abolished import duty on modern looms No sanction is needed. Demand of better quality cloth motivated interest amongst the investors and imports of Repaiers Projectile and Air Jet Looms was made. It is estimated that a total of 13940 looms have been imported including 600 Water Jet Looms also. The import taxes are as under:Custom Duty Sales Tax New Shuttleless Loom: Free Used Looms : Free Loom Spares : 0-80% 0-15% Free Free 15% other Taxes 15% 15%

The duty on spares should be brought to minimum. The local taxes at production stage are charged as sales tax on fixed rate per loom per annum basis which range as under:

Type of Loom Non Automatic Loom : Automatic Loom Projectile / Rapier Air Jet Water Jet

Tax per Loom per Annum (Rs) : : : 200 1000 2000 3000

PRODUCTION OF CLOTH: . The production of cloth in mill sector is reported. The production of cloth in the non-mill sector is estimated in survey basis. The total cloth production from1970-71 to 1995- 96 has thus been estimated.

The table below describes production performance during last three year:

COTTON CLOTH PRODUCTION (MILLIOM SQ. METER) Year 1992-93 1993-94 1994-95 1995-96(July Dec) Integrated Textile Mills 325.40 318.00 322.00 149.14 Independent Units & Power Looms 3034.60 3068.00 3078.00 1576.86 Weaving 3360.00 3378.00 3400.75 1726.00 Total Non- Mil as %age of Total 90 91 91 91

The production of cloth in mill sector reached a maximum in 1970-71 at 658.30 Million Sq. Meters producing about 50% of the total cloth output. Mill production declined from then whilst production in the independent and power loom sector has increased five (5) times by 1994-95 and accounts for 91% of total cloth production. The progress of this sector is due to favorable Govt. policies for cottage industries as well as market forces. While independent weaving sector with shutteless looms capacity is concentrating mainly on exports, the power loom sector is producing comparatively low value added grey cloth of mostly inferior quality. The problems of the power loom sector revolves mainly round the non-availability of cotton yarn (of right type and quality at right price) and financing. The bank are generally reluctant to finance this sector for working capital and where the banks offer credit at usual terms, most of the units find it difficult to avail. Availability of yarn become a matter of concern when it is a heated up market activity. The spinners exports the bulk of quality yarn at premium prices and in the local market the yarn dealer withdraw the facility of credit sales and prefer to sell on cash terms. Further there is always lag in adjustment of cloth prices in relation to price of yarn. The small entrepreneurs are very sensitive to such factors and suffer most. In the Trade policy 1987-90, Government approved a policy package for the alleviation of power loom sector. A sum of Rs. 250.00 M. per annum had been allocated for induction of locally produced automatic loom, at concessionary mark up for which a criteria was fixed by Ministry of industries and given to Ministry of Finance who have launched the scheme through commercial banks. A 10% quota of cotton cloth is distributed through two power Loom Associations and to establish contract with the main markets, the Government sponsored their delegation to visit USA, Canada and E.E.C. countries in June /July 1988. It is unfortunate that the practical impact of these measures is nil and the power loomers have not been able to utilize concessionary finances for new looms.

Since this sector had been the main supply sources of the basic cloth at cheaper rates for exports it should be strengthened enough to develop into cheap source of quality fabrics for both local Garment Industry as well as exports. The industry needs to be financed at concession rates for purchase of good quality local looms or import of secondhand / reconditioned shuttleless looms. Facilities for technical assistance and incentives to shift to organized industrial estates are desired. EXPORT OF CLOTH: As analysis of the cloth production exports (direct/indirect) and local consumption during 1994-95 reveals that the distribution of the cloth is as under:Total Production Direct Export Export as Garment & Made Ups. Local Consumption : : : : 100 34 35 31

EXPORT OF CLOTH Year Production EXPORT Quantity Value (M. S .q . M.) 1127.584 1046.774 1160.627 442.000 Value (M. $) 863.101 820.583 1081.444 441.731 0.77 0.78 0.93 1.00 33.55 31.00 34.14 25.62 Value Unit Export % age

1992-93 1993-94 1994-95 1995-96 July-Dec)

3360.00 3378.00 3400.00 1726.00

In the last decade, export, export performance of fabrics has been very good with Pakistan having doubled its word market share as well as increase in unit value. About 80% of the cloth exported from Pakistan comes from independent weaving mills and power loom sector. Pakistans share in word trade in grey cloth increased from 6.2% in 1972 to 11.4% in 1983 which dropped to 9.5% in 1985. Cloth export ranked at 3rd position in 1990 with a share of 5.7% in the world. The share of blended cloth is steadily increasing and if supported can develop further. Pakistan occupies a dominant position in the low cost quality cotton fabric market which is world is largest market. Pakistan is amongst 4 major exporters of grey cloth viz.

West Germany, Pakistan, Hong Kong and Korea in order of share. They account for 40% of the total market share in grey cloth. However, in bleached and finished cotton fabrics Pakistan ranks at 10th position with only 3% share of the finished cloth market. DEMAND OUTLOOK: Pakistan occupies a dominant position in the large low cost and low quality cotton fabrics market and there is considerable opportunity to increase export earnings. As probably the cheapest source of cotton cloth Pakistan has the potential opportunity to both capture increased market share by producing both existing product even cheaper in competitive with China Hong Kong- Singapore Korea and Taiwan who are quality wise better and in close proximity in cost production and new products of higher value and quality by induction of looms based on better technology in the organized sector and to improve units value added. Pakistans share of world cotton cloth exports is only 5 percent. As Pakistan has held in the past around 10 percent of grey cloth exports it is not unreasonable to export that the total current market share could be doubled. In the domestic market, improved quality and marketing indicate potential to achieve a similar volume growth. The opportunities to increase exports are substantial. Pakistan can increase its exports to quota countries by raising its unit value to the average unit value of all imports into these countries within the existing quota ceiling. BLENDED TEXTILE PRODUCTS: The most popular blends which are commonly used for domestic and international markets are polyester / cotton and polyester/ viscose in the ratio of 65:35, 50:50 and 80:20. The production of man- made yarn in the country had increased from 10% in 1983-84 to 17.7% in 1993-94 of total production of yarn during the last 10 years. There has not been major shift from the cotton to blended yarn in the country although the production has increased proportionately with the increase in with the increase in cotton yarn production. The production of blended yarn had been as under:PRODUCTION OF BLENDED YARN (M.KGS) S. No. 1 2 3 4 5 Period 1983-84 1988-89 1992-93 1993-94 1994-95 Total Yarn 431.580 767.434 1234.539 1498.948 1413.648 Blended Yarn 44.000 103.634 192.945 265.065 229.216 Blended as %age of total 10.2% 13.5 15.6 17.7 16.2

The major consumption is for domestic apparel use. However, recently the export of blended yarn as well as blended cloth and garments had started picking up the export of blended cloth had been as under:-

EXPORT OF BLENDED FABRICS Year 1991-92 1992-93 1993-94 1994-95 Blended cloth (M.Sq.M) 224.04 236.13 279.73 233.06 Value (Million US$) 139.26 157.93 173.49 179.18

From the above figure it appears that there has been gradual increase in the export of blended cloth, in spite of the fact that we have not been able to utilize the facilities of non-quota status in quota countries as well as the potential of non quota countries for the export of blended cloth. The main retardant for increase, in the production and export of blended yarn and cloth is high rates of duties and taxes on the import of man made fibre. Domestic production is more than 70% of the total demand of manmade fibre in the country. The availability of polyester and viscose fibre had been as under:Period 1984-85 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 Local Prod. (Polyester) 23.05 43.88 59.91 70.67 103.00 128.00 137.00 150.00 Imports Polyester 20.37 16.08 13.52 17.06 33.47 24.68 24.93 32.60 Viscose 21.50 16.95 17.36 19.87 22.96 13.78 11.54 13.82 Acrylic 0.54 1.93 3.18 10.15 11.35 17.35 24.34 46.76 77.45 92.72 110.78 169.58 177.81 190.82 220.76 G.Total Available

The domestic producers are generally selling their products at about 5% below the landed cost. High taxation of this basic input both at import stage and on local production stage jas stiffled the growth and increased the cost of the blended cloth and garment, thereby taxing the domestic consumers and preventing the country from getting proper share in the export market. While on export of man made fibre products duty drawback is provided on the assumption that the inputs are imported, this mechanism is not fully compensatory because of the lower drawback rates and delays in refunds.(Annexure VII) The cotton crisis (1992-95) has been a matter of blessing in disguise. The industry looked towards synthetic fibres and a large variety of blended yarns based on polyester viscose and acrylic were produced. While the standard blended sheeting increased in valuing. This also helped in product innovation and dyed fabrics and dyed yarns were

employed in development of high fashioned fabrics blended suiting and acrylic shirting. The quality of these products is much better than our close competitors viz. India Indonesia Thailand have acceptability in markets like Dubai Saudia and Gulf States. A realistic duty draw back rebate can push up the exports and help for market penetration against active competitors. A demand gap in these markets was created when Japanese products lost their competitiveness and Japan focused on high fashioned item in the European and U.S. market. India Indonesia and Thailand made vigorous efforts to make their products feasible and acceptable to fill up the gap in these markets. Pakistani entrepreneurs have also made efforts and their products have better acceptability but find difficult to compete because of the higher price structure of Pakistani goods.

QUALITY OF TEXTILE PRODUCTS: Although the industry is putting up latest plants and equipments and are developing business linkages with worlds major buyers, the level of quality is far less than the international standards. This is a critical state and as the world trade moves to more quality conscious demands as envisaged in I.S.O. 9000, the industry needs to plan to improve the quality levels of its products. The key to successful upgrading, however, will be in proper process controls and attention to quality as it affects the marketing of end products. The main stress should be to substantially upgrade the technology base of constraining aspects of the industry whilst allowing better operator to achieve incremental improvements. Although the standards exist as laid down by P.S.I. these are hardly applied. The general standard of the products is lower than international level and it results in poor earnings. The international trend is to achieve quality control through process supervision. Hence all new machines have constant monitoring devices fitted so that it is known that if the processes are up to standard so will be the products. The basic approach in the industry is simply production oriented rather than quality production. Further for most of the smaller operations no testing is done and it is quite unusual for any operation to test input materials on receipt. QUALITY OF COTTON CLOTH: The quality of woven cloth on shuttle looms is inferior. Most common defects are thick and thin places rushing in & double pick, oil sonears, trash and napes etc. The defect per yard are above the 0.5 level. The product quality of shuttleless loom units is comparatively batter. The defect rate per yard is between 0.10 0.26. Despite the fact that product quality is poor entrepreneurs efforts to improve are lacking even integrated mills. Except for few mills the concept of inspection and quality control at yarn preparation viz warping sizing yarn tying wearing stage is lacking. This may be due to firstly the cloth production is mostly in the Power Loom Sector where operation size is too small to apply quality control and secondly majority of the cloth is

