TEXTILE INDUSTRY IN

PAKISTAN

Course: Analysis of Pakistani Industries 75363

Faculty: Dr Khadija Malik Bari

Submitted by:
Ayesha Sarfraz Siddiqui 26371
Sabih ur Rahman 26362
Hadia Sohail 25891
Table of Contents
Pakistan’s Economic Condition .................................................................................................................... 3
Michel Porter’s Diamond Model .................................................................................................................. 7
Factor conditions........................................................................................................................................... 9
1. Labour force and its skill level .......................................................................................................... 9
2. Raw materials.................................................................................................................................. 10
3. Technology ..................................................................................................................................... 12
Demand conditions ..................................................................................................................................... 12
1. Market size ...................................................................................................................................... 12
2. Import and Export ........................................................................................................................... 13
3. International demand....................................................................................................................... 15
Strategy, structure and rivalry ..................................................................................................................... 15
Structure: ................................................................................................................................................. 15
A. Processes (Textile Value Chain) ................................................................................................. 16
B. Public Companies ....................................................................................................................... 19
C. Private Companies ...................................................................................................................... 19
D. Trade Organizations ....................................................................................................................... 20
Strategy: .................................................................................................................................................. 21
1. Local production of raw materials: ................................................................................................. 21
2. Vertical Integration: ........................................................................................................................ 21
3. Low labour costs: ............................................................................................................................ 21
4. Subsidies in energy cost: ................................................................................................................. 21
Rivalry: ................................................................................................................................................... 22
Related and supporting industries ............................................................................................................... 23
a. Edible oil industry: .......................................................................................................................... 23
b. Dyeing and Chemical Industry: ...................................................................................................... 24
c. Printing and Packaging: .................................................................................................................. 24
Government................................................................................................................................................. 25
Free Trade Agreements (FTA) ................................................................................................................ 26
Chance Factors ............................................................................................................................................ 27
Primary Research ........................................................................................................................................ 29
Recommendations ....................................................................................................................................... 31
Bibliography ............................................................................................................................................... 32
 Pakistan’s Economic Condition

The average growth rate for Pakistan in late 2021 was 3.94%. The world average stood as 5.9%
while the average for South Asian countries was 7.9%. India and Bangladesh had a GDP growth
rate of 8.7% and 6.9% respectively (Bank, 2021). Pakistan is currently undergoing an economic
crisis unlike any before. Oil prices rising globally due to Russia’s invasion of Ukraine has
drained Pakistan’s foreign exchange reserves. External borrowing over decades has caused
Pakistan to inch near national default, with the currency falling rapidly (Wikipedia). The
average dollar exchange rate in 2021 was 162 PKR. In little over a year, this has risen to 283.5
PKR as of today. Till 2010, Bangladesh’s per capita income was only half of Pakistan’s. Now,
the per capita GDP, Bangladesh has exceeded Pakistan by 80 percent. In the fiscal year 2021-22,
the per capita GDP of Bangladesh was $2793 while Pakistan's was $1547. Moreover,
Bangladesh's export earnings in FY 2021-22 were over $52 billion, which is more than double
the amount earned by Pakistan. Major factors for this disparity include gender and income
inequality. Pakistan is ranked 145th out of 156 countries in terms of UN’s economic growth
participation for women, while Bangladesh is ranked the highest in South Asia.

In the fiscal year 2023, Pakistan's economy encountered significant challenges, including
international supply disruptions and a domestic natural disaster in the form of the 2022 floods.
These events exacerbated existing vulnerabilities in economic growth, which had already been
impacted by demand-driven policies implemented in the previous year. Despite the government's
efforts to project an improvement in economic activities for FY2023 based on optimistic
expectations and key indicator performance, the economy experienced a loss of momentum in
the first quarter of the fiscal year. This downturn was primarily due to the severe global
economic downturn and a domestic supply shock caused by flash floods, which devastated a
substantial portion of agricultural land, hindering the government's fiscal consolidation efforts as
it recovered from the aftermath of COVID-19.
The repercussions were particularly felt in the agriculture sector, which serves as a vital link to
various commodity sectors. The damages caused by the floods resulted in significant losses to
GDP, estimated at PKR 3.3 trillion (US$15.2 billion), with additional expenditures of PKR 3.5
trillion (US$16.3 billion) required for rehabilitation efforts. The challenging economic conditions
both domestically and among major trading partners further dampened economic growth.
Moreover, the lack of significant participation from development partners and resource
constraints contributed to a slowdown in GDP growth, which registered at a mere 0.29 percent
for FY2023.

On the global stage, the protracted Russia-Ukraine conflict had a more pronounced adverse
impact on global growth and inflation than initially anticipated. Consequently, the escalated
international prices had ripple effects on currencies, commodities, and production costs, creating
three distinct pass-through effects within Pakistan's economy. Firstly, the conflict led to an
increase in commodity prices, particularly for essential items like food and energy. This surge in
prices contributed to a boost in the Consumer Price Index (CPI) inflation, resulting in a reduction
in the purchasing power of income and a subsequent decline in aggregate demand. Secondly,
disruptions in supply chains and remittances further exacerbated challenges within Pakistan's
trade-dependent economy. The disturbances in these essential economic channels hindered the
smooth flow of goods and services, amplifying existing economic vulnerabilities. Thirdly,
heightened global uncertainty stemming from the conflict dampened business confidence and
asset values. This decreased confidence translated into cautious investment behavior and a
reluctance to engage in financial activities, contributing to tighter financial conditions
worldwide. These conditions, particularly evident in major trading partner economies,
accelerated capital outflows from Pakistan, adding pressure to its economic landscape.
(finance.gov.pk)

The agriculture sector of Pakistan, which accounts for 22.9 percent of GDP and generates 37.4
percent of employment, plays a crucial role in ensuring food security and supplying raw
materials to the industrial sector. Additionally, it serves as a vital source of foreign exchange
earnings and is integral to sustainable economic growth. However, over the past few years,
Pakistan has experienced climatic shocks that have had adverse effects on the agriculture sector.
Consequent upon the Floods-2022, the Rabi season crops have shown higher yield, which
compensated the crop damages of the Kharif season, leading to an overall growth of agriculture
sector to 1.55 percent. As such, the production growth of wheat (5.4 percent), sugarcane (2.8
percent), and maize (6.9 percent) compensated the negative growth of cotton (41.0 percent) and
rice (21.5 percent). Furthermore, the normalization of livestock activities also led convergence
toward the stability path. The overall decline of important crops during this year is 3.20 percent.
This year witnessed an increase of 0.23 percent in other crops (contribute 3.32 percent in GDP)
primarily due to increase in Oil seeds production by 53.15 percent. Cotton Ginning having share
of 0.97 percent in agriculture and 0.22 percent in GDP has declined by 23.01 percent due to
decrease in cotton production. However, it is well compensated by the increase in production of
other crops. (finance.gov.pk)

In 2022, the global economy faced a series of significant shocks that not only complicated the
present circumstances but also clouded the future outlook. While recovering from the impact of
the COVID-19 pandemic, the outbreak of the Russian-Ukraine war initiated a new crisis,
disrupting food and energy markets and heightening global inflationary pressures. The instability
in the financial sector exacerbated these challenges further. In this highly volatile and demanding
economic environment, many countries shifted away from the expansionary fiscal policies
adopted during the pandemic-induced recession, primarily due to soaring inflation and the
imperative to address debt vulnerabilities.
Consequently, fiscal deficits worldwide decreased to an average of 4.7 percent of GDP in 2022
from 9.6 percent in 2020. However, they are anticipated to rise slightly, averaging 5.0 percent of
GDP, driven by escalating interest costs and the projected increase in public spending, notably
on wages and pensions to offset past inflationary impacts. As economies grapple with mounting
expenditure pressures, fiscal consolidation efforts are expected to dampen global economic
activity in 2023. Moreover, ongoing geopolitical tensions may necessitate significant boosts in
defense spending and budgetary support to mitigate the adverse effects of international trade
disruptions. (finance.gov.pk)
Pakistan, being a net importer of food and petroleum products, has faced significant challenges
due to the surge in crude oil prices amidst the global crisis. This surge has led to double-digit
inflation in the country since November 2021. The depreciation of the Pakistani Rupee has
further exacerbated the situation by amplifying the prices of imported goods. The appreciation of
the US dollar is primarily driven by fundamental factors such as the tightening of monetary
policy in the US and the ongoing energy crisis. Additionally, the conflict between Russia and
Ukraine has disrupted the supply of commodities, as both countries are major exporters of
energy and agricultural products. Furthermore, recent floods have caused extensive damage to
the economy, particularly affecting the agriculture sector, which has experienced massive supply
disruptions of perishable essential items, leading to price hikes.

