Product, market diversification for textile suggested

Sunday, January 03, 2010
By Mansoor Ahmad

LAHORE: Structural imbalances in textile chain, limited product range and a small export market have kept the textile sector on its toes but it still accounts for over 56 per cent of the country’s total exports.

A study by The News reveals textile accounts for only 5.6 per cent of global trade. Economists since long have been urging the planners to explore other (94 per cent) avenues of global trade of which engineering alone has a share of over 60 per cent.

However keeping in view Pakistan’s meagre exports there is a large scope to exploit even the textile market and triple or quadruple its exports because the country, having little less than 2 per cent share in the global textile trade of around $540 billion, has the potential to grab a much larger share. The planners and entrepreneurs would have to undertake reforms quickly to exploit the potential.

To start with, Pakistan would have to enlarge its product base. Currently, the global trade is dominated by blended textile products in which the ratio of manmade fibre to cotton is 80:20. In Pakistan, it is the other way around. Pakistan’s textile products on average use 80 per cent cotton and 20 per cent manmade fibre.

The local industry has the machinery and state-of-the-art equipment to produce a complete textile range. However, its wings were clipped when the government guaranteed a 10-year high-duty protection to a multinational investor for establishing a polyester plant. The protection made it impossible for the textile industry to compete globally in blended textiles.

Besides that, local entrepreneurs have confined themselves to exploring markets in few countries like the US, European Union, Canada and Japan which account for only 20 per cent of global population. Eighty per cent of the global clothing market is still untouched by Pakistani exporters. Instead of waiting for the government, textile tycoons should arrange handsome funds for exploring new markets.

Another point worth noting is that 80 per cent of the textile produced in the country is exported in one form or the other, though with very low value addition. The domestic market accounts for only 20 per cent of the textile produced in the country. Entrepreneurs are denied the domestic market because of under-invoicing, smuggling and massive import of used goods.

However, other countries like India and China enjoy 75-80 per cent share in their domestic markets and 20-25 per cent of their production is exported. This shields their textile industries from depression in the global textile market. Pakistan’s textile sector is extremely vulnerable to any loss to its export market.

Structural balances in the industry are severe. The spinning industry has 25 per cent more yarn producing capacity than can be weaved in the country. Thus, the country exports 25 per cent of yarn, the low value added textile product. Ideally, all yarn should be converted into fabric.

The country does not have the processing and finishing capacity for the fabric it produces from the remaining 75 per cent yarn. The result is that of the $1.8 billion worth of fabric, 33 per cent is exported as grey at a very low price.

In fact, Pakistan should not export fabric as well but convert it into value added items like clothing and home textile.

But the country has a very small clothing industry. Top five clothing units put together are smaller in size compared to garment industries in Bangladesh.

The clothing sector would grow if the 80 per cent global market, which is out of reach due to imbalance in use of manmade fibre, is explored.