1

Report on
PAKISTAN TEXTILE INDUSTRY

ANALYSIS OF PAKISTANI INDUSTRIES

SECTION: A

Group Members:

Nawab Kamal (FA07-BB-0067)

Kashif Afzal Junejo (FA07-BB-0033)

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 TABLE OF CONTENT

S.NO. CONTENT PAGE #

1 Acknowledgment 4
2 Executive Summary 5
3 Introduction 6
4 Explanation 7
5 Managing The Chain 8
6 Supply Chain Problems 9
7 Activities / Functions 10-11
8 Integrated Supply Chain Management 12
9 Benefits of Supply Chain Management 6-12
10 The Role of Information Technology 13
11 Supply Chain With The Use of I.T Software 14
12 Relationship Between ERP AND SCM 15
13 Supply Chain Collaboration 16
14 Impact on Globalization 17
15 Some Emerging Technologies 18-19
16 SCM with the use of I.S 20
17 Current Scenario Challenges 21
18 Strategies For 2007 & 2008 22-23
19 Competitive Trends in SCM 24-25
20 Bullwhip Effect And Supply Chain 26-27
21 Conclusion 28
22 References 29

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 ACKNOWLEDGEMENT

May 2, 2009

First of all we would like to thank Almighty ALLAH TALAH. Whose blessings
remained throughout with us. . Also we would like to express our gratitude to all
those who gave us the possibility to complete this thesis. Firstly We want to thank
our Respected Teacher Sir AfAQ ALI KHAN for giving us permission to commence
this thesis in the first instance, to do the necessary research work and giving us
the opportunity to Explore ourselves by guiding us all the way through the initial
period and providing us with all those important links without which the completion
of the thesis was not
Possible .

Then Obviously I would like to thank the whole faculty of M.A.J.U whom provided
all the sufficient help that was possible. Then our personal Reference was from
MR NOOR ALAM the incharge of operations in textile unit Fazal mill firstly for
providing us with all the information we needed not only that but also giving us
suggestions for further improvement…and being so humble..

We are Deeply indebted to our colleagues and Group Partners who supported us
in the research work. I want to thank them for all their help, support, interest and
valuable hints.

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 OVERVIEW OF THE INDUSTRY

Pakistan is one of the world's largest cotton producing nations. The industry has 40 years
of history. The industry is the major foreign exchange earner for the country. The industry
benefits from Government's emphasis on an export led growth strategy. The main raw
materials for the downstream sector are domestic cotton yarn and fabrics. There is
abundance of land and skilled labour which has experience. In view of these factors the
Pakistan textile industry has enormous potential in the form of raw material, skilled labour
and government support. The combination of these elements provides the basis for
development of its various segments.

Segments: Various segments of the textile industry are:

* Upperstream: Raw cotton and spinning sectors

* Midstream: Weaving and finishing-dyeing (processing) sectors.

* Downstream: Made-ups, Readymade garments and knitwear sectors.

The textile industry is one of the most important sectors of Pakistan. It contributes
significantly to the country’s GDP, exports as well as employment. It is, in fact, the
backbone of the Pakistani economy.

Established capacity

The textile industry of Pakistan has a total established spinning capacity of 1550 million
kgs of yarn, weaving capacity of 4368 million square metres of fabric and finishing
capacity of 4000 million square metres. The industry has a production capacity of 670
million units of garments, 400 million units of knitwear and 53 million kgs of towels.

The industry has a total of 1221 units engaged in ginning and 442 units engaged in
spinning. There are around 124 large units that undertake weaving and 425 small units.
There are around 20600 power looms in operation in the industry. The industry also houses
around 10 large finishing units and 625 small units.

Pakistan’s textile industry has about 50 large and 2500 small garment manufacturing units.
Moreover, it also houses around 600 knitwear-producing units and 400 towel-producing
units.

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Contribution to exports

According to recent figures, the Pakistan textile industry contributes more than 60% to the
country’s total exports, which amounts to around 5.2 billion US dollars. The industry
contributes around 46% to the total output produced in the country.

In Asia, Pakistan is the 8th largest exporter of textile products.

Contribution to GDP and employment

The contribution of this industry to the total GDP is 8.5%. It provides employment to 38%
of the work force in the country, which amounts to a figure of 15 million. However, the
proportion of skilled labor is very less as compared to that of unskilled labor.

Organisations in the industry

All Pakistan Textile Mills Association is the chief organization that determines the rules
and regulations in the Pakistan textile industry.

Opportunities available

The world demand for textiles is rising at around 2.5%, due to which there is a greater
opportunity for rise in exports from Pakistan.

Main features of the Textile Sector

The domestic market although large and growing at 5 per cent per annum consumes only
25 per cent of the yarn produced which translates to downstream production. 50 per cent of
the yarn is exported, the other 25 percent is converted to fabrics etc. for exports. Pakistan
produces around 8 to 10 per cent of the world's cotton but its share in total world trade for
textile and clothing is around 2 per cent in value terms. There is a tremendous scope for
improving its shares of world trade. I will come to this later.

The textile industry plays a pivotal role as a key driver of Pakistan's national economy. Its
predominant presence in the economy is manifested in terms of its significant contribution
to the industrial production, employment generation and foreign exchange earnings

It is the only industry that is self-reliant and complete in the entire value chain, i.e. from
raw materials to value added products (garments, made ups), as a consequence of the
growth and development of the Pakistani economy. The development of the manufacturing
sector has been given the highest priority since Pakistan's founding with major stress on
agro-based industries. For Pakistan, which is one of the largest producers of cotton in the
world, the development of a textile industry making full use of its abundant resources of
cotton has been a priority area towards industrialization. At the time of independence, there
were only 6 textile units with 80,000 spindles and 3,000 looms, which could only supply
8% of the domestic demand at that time.

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The Pakistani textile industry has inherent strength in terms of rich capacity of textile
production, strong raw materials base, large and expanding production capacities, a vast
pool of skilled worker and technical and managerial personnel and dynamic and vibrant
entrepreneurship. However, these strengths have been diluted to a great extent due to
severe disadvantages suffered by the industry in certain other areas affecting its
productivity, quality and cost competitiveness. Such factors were technological
obsolescence, structural anomalies, poor productivity of labor and machines, lopsided
fiscal policies, multiplicity of taxes and levies, high cost of capital, redundant and outdated
controls / regulations, restrictive labor and industrial laws, lack of aggressive marketing,
poor perception of Pakistani products abroad, procedural problems in exporting, etc. These
factors placed it for behind as compared to its major competitors and these adverse factors
have led to the failure of the textile industry to exploit its distinctive advantages.

Hence over the years, successive governments have shown appreciable progress in policy
framework. Pakistan has embarked on a bold experiment in market liberalization. It has
committed itself to a more outward oriented development strategy. Appreciating the
importance of the textile industry, the government announced textile packages and then
launched its economic revival program backed by radical reforms in the textile regime.
Incentives for exports and policies announced from time to time laid emphasis on foreign
investments in value-added textiles, and realizing the situation, the government constituted
a working group headed by leading industrialists to form a long-term policy, and a
unanimously accepted and approved vision statement was devised to serve as a beacon
light for the working group. Textile Vision 2005 is an open market-driven, innovative and
dynamic document and envisages a textile sector which is:

* Internationally integrated

* Globally competitive

* Fully equipped to exploit the opportunities created by the MFA phase-out and to enable
Pakistan to be among the top textile exporting countries in Asia.

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 HISTORICAL GROWTH

Increase in the cotton production and expansion of textile industry has been impressive in
Pakistan since 1947. Cotton – bales increase from 1.1 million bales in 1947 to ten million
bales by 2000. Number of mills increased from 3 to 600 and spindles from about 177,000
to 805 million similarly looms and finishing units increased but not in the same proportion.
It employs 50% of industrial labour force and earns 65% foreign exchange of total exports.
Pakistan’s textile industry experts feel that Pakistan has fairly large size textile industry
and 60-70% of machines need replacement for the economic and quality production of
products for a highly competitive market. But unfortunately it does not have any facility
for manufacturing of textile machinery of balancing modernization and replacement
(BMR) in the textile mills which need to think about joint ventures for the production of
complete spinning units with china, Italy and production of shuttle less looms (Projectile)
with Korea, Taiwan and Italy.

Cotton textile industry has been premier industry in Pakistan and a major source of export
earning and employment. It also helps in value addition to the manufacturing sector of the
economy. During the six years between 1993 and 1998, production of yarn (in quantity
terms) registered a steady annual growth rate of 302% in Bangladesh and 405% in India.
On the contrary, Pakistan registered a growth rate of 101% per annum in yarn production
although it ranked third after China and India in the global yarn production during the
same six years. In exports, while Taiwan, India and the republic of Korea registered an
annual increase of 18.1%, 27.7% and 5.4% respectively during 1993-1998, Pakistan
registered a negative growth of 4.8% one important development was that till 1997,
Pakistan was the world’s largest exporter yarn followed by India. However, in 1998, India
gained the NO 1 position, leaving Pakistan at NO 2 In the case of cotton cloth production,
a number of Asian countries have been emerging in the international market to compete
with Pakistan. These countries are Bangladesh, India, Taiwan, Indonesia, Thailand,
Turkey, Sri Lanka and Iran. The latest available date on overall export performance of
Pakistan comported with some regional countries is given in table 1: The above-mentioned
presentation in the context of international scenario highlights the adverse position of
Pakistan’s textile industry when is likely to continue further following the full
implementation of WTO agreement from 2005 onwards when an era of free trade will start
globally. Notwithstanding the above fact, current stagnation in the local textile industry can
be overcome through efforts, consistent with charges occurring in the international market.
It must be appreciated that all successive governments since the birth of cotton textile
industry in Pakistan have been encouraging the textile exporters to penetrate into new
market and also to broaden the base of exportable commodities by including value added
textile goods so that reliance on exports of cotton, cotton yarn and coarse fabrics gradually
become minimal.

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The organized development of cotton textile mills started in the late fifties with the first
five-Year Plan. PIDC came into being with its main objective of the industrialising the
country in major fields as envisaged in the then plan. By mid sixties, there were about 180
units of textiles bleaching, printing and processing units, mostly situated in Karachi and
small number in the Punjab. In 1968, in consequence of change in the basis of collection of
excise duty from capacity to production, most of the mills closed their weaving section.
The looms removed from the mills as their weaving sections were closed The looms were
installed outside the mills premises in units of four, which has been exempted from excise
duty. This fragmentation dealt a deadly blow to textile weaving, in so far as its future
development was concerned.

Reflecting on the state of affairs, Abid Chinoy, Pakistan cloth merchants Association
(PCMA) Chairman, Appreciated government’s efforts to encourage new exports and
finding new markets, which need aggressive export marketing. The steps taken on the
monetary front, such as the frequent devaluation of Pak rupee in terms of dollar could not
improve the cost competitiveness of exportable products due to increase in prices of the
local and imported inputs of the local textile industry, and also due to inelastic demand for
the Pakistan’s exports. It has been rightly mentioned in the latest stage bank of Pakistan’s
annual report (FY01) that, “Over the years Pakistan’s exports receipts have been
vulnerable on account of the narrow base of exportable items, concentrated markets and
low value addition ‘this indicated that the growth in the country’s overall exports,
including textile products which contributed more then 60% of total export receipts each
year, could to be related some cosmetic and ad hoc measure like devaluation of Pak rupee
and concession export credits. The first textile commission, which was constituted by the
first material law government in 1960 had, inter-alia, recommended that an economic size
textile unit should preferably have 25,000 spindles and 500 looms. No new mill with only
12,500 spindles and without looms should be sanctioned. However, no need was paid to
the advice by the sanctioning authorities with the result that an excess capacity had tented
to build up in the spinning sector.

During the period 1973 to December 1992, some 71 spinning units with 1,136, 835
spindles, 6,600 rotors ands 7,329 looms were closed down. In 1992, a foreign consultant
form was hired by the government to look into the stagnating conditions in the local textile
industry. One of the observations of the foreign consultant was “Pakistan has failed to
make real progress in the international market and is being over taken by many of the
neighboring competitor countries. The spinning sector, traditionally the core of the
industry, is already in the crisis with many spindles lying idle and mills being forced to
close. Worse still, this sector will be hit by the projected decline of its major markets in
Japan and Hong Kong in the coming years.”