printed for bedwear and home textiles for which a high quality level is not demanded. The cloth for local market is commonly sold in small length and it is possible to cut off defective sections. Vital cloth inspection is however carried out by units exporting grey cloth. Some mills employ inspection device to carry out fluoroscopic inspection on a defect point system and careful mending and washing is carried out on the demand of export buyers and comparatively good product is selected out for exports. The Japanese experts in their recently concluded study has observed that although Pakistan is a major cotton producing country, it has failed to emerge as leader in exports of clothing and garments. The protection given to the weaving and garment sector is cited as an important contributor to the poor growth of the weaving sector. It has warned that unless the industry upgrade its products and prepare for demand for the garment sector by developing up stream and down stream linkage the textile industry in Pakistan will be wiped out from world market. It is also pointed out that high rate expansion and the export growth in recent year shows that Bangladesh, Mauritius, Morocco and Srilanka are closing fast on Pakistan in the export of garment. It has also observed that the quality of Pakistan cotton yarn, fabrics, knitwear and secondary products were below international standard but thanks to its comparative advantages in raw material, the Pakistan products of all categories were enjoying price competitiveness. However, Pakistan stands in danger being caught up by India, Indonesia, Turkey in all its products, in competitiveness. It is therefore, stressed for the skill development at all levels viz: from the level of picking up of cotton in the field to finished products to improve the quality of textile products. The study proposed and energetic role for the unorganized power loom sector in Faisalabad and believes that the role of the unorganized sector is bigger than the mill sector since it accounted for 90% of the fabrics production in Pakistan. It has therefore, called for modernization of the power loom sector by making it available liberal credit. It is hoped by the JICA Team that the power loom sector can be developed into a strong sector for quality garments export. As per directive of the Advisor to the Prime Minister on Finance and Economic Affairs a survey was launched by Textile Commissioners Origination, in association with APTMA, CBR and Banking Council. A format was circulated to 212 units including 53 Integrated Textile Mills and 112 Shuttleless loom units. Beside Industries Department of Sindh and Punjab, Central Excise and Sale Tex Departments and the Two Power loom Associations were requested to furnish information regarding closure or operation of the Weaving units. In spite of repeated persuasion only 24 units responded and furnished the information. Annexure .VII in - corporate the details of these units. Accordingly a total of 35 units were reported as closed. Since this information was not sufficient, interviews were made with All Pakistan Textile Mills Associations, Shuttleless Weavers Group, Power Looms & Cloth Exporters and the findings are discussed below: The Weaving Sector had a set back of increase in yarn price in pursuance of raw cotton crisis. The performance of the industry in general slowed down because of losses

on export sales as well as sluggish attitude of making up which too faced the problems of absorbing the increase in yarn prices. Beside the increase in Power Tariff and impact of inflation also affected the performance and industry has start-stop behaviour. Shuttleless Looms sector was the most affected sub-sector as it by virtue of its high initial depreciation and financial cost was unable to compete. The impact of crisis was noticed as low capacity utilization, reduction in shifts, Number of working looms as closure of units. However, the complete closure which always is an extreme case was not noticed as the sponsor attempted to reduce the losses and preferred not to default with the banks. The power loom units both large and small were squeezed due to low demand. Since they operate on commission weaving basis as such their performance was comparatively better where no bank loan was drawn then the units with bank loans. The recent package on Textile Industry had started showing a positive effect and the exports had started picking up. While the power loom sector based cloth is feasible the shuttleless loom sector are either break even on certain varieties or are still loosing and need state support to make their products competitive within the cost frame work which had gone against them adjustment measures. Raw Materials: The readymade garment industry uses both locally produced and imported raw-materials, but it mainly uses locally produced raw materials. Both locally produced and imported are readily available in the market. The production of cotton and cotton blended cloth, which are largely used by the garment industry, is not only sufficient but also surplus for exports. Besides the mill sector, the non-mill sector also produces cotton cloth which is widely used by the garment industry. The non-mill sector is scattered and unorganized. Its production is estimated to have risen to 3,690 million square meters in 1999-2000, from 2,561 million square meters in 1990-91. According to an estimate there were about 2,50,000 looms operating in the non-mill sector in 1999-2000. The power loom sector produces pure cotton, polyester, viscose and blended fabrics, which usually fetches low prices in the market. Production of cloth in mill and non-mill sectors is given in Table-1.
Table-1 Production of Cloth (Mill and Non-mill Sector) (Million Sq. Meters) Year Mill Sector 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 293 308 325 315 322 327

Non-mill Sector 2,561 2,931 3,035 3,063 2,779 3,379

Total 2,854 3,239 3,360 3,378 3,101 3,706

1996-97 333 3,448 3,781 1997-98 340 3,573 3,913 1998-99 385 3,600 3,985 1999-2000 449 3,690 4,139 Source: I) All Pakistan Textile Mills Association. II) Federal Bureau of Statistics, Government of Pakistan

The other locally produced raw materials of the readymade garment industry which include lining, thread, buttons, buckram, labels, polythene etc. are wither imported or manufactured by the un-organised sector. The production data of these is not available. However, these are also produced locally in fairly large quantities and have easy availability. The quality of some of the locally produced raw materials, such as threads, buttons, buckram, etc., are not as good as the imported. Secondly, some items of the readymade garment industry are not produced locally, the requirements, of which are met through imports. Import of major raw materials is given in Table-2.
Table-2 Import of Raw Materials for Garments (Rs. in `000) Products

1997-98 1996-97 Qty Value Qty Value Sewing Thread249,994 61,752 397,840 71,676 Synth. Filaments Sewing Thread3,006 523 2,720 512 Artificial Filaments Sewing Threads22,252 4,433 4,841 1,189 Synth. Staple Fibre Sewing Thread Art3,355 756 25,259 5,229 Staple Fibre Bukram 63,129 7,969 104,199 12,118 Hooks 43,811 4,817 22,252 1,984 Buckles 15,727 1,513 33,642 3,380 Claps 29,938 2,612 82,434 3,232 Eyes of Apparel 214,790 19,975 178,964 14,820 Ribbons 3,552 2,104 3,669 1,634 Total 649,554 106,454 855,820 115,774 Source: Federal Bureau of Statistics, Government of Pakistan

Pakistan also imports cotton cloth as well as silky, nylon, synthetic and artsilk fabrics. Pakistan has occasionally been importing cotton cloth bleached handloom, cotton drills and jeans both mill and non-mill made. The quantity of these has been

meagre and is exclusively imported to manufacture garments for exports. Apart from locally produced and imported raw materials, the garment industry also obtains some raw materials from the imported worn clothing. These include zips, lining and buttons etc. The first two items are frequently used, particularly by the unorganised sector which manufacturers garments for local markets. Such inferior raw materials are generally not used in the manufacture of export garments.

Production: The readymade garment industry in Pakistan generally operates on a small and unorganised scale. According to an estimate about 70% of its units are in the unorganised sector and are established in small shops, flats and houses. These units also do not have modern machines like over locking, creasing, collar pressing buttoning and cutting etc. These units are mostly equipped with 4-10 sewing machines and 1-2 electric irons. These items are usually Pakistan-made/assembled and give satisfactory service. The useful life of a sewing machine is stated to be about eight to ten years, whereas an electric iron is expected to last one to two years only. However, their durability depends on their handling.

The garment industry uses both industrial sewing machines and domestic sewing machines. The domestic sewing machines operate at a considerably slower speed of upto 250 stitches per minute. These are of low price and require much less skill to operate than the industrial sewing machines. As such these are commonly used in small units. There are seven factories which reduce sewing machines in Pakistan. Their production shows an erratic trend during the last five years. Local production of sewing machines decreased from 68,131 numbers in 1994-95 to 35,690 numbers in 1999-2000. Table-3 shows local production of sewing machines.
Table-3 Local Production of Sewing Machines Year No. of Units Production (Number) 1994-95 3 68,131 1995-96 5 84,137 1996-97 6 61,131 1997-98 7 36,191 1998-99 7 29,696 1999-2000 7 35,690 Source: Federal Bureau of Statistics, Govt. of Pakistan

Table-4 Import of Sewing Machines and their Parts (Rs. in `000) Product Unit Sewing No. Machines (House hold type) Sewing No. Machines (Industrial) Other No. Sewing Machines NS Sewing Kg Machine Needles Domestic Kg Sewing Machines

1997-98 Qty Value 6,755 7,619

1996-97 Qty Value 4,193 3,263

47,435

563,059 25,408

250,946

5,788

35,148

3,930

15,050

35,745

185,897 68,245

35,353

30,920

5,067

29,532

3,991

Parts Industrial Sewing Machine Parts

Kg

317,897 87,033

169,261 59,483

Source: Federal Bureau of Statistics, Government of Pakistan

The industrial sewing machines are mainly imported from Japan and are capable of working at high speed upto 4,500 stitches per minute. These are specially suitable for assembly line operation and are mostly used by the organised sector. Besides industrial sewing machines, household sewing machines alongwith parts and electric irons etc. are also being imported. Imports of sewing machines and their parts are given in Table-4. The other important machines used by the ready-made garment industry is the overlocking, which is used to trim the edges of cut cloth. In addition, specialised machines are used for cutting, making button holes and stitching of buttons. According to an estimate, one specialised machine is required for very five sewing machines. Readymade garment industry mostly produces cotton and cotton blended shirts, T-shirts, Bush-Shirts, Pants, Children's suits, school uniforms, skirts, blouses and maxies. Among these men's shirts and children garments are widely manufactured for local markets. These are mostly made of cotton blended cloth. In cotton articles, the non-mill made cotton cloth is largely used as against mill-made cloth. The unorganised sector of the industry largely uses non-mill made cotton cloth even when it manufacturers garments for exports. The mill made cotton and cotton-blended cloth is used mainly for manufacturing shirts, T-shirts, Pants, Kurtas and Shalwars. The non-mill made cloth is used for shirts, T-shirts, maxies, skirts, blouses and children suits which have potential markets abroad. Apart from these, some traditional, as well as regional dresses of ladies such as Sindhi and Balochi long Kurtas, are also manufactured, particularly for export. Inspite of the fact that the industry has shown rapid growth no figures of annual production are available either from the data published by Federal Bureau of Statistics or from other sources, including the Readymade Garments Manufacturers and Exporters Association. Further, determination of production in this industry is difficult to make. Firstly, due to predominance of unorganised cottage scale units where the major portion of the work is performed manually. Secondly, the capacity of the same machine varies significantly, depending upon the type of garments prepared. Thirdly, it is easy to switch over from one product to another. The production of the garment industry is roughly worked out at 60 million dozens per annum. The readymade garment industry basically follows the piecework system which involves completion of the whole garment, except cutting, by one person. A few organised and large scale units use the trolley system (division of labour) in which one garment is prepared by different persons. Each industry employs/engages labour force according to the number of sewing machines operated, besides one or two garment cutters and a pressman. The production capacity of each labour depends on the nature of garment which he stitches. The labour of this industry consists of both male and female. Female labour is mostly of widows, orphan and members of low earning families. The production capacity of male labour is higher compared with female labour. It is due mainly to additional

responsibilities of the female folk. The stitching of units established in-houses is also not as good as that of established commercial centres with male labour.

The organised and large scale units mostly hire labour on monthly basis while unorganised small units hire labour on daily wages or contract basis. The stitching charges of garments vary according to their nature and quality of work. Ladies garments are stitched at a bit higher rate as compared with the gents garments. The exact stitching charges cannot be ascertained as it varies from unit to unit and also depends upon the efficiency and experience of the labourer.

Export: Production of garments by units depends on export orders directly of indirectly. These orders have somewhat risen in terms of value, but they have fluctuated widely in terms of quantity. Generally export earnings from garments have increased tremendously. Pakistan's export of ready-made garment and apparel came up 5th position during 19992000. Exports increased from 19 million dozens of various types of readymade garments worth US$ 394 million in 1989-90 to 31 million dozens worth US$ 772 million in 1998-99, thus showing an increase of 96% in terms of value. Pakistan exports garments to a number of countries. Major buyers of readymade garments during 1998-99 were USA, Germany, UK, France, Canada and Saudi Arabia. Pakistan's export success in the US is limited to categories 338 and 339 ( men and women's knitted shirts). Pakistan's share of all US knitted garments exports is less than 3% in most years. The share of the EU market in knitwear is typically 1% vast untapped scope exists for expansion in the following products groups: USA - Playsuits, babywear, nightwear, underwear and sweaters. EU-gloves, socks, shirts, nightwear, trousers, babywear, sportswear.

