talk, more R&D
Over the years
'We don't want
doing all it can'
Value added or lost
Pakistan's textile sector, in the post quota regime, has been on the decline in terms of our share of exports in the global market. The industry demanded an incentive package of Rs 29 billion from the government but deemed it 'too little too late' once it received the package. That was 2006. So they demanded an equivalent amount again and the government agreed on that too in principle. The second tranche, if one may call it, has been delayed and the reason cited is the political crises, one following another.
Textiles, Pakistan's largest export, have been understood to be a sector replete with problems and not a happening one as one would wish it to be. But two factors that have squarely impeded Pakistan's growth in the international market have been the inability to export value-added products and unskilled labour force.
There are of course a million related problems like lack of investment in research and development, lack of proper institutions, high input costs like electricity and this being an overly-taxed sector.
The industry shuns all claims that it seeks protection and states that it needs to be freed of all unfair taxes and given a level playing field. The government claims to have done a lot already and hopes for the best.
How much value have we learnt to add to this sector, only time will tell.
Precisely whatever is stopping Pakistan from staying as the most competitive country in textile trade?
By Mansoor Ahmad
The textile industry and planners are paying the price for their complacency that had crept in over the past few decades of the 'quota regime' after the entire world, including international consultants, WTO, and the US trade department declared Pakistan as the most competitive country in quota-free textile trade.
While the Pakistanis sat back, celebrating the ratings given to them by global textile experts, all competing countries took a cue and embarked on a war footing, as it were, to close in on the technological, quality and efficiency edge enjoyed by Pakistan.
Pakistan's Textile Vision 2005 was conceived by textile tycoon Tariq Saigol in the year 2000 and approved by President Musharraf. The Vision document projected textile exports of all the major exporting countries in 2005 in what was our first year of quota-free textile trade. Ironically, all projections about export quantum of our competitors were surpassed while Pakistan's exports increased slightly above historic average.
The authors of Vision thought that China's textile exports in 2005 would be a little above $55 billion, but the figure turned out to be around $115.2 billion. Hong Kong's own textile exports shot up to $41.12 billion against predictions of $10.6 billion. Furthermore, the Vision authors expected Turkey to export $16.4 billion of textiles in 2005, whereas its actual exports were worth $18.89 billion. Similarly, Indonesia was supposed to reach textile exports worth $4.9 billion in 2005; its textile exports crossed $8.5 billion. Contrary to the Vision expectations, again, Pakistan ended with exports worth $9.8 billion only, as against the predicted $13.8 billion in 2005.
During 2005-06, the Indian exports increased to $17.88 billion, at an incredible rate of 32.35 per cent, from the previous year's $13.58 billion. Bangladesh also saw a fairly commendable increase of 23.11 per cent in its textile exports during the same period, followed by China seeing a surge by 21.68 per cent, while Pakistan could barely increase its textile exports by 13.93 per cent in the same year.
When the Textile Vision was prepared, the fundamentals of Pakistan economy were not as strong as they are today. The rupee at that time was under immense pressure, interest rates were higher than what they are today. Though inflation was at almost the same level as today, petrol rates were in line with international price of crude oil. The economic scenario changed dramatically after 9/11. The interest rates declined to an unimaginable low level. Rupee gained remarkable stability as the workers' remittances quadrupled from one to four billion dollar per year.
Inflation declined to lowest levels in three decades. The textile investors obtained loans on the condition that they would be based on Treasury Bill rates in addition to two to three per cent premium of the banks. All Pakistan Textile Mills Association (APTMA) blames that change in economic parametres have impeded the growth in textiles.
The textile sector points towards change in economic and cost factors faced by it in the past three years. The APTMA table on change of parametres gives the impression that these changes were Pakistan-specific. This is partly true. Petrol, diesel and furnace oil rates increased by higher percentage in our competing economies as international crude oil prices sky-rocketed. Likewise, the gas rates are still much higher in competing economies. Transport rates increased all over the world due to an increase in international fuel rates. Pakistan, thus, has not lost any competitive edge on these parametres to its competitors.
