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The Textiles and Garments Sector: Moving Up the Value Chain

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The textiles and garments (T&G) sector accounts for almost 50% of Pakistan's exports and is the largest component of manufacturing. T&G sector, because of recent favorable developments for the industry in Pakistan and the expected future changes in the international trade structure for the sector, has the potential to play an important role in expanding Pakistan's exports. In addition, garments manufacturing is the least energy and capital intensive industrial activity and thus resonates with Pakistan's resource endowment to generate economic growth and employment. Garment manufacturers have tried to overcome the constraints arising from the energy shortages and adverse security and country risk perceptions by investing in power generation, upgrading IT, developing design and R&D capability. Punjab Government's focus on garments as a central plank of its industrial strategy has also helped. However, this paper argues that for the sector to fully realize its potential, government policies that shape the incentive structure faced by the industry need to be realigned In this regard, the most important is Pakistan's import policies and customs procedures that discourage the import of materials such as synthetic yarn and fabric, technical textiles and specialized trimmings and accessories needed by exporters to move up the value chain, and a significant bump up in the growth trajectory will only take place if import policy and custom procedures are substantially reformed. This paper focuses on the following themes: First, structural changes and trends in T&G exports; second, the associated constraints to growth of the garments sector; and third, to highlight some of the steps taken by the industry leaders in terms of policy reforms and by firms, particularly with regards to managing resources to enhance competitiveness.
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The Lahore Journal of Economics
19 : SE (September 2014): pp. 283306
The Textiles and Garments Sector: Moving Up the Value
Chain
Naved Hamid*, Ijaz Nabi**, and Rafia Zafar***
Abstract
The textiles and garments (T&G) sector accounts for almost 50% of
Pakistan’s exports and is the largest component of manufacturing. T&G sector,
because of recent favorable developments for the industry in Pakistan and the
expected future changes in the international trade structure for the sector, has the
potential to play an important role in expanding Pakistan’s exports. In addition,
garments manufacturing is the least energy and capital intensive industrial
activity and thus resonates with Pakistan’s resource endowment to generate
economic growth and employment.
Garment manufacturers have tried to overcome the constraints arising from
the energy shortages and adverse security and country risk perceptions by investing
in power generation, upgrading IT, developing design and R&D capability. Punjab
Government’s focus on garments as a central plank of its industrial strategy has also
helped. However, this paper argues that for the sector to fully realize its potential,
government policies that shape the incentive structure faced by the industry need to
be re-aligned In this regard, the most important is Pakistan’s import policies and
customs procedures that discourage the import of materials such as synthetic yarn
and fabric, technical textiles and specialized trimmings and accessories needed by
exporters to move up the value chain, and a significant bump up in the growth
trajectory will only take place if import policy and custom procedures are
substantially reformed. This paper focuses on the following themes: First, structural
changes and trends in T&G exports; second, the associated constraints to growth of
the garments sector; and third, to highlight some of the steps taken by the industry
leaders in terms of policy reforms and by firms, particularly with regards to
managing resources to enhance competitiveness.
* Director, Centre for Research in Economics and Business, Lahore School of Economics.
** Visiting faculty, Lahore University of Management Sciences (LUMS) and Country Director,
International Growth Center (IGC).
*** Former research assistant, Centre for Research in Economics and Business, Lahore School of
Economics.
The authors wish to acknowledge the excellent research assistance provided by Maha Ikram Khan,
research assistant at the Centre for Research in Economics and Business, Lahore School of Economics.
284 Naved Hamid, Ijaz Nabi, and Rafia Zafar
Keywords: Pakistan, exports, textiles, garments, international trade,
growth, global value chain.
JEL classification: F10, F13, L10, L25, L50, L60, L67, O10, O14.
1. Introduction
The textiles and garments (T&G) sector accounts for 48 percent of
Pakistan’s total exports, 30 percent of value-added in large-scale
manufacturing, and 40 percent of industrial employment (Table 1). The
sector is expected to continue doing well, given that Pakistan was recently
granted GSP-plus status by the European Union (EU), which has opened
up a large market for the country’s T&G exports. Furthermore, rising labor
costs in China and the increasing technological sophistication of its
manufactured exports are likely to reduce the Chinese share (about 40
percent in 2012) of the world garments market.
1
This will create an
opportunity for other T&G exporters, including Pakistan, to expand their
share of the market.
Additionally, as incomes rise in the large, fast-growing economies
of China and India, their demand for T&G will likely rise in tandem. This
will further expand the sector’s export potential for Pakistan if it builds on
its close economic and political ties with the former and common overland
border with the latter. Several recent developments thus point to the
continuedeven risingimportance of the T&G sector in expanding
exports and employment in Pakistan over the next five to ten years.
However, we argue that, for the sector to realize its potential, policies that
shape the incentive structure facing the industry need to be realigned.
1
According to Lin (2011, pp. 29–30), “China has already seen rapid growth in wages. Manufacturing
wages rose from just over $150 a month in 2005 to around $350 in 2010. [It is likely that] China’s real
wages will approach $1,000 a month within a decade.” He continues, pointing out that “China will
have to follow the path of the earlier Asian ‘geese’ and start to relocate its labor-intensive industries to
low-income countries.” There are a number of indications that, in the case of the apparel industry, this
process is well underway. First, almost none of the garments exporters interviewed by Nabi and
Hamid (2013) said they faced much competition from China; some even said that, “China is almost
out” (pp. 37–39). Second, Pakistani business publications have reported for some time that Chinese
investors are looking to acquire local textiles firms: in January 2014, a major textiles group from
China acquired majority shares in Masood Textile Mills, Faisalabadprobably the largest knitwear
manufacturer in Pakistan (Alam, 2014). Third, according to a recent McKinsey survey, 86 percent of
the chief purchasing officers in leading apparel companies in Europe and the US plan to decrease
levels of sourcing in China over the next five years because of declining profit margins and capacity
constraints (Berg, Hedrich, & Tochtermann, 2012).
The Textiles and Garments Sector: Moving Up the Value Chain
285
Table 1: Economic importance of the T&G sector
T&G sector’s share of
Percentage share in 2011/12
National exports
48
Large-scale manufacturing
30
Industrial employment
40
GDP
4
Market share capitalization
5
Source: Adapted from the State Bank of Pakistan (n.d.); Pakistan, Ministry of Finance
(2013); All Pakistan Textile Mills Association (2014).
This paper is divided into five sections.
2
Section 2 describes the
structure of the T&G sector and recent trends in T&G exports. Section 3
discusses the problems and weaknesses of the garments sector, particularly
those arising from the policy environment. Section 4 explores the ways in
which many garments manufacturers have successfully overcome the
problems associated with Pakistan’s weak industrial environment. Section
5 summarizes the recent initiatives undertaken by the Punjab government,
which has made the development of this sector a key element of its
industrial policy. Section 6 concludes the study.
2. T&G Exports: Structure and Trends
Since independence in 1947, Pakistan has been a major producer of
raw cotton: in 2012, it was the fourth largest producer, accounting for about
8 percent of the world’s total cotton output (US Department of Agriculture,
2014). It is not surprising, therefore, that Pakistan has followed a cotton
textiles-led industrialization strategy. The textiles chain in Pakistan consists
of activities spanning cotton ginning, spinning, weaving, finished fabrics,
textile made-ups (particularly towels and household linen), and garments
(woven and knitted apparel). In the 1960s and 1970s, Pakistan also
promoted the synthetic fiber industry by giving it fiscal incentives and a
high level of protection.
Initially, the textiles-led strategy was very successful and Pakistan
was among the fastest growing economies in the world in the 1960s. Except
for a brief interregnum during the Bhutto government’s nationalization
drive and heavy industry push in the 1970s, textiles remained at the
forefront of Pakistan’s industrialization strategy through the 1990s. The
2
The discussion on garments draws heavily on Hussain et al. (2013) and Nabi and Hamid (2013).