Local demand of readymade garments during the past five years increased manyfold due to increase in GNP, urbanisation and population. Growing tailoring charges will induce the people to purchase readymade garments in larger quantities in the coming years. On the other hand industry also provides an impetus to many other allied industries such as spinning, weaving, printing/dyeing processing and also provides employment to various artisans, such as embroidery art work, block printing and hand screen printing, cutting, stitching and packing etc. The potential for export of readymade garments is estimated at more than US$ 2.0 billion in the year 2005, provided appropriate measures are taken to solve the problems confronting this high value-added industry.

Pakistan Textile PROBLEMS AND THREATS

Readymade garment industry has emerged as one of the important small scale industries in Pakistan. Its products have large demand both at home and abroad. The local requirements of readymade garments are almost wholly met by this industry. Its exports in 1999-2000 stood at US $ 772 million or 8.5% of the total exports. Garment industry is also a good source of providing employment opportunities to a large number of people at a very low capital investment. It mainly uses locally produced raw materials. Most of the machines used by this industry are imported or locally made and assembled. The readymade garment industry started in 70's in Pakistan. With the passage of time and industrialisation, this industry expanded very rapidly. The majority of the units making cotton fashion garments are medium and small-size in terms of machines, workers and output, with a few notable exceptions and scattered throughout Pakistan. The importance of this industry lies in the value it adds to indigenous raw material - cotton + blended cloth - thereby substantially increasing the revenue from its sale in the international market. After meeting expanding domestic requirements, the industry is capable of making available a large volume of its products for export. The industry turns out various kinds of garments for men, women, boys such as plain/embroidered/printed dresses, blouses, maxies, shirts, skirts, night dresses, track suits, middies, trousers, sub-dresses etc. All sorts of readymade garments are made from cotton fabric and synthetic fibre. The bulk of these garments are mainly exported to developed countries, like U.S.A., Europe, Japan and Australia. However, our country's exported readymade garments are inferior in quality in comparison with garments from India, Korea, Hong Kong, Taiwan, Philippines and Sri-Lanka. Consumption of local fabrics in making of garment and apparel accounts for 80% in Thailand, 70% in Hong Kong and 100% in India. This shows that our neighbouring country India, our main competitor, has increased its exports of ready-made garments nearly 20-fold over the ten years period. Nevertheless, Pakistan's cotton textile industry, has won world-wide recognition for producing cool and colourful lawns, which cater for the fashion needs of the people, both at home and abroad. In hot weather of the tropical East during summer, people just can't put up which clothes made of synthetic fabrics as insulated they do not absorb perspiration and become quite sticky. As a result, some people get rashes on the skin and develop allergy.

During summer, when every body wants to keep his or her body cool, the cool and colourful lawns, produced by the Pakistani textile industry come in handy. No wonder, therefore, that Pakistani markets are flooded with tastefully designed printed lawns during summer. These fine cotton fabrics are displayed in show cases and prominently advertised on television. Every year the old designs are discarded and new ones introduced. They attract a large number of buyers, who like to live in style and go for the latest fashions. Other fashion fabrics are silk, linen and man-made materials, which are generally blended with cotton. Much of the success of any design depends on the clever handling of such elements as line, shape, colour and texture. Pakistani textile craftsmen are increasingly acknowledging the importance of this, alongwith the qualities of balancing as a centre of interest repetition, rhythm and contrast. In Pakistan woven garments have grown rapidly in recent years and now account for almost 10% of Pakistan's total export earnings. North America and the EU are the major markets supplied by Pakistan and together account for over 50% of Pakistani garment exports.

Background Problem of SMEs

Pakistan's Small and Medium Enterprises (SMEs) sector is currently operating at a disadvantage. This is primarily because a majority of the manufacturing and planning processes are either unautomated, or, if automated, are not being utilized to their fullest potential. PSEB has partnered with the following 3 Industrial Associations after technical evaluation of their Expressions of Interest (EoIs) through the national press, and Terms of Reference (ToRs) made available on the website till the prescribed deadline. APTPMA PRGMEA /PHMA All Pakistan Textile Processing Mills Association Pakistan Readymade Garments Manufacturers Association Pakistan Hosiery Manufacturers Association

Initially the solution will be provided to fifteen industrial units in each of these four sectors. Software Companies PSEB has further partnered with software consulting companies for the requirement-gathering and development of ERP solutions for units in these sectors. Sector APTPMA PRGMEA/PHMA Requirement-gathering Netsol PrisLogix Software Development ITIM Associates AZM Computer Services

Current Status APTPMA PRGMEA/PHMA Benefits This ERP solution will help the industry to utilize its resources effectively, make automation affordable, especially for SMEs, and increase profitability and economies of scale. It will also shorten the activity lifecycle in time-sensitive, exportoriented industries. The ERP solution will integrate the processes and procedures in the industry in HR and Payroll, Finance, Production, Sales and Inventory management. The solution will provide and improve: Security - Application access available based on rights Efficiency - Quick access to information; all data is entered once only; integration of information between different modules. Data Consistency - All users in the application see the same information Order Tracking - Faster product/service look-up and ordering, saving time and money Automated ordering and payment, lowering payment processing and paper costs Remove Redundancy - Any data will be entered only once Generate invoices and vouchers Generate needed reports Fast access to detailed account histories, providing more abundant information and improved planning and analysis. Software Development Complete Implementation at 15 units in Progress Software Development Complete Model Implementation at 1 unit in Progress

APTPMA
The Textile Processing is one of the most value-added and export-oriented sector of Textile Industry in Pakistan. All Pakistan Textile Processing Mills Association (APTPMA) which represents textile processing units of Pakistan, is a registered trade body which is duly affiliated with the Federation of Pakistan Chambers of Commerce & Industry, (FPCCI), the apex Trade Organizations of Pakistan. History/Background: Textile Processing Sector has been operative virtually since the very inception of Pakistan in 1947. With the sudden upsurge of Textile industry in Pakistan during the fifth and sixth decades when quite a few Textile Spinning and Composite Units started picking up roots and Power Loom Units sprang up like mushroom in Pakistan in the unorganized sector, in every nook and corner, whose number rose to about 0.3 million plus. As out of necessity, a proportionate number of Processing Units was required for dyeing, bleaching, printing, sunforising, finishing, packing and packaging of the raw-

fabric which was being mass-produced by the unorganized Power Loom Sector. And this was the occasion when the entrepreneurs and pioneers of the Processing Sector rose to the occasion and, remarkably enough, came out with flying colours. Despite their meager resources, they succeeded not only in making the country self-sufficient in dress and apparel, but also in providing quality fabrics to the International Export Market while their quality was second to none. The Textile Processing is one of the most value-added and export-oriented sector of Textile Industries in Pakistan. All Pakistan Textile Processing Mills Association (APTPMA) was formally affiliated with the Federation of Pakistan Chambers of Commerce & Industry (FPCCI). APTPMA with its Head Office in Faisalabad was registered with Ministry of Commerce on 5th July, 1990 under Trade organization Ordinance. 1961, and started functioning from July 1991. All unregistered organization established for similar purpose merged themselves into one Association and then the organization opened three regional / Zonal Offices namely Faisalabad, Karachi, Lahore/Gujranwala. The total number of its registered Member Units as on 20th September 2000, is 394. The principal object in the association is to protect and promote the interest of all persons dealing of processing of textile products in Dyeing, Bleaching and Printing.

PRGTTI Pakistan ready made garments technical training institute

Introduction Pakistan Readymade Garment Technical Training Institute (PRGTTI) was established in the year 1997, with a mission to offer practices of management through training programs that makes meaningful contribution towards the global industry development. Since its inception in the training industry, the institute has built rapport in the market for its quality training programs. PRGTTI understands the importance of training in both, practical and theoretical knowledge and has successfully designed short course programs, which are aimed at training all sectors of the garment industry. Mission And Objectives: To encourage equal training opportunities for the textile sector of the industry. To enhance existing skills through professionally designed training courses. To develop self-confidence and to enhance job opportunities for trainees. Current Status The institute has trained more then 1600 (sixteen hundred) students in various trades since its inception in 1997. The institute has organized three Certificate Award Ceremonies and distributed gold medals and certificates to the successful candidates.

New basic courses have been introduced according to the requirement of industry. The running courses are regularly updated and advanced courses of the same have been designed. To provide quality training services to all parts of Pakistan an institute of same caliber is being inaugurated in March 2003 at Lahore. Board of Governors Mr. Pervez Hanif Chairman (hanifs@sol.net.pk) Mr. Masood Naqi prestige@cyber.net.pk Mr. Talib Sohail Mr. Vaqar A. Khamisani Mr. Jamil Akhtar Mr. M. Javed Chinoy Mr. Abdur Rehman Ms.Asma Hassan Principal (prgtti@cyber.net.pk)

Features
Counseling Service is available to all students encountering personal problems or difficulties with their studies. Individual and group counseling can be arranged on request. Equal opportunities for the females at the garment industry are encouraged and seek to maintain an environment, which encourages all its members to contribute fully and on an equal basis at work and in practical life. Career Service is offered at the institute to help students to provide them knowledge of job options in the garment field, and plan their future accordingly. Procedures Admissions are open indiscriminately to all eligible applicants as per PRGTTI admission procedure, irrespective of gender, religion, Economic background or any other factor. Pakistan Readymade Garments Technical Training Institute (PRGTTI) reserves the right to refuse admission to any candidate with out giving any reason Courses Pattern Cutting & Grading. Industrial Sewing. Quality Control & Quality Assurance. CAD/CAM/CIM Pattern Cutting & Grading. Garment Machine Mechanics. Merchandising. Intl Marketing with Reference to Marketing. Business Communication Skills. Inventory Control & Material Management.

Performance Results of some of the active textile units.

Sindh Fine Textile Mills Ltd: The unit earned handsome profits to the tune of Rs30.8 million (pre-tax) during the year 1996 as compared to Rs7.8 million earned previous year. The outstanding results were achieved by adopting cautious approach with strict monitoring of its quality, procurement of cotton, great care in utilisation of finances and strictly controlled and variable expenses. The performance is commendable especially in view of constant problems faced by the economy such as large fiscal deficit, excessive government borrowing, high interest rate, pressure on exchange rate and balance of payments and abnormal increase in the prices of utilities and rupee devaluation by 17 percent against the dollar resulting in pushing up the inflation during the said period. The unit has entered into a Power Purchase agreement with Sindh Energy Ltd (SEL). The entire energy requirement will be met by SEL. The unit feel relaxed and hopes that they will get regular, uninterrupted power supply at competitive rates, as compared to the rates charged by WAPDA. Sapphire Fibers Ltd The unit earned a profit worth Rs132.4 million (pre-tax) during the said year as against Rs61.7 million during last year. The exports were increased by 13 per cent over last year and sales also increased about 13 per cent resulting an increase in Gross Profit of about 4.5 per cent. The export sales includes knitted fabrics of about Rs.210 million. The company has imported modern Dyeing and Finishing unit for knitted fabrics through a long term loan of about $2.65 million from PICIC. This is a step forward for increasing value addition capacity of the unit. Sapphire Textile Mills Ltd This unit also succeeded in enhancing the profits. The pre-tax profits of the company amounted for Rs133.5 million during the year as compared to Rs19.5 million profit earned last year. The company carried out major replacement of machinery at its old plant at Kotri. The company has acquired 100 per cent share of its subsidiary Sapphire Energy Ltd during the year and has set up generating sets to ensure uninterrupted power supply to its units. Kohinoor Weaving Mills Ltd The pre-tax profit during the year were estimated at Rs31 million as compared to the profit of Rs109 million it had earned last year. This unit has embarked upon a reengineering programme in the areas of financial management, human resource development and organization restructuring, technical improvements and quality assurance through adoption of ISO-9001 Quality Standards and ISO-14000 Environmental Standards. This programme is expected to be implemented by the year 1999 reassuring the company to move in to next century with confidence.

