Readymade garment manufacturers face energy shortage and high cost of production

by Dr. Noor Ahmed Memon.

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 2010-11 stood at US $ 1.77 billion or 7.1% 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 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. During summer, when everybody wants to keep the 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, along with 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. 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 for domestic market. 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 unorganised. Its production is decreased to 8.95 billion square meters in 2010-11, from 9.00 billion square meters in 2001-02. According to an estimate there were about 2, 50,000 looms operating in the non-mill sector. The power loom sector produces pure cotton, polyester, viscose and blended fabrics, which usually fetches low prices in the market. The other locally produced raw materials of the readymade garment industry which include lining, thread, buttons, interlinings, labels, polythene etc. are whether 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.

Apparel & Knitwear

The quality of some of the locally produced raw materials, such as threads, buttons, interlining, etc., is not as good as the imported. Secondly, some items of the readymade garment industry are not produced locally, the requirements, of which are met Table 1: Import of Sewing Machines and Parts through imports.

Machines / Parts
Sewing machines / CKD (household) Other Sewing Machines (household) Automatic Sewing Machines Other Sewing Machines (Industrial) Sewing Machines needles Furniture Sewing Machines Parts of Sewing Machines Total

Unit
000 kg No No No 000 kg 000 kg 000 kg

2008-09 Quantity Value

1 21,434 288 40,433 71 1 166 -2.4 101.0 38.2 33.8 780.0 142.6 1.2 1099.2

Source: Federal Bureau of Statistics, Government of Pakistan.

Import of Machinery: Pakistan imported various kinds of sewing machinery and part from world Quantity Value Quantity Value wide. The industrial sewing machines are mainly imported from 27 61.2 46 101.0 China and Japan and are capable of working at high speed up to 4,500 stitches per minute. These 16,091 34.26 28,594 60.7 are specially suitable for assembly line operation and are mostly used 968 93.23 1,137 48.0 by the organised sector. Besides 88,773 1318.8 89,898 1687.2 industrial sewing machines, household sewing machines along with 77 160.0 78 166.0 parts and electric irons are also being imported. Imports of sewing 1 1.0 4 4.1 machines and their parts are given in Table-1 and country wise 143 161.9 112 146 imports of industrial sewing -1830.39 -2213.0 machines are given in Table-2.

Value: Rs. Million 2010-11

2009-10

38 PTJ January 2012

The other important machines used by the ready-made garment industry are the over-locking machines, which is used to trim and overlock the edges of cut cloth. In addition, specialised machines are used for cutting, making button holes and stitching of buttons. 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. 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. Exports: Production of garments by units depends on export orders directly or 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. Exports increased from 28 million dozens of various types of readymade garments worth US$ 1.30 billion in 2009-10 to 36 million dozens worth US$ 1.77 billion in 2010-11, thus showing an increase of 38% in terms of value. Export of readymade garments is given in Table-3. Pakistan exports garments to a number of countries. Major buyers of readymade garments during 201-11 were USA, Germany, UK, Spain, France, Italy and Netherlands. Country-wise exports of readymade garments are given in Table-4. Major Thrust: At present the major thrust of garments exports from Pakistan is on the USA market. The European Union is the second largest market for garment manufacturers from Pakistan. Pakistan's export success in the US is limited to categories men and women's knitted shirts. Pakistan's share of all US garments exports is 28%. The share of the EU market in knitwear is 10% 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 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

Table 2: Country-wise Import of Industrial Sewing Machines 2010-2011 2009-2010 Country Quantity Value Quantity Value (No) (Rs. 000) (No) (Rs. 000)
China Germany India Italy Japan Korea Republics Asian Countries Singapore Hong Kong Malaysia Turkey Vietnam All others Total 43,868 8,210 2,160 1,213 22,195 1,605 3,774 2,962 779 669 478 250 1,735 89,898 617,738 258,105 28,262 36,959 445,811 40,341 96,507 74,940 17,329 16,126 11,998 15,564 27,570 1,687,250 40,377 186 3,414 313 22,788 3,841 8,505 2,442 1,734 796 -655 3,722 88,773 453,956 3,943 27,016 9,321 406,050 77,910 141,330 65,517 23,757 22,258 -14,944 72,754 1,318,756

Source: Federal Bureau of Statistics, Government of Pakistan.

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. At present Pakistan is fast losing its share in the global garment market, because of high cost of production. Garments exports from Pakistans traditional competitors in the region Bangladesh, Sri Lanka, China and India - have picked up dramatically because the exporters of those countries are getting hidden subsidies from their respective governments. The apparel segment is the highest value added link in the entire textile value chain. The global trade in the sector accounts for 53% of the total value of global textiles trade and is consistently growing since the last two decades. On the other hand Bangladesh gets duty-free access to the neighbouring countries in the US. At present Bangladesh has earned $US 17.91 billion in the fiscal year to June 2010-11 by exporting ready-made garments. Garments accounted for threequarters of the country's total export income. Garment exports, including readymade garments, primary textiles and knitwear, account for more than 80% of national export income. Bangladesh apparel exports have grown to Germany, USA, UK, France and Netherland. Bangladesh is in the process to get duty-free export of garments to Russia, Malaysia, Pakistan and the member countries of the Association of South-East Asian Nations. Export of readymade garments from Bangladesh is given in Table-5. Pakistan produces apparel of various patterns and styles, of the latest fashions and quality. The industry is adequately equipped to produce latest fashions to suit tastes and needs in any part of the world. Leading Pakistani designers, garment manufacturers and exporters regularly display their designs and products round the world at international fairs and exhibitions and in trade centres like Paris-London, New York, Tokyo and Berlin. Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) said Bangladeshs opposition to proposed European Union (EU) trade concessions package of 75 items to Pakistan seems to have no basis as it has insignificant exports to EU in home textiles.