Rupee has remained relatively more stable in Pakistan than in its historical average decline in the past. The Indian rupee has appreciated by over seven per cent against Pak rupee that is to the country's advantage. Similarly, the currencies of China and Bangladesh have gained value against Pak rupee. In fact, the Chinese and Indian currencies are still undervalued and are bound to gain more against Pakistani currency.
Historically, Pakistan remained a double digit inflation economy for two decades. However, current inflation level in Pakistan is slightly higher than the competing regional countries. The interest rates are high, though not higher than what they were when industry and government prepared the Textile Vision document. Moreover, the banks offered the industry fixed interest rates credit that was higher than the interest rates prevailing in 2004 but much lower than current rates.
Almost all industrialists declined the offer. They envisaged that the low interest regime would last for a longer period. It was the business decision of the entrepreneurs that backfired. They reaped the benefit of abnormally low interest rates and now should suffer the consequences of their wrong decision.
Actually the industry crisis is not merely because of the incentives provided by competing economies to their textile exporters. That is only a part of the problem. It got what it demanded from the government. So much so that textile exports are now completely zero rates. The textile sector now desires that the government should stop collecting even 0.75 export development fund that is used to boost exports only. It even wants to run away from its social responsibility of paying education cess or employers old age benefits.
Against an impact of about 1.5 per cent due to these taxes the government has instead provided to most textile sectors research and development facility of three to six per cent on exports.
Textile sector is demanding incentives in the form of subsidies and concessions from the government to compete with textile exporters of Bangladesh, India and China. According to the local textile sector, the exporters in these regional economies are getting 10-14 per cent concessions from their governments.
Pakistan government provided six per cent research and development grant to the apparel exporter about two years back. In November last year, same research and development grant ranging from 3-5 per cent was extended to the fabric and dyed fabric sectors. The impact of these concessions would be $25-30 billion. The textile sector wants more monetary facilitations.
Experts informed TNS that the local textile industry is structurally imbalanced. They point out that its lowest value added spinning sector is quite strong while the fabric manufacturing - the next higher value addition product - is weaker than spinning though stronger than dyed and finished fabrics that are a step ahead in value addition.
Spinning and weaving industries in Pakistan are operating at their optimum capacity. Any government incentive to these sectors of textiles would not boost exports significantly. In fact, the investments made by China, Bangladesh and India in spinning sectors in recent years would squeeze the demand of Pakistani yarn in international market as textile trade. The local yarn would have to be used in Pakistan for higher value addition.
The highest value addition in Pakistan and the world over comes from knitwear and garment exports. This is the weakest link in the entire textile chain.
Exports of all competing regional economies increased in the past two years on the strength of knitwear and garment exports. China, India, Bangladesh, Sri Lanka, Vietnam and Indonesia have leaped ahead in textile exports on the strength of this value-added sector of economy.
Industry experts point out that Pakistan possessed, prior to the elimination of quota, state-of-the-art stitching machines that competing nations are acquiring in quota-free textile regime. The knitwear and apparel making units in the country are too small to achieve economies of scale. The average knitwear or garment producing unit in Pakistan has less than 100 machines while competing countries have 4-10 time higher average units. The wastages in these units are very high by international standards. This adds to their cost. Buyers accept only those goods that comply 100 per cent with their specifications. This includes stitching quality, colour and size of each garment.
During the textile quota regime the buyers were forced to procure garments according to the quota allocated to each country. Now they buy from places where they get best quality clothing at the cheapest rates. Small knitwear and garment units, therefore, were the first casualty of quota free regime. Textile clothing rates have declined appreciably the world over as large efficient suppliers edged out inefficient manufacturers from the market.
After 2005 when textile trade became free of quota almost 30-40 per cent of the garment and knitwear units in Pakistan have closed down. Now only the larger units are operational at their maximum capacity. These units, however, face constraints of skilled workforce. They cannot further increase their exports due to shortage of skilled workers. The skilled labour produced by a few government training institutes for garments is not sufficient to meet the demands of the industry.
These units now train in-house skilled labour in small numbers without disturbing their commercial production. They are increasing production slowly as and when they are able to induct new, trained workforce. The government has also planned a number of technical and vocational training centres for training manpower required by the garment and knitwear industries.