286 Naved Hamid, Ijaz Nabi, and Rafia Zafar
results of this strategy are evident from the continuing importance of the
T&G sector to the economy.
However, the industry’s historical pattern of development and the
resulting dominance of the spinning industry in textile policymaking as
well as the presence of a highly protected synthetic fiber industry have
become major constraints to the growth of the value-added components of
the T&G sector since the 1990s. To some extent, this is evident from the
differential performance of T&G exports in Pakistan and Bangladesh. In
2011, Bangladeshwhich does not produce any cotton and had no cotton
spinning mills at the time of its separation from Pakistan in 1971had
garments exports of almost US$ 20 billion, i.e., about two thirds more than
Pakistan’s total T&G exports that year. Although there are also other
factors underlying this remarkable difference in the export performance of
the two countries, we believe that the historical pattern of development of
the industry has, in both cases, played an important role.
Following the end of the textiles quota regime, Pakistan’s T&G
exports increased from US$ 9.7 billion in 2005 to US$ 11.9 billion in 2012.
As a proportion of world T&G exports, however, Pakistan’s share declined
from 2.46 percent in 2005 to 2.17 percent in 2012. The country’s failure to
benefit from the opening up of T&G trade in 2005 is largely a result of
government policies and the ensuing structure of Pakistan’s T&G sector.
As Table 2 shows, Pakistan’s T&G exports are primarily either low or
intermediate value-added products, which, in 2012, accounted for 69
percent of T&G exports compared to 32 percent of world T&G exports.
While little value is added at the spinning stage, particularly in the
low- and medium-count cotton yarn that Pakistan exports, the share of
yarn in its T&G exports increased significantly between 2005 and 2012, at
the expense of intermediate value-added items such as textile made-ups
and manmade fiber (MMF) yarn and fabric. We also see that, while the
total share of the garments sector in world T&G exports remained more or
less constant at 68 percent in 200512, trade in knitted apparel increased far
more rapidly than in woven apparel. Unfortunately, in Pakistan the reverse
seems to have been the case with woven apparel exports growing more
rapidly than knitted apparel. This indicates that Pakistan’s strength may lie
in the slower growing portion of the apparel market, which could have
implications for future export growth.
The Textiles and Garments Sector: Moving Up the Value Chain
287
Table 2: Structure of Pakistan and world T&G exports
Share of Pakistan’s
T&G exports (%)
Product
HS code
2005
2012
2005
2012
Low value-added
Cotton yarn
5204-07
12.6
18.9
2.4
2.7
Intermediate value-added
Cotton fabric
5208-12
21.5
21.9
6.8
5.4
MMF yarn and fabric
54
2.5
0.3
9.3
8.3
Knitted fabric
60
0.7
0.3
5.1
5.5
Textile made-ups
63
31.8
27.6
8.5
9.9
High value-added
Knitted apparel
61
17.1
16.8
31.2
36.0
Woven apparel
62
13.8
14.2
36.7
32.3
Source: Authors’ calculations based on data from the United Nations Commodity Trade
Statistics database.
Given that this paper stresses the importance of moving up the
value chain in the T&G sector, it is necessary to gain a more concrete idea
of why that is so important. Table 3 provides data on the average export
price per kg for the main T&G products exported by Pakistan. In many
cases, at the aggregate product level the quantity in terms of weight is not
available, which is why the table provides the average price per kg for the
most important items at the HS 6-digit level in that product category.
3
Starting with 1 kg of cotton with a value of US$ 2, the spinning
stage adds about US$ 1 in value; the weaving stage adds another US$ 3.55
and the finishing of the fabric can add as much as US$ 6 (as seen from the
difference in value between unbleached and dyed twill). However,
converting 1 kg of fabric into garments can add US$ 2025 (allowing for 5
percent in wasted fabric and an additional 10 percent of the garment’s
value for the cost of trimmings and accessories). Since spinning is the most
capital-intensive industry in the T&G sector, followed by weaving, and
garment manufacture is the most labor-intensive, the ratios in terms of the
number of jobs created per kilogram at each stage probably increase even
more sharply. These numbers give some idea of the impact on export
earnings and job creation if Pakistan was able to move up the value chain
in the T&G sector.
3
Since quantity in terms of weight is not reported for 2012, we have used data for 2013 in Table 3.
However, for comparison, the aggregate mean unit values per item for garments are provided for
both 2012 and 2013: we can see there is no significant difference between the two years.
288 Naved Hamid, Ijaz Nabi, and Rafia Zafar
Table 3: MUV per kg of Pakistan’s major T&G export items
HS
code
Product and description
Product/item*
share, 2013
MUV ($)
in 2012
MUV ($) in 2013
Per item
Per kg
5204-07
Cotton yarn
18
Per kg
520511
Single yarn of uncombed
fibers (< 14 metric no.)
7
2.77
2.76
520512
Single yarn of uncombed
fibers (1443 metric no.)
64
2.91
2.93
520532
Multiple yarn of uncombed
fibers (1443 metric no.)
9
3.22
3.26
5208-12
Cotton fabric
22
520812
Unbleached plain weave
8
6.47
520911
Plain weave
5
8.87
520912
Unbleached twill
8
6.81
520932
Dyed twill
7
12.52
520942
Denim
18
8.27
63
Textile made-ups
29
630231
Other bed linen of cotton
18
7.62
7.66
630260
Toilet and kitchen linen of
terry fabric, cotton
21
4.50
4.57
61
Knitted apparel
17
Per item
610332
Mens/boys suits, jackets,
trousers of cotton
3
6.37
6.71
31.73
610462
Womens/girls suits,
dresses, skirts of cotton
2
4.05
3.49
29.25
610510
Mens/boys shirts of cotton
13
3.69
3.74
46.97
610910
T-shirts, singlets, other vests
of cotton
10
2.31
2.26
33.20
62
Woven apparel
15
620342
Mens/boys suits, jackets,
trousers of cotton
35
6.67
6.84
39.17
620462
Womens/girls suits,
jackets, dresses, skirts of
cotton
26
7.09
6.90
45.98
* Product share as a percentage of total T&G exports and item share as a percentage of the
total export of that product. MUV = mean unit value.
Note: The average international price of cotton in 2012 and 2013 was $1.97 and $2.00,
respectively (derived from National Cotton Council of America, 2014).
Source: Authors’ calculations based on data from the United Nations Commodity Trade
Statistics database.
In 2012, Pakistan’s share of world exports of cotton yarn, cotton
fabric, textile made-ups, and garments (knitted and woven apparel) was
15.3, 8.8, 6.1, and 1.0 percent, respectively (Table 4). Instead of moving up
The Textiles and Garments Sector: Moving Up the Value Chain
289
the value chain, Pakistan seems to have moved downward in the last
decade or so: in 2003, its world export share of these four product groups
was 10.7, 6.0, 9.4, and 1.1 percent, respectively. At the same time,
Pakistan’s increasing concentration on cotton textiles can be seen from its
declining world export share of MMF yarn and fabric, which was 1.9
percent in 2003 and 0.1 percent in 2012.
Immediately after the end of the textiles quota regime, Pakistan’s
garment exports declined; in order to reduce the impact of the elimination
of quotas and adverse security environment, the government granted a 6
percent research and development (R&D) subsidy to apparel exporters in
2005 (and subsequently to all T&G exporters). The subsidy was withdrawn
in 2008 because of a fiscal crisis. At best, it prevented a decline in T&G
exports, which, after increasing from US$ 7.8 billion in 2003 to US$ 9.7
billion in 2005, stagnated for the next three years. In 2008, T&G exports
began to grow once again, increasing to US$ 11.9 billion in 2012, but the
main driver of growth was cotton yarn, which contributed over 50 percent
of the total increase in T&G exports during this period (Table 4). Other
products that recorded a significant increase over these four years were
cotton fabric and woven apparel, both of which also increased their share
of world exports of these products.
