Textile, being one of the major components of the Pakistan economy, makes up around 8.5 per cent of GDP and contribute around 60 per cent to the country’s total exports.
However, the sector underperformed during the last few years, owing to the intermittent power outages, high manufacturing costs and the lack of research and development (R&D) work.
The cost of doing business has significantly increased in the last couple of years’ that not only resulted in trimming of earnings, but also made it difficult for the exporters to compete in the international market, especially with the regional peers.
The industrialists make alternative arrangements with additional costs because of the power and gas shortages. During the last few months, momentum has been built, while the new government should make efforts to support the textile sector through ensuring uninterrupted power and gas supplies at affordable rates.
Besides, the exporters were confronted with certain other challenges such as shortage of containers and unavailability of vessels. These problems are manageable, but the constant rise in fuel prices adversely impacts the businesses. Pakistan exports a diverse range of textile products from raw cotton to readymade garments, but the textile sector exports remained on the downward trajectory.
The Textile Policy 2021/25 aims at increasing exports to over $25 billion by 2025 and $50 billion by 2030 against $16.05 billion, at present, but achieving these ambitious targets remained a gigantic challenge for the new government.
The global textile trade was recorded at $610.19 billion with a compound annual growth rate (CAGR) of 6.6 per cent. China dominated the global market for textile sector exports, accounting for over 32 per cent of exports worth $266 billion. Currently, Pakistan’s share is 1.7 per cent in the world textile trade, which is likely to be increased to 3 per cent and the world’s textile exports are expected to reach $843.35 billion by 2025.
The new government, after coming into power, needs to take tangible measures by promoting high value-added products such as readymade garments and knitwear to get the attention of the foreign buyers.
Since 2020, the Covid-19 pandemic has played havoc with the Pakistan economy, and, at the same time, it has offered a window of opportunity to tap the actual potential of the textile sector after substantial value addition. This is only possible if the upcoming government makes efforts to overcome the challenges the sector is confronted with.
Analysts expect the earnings of textile companies to remain robust in the near term with the rupee depreciation and higher offtakes, as the global economies started reaching the pre-Covid levels and could keep the sector in the limelight. Hence, a bullish stance on the sector can be taken where any dip in the prices will provide an opportunity to take exposure in textiles.
Another factor that needs immediate attention is the use of innovative tools so that the country can maintain its share in world trade. Pakistan needs to enhance the world share through innovation and research and development. Similarly, Pakistani textiles have the longest production chain with inherent potential for value addition at each stage of processing from cotton to ginning, spinning, fabric, processing, made-ups and garments.
The textile sector is facing immense problems due to the inconsistent and inefficient policies of the successive governments and needs immediate attention to overcome such challenges.
The analysts believe the textile industry should focus on the quality and volume of the raw material, i.e., cotton, whose quality is very poor. Over the last two decades, the area under cotton cultivation has reduced. The problem is not only the reduction in the cultivation area, but also contamination and poor quality.
To increase cotton production, the farmers should be provided high-yielding seeds, which will bring more profitability. Provision of such seeds is possible after necessary research and innovation regarding the seed quality is carried out. To realise the true potential of the sector and to improve the quality of cotton, there is a dire need to invest in machinery, enhanced skill set and product development, while consistent and efficient government policies will help achieve this target.
Pakistan lacks linkage between research organisations and industry, which resulted in a low quality of cotton in comparison to the rest of the region. Owing to low profitability, the farmers are shifting to other cash crops. The rupee depreciation, increasing interest rates, double-digit inflation, and the rising cost of doing business and raw materials have also placed major obstacles against the country.
The next government would have to take immediate initiatives to safeguard the domestic industry, which is the highest foreign exchange earner and provides employment opportunities to the people. In this highly competitive world, the textile sector of Pakistan needs to improve supply chain, productivity and maximise value-addition for survival.