This will take time. Until then Pakistan will have to remain content with slow growth in textiles.
The export growth in the garment and knitwear sectors of Pakistan is linked to the availability of sufficient skilled workforce and mergers of medium-size units into larger units to achieve economies of scale. Till then no government subsidy or incentive would have significant impact on our clothing exports.
Less talk, more R&D
High-end quality stuff incorporating a great deal of R&D is the key to gaining a lion's share in global markets. The government seems to miss the point though
By Aziz Omar
At the international level, budget allocated towards research and development (R&D) and its associated results actually serve to determine the state of an industry. Companies usually dedicate 3.5 per cent to 40 per cent of their revenues towards developing innovative techniques in manufacturing and superior quality products. The US, China and Japan spend hundreds of billions of dollars on R&D and consequently their companies hold the most numbers of patents.
The state of R&D related activities in the textile sector in Pakistan represents a catch-22 situation. The apparel and, recently, the fabric manufacturers claim that they will only be able to set aside sufficient funds for innovation if the sales of their products are high and bring in large amounts of revenue. However, in the highly competitive world of textile related businesses, mostly high-end quality stuff that incorporates a lot of ongoing R&D is capable of garnering the lionís share in global markets.
In July last year, the government of Pakistan approved a 22-25 billion rupee package for investment in the textile sector. Even though, a sum of about 15 billion was earmarked for being spent on R&D, figures in the industry complain that recommendation for lowering business expenses was not considered. This plan is still an addition to the already 6% export subsidy that is being granted since the last two years, on grounds of promoting research and development.
Adnan Iqbal, the marketing head of Paramount Apparel that is part of the Gulistan Group, agrees that the situation represents the classic chicken-and-egg dilemma, with regards to which one comes first.
"The major revenue earners in the textile industry are the value-added apparel items such as denim jeans, fashion pants and knitted tops. Even with the six-percent rebate, we are not able to justify the costs of importing the latest technology from abroad and enhancing the quality of our range of products. The high manufacturing related expenses, low-skilled and inefficient labour and narrow profit margins leave the manufacturers with no option but to avail the subsidy in order to just keep the operations afloat."
Within the textile sector itself, a strong rivalry is emerging between the garment manufacturers and exporters and the plain, low-value fabric producers. In November 2006, the government extended the R&D subsidy to the exports of dyed fabric based materials as well, on a scale of 3-5%. The scope of this facility was expanded to exports to developing countries such as Bangladesh and Sri Lanka, besides the usual EU states and the US. This is in contrast to the allowance for apparel exporters, who can benefit from only the trade they do with the affluent Western nations.
In the light of the above mentioned state of affairs, the apparel makers claim that other South Asian countries will further benefit from using low-priced fabric imported from Pakistan in manufacturing their own high-value textile products. "Countries such as Bangladesh are already enjoying a duty-free status granted to them by the European governments. This means that the exporters don't have to bear the brunt of the duty levied on their wares, which is in contrast to Pakistan textile exports to those regions," asserts Adnan.
He further suggests that the government of Pakistan should further increase the R&D facility to 10% and also decrease the import duties on apparel stitching machinery. Yet, Adnan fears that the state officials are actually planning to bring down the subsidy as they also want to curtail the economy's dependence on textile exports.
Surprisingly, nearly 64% of the revenue of Pakistan's economy already comes from this sector.
However, strong criticism is also being levied against the textile manufacturers, despite their claims of incurring losses. There has been a reported growth in exports of some 15% in the FY 2005-2006, which translates into an increase of just over $2 billion. As a consequence of these figures, some mill owners are allegedly directly pocketing the funds freed up due to the R&D subsidy, that too at the poor taxpayer's expense.
The director of marketing of a major textile company, who wishes to remain anonymous, is of the opinion that the subsidy should be removed altogether. In his view, the textile sector is a level playing field and those who sincerely want to improve upon the quality of their products will do so nonetheless.
Mr Shafqat Ellahi Sheikh, Chairman All Pakistan Textile Mills Association, is also against any sort of rebate or subsidies. "All we want is for the government to implement their own stated policies."