For the outgoing fiscal year, the inflation target was set at 11.5 percent. However, inflationary
pressures have persisted throughout the first ten months of the current fiscal year, marking the
18th consecutive month of double-digit inflation since November 2021. In April 2023, the
Consumer Price Index (CPI) stood at 36.4 percent year-on-year (YoY), higher than the previous
month's 35.4 percent and significantly up from April 2022's 13.4 percent. On average, CPI
inflation recorded 28.2 percent during July-April FY2023, compared to 11.0 percent in the same
period last year.(finance.gov.pk)

In 2022, Pakistan was the number 41 economy in the world in terms of GDP (current US$), the number 66 in
total exports, the number 49 in total imports, the number 155 economy in terms of GDP per capita (current
US$) and the number 84 most complex economy according to the Economic Complexity Index (ECI) . The top
exports of Pakistan are House Linens ($4.86B), Rice ($2.55B), Non-Knit Men's Suits ($2.53B), Knit Sweaters
($2.01B), and Refined Petroleum ($1.56B), exporting mostly to United States ($6.47B), Germany ($2.8B),
China ($2.79B), United Arab Emirates ($2.58B), and United Kingdom ($2.41B). The top imports of Pakistan
are Refined Petroleum ($6.98B), Crude Petroleum ($5.23B), Petroleum Gas ($4.58B), Palm Oil ($3.8B), and
Raw Cotton ($2.44B), importing mostly from China ($21B), United Arab Emirates ($5.8B), Indonesia
($4.55B), Saudi Arabia ($4.5B), and Kuwait ($3.97B). In 2022, Pakistan was the world's biggest importer of
Sulfonated, Nitrated or Nitrosated Hydrocarbons ($822M), Tea ($707M), Used Clothing ($250M), and
Metallic Yarn ($28M). (oec.world)

Pakistan, with a current population estimated at 225.2 million by the United Nations, ranks as the
sixth most populous country globally. It shares land borders with India, Afghanistan, Iran, and
China, and has a maritime boundary with Oman. Additionally, it boasts a coastline spanning
1,046 kilometers along the Arabian Sea and the Gulf of Oman to the south. Pakistan's proximity
to Tajikistan is marked by Afghanistan's Wakhan Corridor in the northwest.The country
experiences an average annual population growth rate of 2.4 percent, with 64 percent of its
population residing in rural areas and 36 percent in urban areas. The typical household size is 6.4
individuals, and the national literacy rate stands at 58.9 percent. Pakistan comprises diverse
ethnic groups.

Endowed with substantial natural resources, Pakistan's fertile land exhibits rich biodiversity
across various climatic zones. Its economy is semi-industrialized, with manufacturing and
agriculture serving as primary sectors. Agriculture contributes around 24 percent to GDP and
employs roughly half of the labor force, serving as a pivotal source of foreign exchange earnings.
Key crops include wheat, rice, sugarcane, maize, and cotton, while major exports encompass
textiles, leather goods, sporting goods, chemicals, and carpets. The GDP growth rate for
Pakistan, as per the Economic Survey of Pakistan 2021–2022, stands at 3.9 percent.
Development in Pakistan has been uneven, marked by intermittent periods of growth, influenced
by external economic shocks, incomplete economic reforms, natural calamities, political
uncertainties, and security challenges. The socio-economic stability faces threats from militant
attacks targeting civilians and security forces, resulting in internal displacements. Various
militant groups, including the Tehrik-i-Taliban Pakistan (Pakistan Taliban) and Islamic State
affiliates, contribute to heightened insecurity. Additionally, shelling along the Line of Control in
Pakistan-administered Kashmir poses risks of protection and displacement. (Pakistan |
ReliefWeb)
 Michel Porter’s Diamond Model

The Porter Diamond Model, developed by Michael Eugene Porter, is a seminal framework in the
realm of business strategy and international economics. This model provides a comprehensive
understanding of the factors that underpin a nation's competitive advantage in specific industries.
By delving into the intricate interplay between various elements, the Porter Diamond Model
elucidates why certain nations excel in particular sectors, thus enabling businesses to formulate
targeted strategies to enhance their competitiveness on a global scale.

The Porter Diamond Model comprises four key determinants, often referred to as the "diamond"
due to their interconnectedness and collective influence on national competitiveness:

1. Factor Conditions: This component encompasses the nation's endowment of factors of

production, including natural resources, labor, capital, infrastructure, and technological
know-how. Factor conditions serve as the foundational building blocks upon which
competitive advantage is built. Nations endowed with abundant and high-quality factors
of production are better positioned to excel in industries reliant on these resources.
However, the significance of factor conditions extends beyond mere abundance; the
quality, efficiency, and sophistication of these factors are equally crucial in fostering
competitiveness.
2. Demand Conditions: Demand conditions refer to the nature and characteristics of
domestic demand for goods and services within a nation. The size, growth, and
sophistication of domestic demand play a pivotal role in stimulating innovation, product
differentiation, and competitiveness. Strong and dynamic domestic demand fosters a
competitive environment wherein firms are incentivized to innovate, improve product
quality, and meet evolving consumer preferences. Moreover, demanding domestic
customers serve as discerning test markets, providing valuable feedback that enables
firms to refine their offerings and compete more effectively on a global scale.
3. Related and Supporting Industries: This component underscores the importance of a
robust ecosystem of related and supporting industries in enhancing national
competitiveness. A strong network of suppliers, manufacturers, distributors, and service
providers fosters collaboration, knowledge sharing, and economies of scale. Moreover,
proximity to related industries facilitates the exchange of ideas, technologies, and best
practices, spurring innovation and productivity gains across the value chain. The presence
of competitive local suppliers and complementary industries enhances the efficiency and
competitiveness of domestic firms, enabling them to access critical inputs and resources
at competitive prices.
4. Firm Strategy, Structure, and Rivalry: The final component of the Porter Diamond Model
pertains to the prevailing business environment, including the strategies, organizational
structures, and competitive dynamics within the nation. Intense domestic rivalry among
firms fosters innovation, efficiency, and continuous improvement, driving firms to
enhance productivity, reduce costs, and differentiate their offerings. Moreover, a
competitive business environment compels firms to adopt sophisticated strategies, such
as investment in research and development, strategic alliances, and internationalization,
 to gain a competitive edge. The presence of vibrant competition fosters a culture of
excellence, driving firms to strive for continuous improvement and innovation to
maintain or enhance their market position.

Applications and Implications of the Porter Diamond Model:

The Porter Diamond Model holds significant implications for businesses, policymakers, and
economic stakeholders seeking to understand and enhance national competitiveness. By
analyzing the interplay of factor conditions, demand conditions, related and supporting
industries, and firm strategy, structure, and rivalry, businesses can identify the key determinants
of competitiveness within their industry and formulate targeted strategies to leverage their
strengths and mitigate weaknesses. Moreover, policymakers can use the insights gleaned from
the Porter Diamond Model to design policies and initiatives aimed at fostering a conducive
business environment, promoting innovation, and enhancing national competitiveness.
Ultimately, the Porter Diamond Model serves as a powerful analytical tool for understanding the
complex dynamics of international competitiveness and guiding strategic decision-making at
both the firm and national levels. (wallstreetmojo.com)
 Factor conditions

1. Labour force and its skill level

Pakistan's textile industry possesses a skilled labor force, bolstered by training opportunities like
TIP, PRGTII, SMARTI, PHMA Institute of knitwear and technology, PIFD, PHMA Institute of
knitwear and technology, PIFD, and government initiatives like the TVET Reform Program.
However, this strength is tempered by limitations. Age restrictions for workers potentially limit
the available talent pool. While skilled, there's a scarcity of trained labor in specific areas,
leading to a gap between demand and supply for formally skilled workers, particularly evident in
Sindh where machine operation and garment stitching skills are lacking. Additionally, the
industry leans heavily on male workers, with females comprising only 7% of the skilled
workforce in Punjab compared to 30% in Sindh. This imbalance restricts the overall talent pool
and potentially limits female participation in more sophisticated roles.

