CHAPTER 1

INTRODUCTION
 CHAPTER 1
INTRODUCTION

1.1 Introduction

Industrial sector have a significant effect on economic development of a

country. It is verifiable fact that the countries which have strong industrial sector
exhibited more economic growth and development . Industrial sector contributes
in increasing national income and promoting the living standard of
population. Manufacturing is the second largest sector and plays an important role in
economic growth. According to some economists, manufacturing is a wealth-
producing sector of a country, whereas a service sector tends to be wealth-
consuming. The contribution of manufacturing sectors in Gross Domestic Product (GDP) is
13.6 percent. This sectors mainly consist of textile industry, engineering goods and industry, agro
based industry, chemical industry and small & medium enterprises.

Pakistan is basically an agrarian nation and its cotton is naturally of good

quality. Pakistan is the worlds fourth greatest maker of cotton and third
greatest purchaser. Pakistan textile industry positions among the top in the
world and holds a main part in the advancement of manufacturing sector.
Textile sector is the largest manufacturing sector of Pakistan. The Textile and Clothing
Industry has been the main driver of the economy for the last 50 years in
terms of foreign currency earnings and jobs creation. The textile industry is
the stupendous manufacturing industry in Pakistan. Pakistan has intrinsic lead of
being 4th largest producer of cotton in the world with a huge prospective to further increase crop
yield. Pakistan is the 8th largest transporter of textile products in Asia. The
contribution of textile sector in GDP is 8.5%. Moreover this sector employs
about 45% of the total labor force in the country (providing employment to
38percent of the work force in the country) It is encouraging that Pakistan rank 3rd in
the world in the field of yarn production. By 2010, the spinning potential increased to 15 million
 spindles. Total world textile trades volume is US$18 trillion which is growing at
2.5 percent.

YEARS GROWTH
The global recession affect the
2008-2009 -0.70 %
2009-2010 -1.78 % textile industry very badly. Textile
2010-2011 1% industry have been facing toughest
2011-2012 4.8 %
period since last 5 years. Serious internal
2012-2013 13.02 %
issues also weaken the textile industry such
as higher cost of production has been the basic cause of concern. Increasing prices of
imported inputs also affect the performance of textile industry.

Source: Economic Survey of Pakistan, by State Bank of Pakistan

GROWTH OF TEXTILE SECTOR 2008-2009

State Bank of Pakistan
In starting the growth in textile industry is less than 1.01%. In next year, energy crises badly
affect the growth of textile sector and will go in negative number, first time in the history of
Pakistan. After that it improves gradually and in 2011-1012 overall textile growth reached to 5%.
In 2012-2013 growth rate rises at 13%

By developing synergy amongst different sub sectors, there is no alternative industry that has
the potential to benefit the economy with foreign exchange and new job opportunities.

1.2 Origin of textile industry:

The beginning of the Indian textiles is thought to be the Indus Valley

civilization, situated in modern Pakistan, where people used simple cotton to
weave garments. Trade is carried out by the region of Indus valley. The silk
from these regions was known to have been popular in Rome, Egypt, Britain,
and Indonesia.

In the 1950s, textile manufacturing appeared as a central part of Pakistan's

industrialization, shortly following independence from the British rule in the
South Asia. In 1974, the Pakistan government established the Cotton Export
Corporation of Pakistan (CEC). The CEC served as a blockade because it
restricts the private manufacturers from contributing in international trade.
However, in the late 1980s, the interference of the CEC denigrates and by
1988-89, private manufacturers were allowed to purchase cotton from
ginners and sell it at both domestic and foreign level. Between 1947 and
2000, the number of textile mills in Pakistan increased from 3 to 600. In the same time period,
spindles increased from 177,000 to 805 million.

1.3 Textile industry in Pakistan:

1.3.1 Evolution of textile industry in Pakistan:

In Pakistan since 1947 intensification in the cotton production and growth of
textile industry has been remarkable. From 1947 to 2000 cotton bales
increased from 1.1 million bales to ten million bales. Number of mills
increased from 3 to 600 and spindles from about 177,000 to 805 million.
Finished units and the apparatus for making fabric were also increased but
not up to the extent. It employs 50% of industrial labor force and earns 65%
foreign exchange of total exports. The specialist of Pakistans textile industry
feels that though Pakistan has a large fairly textile industry but in a
competitive environment and for economic and quality production, 60-70%
machines should be replaced. But unluckily, in Pakistan textile mills, there is
no facility of balancing modernization and replacement (BMR). Cotton textile
industry has been leading industry in Pakistan. Textile sector also alleviate in
value addition to the manufacturing sector of the economy. During the six
years between 1993 and 1998, production of yarn (in quantity terms)
registered a steady annual growth rate of 302% in Bangladesh and 405% in
India. On the other hand, Pakistan enumerated a growth rate of 101%
per annum in yarn production although it in the global yarn production
during the same six years it graded third after China and India.