This is especially pertinent with regard to the duty imposed on the import of synthetic polyester staple fiber (PSF), the second most important raw material. This duty should be refunded per policy on the exports composed of PSF.
Among the plethora of problems plaguing the textile industry of Pakistan, those pertain to lack of R&D can only be addressed with the concerted effort of the respective government departments and textile manufacturers. The textile manufacturers should not just siphon off the resources made available for research into meeting their target profit margins. The speedy enforcement of trade policies will also be vitally instrumental in facilitating the innovative efforts of textile companies earnestly working towards building up Pakistan's image.
Foreign investment in the textile sector is of vital importance
No developing country in recent times has made a quantum jump in world textile trade without substantial foreign investment in the sector.
China and Hong Kong made their mark in world textile trade on the strength of huge foreign investment. Bangladesh has survived as a major textile player due to investments made by Korea, Japan and China and even Pakistan. India has made fast gains on the strength of its textile tycoons buying foreign brands; buyer sourcing companies and most recently numerous joint ventures with major textile players in the developed economies.
Foreign investment in the textile sector is of vital importance as it brings the much needed technology transfer and quality equipment in developing economies. Textile is a trade where one can convert same quality of one pound cotton into value added products of different range. The most valued textile product is often worth 50 times the lowest value-added product made from the same raw material.
Global textile investors, due to their expertise in producing highest value-added products, have the power to multiply the textile exports of the country where they invest and transfer their technology.
Textile is the mainstay of Pakistan's economy with a share of 65 per cent in country's total exports. Almost 100 per cent of the industry is locally owned. There is hardly any investment. According data available on Board of Investment's website, Pakistan received a total Foreign Direct Investment of $12 billion from 1996-97 till July-Jan 2006-07. Textile sector received only $250 million investment during this ten-year period.
Two major foreign investments in Pakistan's textile sector remain in denim production in the form of joint ventures. The first was Crescent Greenwood joint venture that planned to produce denim jeans for export purposes. The project did not take off as a profitable venture. The foreign investor finally opted out of this arrangement.
Market experts say that the project started production when the entire industry was under pressure. Otherwise they point out that Pakistan is the most suitable location for producing denim cloth based products. This is the reason why Crescent group was able to bring in another foreign investor and is currently successfully operating under the new name of Crescent-Bahuman.
The other joint venture in denim was between Langler and Nafees. The venture is successful. The company's name has changed to Azguard9 as the foreign investor was bought by Azguard9. This is also a successful partnership.
The performance of these two companies is likely to encourage other foreign investors.
A local group has recently entered into a joint venture with a foreign investor for producing towel. The Chinese first tried to buy out some closed processing units at Faisalabad but then probably changed their mind. Chinese government, however, is establishing a special industrial zone near Lahore where they intend to provide stitching facilities as well. This is the first of the eight industrial zones that the Chinese intend to establish in foreign countries. They have earlier ignored Pakistan and established numerous joint venture projects of spinning and knitwear in Bangladesh, in late 2004.
-- By Mansoor Ahmad
'We don't want rebates'
-- Shafqat Elahi Shaikh, Chairman APTMA
By Aoun Sahi
The News on Sunday: What is the role of APTMA in promoting textiles exports? Has it been able to deliver in the past?
Shafqat Elahi Shaikh: APTMA's role over the years has changed according to the challenges it has faced. If you look at the immediate past, APTMA was instrumental in working with the government in removing the bottlenecks that were hindering progress and exports. The removal of the sales tax on the textile chain and the rationalisation of the tariff structure on the polyester chain are among a few achievements. We are also among the few associations involved in managing a textile college to produce quality manpower to feed the growing needs of the export industry.
TNS: The textiles sector is making various demands on the government. Critics say there is no justification for incentives like rebates, subsidies etc. What do you say?