Despite these challenges, there are positive aspects. The industry prioritizes skill development
through established institutes, and the TVET Reform Program aims to bridge the skill gap by
aligning training programs with industry needs. This initiative encompasses various educational
levels, from diploma programs to higher education, indicating a comprehensive approach.

To further improve the situation, establishing resource employment centers across cities and
towns can create a formal marketplace connecting trained workers with textile units. Regularly
reviewing and revising TVET curricula is crucial to ensure they align with industry needs and
address emerging skill gaps. Finally, organizing joint awareness sessions for textile units and
trained workers can enhance understanding and facilitate smoother workforce integration. By
addressing these challenges and capitalizing on existing initiatives, Pakistan's textile industry can
leverage its skilled workforce and enhance its global competitiveness.
 2. Raw materials
The availability of inexpensive raw materials is one of the biggest factors that contribute to the
success of the Pakistani textile industry. The raw materials used in this industry are natural or
synthetic fibers, yarns, fabrics, or other products like dyes which are used to make textile-based
products.

A. Cotton
Cotton is the main raw material in this industry hence cotton agriculture has drastic effects on the
overall performance of the textile industry. It is also known as “white gold” due to the revenue it
generates for farmers. Currently, Pakistan is the 5th largest producer of cotton and the 3rd largest
producer of cotton yarn worldwide. 1.3 million out of 5 million of our local farmers grow cotton
on an area of 6.0 million acres which makes up about 15% of the total cultivated land in
Pakistan. Cotton crop has a share of 0.8% in GDP and has a 5.2% contribution to value addition
in agriculture. It also has a 51% share in total foreign exchange earnings in our country.

Punjab is a major cotton producer, cultivating the crop on a substantial 4.7 million acres
annually. This translates to an impressive 7 million bales of cotton and a lint yield of 700
kilograms per hectare. Key cotton-growing districts within Punjab include Rahim Yar Khan,
Bahawalnagar, Bahawalpur, Lodhran, Multan, Khanewal, Vehari, Sahiwal, Muzaffargarh,
Rajanpur, D.G. Khan, and Faisalabad.

Cotton Research Institute (CRI) in Multan, along with its allied research stations have a huge
hand to play in success. These stations, located in Bahawalpur, Faisalabad, Khanpur, Sahiwal,
and Vehari, all operate under the umbrella of the Ayub Agricultural Research Institute (AARI) in
Faisalabad. Through their efforts, 59 cotton varieties have been developed, finding cultivation
across vast areas in both Punjab and Sindh provinces. (Cotton | Ayub Agricultural Research
Institute, n.d.)

An analysis of cotton production reveals

ten leading countries: India, China, the
United States, Pakistan, Brazil,
Australia, Uzbekistan, Turkey,
Turkmenistan, and Burkina Faso (refer
to Fig. 1.2 for their annual production
figures). While India holds the top
position, contributing approximately
26% of global cotton production, its
yield per unit area remains relatively
low. China, on the other hand, cultivates
cotton in 24 out of its 35 provinces,
making it a primary crop. Notably,
99.5% of the designated cotton planting
area within China is utilized for this
purpose. Finally, the United States emerges as a leader in cotton exports, with a significant
portion of its production originating from
southern states like Mississippi, Louisiana,
and Arkansas.

Cotton's story since the mid-1990s is one of

impressive growth. Global production has
jumped a whopping 75.86% between 1995-
1996 and 2017-2018, though yearly
increases haven't always been consistent.
This surge extends to international trade as
well, with both imports and exports seeing
a similar upward trend. The demand for
cotton itself has also boomed, with
consumption rising by roughly 70.10%
over the same period.

B. Synthetic fibers:
Pakistan's synthetic fiber industry is led by
four key materials: nylon, polyester,
acrylic, and polyolefin. These materials
account for the majority of synthetic fiber
production in the country. Currently,
Pakistan has five major manufacturers of
synthetic fibers, with a combined capacity of 636,000 tons per year.

C. Filament yarn:
Pakistan's filament yarn industry manufactures three
main types of yarn: acetate rayon, polyester filament,
and nylon filament. The country currently boasts around
six production units dedicated to these materials.

Filament yarn manufacturing

D. Artificial Silk:
Pakistan produces a type of fiber that is similar to silk but more affordable to manufacture. The
country has around 90,000 looms for weaving this fiber, primarily located in Karachi,
Faisalabad, Gujranwala, and Jalapur Jattan. It's important to note that FATA is no longer a
designated administrative region.

E.Wool:
Wool is a versatile material used in a wide range of products, including woolen yarn, acrylic yarn
(often blended with wool), fabrics, shawls, blankets, and carpets.
F. Jute:
Jute plays a key role in the packaging of agricultural products like grain and rice. In 2009-10,
Pakistan's production of jute products was estimated to be around 100,000 tons.

3. Technology
According to the Federal Textile Counsel, Pakistani mills require 33 minutes more to produce a
single piece of fabric compared to their Asian counterparts. This productivity gap translates to
wasted resources, with estimates suggesting 30% wasted during finishing and 12% wasted
during washing.

A key contributor to this inefficiency is the lack of technical expertise among the
workforce. Limited technical knowledge hinders worker productivity, product quality, and
ultimately, worker income. This is particularly detrimental in today's technology-driven textile
industry, where automation and computerization are crucial for maintaining competitiveness.

The global textile market is fiercely competitive, with manufacturers constantly innovating and
employing cutting-edge technology to boost efficiency and productivity. The following programs
offer valuable insights and potential models for Pakistan to consider in its efforts to upskill its
textile workforce: Germany's "Industry 4.0" initiative, Singapore's "Skills Future" program, the
US "Manufacturing Extension Partnership" (MEP) program, and Japan's "Human Resource
Development Program for Industry" (HRDPI) initiative.

Demand conditions

1. Market size
The textile industry is a powerhouse for the Pakistani economy. This translates to a market size
of approximately PKR 3,816 billion in fiscal year 2021 (FY21), which is a growth from PKR
3,345 billion in FY20.

Exports are a major driver of this

sector's success. In FY21, the
textile industry generated PKR
2,461 billion in exports, which is
an impressive 61% of Pakistan's
total exports for that year. This
represents a substantial increase of
25% compared to the PKR 1,972
billion earned in FY20. This
growth can be attributed to two key
factors:
 1. Global Disruptions: Strict lockdowns imposed by regional competitors due to the
COVID-19 pandemic caused a shift in export orders towards Pakistan.
2. Trade Wars: The ongoing trade war between the United States and China also presented
an opportunity for Pakistan to capture a larger market share.

Pakistan's textile industry boasts a strong presence of composite entities. These companies
integrate multiple stages of the textile value chain within their operations, either through
backward or forward integration, to achieve greater efficiency. There are approximately 50 of
these organized textile composite entities functioning in the country, with 30 being listed on the
Pakistan Stock Exchange. As of October 22nd, 2021, the market capitalization of these listed
composite firms stood at a noteworthy PKR 310 billion.

A remarkable level of product differentiation is a hallmark of the Pakistani textile

industry. Manufacturers produce a wide range of finished goods, catering to diverse consumer
needs. This includes a variety of garments, knitwear, towels, and home textiles. This product
diversity strengthens the industry's position in the global market.