Table 4: Value of Pakistan’s (PK) T&G exports and share of world (WX)
T&G exports by major products
Exports 2003
Exports 2005
Exports 2008
Exports 2012
Commodity
HS
code
PK
Share
of WX
PK
Share
of WX
PK
Share
of WX
PK
Share
of WX
$ mn
%
$ mn
%
$ mn
%
$ mn
%
Cotton yarn
5204-
07
979
10.7
1,221
12.8
1,215
10.5
2,250
15.3
Cotton fabric
5208-
12
1,470
6.0
2,078
7.8
2,216
7.8
2,603
8.8
MMF
54
621
1.9
240
0.7
35
0.1
34
0.1
Knitted fabric
60
53
0.3
67
0.3
69
0.3
36
0.1
Textile made-
ups
63
2,358
9.4
3,071
9.2
3,146
7.0
3,285
6.0
Knitted apparel
61
1,300
1.3
1,655
1.3
1,888
1.1
2,006
1.0
Woven apparel
62
1,051
0.9
1,330
0.9
1,361
0.8
1,694
1.0
Total T&G
exports
7,832
2.4
9,661
2.5
9,931
2.0
11,909
2.2
Source: Authors’ calculations based on data from the United Nations Commodity Trade
Statistics database.
290 Naved Hamid, Ijaz Nabi, and Rafia Zafar
Pakistan’s T&G exports were largely concentrated in the EU and
US, with these two markets accounting for 22 and 36 percent of total T&G
exports in 2005, respectively (Table 5). With the end of the quota regime in
2005 and the post-9/11 security environment in Pakistanwith resulting
long-standing travel advisories issued by the US State DepartmentT&G
exports to the US have fallen steadily from US$ 3.5 billion in 2005 to US$
3.1 billion in 2012. In this period, exports to the EU increased from US$ 2.1
billion in 2005 to US$ 3.4 billion in 2012: as a result, the EU is now the
largest market for Pakistan’s T&G exports, accounting for 28 percent of
total exports in 2012.
Thus, it seems that an important factor in Pakistan’s poor export
performance in the T&G sector, particularly in value-added items (textile
made-ups and garments), is the country’s security situation. Had T&G
exports to the US grown at the same rate as to the EU, Pakistan’s T&G
exports would have been US$ 2.5 billion higher in 2012 than they were.
4
China is Pakistan’s third largest market for T&G exports and its share has
increased from 3 percent in 2005 to 15 percent in 2012. However, this
increase was almost entirely due to cotton yarn exports, which accounted
for 80 percent of T&G exports to China in 2012.
Table 5: Main markets for Pakistan’s T&G exports (%)
2005
2012
Product
EU
US
China
EU
US
China
1
Cotton yarn
6.19
9.52
16.77
3.99
1.02
63.75
2
Cotton fabric*
13.16
14.67
2.74
17.72
4.43
12.30
3
Textile made-ups
25.01
48.49
0.04
35.27
40.76
0.70
4
Knitted apparel
24.56
62.39
0.06
32.78
54.68
0.25
5
Woven apparel
42.22
39.83
0.02
57.40
28.35
0.40
Total
21.93
36.28
2.75
28.23
25.67
15.03
* Bangladesh is also an important market for fabriclargely denimaccounting for 15.6
percent of Pakistan’s fabric exports in 2012.
Source: Authors’ calculations based on data from the United Nations Commodity Trade
Statistics database.
The garments industry is divided into knitted and woven apparel;
in 2012, Pakistan’s exports of these two products were US$ 2 billion and
US$ 1.7 billion, respectively, with the EU and the US accounting for 87 and
82 percent of knitted and woven apparel exports, respectively. The
4
Garment exports would have been US$ 4.4 billion, i.e., 20 percent higher than actual exports in 2012.
The Textiles and Garments Sector: Moving Up the Value Chain
291
knitwear industry was the first to develop due to substantial US quotas
under the Multi-Fiber Arrangement, which came into effect in 1974. The US
accounted for 62 percent of Pakistan’s knitted apparel exports in 2005.
Subsequently, the knitwear industry suffered a major setback with the end
of the quota regime in 2005. This, compounded by the impact of the post-
9/11 security situation on exports to the US (as discussed above) compelled
some of the largest firms, such as Ammar and Klass, to close down
between 2006 and 2008.
The primary products exported by the woven apparel industry are
cotton jeans and this is largely because the medium-staple cotton grown in
Pakistan is particularly suitable for denim production; the country is also a
major exporter of denim cloth. In 2005, the EU and the US were more or
less equally important for Pakistan’s woven apparel exporters; since then,
exports to the US have declined while exports to the EU increased by over
70 percent in 2012, with the EU accounting for over 57 percent of Pakistan’s
woven apparel exports that year. With Pakistan having been granted GSP-
plus status by the EU from 2014, the latter’s market share of both knitted
and woven apparel exports is likely to continue to increase.
Not only is the garments industry a major contributor to exports (15
percent of Pakistan’s total exports in 2012), it is also labor-intensive and
probably the largest employer in the manufacturing sector. There may be a
tendency to associate employment in the garments industry with visions of
‘sweatshops’, but the work environment is generally much better than that
of most other industries in Pakistan. This is because virtually the entire
output is exported, which means that the large and medium-sized garment
firms have to meet the safety and social compliance standards set by
international buyers. In the post-9/11post-textile quotas world,
Pakistan, unlike Bangladesh, has not been the country of choice for
international buyers. As a result, large garment manufacturers in Pakistan
have faced much stricter scrutiny and had to meet higher standards of
compliance to retain or attract large buyers (both among brands such as
Levis and Gap and retail chains such as Zara and JC Penney) as customers.
Jobs in the garments industry also pay better on average as the
ratio of unskilled to skilled workers (mostly stitchers) is 20:80 and,
according to Nabi and Hamid (2013), in 2012 the take-home monthly
earnings of stitchers (PRs 15,000) were two thirds higher than the
minimum wage (PRs 9,000). In addition, given the large number of skilled
workers required by the garments industry and the paucity of formal
training institutions in Pakistan, many large garment manufacturers run
292 Naved Hamid, Ijaz Nabi, and Rafia Zafar
their own training programs. Most other firms use the apprentice route,
i.e., an experienced stitcher is allowed to bring a helper who, in three to
four months, acquires the necessary skills, first by observing and then
performing the simpler tasks.
Finally, the garments industry probably provides employment to
more female workers than any other industry in Pakistan. A number of
firms we visited had set up special training programs for women and
provided a pick-and-drop service for their female workers. The firms
explained that the extra effort they made to hire and retain female workers
was because the latter were more productive employees, better at handling
fine fabrics, and more quality-conscious.
3. Constraints to the Growth of the Garments Sector
This section examines the key constraints to the garments industry,
which include the sector’s narrow base and price range, energy constraints,
the poor security situation, and lack of investment in human capital.
3.1. Product Range, Price Range, and Government Policy
Pakistan’s garment exports have a relatively narrow base, with a
few products accounting for the bulk of exports. Table 6 presents data on
Pakistan’s exports in the ten most important products (at the HS 4-digit
level that are described in Table 7) in world trade, which together account
for about 74 percent of the world’s garment exports. Pakistan has
substantive exports (over US$ 200 million in 2012) in only half these
products. The top six products it exports account for over 78 percent of the
country’s garment exports but only 41 percent of the world trade in
garments. This implies that Pakistani exporters are not competing in about
three fifths of the world market for garments, which seems to be in line
with the share of cotton and MMF in world fiber consumption.