SES: We don't want rebates. This entire effort has been distorted. There are two aspects to the requirements of the textile industry. The first involves a request to the government to implement their own stated policies. For instance, the government says that exports must be zero-rated for all taxes. However, we find that the activity of textiles is taxed at each stage of operation, which cumulatively adds up to approximately between 3 to 4.2 per cent of sales on different links in the chain. This is an imposition which our international buyers of textiles are not willing to pay. It is also a burden from which textile exporters in competing countries are exempt, adding to our cost of doing business.
TNS: The government has offered certain incentives to the textiles sector. Do you think they are enough?
SES: It was assumed by both the government and the industry that post 2005 there would be a free and fair competition in the textile trade internationally. On the contrary, we find that international trade in textiles is neither free nor fair. Though the government has provided some belated relief to a section of the textile industry. We can see that the falling trend of exports in July to October 2006 has been arrested somewhat.
However, we cannot blame the government entirely for all our ills. A flawed quota policy in the past encouraged exports for quantity and not quality. This will take some time and re-engineering to overcome.
However, the spinning sector has not been given any relief.
TNS: There is a perception that Pakistan's textiles industry is lagging behind its competitors when it comes to innovation and product development. That's why we are losing high-end market, especially in the Far East, Japan etc. Comment.
SES: We have to recognise that unlike some of our competing countries we have a very small domestic market for garments and made-ups, in spite of a 155 million population. The Indian and Chinese populations provide a ready domestic market for their textile products. Once the quality is set then the marginal goods are suitable for exports. Cranking up production from there is then an easier job. Both industry and government must work hand in glove to identify the menace of under-invoiced, mis-declared and smuggled goods to allow the domestic manufacturers to focus on the domestic market.
TNS: How much of the industry is focusing on value-addition and use of synthetic/man-made stuff in textile made-ups?
SES: It is not enough to produce innovative products alone. The buyer must be willing to travel to your location and inspect the goods and the enabling environment to be comfortable to purchase high priced products. I think the managers of the country are trying their best to improve the image of the country. Their success will be followed by the success of all value products from this country.
The trend in the world today is to use more synthetics. The lion's share of the total fibre consumption in the world is synthetic. The focus here is the reverse. However, which industry in the world today can survive with tax on exports as in our case with polyester staple fibre (PSF)? The distortions in the duty structure of synthetics over the last twenty years have never encouraged the industry to exploit this potential.
TNS: Different blocs like the European Union are imposing non-tariff restrictions (anti-dumping duty) on imports from Pakistan. Have you challenged such decisions in international courts?
SES: The ministry of commerce in consultation with industry has agitated the case at different appeal forums. However, lack of market access to the EU, and to the United States for that matter, continues to hamper development of value added textiles in the country.
'Government is doing all it can'
-- Syed Masood Alam Rizvi, Federal Secretary for Textile Industry
By Nadeem Iqbal
The News On Sunday: What's your strategy for the implementation of the recommendations approved by the prime minister for increasing exports?
Syed Masood Alam Rizvi: The government is making all out efforts to create an enabling environment for the industry to avail the opportunities in the global market. Besides reducing cost of doing business, world class infrastructure is being developed for the textile industry in the form of Textile City in Karachi & Garment Cities in Lahore, Faisalabad & Karachi. All the world class facilities would be made available to reduce lead time and help industry become compliment.
The prime minister has set up a National Textile Strategy Committee to develop future vision for Textile Industry as well as sort out the current problems of cost of doing business. But the stress of Textile Strategy would be on facilitating the textile industry to achieve economies of scale, improve productivity and shift to value addition.
The government is making efforts for enhancing market access also. Free Trade Agreements are being signed and regional trade is being promoted.
TNS: Who do you think are our main international competitors from amongst India, China and Bangladesh and what kind of edge they have over us?
SMAR: During the ten year transition period of A.T.C (Agreement on Textile & Clothing) almost all the competitors made investments in new technology, human resources and marketing. After the quota phase-out, China surpassed everybody followed by India. This is mainly due to the large scale manufacturing capacity which they have managed to build, which has made them very competitive. Pakistan is still making large volume exports but its unit values are less. For value addition, our textile industry has to invest in technology, skills and innovation.
TNS: Your comments on the demands made by the textile sector like subsidies, rebates, release of R&D fund, concession on duties, etc.