Saif Textile Mills Ltd The pre-tax profit earned during the year amounted to Rs101.9 million as compared to Rs84.7 million of the previous year. The company spent Rs 51,327 million on its expansion project. The management had a programme to install captive power plant to provide uninterrupted and cheaper power supply to the mills. Sarhad Textile Mills Ltd The company's pre-tax profit during the year amounted at Rs9.2 million showing a decline over the last year's profits which stood at Rs22.9 million. The management is however confident that once a proper treatment of the assets/debts situation is in place as per the policy of the government, the company will be in a position to re-establish the production. Mahmood Textile Mills Ltd This unit again produced encouraging results and earned Rs2661.8 million as operating profit as compared to Rs79.1 million in the previous year. The company could achieve these significant results, in the face of severe inflation, due to better management control and its efforts to acquire raw materials well in time at very competitive prices. This company has also invested 100 per cent sponsors stake amounting Rs66.806 million in Mahmood Power Generation Ltd, from self generated funds. This company is setting up 9.2 MW captive energy project to ensure uninterrupted electricity to all units of Mahmood Textile Mills Ltd.

Benchmarking Pakistan's Textile and Clothing Exports

Performance of Pakistan's Textile and Clothing Exports Here we benchmark Pakistan's exports of textiles and clothing (T&C). Pakistan's T&C exports in 2001, $6.8 billion, lay between those of Thailand ($5.8 b.) and Indonesia ($7.9 b.). PRC was by far the largest exporter in this industry, with values approaching $55 billion in 2001. In terms of growth rates, Pakistan was a modest performer as its growth over 1990-2001, 4.5 per cent per annum, was below that of its neighbors but above that of high wage countries like Korea and Hong Kong. The world growth rate for T&C exports was 4 per cent; after a spurt during the 1980s, it slowed down to one of the slowest growing segments of world trade in the 1990s. Therefore, in terms of market positioning for future growth, it was clearly an undesirable segment. Pakistan, however, is heavily reliant on T&C exports, and this reliance has hardly changed over time. Given that global T&C markets are relatively stagnant, entry is relatively easy and the industry offers few technological and skill spillover benefits, this specialization does not bode well for future growth: Pakistan must diversify into faster growing and technologically more advanced products. Most East Asian Tigers also

started with a strong reliance on T&C exports but over time quickly moved into other activities. Electronics offered the main avenue for diversification but it was not the only one. Pakistan comes next only to Bangladesh in its dependence on T&C products. Even PRC, with its dominance of T&C markets, is rapidly reducing the share of the industry in exports (down to 20.5 per cent by 2001). Of the East Asian economies, only Hong Kong raises its reliance on T&C exports, and it is the only Tiger economy whose exports have been declining in absolute terms. The T&C industry contains some 100 products at the 4-digit SITC (Rev. 2) level, and some of these are growing faster than others. The ability to specialize in dynamic products and to move from slow to fast growing products (flexibility) is an important aspect of competitive performance within the industry. Another aspect is product sophistication: some T&C products are more sophisticated than others, and there is a presumption that these offer greater scope for value addition. This section benchmarks Pakistan in terms of positioning in dynamism, flexibility and sophistication in the T&C industry, using a set of different measures all based on available trade data.

Dynamism and Flexibility of Textile and Clothing Exports

Dynamism and flexibility are assessed in terms of the 'market positioning' matrix. To reiterate, the four positions in the matrix in order of desirability are: champions (dynamic products in which the country is gaining market share, the best position for an exporter), achievers in adversity (stagnant products in which the country is gaining market share), declining sectors (stagnant sectors in which the country is losing market share) and underachievers (dynamic products in which the country is losing market share, the worst position). The share of champions has risen in all four countries, but Pakistan has the lowest share of champions of the group in both years. In 2000, it also has the highest share of declining sectors and underachievers. PRC and Indonesia have the highest shares of champions while India is more similar to Pakistan - but with a higher share of achievers in adversity (products gaining market share in stagnant products). While Pakistan's overall positioning appears relatively weak, it is 'flexible' in raising significantly the share of exports in the dynamic segment ('champions' plus 'underachievers') over time, with a gain of 18.4 percentage points, which is a little more than the gain of India at 15.8 percentage points. Indonesia raises its share by 5.2 points but maintains a high share in dynamic products in both years. PRC starts with a smaller share of dynamic products in 1990 than Indonesia (if higher than Pakistan or India) but raises it by an impressive 25 points. Now consider Pakistan's performance for its 10 largest T&C exports during 1990-2000. It appears that the leading 10 T&C exports of PRC are better positioned than those of Pakistan, with more champions than achievers in adversity Each of the countries in the table gains market share in the 10 products taken together. PRC continues to be the leading performer with the largest gain, an increase of

a massive 8.6 percentage points. India comes next in the group, with 1.4 points. The lowest gain (0.4 points) is by Pakistan. More interestingly, Pakistan loses market share in 5 of the 10 dynamic products. India and Indonesia lose in 2 products each while PRC and Sri Lanka raise shares in all products. Pakistan's overall market share gain is due predominantly to one product, undergarments knitted of cotton, which, fortunately, are also the fastest growing T&C export in the world. However, it is also a very simple product in which entry is very easy, and is vulnerable to competitive erosion. Pakistan's market share losses in 5 of the 10 dynamic products are worrying, but without further investigation, we cannot evaluate their cause or significance.

Sophistication of Textile and Clothing Exports in Pakistan

We now consider sophistication of textile and clothing exports at the 4- digit level. The 100 products that fall under this industrial category show a fairly wide range of sophistication. The sophistication score for the industry is calculated independently of the scores assigned to all 181 manufactured products at the 3-digit level, but most T&C products rank fairly low in terms of manufacturing sophistication. The average sophistication score of T&C exports by Pakistan and comparators shows that here the scores range from zero to 100 for textile and clothing products only. The scale is thus quite different from that used to assess total exports, with the top in T&C being relatively low on the overall scale. Two advanced exporters, Japan and Korea, are also shown for comparison. Pakistan ends the period with the lowest average sophistication level in the group. Japan and Korea, as expected, have the highest levels. They are followed by Indonesia, Sri Lanka and PRC. India is second from bottom in the group. Over the 1990s nearly all the countries in the chart see a decline in their sophistication scores, a manifestation of the rapid relocation of most T&C products to low wage economies. The only exception is Bangladesh, which moves into more sophisticated products; this is, however, probably due to the very low level of sophistication it started with in 1990. Korea has the smallest decline of the other countries; combined with its high average sophistication score, this suggests that it has managed to shift production into more complex products while relocating simpler ones to cheaper sites. Pakistan's relatively low score in 2000 suggests that it is specialising in low value-added segments of the industry. This is explored further by dividing T&C products into four groups according to product sophistication scores and tracing distribution of exports by countries over these groups. 1990 and 2000 distributions for Pakistan and five comparators show that with SL1 being the most sophisticated T&C products and SL4 the least sophisticated. There is an interesting difference in the evolution of T&C sophistication over the 1990s. Pakistan's structure remains stable with a very low share of highly sophisticated products SL1, a moderate share of SL2 and very high concentration in SL4. Indian exports start fairly similar to Pakistan's but then shift more towards SL3 products, with corresponding losses in SL2 and SL4. Bangladesh moves significantly from the lowest level to SL2 and SL3, with SL1 remaining steady at a very low level. PRC shifts from SL4 to SL2. Japan's structure is practically unchanged, with SL levels 1 and 2

dominating its T&C exports. Korea shifts its structure upwards, with the top two levels gaining over the bottom two. Again, the rapid upgrading of Bangladesh's T&C exports is noteworthy. In 2000, Pakistan has the highest share of SL4 category products (nearly 55 per cent) in its T&C export basket. All other countries in the figure with similar wages India, Bangladesh and PRC - have much lower shares, the lowest being Bangladesh with only 13 per cent. (While it is beyond the scope of this paper to analyze this in greater detail, there are important policy issues here in terms of evolution and drivers of product upgrading in Pakistan relative to its main competitors.

Some Final Thoughts:

Given the prime importance of textiles and clothing to Pakistan's exports, the analysis here, simple as it is, has some disturbing implications. It is clear that overwhelming specialisation in this industry is not desirable for Pakistan's future competitiveness: it is unlikely to yield sustained growth in a world where dynamism resides increasingly in technology-intensive products. Our analysis suggests that over the period studied, even within the T&C industry, Pakistan's performance is weak in several aspects. Pakistan's textile industry has invested substantially in new equipment and technologies in recent years. It is well placed, given its raw material base and vertical integration across stages of production, to continue to be a major T&C player once quota restrictions are lifted. However, its major competitors are also investing heavily in upgrading the industry, and most are also upgrading their skill and design base and moving into better quality products. It is not clear if a raw material base will suffice for Pakistan to maintain a strong export position if it does not match its competitors in terms of technology, skills, designs and quality. The data here suggest, albeit indirectly, that it is lagging in this. It continues to focus on the least sophisticated products. It has a low share of champions and is losing market share in many of the most dynamic global T&C exports. There are many issues here that need more detailed benchmarking and analysis than is possible in this paper. It would appear imperative to undertake such an effort quickly if Pakistan is to formulate and implement a coherent strategy on export competitiveness.

WTO and its IMPACT:

SECTORAL REVIEW CORE CATEGORIES) Textiles and Garments export were US $ 8.302 billion. This is 68% of the total exports and an increase of US $ 844 million, or 11.3%, over 2002-2003. Of the total increase in exports of US $ 1.113 billion, Textile and Garments contribute 75.8%. It is encouraging to note that five of the subsectors namely cotton cloth, knitwear, bed wear, cotton yarn and ready made garments, achieved exports in excess of US one billion each.

Our Other Core categories combined, recorded an export level of US $ 2.353 billion, which is 19.2% of our total exports, registering an increase of US $ 99 million or 4.03% over last year. These contributed 8% of our total increase in national exports. Whilst Rice at US $ 627 million and Petroleum products at US $ 284 million produced appreciable growth over last year, 12.9% and 14.3% respectively, our other traditional product sectors were lower or declined. Exports of leather & leather products, at US $ 723 million, were 4% higher, molasses at US $ 48 million were up 4.7%, carpets at US $ 223 million increased by 0.2%, sports goods at US $ 310 million declined by 7.7% as did surgical instruments at US $ 124 million by 17.3%. Performance of our traditional products, other than textile and garments, postingeither incremental gains or decline, is a matter of concern as these currently account for 19.2% of our total exports. In todays global trading environment, economies cannot function in isolation. Therefore it is necessary to have a system of international trade that works for the benefit of all. For such a system to be functional, it needs to be rule based and cater to the interests of all countries irrespective of their level of development. The World Trade Organisation (WTO) represents an effort to put in place such a system which is not only rule based, but one where decisions are taken by cons . The WTO was established and made operational in 1995. Pakistan has been a WTO member since 1995 and has been complying with its legal obligations under various WTO agreements. At this point I WANT TO reiterate that contrary to popular perception, the WTO regime will not come into effect in 2005 since it is already operational However, what makes the year 2005 especially significant from Pakistans point of view is that with effect from 1st January 2005 all remaining quotas on our textile exports will be phased out in keeping with the requirements of the WTO agreement on textiles and clothing. The elimination of textile quotas has been a longstanding objective for us because we enjoy a comparative advantage in this sector. The Textile industry of Pakistan, in collaboration with Government, has been preparing itself by making sizeable investments in order to take advantage of the new market opportunities likely to emerge after the end of the quota regime. Our assessment is that in overall terms Pakistan stands to gain from the abolition of textile quotas. Given the major share and importance of the textile sector in our economy and trade, I would like to inform you about some of the specific supportive measures under taken for this sector: (a) Sales tax on ginned cotton has been eliminated to reduce costs for the spinning sector. (b) Ban on import of cotton waste has been removed to help towel manufacturers. (c) Almost all restrictions on relocation of used textile machinery, and related equipment have been removed to encourage aggressive establishment of enhanced textile production capacity.