Another important strategic recommendation given by the foreign consultant very much
relevant to the current

conditions: “It is vital that companies play very positive role in the markets, which each
one having its own marketing activity, whose job is to understand the need of the

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customers and the ever changing competitive dynamics of the markets. In order to improve
exports, Pakistan’s Readymade Garments Manufacturers and Exporters Association
(PRGMEA) has urged the commerce minister Abdul Razzak Dawood to set up an Apparel
Board for the promotion of export of woven and kit garments which fetch US$ 2.5 billion
foreign exchange for the country. The industry experts are of the opinion that in the order
to have a strong industrial base, Pakistan economy need investment upswing. Pakistan’s
economic growth performance during recent years has been dismal: as against the average
growth rate of 6.1% in the 1980s, the half and 4.0% in the 2nd half of the 1990s. The major
micro-economic instability factors like high inflation rate, budgetary deficit, continuous
depreciation of rupee, economic sanctions, etc. could not help the investment process. Such
an environment cannot be conducive to investment and growth. Exporters of textile
products have found the target of US$ 10.4 billion set by the government for the year
2002-2003, as achievable and termed it a realistic approach. The textile sector which
constituted 69% of total export during 2001-2002, believes that enhanced quota by the
European Union and Turkey would make this possible to fetch another US$1 billion this
year.

The rise in export of value-added products from Pakistan was another point of
encouragement for the textile sector. “The export of value-added products rose to 57.4%
from 53.9% last year-a clear sign that we are moving in the right direction, “said the
Chairman of all Pakistan textile mills association.

The trade policy is considered an acceptable paper, but in the industry does not fine
anything that could lead to a high level exports achievement and remove trade imbalance.

Contrary to the declining trend in the production of cloth in the mill sector, the non-mill
sector or power loom sector, maintained a rising tempo of expansion in capacity and
production. It made a major contribution to exports of different types of fabrics, including
grey cloth, bed spreads, tapestry cloth, specialized cloth etc. In this way the power looms
sector was also backed up by the mills sector. As a results, as against the declining trend in
the production of cloth in mill sector, the production in the power loom sector kept rising.
Most of the idle looms have been removed from the mill-sector and installed in the power
loom sector.

The remarkable progress of the power loom sector is due to favourable government
policies as well as market forces. This sector is producing comparatively low value added
grey cloth of mostly an inferior quality. The power loom sector employs poor technology;
it faces scarcity of quality yarn and lacks institutional financing for its development. The
growth record of Pakistan's textile industry shows a reverse trend, specially in the weaving
capacity of the mill sector, in which the installed capacity of looms shrunk from 26,000 in
1978-79 to only 10,000 in 1999-2000, the working looms were reported to be only 4,000.
Thus, the organized sector seemingly made an all-out shift towards cotton spinning and
almost completely gave up efforts to develop and modernize the weaving sector, Capacity
utilization of cotton textile weaving (mill sector) is given in Table- I.

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Power Looms Sector: The non-mill or the power loom sector has registered a phenomenal
growth over the last two decades. The exemption of excise duty acted as a catalyst. Labour
unrest in large mills experienced in the late sixties was conspicuous by its absence in small
units, these operated on contract or self-employed basis. Besides, periodical export booms
also helped the power loom sector to establish itself. Its output rapidly increased when
demand for cotton bags was created after the cessation of jute bags supplies from
Bangladesh.

The number of power looms cannot be ascertained in the absence of any census. The
number of operating looms keep on fluctuating, consumption of yarn and production of
cloth by this sector is still more difficult to calculate because (a) this sector does not
maintain production statistics. (b) the looms operate generally for one or two shifts and
often stop suddenly, depending upon market demand or yarn availability. From the data
furnished by the Textile Commissioner Organization, it has been estimated that the number
of power looms working on cotton/blended yarn varies from 175,000 to 250,000.
Production of cloth increased from 722 million sq. meters in 1971-72 to 4.550 million sq.
meters in 1999-2000. The power loom sector accounts more than 90% of the total fabric
production. As a result the non-mill sector weaving capacity continues to occupy
predominated position

Export Performance - 1990 to 1994

Textile industry contributes over 60 per cent of export earnings of Pakistan. There is a very
heavy dependence on earnings from this single sector for maintaining a satisfactory
balance of payment situation. Sluggish and lacklustre export performance of this industry
in the last 2 years has caused serious concern to our economic planners. In some quarters it
is termed as export crisis which has seriously hampered our industrial growth strategy. Let
us look at the figures and analyse the reasons for the poor performance in various streams
of this industry.

in 1994 export contributed 78 per cent of export earnings. On the side the graph shows
trend; up from 1990 to 1992, flat 1993 and down 1994. I will come to figures later. Next
chart gives year to year export value variances. In 1990 our export earnings from textile
were US $3.4 billion which increased by 28.30 per cent to US $4.3 billion in FY 1991 and
by 14.19 per cent to US $4.9 billion in FY 1992 and increased by only 1.14 per cent to US
$5.0 billion in FY 1993 and unfortunately it declined by 3.8 per cent in 1994 to US $ 4.8
billion. Thus it can be seen that against fast growth in 1991 and 1992, there has been
stagnation in 1993 and decline in FY 1994. Against expected growth at 10 per cent the loss
of export earnings in 1994 works out at 1.2 billion US dollars. This is what is disturbing us
as it has affected the momentum of industrial growth and has sent alarm bells to our
economic managers. Except for last quarter of FY 1994, average price realised for our yarn
and grey cloth in FY 1993 and FY 1994 have been disappointing. There are 3 main reasons
for this decline the lacklustre performance in the last two years.

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Raw Cotton Crisis

Production of raw cotton had reached a record level of approximately 12.5 million bales in
FY 1992 which dropped to 9.5 million bales in FY 1993 and further dropped to
approximately 7.5 million bales in FY 1994 as against the industry requirement of 8 to 8.5
million bales. The reason for these crop failures is largely due to insufficient research on
the type of virus that our cotton has been infected with the insufficient and timely use of
pesticides. Price of raw cotton sky-rocketed from around Rs. 900 per maund to over Rs.
2,000 per maund which caused a serious crisis and jitters in textile industry as a whole.
Export of raw cotton had to be banned and the industry had to import cotton from CIS
countries at considerable cost making negative contribution to balance of payment
situation. Consequently, earnings from export of raw cotton, which was about US $500
million in 1992 sharply declined in the last 2 years. However, in 1994 this was partly
made-up by increase in price of cotton yarn and export earnings from synthetic fabric.
According to Mr. V.A. Jaffery our GNP was affected by 2 percent in 1993-94 on account
of cotton crop failure. This shows importance of this crop to our national economy.

A Global History of Textile Workers,

1650-2000

Textiles shield our bodies and bring comfort to our homes. Textile
products thus cater to a basic human need, they are among the
most important goods fabricated and traded by mankind and have
thus played a central role in history. It is no wonder that historians
have paid a lot of attention to spinning and weaving, the basic
processes in producing textiles. Not only have numerous regional
and national studies on developments in the textile producing and
trading sectors been published, but textiles have also been in the
centre of several crucial historical debates. Theories on
(proto-)industrialization, technological and business history, and
the gendered division of labour, for instance, have often taken the
textile industry as an important point of reference.
This project aims to take stock of the work done on textile workers
all over the world, to compare their history internationally and
over a long stretch of time. In doing this, we want to focus on wool
and cotton production. Many natural and artificial fibres have been
spun into yarn and woven to cloth over the past centuries, but
wool and cotton have been the most important fibres, considering

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global production over the entire period from 1650 until recent
times.
This period has been chosen to be able to show processes of
industrialization and de-industrialization in all parts of the world. In
the pre-industrial phase, market production of textiles mostly took
place on farms by part of the rural population and in urban
workshops by artisans. In some regions, weavers and
entrepreneurs sought for cheaper ways of organising market
production, by employing other weavers and spinners in the
countryside for wages to produce for them. The specific nature of
this 'proto-industrialization' was debated especially in relation to
textile production.
In search of cheaper cloth production, technical improvements
were made to enlarge spinning and weaving production from the
1760s onwards. Cotton and wool were among the first raw
materials to be processed industrially after the introduction of new
machinery. The 'industrial revolution' created immensely wealthy
textile employers and condemned the actual producers to work in
more efficient factories. The living conditions of textile workers
and their efforts to organize to improve their situation have largely
characterized the debates in social and economic history on the
consequences of Industrialization.
Specific stages of textile production, whether in domestic, artisan
or factory industry, were almost invariably divided between men
and women. In some cases spinning was performed exclusively by
women, in other cases by men. Certain kinds of products were
only made by one, others by the other sex. Sometimes specific
machines were only operated by one sex. Usually female workers
(and children of both sexes) earned far less than men, even in
performing exactly the same tasks. These and other aspects of the
gendered nature of textile production can only be sufficiently
explained by a thorough historical analysis, which compares these
mechanisms in different parts of the world, throughout time.
Textiles early became a global product. Wool and cotton were
cultivated in one place, transported to centres where yarn and
cloth were produced, and the (partly) finished products were again
moved to places all over the world, where they were sold for
further refinement or usage. Both within and between countries
different technologies, even un-mechanised and mechanised
production, often co-existed for remarkably long periods for a
variety of reasons. Trade relations and political hegemony greatly
influenced the decisions about what processes could be performed
most profitably in which place. Metropolitan authorities often

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prevented their colonies from protecting their local textile
industries. With the process of de-colonisation, however, the lower
wage rates in the ex-colonies served very well to compete with the
former colonial powers. Consequently, the textile industries in the
economic core regions of the world dramatically declined after
1950. Notwithstanding this reversal of roles, long commodity
chains in textile goods, linking all parts of the world, remained
typical.
The relevance of a global history of textile production over a long
period of time seems clear. To realise such a broad comparison,
the project follows a research model of an earlier comparative
project on the history of dock workers. The results of this method
have been published in Sam Davies e.a. (eds.), D O C K W O R K E R S .
I N T E R N AT I O N A L E X P LO R AT I O N S I N C O M PA R AT I V E L A B O U R H I S T O RY (2
vols., Ashgate, Aldershot: 2000).

WORLDS TEXTILE SCENARIO

Textile industry world over has experienced highly significant and

irreversible changes in recent years. These changes have been
both on the demand as well as on the supply side. Market demand
has altered e.g. in terms of product types segmentation and
particularly in over all volume terms whilst the supply side has
countered with a concentration and rapid expansion of the
industry is new textile producing countries as well as adaptations
of the many new technologies and cost effective equipments.
The Garment Sector which is the principal driving force
for the textile
industry still Remains labor intensive and therefore is
attracted to
countries with
cheap labor force.
The recent concentration of Garment industry in Far
East, Asian
region and South East Asia has increased the demand of
high quality
fabrics and initiated investment in the Weaving,
finishing operations
to match the demand. The emergence of major
exporting

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Industries in countries with indigenous cotton fiber such
as Pakistan –
Turkey India and China offers the best opportunities for
such
investments.

The textile sector of Pakistan

ECONOMIC CONTRIBUTION

• 55 % OF TOTAL EXPORTS (10.62 billion US dollars) (1HFY09)

• 46% OF TOTAL MANUFACTURING

• 38% OF TOTAL LABOUR FORCE (More than 19 Million)

• 8.5% OF TOTAL GDP

• Investment US $ 6.4 BILLION

T he textile and apparel industry is often considered the backbone of the Islamic
Republic of Pakistan’s economy. In that south Asian republic — which shares borders with
China to the north, India to the east, and Iran and Afghanistan to the west, as well as the
Arabian Sea to the southwest — cotton textiles and apparel historically were the focus of
the industry, mainly because of the large amount of cotton grown in the country. In fact,
Pakistan currently ranks fourth among world cotton producers and third among world
cotton consumers — having produced 9.9 million 480-pound bales and consumed 11.8
million 480-pound bales in the

The textile industry in Pakistan is the only determinant of the

economic growth of the country. This is because over the years,
the nation is characterized as the single crop economy that

15
includes cotton and textile and they contribute immensely in the
Pakistan national economy. In fact, the textile industry has the
major share in the GDP, exports, employment, foreign exchange
earnings, investment and revenue generation of the nation.

