41907164-diamond-porter-textile-pakistan

Term Paperon

Diamond Porter Analysis of Textile Industry of Pakistan – A Comparative

Advantage

By

Amna Alvi

Term Report – Diamond Porter Analysis of Textile Industry of Pakistan

Table of Contents

Introduction – Textile Industry and Pakistan

o Historical Background

o Current Situation

Competitive Advantage

o Diamond Porter Model

Literature Review

o Competitive factors Confronting Pakistan’s Textile Industry

Conclusion

o SWOT Analysis of Pakistan’s Textile Industry

Policy Implications

Reference


Introduction

Over the years, Pakistan is said to be the single crop economy i.e. cotton and textile that

claims the lion's share in terms of the contribution in the national economy of Pakistan.

Despite efforts to bring in diversification in country's overall economic get-up the textile

sector continues to be the most important segment of the national economy. Its share in

the economy, in terms of GDP, exports, employment, foreign exchange earnings,

investment and revenue generation altogether placed the textile industry as the single

largest determinant of the economic growth of the country.

Despite harsh international economic conditions, Pakistan's textile industry has weathered

the storm by coming out of the international crisis in a very positive manner. During the

year 2006-2007 exports were controlled from falling and significant investment was made in

value-added expansion and in Balancing-Modernization- Replacement (BMR) (Latif, 2000).

About 10 percent of the world cotton crop is produced in Pakistan, making it the fourth

largest producer in the world. The textile industry currently accounts for almost 67% of

Pakistan's exports, 20% of value-added production and employs 35% of manufacturing

labor.

Made of premium quality Cotton, the textile fabrics of Pakistan are distinguished for their

quality, texture, lustrous colour and rich combination of superior designs and competitive

prices.

That is why this sector have been chosen to analyze what are the obstacles that are

affecting the textile industry of Pakistan in achieving competitive edge over other

economies of the world.

Textile Industry and Pakistan – The innate relation:

Textiles, all fabrics made by weaving, felting, knitting, braiding, or netting, from the various

textile fibres. Textiles are classified according to their component fibers into silk, wool, linen,

cotton, such synthetic fibers as rayon, nylon, and polyesters, and some inorganic fibers, such

as cloth of gold, glass fiber, and asbestos cloth. They are also classified as to their structure

or weave, according to the manner in which warp and weft cross each other in the loom.


Value or quality in textiles depends on several factors, such as the quality of the raw

material used and the character of the yarn spun from the fibers, whether clean, smooth,

fine, or coarse and whether hard, soft, or medium twisted. Density of weave and finishing

processes are also important elements in determining the quality of fabrics. The weaving of

carpet and rugs is a special branch of the textile industry1.

Since its inception, Pakistan has its roots in being an agrarian state with indigenous cotton

supply. In 1947, two textile mills were established in the country as a colonial heritage.

However, the Pakistani textile industry has played a crucial role in the country’s industrial

development. Pakistan’s Industrialization began in 1950 with the textile industry at its

centre2.

Over the time, textile industry have depleted due to various complexities. The difficulties

faced by textile industry were partly due to limited focus of the players and partly due to

globalization. (Meier, 2007) During 1984-1990 many of the spinning mills did not go for

upward integration as raw cotton suppliers were adamant in bringing down the prices. And

so with the globalization and ease of trading these intermediaries find it more profitable for

themselves to export primary goods. Having a look at the exports composition of that time

we can see it mainly comprised of yarn, unbleached fabrics, and low quality made-ups that

did not create much demand in the international market. Ideally, Globalization was a mean

to reallocate units and resources, get maximum advantage, and highest value addition, to

attain competitive edge. Nevertheless, Pakistan failed to attract much investment while

other countries reallocated their units to cheaper countries such as Indonesia and Thailand.