In term of exports, Taiwan, India and the republic of Korea recorded an

annual increase of 18.1%, 27.7% and 5.4%respectively during 1993-1998,
while Pakistan showed a negative growth of 4.8%. But till 1997, Pakistan was
the worlds largest exporter yarn followed by India. However, in 1998, India
goes ahead and became the first largest exporter and throws over Pakistan
at second ranked.
 No. Textile Companies
1. Colony Sarhad Textile Mills
2. Colony Thal Textile Mills
3. Adil Textile Mills Ltd.
4. Ahmed Hassan Textile Mills Ltd.
In 5. Al-Qadir Textile Mills the case of cotton
6 Ali Asghar Textile Mills Ltd. cloth production,
7. Allawasaya Textile & Finishing Mills Ltd.
8. Amtex Ltd. various Asian
9. Annoor Textile Mills Ltd. countries have
10. Apollo Textile Mills Ltd.
been coming out
11. Artistic Denim Mills Ltd.
in 12. Ashfaq Textile Mills Ltd. the international
13. Asim Textile Mills Ltd.
market as a
14. Ayesha Textile Mills Ltd.
15. Babri Cotton Mills Ltd. competitor of
16. Bhanero Textile Mills Ltd. Pakistan. These
17. Bilal Fibres Ltd.
18. Blessed Textiles Ltd. countries are
19. Brothers Textile Mills Ltd. Bangladesh,
20. Chakwal Spinning Mills Ltd.
21. Chenab Ltd. India, Taiwan,
22. Colony Mills Ltd. Indonesia,
23. Crescent Cotton Mills Ltd.
24. Crescent Fibers Ltd. Thailand, Turkey,
Sri 25. D.M. Textile Mills Ltd. Lanka and
26. D.S. Industries Ltd.
Iran. This
27 Dar Es Salaam Textile Mills Ltd.
28. Dawood Lawrencepur Ltd. competition can
be 29. Dewan Farooque Spinning Mills Ltd. overcome through
30. Dewan Khalid Textile Mills Ltd.
31. Dewan Mushtaq Textile Mills Ltd. efforts, consistent
32. Dewan Textile Mills Ltd. with changes
33. Din Textile Mills Ltd.
34. Elahi Cotton Mills Ltd. occurring in the
35. Ellcot Spinning Mills Ltd. international
36. Faisal Spinning Mills Ltd.
37. Fateh Textile Mills Ltd. market.
38. Fatima Enterprises Ltd.
39. Fazal Cloth Mills Ltd. 1.3.2 Textile
40. Fazal Textile Mills Ltd.
41. Feroze 1888 Mills Limited companies in
42. Gadoon Textile Mills Ltd.
43. Ghazi Fabrics International Ltd. Pakistan:
44. Glamour Textile Mills Ltd.
45. Globe Textile Mills (OE) Ltd. Table 1.3.1
46. Globe Textile Mills Ltd.
47. Gulistan Spinning Mills Ltd.
48. Gulistan Textile Mills Ltd.
49. Gulshan Spinning Mills Ltd.
50. Hafiz Ltd. (Formerly Hafiz Textile Mills
Ltd.)
51. Haji Mohammad Ismail Mills Ltd.
52. Hajra Textile Mills Ltd.
In both developing and developed countries, efficiency measures are
important because it determines the productive growth. Producing
maximum output with available inputs is termed as efficiency. In economic
terms efficiency is divided into four kinds i.e. technical efficiency, cost
efficiency, revenue efficiency, scale efficiency and allocative efficiency.
To examine the efficiency of textile sector is important because textile
industry has been the main driver of economy in terms of foreign currency
earnings and jobs creation. The calculation of efficiency of textile companies
may help to enhance the overall performance of the textile companies which
may help to achieve competitive edge. The efficiency of a textile companies
has become an important point of interest both for decision making and
academic point of view in the whole world. The measurement of the
efficiency of textile companies is the interesting economic issue for the
economists around the world.

For calculating efficiency, researchers used profitability and other financial

ratios but the origin of the firms performance and growth is due to change in
productivity, efficiency and variation in the prices of inputs and outputs. (Fried
et al, 2008). In Pakistan, researchers also used financial ratios to examine the performance of
different sectors. (Nazir&Afza, 2009; Khan, 2012)
1.5 Problem statement:
The Textile and Clothing Industry has been the main driver of the economy
for the last 50 years in terms of foreign currency earnings and jobs creation
success. As the textile industry is very important for the economic
development, the problem statement could be delivered in the following
points.

Political

Low Budget for Textile Sector

Influence of Concerned Parties

Labor Union Alliances

Limited Global Exposure

Social

Snobbish Public regarding Imported Brands

Poor Marketing / Branding of local products

Standard Related Barriers when compared with Multinational BRands

Economical

Energy Crises

Heavy Taxes

Increasing Wage Rate

Non Check over Pricing

Technical
Obsolete Machinery using high level of fuel / consumption

No technology up gradation

Human

Lack of skilled Labor / Manpower

Natural

Floods

Rotten Crops