The textile industry in Pakistan has tremendous potential to grow,

provided its comparative advantages are maintained. Pakistan has
gradually emerged as world’s largest supplier of yarn, with china
as one of the major buyers. The domestic consumption of yarn in
weaving, knitting and towels industry is rapidly growing as is
evident from 14 percent per annum increase in export of value
added textile for last five years.
Pakistan has become one of the largest consumer of US variety
PIMA cotton for manufacturing fine count value added yarns to
make sophisticated fabrics for use in made ups for high end of the
market.
Pakistan has potential to become a strategic supplier of textile
products for world’s major malls and stores, which again want a
guaranteed and timely supply from the source.
According to the “ECONOMIST” intelligence report of August 2006
for Pakistan the following observations have been made: Despite
Government efforts to diversify exports and widen the industrial
base, the industrial sector remains dominated by the Textile
sector. Textile Sector still represents 46% of total manufacturing
and provides 60% of Pakistan’s Export receipts

SEGMENT PROCESS

Cotton raw material

Cotton is a natural vegetable fibre used primarily as a raw material
for textiles. Cotton's strength, absorbency, and capacity to be
washed and dyed also make it adaptable to a considerable variety
of textile products. Leading producers of cotton include USA,
China, India, Pakistan, Uzbekistan and Turkey. The current market
share of cotton is 56 percent in all fibres. World textile fibre
consumption in 1998 was approximately 45 million tons, of this
cotton accounted for approximately 20 million tons. The world
cotton production trend over the last thirty-five years. Production

16
is level with consumption and both have shown very little growth
over the last five years. The export trend shows that the big
producers are also the major consumers of cotton like USA, China,
Pakistan and India. China and India have now become net
importers of cotton and the volumes of raw cotton export have
shrunk.

World Cotton Production

Agriculture sector is the base of Pakistan's economy with
approximately 25% share in GDP. Within the agriculture sector
cotton crop is the basic raw material for the textile industry. As
textile exports comprise more than 60% o of Pakistan's total
exports, thus the success or failure of cotton crop has a direct
bearing on textile exports. Cotton production is the inherent
comparative advantage of the textile sector of Pakistan.

Area & Production of Pakistan

The area under cotton cultivation has not changed appreciably
over the last ten years. The annual cotton crop growing area is
about 3 million hectares. In the future, if Pakistan has to increase
production, it shall have to come mainly from increase in yield and
higher GOT (Ginning Out Turn percentage), and not area.
Agriculture department of provice of Punjab has laid criteria for the
approval of new cotton varieties - GOT not less than 38%, staple
length not less than 27mm, micronaire not more than 4.8, strength
95,000 psi, uniformity ratio not less than 48 and boll size not less
than 4gm (existing 2.2-2.3 gm). However, there are certain areas
in NWFP and Baluchistan where cotton can be grown with a
potential of about half a million bales.

Ginning
The first mechanical process involved in the processing of cotton
is ginning. Ginning is the process for separating lint from seed to
cotton. The ginning industry has mushroomed in the cotton
growing areas of Pakistan informally, without adequate regulation.
There are 1,221 ginning factories in the country. Ginning industry
has and installed over capacity of more than one million bales on a
single shift basis and a total capacity of around 20 million bales on
three shift basis, part of which lies unutilized.

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 Pakistan is a developing country with
peculiar issues and problems faced by its ginning industry. Cotton
is entirely hand picked and use of gin process monitoring and
controls are not there. Being producer of good quality medium to
medium long staple cotton varieties, suffers from a number of
problems related to nonapplication of standards, ginning practices
and poor management. The machinery being used is locally made
and is very old. Hence the efficiency and productivity of the
process is one-fifth of that of machines currently being used in US
or in other competing countries.

In Pakistan cotton processing industry

has catered to low quality products - lint, yarn and fabric, over the
past few decades. Changing global demands and textile market
profiles are demanding a shift to quality products. In this the
ginning factory plays a pivotal role for determining quality of
cotton fibre as raw material for downstream industry. Yet this
component of local textile industry is the most neglected and
antiquated. Unless upgradation of this industry is undertaken, it
would not be possible to remain competitive in export markets.
However, now government is taking some serious steps to up
grade this sector of the industry. Establishment of cotton
standards through PCSI, setting up of a Ginning Institute are
positive steps towards the right direction.

KNITTING
The knitwear industry in Pakistan is poised for a major take-off in
the world of fashion as designers find in it a lucrative outlet for
their creative ideas. During the last few years, the segments of
knitwear and selected items of ready-made garments have shown
an appreciable rising trend in exports. However, Pakistan's textile
sector is relatively weak in synthetic fibre products, women's
garments and fancy apparels. The export of value-added products
depends heavily on quota imposing markets

18
 weaving and finishing
Research, innovations and development in technical textiles, yarn
quality, clothing products, process performance, fabric finishing,
colouration technology and marketing can bring significant
advancement in textile sector and market supremacy. Drastic
measures through strategic management both in public and
private level can strengthen the position of Pakistan in post-2004
era of textile world. Pakistan's textile sector has made
considerable advances in production capacity and capability in the
last four years. There is now a marked shift to value addition and
the share of garments and made-ups has increased from 47% to
58%. Simultaneously, the share of yarn and fabrics in exports has
fallen from 53% to 42%. Today it contributes 67% of exports, and
many product lines, such as bed linen and garments, are
expanding rapidly.

By mid-sixties there were about 180 units of textile bleaching,

printing and processing units, mostly situated in Karachi and a
small number in the Punjab. In 1968, inconsequence of change in
the basis of collection of excise duty from capacity to production,
most of the mills closed down their weaving sections. The looms,
removed from the mills, were installed outsides the mills' premises
in units of four, which has been exempted from excise duty.

About 31,000 looms since 1969-70, continued to operate in the

mill sector even after general segregation of weaving. This number
decreased to only 10,000 looms by the end of June 2003. In the
non-mill sector a big majority of the units operate at very low
level, having no automatic machinery. In some factories, the
printing of textile is done by spreading the cloth on tops of tables
and pressing design screens on them, a method which is primitive
as compared to the process in use by the modern and automated
factories.

There are two major complaints about Pakistani fabrics: there is no

consistency in colours/shades; and the dye bleeds out in the first
washing. While poor selection of cotton is responsible for
inconsistency in dyeing and bleaching due to use of substandard
dyes. The poor finishing may also be attributed to the facts that

19
the textile processing units are operating mostly in the
unorganised sector at small scale, without modern processing
facilities. Thus, the overseas buyers prefer to buy yarn or grey
fabrics from Pakistan. According to a study conducted by the
National Productivity Organisation (NPO), the loss of productivity
resulting from the poor shape of the machinery in operation in the
power loom sector has been estimated at Rs. 450 million annually.

The government under Textile Vision 2005 has focused more on

providing credit and other facilitative support to diversify the
products, especially to cater the needs of the high value added
sector like garment industry. The textile industry invested
substantially in BMR for improving production quality and moving
towards more value addition during the last four years. There has
been a substantial increase in the capacities, production and
consumption of raw materials.

The weaving and made-up sectors have three different sub-sectors

in weaving viz. integrated, independent weaving units and power
loom sector. Cloth is being produced in both mill and non-mill
sectors. Production of cloth (mill-sector) increased from 295 million
sq meters in 1989-99 to 586 million sq meters in 2002-2003.
Pakistan fabric's range from coarse to super varieties, with coarse
and medium varieties consumed locally.

ISSUES CONCERNING SEGMENT PROCESS

20
Some segments of textile industry where special attention is required.

First raw cotton: 95 per cent of the raw cotton produced in Pakistan has a fibre length 1-
1/3" and it is possible to manufacture 20/30s low count yarn using this raw cotton. There is
need for improvement of cotton varieties so that the country can produce higher and finer
counts. Both Government Agencies and Private Sector should join hands to promote new
varieties and provide necessary incentives to farmers to go in this direction.

Next comes ginning: Major investment is required for improving ginning technology.
High level of impurities, trash and excessive water contents etc. which are considered to be
poor by international standard are affecting the quality of yarn and fabric and is also
causing imperfect dyeing and printing in this country. If we are to improve the quality of
our downstream products, some improvements have to be made in this area as well
Next stage is yarn: Similarly spinning has to take steps to move from lower counts to
higher counts to permit downstream sector to make improvements in its products. This
segment which is fully matured now suffers from over capacity. Some say spinning has
benefited from under priced cotton. It has to learn to compete without any support and
recognize the need of downstream sectors.

Next is weaving: Weaving sector has made much progress with the induction of new
technology based on shuttleless looms but still there is room for further expansion in this
sector for the sake of balanced growth of downstream value-added products.

Coming to finishing: Modernisation and expansion of printing and finishing technology is

overdue. We need to take urgent steps to produce better quality products. In this
connection it would be pertinent to mention that Pakistan is much lagging behind as
regards improving quality of its products. There is shortage of skilled manpower in this
area and lack of knowhow. Setting up of Textile University in Private Sector is a step in
the right direction to bring about all round performance. There is a need for improving the
training of technician and the quality of education in technical institutions.

Investment in Textile Sector

21
Textile industry has made an investment of about $6.0 billion during the last six years.
This investment includes both investments through bank loans as well as own sources. This
investment has been made in the form of BMR expansion and new capacity. Textile
machinery worth US$ 0.6 billion has been imported during 2005-06. the import of textile
machinery for the last seven years are documented in Table and Sector wise Investment is
shown in figure

Table- 3.4 Import of Textile Machinery

Year Million US $ % Change
1999-2000 210.9 28.6
2000-01 370.2 75.5
2001-02 406.2 9.9
2002-03 531.9 30.7
2003-04 597.9 12.4
2004-05 700 17
2005-06 (Jul-Mar) 654.2 -6.5
Total 3472
Source: Federal Bureau of Statistics

Reforms in the Textile Sector

The government is providing support for the local production of textile machinery. A wide
ranging campaign to produce contamination free cotton in the country with a view to
promoting value addition has already been started. As a result, the cotton prices are now
being quoted on a PSCI grade standard basis. To ensure an abundant supply within the
country, cotton is allowed to be imported and exported freely. To stabilize prices in the
domestic market, the Trading Corporation of Pakistan (TCP) has been intervening as and
when required.

In order to prepare the textile industry in the post quota regime the government has set up a
high level Federal Textile Board with Textile Commissioner’s Organization serving as its
Secretariat. The Board has been entrusted the task of looking into the issues of clean

22
cotton, labor, social and environment laws, modernization of ginneries, rationalization of
tariffs, facilitation in sales tax issues and developing a package to promote garment sector,
especially by improving their competitiveness in international market.
Source: Economic Survey 2005- 06

Textile Sector – A Snap Shot

Total Number Of Units (2005)
Ginning 1221

Spinning 445

Weaving
Large 140
Small 425
Power Looms 20600

Finishing
Large 106
Small 625

Garments 5000
Large 600
Knitwear 700
Towels 400

Total Capacities:
Spinning: 1900 Million Kgs Yarn
Weaving: 5600 Million Sq. Mtr. Fabric
Finishing: 3500 Million Sq. Mtr
Garments: 650 Million PCs.
Knitwear: 350 Million PCs.
Towels: 55 Million Kgs.
Ginning: More than 10 Million Bales

23
At Present, the industry consists of large-scale organized sector and a highly fragmented
cottage / small-scale sector. The organized sector comprises integrated textile mills i.e.
spinning units with Shuttle-less looms. The down stream industry (Weaving, Finishing,
Garments, Towels & Hosiery), with great export potential, is mostly in the unorganized
sector. The following table depicts the magnitude of the textile industry.

Large Scale Mill Sector

No. Of
Sub Sector Size Production
Units

1. Spinning 403 9.2 million spindles 1550 M. Kgs.

384 M. Sq.
2. Composite Units 50 9,876 Looms
meter
Total 453

23,600 shuttle-less
3. Independent Weaving Units 124
looms
4. Finishing Units 10
5. Garments Units 50 5,000 Sewing machines

Cottage / Small Scale Sector

No. Of
Sub Sector Size Production
Units
1. Independent Weaving Units 453 50,000 Looms 3600 M. Sq. meter
2. Power Looms 20,600 175,200 Looms
Total 21053 225,200
3. Finishing 625 Cotton 2700 M. Sq. meter
4. Terry Towels 400 7,602 Looms 53 M. Kgs.
300,000 Sewing
5. Garments 2,500 600 M. Pcs.
machines
12,000 Knitting
6. Knitwear 600 400 M. PCs.
machines

Source: Pakistan Investment Guide (Experts Advisory Cell)

Policy & Projects

24
Policy Incentives:
• 100% foreign equity is allowed

• Custom Duty @ 5% on import of PME (Plant, Machinery and

Equipment) (SRO:358(I)/2002 dated 15-6-2002)

• Tax relief: First year allowance or depreciation allowance @

50% of Machinery & equipment cost.