Apparel & Knitwear

Table 3: Exports of Readymade Garments from Pakistan

Year
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Quantity (Million Doz)

36 41 61 28 34 37 41 42 29 28 36

Value (US $ Million)

827 875 1,093 993 1,088 1,310 1,385 1,592 1,230 1,269 1,774

Source: Trade Development Authority of Pakistan.

PTJ January 2012 39

EU imposed ceilings/quotas on eight major items in package. If ceilings are surpassed then normal import duty structure will be applied. It set ceiling of 7,571 tonnes on ladies jeans for 2012 and 13. This implies there is no room for growth for two consecutive years. Certain leading EU buyers already increased their buying in these products to build capacities ahead of package approval. EU package announced in September 2010 after devastating floods in Pakistan is pending at World Trade organization (WTO) for a year due to objections by India, Bangladesh, Brazil, Peru and Indonesia. India withdrew its objections but Bangladesh was blocking EU decision to give trade concession to Pakistan for three years from 2012 saying aid and trade should not be mixed up and trade concession to Pakistan might hamper Bangladesh garment exports to EU. According to PRGMEA, Bangladesh has virtually no exports in cotton yarns, fabrics, polyester, synthetic yarns, cotton fabrics which constitute bulk of EU package. In seven textile items on which quotas are proposed Bangladesh had only Euro 179 million exports, which is less than 3% of its total exports to EU. Bangladeshs export to EU in 2010 was nearly euro 6 billion while Pakistans garment exports less that euro 1 billion. In 23 garment categories of package, Pakistan had significantly lower average unit price than Bangladesh signifying Pakistani exporters are targeting different market segments than their competitors in Bangladesh.

Table 4: Country wise Export of Readymade Garments Value in $ 000 Country

Germany Spain France Netherlands U.A.E Turkey Sweden Australia Greece Norway Benin Denmark Brazil Hong Kong Poland Japan U.S. America United Kingdom Italy Belgium Canada Saudi Arabia Ireland Finland South Africa Portugal All others Total

2010-11
327,939 136,291 87,836 45,698 45,022 39,751 29,230 11,935 4,718 10,854 1,068 6,622 2,809 1,237 8,504 4,691 501,425 193,647 71,437 124,481 28,415 19,720 11,406 4,694 2,466 2,637 49,128 1,773,661

2009-10
154,047 88,821 63,727 30,785 31,844 21,414 21,058 9,203 5,939 10,505 3,031 5,531 1,874 856 3,637 3,248 393,714 162,025 63,490 90,169 20,681 18,003 14,034 3,459 1,567 2,495 44,181 1,269,338

2008-09
174,501 68,120 67,994 41,786 38,684 25,513 20,017 9,551 7,715 9,097 3,782 13,730 3,081 554 1,817 1,508 403,580 136,027 53,353 66,875 16,165 22,939 6,998 3,107 1,649 1,166 29,743 1,230,019

Apparel & Knitwear

The effects of unprecedented energy crisis have started appearing on the export horizons of Pakistan. The readymade garments export industry that was growing at a rapid pace until the recent years, is reported to be continuously nose-diving since 2008-2009. The importance of the garment sector in the overall economic perspective is twofold. On the one hand the sector has the potential to be the engine of Pakistan textile export growth, while on the other the sector is the largest source of creating low cost employment in the country at all levels

Table 5: Bangladesh: Export of Readymade Garments (RGM) (US $ Million) Year

1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Woven
2,843 2,985 3,083 3,364 3,125 3,258 3,538 4,084 4,658 5,167 5,919 6,013 8,432

Knitted
940 1,035 1,270 1,496 1,459 1,654 2,148 3,817 4,554 5,533 6,429 6,483 9,482

Total
3,783 4,020 4,353 4,860 4,584 4,912 5,686 7,901 9,212 10,700 12,348 12,496 17,914

Source: Trade Development Authority of Pakistan.

The gas suspension during January-December 2011 to Punjab industries was 174 days or approximately six months. It had also remained deprived of gas in the first four days of January 2012. Punjab has 54% of the documented weaving industry, 60% textile processing mills, 65% knitwear units and 30% readymade garment producers of the country. The acting Chairman of Pakistan Readymade Garments Manufacturers and Exporters Association (Prgmea), Bilal Mulla expressed grave concern over the decreasing trend in Pakistan's garment exports during the current year. Several internal reasons for the decline, besides persistent bad law and order situation followed by lingering energy shortages, which have virtually crippled the industry. Moreover, the negative perception about Pakistan and high financial costs are adding fuel to fire. Frequent price fluctuations create a serious problem for the industry, particularly for those who manufacture garments on orders. As the non-mill sector mostly manufactures cloth against advance payments, frequent price fluctuations make it difficult to comply with the orders. The effect of these fluctuations is however, less severe for the mill sector as the cloth manufactured therein is usually readily available.

Source: Bangladesh Knitwear Manufacturers and exporters Association.

40 PTJ January 2012