The Textiles and Garments Sector: Moving Up the Value Chain
293
Table 6: Pakistan and world exports of top ten garment products, 2012
World
Pakistan
Product
Exports
(m$)
Share
(%)
Exports
(m$)
Share
(%)
Share of world
exports (%)
6204
49,478
13.21
591
15.97
1.19
6110
44,059
11.77
99
2.67
0.22
6104
38,505
10.28
128
3.46
0.33
6203
36,610
9.78
921
24.89
2.52
6109
33,479
8.94
291
7.86
0.87
6103
14,409
3.85
294
7.94
2.04
6202
12,755
3.41
2
0.06
0.02
6115
12,752
3.41
260
7.02
2.04
6205
12,289
3.28
15
0.41
0.12
6201
11,064
2.95
3
0.08
0.03
6105*
7,521
2.01
543
14.68
7.22
Total for PK top six exports
154,249
41.2
2,900
78.40
1.90
Total garments
374,493
100.00
3,701
100.00
0.99
* Ranked 16 in importance in 2012.
Source: Authors’ calculations based on data from the United Nations Commodity Trade
Statistics database.
An important segment of the market in which Pakistan has a very
limited presence is women’s garments. For example, women’s garments
account for three of the ten most traded products in the worldPakistan
has substantial exports in only one of these, probably because MMF yarn
and fabrics and other imported inputs (such as trimmings and accessories)
are more important in the case of women’s garments than men’s garments.
Table 7: Leading garment products in world trade
HS code
Description of products in that category
6103
Mens/boys suits, jackets, trousers, etc., knitted or crocheted
6104
Womens/girls suits, dresses, skirts, etc., knitted or crocheted
6105
Mens/boys shirts, knitted or crocheted
6109
T-shirts, singlets, other vests, knitted or crocheted
6110
Jerseys, pullovers, cardigans, etc., knitted or crocheted
6115
Pantyhose, tights, hosiery n.e.s., knitted or crocheted
6201
Mens/boys overcoats, capes, wind-jackets, etc., woven
6202
Womens/girls overcoats, capes, wind-jackets, etc., woven
6203
Mens/boys suits, jackets, trousers, etc., not knitted
6204
Womens/girls suits, jackets, dresses, skirts, etc., woven
6205
Mens/boys shirts
Source: United Nations Commodity Trade Statistics database.
294 Naved Hamid, Ijaz Nabi, and Rafia Zafar
Pakistan’s exports are also concentrated around the lower end of
the price range for the products it exports. Table 8 gives the average unit
prices of Pakistan’s garment exports of the most traded products in which
its exports exceeded US$ 200 million in 2012. For four of the five items
listed, Pakistan’s average export price is 47–58 percent of the world average
export price. In only one itemmen’s knitted jackets and suits, which
includes fleece jackets, hoodies, and tracksuitsis the average export price
relatively close to the world average of 85 percent. In other words, not only
are Pakistani exporters exporting a limited range of products, they are also
competing at the lower end of the price range.
Table 8: Average unit value of Pakistan’s top five garment exports,
2012*
Average unit price (US$)
Pakistan average
Product
Pakistan exports (m$)
World
Pakistan
/world average (%)
6103
294
6.36
5.41
85.1
6105
543
7.91
3.99
50.4
6109
291
4.01
2.32
57.9
6203
921
13.62
6.38
46.8
6204
591
12.73
6.70
52.6
* The combined export value of these five items was US$ 2,640 million, i.e., 71 percent of
Pakistan’s garment exports.
Source: Authors’ calculations based on data from the United Nations Commodity Trade
Statistics database.
While the structure of Pakistan’s garment exports explains why the
sector has failed to expand more rapidly since the textile quotas regime
ended in 2005, it also shows that there is considerable potential for export
expansion both on the extensive (i.e., number of products) and intensive
(i.e., export unit price) margins.
The government’s poor industrial policy is an important reason for
the narrow product range and low export unit value of Pakistan’s garment
exports. As already mentioned, government policies have aimed to protect
existing firms in the T&G industry, with two consequences. First, the
spinning and weaving firms, which are the oldest and the largest in terms
of investment, remain the most influential with regard to policymaking in
this sector. Their influence can be gauged from the fact that, when exports
of cotton yarn to China declined in 2013/14, they lobbied successfully for
the imposition of regulatory import duty on cotton yarn from India despite
strong opposition from the garments industry.
The Textiles and Garments Sector: Moving Up the Value Chain
295
Second, the existing MMF manufacturing plants, which were set up
in the 1960s and 1970s as part of the government’s import substitution
strategy in that period, are small, high-cost producers that rely on outdated
technology and require protection to survive. Government policy in this
context takes the form of tariff and nontariff barriers on the import of MMF
yarn and all kinds of fabric, including fine cotton, cotton-MMF mixed, pure
MMF, and technical
5
fabrics.
This, on top of the country’s inward-looking trade policyreflected
in the generally high duties and taxes imposed on imported materials, a
nontransparent tariff structure, and a complex set of customs
procedures
6
has serious implications for the range of products exported
and the price segment of the market targeted by Pakistani exporters.
Besides MMF yarn and various kinds of fabric, garment manufacturers
need to import trimmings and accessories, chemicals for washing, and
dyes. Most of the entrepreneurs interviewed by Nabi and Hamid (2013)
complained that customs procedures inflicted costly delays on meeting
orders (p. 63).
7
Thus, garment exporters generally limit themselves to
products that do not require imported yarn, fabric, or special trimmings
and accessories.
5
Technical fabrics, such as odor-resistant, heat technology, and wicking fabrics (which force out
moisture from perspiration but do not allow it to soak in) are a growing high-value segment of the
garments market.
6
Nontransparency arises from the large number of statutory regulatory orders (SROs) issued by the
Federal Board of Revenue and by the finance, commerce, and other ministries concerned. These
provide for concessional import duties levied on items for a particular firm, a certain category of
importers, or a particular location, and may require certification by the director general of the Input
Output Coefficient Organization. SROs may also restrict the import of certain items to a few firms
and require a no-objection certificate from a government body (such as the Engineering
Development Board); they can also be issued to levy regulatory duties on the import of certain
items. Their implications for the complexity of the system and the discretionary powers they give to
customs officials, considering that the items are specified at the 8-digit level of the Pakistan
Custom Tariff Code, can only be imagined.
7
An excellent example of how complex trade policies can prevent firms from moving up the value
chain or innovating is the following incident, which was narrated to the authors by a firm owner
and office bearer of the Pakistan Readymade Garments Manufacturers and Exporters Association
(PRGMEA) in Karachi. A firm had an order from Walmart, which involved inserting a small
gadget in a hoodie that would allow the wearer to listen to music on a smartphone or MP3 player in
the pocket without earphones. The firm had imported the gadget under the Duty Tax Remission for
Export framework, in which the SRO listed 492 items, including “others” that could be imported
(against a post-dated check for the import duty) for re-export within two years. The customs officer
concerned refused to release the gadget on the grounds that it was an electronics item, which was
not on the list. It took the firm a month, and the support of the PRGMEA, to have the consignment
of gadgets released. Because of the delay, the order had to be shipped by air at a substantial
additional cost (Nabi & Hamid, 2013, p. 65).
296 Naved Hamid, Ijaz Nabi, and Rafia Zafar
As a result, given that MMF now comprises 65 percent of total fiber
consumption in the world, Pakistani garment exporters are excluded from
a substantial proportion of the market (Hussain et al., 2013, p. 27).
Additionally, as it is the use of trimmings and accessories, special fabrics,
and unusual dyeing and washing that add value to a garment,
8
Pakistani
garment exporters are generally restricted to the lower end of the price
range for the products they do export.