Projects in Cotton Textiles:

• Cultivation of cotton

• Ready made garments (diversified product ranges) and

accessories

• Fashion designing

• Textile technology

• Handloom Textile

25
26
 Cotton is a natural fiber used primarily as a raw material in textile industry. Being a major
crop, Cotton is an economic asset of Pakistan. The cotton production has been estimated 14
million bales approximately for the year 2004-2005. Both Punjab and Sindh are the major cotton
growing provinces and their share in total cotton production is estimated at 76% and 23%
respectively.

Cotton Seed Market Rate

Dated: September 29, 2006
Rupees per 40 Kgs
1) P u n j a b N/A 2) S i n d h N/A
(RYK) (Nawabshah)

(EXPORTS)
Registration 2005-06: Bales, 3,46,549
PERIOD (MY 2005-06) CROP BALES
01-08-05 to 15-09-2006 2005 - 2006 13,446
01-08-05 to 15-09-2006 2004 - 2005 12,143

Total 25,589
Source: Export Promotion Bureau.

Shipments
PERIOD - (MY 2005-06) Qty. in Bales
Aug., 05 to June.,06 405,105
July.,06 7,129
Total- 412,234
Source: Federal Bureau of Statistics

(IMPORTS)
Qty. in Bales
PERIOD (MY 2005-06)
of 170 Kg s
Aug,05 to April.,06 1,691,206
May., 2006 100,694
Total - 1,791,900
Source: Federal Bureau of Statistics

Mills Consumption of Raw Cotton

Cotton Season 2006-07
Month Bales
Aug.,05 to Dec.,05 5,383,104
Jan., 2007 1,100,035

27
 Total :- 6,483,139
Source: Textile Commissioner's Organization

ARRIVALS / SALES CROP 2005-06

(As on May 01, 2006) Corrected by The PCGA
In Bales

Punjab Sindh Pakistan

Total Arrivals 9,849,284 2,545,505 12,394,789

Sales to TCP --- --- ---
'' to Exporters 14,850.00 59,550 74,400
'' to Mill 9,173,807.00 2,343,972 1,151,779
Unsold Stock as on 01-05-07 802,610
Source: PCGA

28
TEXTILE VISION -2005

29
 Cotton has been cultivated in the sub-continent over the last 3000 years. The
indigenous variety of cotton, known as "Desi Cotton" has been cultivated in the Indus
valley since the ancient period of Mohenjo Daro civilization . Genetically, cotton plant
is a perennial and flourished in cotton forests but it was adapted as a seasonal crop
for higher productivity with advancement of farming technology.

The Desi cotton contains rough fibre characteristics with a staple length of around 20mm and
micronaire count of over 5.5. These features make it suitable for a limited use for the production of
denims, tarpaulins, Khaddar cloth and other rough fabrics spun and weaved locally in the cottage
industry.

The British introduced American cotton in the subcontinent at the beginning of 20th century. The
genotypes were imported from the North American continent initially and a test-cultivation was
made in South Western Indian regions. Dr. Mohammad Afzal, a prominent cotton breeder ,
introduced the American genotype in Punjab by cross-breeding of Desi with American cotton - 3F
variety produced in 1917. Since then cotton cultivation has shifted from desi to ‘American’ varieties
in Punjab and Sindh, which are primarily crosses of new American breeds with 3F progenies.

Because of its finer fibre characteristics, staple length of over 25mm and micronaire below 4.5,
American Cotton is capable of being spun at higher counts to produce finer cloth. It is also for use
in fabrics blended with man-made fibres.

Cotton has played a very significant role in Pakistan’s agro-economy because of the fact that it
provides lint for fabrics and seed for edible oil. There was a rapid expansion of cotton cultivation
during the late 50’s and 60’s and more area came under cultivation from central Punjab to the
Southern Punjab. Short-medium staple varieties like 13/26; B-557 and 4F were grown extensively
during the 60’s and early 70’s. With the establishment of the Central Cotton Research Institute in
Multan, cotton breeding process attained momentum in the country. Later, the Provincial Cotton
Research Station, Multan and Nuclear Institute of Agriculture & Biology (NIAB) at Faisalabad
launched breeding programs that produced a number of new high- yielding varieties in the late 70’s
and early 80’s, which contributed to the phenomenal growth in cotton production during 80’s.

Since 1991-92 when cotton leaf curl virus (CLCV) hit cotton production adversely, the focus of
cotton breeding has been on virus resistance. The new virus resistant varieties had a lower yield
potential and lower Ginning out Turn percentage (GOT) but recent developments in breeding have
managed to produce genotypes that are resistant to CLCV and have a higher GOT with medium
long fibre characteristics. Over the next few years, Pakistan, especially lower Punjab is expected to
switch over to these new varieties, which are perfectly matched to the international industry
requirements. Pakistan is favourably poised to meet the challenges of the times.

The prime characteristic common to most Pakistani varieties is the fibre strength, which is the best
in the world. If other factors like clean picking, good ginning and elimination of contamination can
be managed, local cotton is perhaps the best in the world. Unfortunately, this quality potential was
never achieved largely due to the marketing anomalies prevalent in the cotton markets, which
impeded the incorporation of the desired technological perfections.

Source: Textile Vision 2005

Cotton
Cotton is a natural fiber used primarily as a raw material in textile
industry. Being a major crop, Cotton is an economic asset of Pakistan.

30
The cotton production has been estimated 12 million bales approximately for the year
2005-2006. Both Punjab and Sindh are the major cotton growing provinces and their share
in total cotton production is estimated at 76% and 23% respectively

According to Pakistan Economic Survey 2005-06, cotton accounts for 8.6 percent of the
value added in agriculture and about 1.9 percent to GDP. The area and production target
for cotton crop during the current fiscal year were 3247 thousand hectares and 15.0 million
bales, respectively. The crop was however, sown on the area of 3096 thousand hectares –
4.6 percent less than the target and 3 percent less than last year (3193 thousand hectares).

The major cotton producing countries in the world include China, India, Pakistan, USA
and the European Union besides the central Asian and African states

Cotton, Area, Production And Yield

Area Production Yield
(000 % (000 % %
Year (Kgs/Hec)
Hectare) Change Bales) Change Change
2001-
3116 6.5 10613 -1.1 579 -7.2
02
2002-
2794 -10.3 10211 -3.8 622 7.4
03
2003-
2989 7.0 10048 -1.6 572 -8.0
04
2004-
3193 6.8 14265 42.0 760 32.9
05
2005-
3096 -3.0 12417 -13.0 682 -10.3
06 (P)
Provisional (July-March). Source: Ministry of Food, Agriculture and Livestock
Federal Bureau of Statistics.

31
Fiber

Pakistan is among the major global producers and exporters of textiles and
apparel. Cotton was primarily used as raw material in Yarn manufacturing but
the growing demand for blended yarn and fabrics has shifted the raw-material
source towards the Man-Made or Synthetic Fiber in Pakistan.

Pakistan is among the major global producers and exporters of textiles and apparel. Cotton
was primarily used as raw material in Yarn manufacturing but the growing demand for
blended yarn and fabrics has shifted the raw-material source towards the Man-Made or
Synthetic Fiber in Pakistan. The MMF industry in Pakistan has gradually developed during
the last decade but still Pakistan usage is currently at 74% cotton and 26% man-made
fibers, whereas the world fiber mix is 45% cotton and 55% man-made fiber

Man-made Fiber sub-sector is organized and most of the production is from the five key
players producing Polyester Staple Fiber (PSF)

CONSUMPTION OF RAW MATERIAL (PAKISTAN)

(Fig. in '000' Kgs)
RAW MATERIAL GROWTH % % OF TOTAL
Period Cotton Fiber Total Cotton Fiber Cotton Fiber
1994-95 1,412,732 192,152 1,604,884 -7 6 88 12
1995-96 1,509,955 192,691 1,702,646 7 0 89 11
1996-97 1,444,368 236,692 1,681,060 -4 23 86 14
1997-98 1,471,169 318,923 1,790,092 2 35 82 18
1998-99 1,441,923 407,686 1,849,609 -2 28 78 22
1999-00 1,566,348 404,008 1,970,356 9 -1 79 21
2000-01 1,673,280 405,038 2,078,318 7 0 81 19
2001-02 1,755,669 409,557 2,165,226 5 1 81 19
2002-03 1,943,197 449,424 2,392,621 11 10 81 19
2003-04 1,938,678 468,984 2,407,662 0 4 81 19

Synthetic Fiber Manufacturing Sector

This sector has made progress in line with demand of the textile industry. Presently there
are seven polyester fiber units with production capacity of 625,000 tons per annum, two
acrylic fiber units of which one unit has started its Commercial production in December
1999 with rated capacity of 25,000 tons per annum while other unit of crescent group is
under installation. One unit of viscose fiber with a capacity of 10,000 tons has also gone

32
into production. Besides, import of fibers is also permissible to supplement the local
production

Filament Yarn Manufacturing Industry

The synthetic filament yarn manufacturing industry picked up momentum during 5th Five
Year Plan when demand and hence imports increased and private sector was permitted to
make feasible investment in the rising market conditions. Following three kinds of filament
yarn are manufactured locally: Production capacity of polyester filament yarn has
increased while the demand for local synthetic weaving industry is export sales are not
feasible and local market is heavily flooded with smuggled goods. The production of
polyester filament yarn is approximately 78000 tones per annum. The duty on filament
yarn was reduced last year.

While it was helpful to the synthetic weaving units, its impact on the filament industry is
evident in the form of closure. Recently hosiery sector has started consuming synthetic
yarns for export of knitted garments, which are, both value added as well as diversified in
product.

Capacity of Synthetic Filament Yarn

Production Capacity
Type of Yarn No. of Units
(Metric Tons)
Accetate Rayon Yarn 1 3,000
Nylon Filament Yarn 3 2,000
Polyester Filament Yarn 21 95,000
Total 100,000

Art Silk and Synthetic Weaving Industry

Art silk and synthetic weaving industry has developed over the time on cottage based
power looms units comprising of 8-10 looms spread all over the country. There are
approximately 90, 000 looms in operation of which 30, 000 looms are working on blended
yarn and 60,000 loom on filament yarn. Besides there are some mobile looms which
become operational on market demand. The major concentration is in Karachi, Faisalabad,
Gujranwala, and Jalalpur Jattan as well as in the unsettled area (Bara, Sawat, Khyber
Agency and Waziristan).

Source: APTMA, Economic Survey 2005-06

33
Installed/Production Capacities of Synthetic Fiber in Pakistan
Manufacturers
Installed Capacity (Metric
Tons)
A. Polyester Staple Fiber
1. Dewan Salman Fiber 265,000
2. Ibrahim Fibers Limited 209,000
3. ICI Pakistan Limited 115,000
4. Rupali Polyester Limited 23,000
5. Pakistan Synthetics Limited 27,000
TOTAL 639,000
B. Acrylic Staple Fiber
1. Dewan Salman Fiber 25,000

C. Viscose Staple Fiber

1. Chemi Viscose Fiber
10,000
Limited

Grand Total 674,000

Source: PSF Manufacturers (APTMA)

34
Spinning

Spinning is the process of converting fibers into yarn. The fibers may be natural
fibers such as cotton or manmade fibers such as polyester. Sometimes, the term spinning is
also used for production of manmade filament yarn (yarn that is not made from fibers).
Whatsoever is the case, the final product of spinning is yarn.

Spinning is the process of converting fibres into yarn. The fibres may be
natural fibres such as cotton or man-made fibres (MMFs) such as polyester. Sometimes,
term spinning is also used for production of man-made filament yarn (yarn that is not made
from fibres). Whatsoever is the case, the final product of spinning is yarn.

Cotton value chain starts from Ginning that adds value to it by separating cotton from seed
and impurities but Spinning can rightly be called as the first process of the chain that adds
value to cotton by converting into a new product i.e. conversion from ginned cotton into
cotton yarn. The importance of spinning cannot be overemphasized. Since spinning is in
the beginning of value chain, so all the later value added processes of weaving, knitting,
processing, garments and made-ups manufacturing are dependent upon it. If spinning
industry produces sub-standard yarn, its effect goes right across the entire value chain.

The spinning sector forms the heart of the textile industry. This sector produces yarn for
downstream sectors, namely weaving, processing and knitting. Pakistan is the third largest
player in Asia with a spinning capacity of 5% of the total world and 7.6% of the capacity
in Asia. Pakistan’s growth rate has been 6.2% per annum and is second only to Iran
amongst the major players. At present, cotton-spinning sector is comprised of 458 textile
units (50 composite units and 408 spinning units) with 8.8 million spindles and 77
thousand rotors in operation with capacity utilization of 87 percent and 49 percent
respectively, during July-Feb 2005-06

35
Weaving

Weaving sector is one of the most important textile sub-sectors. The exports of
woven fabrics and other related woven made-ups form a major portion of textile exports
from Pakistan.