2. Import and Export

Moving onto the breakdown of the exported products, Pakistan majorly exported knitwear,
followed by readymade garments and bedwear. The major destinations for the exports are the
US, UK, Germany, Spain, and Netherlands (based on FY22). The top exporters contributing to it
include Style Textile (Pvt) Ltd, Interloop Ltd., Nishat Mills Ltd., Artistic Milliners (Private) Ltd.,
Gul Ahmed Textile Mills Ltd, Soorty Enterprises (Private) Ltd., Yunus Textile Mills Ltd.,
Liberty Mills Ltd. Feroze1888 Mills Ltd., US Apparel & Textiles (Pvt) Ltd, etc.
Next, in the breakdown of imported textile products, we can observe that despite being a
producer of raw cotton, Pakistan continues to import more than US$ 1 billion worth of it,
followed by miscellaneous textile items and synthetic yarn. The major import destinations are
China, the US, Brazil, Turkey, and Afghanistan (based on FY22). Multiple companies order
these products to counter local shortages. Although, some prominent companies importing raw
cotton include Gadoon Textile Mills Ltd., Indus Dyeing and Mfg, Company Ltd., and Riaz
Textile Mills Pvt. Ltd.
 3. International demand
Spinning sector have more than 50% of total spending followed by processing and weaving
sector. Instead of utilizing good quality yarn into value added products it is exported to countries
like Japan, Hong Kong, and south Korea. Yarn is sold at a low price in the international market.
If we talk about cloth production around 50-80% is used in the domestic market and 20-40% is
exported. International demand for dyeing and printing is higher as it adds more value to grey
fabric. However, due to its requirement of capital and skilled for, exports in this particular
category are comparatively low in Pakistan. Most value-added sector of its industry is readymade
garment. Due to technological backwardness this sector suffers in Pakistan.

The textile industry is unable to fulfil local and international demand of textile because of energy
crises, political and economic situations. Although the industry has grown over the years but,
over the decade the industry has faced downfall with numerous textile mills in Faisalabad and
Punjab being shut down. The main reason behind it is power shortage and increased prices of
raw materials. As a result, consumers are shifting towards our south Asian competitors namely
China, India, and Bangladesh. There is a shortage in the market and barrier to consistent supply
are increased prices, import duties and excise duties on raw material and energy crises. Demand
have exceeded the supply by more than 5000MV due to energy crises. 60-70% of the industry
was affected and unable to take export orders.

China, Bangladesh, and India give tough competition to Pakistan textile industry. In the world
textile market share of Pakistan decreased to 1.7% from 2.2%. Share of Bangladesh increased
from 1.9% to 3.3% and share of India increased from 3.4% to 4.7%. Economic factors are the
major reasons why Pakistan is lagging behind its competitors that include inflation, devaluation
of currency, high interest rates and high cost of raw materials of cotton and yarn. These factors
make prices of Pakistan’s textile products high in international markets resulting in fall in
international demand. Pakistan also fails to comply with international safety measures. For the
same reasons Walt Disney terminated all its manufacturing-based garment order with Pakistan.
The import of US consists of $3.2 billion worth of textile products and Pakistan exports around
1.2 billion textiles to companies like Nike, GAP, levies, and Walmart. If manufacturers do not
comply with international rules and regulations our industry will suffer greatly. International
labor organizations have also given us a warning against poor working conditions and child
labors.
Massive change has occurred in terms of the structure and magnitude of the textile industry due
to the following reasons. There has been a change in consumer spending patterns, lesser
international trade barriers and increased competition from developing countries.

Strategy, structure and rivalry

Structure:

According to All Pakistan Textile Mills Associations (APTMA), currently 1200 textile mills are
operating in Pakistan which are characterized by high degree of fragmentation. Based on the
statistics reported by the Textile Commissioner Organization, the Large mill sector of the textile
industry includes 526 Spinning units, 50 Composite Units, 150 independent weaving units, 115
finishing units and 800 garment units. (Pakistan Textile Journal 2022) Punjab, with 332
spinning units and 23 composite units and Sindh with 110 spinning units and 17 composite units,
dominate the textile industry with Karachi, Lahore and Faisalabad as the main centers of textile
production. There are a few textile firms operating in Baluchistan and KPK, with 10 spinning
units in the former province and 19 spinning units in the latter. 269,208 spindles and 13,689
rotors are installed in Balochistan and 838,376 spindles and 2690 rotors are installed in KPK as
per the statistics till 2021. (Value addition) Due to the massive number of players operating in
Pakistan, the industry is dominated by monopolistic competition. Major share of the textile
companies are private limited companies while nearly 5% are listed on stock exchange while
some are individually owned. By size, nearly 70% of the textile firms are SMEs which operate
mainly in the spinning and weaving sector of the industry while the rest of the players are large
companies which are significant contributors towards exports and creating modern industry
advancements. The small and medium scale sector is constituted by 500 independent weaving
units, power looms, 690 finishing units, 800 terry towels units, canvas, 5000 garments units and
1200 knitwear units. (Pakistan Textile Journal, 2022) Faisalabad is the main center of textile
cluster with weaving industry at its core. The textile industry is linked with suppliers, upstream
and downstream industries and supporting and related industries. This textile cluster reduces the
production and transportation costs, creates ease in lending facility due to credibility. There is an
intense competition among the firms in the weaving sector in the cluster. The textile industry of
Faisalabad is dominated by strong family groups mainly Sheikhs and Chiniotis.(Khan & Ghani,
2004)

A. Processes (Textile Value Chain)

The journey begins with cotton cultivation, which primarily takes place in regions with warm
climates (cotton is native to tropical and subtropical regions like Egypt and India). The process
involves several key steps:

• Planting: Farmers carefully prepare the soil and sow cotton seeds at the optimal time of
the year.
 • Growth and Maintenance: To cultivate cotton successfully, an extended period without
frost, ample sunlight, and moderate rainfall are essential. Farmers vigilantly oversee their
growth, eradicate weeds, and shield the plants from pests and diseases.
• Harvesting: When cotton bolls attain maturity, they are prepared for harvesting, which
can be accomplished either manually by hand-picking or with the aid of mechanical
equipment.

Figure 1 and 2: Cotton Cultivation

After harvesting, the cotton goes through various processing stages to prepare it for fabric
manufacturing:

• Ginning: The initial stage involves ginning, during which the cotton fibers are extracted
from the seeds and any residual plant matter. This process commonly employs a cotton
gin machine.
• Cleaning: After ginning, the cotton is subjected to cleaning procedures to eliminate
impurities like dirt, leaves, and small particles. Diverse machinery, including cleaners
and carding machines, are employed for this precise task.
• Carding and Combing: Carding is the process of straightening and aligning cotton
fibers, readying them for spinning. Combing, which is an optional step, enhances the
refinement of the fibers by eliminating shorter ones and ensuring uniformity.
 Figure 3: Cotton ginning Figure 4: Cotton Carding

Once the cotton fibers are processed, they are ready to be transformed into fabrics through
manufacturing processes:

• Spinning: Spinning machines are utilized to spin the cotton fibers into yarns. This entails
twisting the fibers together to form uninterrupted strands of yarn.
• Weaving or Knitting: The yarns are then used in weaving or knitting machines to create
the fabric. Weaving involves interlacing the yarns in a crisscross pattern to form a stable
fabric structure. Knitting uses loops of yarn to create a more flexible and stretchable
fabric.
• Finishing: Once the fabric is woven or knitted, it proceeds through several finishing
stages. These encompass washing, bleaching, dyeing, and printing, all aimed at
augmenting its visual appeal, texture, and coloration.
• Cutting and Sewing: Upon completion, the fabric undergoes cutting into pattern pieces
and subsequent sewing to fashion garments or other textile goods, a process that
integrates the expertise of skilled artisans alongside modern manufacturing methods.