3.2. Energy Shortages
According to the owners and managers of garment firms, the most
important constraint to the growth of production and exports in the
garments sector has been the energy (electricity and natural gas) crisis
(Nabi & Hamid, 2013, p. 52). Pakistan has faced growing energy shortages
since 2007; in 2012, most of the industry suffered power outages of 8 to 12
hours a day
9
while the supply of natural gas was suspended for several
months in the winter. Most large firms have installed generators at a
substantial cost to meet their basic power needs, but small firms may not
be able to afford this. This is particularly important in the case of the
trimmings and accessories industry, which is dominated by small firms:
delays in supplies of trimmings and accessories can affect both large and
small firms. Suspended gas supplies are especially disruptive to the
knitwear industry as natural gas is used to fire boilers for dyeinga crucial
component of the production cycle for knitted appareland the capital
cost of switching to an alternative fuel source such as coal is substantial
while the cost of LPG in place of natural gas can be prohibitive.
The energy crisis has had a twofold impact on the garments
industry. First, it has raised the cost of production for garment
manufacturers in Pakistan and thus made them less competitive. Second, it
has increased uncertainty with regard to production planning by creating
the possibility of delays at different stages of the production cycle over
which the firm has little control. Timely delivery of an order is extremely
important in the garments industry given its seasonal nature,
10
and in the
case of a delay, the manufacturer may have to ship the order by air. Thus,
energy shortages not only impose a substantial cost on the manufacturer,
8
In woven apparel, 40 percent of the in-house value-added comes from washing and finishing; in
knitwear, dyeing and finishing contributes over 50 percent (Nabi & Hamid, 2013, p. 22).
9
While firms located on industrial estates received an uninterrupted power supply for eight hours a
day, other firms in Punjab were subject to hour-long power outages every one or two hours
throughout the day.
10
For example, if an order is delayed even by a few weeks during the Christmas season, it becomes
worthless to the buyer and may have to be disposed of by the manufacturer at a fraction of the price.
The Textiles and Garments Sector: Moving Up the Value Chain
297
but also erode the firm’s credibility with its buyers as a dependable source.
The latter has long-term implications, not only for the growth of export
volume, but also for the product price range as the importance of
timeliness increases as firms move up the price range. At the high end,
even a few days’ delay is usually not acceptable.
3.3. Security and Country Risk Perception
The impact of post-9/11 security concerns on aggregate garment
exports, particularly to the US, has already been discussed. From the firms’
perspective, security concerns (and travel advisories) manifest themselves
in international buyers not coming to Pakistan.
11
This has obvious
implications for obtaining new orders, particularly for medium and small
firms that cannot afford an overseas presencemany have complained
that this leaves them entirely dependent on local buying houses and that
they only receive orders during peak season when firms in Bangladesh are
unable to meet the demand.
Security concerns also affect the price range in which Pakistan
exporters can compete. The normal practice in the garments industry is for
the employees of international buyers (i.e., from the design department
during the product development stage and from the quality control
department during the production stage) to spend considerable time in the
country working with their counterparts in the exporting firm. Due to
security concerns, these employees almost never visit Pakistan and since
the importance of such interaction increases as firms move up the price
range for a product, this makes it very difficult for Pakistani exporters to
target the medium- to upper-end of the garments market in any product.
Poor security, political uncertainty, and the law and order situation
mean that international buyers have a high country risk perception of
Pakistan. As a result, they think (not incorrectly) that delays in production
and shipment can occur at any time for reasons beyond the control of the
exporter.
12
Therefore, they generally do not include firms in Pakistan
among their list of “reliable suppliers. The implications of this for
Pakistani exporters include smaller orders, items that are less time-
11
As one firm owner put it, “there are more buyers in the lobby of one hotel in Dhaka in
Bangladesh on any given day than in all of Pakistan in a month” (Nabi & Hamid, 2013, p. 13).
12
A recent example of such unforeseen delays caused by political uncertainty was the stoppage of
all intercity transport and the confiscation of all containers on the road in Punjab at the time by the
government in the first ten days of August 2014. This resulted in many export shipments being
delayed, damaged, or lost.
298 Naved Hamid, Ijaz Nabi, and Rafia Zafar
sensitive and thus at the lower end of the price range, and a price discount
relative to their competitors in other countries.
3.4. Lack of Investment in Human Resources
In Pakistan, the lack of educated and skilled workers is an
important constraint to industry in general. The low level of general
education in the country translates into poor trainability of the workforce
and the shortage of formal vocational training institutions results in a skills
gap that firms must fill themselves. Firms in the garments industry have
identified two categories of workers vital to their growth: stitchers and
middle management, i.e., supervisors, technicians, and engineers in the
areas of production, quality control, dyeing, and washing (Nabi & Hamid,
2013, p. 45). Of the large firms, over 60 percent complained of a shortage of
stitchers and over 85 percent reported difficulties in finding middle
managers
13
(ibid). Many of the large firms have formal training programs
in place for stitchers and all of them train most of their middle managers.
However, most firms felt that the poor quality of entry-level workers’
schooling was an issue.
In some regions, labor shortages were exacerbated by other factors.
For example, in Faisalabad, a number of firms pointed to the acute shortage
of stitchers, which they explained as follows. Since workers are paid at a
piece rate, the ongoing power outages had reduced their monthly earnings
to the equivalent of 1520 days worked in a month. As a result, many
stitchers had left the labor market and turned instead to self-employment
in the services sector or agriculture (Nabi & Hamid, 2013, p. 47). In Karachi,
the labor shortage was linked to the poor law and order situation, which
had compelled some female workers to withdraw from the labor market or
find service jobs nearer their homes. Stitchers from Punjab had moved to
garment clusters in their province, particularly Lahore, where they felt it
was safer (ibid).
To sum up, a number of constraints have prevented garment
exports from expanding more rapidly. These have had an impact on both
supply and demand, affecting all aspects of the industry, including costs,
production volume, product diversity, and targeted price range. Some of
these constraintssuch as the security situation and country risk
perceptionare difficult for the government to address. Others, however,
such as trade policy reforms and a demand management policy aimed at
13
Small and medium firms felt the shortage of stitchers far less than large firms, but as far as the
shortage of middle managers was concerned, the proportion (75 percent) was almost as high.
The Textiles and Garments Sector: Moving Up the Value Chain
299
providing the export industry (including garments) with an uninterrupted
power and gas supply for eight to ten hours a day, could be implemented
in the short to medium term with minimum budgetary implications.
4. Garment Manufacturers’ Response
It seems surprising that, despite these constraints, the garments
industry has continued to grow; some of its components, such as denim
products, have expanded quite rapidly. The reason is that many firms have
invested a great deal of capital (e.g., installing standby power generation
capacity) and management resources to enhance their competitiveness. The
purpose of this section is to highlight some of the steps taken by industry
leaders, particularly with regard to the latter.
4.1. Overcoming International Isolation
Many firms are using information technology not only to improve
their production planning and management, but also to overcome the
constraint arising from buyers unwillingness to travel to Pakistan because
of security concerns. Some have installed electronic job tracking systems,
which provide information from the time the yarn or fabric enters the firm,
through each step of the production cycle to packing and until the
shipment leaves the premises. This is made available online in the form of
an order tracking system for the buyer, who while sitting in her office
anywhere in the world, can check the status of her order in realtime (Nabi
& Hamid, 2013, pp. 2729).
Some firms have provided their buyers with online access to all the
CCTV cameras on the premises, allowing the latter to monitor in realtime
the production area, cafeteria, etc., for compliance assurance. One of the
larger knitwear firms is operating a just-in-time inventory system for its
buyerthe Pakistani firm has been given access to realtime sales data for
each of the buyer’s stores and it automatically replenishes stocks as needed
from the firms warehouses in the US (Nabi & Hamid, 2013, pp. 2729).
To improve and retain access to large international buyers, another
area that firms have worked on is meeting global standards for
environment and social compliance. Some of the larger firms have invested
in wastewater treatment plants and many of them have Worldwide
Responsible Apparel Production Principles certification, which assures
buyers of their compliance with socially responsible global standards for
300 Naved Hamid, Ijaz Nabi, and Rafia Zafar
manufacturing and certifies that the products are produced under lawful,
humane, and ethical conditions (Nabi & Hamid, 2013, pp. 2931).