There are three different sub-sectors in weaving i.e, Integrated, independent Weaving
Units, and Power Loom Units. Investment has taken place in shuttle less loom, both in
integrated and independent weaving sector. Further investment in this sector will be
forthcoming in the medium term.

Installed and Capacity Worked in Weaving Sector

Installed Effective/ Capacity
Category
Capacity Worked
(a) Integrated Textile Units 9050 4350
(b) Independent Weaving Units 27500 27000
(c) Power Loom Sector 295442 285442
Total 331992 316792
Source: Textile Commissioner Organization

The Power Loom Sector has modernized and registered a phenomenal growth over the last
two decades. The growth in power loom sector owes to a larger extent on the government
policies pursued this far as well as increased demand for the product. This sector is
producing comparatively low value added Grey Cloth of mostly inferior quality. Problems
of the power loom sector revolve mainly around the poor technology, scarcity of quality
yarn and lack of institutional financing for its development from unorganized sector to an
organized one. There is need for training facilities and guidance to diversify their products,
especially to cater the needs of the garment industry. However, the performance of cloth
sector remained in 2006 is far better than the year 2005.

A) Integrated Textile Mills

These are composite units with spinning and weaving operation at one premise. There
are about 50 integrated textile units with an installed capacity of about 9,050 looms.
Recent phenomenon of induction of Shuttle-less looms, viz. Projectile and Air jet
looms, in this sector is a healthy sign. As the pace of investment increases, the number
of modern looms in this sector is on increase. However, the textile millers still prefer
to set up an independent weaving unit rather than integrated ones.

B) Independent Weaving Units

This is a new segment of weaving units, which is in the process of coming up on the
same pattern as independent spinning units. Motivated by market demand and
government incentives as well as shift towards high quality fabrics, the entrepreneurs

36
 are establishing independent weaving units with shuttle-less looms. These looms are
both second-hand and new ones and employ the modern technology of Rapier,
Projectile and Air jet looms.

C) Power Loom Sector

The power loom sector has registered a phenomenal growth over the last two decades.
New automatic cop-change looms of local origin are being added. The trend is to add
wider width looms to produce cloth for exports. The growth of power loom sector has
been due to market forces. This sector is producing comparatively low value added
Grey cloth of mostly inferior quality

SUCCESS STORIES (TEXTILE)

Company Name Rs. in Million Rs. in Million Rs. in Million

Net Worth Net Income Net Profit
A.A. Textiles Ltd. 223.2 822.3 53.9
Ahmad Hassan Textile Mills Ltd. 209.8 659.4 101.8
Al-Abid Silk Mills Ltd. 352.3 2033.1 80.8
Al-Hamad Textile Mills 96.3 380.2 28.2
Allawasaya Textile 7 Finishing Mills 77.6 589.4 28.9
Ltd.
Apollo Textile Mills Ltd. 213.3 968.8 18.8
Artistic Denim Mills Ltd 321.2 917.2 55.4
Ayesha Textile Mills Ltd. 152.8 1211.6 118.2
Bengal Fibre Industries Ltd. 91.8 389.5 19.3

37
Bhanero Textile Mills Ltd. 325 1308.3 165.2
Blessed Textile Ltd. 215.8 693 116.4
Burewala Textile Mills Ltd. 337.9 431.1 60.5
Chanab Fiber Ltd. 108.6 478.6 47.8
Colony Textile Mills Ltd 96.4 683.3 147.7
Crescent Textile Mills Ltd 1425.9 4632.5 246
Dares Salaam Textile Mills Ltd 92.3 452.1 82.5
Dewan Khalid Textile Mills Ltd 254.7 560.6 31.9
Dewan Mushtaq Textile Mills Ltd 124.8 761.7 38.5
Dewan Salman Fibre Ltd 458.4 6723.7 514.2
Dewan Textile Mills Ltd 685.4 2282 121.6
Dilon Ltd 100.7 186.6 18.5
Faisal Spinning Mills Ltd 387.9 714.3 127.9
Fateh Textile Mills Limited 585.2 3636.2 21.9
Fazal Cloth Mills Ltd 257.5 1553 107.2
Gadoon Textile Mills Ltd 1332.5 3438.6 485.4
Gatron Industries Ltd 1709.6 4924.9 349.9
Gul Ahmed Textile Mills Ltd 1322 4516 558
Gulistan Spinning Mills Ltd 214.5 592.8 76.8
Gulistan Textile Mills Ltd 875.8 2323.6 120.2
Gulistan Spinning Mills Ltd 512.2 4373.4 99.8
Hussein Industries Ltd 276.1 1188.6 35.7
Ibrahim Fires Ltd 5138.1 6944.2 474.8
Ibrahim Textile Mills Ltd 239.9 1161.6 52.8
ICC Textiles Ltd 147 629 31.8
Ideal Spinning Mills Ltd 137.2 536.5 22.8
Indus Dyeing & Manufacturing Co 281.2 2184.7 134.6
Ltd
Ishaq Textile Mills Ltd 218.7 742.8 10.8
Khalid Siraj Textile Mills Ltd 144.6 367.4 46.5
Kohat Textile Mills Ltd 96.2 532.3 27.7
Kohinoor Raiwind Mills Ltd 525.4 1372.9 132.0
Kohinoor Textile Mills Ltd 502.8 2251.8 97.7
Kohinoor Weaving Mills Ltd 741.8 2140 308.7
Landmark Spinning Industries Ltd 121.2
Lawrencepur Textile Mills Ltd 245.6 298.7 29.8

38
Liberty Mills Ltd 193.3 1455.7 35.1
Mahmood Textile Mills Ltd 816.1 2936 421.3
Maqbool Textile Mills Ltd 146.7 640.7 34
Main Textile Industries Ltd 114.3 807.6 51.4
N.P. Spinning Mills Ltd 155.8 922.3 61
Nadeem Textile Mills Ltd 188.5 406.7 54.4
Nakshbandi Industries Ltd 262.6 1067.2 27.6
Nayab Spinning & Weaving Mills 251.6 413.5 12.3
Ltd
Nina Industries Ltd 352.3 892.4 16.3
Nishat Chunian Ltd 595.5 2367.0 357.5
Nishat Mills Ltd 4569.6 10134 700.9
Paramount Spinning Mills Ltd 286.6 830.7 3
Prosperity Weaving Mills Ltd 244 1141.1 78.5
Quetta Textile Mills Ltd 245.9 1792.9 110.4
Reliance Cotton Spinning Mills Ltd 236.1 701.3 40.3
Reliance Weaving Mills Ltd 313.4 1306.9 143.1
Rupali Polyster Limited 1374.1 2175.2 140.4
S.G. Fibre Ltd 417 808 66
Saif Textile Mills Ltd 506.1 1066 28
Samin Textile Mills Ltd 256.5 1012.9 32.1
Sapphire Fibres Ltd 1305.7 2499.6 500.9
Sapphire Textile Mills Ltd 1108.3 4128.1 650.2
Shahpur Textile Mills Ltd 161.2 416.6 24.6

CURRENT STATUS
Textile Industry in Pakistan

During the year 2006-07 the Textile Industry was confronted with problems both at local
and global level. The input cost impacted almost all sub sectors. In spite of that the
performance of Industry during the last five years has been satisfactory. The market was
responsive, the Government’s policy was supportive and inputs were viable. The industry
made profits and re-invested in new machinery for balancing, modernizing and

39
restructuring (BMR) and expansion. The industry made an investment of approx. $6.4
billion during the period 1999-2007. The major investment has been made in spinning,
weaving, textile processing and making up sectors Approx. 454,000 new direct jobs have
been created and industry has been able to make incremental production and exports.
Import of textile machinery, which is the single largest item in the machinery group,
picked up to $928.6 millions in 2004-05, $771.5 million in 2005-06, $503.0 million in
2006-07 and $281.7 million up to July- Feb. 2007-08 This shows that investment for
modernization of textile industry, which started four years ago, still continues. The
industry, however, needs to be facilitated to exploit its full potentials. The Textile Industry
in Pakistan has not been able to reap all benefits of quota phase out as compared to its
regional competitors. China, India and Bangladesh are posing tough competition by virtue
of their competitiveness in term of price and quality. Some sub-sectors of Textile Industry
have been impacted from the new trade development,
vis-à-vis cotton yarn and cloth, bed ware, garment and knitwear sector remained under pressure and
declined.

Table 3.2: Importance of Textile Industry in Pakistan’s Economy

2007-08 (July-Feb)

Share in Total Exports 53.8%

Share in Manufacturing 46%

Share in Employment 39%

Share in GDP 8.5%

Textile Exports $6.6 billion $6.3 billion

Investment in Textile $6.4 billion $7.0 billion

Source: Textile Commissioner’s Organization

Recent Initiative Taken to Support Textile Industry

Government of Pakistan has taken various initiatives to boost the textile sector and to make
it compatible with other global competitors in the quota free regime, these are:

• Establishment of separate Ministry of Textile to focus on textile issues.

• Amendments in labour laws and factories act to make them ILO and W.T.O compliant.

40
• A Campaign for the production of contamination free cotton was launched with
amendment in Cotton Control Act, 1966. As a result the foreign matter in cotton has been
reduced from 60gm per bale to 5 gm per bale.

• Gradual reduction of import duty on textile machinery to 5%.

• Sales Tax on the import and local supply of major inputs/raw materials utilized in the
manufacturing regime of textile industry, has been zero rated.

• Import duty on raw material, sub-components and components used in the local
manufacturing of textile plants and machinery for export sector has been reduced to zero%.

• Import duty on ginning presses has been reduced to 5%.

• Turn over tax has been reduced to 1% on retailers of specified textile fabrics and articles
of apparel including readymade garments or fashion wear. The 15% Sales Tax levied
earlier on retailer has been reduced to 2%. Both these taxes will be final tax liability.

• Custom Duty, Sales Tax and withholding 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.

• R&D support has been given to Garment Exports at 6%, Dyed/Printed & White, Home
Textile at 3% & dyed/printed home textile at 5% of the FOB value.

• MINTEX has launched studies by International consultants M/s. Gherzi to conduct a

study based on 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 in Pakistan.

• In order to meet the shortage of raw cotton, import of raw cotton was allowed from
Wagah Border

APTMA (ALL PAKISTAN TEXTILE MILLS ASSOCIATION)

All Pakistan Textile Mills Association (APTMA) is the premier national trade association
of the textile spinning, weaving, and composite mills representing the organized sector in
Pakistan. APTMA represents 360 textile mills out of which 292 are spinning, 40 weaving
and 28 composite units. These spinning mills have production facilities of texturing,
mercerizing, dyeing of yarns and manufacturing facilities from spinning to finished textile
products under one roof.

The total installed capacity of APTMA member mills accounts for 8,810,127 spindles,
65,580 rotors and about 10,000 looms. The Association's members produce spun and open-

41
end yarn, grey, printed dyed fabrics and bed linen.

Government Liaison

Government policies and plans at the federal level have a significant impact on textile
industry affairs. APTMA works
in close coordination with other national textile trade association and groups to safe guard
the interest of its members in particular and textile industry as a whole. APTMA's role to
supplement and complement overall industry activities is always motivated with interests
of yarn and cloth segments of the industry.

Specifically, APTMA is involved on a continuing basis in the areas such as import and
local procurement of cotton, cotton legislation, income and sales tax law, government
statistical programs, and customs regulations concerning textiles exports and imports.

Statistical and Economic Information

The Association collects and compiles statistical and economic data on the textile industry
mostly from a number of government sources and publishes Chairman's Annual Review to
keep Association members and other sectors related to the industry fully informed about
production and marketing trends in Pakistan and world. In addition, special reports are
developed periodically on specific subjects at the request of the various committees and
government agencies.