(d) Garment Cities are being set up to encourage production and export of value added products. Presently negotiations are underway to further improve the WTO system and the global trading environment. In these negotiations referred to as the Doha Development Agenda, Pakistan is striving to ensure that the final outcome is development friendly and conforms as closely as possible with our economic objectives. In the most important negotiations i.e. on agricultural trade liberalization, Pakistan, alongwith other developing countries, is calling upon developed countries to make major reductions in their agricultural tariffs and eliminate their subsidies as this would be immensely beneficial for our agricultural sector, given its predominant position in our economy. At the same time, we are also mindful of the need to ensure protection of our farmers against import surges of low priced agricultural products. Accordingly, we have allied ourselves with a group of developing countries that are calling for a special safeguard mechanism to cater to such eventualities.

REVIEW OF LAST YEARS TRADE POLICY INITIATIVES

Our trade policy last year contained an array of new initiatives some of which were trend setters, designed to identify opportunities. It is encouraging to note that a vote of confidence has been expressed by other Federal and Provincial agencies as they have decided to pursue some of these initiatives themselves. I am particularly appreciative of the concerted efforts of the Ministry of Industries to set up the Textile City in Karachi; and of the policy decision of the Government of Punjab to set up Garment Cites at Faisalabad and SUNDAR near Lahore. In order to be able to finance the plans emerging from the 2003-2004 Trade Policy initiatives, a special long-term, fixed mark-up rate finance scheme has been launched in collaboration with the State Bank of Pakistan. Under this scheme, such units are being provided Credit on concessional terms with mark-up rates of 5 to 7.5% repayable over a period of 2 to 7-1/2 years. Diversification of products and markets is an important thrust of our trade strategy, hence a 25% freight subsidy incentive was allowed to exporters to explore nontraditional products and markets. This subsidy was available for products whose annual exports were less than U.S. $ 5 million or to markets where total annual Pakistani exports were under $ 10 million. This measure resulted in a 30% increase in exports to the eligible countries. Availability of contamination free cotton is an essential pre- requisite if Pakistan is to take a quantum leap in textile exports. To this end, targeted research on issues of the

ginning sector and creation of awareness among stakeholders is necessary. Accordingly, a Cotton Research Institute is being established in Multan in collaboration with Pakistan Cotton Ginners Association. Land for this facility has been identified, and feasibility prepared, on the basis of which the necessaryfinancing has been firmed up from the Export Development Fund A ground breaking initiative was the establishment of garment cities in Karachi, Lahore and Faisalabad. Funding for this initiative of Rs. 1.42 billion has been arranged from the Export Development Fund. Furthermore, land for the Lahore project stands identified, and its procurement is underway. Two sites in Karachi and three in Faisalabad have also been shortlisted and selection of the most appropriate sites will be made shortly, so that these facilities become operational in the verynear future.

EXPO PAKISTAN
Marketing of our export products is of course a critical activity of the Export Promotion Bureau. There is a continuing emphasis on this activity to support our exporter community. A major initiative in this regard is the proposed holding of a mega event in the form of EXPO PAKISTAN, scheduled from 2nd 5th February 2005, at Karachi. On this occasion, besides show casing all our products with export potential, side events like seminars, conferences etc. will also be organized to get maximum marketing mileage. Preparations for successful mega events require massive effort, and these are well underway.

CHALLENGES FOR PAKISTAN TEXTILE INDUSTRY 1.

There has been not adequate investment in modernizing the Weaving Sector as adopted by our competitors to bring it at par with the technological level of Spinning Sector or to match the demand of Garment Sector. Investors have reservation that looms are very costly and not very profitable. 2. Lack of adequately trained workers and supervisors to handle the new technology has rendered the projects yield results of low levels of utilization productivity and hence result in higher costs. 3. Recent increase in raw material viz. cotton and blended yarn prices has made all the yarn products viz. Cloth Towels Hosiery and Garments more costly. The increase in yarn cost is 100% while the increase in sale price is about 20% during the last two years. The Power Loom Units by virtue of their more vulnerable nature and Shuttle less Loom Units which are already faced with low yields are facing it more difficult to absorb it especially in low price grey fabrics.

4. Production and marketing is still restricted to low priced market segments where the high cost of inputs are not properly recovered. 5. The industry is in the process of transformation from very low priced market segment to medium priced market segments. The pace of shift is very slow. This is mainly due to the image of Pakistan as low quality cheap cloth supplier, good only for printing purposes. It will take some time to build up the image and confidence as quality suppliers of dye able cloth in export markets. 6. The local garment industry which is main consumer of quality fabrics is unable or slow to shift their fabric demand to shuttle less units due to price factors. 7. The increases in power cost had made cloth production more un-economic as power consumption is higher in shuttle less technology than conventional looms. 8. The contention of the industry that due to incentive for direct exports, there is encouragement for yarn export and generally A grade yarn is made available to domestic weaver at a higher price than competitors abroad, is correct. This is one of the reasons of slow pace of development of value added yarn products. 9. The increase in interest rate of Export Re-Finance from 3% in 1989 to 13% at present as well as electricity rates from Rs. 1.67 per unit in 1991 to Rs. 3.08 at present has impacted the industrys competitiveness. 10. The industry after high investment in capital cost find it difficult to get quota which has no linkage to technology and as such they have to purchase from market, burdening them further. 11. The contention of A. P. T. M. A. that non-availability of quota has led to a situation whereby most of the new shuttle less mills and concentrating on the only active non quota market of Hong Kong, which has created undue competition amongst themselves thereby resulting in reduction of fabric price is correct. 12. The cuts in duty draw back rebates on cotton fabrics in march 95 and again in Aug. 95 seriously affected the cloth exports as the industry which was otherwise, struggling hard to pass on increase of yarn prices to it buyers become more uncomfortable. The decisions may be correct, but was untimely and lack of coordination with agencies which promote industrial development-production and exports Rationalization of rebate and devaluation in oct.95 has helped the industry improve the sales. 13. Present system of rebate calculation and the valuation at export stages are all oriented to mass production low value added products. The concept of quality premiums differentiated products appreciation and high fashion high value added goods are not

fully compensated by existing system. If we have to improve the export yield major promotional focus will have to be made on such non-traditional items. 14. Though the product base of blended textile has increased by use of polyester viscose and acrylic fibers, the high incidence of taxes has kept the performance of this sub-sector suppressed. A wide product assortments offer better opportunities for exports provided the rebate structure is rationalized.

Three Stars Hosiery Mills (pvt) Ltd.

Woven & Home Textile Division
NAME : Three Stars Hosiery Mills (pvt) Ltd HISTORY OF THE FIRM: 3 star was inaugurated in 1956. it was basically a Company owned by: a father, Mr. Mohammad Rasheed and his two sons, Mr. Mansoor Rasheed and Mr. Saud Rasheed. They all started at a very small scale with only 10 machines working then gradually due to growth orientation in textile industry, the three stars installed its 4 more units in DUBAI, JORDAN, BEHRAIN AND EGYPT. At that time three star became the milestone in textile industry .in Multan , four units are working at this time but the unit operated at MASSOOM SHAH ROAD was commenced in 2003. INTRODUCTION OF FIRM: NAME: THREE STAR HOSIERY PRIVATE LIMITED YEAR OF COMMENCEMENT : 1956, Multan Pakistan. ADDRESS: Old Sabzazar Club, Masoom Shah Road, Multan PHONE NO.: MULTAN : 92-61-6556757 / 6562133 KARACHI : 92-21-4386020-1 FAX NO: MULTAN : 92-21-4556758 KARCHI : 92-21-4386022 EMAIL: tariq@threestarspk.com (General Manager) ismailsidat@threestarspk.com (Executive Manager Marketing) DIRECTORS: Mr. Mohammad Rasheed, Managing Director Mr. Mansoor Rasheed, Director Mr. Saud Rasheed, Director

MARKETING EXECUTIVE : Mr. Ismail Sidat, ( Mobile: 0300-8254148) FACTORY MANAGER : Mr. Mohammad Tariq, ( Mobile: 0300-8636124) FACTORY AREA: 45,000 sq. ft. LINE OF PRODUCT: - Manufacturer & Exporter of all types of readymade garments like Pants, Shorts Overall, Rompers, Skirt, Pajama,Pjset Shirts Quilted shirt in different types of fabric as under Fabrics: All types of denim in different weight, Twill, Canvas, Slubs, Cross hatch with pigment dyed, Stretch twill and canvas, Bed ford Cord, Rib stop, Corduroy, All types of yarn dyed flannel. - Kitchen Textiles of comprehensive variety including plain And Jacquard Kitchen Towels. - Satin Band Napkins & Table Covers, mercerized & sanforised. - Y/D Napkins & Table Covers - 100% Cotton and blended comprehensive variety of Damask in mercerized Sanforized optical white and dyed Napkins & Table Covers Kitchen Accessories like Aprons, Oven Gloves, and Placement Etc. in Y/D varieties and plain Twill fabric optical white & dyed.

PRODUCTION CAPACITY: Based on Woven Tops, approx. 10,000 pcs/day. Based on Kitchen Towels, approx. 50,000 pcs/day. Based on Table covers & Napkins, approx.2000 sets/day. NO. OF MACHINES: Approx. 650 Plus NO. OF WORKERS : Approx. 700 Plus PRODUCT CATEGORY : All types of Woven Tops & Bottoms Garment Div. Kitchen towels / HTD Div. FABRIC CAPABILITY:

Fabric Weaving facility on Power Looms / Air jet Wider width fabric MAJOR CUSTOMERS: Wal Mart - Germany Karstadt Quelle, France Noris International - Germany Metro Group Buyers ( Metro France, Metro Russia Metro Austria, Metro Denmark) Haband U.S.A. Bon Prix - Germany Tommy Hilfiger USA Flyshacker - USA Aliflinen - Canada COOP Italia

INHOUSE FACILTIES
PRINTING
Precision Screen belt printing machine from USA . Printing up to 8 colors. Table Printing 2 nos. tables (each table 8x100).

PATTERN MAKING:
Lector, computerized pattern making unit.

EMBROIDERY
Multi head computerized embroidery machines 6. Units of 20 head each from Barudan.

PROCESSING Complete range of dyeing and processing Including cone dyeing and state of art dryers, Calendering and stantering with compaction machines.
.Cutting Tables :

Currently, this section contains four tables as follows: Width Length Quantity 84 21 Yards & 20 Inches One 49 16 Yards Two 78 11 Yards & 34 Inches One Hanger Making Machine: 2 pcs capacity of 10000 pcs per day.