Figure 5: Cotton Spinning Figure 6: Fabric Manufacturing

B. Public Companies

1. Gul Ahmed Textile Mills Limited: Gul Ahmed now has an extensive chain of more than
40 retail stores across the country, offering a diverse range of products from home
accessories to fashion clothing. With an installed capacity of more than 51,840 spindles,
300 state-of-the-art weaving machines, and the most modern yarn dyeing, processing &
stitching units, Gul Ahmed is a composite unit – making everything from cotton yarn to
finished products. (Company Overview – Gul Ahmed)
2. Nishat Mills Limited: stands as a pinnacle of modernity, being among Pakistan's largest
vertically integrated textile enterprises. With an impressive infrastructure boasting
303,048 spindles and 959 Toyota air jet looms, the company is a powerhouse in the
textile industry. Additionally, it boasts cutting-edge textile dyeing and processing units,
along with two stitching units dedicated to home textiles, another for garments, and
robust power generation facilities capable of producing up to 120 MW. (About | Nishat
Mills Limited)
3. Artistic Denim Mills Limited: is a vertically integrated composite involved in the
manufacturing and sale of denim fabric and garments products. As of June 30, 2019, the
company operated with 20,000 spindles and 864 rotors. The spinning facility has the
capability to manufacture over 18 million pounds annually. Additionally, the weaving
operations are facilitated by 160 air jet looms, capable of producing 19 million meters of
fabric per year. Furthermore, there is a dyeing facility capable of processing
approximately 140,000 meters in a single run. (Artistic Denim Mills Limited - Markets
- Business Recorder)

C. Private Companies

1. Alkaram Textile Mill Limited: Al Karam is a prominent manufacturer and supplier of

high-quality fabric for apparel, home, and industrial markets. The company operated with
124,000 spindles and 4320 open end rotors. The spinning facility has the capability to
produce 450,000 bags / year. The current capacity for fabric manufacturing is 324 Air Jet
Looms and 4 Colours Weft Insertion. (Capabilities / Divisions - Alkaram Textile Mills)
2. Artistic Garment Industries(AGI Denim): is a vertically integrated company that deals
in manufacturing and sale of denim fabric, yarn and all kinds of ready-made denim
garments, dresses and clothes. The company operated with 30,000 spindles and 304
looms utilized in denim fabric. (Artistic Garments Industries (AGI Denim) (Private)
Limited)
3. Metco Textile Limited: METCO Textile, established in 2003, is a reputable Private
Limited Company specializing in manufacturing 100% Cotton and Polyester Yarns. We
take pride in providing high-quality products to our customers both locally and
internationally. With our first spinning unit of 25,000 spindles, we began producing high-
quality Hosiery yarns. In 2012, we expanded by setting up a second spinning unit with
15,000 spindles for high-quality Weaving yarns to cater to local Denim and export Siro
Markets. Recently, we established a third unit with 21,600 spindles, manufacturing top-
grade CVC/PC yarns for the local market. (METCO | Who We Are)
D. Trade Organizations
1. Pakistan Readymade Garments Manufacturers & Exporters Association (PRGMEA):
The Pakistan Readymade Garments Manufacturers & Exporters Association (PRGMEA) serves
as the leading trade body for the Readymade Garment Industry in Pakistan. Its main aim is to
protect the interests of garment exporters while fostering a sustainable manufacturing ecosystem.

As a trade organization, it is recognized by the Government of Pakistan and affiliated with the
Federation of Pakistan Chamber of Commerce & Industry ( FPCCI ), Employers' Federation of
Pakistan ( EFP ), Trade and Development Authority of Pakistan ( TDAP ) and International
Apparel Federation ( IAF ). It is an honour that the International Apparel Federation opened its
first regional office on 27th September, 2017 at PRGMEA House in Sialkot where Pakistan
Readymade Garments Manufacturers & Exporters Association also inked a MoU with The Dutch
National Fashion & Textile Association Netherlands (MODINT) for the first time in Asia with a
view to support Pakistan apparel industry.

PRGMEA operates two technical training institutes, located in Karachi and Lahore, known as the
Pakistan Readymade Garments Technical Training Institute (PRGTTI). Additionally, a third
institute is currently under development in Sialkot. The primary goal of PRGTTI is to equip
individuals with the necessary skills and knowledge to become proficient and productive in the
value-added textile industry. Over the years, PRGTTI has successfully trained thousands of
students who have subsequently found employment opportunities within the garment industry.
(prgmea.org)

1. All Pakistan Textile Mills Association (APTMA):

The All Pakistan Textile Mills Associations (APTMA) is a trade organization that represents the
largest sector in Pakistan, the textile industry, comprising 222 textile companies. APTMA
assumes a crucial role in protecting the business interests of not only textile companies but also
other sectors, thereby facilitating their contribution to the economic growth of the country.
Leveraging its political, economic, and social influence, APTMA has consistently taken on a
leadership role in facilitating business and providing government-related services.

APTMA is a prominent association within Pakistan's textile industry, comprising 13 committees

overseeing various industrial and governance functions aimed at supporting member textile
mills. This sector represents Pakistan's largest exports, commanding an annual share of 67%.
Registered with the Federal Ministry of Commerce on July 5, 1990, under the Trade
Organizations Ordinance 1961 and also registered under section 42 of the Companies Ordinance
1984, APTMA commenced operations in July 1991, establishing its headquarters in Faisalabad.
Affiliated with the Federation of Pakistan Chambers of Commerce & Industry (FPCCI), APTMA
plays a significant role in advancing the interests of Pakistan's textile sector.

Currently, APTMA's main office is located in Islamabad, Pakistan. The organization also
maintains zonal offices in Lahore for the Northern region and Karachi for the Southern region,
along with sub-zonal offices situated in Faisalabad and Quetta. (All Pakistan Textile Mills
Association – APTMA)
Strategy:
The key approach for the development of the textile industry in Pakistan to remain competitive
in the global textile market is to focus on cost effectiveness and elevating quality standards and
value-added products. With a large number of countries excelling in the textile industry in the
global market such as China, India, Bangladesh which are the main competitors of Pakistan,
Pakistan employs cost-reducing strategies to gain cost advantage over the rest. They achieve this
by:

1. Local production of raw materials: Cotton is cultivated in the province of Punjab and
Sindh which are the main producers to meet the growing demand of cotton for the textile
industry. The volatility in the production highly affects the changes in the prices of cotton
due to the difference in the value of the currency. The local industries make efforts to
fulfill their requirement for cotton as a raw material by the local production rather than
importing to ensure cost effectiveness.
2. Vertical Integration: Vertical integration refers to the ownership of a single firm of all the
operations in its supply chain. Textile firms, especially larger players have implemented
vertical integration strategies to reduce the transaction costs, the inventory holding costs
and establish economies of scale which directly affects the cost of the output.
3. Low labour costs: Pakistan’s textile industry is mainly labour oriented and requires
unskilled and semi-skilled labour which are involved in the spinning, weaving and
processing sections of the industry where they mostly perform manual tasks. These
labours do not require thorough recruitment procedures or specific qualification hence
this type of labour is abundant in Pakistan. Such labour is paid lower wages than the
skilled labour which also contributes towards cost-cutting.
4. Subsidies in energy cost: The government plays a vital role in supporting the industry to
maintain its competitiveness in terms of cost-reduction by offering subsidies on
electricity and fuel gas and other utilities to reduce production cost.

