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:
The Pakistan textile industry contributes more than 60 percent to the country’s total exports that sum around 5.2 billion US dollars. The industry contributes approximately 46 percent to the total output produced in the country. In Asia, Pakistan is the 8th largest exporter of textile products. The contribution of this industry to the total GDP is 8.5 percent. Moreover, it provides employment to 38 percent of the work force in the country, which amounts to a figure of 15 million.
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 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, [see related post]. 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.