4.2. Moving Up the Value Chain
To be part of the supply chain of a product in the middle to upper
price range, it is essential for a firm to have own design capacity for
product development and be able to ensure a quick turn-around for
samples and trial orders. Most of the larger firms in the woven apparel
industry have well-staffed design departments in Pakistan and a number
of firms have also set up R&D and design departments in London or
Istanbul (Nabi & Hamid, 2013, pp. 2526). These are staffed by locally hired
designers who spend half their time in Pakistan and half at the overseas
office. Some firms have also invested in facilities for producing samples so
that when they are given a new design, they can send out samples in less
than a week. One firm has even set up a small production facility in
Istanbul that manufactures and retails its products locally. This gives it a
head-start on new fashion trends in Europe and if it receives a large order
for one of the designs it has developed, the firm shifts production to its
facility in Pakistan.
One approach adopted successfully by a number of small and
medium-sized firms is to move up the price range by targeting niche
markets. The products being supplied by different firms include heavy
protective garments produced using denim and Kevlar for bikers, baseball
and American football uniforms for teams in the US, sports uniforms
(particularly rugby shirts) for schools in the UK, and fleece jackets
(hoodies) for universities in the US (Nabi & Hamid, 2013, pp. 2627).
Another approach has been to develop the capacity to produce
small orders of complex garments, such as heavily embroidered garments
(Nabi & Hamid, 2013, pp. 2324). To add value to their garments, many of
the large firms in the woven apparel industry have invested in advanced
washing systems for denim jeans, many with technical expertise from
Turkey.
14
Some of the knitwear firms have invested in specialized
equipment such as computer-controlled Jacquard knitting machines to
produce patterned knitwear. A few firms have acquired Global Organic
Textile Standard manufacturing certification. This requires creating a
certified supply chain and, since there are few certified local suppliers, they
14
In denim, most of the value addition occurs through the washing process: Turkey is a leader in
this field.
The Textiles and Garments Sector: Moving Up the Value Chain
301
have to rely on imported organic cotton and other inputs (although one
firm now grows its own organic cotton and gins it in its own factory).
5. Recent Initiatives by the Punjab Government
Employment generation is one of the key objectives of the Punjab
government’s development strategy: given the importance of the garments
industry in the province and its employment and export potential, the
government set up a working group in July 2013 to recommend measures
that could help the industry realize its potential. The working group, which
comprised policymakers and garment manufacturers, put forward a
number of recommendations based on studies carried out by the
International Growth Centre and other analytical work. The
recommendations targeted a number of areas, including market access,
energy, skills development, garment clusters, import policy, and customs
procedures. The Punjab government accepted these recommendations and
has initiated efforts to implement them.
On energy, which is a key determinant of the sector’s international
competitiveness but is a federal subject, the government decided to take a
cluster-based approach by linking its efforts to Punjab’s solar and coal
power initiatives. Similarly, since import policy is under the purview of the
federal government, the Punjab government’s efforts in this area focus on
customs procedures and facilitation by working with federal officers
located in Punjab. The progress made in implementing the
recommendations of the working group is discussed below.
5.1. Market Access
Pakistan had become eligible for duty-free export status to the EU
under the new GSP-plus scheme. However, to benefit from the scheme, the
country was required to ratify and give binding commitment to effectively
implement 27 international conventions on human rights, political rights,
labor rights, environment, narcotics control, and good governance. Although
it ratified the necessary conventions, submission of the required
implementation reports was delayed since they could be submitted only
after the federal and four provincial governments had taken the necessary
steps to address the shortcomings. The application for GSP status, supported
by the completed reports, would then be evaluated by the European
Commission’s technical team and approved by the European Parliament.
302 Naved Hamid, Ijaz Nabi, and Rafia Zafar
In the past, Pakistan had missed similar opportunities because of
bureaucratic delays or failure to complete the reports and pursue the
application on the diplomatic front. With this in mind, the working group,
particularly its private sector members, highlighted the pending issues. The
Punjab chief minister then personally guided the process to ensure the
reports were submitted in time and the necessary diplomatic effort made to
secure sufficient support for approval by the European Parliament. As a
result of these efforts, Pakistan’s application for GSP-plus status was
approved in December 2013.
5.2. Skills Development
The Punjab Skills Development Fund (PSDF) has taken the lead in
skills development for the garments sector with help from the PRGMEA,
Punjab’s Technical Education and Vocational Training Authority (TEVTA),
and the Punjab Vocational Training Council (PVTC). A workshop hosted
by the PSDF in collaboration with the PRGMEA was held in September
2013 to assess the demand for skilled workers in the garments industry.
Following the demand assessment, the PSDF launched the Skills for
Garments scheme, which is designed to address skills shortages in the
apparel industry, especially at the worker and middle management level.
Under this scheme, the PSDF has started its first program for training over
9,000 individuals using a private provision, government-financed model.
The 14 skills training providers in this program include some of the
country’s largest garment manufacturers (such as Crescent, Nishat, and
Style), the PRGMEA’s training institution, the Pakistan Readymade
Garment Technical Training Institute, and public sector training
institutions such as TEVTA and the PVTC.
5.3. Customs Facilitation
The Punjab government has facilitated meetings between garment
manufacturers representatives and the Federal Board of Revenue to
discuss the former’s concerns and suggestions for simplifying the import
regime for garment exporters. While much remains to be done on this
front, the government has succeeded in having the following
recommendations of the working group implemented:
A customs clearance facility for imports by the garments industry has
been made available on a 24/7 basis.
The Textiles and Garments Sector: Moving Up the Value Chain
303
The Input Output Coefficient Organization (IOCO) office in Lahore
has been fully staffed to provide quick approval for the import of
materials by garment exporters under the Duty and Tax Remission for
Exports (DTRE) scheme.
15
5.4. Developing Garment Clusters
It is difficult for the Punjab government to address the pressing
problem of power and gas outages, as energy sector policy and providers
are under the federal government’s purview. Therefore, it was decided to
set up a model garments cluster near Lahore where existing firms could
relocate or undertake expansion projects. The Quaid-e-Azam Apparel Park
is being developed on over 1,500 acres near the Sheikhupura motorway
interchange, 40 km from Lahore. The government has acquired the land,
constituted a management board, and asked the Punjab Industrial Estates
Development and Management Company to initiate development work.
Some of the planned features of the apparel park are:
A private sector management board
Space for over 100 garment manufacturers and accessories suppliers
Dedicated power plants for an uninterrupted power supply to the estate
Common facilities such as effluent waste treatment plants, clean
drinking water, and solid waste disposal
A garments center of excellence for skills.
6. Conclusion
Given recent favorable developments for the industry in Pakistan
and expected changes in the international trade structure of the sector, the
T&G industry could potentially play an important role in expanding
Pakistan’s exports. Garments manufacturing is also the least energy- and
capital-intensive industrial activity and thus resonates with Pakistan’s
resource endowment to generate economic growth and employment.
However, to fully realize its potential, garments manufacturing must move
up the value chain. This requires reversing the 2003 to 2012 trend whereby
the share of the lowest value-added product (cotton yarn) in Pakistan’s
15
Before a firm can import materials for use in the manufacture of garments for export under the
DTRE scheme, it must obtain certification of the quantities to be imported from the IOCO.
Previously, the IOCO office in Lahore served primarily as a drop-box and all applications were
processed at the head office in Karachi. This often required making several trips to Karachi by
someone from the firm and caused long delays in getting approval.
304 Naved Hamid, Ijaz Nabi, and Rafia Zafar
T&G exports increased by 50 percent, while the share of the highest value-
added product (knitted apparel) declined.
An important reason for the poor growth of the garments sector is
that Pakistan exports a limited number of products and barely (if at all)
competes in those products that account for about 60 percent of the world
trade. Furthermore, Pakistani garment exports are concentrated around the
lower end of the price range: the average export unit value of its main
products ranges from 40 to 60 percent of the world average.