PROCESS OF PUTTING DEMAND: Our firm is having our own marketing setup running world wide. By this we use to contract our buyers .customers themselves use to visit us and check our whole processing and the quality of our product .as you people have also seen our tempting setup running so most of buyers get attracted with our firms quality production. So they put their order by sending us the samples. Besides that we have our buying houses who promote our firms advertising. They fetch us the buyers and we use to pay them .sometimes they are paid 5-7% of our total profit earned. We also get assistance from EPB (export promotional bureau) which is responsible for sending the delegation to promote the market and our exports. The largest fear in the whole world holds in Frankfurt, Germany, where different products are displayed from the worldwide. Every country is allowed to come and participate in this fare. it is largely meant to attract the firms and buyer from the whole world by making them observe our quality design and remarkably reasonable prices. TYPES OF CONTRACTS: Our company holds 2 types of contracts with the buyers. These are as follows: a) FOB: Factory onboard. In this type of contract, we are only responsible to transport the manufacturing goods till Karachi port .this can be done by road. b).CNF: COST AND FREIGHT .In this we are responsible to send the manufactured goods to Karachi first and then from Karachi port to buyers port also. With the help of shipping lines. We do not prefer airlines services for transportation (from multan to Karachi and Karachi to buyers port) this is mainly due to the fact that it costs is a lot but on the other hand we cant deny from its brighter side that is delays are very less. MACHINE: We have got 3 types of machines, which are being working in our firm. These can be included in high-tech machinery .the 3 types are as follows: 1) Plain Weaving machine 2) Dobby Weaving machine 3) Jacquard Weaving machine

Machine Type

- Brand

- Qty
- 450 sets - 01 set - 30 sets - 08 sets

Single needle lock stitch - Juki / Kingtex Cad Cam System - Electra Single needle lock stitch with trimmer - Juki Twin needle lock stitch with trimmer - Juki

Twin needle lock stitch Overlock ( 3 / 4 / 5 thread ) Button sewer Button holing Feed-off-Arm machine Electronic Bartack machine Automatic Pocket Welting machine Eyelet Button Hole machine Bottom hammer Pocket facing machine Elasticating machine Waistband attaching machine Belt loop making machine Vacuum Press Tables Continuos Fusing Press Thread sucking machines Band Knife cutting machine Snap attaching machine Cutting machine Steam Generator Steam Generator Electric Steam Iron

- Sicama - Juki / Pegasus / Kingtex - Juki - Juki - Juki - Juki - Juki - Durkopp Adler - Union Special - Union Special - Kansai Special - Kansai Special - Kansai Special - Oshima - Taiwan - Hashima - Japan - Ngai Shing H.K - Ngai Shing H.K. - China - Hitaka / Eastma - Naomoto - Booster - Silver Star

-04 sets - 12 sets - 05 sets - 04 sets - 04 sets - 04 sets - 01 set - 01 set - 02 set - 01 set - 02 sets - 02 set - 01 set - 10 sets - 02 sets - 02 sets - 01 set - 04 set - 04 sets - 01 set - 01 set - 15 sets

DEPARTMENTS: Our whole product line is classified into 3 categories: 1) Women garments department: it has been categorized into various sections which are further having vast variety of products available within it. This is the department where fabric is woven; vertical lines are prepared through warping .the vertical thread is called wrap and the shuttle that moves is called BEFT. The process of warping which our company is running is as follows: 2) Home textile section: It includes (aprons, kitchen towels, etc) it has got vertical setup. 3) Hosiery section Our this department is not yielding us much profits but still it is considered as producing competitive products

Subsidy: Government is very much helpful towards us and our exports in a way that it is providing us subsidy is the form of 5 to 10% rebate (it keeps on changing)

Ladies unit: Our firm is facilitating ladies to work in a very protective environment, they are provided with the special unit where they are required to do stitching of the cut-scores. Automatic Electra system is used to cut the cloth which is very solid and hard, in this ladies unit no men is allowed to enter without taking permission from the higher authority. Everywhere is working a chain system out of which ladies unit is the one .In this, we use to record per hour production. 6 100 535 It tells us that in 6 hours 100 pieces have been manufactured and the aggregate of 6 hours in 535 pieces. There are 350 workers working in the ladies unit. Wages Wages are given on the monthly basis RS.4000 per worker in given month. Age limit: Our workers include age group of mature people that is not less then 18. Duty hours: In normal routine our workers performs 8 hours duty and if workload is greater or the orders need to be supplied urgently then we increase the working hours but we pay overtime on extra duty hours. Line supervisor: Duty of line supervisor is to control the production and to manage any sort of disputes among workers. After line supervisor we have floor incharge and then production manager. Daily output: 10000 units per day are produced in our branch by the help of 350 workers as we are having 4 branches in Multan so overall 40000 units are produced in Multan only. These units include woven garments, knitted garments, home textile garments like kitchen towels etc.

Processing of the firm

Firstly we purchase the cotton from our suppliers. This is the only support we get from outsiders. This cotton is then converted into yarn with the help of 2 spinning mills of our own firm then this yarn is put into yarn dying machines with the capacity of 5 tons/day yarn then this yarn is converted into shape of reeling (luchi). Then this luchi is sent to power loom for conversion in cone shape dyed yarn. At this step the sample quality and design matters a lot. If the sample shows that the cloth is made by single

thread, we do not do further alterations in yarn. But if sample shows somewhat complex design of cloth then we do doubling of yarn. In this, actually synapsis of yarn occurs as 2 yarns are overlapped. By this we get a thick yarn which is now ready to prepare product according to sample. Now this yarn is sent to bleaching and dying section. Where the colors of yarn are more idealized, after this it is sent to weaving and knotting depts. which usually occurs on power looms. For further enhancing the beauty of cloth prepared it is sent to fabric processing unit where dying of cloth and raising takes place. For pressing purpose it is sent to calendaring unit. Here the employers put efforts in making the bundles of the dyed and processed clothes these bundles are called THAANS. These bundles are then sent to fabric store where they are kept save till the time that they are required. It is then sent to cutting department which is entirely run by the male employees. Here the cutting, according to sample is done. After cutting the cloth is sent to the stitching department in which we have males and females, both working in a separate places. Here the pieces are stitched as per order. Then the stitched pieces are sent to cropping section where labels are attached and final touches are given to the manufactured item like cutting the extra threads. Then the prepared stuff is sent to the inspection department where quality checks are very strong and from here pieces are out by quality. After this the inspected items are sent to folding department where the clothes are ironed and then folded in a proper way. Finally they are sent to packing department where the finished goods are packed according to the desire of the customer. They may want us to pack in carton or in packets. For example right now, we have recently packed the order sent by WALLMART of 8000 pants in small cartons having 180 pants in each carton .on carton will be mentioned :

In first line is mentioned the order number then the color is written and finally the carton having the number of pieces in it (total and the number of pieces in each packet) this shows that there are total; 180 pieces in a carton and 30 packets and in each packet there are 6pants.so 45 cartons will be sent to you by the buyer (45*180=8100) 100 pieces will be the extra quantity delivered to them by us. Then finally our packed goods are sent to finished goods store in the above mentioned carton form where they are ready to be delivered to customers.

Cotton from suppliers

Converted into yarn

Send to yarn dying machine

Luchhi formation

Cone shape dyed yarn (in power looms)

Doubling if required

Bleaching and dying section

Weaving and knitting section

Fabric processing unit

Calendaring unit

Thaans formation

Cutting department

Stitching department / half cropping department

Cropping department

Inspection department

Folding department .

Packing department

Finished goods store

Ready to be send

ENVIRONMENTAL ANALYSIS:
(SIMPLE\COMPLEX, STATIC\DYNAMIC) It has a simple and static environment. The environment of the garment industry as stated by the general manager, Mr .Muhammed Tariq, is simple static. It is due to two reasons. Firstly while exporting our products abroad we are concerned with our product abroad, we are concerned with changing taste and preferences pf customers there and therefore they do not recommend changing our product by ourselves. Our buyers send us the samples on which pattern; we are directed to fulfill the order. Secondly in Pakistan, the textile industry is a sick unit industry because if we analyze data from last10 years we will come to know that 306 units were in working condition10 years before but now only 10 to 15 averages are left with good name. this is due to high company production leading to lower margin of profits 2 years back only rs.2500 were paid to hire a female workers but now the same worker is paid rs.4000 to work at the same capacity.

PEST ANALYSIS
(Political, economical, social and technological analysis) PEST analysis of any industry sector investigates the important factors that are affecting the industry and influencing the companies operating in that sector. PEST is an acronym for political, economic, social and technological analysis. Political factors include government policies relating to the industry, tax policies, laws and regulations, trade restrictions and tariffs etc. The economic factors relate to changes in the wider economy such as economic growth, interest rates, exchange rates and inflation rate, etc. Social factors often look at the cultural aspects and include health consciousness, population growth rate, age distribution, changes in tastes and buying patterns, etc. The technological factors relate to the application of new inventions and ideas such as R&D activity, automation, technology incentives and the rate of technological change. The PEST Analysis is a perfect tool for managers and policy makers; helping them in analyzing the forces that are driving their industry and how these factors will influence their businesses and the whole industry in general. Our product also presents a brief profile of the industry comprising of current market, competition in it and future prospects of that sector. This title is updated at time of order to ensure it contains the most up-to-date information. This will take 1 business day.

OLITICAL:

An important factor may be the political economy of the cotton chain in Pakistan. Yarn producers have a powerful position in the industry and their economic importance is paralleled by the political influence they exert. Despite the rhetoric of demanding clean cotton--i.e., cotton not contaminated by cotton sticks, human hair, and polyethylene bags, as an input for their spinning mills--no incentives are provided for growers to supply such uncontaminated cotton. Obviously, the profits that can be reaped by selling poor quality yarn based on very low labour costs are higher than the premia for uncontaminated yarn and cloth. However, recently a decision has been taken to provide such incentives through the Trading Corporation of Pakistan (TCP). If implemented, this might translate into better pay for cotton pickers as it is they, ultimately, who control this type of contamination.

Govt.stability:
The Pakistans economy has made significant progress over the last five years. Wide-ranging Structural reforms, prudent macroeconomic policies, financial discipline and a consistency And continuity in policies has transformed Pakistan into a stable and resurgent economy. A Broad-based economic recovery has already gathered momentum, macroeconomic stability Has been achieved and the external balance of payments is much stronger today than ever Before. The stage is now set for economic growth to accelerate to 7 8 percent per annum Over the next 3 4 years with the private sector playing the leading role. Fiscal year 2004-05 not only envisages consolidating the gains made over the last five Years but to further strengthen the foundation this will take the economy on a higher Growth path in the medium -term. Accordingly, the real GDP is targeted to grow by 6.6 Percent with agriculture and large-scale manufacturing growing by 4.0 percent and 12 Percent, respectively. Inflation is targeted at 5.0 percent; budget deficit is projected to be 3.2 percent of GDP, exports and imports are targeted to grow by 9.1 percent and 20.7 Percent, respectively.

Taxation policy:
The wide ranging tax and administration reforms introduced five years ago Have started paying dividends. During the last five years, tax collection has increased by 68 percent or 13.6 percent per year on average.
This is the second year in a row when Original target for tax collection by The CBR was surpassed. CBR has collected Rs 518.8 billion for the current fiscal year which is higher than the original target for the year of Rs. 510 billion which is 12.6% higher than last year. Direct taxes have increased by 8.8 percent while indirect taxes increased By 14.5 percent. Within indirect taxes, sales tax has increased by 12.3 Percent and customs collection is up by 30.6 percent. It took 5 years to reach from Rs 200 billion to Rs 300 billion but during the last four years we are set to move from Rs 300 billion to cross Rs 500 billion in just 4 years. It is important to note that Rs 100 billion additional tax revenue was collected in 5 years with more than Rs 90 billion of additional tax. But we collected Rs 210 billion additional amount in 4 years with no additional tax measures in the budgets.

CONOMIC:

The proliferation of regional and bilateral preferential trade agreements is very important.. The pattern of regional markets in the textile and clothing industry is being reinforced by agreements that often tie tariff concessions to the use of inputs from the consuming countries (e.g., US origin textiles and fabrics). NAFTA, the Caribbean Basin Trade Partnership Act and the Euro-Mediterranean partnership are good examples. It is important to remember that after the elimination of quotas discriminatory tariffs remain as the major public policy instrument to redirect the flows of free trade. In South Asia, Bangladesh is a beneficiary having free entry into the EU due to its status as a Least Developed Nation. Textile industry is not concerned with any sort of political influences. If there lies its impact, then it is meant for the whole industry. Besides, good firms are never affected by such changes rather they consider it as an opportunity. We, therefore, are not concerned with any sort of political instability .Our main mission is to keep the people involved in work we dont believe in strikes even if the whole market is closed we will be seen working.

