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Value addition can give boost to textile exports

Published on 19th Oct, Edition 42, 2015

 

Government must establish more textile cities

Textile sector is the backbone of Pakistan export economy. Comprises of 391 textile mills, Pakistan is the world’s fourth largest producer of cotton and third largest consumer. It contributes 8.5 percent of GDP and employs 38 percent of the workforce in the manufacturing sector. But Pakistan textile industry is mainly beset with the major problems like energy crisis, lack of value addition and branding, dearth of latest textile machinery, shortage of skilled manpower and overburdening debts.

Major players in the South Asian region have penetrated successfully in the textile industry and started exporting value added products. Value-added products are a significant part of textile exports from any country. A lot of foreign exchange earnings have been possible through exports of high value added products.

The value added textile products in Pakistan are bed wear, towels, hosiery, knitwear, ready-made garments and other made ups. Cotton yarn, cotton fabrics, waste material of textiles fibers, cotton yarn and fabrics are categorized as low value added products. Pakistan’s textile exports primarily consist of low or intermediate value-added products (at 69 percent of Pakistan’s textile exports, compared to 32 percent of global textile exports in 2012).

Pakistan being the fourth-largest cotton producing country in the world, had failed to convert the local produce to value-added products. Pakistan fetches only $1.17 billion per million bales compared to Bangladesh’s $6 billion and India’s $1.79 billion.

In spite of sixty eight years of establishment Pakistan is still focusing basically on exports of raw material. The other cotton producer like China and India are no more or very much less exporting yarn but using the local yarn for their high value-added textile exports products.

Japan and South Korea are not cotton producing countries but are importing yarn to convert it into high value added product and fetching much higher prices in the international market.

Cotton yarn the low value added product could hardly give to the foreign exchange treasury more than US$1 billion. On the other hand the textile value high products could fetch more than US$10 billion in foreign exchange earnings.

The textile industry is central to Pakistan’s economy and within the textiles industry, readymade garments are a significant and growing component. Exports of readymade garments have increased nearly four times in value from 1990 to 2013, from US$ 1 billion in 1990 to US$ 3.9 billion in 2013.

Manufacturing of readymade garments also represents a progression towards higher value addition in the textiles chain. For example, 50,000 kilograms of cotton fiber creates 400 jobs in spinning, weaving and finishing stages. The same amount of cotton fiber creates 1,600 jobs if utilized in garments manufacturing.

Similarly, US$1 million invested in spinning and weaving leads to US$ 0.27 million in exports, compared to a much larger US$ 3.2 million in exports when the same amount is invested in garments manufacturing. In sum, garments have tremendous potential for creating jobs and generating exports for Pakistan.

Serious financial crisis

The export-oriented industry, especially the value added textile exporters, is facing serious financial crisis, as the present government has not issued a single installment of billions of rupees income tax and sales tax refunds stuck up with the Federal Board of Revenue.

Without introducing the culture of value-addition, Pakistan would never be able to compete in the international market. Pakistan is far behind the other countries when it comes to earning the value fetched per million bales.

Pakistan earns $1.17 billion from one million bales while Bangladesh earns $6 billion, China $7.09 and South Korea earns $10.68 billion from the same quantity of bales.

Serious and well-planned efforts are needed to increase the value addition in the textile sector to capture greater share in regional and international markets. Pakistan’s textile exports have been declining due to largely to low-value textile products like cotton, yarn and gray fabric.

It is noted that export of low-value textile products have decreased which give us the opportunity to convert it in high value. Pakistan’s exports of value added textile products rose 7.5 percent to $4.517 billion in 2014-15 from $4.202 billion a year ago.

Exports of readymade garments grew 10.5 percent to $2.101 billion from $1.909 billion, and of knitwear rose 5.37 percent to $2.416 billion compared to $2.293 billion during the previous year. The reason behind the rise in the exports of value added textile products is preferential access to the 28-nation European Union under GSP plus scheme.

 

The world is continuously shifting from cotton to man-made fiber, and the ratio has reversed from 60-40 to 40-60 within 10 years. In Pakistan, the ratio is 86-14, which is quite low as per international demands.

The import of textile machinery fell by around 20 percent year-on-year during fiscal year 2015, which suggests that there is little interest for investment in diversification or improving the quality of products.

Cotton trade analysts believe that this way Pakistan is exporting jobs to other countries by encouraging and facilitating exports of raw materials or semi-finished products.

Exports of bed-wear also declined during 2014-15 by 1.97 percent. However, exports of towels rose by 1.78 percent and made-ups by 0.26 percent during the year. The strong price effect over quantity effect is the major reason for exports growth of these items.

Comparison

According to UNDP Asia Pacific Development Report 2006, Pakistan fared not well in textile exports compared to Bangladesh, a non-cotton producing country. China and India which are cotton producing countries have a larger share in the global market both in terms of volume of production and exports. These two giant countries have laid emphasis both on production and value added exports.

Bangladesh and India apart from their less cost of doing business concentrate on the improvement of the working condition of their employees. They keep pace with the market fashion, trends, design and brand development. Unfortunately, Pakistan is not at all keeping pace with these changing international trends. Pakistan textile industry management lies with families who have very little concern with human resource development and boosting value added textile products.

There are two major hurdles about Pakistan fabrics. There is no uniformity in colors and shades; and dye fades in the first washing. The substandard finishing touches are mainly due to the fact that a large number of processing units are running at small scale, without up to date machines. It is seen that printing is done by laying cloth on tables and pressing design screens on them, a method considered be crude.

Due to these factors and practices Pakistani products are not preferred. The countries that use most sophisticated machines to add value to their products are liked because of their durability. In the blending sector Pakistan had not been able to make any progress. Blended product made from a combination of national and man-made fabrics are preferred throughout the world over.

The element of man-made or synthetic in the textile product of our country is negligible. In the Korean product the use of synthetic fibers is more than 70 percent. They have a comparative advantage in capital intensive than us.

The global demand is increasing for these fibers because of greater durability of these products. The Chinese, Japanese and Taiwanese have increasingly shifted to synthetic fibers.

Low technology power looms

In the weaving sector, (the organized mill sector), the installed loomage has kept on dwindling. No efforts have been made to develop and modernize the weaving sector. More than eighty percent of Pakistani cloth is produced from the non-organized mill sector.

The non-mill sectors which constitute a high majority have very low technology power looms in their units. The garment production which is considered as the highest valued product among the textile group in Pakistan fetches less price compared with the other countries. This is due to the fact that the units producing do not have modern machinery use and so they use non mill made cloth.

By laying emphasis particularly on the value added products like garments, hosiery, knitwear and other textiles made up the export in term of value can be increased abundantly.

In this context important consideration should be given to stitching industry that leads to highest value addition. Good quality yarn should be utilized domestically in the organized mill sector for producing high value added fabric of better quality.

The importance of capital intensive synthetic fibers, particularly from the point of view exports must not be ignored. The proportion of these fibers should be gradually increased in textile product.

Further, for enhancing export of value added product appropriate manpower training, introduction of simple export procedures, prompt delivery of shipment and maintenance of enforceable contract with foreign investors are needed.

Also quality standards, ISO 9000 and ISO 14000 in the production of textiles product be introduced. Dependence on low technology should be reduced and the number of shuttle less looms be increased which have the capacity to produce wider width superior quality fabric for the international market.

The government should establish more textile cities in the major cities of Pakistan as in the case of India the city of Ludhiana has been developed for knit apparel, Bangalore for trousers, Jaipur for handicrafts, traditional prints and Delhi for innovative products. In order to boost value added textile products Pakistan should keep abreast with changes in fashion trend in value added clothing or garments

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