A major cause of the sector’s lackluster export performance are the
federal import policies and customs procedures that discourage the import
of materials such as MMF yarn and fabric, technical textiles, and
specialized trimmings and accessories, which exporters need in order to
move up the value chain. Other constraints include the chronic energy
shortages and Pakistan’s poor security and country risk perception since
9/11. The impact of the latter can be judged from our estimate that
garment exports would have been 20 percent higher in 2012 if exports to
the US, the largest market for Pakistan in 2005, had grown at the same rate
as Pakistan’s exports to the EU after the end of the quota regime in 2005.
Garment manufacturers have tried to overcome the constraints
arising from the energy shortages and adverse security and country risk
perception by investing in power generation capacity, upgrading IT,
developing design and R&D capability, and opening up offices and
warehouses in or near major markets and fashion centers. The Punjab
government’s focus on garments as a central plank of its industrial strategy
has also helped. In areas of federal domain, Punjab has liaised with the
concerned federal ministries and agencies to mitigate some of the
constraints, such as market access and customs procedures. In areas that
are in the provincial purview, the government has launched important
initiatives such as the development of skills and garments clusters.
Given the emerging opportunities and the support of the Punjab
government, growth in the export of garmentsparticularly from
Punjabis likely to accelerate. However, a significant bump up in the
growth trajectory will only take place if import policies and customs
procedures are substantially reformed.
The Textiles and Garments Sector: Moving Up the Value Chain
305
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.do?documentID=1860
... Similarly, 'Desi' cotton had higher plant height than American cotton in all weed control treatments and row spacing. Hamid et al. [30] and Wang et al. [31] reported that 'Desi' cotton produced taller plants compared to American cotton. The difference among cotton types for plant height might be due to their genetic potential and plant's tendency to adjust according to available spacing [32]. ...
... A higher number of sympodial branches was indicative of the formation of more fruiting points. Ali et al. [33], Khan et al. [32] and Hamid et al. [30] reported the same results. ...
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The textile industry of Pakistan is one of the most vital sectors for the economic growth of the country. It is a significant contributor to its industrial exports. Over the years, this sector has undergone a rise and fall due to various reasons. The sector has struggled due to high manufacturing expenses, frequent power shortages, faulty strategies and lack of support policies from the government. A worldwide recession, global tension and quality competence are also major threats to the sector. The textile industry of Pakistan is also faced with several challenges and opportunities like frail infrastructure, obsolete technology, adverse law and order situation and lack of investment. The main segments of this sector are clothing and garments, ready-made fabrics, weaved apparels, twisting sector and chemical processing sector. Despite the fact that majority of the textile sales is done overseas to the developed countries, the sector is still way behind South Asian regional competitors and has not performed to its full potential particularly in recent years.
... The situation can be improved through promoting trade facilitation measures. Hamid et al. (2014) argued that Pakistan should change import polices and customs procedures to facilitate the import of textile materials, including synthetic yarn and fabric which are required by exporters so that a textile value chain can be developed. A study by ITC (2015) on Kenya pointed out that the potential of the textile and clothing sector can be increased by promoting the development of full value chains, which also require economically productive support services and the development of customs, finance and logistics. ...
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The paper aims to identify the various types of non-tariff measures (NTMs) affecting Pakistan’s textile sector. The textile industry is of great importance to Pakistan and is a major contributor to its gross domestic product. However, Pakistan’s textile exports are facing market access challenges, in part due to trade barriers of some developed countries. An in-depth analysis of Pakistan’s textile sector and NTMs country-wise and category-wise for the period of 2010-2017 was conducted. Statistics about the textile industry of Pakistan were obtained from the State Bank of Pakistan, while categorical export data on NTMs was taken from UNCTAD’s TRAINS database. Face-to-face informal interviews were also conducted with 15 participants from relevant stakeholder groups, including public and private sector officials. The authors found that Pakistan’s global share in textiles has declined significantly since 2010 and that it relies heavily on a few international markets such as the United States, China and the European Union. Turkey was found to have the highest number of NTMs targeting textile products, followed by the United States. Additionally, not only do countries importing Pakistani goods impose NTMs, Pakistan’s own export procedures also hamper the trade. Interviewed exporters mentioned that they face difficulties in the costly and time-consuming acquisition of certification, whereas Government officials claimed the certification process improved competitiveness. Exporters also complained about the high cost of doing business, which results in the shifting of exports to China, Bangladesh and India.
... The situation can be improved through promoting trade facilitation measures. Hamid et al. (2014) argued that Pakistan should change import polices and customs procedures to facilitate the import of textile materials, including synthetic yarn and fabric which are required by exporters so that a textile value chain can be developed. A study by ITC (2015) on Kenya pointed out that the potential of the textile and clothing sector can be increased by promoting the development of full value chains, which also require economically productive support services and the development of customs, finance and logistics. ...
Article
Full-text available
The study aims to identify the various types of non-tariff measures (NTMs) affecting Pakistan’s textile sector. Pakistan’s textile industry holds a huge stake in Pakistan’s economy and is a major contributor to its gross domestic product. However, Pakistan’s textile exports are facing market access challenges due to discriminating trade barriers by developed countries. The survey method has been used for in-depth analysis of Pakistan’s textile sector and NTMs country wise and category wise for the period of 2010-17. Statistics about the textile industry of Pakistan were gained from the State Bank of Pakistan, while categorical export data on NTMs was gained through UNCTAD’s TRAINS database. Face-to-face informal interviews were also conducted with 15 participants from relevant stakeholder groups. The study found that Pakistan’s global share in textiles has dropped significantly since 2010 and that it relies heavily on a few international markets such as the United States, China and the European Union. Furthermore, exporters mentioned facing difficulties in the costly and time-consuming acquisition of certification, whereas government officials claimed it improved competitiveness. Additionally, not only do countries importing Pakistani goods impose NTMs, Pakistan’s own export procedures also hamper the trade. Turkey was found to have the highest number of NTMs at 22, followed by the United States with 13. Exporters also complained about the high cost of doing business, which results in the shifting of exports to China, Bangladesh and India. The study recommends that trade agreements and facilitations need to be rationalized and simplified, uniform certification requirements for exporters must be implemented to save costs and time, cheaper tests in Pakistan rather than abroad should be made available, and that B2B forums be developed to promote information exchange. Finally, it suggests that frameworks to deal with NTMs are needed.The promotion of Pakistan’s textile exports is difficult to sustain without addressing these challenges. Keywords: Textile industry, export performance, non-tariff measures, Pakistan
... Garments sector, because of current promising changes for the businesses in Pakistan and the probable future developments in the global world business edifice for the industry, can perform a significant part in increasing Pakistani exports. Besides, garments-manufacturing echoes with Pakistan's policy to help in saving and generating resources for employment and economic growth due to the sector's capital intensive and energy saving nature [16,17]. Considering the economics as well as the employment importance of this sector, the researchers selected this sector. ...
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This current study is among the very few investigations, which seeks the relationship between knowledge management and sustainable organizational innovation in garment business firms. This investigation focused on examining how organizational learning mediates the relationship between knowledge management and sustainable organizational innovation. This research establishes that knowledge management and organizational innovation procedures are integral parts of the progress and survival of the organizations. The received data of this population reports on the garment firms, operating their businesses in Lahore and Gujranwala. The study applied a stratified random sampling method for data collection and employed structural equation modeling (SEM) to examine the hypothesized relationships. The results specify that knowledge management shows a significant positive association with organizational learning, which in turn reveals a positive linkage to sustainable organizational innovation in SMEs of the garment industry. The study results also specify that organizational learning mediates the relationship between knowledge management and sustainable organizational innovation. This research survey identifies the significance of knowledge management and organizational learning in executing the process of organizational innovation, and it helps business managers to understand organizational learning as a mediator, which in turn indicates the benefits of knowledge management in achieving sustainable organizational innovation. This review provides an empirical indication of original data to investigate the linkage between knowledge management, sustainable innovation process, and organizational learning culture in the Pakistani garment sector. The generalizability of the study fallouts is restricted to the garment industry, and it offers valuable insights for imminent researchers.