INFLATION:

OCIAL:

Population demographics: Pakistans textile and clothing (T&C) industry stands on womens shoulders. Under the scorching sun, thousands of female cotton pickers work in the cotton fields of Southern Punjab and Sindh, harvesting the raw material for the production of yarn, cloth, trousers, and t-shirts.

Cotton pickers are responsible for the T&C industrys successes, but remain poor themselves. Pakistan is the fourth largest cotton producer of the world and is expected to become number three in its consumption this year. Cotton is planted on 3m hectares of land, producing an output of 1.7m tonnes in 2003. An estimated 700,000 cotton pickers, most of them women and girls, are employed on the 1.6m cotton-growing farms in Pakistan during the picking season between September and December.

Income distribution:
Working conditions were extremely poor in the past. In 1999, pickers pay was only about Rs40-50 per maund. One maund is what a fast picker can harvest in a day, and half of that weight is more common. Alternative sources of income are few; Womens wages still stand at similarly low levels of Rs50-70. Considering that price levels have climbed more than a fifth between 2004 and 2005, only purchasing power has actually declined substantially.

Life style changes:

It will surprise many that the transition in lifestyles is a driver for the most profound changes in the industry. Till the end of the 1960s, over 70% of mens shirts sold in the United States were white dress shirts. By 1986, this share was down sharply to 20%. The youth rebellion made the world a much more casual place. It will surprise many that the transition in lifestyle is a driver for the most profound changes in the industry. Just one indicator can illustrate this point. Till the end of the 1960s, over 70% of mens shirts sold in the United States were white dress shirts. By 1986, this share was down sharply to 20%. The youth rebellion made the world a much more casual place. Now instead of a large quantity of white dress shirts retailers carry a dizzying combination of colors, sizes, styles, fabrics and price lines with a smaller quantity of each product type on their shelves. At the same time, the consumer has become increasingly more fashion-conscious-even faddish as some old timers complain--with rapidly changing tastes. A product that gets outdated or misses a particular selling period has to be disposed at a heavy discount. The proliferation of fashion design institutes and the frequency of clearance sales is evidence of this development. Levels of education: Education is very limited due to lack of awareness.Educational limitations also weaken their bargaining power vis--vis their employers.

ECHNOLOGICAL::

It is not surprising that the first users of the new technology to assist with the problems of managing demand were the food stores--beginning in 1970--followed by the leading apparel retailers. The principal elements of this technology package were the uniform product code, bar codes, laser scanners, and electronic data interchange. Using these technologies, retailers gained access to real-time sales information collected at the register via bar code scanning. Today, the leading retailers collect information on the sales of particular products at the size, style and color level, compile it on Sunday night (after the weekend sales are known) and transmit an electronic order to the appropriate supplier the same night. By the following Thursday, they expect floor-ready supplies delivered to their individual store. Low-cost items like hosiery, underwear and mens shorts are replenishables while high cost, fashion sensitive items like womens dresses are non-replenishables. The replenishable segment is growing in importance. In 1988, 60% of the sales volume in the US was shipped on a non-replenishment basis; by 1992, this was down to about 20%.o their individual stores. The consequences can be seen in the pattern of trade. In 2003, the top five suppliers to the US of mens and boys denim jeans, a typical replenishable item, were Mexico, Costa Rica, Guatemala, Colombia and Honduras. China was 18th and Pakistan 19th on the list. For the same product category, of the top ten suppliers to the EU, six were neighbouring countries. By contrast, for a typical non-replenishable item (womens and girls cotton dresses), the top ten suppliers to the US were all Asian countries. This clearly indicates how the market for apparel is being segregated and how completely different considerations determine the sourcing of these different product types. We are having adequate technology and machinery in proper working condition, which are compatible nationally. We are not facing any sort of inferiority complex in this aspect we are having 3 types of machines working in unit. Plain weaving machine Dobby weaving machine Jacquard weaving machine But if we talk internationally, I think our technology has gone obsolete due to incompatibility with the international firm machinery.

INDUSTRY ATTRACTIVENESS MODEL

1. THREAT OF SUBSTITUTE
We are not facing any sort of threat of substitute because we are producing quality products on the basis of order put by the buyers from abroad. If theyre is any threat prevailing then it is for all the competition not just for us. A. Quality of substitute: Our competitors in Multan are not producing quality products. So, we are not facing this threat regarding quality of substitute. B. Relative price and performance of substitute: In fact, price is set similar by many of the exporting companies .so, overall impact of price of substitutes does not matter. Price is kept stable and relatively low in order to attract more and more buyers. Due to quality difference, performance of substitute varies. Quality differences includes following variables: Skilled labor Labor hours Working conditions (raw material, processing of raw material)

2.

THREAT OF ENTRY

Definitely this industry is offering certain entry barriers to the new comers this is due to tough competition and relatively lower prices of the products by ways of achieving economies of scale, which a new comer cannot cope with. A Economies of scale:: It is being achieved by every firm in this industry thus leading to proper price satisfaction from customer side. If we analyze our own firm we can see that it took us decades to achieve economies of scale because of limited order put by the buyers. This didnt help us reduce per unit costs but due to the successive efforts and determination now we feel pride that we have achieved economies of scale. b. Initial capital requirement: In 1956, our company was inaugurated by having capital of only rs.100 by which we purchased simple operating 10 machines but now due to devaluation of rupee and need of the day, a company to operate at this level will be requiring multi millions of rupees, as the machinery will cost them too high.

c. Switching cost: if we will be given certain benefits like rebate etc from government side and keep on earning profit we will not switch to manufacture other products. but in case, if our hosiery section does not earn us much profit, then if we decide to make our this unit switch to some other products, then the switching cost faced will not be high because we are already having machinery which is suitable for manufacturing of any other textile product plus we are already having employees working in hosiery department which on the closure of hosiery section will be shifted to the newly formed section. So switching cost will not be very high for us. d. Access to distribution channel: As such we are not having our own distribution channels world wide. Our responsibility is just to shift the manufactured product till Karachi port. We preferably do contract or agreements on FOB (factory on board). In Pakistan, shipping lines offer their services to deliver the goods on buyers port; we prefer this because it is cheap for us too. e. Access to technology: We are having hi-tech machinery being operated in our company. We are very much satisfied with the technology we are using because it is yielding us high productivity gains. But if we compare our technology internationally I think that our firm needs much advancement f. Customer loyalty or brand loyalty: Our customers are very much loyal with us because we use to concentrate more on the patterns and quality sent by them as a sample. once it happened that after receiving the order, we started to work for manufacturing of 3000 shirts (as per order described).while producing shirts, we only changed the position of button by only half centimeter (as it seemed us better)and it resulted in the customer dissatisfaction. So finally we analyzed that provide the customer with his desired things to make him loyal retained to your product. Now our company is concentrating on each and every inch dimension of the sample in order to increase customer satisfaction and loyalty ratio. Once a company puts an order to us, is badly trapped by our excellence according to specification products. g. Government regulations: As we are not the single exporting company so whenever government imposes any regulation, it is meant for all. We are not the only one affected by the government interventions so; it does not create any anxiety matter for us alone. If we have to suffer all are to suffer Another fact attached to this aspect is that smaller firms have to face problems due to govt regulations like increasing wage rate (which normally they cant provide).increasing raw material prices etc. but thanks to GOD that we are among top 10 firms at national level so we can manage such sort of problems.

h. Retaliation by existing players: In garment industry, every firm is earning a normal profit through which expenses just can be recovered .so, the price which is maintained by us all is very much appropriate. any new firm ,if tries to compete us by lowering the price, will have to face loss. So we cannot consider ourselves as a reacting player for new comers.

3 POWER OF SUPPLIERS
In our country suppliers are few in number because of limited production of cotton as compared to the requirement of many firms. So supplier power remains less as they, sometimes are not able to provide us cotton when needed. In our country, nowadays Vehari district is producing good quality cotton if local suppliers are unable to provide cotton, then we prefer to purchase it from Egypt which is best known for its excellent quality this Egyptian cotton is therefore called butter cotton. A Concentration of suppliers: Cotton is produced Marjory in southern Punjab. So every textile related firm prefer to install themselves in the area located in the best reach of cotton suppliers so as to reduce transportation costs and other expenses. We can see that due to concentration of suppliers, prices, which are offered by them, dont have much difference. B Profitability: Suppliers profit depends on quality alone. Let me make you understand this by considering 3 stars as a supplier towards the foreign borrower. The only thing that matters is whether we producing according to demand or not. Only this will lead us to earn profit. Now if we take raw material, suppliers example we can see that they can only earn that amount of profit which will be the immediate result of their provisioning of quality cotton on demand by us and other firms. So, profitability of suppliers is very much dependant on quality they are providing to buyers.

C Forward integration threat by suppliers No such threat is faced by our firm because suppliers are only involved in fulfilling the demand of cotton. So, up till now, nothing such has happened yet that suppliers start some activities like spinning, ginning, weaving etc. but it can happen anytime depending on market conditions and Government regulations favouring the suppliers. d. Threat of backward integration by buyers: Our firm has not yet decided going for backward integration because our suppliers are capable enough of providing quality cotton when demanded. plus, our system is already so much intensified that wee dont feel any need to expand it further by producing cotton of our own also. as We produce products on demand so by

producing cotton ourselves will lead us to problem of inventory management and sometimes wastage in case of lesser orders. e. Switching cost: This cost can be borne depending on the quality of orders. If order is put for low quality then definitely we will switch towards low quality cotton suppliers and vice versa. f. Importance of industry to suppliers as a key customers: Our textile industry exhibits a great importance in the eyes of suppliers as it can be seen by the evident that the suppliers do not stop producing cotton through out the year (except for land rotation). Besides this, we can also see the bright side of suppliers by the fact that they have started to operate their own spinning and ginning mills which are meant to facilitate the textile industry in the emerging trends (keeping profitability as another factor). g. Role of quality and services If we are given an order to produce 2000 bottoms of high quality and for its manufacturing if we demand high quality cotton from our suppliers and they provide us with low quality (which will directly affect our final product), we will immediately switch onto another supplier. So, we can deduce that quality of raw material matters a lot for us. On the other hand, if we are required to fulfill same demand till the 1st week of June (order if put on Feb 1st) then our company will prepare the schedule for each and every activity. If we allocate 3 days to suppliers to make their raw material available to us, and they distribute cotton to us after 5 days, then definitely these 2 days carelessness will push us into long term problems. Even at that time, we will not be able to consult any other supplier due to shortage of time. So what we prefer as selection criteria of suppliers is the quality and services offered by them.

