The textile industry plays a crucial role in Pakistan's economic health - but mismanagement and unfavourable political and global conditions have seen the sector take a nosedive in the Nineties. Now the industry stands at a crossroads - will it continue along its current negative trajectory or can it turn its fortunes around? To see the first in this series click here

Over the next two weeks, just-style will publish three features taken from Textile Vision 2005 - an in-depth analysis of the state of the Pakistani textile industry from spinning through to WTO and textile quota issues. The report, written by analysts at the Pakistan government's Small and Medium Enterprise Development Agency (SMEDA), is also for sale for £200 ($298) in our Knowledge Store. Click here for more details.

Woven Fabric and Weaving Industry
Global Trade
The global trade in woven fabric can be classified under cotton and blended fabrics and synthetic and synthetic, or man-made, fabric. The world trade in woven fabric is worth around $43bn, of which the man-made fabrics constitute 57 per cent of the overall export value.

Asia enjoys a significant position with regards to woven fabric as almost 50 per cent of the world's cotton and blended fabric exports originate from this region. The shift of man-made fiber production over the past few years from Europe and other developed regions towards Asia has also resulted in the healthy growth of synthetic and artificial fabric exports from the region. Asia currently accounts for almost 48 per cent of the global exports in the man-made fabric category.

Pakistan and woven fabric exports
Pakistan's textile industry has traditionally relied on manufacturing pure cotton fabric whereas global mill consumption is rapidly moving towards a diverse range of staple fibres and artificial and synthetic filaments.

This is also reflected in Pakistan's export of woven fabric, where it accounts for almost seven per cent of the world exports in cotton and blended fabrics. On the other hand its share in man-made fabric exports is limited to two per cent only.

Product and Market Mix

Processing is the weakest link in Pakistan' s textile value chain, which leads to high exports of unprocessed fabric. Greige fabric dominates the export product mix, accounting for almost 40 per cent of the total fabric exports from Pakistan.

Lack of proper dyeing and processing facilities can also be considered to have its negative impact on the development and growth of the downstream industry.

Hong Kong, a major player in the world apparel trade, is the largest importer of woven fabric from Pakistan. An important feature of Pakistan's fabric exports is the Bangladesh market which imports more than $50bn worth of fabric from Pakistan. Bangladesh, which has positioned itself as a major converter of fabric into high value added garments, has strengthened its position in the international apparel markets.


"In the global fabric markets Pakistan is perceived as a low quality fabric supplier, this translates into low unit price realisation when compared with competitors. "
In the global fabric markets Pakistan is perceived as a low quality fabric supplier, this translates into low unit price realisation when compared with competitors.

Domestic weaving industry

The introduction of shuttleless weaving machines in recent years has resulted in high growth in fabric production. Currently the shuttleless weaving sector is believed to be the largest consumer of cotton yarn in the country.

The power loom weaving sector, although quite large in numbers, contributes to the export earnings through the production of low quality sheeting fabric. The quality improvement in fabric production is directly related to the upgradation of technology in the weaving sector. Future success in the weaving industry is highly dependant upon the flexibility of the industry to cater for the diverse range of fabrics required by international and local markets.

Issues In weaving industry development
The growth in world production of cotton fabric has been stagnant for the past ten years. Successes in Pakistan's weaving industry are associated with diversified use of fabric blends along with enhanced consumption of numerous man-made textile fibres.

A move in this direction is also likely to pave the way to success for the domestic apparel industry by eliminating the imbalances in the export product mix. Reduction in the level of protection offered to the domestic man-made fibres and filaments producers can play an instrumental role in facilitating this shift to blended and synthetic fabrics. Improvements in export product mix and unit price realisation is possible through technology upgradation in the sector. The power loom sector in particular urgently needs to upgrade its equipment.

For this purpose, mark-up rates on credit facilities, both long and short-term, including export refinance should be manipulated in favour of high value added products. A cascaded system of credit allocation could act as a catalyst in bringing the desired change through product diversification and product mix optimisation.
Sustainable growth of the weaving sector can only be ensured through the aggressive development of the domestic apparel industry.

Processing
Fabric processing is the most critical stage of value addition in the entire value chain. The processing sector took off in the early 1980s and investments were made in the sector during that period. But, despite this, it remains the weakest link in the entire textile value chain.

About 40 per cent of the fabric exported from Pakistan is in unprocessed form. Dyed fabric makes up only 14 per cent of total fabric exports. Exports of unprocessed fabric result in low unit value realization.

Issues

  • Scarcity of Trained Manpower
    The availability of trained manpower is an acute problem for the processing industry. The industry is heavily dependent on unskilled labour, a workforce that is unable to produce quality fabric - hence compounding the problem of low unit value realization.

    Not only is the quality of the fabric affected, but lack of proper training also leads to decreased process and production efficiencies increasing overall production costs. The processing industry requires a dedicated modern training institute in order to align itself according to the demand of international markets.
  • Technology
    Currently, there are about 600 processing units of which only five per cent are in the integrated mill sector. The rest are independent commercial dyeing and printing units. Technology is still to take a hold in this sector and most of the machinery is old.

    Investment in this area has been very low in the last decade. Moreover, the current processing capacity is biased towards printing rather than dyeing. This is mainly because of the large amount of fabric produced on power looms, which is more suited for printing. New investments are essential if the value added garments and made-ups sector is to reinvent itself.