The Role of APTMA

As per charter and by-laws, aims and objectives of the Association are;
1. To encourage friendly feeling and unanimity amongst Textile Mill owners on all
subjects connected with their common good.
2. To secure good relations between members of the Association.
3. To promote and protect the trade commerce and manufactures of Pakistan in general and
of the cotton trade in particular.
4. To consider questions connected with the trade commerce and manufactures of its
members.
5. To collect and circulate statistics & information classify relating to the trade, commerce
and manufactures of its members.
6. To take all steps which may be necessary for promoting, supporting or opposing
legislative and other measures affecting the trade, commerce or manufactures of its
members.
7. To make representation to local, Provincial and Central authorities on any matter
connected with the trade, commerce and manufactures of its members.
8. To arbitrate in the settlement of disputes arising out of transactions, piece goods, yarn
and other manufactured goods between parties willing or agreeing to submit to arbitration
in accordance with the Arbitration Rules of the Association.
9. To advance and promote commercial and technical education connected with the trade

42
and commerce of its members.
10. To undertake special inquiries and initiate or support any action for securing the
redress of legitimate grievances connected with the trade or commerce of its members.
11. To take any action which may be conducive to the extension of the trade and commerce
of its members or incidental to the attainment of this object.
12. To subscribe, to become a member of and cooperate with any other Association
whether incorporated or not whose objects are altogether or in part similar to those of the
Association and to procure from or communicate to any such Association such information
as may be likely to forward the objects of this Association
13. To establish or aid in the establishment of funds to benefit employees of the
Association or the depending of such persons and to subscribe, donate or guarantee money
for charitable or benevolent purposes at the discretion of the Association.
14. To regulate conditions of employment in the industry conducted or carried on by its
members.
15. And generally to do all that may be necessary in the interest of the realization of the
above objects of the Association directly or indirectly.

The Organization

Association's Principal Office is located at Karachi and Regional Offices are at Karachi,
Lahore and Peshawar. The Principal Office functions under the administrative control of
the Chairman and Central Executive Committee. It deals with the affairs connected with
textile trade and industry effecting members relating to Federal Government, whereas
matters concerning Provincial Governments are dealt by the Regional Offices under the
direction of Regional Chairmen.
The Chairman and Vice-Chairmen from Regional Offices are elected by the members
annually and are charged with implementing the policies and program directives decided
by the Central Executive Committees. The Chief Operating Officer and Secretaries are
responsible for carrying out day-to-day affairs and programmes of the Association. The
Central Executive Committee continuously reviews the policies and programs of the
Association and establishes priorities accordingly.

Government Liaison

Government policies and plans at the federal level have a significant impact on textile
industry affairs. APTMA works in close coordination with other national textile trade
association and groups to safe guard the interest of its members in particular and textile
industry as a whole. APTMA's role to supplement and complement overall industry
activities is always motivated with interests of yarn and cloth segments of the industry.
Specifically, APTMA is involved on a continuing basis in the areas such as import and
local procurement of cotton, cotton legislation, income and sales tax law, government
statistical programs, and customs regulations concerning textiles exports and imports.
Several yarn industry executives serve on government advisory committees including the
State Bank of Pakistan, TDAP, Ministry of Commerce and Federal Board of Revenue,
Trade Policy Advisory Committee, and the Industry Sector Advisory Committee etc.

Statistical and Economic Information

43
The Association collects and compiles statistical and economic data on the textile industry
mostly from a number of government sources and publishes Chairman's Annual Review to
keep Association members and other sectors related to the industry fully informed about
production and marketing trends in Pakistan and world. In addition, special reports are
developed periodically on specific subjects at the request of the various committees and
government agencies.

The annual general meeting of the Association held each September is an important
component of APTMA's total program. Through this vehicle, industry members come to
know each other's issues/problems and have time to assess industry trends in an
atmosphere apart from day-to-day operations.
Committees

APTMA's activities and specific areas of interest are addressed through its Standing
Committees, chaired by an industry executive.

Committees (2008-09)

The committees are as follows:

Standing Committee on Raw Cotton
Standing Committee on Man Made Fibre & Synthetic Textiles
Standing Committee on Banking
Standing Committee on Energy
Standing Committee on International Trade / WTO / ADI
Standing Committee on Research & Development
Standing Committee on Legal Affairs
Standing Committee on Administration & Finance
Standing Committee on Image Building and Media Management
Standing Committee on Islamabad Affairs
Standing Committee on Value Addition
Standing Committee on Export Price Check
Standing Committee on Customs, Sales Tax & Industry
Standing Committee on Taxation

Membership

APTMA membership consists of partnerships and or individual proprietorships, which

operate machinery for spinning, dyeing, texturizing, twisting, or otherwise processing of
yarn, thread, or cordage, grey, printed and printed cloth and made ups for sale.
The expenses of maintaining APTMA's professional staff and offices are met from the
annual subscriptions and services provided to members. APTMA Principal Offices is the
central administrative organization, but each member has its own offices and governing
board.

For information about Membership, Chief Operating Officer of APTMA, Principal Office,
can be contacted.

44
 GROWTH OF TEXTILE INDUSTRY IN PAKISTAN: PROVINCE - WISE

Suggestions

APTMA suggested that powers to issue tax exemption certificates and carry out other tax related
business should be allowed to be handed by income tax officers at Karachi, Lahore, Faisalabad,
Multan, Peshawar and other cities where offices of the textile mills are located.

He also regretted that despite the assurances held out by the Governor State Bank of Pakistan
regarding withdrawal of Refinance Facility from Grey Fabrics, the issue is still hanging and the
exporters are disturbed and feel that this will seriously affect the exports.

It may be mentioned that government had announced withdrawal of refinance facility from Grey
fabrics in trade policy announced on June 29, 2000. To implement the decision SBP issued a
circular on June 30 excluding all types of cloth falling under Harmonized Code from the purview of
exports Refinance Scheme including Bleached, Dyed, Printed and Denim fabrics. Denim Fabrics is
a significant value added item.

When APTMA brought the issue to the notice of Governor SBP, he agreed and confirmed that
denim fabric is a value added item and assured to discuss the matter with the minister, however no
decision in this regard has been taken so far.

GLOBAL SCENARIO & COMPETITORS

Introduction
The present Global Scenario of Textile Industry with particular reference to the position of
Pakistan in the International Textile Market is given here for the interest of our readers.
The demand for textiles in the world is around $18 trillion, which is likely to be increased
by 6.5% in 2005. China is the leading Textile exporter of the world's total exports of US$
400 billion in 2002. Country wise major market shares of the textile exporting countries
are: China: $ 55 billion, Hong Kong:$ 38 billion, Korea: $ 35 billion, Taiwan:$ 16 billion,
Indonesia:$ 9 billion.
Though Pakistan has emerged as one of the major cotton textile product suppliers in the
world market with a share of world yarn trade of about 30% and cotton fabric about 8%,
having total export of $ 7.4 billion which accounts for only 1.2% of the over all share. Out
of this Cotton fabric is 0.02%, Made-ups is 0.18% and Garments is 0.15%.
This is mainly due to the laxity towards the promotion of value added sector. Pakistan
should learn a lesson from Bangladesh, which, by importing yarn and fabrics from
Pakistan and other countries, has increased the export volume of Textiles made ups. If we
desire to achieve the target of Textile Exports as envisaged in Textile Vision 2005, we will
have to promote Value added sector in Textiles.
Role of textile industry in national economy

45
Textile products are a basic human requirement next only to food. This industrial sector in
Pakistan has been playing a pivotal role in the national economy. Its share in the economy,
in terms of GDP, exports, employment, foreign exchange earnings, investment and
contribution to the value added industry; make it the single largest determinant of the
growth in manufacturing sector. Textile share of over all manufacturing activity is 46%,
export earning is 68%, value addition is 9% of GDP and as a provider of employment 38%.
In spite of the government's efforts to diversify exports as well as industrial base, the
textile sector remains the backbone of industrial activity in the country.
Textile Vision 2005

Textile Vision-2005 has been directed towards an open, market-driven, innovative and
dynamic textile sector, which is internationally integrated, globally competitive and fully
equipped to exploit the opportunities created by the Multi Fibre Arrangement (MFA).
Pakistan, at present, holds 8th position in textile exports in Asia. Pakistan can achieve the
5th position in Asia in the textile exports as has been targeted in the Textile Vision-2005.
The future of textile exports

After nearly four decades of derogation in GATT and imposition of quotas, unilaterally,
bilaterally, multilaterally and voluntarily, the trade in textiles will be integrated into GATT
on 1/1/2005 , meaning there will be no quota restraints on textile products, except possibly
in some categories for China's exports to the USA and EU as a result of China's terms of
accession to the WTO.
Strengths and weaknesses of
Pakistan?

The global export of textiles and

clothing, accounting for 6% of global
exports is estimated at $370 billion for
2003 of which the share of clothing is
$210 billion or 57%. This compares with
67% of
Pakistan's exports being accounted for by textiles and clothing valued at $7.4 billion for
2002-2003, having only 30% share for clothing. Yarn and cotton and MMF fabric alone
accounted for 34% .
The major players, vis-a vis quota are EU and the USA. How will Pakistan and other
competing countries fare post-quota regime depends on the attitude, mainly of USA and
the EU.
The 15 EU member states are to take in additional 10 members on 1st May 2004. These
countries are also relatively cheap textile manufacturers where the EU companies have
traditionally sub-contracted or relocated their units. While the EU 15 accounts for 20% of
world's import (second only to USA at 24% ) it is also the world's second largest textile
and clothing exporter accounting for 11% and second only to China.

46
The EU textile and clothing sector accounts for 4% of EU manufacturing and accounts for
7% of manufacturing employment in mainly 177,000 SMEs. With the enlargement, the
EU's employment in this sector will touch 2.5 million people.
Another potential threat to Pakistani exporters in 2006 or earlier if the EU looses its case in
the WTO is the withdrawal of 0% duty presently granted under the EU's GSP Scheme.
In the USA around one million people are employed in 5117 textile companies and 6134
textile plants. The Southern States, particularly North and South Carolina, Georgia,
Virginia and Alabama are strongly lobbying for protection of textile sector in USA. Since
the Asian crisis and WTO's ATC, over 250 textile plants shut down and the USA lost
around 200,000 jobs with 30,000 jobs lost since January 2002, mainly in the 5 states
mentioned above. Thus one can not expect easy ride into the USA after 2005 without
resistance. The major likely trend for USA for 2004 can be summed as following:

Net yarn exports and imports may be approximately $1.3 and $1.7 billion respectively; in
fabric imports may be $8 billion with exports less than $6 billion; in made-up articles, $9.5
billion may be imported, with less than $2 billion exports and in apparel, $7 billion of
exports against more than $63 billion of imports.
Like the EU, the USA will also concentrate on high tech textile products like non-woven,
particularly hygiene products like diapers, wipes, feminine hygiene and adult incontinence
and high end fashion, particularly for women's wear.
There is every likelihood that quotas on safeguard categories will be in force beyond 2005
for China and Vietnam. This will provide a breathing space to exporters in other
developing countries as well. For Pakistan, the competitor will not only be China and
Vietnam but also countries whom USA has given preferential treatment like NAFTA, CBI,
AGOA, etc. The USA has signed TIFA with Pakistan but it will not translate into
preferential duties for Pakistani textiles in the near future.
The USA and the EU will, on the one hand, demand better market access for their textiles
and also the implementation of WTO bindings, particularly in tariffs and intellectual
property rights and enforce strict rules of origin, while on the other hand the buyers will
make more demands for compliances. Pakistani exporters will have to be ready particularly
on account of chemicals and dyes, labour and environment compliance issues.
In case of USA, the security compliance may also put Pakistani exporters at a
disadvantage. The opportunities for Pakistan will be quota on China and Vietnam beyond
2005, closure of some EU and US companies dealing in basic textile, disadvantage to

47
countries like Bangladesh and Sri Lanka who thrived due to quota regime and finally, the
biggest advantage to Pakistan will be its vertically integrated cotton textile industry.
Pakistan's export of textile and clothing is expected to cross the $8 billion mark in 2003-
2004 from previous year's nearly $7.5 billion exports, present high price of cotton
notwithstanding.
If the Pakistan government and the private sector cooperate, the net balance is in favour of
Pakistan. Supply of yarn and fabric to exporters, both within and outside the purview of
DTRE should be treated as deemed exports for all purposes, production of MMF/Synthetic
should be encouraged, private sector be encouraged to stock-pile and have buffer stock of
cotton. The govt on the other hand should agree in the WTO to lowering of duties as it is
difficult for Pakistan to have FTAs/RTAs with any relevant countries and blocs.
Pakistan will also have to concentrate on lowering of its cost of doing business for which
the Ministry of Commerce and the State Bank has reportedly undertaken studies. Finally,
the three weakest links in Pakistan's textile chain, viz, ginning and dyeing and marketing
initiatives will have to be improved to take maximum advantage of it's potentials.
Bottlenecks & deregulation strategy for investment

1.Poor infrastructure
2. Over governed and over monitored regime of different 27 Government Agencies,
harassing the industry virtually every day.
3. Delay in sales tax refund causing serious cash flow / liquidity problem to the industry.
4. Pakistan's bad image portraited by the international media.
5. Adverse travelling advice by the foreign countries to their citizens discouraging travel to
Pakistan.
6. Pakistan to sign international agreements, providing protection to intellectual property
rights and international arbitration agreements.
7. Lack of infrastructure required to meet challenges of the requirement of social
compliances after 2004.
8. Non-availability of good quality soft water for the textile industry.
9. Negative impact of SRO's culture.
10. Not providing our industrialists and exporters level playing field to procure raw
material at the international rates viz-a-viz our regional competitors. Our utilities rates are
the highest in the region.
11. Arrangements to provide Insurance guarantees to U.S. investors on their investment in
Pakistan

WTO AND ITS IMPACT

The Cotton Arrangements (1961-1973)

Developed Countries in the decade of 50s faced a threat of closure of production facilities
in the sector leading to serious social problems. Hence in 1960, an agreement to allow

48
selective safeguard action was formed which was a fundamental departure from GATT
regime. In 1961 a Short Term Agreement was signed which was followed by the Long
Term Cotton Arrangement. It was a 5 year pact consisting of bilaterally agreed quotas and
unilateral safeguards. It was renewed in 1976 and 1970.