SMAR: The performance of Textile Industry has been satisfactory after the quota phase-out. However the industry is confronted with new challenges of Non Tariff Barriers (NTBs), including the social compliance issues. The threat of anti-dumping actions against our exports and Regional Trading Blocks are posing pressures. After phasing out of the quota regime, the industry is facing difficulties in competing with China, India and Bangladesh and is demanding subsidies, rebates, zero rated duty facilities etc.
The government has already provided facilities by granting 6 per cent R&D support to Garment Exports (both knitted & woven) 3 per cent support to export of dyed/printed fabrics and white home textiles and 5 per cent on dyed/printed home textiles of their FOB value. Customs duty, Sales Tax and with holding Income Tax on raw materials for the manufacture of Textile has been zero-rated at the import stage to do away with the duty drawback/refund claims under the revised and simplified DTRE Scheme.
TNS: How much is the government ready to give and would it make any difference?
SMAR: In order to prepare the textile industry in the post quota regime, the government has setup a high level Federal Textile Board, with Textile Commissioner's Organisation serving as its secretariat. The Board has been entrusted the task of looking into the issue of clean cotton, labour, social and environment laws, modernisation of ginners, rationalisation of tariffs, facilitation in Sales Tax issues and developing a package to promote Garment Sector, especially by improving their competitiveness in international market. Textile Skill Development Board has also been established with Textile Commissioner's Organisation serving as its Secretariat. Under the Board, Stitching Machine Operators Training (SMOT) Scheme was launched in June 2006. The training is now being extended to Towel and Bed-wear sectors also.
The government has launched studies by international consultants to make an assessment of the cost of production in competing countries and the subsidies being provided by their respective governments in order to enable us to develop a strategy to enhance competitiveness of the industry.
TNS: Has the establishment of a Textile Ministry done any good to the sector?
SMAR: Yes, it has. Textile & clothing being the biggest foreign exchange earner, with almost 9 per cent contribution to GDP and employing almost 40 per cent of the country labour force, deserved specialised and focused attention. Presently textile and clothing sector is the lifeline of the country.
TNS: What problems are faced by the government in marketing products abroad?
SMAR: The post-quota scenario has dramatically altered the global trading patterns. With the complete phasing-out of quota, the textile and clothing sector is experiencing another global revolution. With the opening of world markets and increased global competition, new focus is required for textile industry to compete globally. In this context, both the government and the textile manufacturers will have to work together to come out with a workable solution to enhance productivity and reduce cost of doing business so that they become competitive in the global market and increase their market share. Trade Development Authority of Pakistan (TDAP) has been established with the purpose of marketing products abroad.
Figures of global textile exports show that countries focusing on value addition have fared well while those, like Pakistan, that concentrate on export of raw material, lag far behind
By Shahzada Irfan Ahmed
Over the last couple of years, Pakistan's textile industry is struggling hard to retain its share in the global textile exports market. Its main competitors-India, China, Bangladesh and even Cambodia and Vietnam are fast becoming popular among the importers of textile products for more than one reasons.
These countries have drawn up comprehensive plans to expand their textiles industry in a big way in the next five years. Bangladesh has fixed a target of $14.5 billion, while India's target is $50 billion a year and China's is $220 billion. On the other hand, Pakistani textile industry is finding it difficult to keep pace with them. It is demanding certain incentives from the government including reduction in electricity and gas cost. Last year, Pakistani manufacturers of bedsheets and readymade garments even threatened to move to Bangladesh and set up their units there.
The figures about global textile exports show that the countries focussing on value addition have fared well and those concentrating on export of raw material are lagging far behind. The success of China, India and Bangladesh can be attributed to the increase in the export of value added products from these countries whereas Pakistan's main exports are still raw yarn and grey fabric.
Calculations made by industry experts have proved that when a country exports raw cotton, it earns around 60 to 70 cents from one pound of cotton (depending upon the quality). But when the same weight of cotton is converted into yarn it earns around US$1 to US$1.5 per pound. If further value addition is made and the fabric is converted into apparel, the returns can be as high as US$5 to US$10 per pound. The story does not end here. The earned amount against every pound of exported apparel can be manifold if the product has a brand value added to it.