Current Situation3:

Pakistan is the world’s 4th largest producer and 3rd largest consumer of cotton. The Textile

and Clothing Industry has been the main driver of the economy for the last 50 years in terms

of foreign currency earnings and jobs creation. The Textile and Clothing Industry will

continue to be an important engine for future growth of the economy; there is no

alternative industry or service sector that has the potential to benefit the economy with

1 Amna Alvi (2005), ‘Textile Industry of Pakistan – An Overview’

2 Akbar Zaidi, ‘Issues of Pakistan Economy’

3 Economic Survey of Pakistan (2010)

http://www.answers.com/main/ntquery;jsessionid=2e6fvt4uwc6io?method=4&dsid=2040&dekey=carpet&curtab=2040_1&sbid=lc04b


foreign currency earnings and new job creation, especially if synergy is developed amongst

different sub sectors and efforts are made to aggressively grow the Ready Made Clothing‐ ‐

Sector. Pakistan’s Textile Industry had proved its strength in global market during the last

four decades. It has proved its strength even in post quota era by not only sustaining its

position but, also showing growth during 2005 to 2007, but declined to $11.1 billion in 2008

due to financial and economic melt down globally. The Garment Sector & especially the Knit‐

Garment Sector need special focus in future policies.

It has an overall integrated structure with an important indigenous cotton crop, increasing

man-Made Fibre production, large spinning, weaving, and knitting, dyeing/printing and

finishing capacities as well as expanding garment and home textile industries.

Structure of Textile Industry of Pakistan Source: Textile Commissioner Organization (July 2006)

The Textile & Clothing trade has increased, from US$ 212 Billion in 1990 to US$ 612.1 Billion

in 2008. The clothing trade is growing at a faster rate. Pakistan exported textiles worth

$7.19 Billion and clothing worth $3.9 Billion in 2008. The year 2009 was dismal period. The

industry was confronted with problems of multiple natures. The global economic crisis in

Oct. 2007 had impacted the trade badly. Weaker demand in the developed economies

limited the expansion of global trade. The 12% drop in the volume of world trade in 2009

was larger than most economists had predicted. World trade and output are currently in a

recovery phase. The WTO Secretariat estimates that in year 2010 world exports in volume

terms will grow by 9.5%, developed economies’ exports will expand 7.5%. The current


decline in exports of all manufactured goods including Textile & Clothing is visible in the

quarterly data.

Source: Economic Survey of Pakistan (2010)

US imports of textiles and clothing fell for the second year in succession in 2009, by 7.5% to

46.6 billion square meters equivalent (SME), following a 5.2% drop in 2008—which was the

first decline since 2001. Within the 2009 total, fabric imports fell by 5.4%, imports of apparel

by 6.1%, imports of made up textiles by 8.5% and yarn imports by 18.4%. Of these four‐

categories, apparel continued to account for the highest share of total imports. The average

price of US textile and clothing imports fell for the first time in three years in 2009, to a new

low of US$1.74 per SME.

The period of heavy investment boom in most Textile Industry segments between 2003 and

2007 came to an abrupt end in 2008. This investment boom until 2007 was due to the phase

out of traditional quota regime under WTO – Agreement on Textile and clothing and China’s

integration into WTO structures. Global yarn and fabric productions were continuously

falling since the second quarter of 2008. Despite challenges, there are fundamental aspects

that promise a bright future for the textile industry in general.

Competitive Advantage:

Theory of Competitive Advantage can be traced back to the initial development of

Economics as a separate discipline. Classical Economist such as Adam Smith, Thomas

Malthus, and specially David Ricardo gave immense attention to producing what the nation

is best at and then take advantage of that edge through free trade.

However, all these economists talked about factor endowments (such as Land, Labour, and

Capital) and macroeconomics for the growth and development. Using these factors

effectively would give a country an edge over others.


With the further development of study of Economics and overall economic condition of the

world with massive industrialization and liberalization of trade, classical macroeconomic

theory was insufficient to explain the growth and development of some countries that

lacked the availability of the factors, of the kind mentioned in the theories. Some

economists of that time started to take into consideration other factors that could play

pivotal role in a country’s growth such as Technology, capital-labour ratio etc. Still, no one

thought about giving it a micro level look.

This is what Michael Porter discovered and came up with the six forces model, through

which any country can determine its strengths, weaknesses, opportunities and threats

(SWOT) and then put these into consideration before making any decision. The Diamond

Porter Model so called because the six factors collaboratively work together to give a

country a picture of where it is standing.

Diamond-Porter Model:

Diamond Porter Model is presented by Michael Porter in his book ‘The Competitive

Advantage of Nations’. It helps in understanding the competitive position of a nation in the

global world.