The Multifibre Arrangement (1974-1994)

MFA (like the Cotton arrangements) provided rules for the imposition of quotas, either
through bilateral agreements or unilateral actions. It extended the coverage of the
restrictions on textiles and clothing from cotton products to wool and man-made fiber
products. Under this agreement the developed countries were required to enhance their
quotas at the growth rate of 1% to 6%. MFA was used almost exclusively by the developed
countries to protect themselves against imports from developing countries.

MFA had 44 members which were less than half of the GATT members but accounted for
most members with an interest in textiles and clothing trade.

By 1994, MFA members were four importers (The US,EU, Canada and Norway) and some
30 developing exporting countries with a total of 1300 T&C bilateral importing quotas
which were negotiated bilaterally at short intervals often every year or so. Additionally the
growth rate of 6% in quotas was sharply reduced in practice. The Multifibre Arrangement
was a major departure from the basic GATT rules and particularly the principle of non-
discrimination.

MFA terminated on 31st December 1994 at the end of Uruguay Round upon the entry into
force of the WTO and its Agreement on Textiles and Clothing (ATC) on 1 January 1995.

Effects of the MFA

The garment industry was flourished in the developing countries using quota as an
instrument for market access. Additionally relocation of textile and clothing industry took
place towards less restricted or unrestricted exporters like Bangladesh. This shift in
production and export activity led to more wide spread restrictions on the part of developed
countries. It is because the more oversupply and the more restrictions demanded by the
producers at stake. This also led to the industrialization in the countries which gained
advantage because of the quota system under MFA rather than because of their
comparative advantage in T&C. Also under the MFA, export rights became scarce and
generated rents for internationally competitive suppliers. Hence most of the rents generated
under the MFA accrued to developing country exporters.

MFA…..a complete Failure

 Did not protect jobs in developed countries.

49
  Loss of consumer surplus in importing countries.
 Producers had to purchase quota rights (corruption).
 Production decisions based on quota restriction not on optimal economic
considerations.
 Led to oversupply and depressed world prices: loss to producers.

The WTO Agreement on Textiles and Clothing

(ATC) 1995-2004

The ATC is a transitional instrument, built on the following key elements: (a) the product
coverage, basically encompassing yarns, fabrics, made-up textile products and clothing; (b)
a programme for the progressive integration of these textile and clothing products into
GATT 1994 rules; (c) a liberalization process to progressively enlarge existing quotas
(until they are removed) by increasing annual growth rates at each stage; (d) a special
safeguard mechanism to deal with new cases of serious damage or threat thereof to
domestic producers during the transition period; (e) establishment of a Textiles Monitoring
Body (“TMB”) to supervise the implementation of the Agreement and ensure that the rules
are faithfully followed; and (f) other provisions, including rules on circumvention of the
quotas, their administration, treatment of non-MFA restrictions, and commitments
undertaken elsewhere under the WTO's agreements and procedures affecting this sector.

The product coverage, listed in the Annex to the ATC, covers all products which were
subject to MFA or MFA-type quotas in at least one importing country.

The integration process is laid down in ATC Article 2 and stipulates how Members shall
integrate the products listed in the Annex into the rules of GATT 1994 over the 10-year
period. This process is to be carried out progressively in three stages (3 years, 4 years, 3
years) with all products standing integrated at the end of the 10-year period. The first stage
began on 1 January 1995 with the integration by Members of products representing not less
than 16 per cent of that Member's total 1990 imports of all the products in the Annex. At
stage 2, on 1 January 1998, not less than a further 17 per cent was integrated. At stage 3,
on 1 January 2002, not less than a further 18 per cent will be integrated. Finally at the end,
on 1 January 2005, all remaining products (amounting up to 49 per cent of 1990 imports
into a Member) will stand integrated and the
Agreement terminates. Each importing
Member decides itself which products it
will integrate at each stage to reach these
thresholds. The only constraint is that the
integration list must encompass products
from each of the four groupings: tops and
yarns, fabrics, made-up textile products
and clothing.

50
 MFA P h a s-oe u t in 4 s ta g e s
W TO
R e s t r ic te d te x t ile
T ra d e d ue to
q uo t a s
F ree world
trade?
1 The former MFA quotas, when carried over into
N o : T a r iff
J a nua ry 1 995 s til l a l lo w e d ! the ATC on 1 January 1995, represented the
starting point for an automatic liberalization
In t e g r a ti o n ’s of a t
2
process set out in Article 21, paragraphs 12-16.
L e a st 1 6 % o f th e
i m p o rt v o lu m e o f
J a nu a ry 1 998
1 99 0 f o r t e x ti l e s
a n d c l ot h in g
3 The former MFA growth rates applicable to
In te gra t io n o f a no t he r
17% o f th e 1 99 0 J a n ua ry 2 002 each of these quotas were increased on 1
I m p o r t vo lu m e
4 January 1995 by a factor of 16 per cent for the
In te gra t io n o f
a no t he r 1 8 % J a n u a r y 2 0 05
first stage of the Agreement and the new growth
T o ta l in te g ra t io n o f arate
ll was applied annually. The stage 1 growth
te xt ile a nd c lo t h in g
rate was further increased by a factor of 25 per
cent for the second stage on 1 January 1998; and
will be increased by a further 27 per cent for the
last stage beginning 1 January 2002. To
illustrate this process, a 6 per cent growth rate
under the MFA in 1994 became 6.9 per cent under the ATC and applied each year
1995/96/97; then it was increased to 8.7 per cent for each year 1998/99/2000/01; and then
will be increased to 11.05 per cent for 2002/3/4.

Article 3 deals with quantitative restrictions (or measures with similar effect) other than
those under the MFA. Members which had such restrictions in place, which could not be
justified under a GATT provision, were required either to bring them into conformity with
GATT rules or phase them out within the ten year transitional period, according to a plan
to be submitted by the restraining Member to the Textiles Monitoring Body. There is no
obligation to eliminate restrictions that are permitted under GATT rules.

A key aspect of the ATC is the provision in Article 6 for a special transitional safeguard
mechanism intended to protect Members against damaging surges in imports during the
transition period from products which have not yet been integrated into GATT and which
are not already under quota. This clause is based on a two-tiered approach - first, the
importing Member must determine that total imports of a specific product are causing
serious damage, or actual threat thereof, to its domestic industry and second, it must then
decide to which individual Member(s) this serious damage can be attributed. Specific
criteria and procedures are set out for each step.

Article 5 of the ATC contains rules and procedures concerning circumvention of the
quotas through transshipment, re-routing, false declaration of origin, or falsification of
official documents. These require, inter alia, consultation and full cooperation in the
investigation of such practices by Members concerned. When sufficient evidence is
available, possible recourse might include the denial of entry of goods. There is also a
provision whereby all Members should establish, consistent with their domestic laws and
procedures, the necessary legal provisions and/or administrative procedures to address and
take action against circumvention.

1
For summary on ATC please sea Annex 2

51
Provisions relating to the commitments undertaken in all areas of the Uruguay Round as
they relate to textiles and clothing require that all Members “shall take such actions as may
be necessary” to abide by these rules and disciplines so as to achieve improved market
access, to ensure the application of fair and equitable trading conditions and to avoid
discrimination against textiles and clothing imports (Article 7).

The Textiles Monitoring Body has been established to supervise the implementation of the
ATC and to examine all measures taken under it, to ensure that they are in conformity with
the rules. It is a quasi-judicial, standing body which consists of a Chairman and ten TMB
members, discharging their function on an ad personam basis and taking all decisions by
consensus. The ten members are appointed by WTO Member governments according to an
agreed grouping of WTO Members into constituencies. There can be rotation within the
constituencies. These characteristics make the TMB a unique institution within the WTO
framework.

Critical Issues in ATC

Developed importing countries have fulfilled their ATC commitments by integrating more
than the required imports volume into GATT? WTO rules. But they were able to do so
without dismantling most of the existing quotas and by using the non-quota products from
the lists. Table A shows that out of 1325 original quotas, only 219 have been eliminated in
the first seven years of integration process and consequently the remaining 1106
(approximately 83% of the original number in 1995) would have to be removed during the
remaining years.

Table A: Number of Quotas Eliminated in First Two Stages

WTO Member Total no. of T&C Stage 1&2 Early Elimination Total Eliminated
Quotas Quotas
USA 757 45 11 56
EU 219 55 0 55
Canada 295 54 0 54
Norway 54 3 51 54
Source: Council of Trade in Goods, 2005

Although the required percentages of products to be integrated had generally been met , the
integration program had been constructed in such a way that the products being integrated
were not products that would be commercially meaningful for poor countries, e.g., ties ,
tents, etc.. Developing countries expected progressive liberalization in all the four groups
indicated earlier including T&C during the life of the ATC. Contrary to their expectations,
developed countries have mostly integrated low value-added yarns, fabrics and textile
made-ups, which are also imported from developed countries.

PROBLEMS CURRENTLY FACING THIS SECTOR

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There are currently a multitude of major issues facing Pakistan. Of these issues, the
economic crises are perhaps the most palpable to the average Pakistani. Below, Abida
Mukhtar, a consultant currently based in Lahore, Pakistan, discusses the current problems
with the Pakistani textile industry:

However, the textile industry currently faces massive challenges. The All Pakistan Textile
Mills Association (APTMA) needs to enhance the quality of its products, upgrade the
technology used, and encourage effective Research and Development (R&D) in order to
compete internationally. However, APTMA argues other factors such as high interest rates
and cost of inputs, non conducive government policies, and non-guaranteed energy
supplies hinder their competitiveness.

Critics argue that the indolent attitude of the industrialist in the 1990s has led up to the
current crisis. If the textile industrialist had worked with the government towards
implementing policies that prepared for the current international scenario, Pakistan textile
industry would have boomed. Instead, the industry suffers from ‘severe technological
obsolescence,’ insufficient R&D, falling cotton crop, and an unclear path forward.

The lack of R&D in the cotton sector of Pakistan has resulted in low quality of cotton in
comparison to rest of Asia. Because of the subsequent low profitability in cotton crops,
farmers are shifting to other cash crops, such as sugar cane. In Punjab alone, the cotton
area sown this season was less by 1.14 percent as compared to the last year. Textile owners
argue that although the Cotton Vision 2015 targets 20 million bales till 2015, it is an
ambitious target as in reality cotton production is decreasing each year. It is the lack of
proper R&D that has led to such a state. They further accuse cartels, especially the
pesticide sector, for hindering proper R&D. The pesticide sector stands to benefit from
stunting local R&D as higher yield cotton is more pesticide resistant.

Moreover, critics argue that the textile industry has obsolete equipment and machinery.
The inability to timely modernize the equipment and machinery has led to the decline of
Pakistani textile competitiveness. APTMA has highlighted that the Pakistan textile
industry faces tough competition from the Indian, Bangladeshi and Chinese textile
industries and local policies have resulted in Pakistani textiles facing a critical condition.