"But this is something that we can only hope for," says Muhammad Asim, manager of a Karachi-based apparel buying house while talking to TNS. He says, unfortunately Pakistani companies have failed to establish their brand names abroad. In fact, they have never tried wholeheartedly to achieve this objective, he says. "Our businessmen are content with their existing role -- of being the suppliers of finished goods to established brands like Calvin Klein, Adidas, Polo, Nike, Pierre Cardin and so on. A shirt that is sold for US$20, by a Pakistani manufacturer, to a foreign brand carries a price tag of around US$100 when it is shelved for retail sale in Europe or the US. This appreciation in the price is mainly due to the popularity enjoyed by that particular brand among its loyalists," Asim says.
He says of late, the government of Pakistan is considering the option of offering soft loans to apparel manufacturers so that they can purchase or buy shares in international retail chains and brands. "The Trade and Development Authority of Pakistan (TDAP) is working on this project and has been given a timeline of one to two years by the government to complete it."
Arif Bhatti, Manager Style Textiles, a knitwear manufacturing unit in Lahore. tells TNS that the unbearable increase in the cost of production in addition to inflationary cost pressures, indirect taxes/levies, lack of skilled labour, Pakistan's negative image abroad and discriminatory treatment meted out to Pakistani businessmen at the hands of foreign buyers have discouraged production of value added textile products in the country and consequently their export. "The imposition of antidumping duties by the European Union on import of bed-linen from Pakistan and the reluctance of the US to allow more market access to Pakistan have further aggravated the situation."
Arif says our competitors are well placed as they enjoy certain privileges that we do not. In China, electricity is totally free whereas in our country it is the major input cost. Bangladesh has access to sufficient cheap labour whereas Pakistani workforce demands much higher wages. Bangladesh does not grow cotton at all; it in fact imports it from countries like Pakistan -- another reason why the cotton ginners in Pakistan prefer to export it rather than refining and converting it into yarn.
Arif says Pakistani workforce in the textiles sector lacks expertise when it comes to manufacturing of value added textile products like ladies' fashion garments, undergarments, men's shirts, trousers, suits and overcoats. "The expertise comes only with practice; when you do not have a local market for a product you are hardly qualified to produce it for the global market. India and Bangladesh have huge local markets for shirts, trousers etc," he says.
Another problem that Pakistani businessmen are facing nowadays is that they have to undergo lots of hassles to get visas for business trips abroad. "On one hand we are not welcomed abroad and on the other the foreign travel advisory services warn their countrymen not to travel to Pakistan. How can a deal get through in a situation where mere bringing the buyers and sellers face to face seems next to impossible," he asks.
Recently, United Nations Development Programme (UNDP) has released a report titled Asia-Pacific Development Report 2006 which says that Pakistan fared badly in the region's textile exports compared to Bangladesh -- a non-cotton-producing country -- mainly for the reason that the latter had exported more value added products than the former. The report says that Pakistan earned US$5.39 billion through the export of textile and clothing in 2005, whereas Bangladesh earned US$6.99 billion the same year. This was despite the fact that Pakistan had exported nearly 200 million kgs of textile products more than what Bangladesh had.
Fast changing fashion trends are another key element in the business of value added clothing or garments. Fashion changes quickly, at least twice a year in developed markets. However, Pakistan's textile industry is not efficient enough to keep pace with the changing trends in the global markets. Therefore, it is suggested that garment designing must be promoted as a major subject in textiles colleges and schools, and R&D sections set up at manufacturing units to address this issue.
Availability of labour force and raw material at affordable prices is a major factor that contributes to the growth of a country's industrial sector. However, the textile sector in Pakistan, despite contributing 66 per cent to the country's total export earnings, and providing employment to 40 per cent labour force in the manufacturing sector, is not believed to be growing at the pace that it should. Experts quote many reasons for that, chief being the unavailability of trained labour force compatible with the requirements of the post quota regime.
A study, titled 'Global Apparel Industry and Major Asian Suppliers', enlists shortcomings in Pakistan's apparel industry. They include low-price image, outdated machinery, and lack of considerable upgradation of human resource skills.