To enhance the worth of textile exports and drive the industry towards sustainable expansion, it
is imperative to investigate various avenues:

1. Investment in Basic Infrastructure: Addressing energy obstacles and guaranteeing a

consistent power supply is essential for the operation of textile machinery. Meanwhile,
enhancing transportation infrastructure, encompassing roads, ports, and railways, will
ease the seamless flow of raw materials and finished goods, minimizing logistical
hindrances.
2. Improving the industry supply chain: The emphasis should be on directing efforts
towards streamlining and optimizing the supply chain of the industry to boost overall
efficiency. This encompasses adopting a comprehensive approach, starting from the
sourcing of raw materials to the ultimate delivery of finished products.
3. Adapting to advanced Textile technologies: Embracing cutting-edge technologies,
notably Artificial Intelligence (AI), has the potential to introduce a new era of intelligent
manufacturing in the textile industry. AI can enhance production processes, elevate
quality inspection standards, refine fault diagnosis capabilities, and streamline equipment
scheduling. Innovations such as SUNTECH's AI Automated Visual Inspection System,
 ST-Thinker, exemplify the considerable strides achievable in defect detection and quality
control throughout diverse textile manufacturing sectors.
Over the past few years, Artificial Intelligence (AI) has significantly advanced in various
aspects of textile fabric design, defect identification, fabric performance assessment,
cotton classification, and grading. It possesses the capability to analyze and forecast
attributes such as breathability, wrinkle resistance, and abrasion resistance. Machine
vision and machine learning technologies are crucial in detecting and analyzing defects,
color variations, patterns, and other complexities in printed and colored fabrics, tackling
enduring technical hurdles within the industry.
4. The Shift to Technical Textiles and High-Value Exports: While Pakistan has
traditionally concentrated on exporting low-value-added apparel, the global textile
industry is evolving rapidly, with nations such as India, Bangladesh, and Vietnam making
significant progress in high-value garment exports. Pakistan must strategically pivot to
leverage the increasing demand for technical textiles. This shift demands substantial
investments in the textile sector, particularly in the adoption of modern machinery and
technology.
Regrettably, over the past decade, Pakistan's investment in textile machinery has fallen
behind countries like Bangladesh and Vietnam, both investing a minimum of $3 billion
annually. Pakistan's existing textile machines are outdated in terms of technology, energy
efficiency, and speed compared to those in competitive economies. To bridge this
disparity, significant investments are imperative to modernize textile machinery, thereby
enhancing efficiency and competitiveness in the global market. (linked-in textiles

Rivalry:

Pakistan and India are rivals in all fields, including textile exports. After the COVID-19
pandemic, Pakistan experienced a surge in momentum and achieved new export targets,
while India's textile sector suffered significant losses. However, January 2022 has
presented a different narrative.
In the first nine days of January 2022, Pakistan's textile exports plummeted by 61%. Projections
indicate a staggering decrease of $290 million in textile production during this period, with
value-added textiles accounting for $213 million and other textiles for $77 million. This decline
represents a substantial reduction in both value and volume. The All Pakistan Textile Mills
Association (APTMA) has reported unforeseen disruptions in textile mills across Punjab due to
issues such as gas shortages, voltage fluctuations, and power outages, resulting in significant
industry losses. With 70% of the textile industry based in Punjab, the suspension of gas supply
jeopardizes 80% of the industry's operations, making it difficult for manufacturers to fulfill
orders and leading to permanent losses for Pakistan.
In contrast, the Indian textile sector exhibited strong recovery in 2021 and promising results.
From April to December 2021, total textiles and apparel exports, including handicrafts,
amounted to $29.8 billion, marking a substantial increase from $21.2 billion during the same
period the previous year, representing a robust growth rate of approximately 41%. Compared to
April to December 2019, textile exports saw a 14.6% increase during the same period in 2021.

Specifically, there was a notable increase in the export of textiles by 31%, cotton
yarn/fabrics/made-ups by 43%, and jute products by 33% from April to December 2021
compared to the same period in 2019. The Indian government has set a target of $44 billion for
textiles and apparel exports, including handicrafts, and nearly 68% of this annual target has
already been achieved. With the final quarter of the fiscal year typically experiencing heightened
activity, industry stakeholders remain optimistic about meeting these targets. (Textile Exports
Comparison: Pak vs. India - TEXtalks)
Pakistan and the United States have maintained a significant trading relationship, with trade
volume remaining relatively stable at around $5.5 billion for several years. However, in the
calendar year 2017, bilateral trade between Pakistan and the US surpassed the $6 billion mark for
the first time.
Considering the product composition of Pakistan's exports, its primary and closest competitors in
the US market include China, India, Vietnam, and Bangladesh. Over the past five years, except
for 2017, Pakistan's share in the US market has remained stagnant, while its competitors have
seen an increase in their market share, particularly in the textile sector. With the current
government of Pakistan Tehreek-e-Insaf (PTI) focusing on import reduction and export
enhancement, there is an opportune moment for Pakistan to diversify its exports to the United
States. (Pakistan needs to diversify exports to US)
There is fierce competition in the industry. The industry requires heavy and expensive
machinery, some of which needs to be imported. High initial cost is a barrier to entry.
Government policies of high custom duties and taxation are not in favor of the new entrants.
Secondly, the existing problem of energy makes it difficult to enter the industry as existing
industries are being shut down due to the power shortage.

Related and supporting industries

a. Edible oil industry:

Linters, hull, oil and meal/cotton seed cake are other products obtained from cotton-seed after
ginning. Cottonseed oil, classified as edible vegetable oil, is popular for cooking (stir-fries, etc.)
and as a salad oil (as a dressing or as a component in mayonnaise) that tastes like nut oil. Though
cotton is mainly cultivated for fiber, its kernel seed oil is also used as an edible vegetable oil and
accounts for a large share of the local oil industry; per capita consumption of edible oils is nearly
14 kg, which is much higher than consumption in countries at similar levels of economic
development. Pakistan fulfills 17.7% of its demand for edible oils through cottonseed oil. Total
demand for this purpose in 2029–30 is estimated at 5.36 million tons of which local production
will be 1.98 million tons. Genetically modified
(Bt) cotton was introduced in Pakistan in 2010 to
control three deleterious lepidopterous insects; it
now accounts for more than 85% of the cotton
cultivated. Information on cottonseed oil and its
utilization is however scanty and not available in
single source. There is strong demand from
industry to further purify cotton seed oil to
render it fit for direct consumption as cooking oil
instead of hydrogenating it as ghee (solid form). Cottonseed oil extraction plant
 b. Dyeing and Chemical Industry:
The chemical sector of Pakistan has a significant impact on the country’s economy. According to
the import data, Pakistan imports $523.4 million in inorganic chemicals and $2.4 billion in
organic chemicals, which include chemicals such as Methyl Isobutyl Carbinol (MIBC), Sodium
Thioglycolate, Ferric Chloride 96% and
Sodium Isobutyl Xanthate
(SIBX). According to the Eurasia
Review, chemical imports constitute
about 17% of the total import bill. The
types of chemicals used in the textile
dyeing industry include basic
chemicals, washing agents, detergents,
leveling agents, salt, sequestering
agents, whitening agents, fixing agents,
softeners, reducing agents, stabilizers,
enzymes, anticreasing agents, anti-
foaming agents, and pH controllers.
Most of the raw Dyeing process in the textile industry

materials and intermediates for dyes and pigments are being imported. These raw materials
belong to or are derived from Petrochemicals, which presently have no base in the country.
Pakistan Chemical Manufacturers Association (PCMA )at the policy planning level in the
Government is taking forward strategic projects like the Petro-chemical complex, formulation of
Petro-Chemical and Chemical Policies, and introduction of projects promoting bio-economy to
tap the inherent strength of available resources in Pakistan. The major issues facing the chemical
industry in Pakistan are low innovation capacity, lack of adequate infrastructure, high energy
costs, outdated environmental regulations, and trade imbalance.

c. Printing and Packaging:

The printing and publishing industry in Pakistan is largely based around the cities of Karachi and
Lahore, producing books, magazines, newspapers and stationery. According to local industry
sources, the estimated local market size of this sector here is $5.5 billion. Despite prevailing
microeconomic challenges, which are primarily driven by Current Account Deficit and local
currency depreciation, this sector grew approx. 10 percent as compared to last year.With
moderate local production, Pakistan’s printing and packaging sector is highly dependent on
imports, particularly raw materials and equipment. Some of the prominent export prospects for
the U.S. companies include:
1. Recyclable paper/paperboard waste
2. Flexible packaging machinery
3. Shrink wrap equipment
4. Vertical form bagging equipment
5. Horizontal flow wrapping equipment
6. Liquid filling equipment
7. Carton and tray formers
8. Tray packing equipment
9. Conveyor systems
 10. Labeling applicating equipment
11. Case and tray formers and packers

Government
With its role in exports and employment possibilities, the textile sector is crucial to Pakistan’s
economy. The government has put in place a number of policies and programs to assist the
expansion of the textile industry.