Michael Porter integrated some knowledge of industrial economics and business strategy to

come up with a comprehensive solution to complex problems in competitiveness. He

believed that macroeconomic stability itself does not guarantee prosperity and so tried to

give competitiveness a constantly evolving micro framework unlike macro overview of

traditional theories. He clearly distinguished between the competitiveness of the firms from

that of nations. In contrast to traditional theories of comparative advantage which focuses

on country’s factor endowments of land, labour and capital, the diamond porter theory

attempts to look at factors affecting immediate business environment and productive

capacity of firms; factor input conditions, demand conditions, firm strategy and rivalry, and

the presence of related and supporting industries. According to this theory, the process of

economic development is about improving this diamond so as to achieve higher and

sustainable productivity.


The traditional theories talk about labour specialization and efficient use of available

sources and economies of scale through large scale production; however in view of diamond

porter model the process of specialization cannot be done with one firm, a cluster is needed

that results in efficiency gains. He gave examples of many cluster initiatives that has driven

competitiveness to a new level including Silicon Valley, Financial Services in New York, and

the Hollywood entertainment cluster. Regarding the role of government in this model is to

act as a catalyst, establishing macroeconomic stability and providing stable political, legal

and social institutions to help companies improve their competitive position.

To measure level of competitiveness, Porter introduced Business Competitiveness Index

(BCI) and Growth Competitiveness Index (GCI). BCI captures a country’s standard of living

and a broad perspective about quality of microeconomic environment where as GCI sketch

out economic dynamism pointing towards quality of public institutions and macroeconomic

environment. Both indices though highly correlated are individually critical to the measure

of quality of micro and macro dimension of the economy.

Hence from the diagram it can be clearly seen what six forces have comprised the Diamond

Porter Model:


i) Factor Conditions – Factors of Production such as physical resources, human

resources, capital resources and Infrastructure (Special resources can be created to

compensate for factor disadvantages)

ii) Demand Conditions – both in the domestic and foreign market

iii) Related and Supporting Industries – Supply chain industries (Upward and Downward

linkages e.g. providers of raw material, distributors etc)

iv) Firm Strategy, Structure, and Rivalry – Organizational goal and presence of intense

rivalry

v) Government – Government interventions can affect all of the above factors at local,

regional, national and supranational or international level

vi) Chance – factors that are outside the control of a firm

“A firm is profitable if the value it commands exceeds the costs involved in creating the

product. Creating value for buyers that exceeds the cost of doing so is the goal of any generic

strategy. Value, instead of cost, must be used in analyzing competitive position ...” (Ibid)

To attain the competitive advantage, Michael Porter has catalogued three types of generic

strategies through which competitive advantage can be pursued. These strategies are:

a) Cost Leadership – Firm sets out to become the lowest cost producer in the particular

industry (price wars)

b) Differentiation – Firm seeks to be the best performer in the industry (having a special

attribute in the product or service that others do not offer)

c) Initiative Focus – Firm looks to exploit a niche market (targeting a group within the

market of that industry and create loyalty)

The strategies vary according to the position of the industry in the diamond analysis besides

its organizational structure and culture. For example if a country’s industry is lying in the


factor conditions that is it has advantage over factors of production, then cost minimizing

strategy proposed by the Porter would be the plan to maintain its competitive edge.

Literature Review


In this section, the reviews have been organized according to the factor forces of the

Diamond Porter Model.

Diamond Competitive factors Confronting Pakistan’s Textile Industry:

i) Factor Conditions:

As Textiles and Apparel cluster involves diverse set of activities requiring different of

inputs, a detailed analysis of factors conditions across the value chain is required.

The recently announced increase in the minimum wages of the workers has left the

industries with higher cost of production. Once having an edge over cheap

availability of labour, Pakistan no longer holds this competitive advantage since

labour in Bangladesh and Vietnam are more low-priced (Hoekman & Winters, 2005).

And so the costs faced by the industry have largely offset the advantage of cheap

labour. The following diagram4 pictures the factor conditions over the value-chain.

According to a study of Pakistani textile and apparel sector (Raptis, 2009) some of

the garment units were over-staffed by 57 per cent. That was an internal negative

4 Diagram is extracted from one of my previous Assignments during Bachelors of Business Administration (2005)


factor whereas external factors included no duty-free market access to the EU and

negative image and perception of Pakistan abroad.