For instance, Bangladesh, India and China enjoy comparatively low interest rates than
Pakistan. The prevailing rates are as following, 8.5 to 9.0 per cent in Bangladesh, 5.25 per
cent in India (market rate is 10.25 per cent, however exemption of 5 percent is provided to
the textile industry) and 5.58 per cent in China. Meanwhile, in Pakistan, the last three to
four years has seen the interest rates to have risen more than 150 percent, to 13.25 percent.
The increase has essentially crippled the small time textiles owner, while seriously
hindering growth of the textile tycoons. This has led to textile owners accusing the
government and banks for maintaining detrimental policies. I believe that it is imperative
that the new government takes actions that have a positive impact on the industry as textile
provides employment to approx 38 per cent of our working class. A coherent plan should
be devised by the Pakistani government that allows some sort of exemption/concession

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such as in India; the Export-Import Bank was set up for the purpose of financing and
facilitating the industries, especially textile.

Industrialists also argue that the non-guaranteed supply of power by WAPDA (Water and
Power Development Authority) is another problem that negatively affects the textile
industry. Although, some textile units have built their own energy generating plants to cut
cost (these units run on gas), small units production depends entirely on the electricity
supply of WAPDA. The textile industry suffered heavy financial losses in Dec, Jan and
Feb quarter, because of the inconsistent electricity supplies. The lack of production
subsequently resulted in the industry not meeting its target for the quarter, massive
financial losses were borne by textile owners and sadly, it hit the most vulnerable: workers
on daily wages. Their frustration was observed recently, when the WAPDA and MEPCO
(Multan Electricity Power Company)offices in Multan, were torched by daily wage
workers, Textile owners as well as workers passionately assert that the inconsistent
supplies have and are destroying business across Pakistan. They also highlight that the high
cost of the utilities has making Pakistani textile uneconomical in the international market.

All things considered, it is apparent that the Pakistani Textile Industry is facing an
uncertain environment. The increase in input cost of minimum wage by 50 percent,
increasing interest rates, non-guaranteed energy supplies, lack of R&D and reduction in
cotton production has had a negative impact on the industry’s competitiveness
internationally. In order to sustain the Textile Industry, the new Pakistani government has a
tough task ahead and needs to urgently implement a suitable long-term strategy that
provides a level-playing field against their regional competitors.

CHALLENGING ISSUES
• The Pakistan textile industry is currently facing several challenges. According to
experts, there is a need for the industry to improve the quality of its products

• There is also the need for greater value addition in its products.

• The technology that is in use in the industry leaves a lot to be desired. It is

necessary that the industry undertake an up gradation in the technology used. Also,
there is lack of efficient R&D and training.

• The Pakistan textile industry is facing tough competition from the Indian,
Bangladeshi and Chinese textile industries. The cost of power in Pakistan is high

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 • On account of these reasons, the Pakistan textile industry is going through a
critical condition.

CURRENT ISSUES
Committee to reschedule textile loans

Yet another committee is being formed by the government to bring depressed and
demoralised textile tycoons and concerned and worried bankers on one forum to discuss
repayment schedule of outstanding loans, interest rate and other related issues.

“We are waiting for a letter from Pakistan Banks’ Association (PBA) anytime on
resumption of consultation,” a top leader of All Pakistan Textile Mills Association
(Aptma) informed Dawn on Saturday.

The Aptma leader said the recent decision of one year moratorium was by the State Bank
of Pakistan, while restructuring of outstanding loans and interest rates were to be settled
with commercial banks for which the committee was being formed.

But the recent decision to offer one-year moratorium to export-oriented industries on loan
payment has apparently failed to cheer up the textile tycoons who want a more
comprehensive financial package to solve their problems.

One reason for disappointment is that the moratorium is for only downstream textile sector
and the most capital-intensive segment of textiles — spinning -- has been kept out of
benefit net. Secondly, it does not answer all issues of textile sector which to quote a top
exporter is groaning under unbearable cost of doing business.

“One year moratorium on payment of my principal amount will not solve my problems,”
the textile exporter remarked. He has just returned disappointed from Frankfurt’s
Heimtextil fair and his bitterness is understandable.

He wants banks to bring down interest rates, gas tariff be linked with fuel oil price, and
that there should be a cap on gas and electricity tariff for at least next three years.

More than 200 textile mills are said to be struggling hard to survive the impact of almost

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19 to 20 per cent interest rates on bank loans, tariff hike of gas and electricity with frequent
long period interruptions in supply, high freight cost and demand of a drastic price cut on
textile products from their buyers in the US and EU.

But bankers are also equally worried and concerned and are said to be making “polite and
friendly enquiries” formally as well as informally from their “sources in textile companies”
on cash flow, business status and profitability prospects.

“Textile sector did not perform up to expectations in 2006 and 2007 after getting more than
Rs30 billion subsidy and concession in swapping of expensive loans with concession rated
loans,” recalled a banker.

Bankers say the non-performing loans portfolio of textiles sector in the year 2007 was
Rs51 billion after having shown a high growth of 25 per cent over 2006. No firm figures of
textiles related NPLS for the year 2008 are available but rough estimates put it anywhere
from Rs80 billion to Rs100 billion. Total exposure of textiles to banking sector is being
estimated at around Rs300 to Rs350 billion and bankers fear further increase in infection to
loans given to textile companies.

Textile industry leaders now do not mince words in demanding relief in loans repayment
from banks and an implied threat is “no relief no adjustment” suggesting that NPLs in
coming days may swell to such a huge amount that it may give a crippling blow to the
banking industry itself.

Designed to cater almost 80 per cent of its products to export market mostly to the USA
and EU, textiles is hard pressed after recent economic meltdown in the major trading
partners, where erosion in personal incomes is said to have drastically brought down
consumption level, resulting in closure and shrinkage of giant retail store chains.

Textile leaders complain that India, China, Bangladesh, Indonesia, Thailand and even tiny
Vietnam have taken steps by way of offering some incentive package to their local textile
industry maintain their stay in world textile export market.

But Pakistan’s decision makers have remained oblivious of problems of textile industry. In
less than one year, since March 2008, there have been three commerce ministers, two
finance ministers and now an adviser on finance and two textile ministers in federal
cabinet.

Enviirronmentt and tthe Texttiille IIndusttrry off Pakiisttan

The processing industry in the textile value chain holds an important position as far as
value addition is concerned. Garments and made-ups comprising the downstream
industry rely heavily on the processing sector for the provision of value added fabrics

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and materials. Unfortunately the processing segment also is the most susceptible area
that can be effected by global environmental regulations regime. More than 650 units
are in operations majority of which operate at a small and medium sized scale. These
units carry out processes including:
Bleaching of Fabric
Dyeing and finishing of fabric
Printing and finishing of fabric
The major area of concern for the textile processing sector is wastewater. Textile
processing is a water intensive process. Almost1 .08-0.15 m3 of water is consumed to
produce one kilogram of finished fabric, translating into 1,000-3,000 m3 of wastewater
generation per day against a production of 12-20 ton/day of finished fabric. Currently
the wastewater generated by the industry is discharged into the local environment
without any treatment that serious negative effect on the environment. A wide range of
chemicals are used by the processing industry for dyeing and printing operations.
These include bleaching agents, vat dyes, azo dyes, sulphur dyes, disperse dyes and
colour pigments, which are manufactured by using chemicals such as formaldehydes,
hydrochloric acid, ammonia, chromium salt, soda ash, caustic soda, sodium sulphate,
sulphuric acid, etc. Extensive usage of these chemicals by the processing industry
results in discharge of toxic elements as effluents, which if not treated properly have
the potential to cause significant environmental degradation.

Characteristics of Wastewater (Textile Processing in Pakistan)

Parameters Prevailing Ranges NEQS Limits
Biological Oxygen Demand (BOD) 120-440 80
Chemical Oxygen Demand (COD) 300-1,100 150
Total Dissolved Solids (TDS) 200-5,000 3,500
Total Suspended Solids (TSS) 50-240 150
PH Value 8-11 6-10
Oil and Grease 10-45 10
Chromium 0.5-2.5 1.0
All values in parts per millions (ppm), except pH
Source: ETPI effluent survey

The above mentioned table clearly depicts the status of existing effluents discharged
by the textile processing industry. The prevalent ranges of almost all the parameters
exceed the limits prescribed in the National Environment Quality Standards (NEQS).
In certain cases the minimum prevalent limits, such as BOD and COD, are much
higher than the maximum limits prescribed in the NEQS.
1 The Textile Sector, Environmental Report by Environment Technology Programme for
Industry

Similarly if individual processes are evaluated and compared with NEQS, there exist
agreat deal of discrepancy between the prevalent parameters of effluents as regards
torecommended values. Certain processes generate greater degree of pollution as

57
compared to others. In dyeing, mercerising and bleaching the values of COD, TSS,
andTDS by far exceed the NEQS recommended values. This effluent when
discharged ineither the sewerage system which finally is thrown into rivers, etc or
discharged in ground water reservoir can play havoc with the eco-system.

Recommendations:
The major problem for the textile sector is its lost competitiveness in the global market.
The main reasons for that are lack of awareness of global trends and changing rules and
regulation. For example, the textile sector could no anticipate the post WTO conditions.
The other problem was the reinvestment and introduction of the latest technology. As the
competitors like Vietnam, China, Bangladesh, which have excelled in the textile sector and
have succeeded in gaining more market share. Also the sector didn't focus on the emerging
trend of the value additions. Due to the strategic geographic position, country could have
take advantage of the value addtion.

For the future, the sector first should concentrate on lowering the cost of production, thus
making it more competitve in the world market. To do this, huge capital investment is
required. And just intoducing the capital only is not the solution, the sector also need to
carry the strategic management in its policy formulation, so that the strengths of the sector
can be identified and can be used to take advantage to capitalize on any opportunies. The
labor also be trained to comply to the international regulations by the importing countries.

1- Remedy though FDI

As the result of measures taken under vision 2005, the fiscal year 2002-03 witnessed
tremendous inflow of investment in value added expansion and BMR. FDI in textile sector
during last four years has reached to US$4 billion which has led to improvement in
productivity, both in terms of quality and quantity, in yarn, fabrics, home textiles and
garments, besides generating more than 300,000 new jobs. However, the investment
volume is not satisfactory as compared with the potential available in our Textile Sector.
There is also an urgent need to set benchmark investment requirements for the creation of
new capacity and up-gradation of the existing production base.
2- Image Building of Pakistan to Attract FDI

The Ministry of Commerce, Ministry of Foreign Affairs and The Board of Investment
should launch Joint Campaign to build positive image of Pakistan as a quality textile
product supplier and to facilitate the international buyers in Pakistan
3- Focus on Value Addition

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Pakistan is a leading exporting nation in raw yarn, cotton, and fabrics. If we emphasis on
the value added products like garments, Hosiery, knitwear and other textile made-ups, the
export volume of textiles can be increased by manifolds. In this respect top priority should
be given to stitching industry that leads to highest value addition and employment
generation.
4- Creation of Ministry of Textiles instead of Textile Board

The Government of Pakistan has established a high powered Textile Board for the
promotion of Textile Industry as envisaged in Textile Vision 2005 but its performance is
not up to the mark. It will be quite productive if the long-awaited demand of Private Sector
regarding the creation of a Ministry of Textile is met on priority basis.
5- Technology Up-gradation & capacity building

The establishment of Textile Cities in major Cities of the country is an appreciable move.
Government should either set up joint ventures in textile related areas or should provide
subsidized credit to textile manufacturers to upgrade their technology and capacity
building through 'Technology Upgradation Fund'. (TUF). It is also suggested that smaller
units of power looms (up to 50 looms) should be upgraded to auto looms and power loom
units larger than 50 looms into air jet looms.
6- Human Resources Development

The Textile Board should establish a separate training wing as a Center of Human
Resource Development where training courses should be conducted for the capacity
building of labour. There is also urgent need to increase the number of such Vocational
Institutions where modern technical education is provided.
7- Accreditation and Certification

We are fast approaching an era of Free Trade Regime, which requires standadization
complied with WTO regulations. At present due to non-availability of testing laboratories,
Pakistani exporters have to spend huge money to get certification from abroad. If WTO
recommended Labs were established in Pakistan a lot of valuable foreign exchange could
be saved. Ministry of Commerce and BOI should set up such laboratories so that the
exporters can get these standards at comparatively competitive prices.
8- Reducing the cost of doing Business in Pakistan

At present cost of doing business in Pakistan is higher as compared to the regional

countries, which has resulted in bitter competitiveness to Pakistani Products in Foreign
Markets. China and India are the bigger competitors of Pakistan. We fear if cost of doing
business in Pakistan is not brought at par with other Asian countries, our products would
find no place in Market both in terms of quality and price. In the context of future trade,
there is an urgent need to bring all the utility charges and levy of taxes down to the
minimum level.

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