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Apr 12, 2023

Analyzing Pakistan's textile industry through the 5F's framework

Pakistan's textile sector must embrace change, harness innovation, and establish

Pakistan's textile sector must embrace change, harness innovation, and establish itself as a trusted source of textile products. The industry can secure its rightful place and unlock its true potential by taking collective action and implementing proactive measures.

|Shahid Sattar and Amna Urooj

Pakistan's policymakers have been consistently formulating excellent policies to address challenges in the country's industrial sector. Still, these have been fruitless due to non-continuity and lack of implementation (Khan 2016). While some policies may yield short-term benefits, however, to gain traction, they often lack sustainability in the long term.

To navigate the complex and rapidly changing landscape, the textile industry can be viewed through the 5F's framework. This framework enables companies to analyze the entire value chain, from Farm to Fiber to Factory to Fashion to Foreign stages, and identify areas of strength and weakness to stay competitive.

It is particularly relevant in a market where consumer preferences, technology advancements, and sustainability considerations are paramount. We will examine this article through the lens of the 5F's framework to identify issues and problems within the sector and formulate policies for mitigating the identified issues.

Lack of fiber (Cotton and PSF) have reduced or closed operations of many factories as both these fibers were to be imported in large quantity in an environment where L/C's were not being opened or honored. This brought to focus the extremely urgent need for establishing a reliable local supply of cotton and PSF to avoid such situations in the future.

Pakistan's cotton farming, which is crucial to the textile industry, faces daunting challenges due to climate change, rising temperatures, unpredictable rainfall, and water scarcity resulting in lower crop yields and diminished quality. As a consequence, cotton production and productivity has reached a 40-year low. This situation not only jeopardizes farmers’ livelihoods but also threatens the sustainability and profitability of the entire textile industry.

Pakistan's low cotton yield and production costs the country approximately $4.0 billion annually, along with a much higher impact on GDP. Imports of cotton worth $5.0 billion in the past three years highlight the need for increased domestic production to reduce reliance on imports and lower the cost of edible oil imports as an important byproduct of cotton is oilseed.

Read more: The Case for Export-Led Growth

Despite challenges, some progressive cotton farmers achieve a yield of 1500 kg/hectares, emphasizing the potential for productivity improvement. This highlights the potential gains that can be achieved through better seed and crop management. Support for edible oil crops and addressing productivity issues are crucial for the cotton industry.

To ensure the long-term sustainability of the textile industry, Pakistan must prioritize the adoption of suitable seed varieties for the sector. By doing so, the country can secure the future of its textile industry and mitigate the adverse impact of climate change on cotton farming.

Ensuring the availability of adequate raw materials/fiber for Pakistan's textile production is crucial for sustained growth, requiring measures such as promoting domestic cultivation, exploring alternative sources, and fostering international collaborations. Textile mills in Pakistan are instrumental in the cotton-to-fiber transformation, supporting high-quality textile production.

To sustain growth and expand market opportunities, the industry needs to tap into the global synthetic textiles market by aggressively entering the industry and accessing raw materials at competitive prices. However, challenges such as high protection rates and tariff structures hinder Pakistan's progress in the synthetic textiles sector. The government may implement trade facilitation measures by abolishing import duties on PSF, enabling the industry to diversify and thrive in international markets.

In terms of sustainability, some textile mills in Pakistan are taking proactive steps to promote eco-friendly practices. They are introducing innovative fabric ranges, such as Radianza fiber, which employs environmentally friendly dyeing processes to reduce water consumption and pollution.

Read more: Falling textile exports in Pakistan

Additionally, larger companies are championing recycling and reuse by offering recycled textile products like "Premium," "Indigo," and "Blue," which are made from post-industrial, pre-consumer, and post-consumer waste, respectively. By reducing the carbon footprint through these recycled products and developing biodegradable polyester, Pakistan's textile industry contributes to a more sustainable and environmentally conscious future. However, an increased R&D in this area is required which definitely requires an increased budget.

Unconventional materials such as Hemp and Banana leaves are increasingly being used in textiles due to their sustainability and eco-friendliness. These natural materials offer durability, breathability, and biodegradability, making them attractive alternatives to traditional textiles. Pakistan should also invest in such innovative yet sustainable fibers.

Investing in human capital is vital for the industry's sustainability. Ongoing training and education for textile workers and engineers are essential to stay updated on technology and production advancements. The industry also offers vocational training to attract young individuals into the field.

Efforts to modernize textile factories and enhance working conditions in Pakistan should be the top most priority. The government needs to focus on policies for energy efficiency and cost reduction, while private investors may invest in advanced machinery and technology to improve production efficiency and quality.

Enforcement of labor laws, strengthening of labor inspections, and protection of workers’ rights is a prerequisite for an exporting industry. Effective implementation of the 27 labor and human rights conventions is crucial as Pakistan's current GSP plus status will be reviewed in December 2023. Factory owners should commit to reform and implement the requisite conventions. Revisions to labor laws, impartial investigations, and increased resources for inspections are needed. Companies should implement transparency, collective initiatives, and grievance redress procedures to improve the situation.

Read more: Inclusive and green pathways crucial for Pakistan's industrial progress

The infusion of approximately $5 billion in the textile sector enhanced textile exports to reach $25 billion by 2025 through the establishment of 100 new textile units, accompanied by significant upgrades in value addition to meet market demands. Regrettably, the investment has failed to achieve its potential due to various factors.

These factors include difficulties in opening letters of credit (L/Cs), challenges related to the supply and pricing of energy (both gas and electricity), the high policy rate (currently standing at 21%), liquidity crises, complications regarding cotton imports and the release of shipments, obstacles concerning the refund of sales tax, and issues associated with the markup rates of the Long-term Financing Facility (LTFF).