“Labour productivity is very low. Our regional competitors take 75 minutes to

complete and produce one piece of cloth whereas we take 133 minutes for the same

work. We also waste 30 percent in finishing and 12 percent in washing.”

(Mirza Ikhtiar Baig)

Moreover, the textile looms and other equipments have become obsolete due to

insufficient timely investment and modernization. One of major reason might be the

rising interest rate which has crippled the small investors and made them risk-averse

(Mukhtar, 2008). So, with inadequate capital, textile industry is unable to equip

efficient machineries for effective production. Although in the current fiscal year,

investments in the import of new textile machineries have shown a gradual increase5

(14.2%), showing better trend for future.

The companies are downsizing, production units are shutting down; around 500,000

of the workers have already lost their jobs. After surviving from the load-shedding

scenario the industry has yet to survive the gas load shedding scenario. LESCO has

informed the industry that it would not supply power for the additional load and

only the sanctioned load will be supplied during the winter months (Fayyaz, 2008).

According to Pakistan textile industry association, 90 percent of Pakistan's textile

industry is losing money losses and facing closure. More than two months of

production has been lost due to power cuts and gas shortages.

The lack of Research and Development in the cotton sector of Pakistan has resulted

in low quality of cotton as compared to rest of the South Asia (Mehta, 1996).

Subsequently, due to low profitability in cotton crops, farmers are shifting to other

high return cash crops such as Sugarcane. In Punjab alone, the cotton sown in 2008

was less by 1.14 percent relative to that of last year.

Gaps in skill set of labour force only add to the problem of low productivity. Informal

apprenticeship mechanism (Shagirdi) is the dominant form of skill transfer which

5 Economic Survey of Pakistan (2010)


eventually leads to inconsistencies in product quality. Ultimately, these inhibiting

factor conditions, such as low quality of raw material, poor technology and

insufficient skills, lead to low value addition and high defect rates. For example, 40%

of exported fabric was grey in 2000—an indicator of low value addition. Similarly,

the defect rate at the processing/printing stage was 10% (SMEDA, 2000).

ii) Demand Conditions:

Due to higher costs of production in Pakistan relative to Bangladesh and India,

Pakistan has lost much of its market since it was unable to provide good quality

cheaper raw material. Yet, Pakistan has cheaper inputs of production as compared to

other countries of the world. Owing to the undiversified value added textile goods,

Pakistan does not have a vast network of trading partners. Only a limited number of

markets have been explored with limited number of customers. Some of its trading

partners are: USA, European countries, Middle-East, Hong-Kong, Singapore, and

Thailand etc.

Pakistan has a very low share of the international textile market. China tops the US

market with a share of 36 percent followed by Bangladesh 21 percent, India 18

percent, and Pakistan 13 percent. Additionally, in the European market, China tops

again with a share of 29 percent, Vietnam 28 percent, India 19 percent, and Pakistan

only 1.5 percent (Baig, 2009).

However, on the bright side of current events, because of a global shortage in

availability of cotton, largely due to a shortfall in Chinese crop, the foreign demand

for Pakistan’s cotton yarn has risen exceptionally in the current fiscal year of 2009-

10. Chinese, in particular, have procured huge quantities of yarn from Pakistan, even

though they are the fiercest competitor of Pakistan in the world market. Textiles are

exported in the form of Yarn, Fabric, Readymade Garments, and Bed Wear & Made

Ups. Past Global Export performance of Pakistan’s textile can be viewed in following

table.

Export of Textile and Clothing (Us $ millions)


1990 2000 2004 2005 2006 2007 2008

World Textile 104,354 157,295 195,541 202,657 220,367 240,364 250,198

World Clothing 108,129 197,722 260,569 276,802 309,142 345,830 361,888

Total 212,483 355,017 456,110 479,479 529,509 586,194 613,086

Pakistan Textile 2,663 4,532 6,125 7,087 7,469 7,371 7,186

Pakistan Clothing 1,014 2,144 3,026 3,604 3,907 3,806 3,906

Total 3,677 6,676 9,151 10,691 11,376 11,177 11,092

% of World Trade 1.73% 1.88% 2.01% 2.23% 2.15% 1.91% 1.81%

Source: Ministry of Textile-09

After the reduction in the quota in March 2010, local production and demand has

been improved but that has not contributed in the windfall gain due to rising costs of

production and loss of production units due to laying-off of workers and load

shedding.

iii) Related and Supporting Industries:

The growth of related industries in the textile cluster has largely taken place in the

informal sector in a very haphazard manner. There are examples of organic

clustering but a conscious effort on the part of industry players or government to


promote a cluster based approach have always lacked. Generally, the capacity of

related and supporting industries is often weak with some exceptions. Such as,

Faisalabad—one of the largest textile producing cities in Pakistan gives a good

examples of organic clustering and interconnection amongst the members. The

upward and downward linkages of the textile firms come under this caption.