According to experts, the textile industry has not been able to exploit the potential in real terms and has failed to make real progress in the international markets due to a lack of trained labour force.
Generally speaking, the productivity of the existing labour force in Pakistan does not meet the international standards. Low productivity and inefficiency add to the cost of production which in turn discourages exports.
According to the statistics provided by the International Labour Organization (ILO), labour productivity measured in terms of value added per person employed in Pakistan is slightly more than half that of Sri Lanka.
According to the textiles industry ministry, Pakistan exported textile goods worth $6.817 billion during the year 2005-06, but the industrialists think the figure would double if the government ensured the availability of skilled labour and good infrastructure in and around the textile hubs of the country.
"We are exporting fabric simply for the reason that no skilled labour is available to convert it into value-added products," says Rana Arif Tauseef, Chairman Pakistan Textile Exporters Association.
He adds that Pakistani labour is much more expensive compared to that of China and India and less productive due to lack of education and training.
Iqbal Ebrahim, Vice Chairman All Pakistan Textile Mills Association (APTMA) and Chairman Sindh and Balochistan Zone, who is also the owner of a textile mill in Karachi, rejects the popular perception that the industrialists are not ready to pay the work force well.
"Mill owners based in Sindh have to bring in labour force from Punjab," he told TNS. "Apart from paying them high wages they also provide them free housing. The rejection rate of different textile products is also very high in our factories."
According to Iqbal Ebrahim, the problem stems from the fact that literate and skilled labour force is not available in the textile sector in Pakistan.
"For that purpose, we have started training workshops in our factories. The government has also taken some initiative in this regard."
It may be mentioned here that there already are a few institutions to train labour. Yet, the industry lacks technical graduates.
A presentation given to the prime minister on March 6, 2007, by Dr Akram Sheikh, Deputy Chairman Planning Commission on Export Plan of Pakistan, reveals that against the total requirement of 12750 technical graduates in various fields of textiles only 7950 are available. A shortage of about 4800 graduates exists. This presentation also states that an acute shortage of trained shop floor manpower in the textile chain exists, especially for value added garments and made-ups, while know-how for synthetic weaving, processing, dying and finishing is also limited.
According to the ministry of industry and production, labour force is available at very cheap rates in Pakistan, costing approximately 44 cents per labour operative hour that is very low compared to any foreign standard.
But why are the industrialists in the textile sector still grumbling? Abu Bakkar Siddique, Chief Operating Officer Ahmed Din Textile Mill, Faisalabad, has an answer.
"The productivity of one trained and two untrained labourers equals almost the same," he explained, talking to TNS, "whereas the quality of output of a trained worker is far better than that of the untrained ones.
"Almost 90 per cent of the labour force in our factories start raw, and they learn how to operate different machines hands on, in the factory itself," he adds.
The result, according to Abu Bakkar, is the creation of an "Ustad shagird culture" in business enterprises. Any innovation or development in technology would be lost on these people who learn a new craft after incurring considerable losses. The level of productivity in manufacturing organisations decreases with the induction of unskilled or not-properly-skilled labour.
"Whenever we plan to replace technology with a new and more efficient system in order to minimise the cost, lack of expert hands stops us from going on."
He also spoke of the textile sector having to pay different taxes such as Export Development Fund in its bid to train people for the industry.
Muhammad Shoaib, who has been working with Aslam Textiles in Faisalabad for the past 15 years, started as a complete novice in the factory, but today he can expertly operate different machines. A worker like him can make Rs.15,000 a month, but those who are armed with a degree from some technical institute commonly start at Rs.50,000/- and can go up to Rs.100,000/- in a matter of a few years only.
The officials of the newly formed Textile Industry Ministry are well aware of the issue. Muhammad Idrees Ahmed, Textile Commissioner, Ministry of Textile Industry, told TNS that over the past six months, more than 2500 workers of different factories related to sewing had been trained. "Now we are planning to train line supervisors and those people who have completed their diploma in different disciplines from polytechnic institutes on textile industry related skills for four months in our institutes."