Shortly after Pakistan gained independence from British domination in south Asia, Textile
production became an important component of that country’s industrialization. Pakistan’s
government created the Cotton Export Company of Pakistan in 1974.

The main factor behind the rapid growth in the 1900s was the reduction of import tariff on cotton
from 85% to 50 % in 1985 and then to 20% in 1988. Government also removed restrictions on
renewal and expansion of spinning and weaving factories. Government has always taken a
supportive role by staying at the side bench, they brought privatization and deregulation. The
government only becomes active to tackle the market imperfections. However due to uncertain
and sudden policy changes the industry does feel vulnerable.(Ravi Magazine, 2015)

The removal of quotas worldwide was a huge shock in 2004. An article in dawn was published
which said, Worldwide quotas on imports of textiles and clothing ended on December 31, 2004.
Since textiles, apparel, and related products account for nearly three-quarters of Pakistan's
exports, this has raised concerns about how the country's export sector will fare after the demise
of the quota system. This led to the exports falling eventually. (DAWN Newspaper, 2005)

Pakistan's government launched the Textile Strategy 2005-06 with the goal of upgrading the
textile sector and boosting value-added goods to boost exports. The textile industry received a
number of benefits from this program, including the duty-free import of machinery, tax breaks,
and improved loan availability. (Reference: Textile Industry Ministry) Trade Policy 2006-07:
The Trade Policy 2006-07 sought to improve the textile industry's competitiveness by actions
like lowering manufacturing costs, upgrading quality, and boosting exports. This program
provided an Export Financing Plan to help exporters with financial support as well as duty
drawback and tax advantages for exports. (Reference: Department of Commerce)

Textile Policy 2009–14: The Textile Policy 2009–14 addressed concerns including energy
scarcity and low productivity while boosting the manufacture and export of textiles with added
value. This policy provided tax breaks, petrol and electricity subsidies, and assistance with the
upgrading of textile machinery. (Reference: Textile Industry Ministry) Energy Policy 2010: The
Energy Policy 2010 sought to address Pakistan's energy issue, which was impacting the
competitiveness and productivity of the textile industry. This program prioritized boosting
investment in renewable energy sources, introducing energy-efficient technology, and enhancing
the energy infrastructure. (Reference: Energy Ministry) The 2012–2015 Strategic Trade Policy
Framework sought to advance exports and raise the competitiveness of Pakistani businesses,
notably the textile sector.
Textile Strategy 2014-2019: In order to boost exports and generate job opportunities, the
Pakistani government unveiled a comprehensive textile program in 2014. The program intends to
lower tariff rates to increase competitiveness, import machinery duty-free, and offer energy at
reasonable prices. Under the Export Financing Plan, the Pakistani government provides financial
assistance to textile exporters to help them with working capital and other costs. The program
gives incentives to exporters who increase their exports as well as funding at cheaper interest
rates. Duty-Free Import of Machinery: The Pakistani government permits the duty-free import of
machinery for various textile processes like weaving, spinning, and knitting to promote
investment in the textile industry. This action attempts to lower production costs and boost
productivity.

Rationalization of Tariffs: In order to support the textile sector, the Pakistani government has
rationalized the tariff system. The government has lowered tariffs on imports of raw materials
used in the production of textiles, which lowers production costs and increases industrial
competitiveness. (http://www.textile.gov.pk)

The "Textile Policy 2020-25" is a five-year plan by the Pakistani government to raise the
country's textile exports to $25.3 billion by 2025. The goal of the policy is to boost the textile
industry's competitiveness on the international market and promote its growth. (The News
International as the source.) For the fiscal year 2021–2022, the government has set out PKR 28
billion for the textile industry. The main goals of the grants are to promote export capacity, assist
the development of innovative textile products, boost industry competitiveness, and strengthen
research and development facilities. (Referring to Pakistan Today).(PAKISTAN TEXTILE
CITY LIMITED, n.d.)

The "Pakistan Textile City" project, which intends to build a specialized center for textile
manufacturing and export in Karachi, was also started by the government. A separate export
processing zone, warehouses, and textile manufacturers are all being built as part of the project.
the Express Tribune as a source To help small and medium-sized textile businesses grow and
create new jobs, the government has announced the "Rozgar Refinancing Scheme," a new
program that would be administered by the State Bank of Pakistan. (Referring to Dawn News)
Additionally, the government intends to create a "Textile Skill Development Fund" to offer
education and training to textile industry employees. The effort seeks to raise employee caliber
while boosting productivity and competitiveness. (Referring to The Nation). Government
policies have been tried to align the benefit of the textile industry.
(https://www.textiletoday.com.bd/topics/pakistan/)

Free Trade Agreements (FTA)

Pakistan-Sri Lanka Free Trade Agreement (PSFTA): Signed in 2002 and implemented in 2005,
PSFTA allows duty-free access for many products between the two countries. The top 10 textile
export products (chapters 52, 55, 61, and 63) receive zero percent duty from Sri Lanka.
However, Sri Lanka's imports of textile products, totaling over $3 billion, mainly come from
China.
China-Pakistan Free Trade Agreement (CPFTA): CPFTA was signed in 2006 and implemented
in 2007. CPFTA II: Pakistan's exports to China grew, but imports from China grew even more,
leading to a widening trade deficit. Product lines worth almost USD 11.5 billion now have duty-
free access.
Pakistan-Malaysia Free Trade Agreement (PMFTA): Signed in 2007 and implemented in 2008.
Initially faced 20-25% tariffs on major textile tariff lines, which were eliminated after five years
under the Normal track, resulting in zero tariff rates

Chance Factors

Following the devastating floods during the summer of 2022, Pakistan experienced a historic
decline in cotton production. The textile sector found itself unable to offset the shortage through
imports due to a government-mandated freeze aimed at preserving foreign exchange reserves.
For months, vital containers holding raw materials and machinery crucial to the nation's
industries were stranded at Karachi's southern port. Additionally, textile enterprises faced a
significant increase in capital costs, grappling with interest rates surpassing 20 percent as the
central bank aimed to tackle rampant inflation. It wasn't until mid-July that Pakistan successfully
bolstered its foreign exchange reserves. This was achieved through the approval of a $3 billion
loan from the International Monetary Fund (IMF) and supplementary aid from China, Saudi
Arabia, and the United Arab Emirates. (Tribune.com)

Amidst the lockdown enforced due to the coronavirus pandemic, Pakistan's textile sector is
facing significant turmoil. International orders have been canceled, and the sector has been
instructed to halt shipments for a duration of four to eight weeks. Textile retailers and outlets are
shuttered, causing a complete disruption in the domestic textile supply chain and jeopardizing the
livelihoods of thousands of factory workers. Pakistan relies heavily on two primary sources to
bolster its foreign exchange reserves: exports and remittances. During the July-April period of
the fiscal year 2019, Pakistan's exports amounted to $20.01 billion, with the textile sector
accounting for 59% of total exports and contributing 8% to the country's GDP. Moreover, the
textile sector employs 40% of Pakistan's total workforce.

According to estimates by the commerce ministry, exports are projected to plummet by either
25% ($1.336 billion) at the minimum or by up to 50% ($2.672 billion) contingent upon the
containment of the virus and the duration of the lockdown. The immediate and direct
repercussions of the pandemic are anticipated to be enduring, with the possibility of an economic
recession lasting a year or even longer. The prolonged lockdown will exacerbate the detrimental
impacts on the economy and impede the pace of recovery.

Pakistan's textile sector had been operating at full capacity following the government's removal
of duties and taxes on the import of raw cotton in January 2020. Additionally, higher export
orders were being received, predominantly for textiles, as China battled the coronavirus
outbreak. However, Pakistani textile business owners argue that the sector lacks the surplus
production capacity to accommodate and fulfill additional export orders.

The global apparel industry is severely affected, with stores closed and many buyers canceling or
postponing orders due to substantial inventory levels. Major export destinations for Pakistan,
such as the United States and Europe, are among the worst affected by the pandemic. The
timeline for their return to normalcy remains uncertain, and consumer spending may be slow to
rebound due to rising unemployment resulting from the lockdown.