Spinners, weavers, looming sector, jute etc are examples of the downward linkages

of the firms that provide raw materials to the firms; whereas Apparels Garment,

Towels, Hosiery etc are all examples of the upstream (textile made-ups) industries

that add value to the yarn. These industries play a vital role in providing employment

opportunities for minority (women). Some of these ancillary industries are

operational at both large scale, and small and medium scale level (Rehman, 2010).

Source: (Islam, 2006)

A few of these industries can be briefly discussed as follows:

a. Cotton Spinning Sector: The Spinning Sector is the most important segment in

the hierarchy of textile production. At present, it is comprised of 521 textile

units (50 composite units and 471 spinning units) with 10.1 Million spindles

and 114 thousand rotors in operation with capacity utilization of 89 percent

and 60 percent respectively, during July – March, 2008 09.‐

b. Cloth Sector: The objective is to convert yarn into grey cloth that can be later

dyed according to the demand. However, this often has resulted in weaving

of low quality cloth due to variety of problems including poor technology,

scarcity of quality yarn, lack of communication facilities, and lack of

institutional financing for its development from unorganized sector to an

organized one.

c. Textile Made-up Sector: This is the most dynamic segment of Textile Industry.

The major product groups are Towels, Tents & Canvas, Cotton Bags, Bed‐

Wear, Carpets and Hosiery & Knitwear & Readymade Garments including

Fashion Apparels. If efficiently functioned, this sector can earn huge profits

for Pakistan through value addition.

iv) Firm Strategy, Structure, and Rivalry:


Most of the firms are operating at small and medium level also termed as cottage

industries, making the textile industry highly fragmented. Another important

characteristic of the textile industry is that firms are largely dominated by family

owned businesses which although may ensure trust and cost minimization but it also

adheres that government supports may rest in the hands of selected few who has

the power to control major part of the textile products (Islam, 2006). Additionally,

some lobbyists exist in the current systems, who are engaged in practises that would

give them discretionary power to control input prices, making it expensive for the

firms. They can deliberately form a cartel to create artificial shortages to raise the

prices for higher windfall gains. Firms do not only face competition from rival firms,

rather rivals also include smuggled goods. Most firms in the textile industry of

Pakistan have adopted cost cutting strategies so that they could charge competent

prices. Major players6 of the textile industry of Pakistan are as follows:

a. Pakistan Textile Industries –

Abdullah Apparels (Pvt.) Ltd

Afroze Textile Industries (Pvt.) Ltd

Al-Karam Textile Mills (Pvt.) Ltd

Crescent Garment Industries (Pvt.) Ltd

Baig Spinning Mills Ltd

Dawood Cotton Mills Ltd

Dewaan Textile Mills Ltd

Al-Ameen Denim Mills (Pvt.) Ltd

Ishaq Towel Factor

Feroze Textile Mills (Pvt.) Ltd

b. Textile Industry Associations –

All Pakistan Textile Mills Association-APTMA

Pakistan Cotton Ginners Association

All Pakistan Cloth Exporters Association

Towel Manufacturers Association

6 Extracted from the website of APTMA (www.aptma.org.pk)


Pakistan Readymade Garments Manufacturers and Exporters

Association

c. Agriculture Universities and Colleges –

Pakistan Agricultural Research Council/ National

Agricultural Research Centre

Nuclear Institute for Agriculture and Biology

Central Cotton Research Institute Multan

National Textile University

Textile Institute of Pakistan

Pakistan Institute of Fashion Design

Garment Weaving and Finishing Institute

d. Textile specific Research and Development Institutes –

Pakistan Central Cotton Committee

Textiles Commissioners Organization

Pakistan Cotton Standards Institute

v) Government:

Due to imposition of high duties, Pakistan’s textile has no choice but to raise its

prices. Pakistan is purchasing cotton at higher prices with the additional 15% duty on

its import. And then along with the rising costs of production and government’s

contemplation, to charge export duty to ensure local availability of yarn, have made

it impossible for Pakistan to compete against other major players of textile in the

global market such as China, Nepal, Bangladesh and India. As a result of this, 50

textile units have been shut down because of the declining and negative profits of

the textile firms (Ahmed, 2010).