    A major portion of this investment should go towards dyeing, since dyed fabric is mostly used for highest value added products such as garments.
  • Dyes and Chemicals
    Dyes and chemicals form the most important input for the processing industry. Duty structure on dyes and chemicals and the raw materials for manufacturing dyes need to be rationalized.
  • Apparel
    The apparel segment is the highest value-added link in the entire textile value chain. Trade in the sector accounts for 53 per cent of the total value of global textiles trade and has consistently grown over the past two decades.

    According to WTO estimates; with the elimination of quotas in the year 2005, the total trade of textiles and clothing will exceed the $500bn mark and this growth will be driven primarily by the clothing sector, which will constitute almost 70 per cent of the total trade.

    Pakistan has been a major Asian player in the garment export market especially during the 1980s and early 1990s. Total apparel exports from Pakistan were to the tune of $1.24bn in 1998.

    The significance of the apparel sector to the country's economic health 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 culprit in creating low cost employment in the country.

    According to SMEDA's estimates there are currently 700,000 people, both skilled and unskilled, employed in this sub-sector and there is potential to double the workforce over the next five years given the favourable business environment.

    Emerging Global Trade Patterns


    "Global textile trade has witnessed numerous changes in recent times. It is noteworthy that over the past decade, the clothing trade has advanced at a faster rate than the textile trade. The textile trade increased at an overall growth rate of 3.2 per cent, whereas the clothing trade increased by almost 82 per cent from 1990 through 1998."
    Global textile trade has witnessed numerous changes in recent times. It is noteworthy that over the past decade, the clothing trade has advanced at a faster rate than the textile trade. The textile trade increased at an overall growth rate of 3.2 per cent, whereas the clothing trade increased by almost 82 per cent from 1990 through 1998.

    Other revealing developments concern changes in world trading patterns that can have serious impacts on those countries which fail to align themselves quickly with these evolving market conditions.

    While the USA and the EU remain the largest markets for garments and other apparel products with a combined share of 73 per cent, apparel production centres are shifting, particularly favouring countries with lower productions cost or strategic geographic location.

    Asian countries have the advantage, especially in the first case, with low wage rates and indigenous production of some of the raw materials required by the sector.
    In 1997, over 59 per cent of textile exports and 70 per cent of clothing exports originated from Asia.

    However Asia's competitive advantage is vulnerable to two basic developments - the emerging regional trade blocks that allow for preferential trade treatments and the threat from countries that are located on the borders of major markets.

    Apparel is a rapidly changing business with very short product life cycles, consumer preference does not just depend on seasons but on numerous other factors. Responding quickly to these changing demands is vital for the success of garment exports. Countries like Mexico and Turkey have the advantage of minimal lead times and are expected to be major rivals to Asian exporters.

    On the demand side, synthetics and garments made of specialised fabrics are taking away the larger share of the market. Women's and men's garments are gradually giving way to garments made for special usage.

    The sportswear, industrial wear and womenswear segments offer increasing opportunities to export countries like Pakistan specially in terms of high values. But Pakistan will have to guard against the introduction of non-tariff trade barriers.

    While the free trade regime is increasingly gaining a foothold in the international export arena, developed countries are becoming increasingly selective in their import preferences. Issues like compliance to environmental standards can severely restrict exports from developing countries.

    These changing global trade patterns offer more opportunities than threats. The need now is to gear garments manufacturers and exporters from Pakistan to exploit the tremendous opportunities that the global apparel market offers.

    Recommendations
    Shifting the product mix
    Pakistan's apparel export product mix is heavily tilted towards menswear and knitted garments. As global market demands change, it is suggested that manufacturers and exporters diversify their product mix.

    The woven sector is a much larger market than knit garments and offers higher price realisations. Sportswear, womenswear and industrial clothing made of specialised fabrics are some of the areas that need to be targeted by Pakistani exporters.

    This product diversification is not possible without a few minimal prerequisites. Introduction of computer added designing and manufacturing (CAD CAM) can enhance the competitiveness of the industry in these new product categories.

    Incentives in the shape of a special quota allotment on achieving the desired product mix and/or special financing facilitates for the import of specialised machinery are a few steps that the government would have to take in order to achieve the desired results.

  • Market diversification
    At present the US is the major importer of garments from Pakistan with the EU coming second. Major markets that Pakistani manufactures have so far not been able to explore are the Japanese market, the United Arab Emirates and markets in the European Union. These markets demand high product standards and in return offer higher unit price realizations.

    Marketing research and development is one fundamental aspect that the industry lacks. The garment industry in Pakistan comprises numerous small players with few resources available for marketing purposes. In order to maximise Pakistan's export potential, a common infrastructural support will have to be provided for the smaller players - a move that would benefit the whole industry.

  • Human resources development
    Both of the previous recommendations cannot be fully implemented without imparting the necessary skills to garment workers. However any such activity must be preceded by identifying the specific training areas and the trainers who will impart the training.
  • Shift towards synthetics
    Changing consumer preferences have now necessitated the introduction of fabrics made of synthetic materials other than cotton. Pakistani manufacturers and exporters will now have to align their productions with this particular shift. In order to facilitate the shift it is suggested that there should be no restrictions on imports or exports of any kind of fabric required by the industry.