While volumes may decrease, they are not expected to vanish entirely. Once life resumes its
normal course, consumer spending is anticipated to rebound as a means of seeking solace after
months of lockdown-induced hardships and depression. Furthermore, all machinery
manufacturers have halted operations, unable to produce new machines, and customers are
unable to accept deliveries. Even after machinery production resumes, it will take several months
for customers to resume accepting deliveries. A recent survey conducted by the International
Textile Manufacturers Federation (ITMF) indicates an average 8% decline in orders worldwide,
with projected turnover for the current calendar year expected to decrease by nearly 15%
compared to 2019 figures. (Covid-19-textile industry)

The currency exchange rate directly influences product exports, representing the purchasing
power of one currency relative to another. Appreciation refers to an increase in the exchange
rate, while depreciation signifies a decrease. Exchange rate appreciation negatively affects
exports by reducing profits. Additionally, fluctuating exchange rates introduce uncertainty into
the market, which adversely impacts export business decisions. In 2008, fluctuations in the
exchange rate between the US dollar and the Indian and Pakistani Rupees had a detrimental
effect on the export performance of both countries (Mehtha, Deosthali, & Mehtha, 2012). The
appreciation of the rupee against the US dollar negatively impacted the textile and clothing trade
in India and Pakistan.

The volatility of exchange rates was found to have a significantly negative association with
exports in certain ASEAN countries (Mohamad, Nair, & Jusoff, 2009). Numerous studies have
explored the impact of exchange rates on the export performance of the textile industry,
particularly in ASEAN regions, by advocating for the control or management of exchange rates.
However, there is limited research on the impact of exchange rates specifically on the raw woven
sector. One study investigated the export performance of the textile industry concerning the
impact of exchange rates, focusing on the management of exchange rate systems after the
Bangladesh government transitioned from a fixed exchange rate rule to a managed exchange rate
rule in 1979 (Paul, 2011). Many economies mitigate the impact of fluctuating exchange rates on
exports by conducting trade in currencies other than the US dollar. For instance, European
countries utilize the Euro, while Chinese countries use the Yen, aiming to minimize the adverse
effects of exchange rate fluctuations. (External Factors-Competitiveness)
 Primary Research
a. Introduction

The Factory that we chose to be the focus of our primary research is Garatex. It is a prominent
textile factory in Pakistan, specializing in the manufacturing and export of woven garments.
Established in 1993, the company initially focused on the dominant U.S.A. market but has
successfully expanded its horizons to include the Canadian and European markets. Located in
Karachi, the industrial hub of Pakistan, Garatex operates from the prominent Korangi Industrial
Area, known for its pioneering role in the textile industry. We engaged in multiple conversations
with employees at different skill levels about the Pakistani textile industry and the various factors
affecting its growth. This is a summary of the discussion we had.

b. Industry Overview

The Pakistani textile industry is a significant player in the global market, particularly in the
production of commodity textile products. The industry caters to international demand, with
foreign markets exhibiting higher purchasing power compared to the domestic market. China,
with its superior quality, remains a tough competitor for Pakistan in international markets.
However, if trade opens with India, it could provide additional opportunities for growth. This
should be a Free Trade Agreement where both parties should benefit because India was the one
to close its trade with us.

c. Import and Export Dynamics

Garatex, as an exporter of woven garments, relies on imported raw materials for its production.
While cotton is imported from countries such as Bangladesh, Nepal, and Uzbekistan, China
serves as a major import market. Along with raw materials, all of the machinery is also imported.
This is the case with most factories in the industry because Pakistan lacks the technological
innovation to design them as of yet. This also increases the cost of production.

The company's clients include renowned international brands, and its products are exported to
various countries, including the USA, Italy, Belgium, the UK, Dubai, and the Netherlands. This
company deals with value added products like finished shirts and jeans and exports 100% of
their production. However, as we discussed this is not the case with the majority. Most of our
exports include cotton yarn and commodity products like towels and bedwear. The textile
industry in Pakistan faces several challenges that impact its operations and competitiveness.
Political instability, gas and electricity load shedding, and delayed payments pose significant
hurdles for timely shipments. The payment takes about 30-40 days to process. Despite having a
cost advantage due to cheap labor, the industry suffers from a lack of specialization, resulting in
lower product quality. Additionally, corruption hampers the efficient distribution of industry
rebates, requiring bribes to access them. We found out that Garatex received its rebate in 2022
which was worth 2 crore and due initially in 2018. This was after bribing the government
officials with around 20-30 lakhs. The 50 lakh rebate that was due in 2023 was received, but
again, with a bribe of 8-9 lakhs. Government incentives are there to encourage businessmen to
grow their business but due to lack of regulation, they become a way for corrupt government
officials to pocket that money.

e. Manufacturing Processes and Quality Control

Garatex follows an in-house manufacturing

process that includes cutting, sewing, finishing,
trimming, and packaging. The company's focus
on quality control is evident through monthly
audits, ensuring adherence to structural
standards, cleanliness, and fair treatment of
labor. However, the lack of research and
development activities within the company
hinders innovation and technological
advancements. As far as innovation goes, the
company has a department that makes their own
designs, inspired from previous demand, and
pitches them to existing and potential clients. Garatex Stiching area

Innovation is however limited in the textile industry across Pakistan. Local craftsmen do not
have the awareness of foreign demand and the fashion trends in the West. This causes hindrance
in producing designs that clients will purchase. In results in our industry making bulk orders on
the specific instructions the client provides and hence is stuck with limited growth.

f. Fabric Selection and Dyeing

The quality of fabric in Pakistan poses a challenge for the textile industry. Garatex has a fabric
expert who oversees the buying process, focusing on cotton, which is easier to work with. The
company employs garment dyeing and mill dyeing techniques to achieve desired colors, while
lint remains a persistent issue in the fabric. Our industry is still stuck on making pure cotton or
polycotton clothes. Polycotton fabrics may not exhibit color vibrancy as well. Even though, there
is a huge demand for blended fabrics, Pakistani craftsmen are still in their comfort zone because
they are known for pure cotton fabrics and hence it’s a safe bet. Any investment in making those
blended fabrics will pose a risk because it’s going to be a new territory and due to the unstable
economic situation businessmen are not willing to take the risk.

g. Energy and Sustainability

The rising prices of gas and electricity, coupled with frequent load shedding, create significant
challenges for the textile industry. In response, Garatex aims to transition to sustainable energy
sources, particularly solar power. However, the lack of net metering approval from K-electric
hampers the implementation of such initiatives. Efforts to recycle solid waste within the Korangi
network demonstrate a commitment to sustainability.
 Recommendations
In light of the challenges faced by Garatex which were identified during our primary research
and the broader Pakistani textile industry, the following recommendations are put forth to drive
improvement and foster growth:

1. Government Support: The government should consider reducing taxes and providing
subsidies for electricity and gas, enabling textile factories like Garatex to operate at lower
costs and remain competitive in the global market.
2. Skill Development: Emphasizing skill development programs and training initiatives
would enhance the expertise of the labor force, leading to improved product quality and
increased specialization, thereby meeting the evolving demands of international buyers.
3. Research and Development: Increasing investments in research and development
activities within textile factories, including Garatex, would foster innovation, enabling
the industry to stay abreast of global trends, introduce new designs, and cater to changing
consumer preferences.
4. Access to Rebates: Streamlining the rebate distribution process and implementing
measures to curb corruption would ensure that textile manufacturers receive their
industry rebates in a timely and transparent manner, providing much-needed financial
support for reinvestment and growth.
5. Focus on Sustainability: Encouraging sustainable practices, such as the adoption of solar
energy and the implementation of waste recycling initiatives, would not only contribute
to environmental preservation but also reduce operational costs and enhance the overall
sustainability of the textile industry.

By implementing these recommendations, textile factories in Pakistan can overcome challenges,

enhance their competitiveness, and contribute to the growth and success of the country's textile
industry in the global marketplace.
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