Despite of this, the tightening on monetary policy and corresponding expansion of

the fiscal policy have drastically increased the interest rates, due to which firms are

lacking the availability of capital and credit. And for up gradation of the obsolete

textile units, more capital investment is needed.


Subsidies provided by the government are inefficient to bring a trickledown effect to

the lower level workers. This could be the reason of inefficient, un-willing and un-

authoritative role of government, and high levels of corruption.

According to the current status, government has taken some initiatives to reduce the

cost of doing business by introducing export loan scheme by the name of Long Term

Financing of Export Oriented Projects (LTF-EOP); marketing and business facilitation

through Expo centre and exhibitions by Export Promotion Bureau to attract potential

buyers from all over the world; and for infrastructural development Special Export

Zone has been setup in Karachi called as Textile City, Garment city has been

established in Lahore, Faisalabad and Karachi, and Skill development institute have

been initiated to train workers in the production of contamination free cotton

(Meier, 2007).

vi) Chance:

Pakistan’s textile industry has had many opportunities to explore new markets and

penetrate into largest market segments than the current concentrated one.

However, what seems to be lacking is the will power of the firm owners. They always

have this opinion that government should provide them tax credits and subsidies so

that they could have more capital at hand for re-investments. By improvising on the

quality of cotton yarn and fabric, Pakistan can reduce its costs, improve its exports

and gain its comparative advantage over other countries.

Conclusion

SWOT analysis of Textile Industry of Pakistan:


It can be inferred from the literature that Pakistan is laying at the first force, i.e. Factor

Conditions with limited or insufficient focus on other forces. And so, to attain competitive

advantage the appropriate strategy according to Porter Model would be Cost minimizing

Strategy. By Cost-minimizing strategy the textile industry of Pakistan would be in a better

position to compete in the world market and can then proceed to the next level i.e. product

differentiation strategy to increase the product and market base. For further examination of

what can be inferred from the study about the textile industry of Pakistan, SWOT analysis is

done. SWOT will draw a picture of the industry as a whole about its strengths, weaknesses,

threats and opportunities.

i) Strength

Largest foreign exchange earner

Largest employer of Labour force

Availability of low-cost Labour and Land

Abundant in raw material (particularly Cotton)

Availability of low-cost machinery

Major part of textile goods are from man-made fibre rather than synthetic one

ii) Weakness

low-price image and reliability

Incompetent marketing

Noncompliance to Environmental and social regulation

Inadequate infrastructure, including power, water

Poor road network not able to provide foundation for a dynamic industrial sector

Deficient technology and outdated machinery leading to low productivity and

poor quality

Lack of considerable up gradation of human resource skills


Poor coordination among cluster players

Lack of finance and capital to small enterprises

iii) Opportunities

The state-of-the-art facilities at the Textile City which is being set up at Karachi, is

a good opportunity to help increase production and competitiveness of textile

products

Enhanced market accessibility for Pakistan Textile products in the Global Market

Rising cost of China’s cotton due to excess of demand, is an opportunity for

Pakistan to take advantage of high priced world market price

With technological advancements, the textile industry can ensure

uncontaminated good quality cotton and cloth

Pakistan is abundant in man-made cotton fibre that assures good quality cloth.