4- Power of buyers:
As we are exporting our products to well known companies like WALL MART etc, and the buyers number is high therefore their power is also very high. Even if they dont like our products according to sample, they can reject that and go for another. a. concentration of buyers Our buyers are not concentrated in a single region of the world. They are scattered in the whole world. So they cant form any union and settle the prices by themselves. we use to set the prices by ourselves according to the competing conditions. b. Profitability of buyers: We set our prices so as to make that buyer satisfied with us and he may not switch onto another seller. so, we use to earn normal profit and set our prices in such a

way so that buyers is not overcharged .we think that in this lies the buyers profitability, as he does not has to pay much. c. Role of quality and services: The only thing that matters the most is quality which serves as a root for all. if buyers puts an order of suppose 10000shirts and mention the quality also, then the seller is supposed to keep in view the quality first. for example if WALL MART COMPANY says us to manufacture 2000 bottoms and sends us the sample in which doubling of thread is shown and if we use the single thread instead of double will create hindrance In completing our order sincerely and up to the sample sent. Besides, if buyer wants the order to be completed till 31 st of June and we accept their condition, so if we even get 2 day late. Our company will suffer because we are not providing services on that promised date. So, quality and services are the major initiators of success. d. Switching cost: In this aspect, price matters a lot. besides price, quality and services are also taken into according by buyers. For example if our company is changing higher price and the quality is not delivered on the promised time, then it is the right of buyer to switch to any other. Company that is fulfilling all these things. Even if out of these three factors, only one is missing, the international companies will not feel any hesitation in switching onto any other company. They usually prefer to switch to either other Pakistani company or to other international companies. where labor is very cheap, like Bangladesh.

5. INTENSITY OF COMPEITION:
The competition in this industry is very high in the global market because there have been installed many firms in the recent decades who want to come up to the global standards at lower cost.

INDUSTRY LIFE CYCLEAND MODEL

1. Hosiery items is exhibiting the declining stage Because its market shares are very less and its contribution towards international trade ha also stared decreasing. profits ,now earned by t are very less (not earning us losses).now many new competitive suppliers with low cost are coming wit cheaper products, this lowering the market value of our home textile items and making it appear as DOG. 2. Our woven and denim section is in growth stage because its market shares are increasing simultaneously. there is being observed continues growth and it is yielding us profits because it is out from the riskier stage of introduction and by now is showing very good prospects. Our woven garment products are readily accepted by the customers and is, therefore acting as STARS

3 Home textile section: Our home textile products (kitchen towels, gloves, aprons) are facing maturity stage. because it is earning us very less profits but we have greater number of its market shares and the degree of competition is very high .our product is no more innovative and standardized .we think that we will receive greater number of revenues from our product replacement .so our this section is acting like a cash cow for us that is even injection of more money I to it, will not yield us much gains as you know that after every sunrise, there is sunset, so our this section ,after yielding us many profits ,has now reached maturity stage.

INDUSTRIAL COMPETITIVENESS MODEL Porter diamond model

1 Related and supported industries:
We are not having a related or supportive industries attached with our firm because we believe in doing our work by ourselves, as we dont compromise on the quality. So, as the suppliers of raw material are not having their ginning or spinning units (no forward integration of suppliers) then we have to perform these tasks by us as well. So, we have to do the backward integration also. But as far as our distribution is concerned it depends upon the contract being signed with the buyer. It is usually of two types: CNF (cost in freight) and FOB (facility on board) We prefer FOB because in this we are only responsible for the distribution till Karachi port. This is mainly done with the help of the service agents and shipping lines. But in CNB, we are responsible for distribution till the buyers port. It is accomplished by the assistance of shipping lines. So, for distribution areas we require some agents no related or supportive industries are attached with us. But as firms competition is not isolated and due to lack of related and supportive industries, there are only 2 to3 names left in the registered exporters we feel honor to say that we are competing even with the absence of that supportive industries.

2. Demand conditions
Our customers are very much receptive in putting the demand. They always put the order by demanding specifications according to the sample sent. So, our company is only concerned with focusing the sample. We dont feel any need towards making innovations and are not feeling any fear that whether our product will be accepted by the buyers or not. We are not much concerned with the changing preferences and tastes of buyers. So, we can see that the demand is sophisticated from buyers side (as they put order according to the demand of customers). But from our side, it is sample specific. The buyers in the form of sample also send innovation. So, we do not face any fear of possible product defects before entering international market.

3. Supply conditions
Our supplying condition mainly includes the following aspects: QUALITY OF SUPPLY: The order put is supplied according to the quality of the sample sent by the buyers. AVAILABILITY OF PRODUCT: Our product are ready available on the specific date as per promise, so supply is made immediately after the accomplishment of the order.

COST OF SUPPLY: It varies with the type of contract. If it is of FOB nature then the cost to be charge by the buyer is the cost incurred to transport the products till the Karachi port. But if CNB contract is signed, then we have to charge the cost which was incurred by transporting the goods, firstly to Karachi and then from Karachi to buyers port. If the cost of supply is not to be charged then we will automatically increase the per unit cost. QUANTITY OF SUPPLY: Our company uses to supply the goods in the definite amount i.e. the number of units in an order. But we use to keep margin in supply also like if Wal-Mart demands us to producer 2000 shirts, and to send the order in bundle having 10 shirts each then automatically 200 bundles will be supplied to them. A part from this we will also send at least 2 bundles extra so that any mishap can be overcome. I think that our firm is attracting more and more buyers due to one of this reason which is not found in any other firm. SUPPLY TECHNOLOGY: If the contract nature is C.N.F. then we use to transfer the manufactured products Multan to Karachi in container on trawler. And from Karachi onwards we use shipping lines to get the product onto buyers post. If contract is FOB and we are just responsible for transportation till Karachi port so we will use only trawlers that are by road.

4. Firms strategic structure and rivalry:

Our firm with the grace of Allah almighty feels honor to say that we are among top 10 firms in Pakistan. That is why we didnt face any barriers to get internationalized. The international involvement is maximum. Every buyer wants to put his order to us. Sometimes the numbers of orders are so great, that we ourselves have to apologize to the customers that sorry we cant accept your order. Due to international involvement our participation is also globalize so we are not only in competition with the national firms rather our competition is with international firms also. We have developed our firms strategic structure in such a way as to maximize the number of buyers and to protect ourselves even in toughest rivalry conditions. List of rivals At Nation wide level: Masood textile Faisalabad. Naveena exports Karachi. Textile textile in Faisalabad.

Globally China is our rival because it is producing lower price products and also they are planning to declare the usage of electricity as free of cost so it is a threat not only for us rather this strategy has put all the world into confusion. Employers loyalty: Employers are not loyal towards our company because employers are never satisfied although we provide them benefits like maximum wage rate of Rs. 4000, one bonus annually and 28 leaves per year. We also pay them group insurance like if our employer expires; we gave his family Rs. 400000. Apart from this we also provide them social security and medical benefits but it has been seen that if our company goes into trouble and we tell our employees to work for some extra hours say till 9o clock, they start complaining. Benchmarking company: Currently, we use to benchmark WALL MART while in past CHENAB GROUP was also in our benchmarking list as they are not showing positive results in some of garments. Future prospects: We are planning to keep our business running if we will keep on getting the govt. aid (like subsidy, rebates, export benefits) etc. Besides of just operating in textile garments, we are planning to inaugurate a standardized hospital in Multan having 350 beds and latest technology and surgical instruments.

FUTURE STRATEGY FOR OVERALL TEXTILE INDUSTRY IN PAKISTAN:

The future potential of Textile Industry is well recognized. Structural adjustments are needed to give support to production and exports of value added goods in large quantum. In order to consolidate its existing strength Pakistan has to relentlessly improve productivity, raise product quality, increase value addition and boost production efficiency. Besides adopting modern technology, major stress has to be laid on human resources and skill development, as this is the most fundamental factor in sustaining continuous development of textile industry. The industry is confronted with problem of shortage of trained Engineers and Technicians who form the backbone to the production activity. The position has aggravated with rapid expansion in the production base during the boom periods and most recently the current crisis has more important to invest in training and skill development. Pakistan has shown appreciable progress in Policy framework. It has committed itself to a more outward oriented development strategy. Efforts are still necessary to pursue further structural changes in line with resources. Although a number of incentives were granted to promote value added sector but the desired result has not been achieved. Apart from various other factors it is because of too much generalized approach in the measure adopted. The industry has been stagnating due to a very narrow product base and over concentration in very few markets under cutting each other, resulting in unhealthy practices. There are several aspects which need to be incorporated in the Industrial & trade Policy. The rules of the game of the past are no longer appropriate for the challenges of the future. A market to market strategy and product to product segment approach has to be designed to increase the market base and motivate to value addition.

STRATEGIES:
MASS MARKET STRATEGEY: High volume standard product mass market strategy has to be adopted for low to medium products primarily based on local raw materials viz. cotton sheeting print cloth twill / drills and plain blended sheeting and shirting. DIFFERENTIATED PRODUCT STRATEGY:

Knowledge intensive technically innovated and differentiated products have to be supported by different strategy as these are really high value added products and service the fashion market requirement. Denim-Satin / Sateen stripped/checked shirtings, blended suitings and acrylic shirtings are recent product developments and have greater potentials for exports with higher price realization. MARKET PENETRATION STRATEGY: There are demanding opportunities for processed fabric sales into the new export market. The demand stems from their garment industries as well as distribution to adjoining markets. Fabric for apparel use viz. cotton shirting blended shirting etc. can be promoted by adopting a market penetration strategy. Dubai Saudi Arabia and Singapore are emerging markets, where Indians are cleverly penetrating and increasing their market share.

R E C O M M E N D A T I O N:
POWER LOOM SECTOR The power loomers are unable to utilize the credit specially created to alleviate this sector. The issue should be thrashed out by Ministry of Finance & Industries by realization of the procedures. The facility for financing shuttleless loom (New & secondhand) to this sector should be promoted by Banks DFIs. Credit facility for yarn purchases be extended liberally especially in heated up yarn market period. A massive programme be launched to diversify their cloth exports to markets operating on price basis by export promotion activities. The industry should be supported by training programmes to improve quality and the image of poor quality sub-standard goods should be washed by developing consistent supply of quality fabrics at competitive rates. The power loom units should b e encouraged to form co-operatives which can avail the state support for investment technical guidance and play its role in marketing its products.

RECOMMENDATIONS
SHUTTLESS LOOM SECTOR 1. As short term measure and to improve the performance of the industry. The following demands of the industry are supported:

(a) All incremental quota to be given to only industrial units with higher technology. In case of cloth it should go to shuttleless loom units. (b) Import duty on P.V.A. may be abolished, as it used for sizing of warp yarn for improving loom efficiency and is not being manufactured locally. c Rationalization of duty drawback rebate against a sound calculation with incidence of taxes on per unit of output. Vgf (d) De-linking of SRO 962 and SRO 722 and disposition thereof to facilitate for competing in international markets. 2. While the demand for compensatory rebate is not possible under the IMF conditionality, compensation may be considered against increase on power cost, financial cost, and the impact of excise duty @1% on bank borrowings and innovative taxes, which are measures adopted by government on the suggestion of IMF /World Bank who also provide adjustment loan to compensate the impact of cost increase as a result of their suggested changes. 3. The proposals of longer amortization periods is to be taken into account on a broader concept of Industrial Policy. 4. The Industry needs to improve its productivity, diversify the product and improve the sale price to market segment which could counter balance the impacts of raw material and other inputs. Finished fabrics can compensate the losses in grey fabrics to a lager extent. 5. Although Govt. has granted a number of incentives for the development of value added products but the practical impact of these measures are diluted by its emphasis for promotion of direct exports individual items. Thus the direct export of yarn and gery cloth have suppressed the process of integration, which is essential to produce higher value added products. It is therefore imperative that the garment driven production and export strategy is developed gradually shifting all the incentives to production and exports of higher value added products. This will enable the high value added production units afford to buy quality raw material locally at higher prices and would in turn develop positive move in the market to revive the closed spinning/weaving capacity. 6. In October Textile Package, the Central Excise Duty was withdrawn on Export Re-Finance Financing. It is suggested that Central Excise Duty be with drawn on all bank borrowings. Particularly there is no justification of imposition of Central Excise Duty on long terms loans. 7. The drawback regime should be structured so as to provide incentives for value added export. For example NIL, on basic raw materials such as raw cotton and yarn, and gradually higher for grey fabrics, finished fabrics and garments respectively expressed as a percentage of F.O.B. export value.