To ensure the success of such policies and investments, adopting a comprehensive approach that encompasses enhancing capacity in all relevant areas is crucial, enabling the policy to yield fruitful results.

Pakistan's rich culture is rooted in the traditions and history of its people, showcasing a unique way of life, ideas, and ethics. The clothing in Pakistan, influenced by its diverse regions like Punjab, Sindh, Balochistan, Khyber Pakhtunkhwa, Kashmir, and Gilgit Baltistan reflects the cultural heritage of these areas. The clothing culture and fashion is a significant aspect that distinguishes each regional culture, incorporating elements of climate, lifestyle, and distinctive styles that contribute to their distinct identity.

Despite this beautiful diversity, Pakistan's fashion industry has not exploited its true potential as of yet. The fashion products and apparel industry are expected to exhibit dynamism and diversity. Despite challenges, the country's textile industry holds significant potential to become a global fashion player. Abundant raw materials and a skilled workforce position Pakistan as a major producer and exporter of high-quality fashion products.

Investment in design and marketing is crucial to enhance the visibility and appeal of Pakistani fashion products. To address the perception of mediocre quality associated with products from Pakistan, manufacturers and designers should concentrate on creating innovative designs that appeal to a specific niche. This niche refers to a targeted segment of consumers who are willing to pay a higher price for textile products from Pakistan when they perceive added value, such as superior craftsmanship, unique aesthetics, or exclusive materials.

Read more: Beyond the needle & thread: Women's empowerment through textile exports

By catering to this discerning niche market abroad, the textile industry in Pakistan can achieve higher profitability and overcome negative perceptions. Effective marketing campaigns and initiatives are necessary to promote Pakistani products successfully and maximize their market reach and impact. Pakistan's textile industry has the potential to establish a strong foothold in the Western fashion sector. Immediate implementation of effective marketing campaigns is essential to capitalise on this opportunity.

The industry can thrive with strategic investments and initiatives and sustained policy implementation. Trade barriers, such as tariffs, hinder Pakistan's textile exports. The government must thoroughly review policy to align our exports with global requirements.

This should involve negotiating free trade agreements and expanding market access to ensure our products can effectively compete globally. By doing so, we can enhance our export potential and effectively meet the demands of the international market. It is also necessary to establish Pakistan as a reliable and quality supplier. Research and development investments are crucial to meet market trends and standards.

The global market for textile fibers has witnessed a shift from cotton to synthetic fibers, particularly polyester, with Pakistan's textile industry lagging behind in this transition. The country's garment exports still predominantly rely on cotton, and the use of man-made fibers remains limited. China, India, and Southeast Asian countries dominate the production and export of synthetic textiles. While a fully integrated chemical industry is crucial for synthetic fiber production, countries like Vietnam, Bangladesh, and Cambodia import materials to excel in the global market.

Read more: Sustainable Business Practices in Textile Sector of Pakistan

Unfortunately, despite the potential, domestic import policies and market conditions have hindered Pakistan's progress in the synthetic textiles sector. Removing import duties on PSF (Polyester Staple Fiber) is essential to compete globally as bulk of PSF based textile manufacturers do not have access to duty-free schemes for import and export. The industry must prioritize enhancing productivity, efficiency, and quality to stay competitive.

Investing in sustainable and ethical practices across the 5F's framework is vital for Pakistan's textile industry to compete globally. This involves adopting organic and recycled fibers, conserving water and energy in factories, ensuring fair labor practices, and minimizing waste in the supply chain. Not embracing sustainable and ethical practices in Pakistan's textile industry carries severe consequences. Failing to meet evolving consumer demands may result in business loss, while exploiting workers and causing environmental harm can lead to legal and reputational repercussions for the industry.

Value addition in Pakistani textile businesses, through the shift to higher value-added products, such as finished garments and designer textiles, will enhance global market share, increase revenue, and establish Pakistan as a reputable hub for quality textile manufacturing.

Read more: Effective Energy Allocation for Export Growth

Pakistan's textile sector must embrace change, harness innovation, and establish itself as a trusted source of textile products. The industry can secure its rightful place and unlock its true potential by taking collective action and implementing proactive measures.

In order to strengthen exports and empower the economy, several crucial measures need to be undertaken:

1)Strengthening the Farm stage:

2)Enhancing the Fiber stage:

3)Upgrading the Factory stage:

4)Promoting the Fashion stage:

5)Expanding in the Foreign market:

6)Embrace sustainable and ethical practices across the 5F's framework:

7)Shift towards value-added products:

8)Continuously innovate and upgrade:

Pakistan's textile sector, with less than 2% global market share, has great potential for expansion, however; Pakistan must focus on a visible shift to more MMF-based products as 70% of the world trade now focuses on MMF-based fabrics. Sustainable practices across the 5F's framework are crucial to revive the economy.

Read more: Regressive interest rate policy stifling growth

Uplifting MMF import duties, enhancing the PSF sector, simplifying import-export schemes, promoting sustainable sourcing, eco-friendly production, innovation in design, and exploring new export markets is mandatory. Pakistan can become a prominent textile player, creating jobs, boosting foreign exchange, and driving economic development.

Mr. Shahid Sattar, now Executive Director & Secretary General of All Pakistan Textile Mills Association (APTMA), has previously served as a Member Planning Commission of Pakistan and an advisor to the Ministry of Finance, Ministry of Petroleum, and Ministry of Water & Power.

Amna Urooj is a research analyst at APTMA.

The views expressed by the writers do not necessarily represent Global Village Space's editorial policy.