But the firm owners and investors must think of ways synthetic textiles can be

made so as to control the rising prices of raw material

The Textile Asia Exhibition provide opportunities to SMEs, especially who instead

of having the need to go abroad and see various markets themselves are able to

interact with all foreign delegates, industrialists present here and showcase their

products

Textile engineering sector will generate employment opportunities. There is

ample scope for qualified engineers in mechanical, electric and electronics

disciplines to boost this sector

iv) Threats

Declining world share in export of textile products means Pakistan is losing some

markets in the hands of others


Limited Value Addition and low product differentiation

Endemic issue of Political and Social volatility in the country

Poor governance would repeal the Foreign Direct Investments

India and China are giving hard time to Pakistan in terms of advancements in

technological innovation with strong engineering process

Insufficient investment in infrastructure and workforce would result in efficiency

loss and create impediments in future as well

Lack of quality production would make customers switch to other countries

reducing the market segment

Rise in prices of inputs due to IMF policies, would further deteriorate the

condition

Policy Implications

The need for improving business environment cannot be overemphasized. Without

improving the country’s image, enhancing the effectiveness of legal and regulatory

institutions, and upgrading the physical infrastructure, direct incentives to local and foreign

investors are less likely to yield desirable results. The current government is well cognizant

of this need and has shown some visible progress in the macroeconomic management to

restore the confidence of investors and businesses. However, there is need to do more on

improving the governance side.

Key Challenges faced by Textile Cluster

Factor Conditions• Availability of quality raw material• Lack of skills• Poor technology

Demand Conditions• Increasing sophistication of demand e.g. product and process standards• Increasing global competition

Related and Support Industries• Gaps in the quality of local supplies• Poor coordination among cluster players• Lack of finance to small enterprises

Context for Firm Strategy & Rivalry•Highly fragmented and unorganized sector• Cumbersome regulatory procedure• Very low foreign direct investment


i) Addressing the Country Level Challenges:

Following steps are needed to address the critical issues that the country as a whole

is facing:

Restore the autonomy of legal institutions

Bring reforms in government agencies

devise and launch a global communication program with the help of

international media to improve the image of the country

Encourage private sector, increase public expenditure, and work with

international institutions such as the World Bank and Asian Development Bank to

improve the infrastructure particularly Energy by exploiting the huge

hydroelectricity and coal-power potential available in the country

Diversify the export portfolio by facilitating the development of multiple clusters

particularly in the areas of logistics and communication, medical devices,

horticulture, and tourism


ii) Addressing the Cluster Level Challenges:

As noted before, the current government has taken some very important steps to

upgrade the Textiles and Apparel cluster in Pakistan.

The emphasis of newly instituted policies and programs is to increase the

productivity and unit value realization through increase uptake of better

technology

Greater value addition and product diversification

Need for greater involvement of other actors by developing a shared vision such

as supporting industries and IFCs to accelerate the progress

iii) Involvement of Private Sector and other IFCs:

A transition from the existing low-end product concentration towards a more

diversified one

High unit value product portfolio through easy access to quality raw material,

technology up gradation, skill development, and R&D in product and process

development

A further shift towards facilitative role of government through enhancing its role

in financing R&D in product and process development, promoting public-private

partnerships, and reducing the barriers to trade

As textile sector is the major foreign exchange earner, therefore we should

increase our exports by improving both the quality and quantity to meet the

challenges of the post quota era

We must increase the quantity by increasing the capacity of the existing mills and

also by opening new textile mills. We should also improve the quality of the

existing machines

APTMA and the government should join hands for bridging the skill gap as there

was a need to promote public-private partnership in this regard to achieve the

desired results


Regular National Exhibitions can be very helpful in bringing out the skills, the

range of products and opportunities of group collaboration. It will help the

planners and large scale engineering industry in defining the way for developing

skills in order to make this sector strong and viable

The Ministry of Textiles Industry needs to be founded on active private-public

collaboration. It should be consumer-friendly and services-oriented

The Pakistan Government also needs to focus on the country’s image building in

the global market and Pakistan Consulate in various countries need to play their

pivotal role rather than enjoying the Foreign Service benefits at the cost of the

tax payers

Another resolution demanded that knitwear classes should be introduced in the

National Textile Engineering College, Faisalabad, so that hosiery products of

international standard could be produced

Stressed is laid upon the government to direct authorities concerned for

installing master treatment plants in industrial areas so that effluent released by

factories could be utilized for irrigation purposes

The tariffs should be reduced to control the prices of textile goods

Reference

Ahmed, S. (2010, July 16). Pakistan - Over 50 Textile Units closed in 2 Months. (T. Nation,

Interviewer)


Baig, M. I. (2009). (T. News, Editor)

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41907164-diamond-porter-textile-pakistan

Documents

pakistani textile industry

textile fabrics of pakistan

textile mills

textile sector

textile industry1

clothing industry

alternative industry

various textile fibres