... Garments sector, because of current promising changes for the businesses in Pakistan and the probable future developments in the global world business edifice for the industry, can perform a significant part in increasing Pakistani exports. Besides, garments-manufacturing echoes with Pakistan's policy to help in saving and generating resources for employment and economic growth due to the sector's capital intensive and energy saving nature [16,17]. Considering the economics as well as the employment importance of this sector, the researchers selected this sector. ...
Article
This current study is among the very few investigations, which seeks the relationship between knowledge management and sustainable organizational innovation in garment business firms. This investigation focused on examining how organizational learning mediates the relationship between knowledge management and sustainable organizational innovation. This research establishes that knowledge management and organizational innovation procedures are integral parts of the progress and survival of the organizations. The received data of this population reports on the garment firms, operating their businesses in Lahore and Gujranwala. The study applied a stratified random sampling method for data collection and employed structural equation modeling (SEM) to examine the hypothesized relationships. The results specify that knowledge management shows a significant positive association with organizational learning, which in turn reveals a positive linkage to sustainable organizational innovation in SMEs of the garment industry. The study results also specify that organizational learning mediates the relationship between knowledge management and sustainable organizational innovation. This research survey identifies the significance of knowledge management and organizational learning in executing the process of organizational innovation, and it helps business managers to understand organizational learning as a mediator, which in turn indicates the benefits of knowledge management in achieving sustainable organizational innovation. This review provides an empirical indication of original data to investigate the linkage between knowledge management, sustainable innovation process, and organizational learning culture in the Pakistani garment sector. The generalizability of the study fallouts is restricted to the garment industry, and it offers valuable insights for imminent researchers.
... In comparison with world exports of textile and garments, Pakistan share dropped from 2.46% in 2005 to 2.17% in 2012. One of the reasons behind it is that Pakistan did not get benefit from trade opening of textile and garments in 2005 due to unfriendly government Source Adapted from Hamid et al. (2014) policies and the resultant uncompetitive structure of Pakistan's textile and garments sector. It is evident from Table 4 that Pakistan textile and garments exports are low and intermediate value-added products. ...
Chapter
Bangladesh as an emerging South Asian economy intends to achieve considerable economic progress in order to significantly reduce its poverty and income inequality. The consistent level of economic growth maintained over the past decades has contributed to reduce Bangladesh’s poverty level—from 56.7% in 1992 to 23.6% in 2016. Alternatively, this data indicates that a large section of people lives below the poverty line who needs to be taken out of the poverty trap. Over the past decades, the structural transformation experienced by Bangladesh economy led to more share of non-agriculture sector not only in GDP but also in employment. Given the persistence of high level of poverty, job creation in the non-agriculture sector, particularly in the manufacturing sector, is still considered to be a major development strategy of Bangladesh. Besides, creating ‘decent jobs’ for the working population is another important aspect related to the sustainable economic growth of the country.
... A large number of statutory regulatory orders (SROs) complicate the incentive regime and orient it toward licensing imports rather than promoting exports (Pursell, Khan, & Gulzar, 2011). In the case of the country's major export, import controls on technical inputs discourage textile exporters from moving up the garment value chain (Hamid, Nabi, & Zafar, 2014). In other areas, Pakistan has not taken advantage of regional agreements, competing more with low-income countries for preferences in traditional markets rather than negotiating trade agreements with dynamic economies (Kaukab, 2014). ...
Article
This paper makes the case for Pakistan to engage actively in globalization. At present, the country is more a recipient of globalization than a participant. There is a need to shift the terms of engagement from passive to active involvement. Particular effort is needed to encourage foreign companies already present in Pakistan to integrate activities with their global operations. Export-oriented investment requires a more favorable trade regime. Above all, global engagement will require Pakistan to build up its technological capabilities substantially, both at the enterprise level and economy-wide. These shifts imply a revitalized industrial policy endorsed by industry and a vigorous policy thrust aimed at investment-led growth.
... Textiles account for over half of Pakistan's exports, with readymade garments (RMGs) and textile made-ups comprising more than half of textile exports in 2011/12 (Hamid, Nabi & Zafar, 2014). 1 Pakistan produces both woven fabrics and knitwear, in about equal amounts. Due to restrictions on the import of synthetic fabrics, Pakistan's garment producers are concentrated in home textiles (towels and bed linen), menswear (socks and polo shirts) and denim. ...
Article
In this paper, we look at denim production in three different factories in Punjab, Pakistan. We map the manufacturing process for a standard pair of denim jeans produced for an international retailer. We asked three factories of different scales and proximities to the technological frontier to stitch, finish and wash an identical pair of jeans. These firms included a large-scale exporter with established links to a major multinational brand, a medium exporter with links to regional European labels and a small producer selling primarily to the domestic market. Timing the operations ourselves, we find that the stitching time of the large-scale exporter is about one-third less than that of the medium exporter and about half the stitching time of the small firm. Of the three firms, only the large exporter pays wages based strictly on standard minute value – the time expected to complete an operation. The two smaller firms pay piece rates that reflect the market rates paid for individual operations by firms throughout the sector. Even without increases in stitching efficiency, the two smaller firms could reduce their stitching costs by 30–50 percent if they were able to switch to paying wages based on stitching times. We also calculate the labor cost savings that the two smaller firms could accrue by adopting some of the more advanced equipment used by the large exporter, along with lower piece rates. Of these, the most reasonable investment would be in better loop-making machines; the cost of equipment could be recuperated by producing 325,000–500,000 garments, which for the medium firm is four to eight months’ production at current levels. However, piece rates are entrenched and, if sticky, could reduce the incentives for firms to adopt labor-saving technologies.
Chapter
Along with productivity growth, job creation has always remained a central focus of economic policies the world over. In this regard, industrialization has emerged as a major policy to create employment opportunities and manufacturing sector, as an employer, has earned a greater attention, the world over. Continuous creation of jobs becomes even more crucial for developing countries wherein the population growth continues to add to the army of unemployed and economic recoveries are more often jobless. We argue that manufacturing sector in Pakistan has the potential to serve as the key driver of growth and employment generation. And that these gains are contingent on restoring the external competitiveness of overall tradable sector of the country.
Article
Economic development is a process of continuous industrial and technological upgrading in which any country, regardless of its level of development, can succeed if it develops industries that are consistent with its comparative advantage, determined by its endowment structure. The secret winning formula for developing countries is to exploit the latecomer advantage by building up industries that are growing dynamically in more advanced fast growing countries that have endowment structures similar to theirs. By following carefully selected lead countries, latecomers can emulate the leader-follower, flying-geese pattern that has served well successfully catching-up economies since the 18th century. The emergence of large middle-income countries such as China, India, and Brazil as new growth poles in the world, and their dynamic growth and climbing of the industrial ladder, offer an unprecedented opportunity to all developing economies with income levels currently below theirs -- including those in Sub-Saharan Africa. Having itself been a follower goose, China is on the verge of graduating from low-skilled manufacturing jobs and becoming a leading dragon. That will free up nearly 100 million labor-intensive manufacturing jobs, enough to more than quadruple manufacturing employment in low-income countries. A similar trend is emerging in other middle-income growth poles. The lower-income countries that can formulate and implement a viable strategy to capture this new industrialization opportunity will set forth on a dynamic path of structural change that can lead to poverty reduction and prosperity.
Buy-out: Chinese firm to acquire Masood Textile Mills. The Express Tribune
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Ministry of Finance Pakistan economic survey 2012–2013
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