Textile Industry Overview

Textile industry is the most essential manufacturing sector of Pakistan as it serves as

the backbone of Pakistans economy. It has the longest production chain, with inherent
potential for value addition at each stage of processing, from cotton to ginning, spinning,
fabric, dyeing and finishing, made-ups and garments. Critical success factors of the
textile industry are availability of cheap and subsidized credit facilities, uninterrupted
supply of gas and electricity at low rates, consistent and industry friendly tax policies
and establishment of new textile units in less developed areas by giving incentives to
the investors i.e. tax holiday. Due to unavailability of these factors, negligible growth of
0.5 percent has been recorded in the current financial year 2014-15 as compared to the
last year in Pakistan.
Government of Pakistan has promulgated Textile Policy 2014-19 to ensure the
maintenance of countrys reputation as a reliable source of high quality textile goods.
Salient features of the Policy are as follows:
1. Draw-back for local taxes and levies are given to exporters of textile products on
FOB values of their enhanced exports if increased beyond 10% over last years
exports at the following rates:

Garments 4%
Made ups 2% &
Processed fabric 1%.

2.

Mark up rate for Export Refinance Scheme of State Bank of Pakistan was
reduced from 9.40% to 7.50% under the policy. This rate has been subsequently
reduced further to 4.50 %.
3. Mark up rates for Long Term Financing Facility (LTFF) provided to textile
manufacturers in the value added sector was reduced from 10.90% to 9.00 %.
This rate has been subsequently reduced further to 6.00 %.
GOVERNMENTS ROLE
The government has always come to the rescue of the textile sector because it knows
the importance of this industry. Every year new incentives are announced to the
growers and the textile industry as well to revitalize this sector. The government has
fixed the export target of US$ 9bn in an aim to reducing the trade deficit.
Complementing the governments aggressive export target is the fact that cotton prices
have made Pakistani exports more competitive in international markets.
It has also announced the Textile Quota Management Policy for 2000, with a focus on
quota allotment based on performance and a check on quota trading which has been

prevalent in the market for quite sometime. The policy has been effective from 1st
January 2000. To promote the textile industry the government has taken effective steps,
which include:

Reduction in sales tax from 18% to 12.5%

10% on regulatory duty on all imports has been abolished
Corporate income taxes have been reduced.
Free imports are allowed for the spare parts of the weaving and finishing units.
Interest rates have been reduced which will lower the cost of BMR.
Imports of processing machinery are being liberalized as well.

GOVERNMENT SUPPORT FOR BLENDED FABRIC

The government and the industry to help and vitalize the value-added sector of the
textile industry in recent years have taken a number of measures. One of these is to try
to correct the imbalance, caused by the dependence of the entire countrys economy on
a single commodity, raw cotton.

GOVERNMENT INCENTIVES
DUTY-FREE IMPORTS
In recent packages of incentives to the industry the government has allowed
manufacturing in bond facility for exports for which nearly all imported inputs are
allowed duty free.
ESTABLISHMENT OF FASHION HOUSES:
An institute of fashions has been set up at Lahore by the Export Promotion Bureau in co
-operation with the noted French fashion house of Oliver Lipids.
Export Promotion Bureau has also assisted SFDAC to set up an Eco- textile laboratory
in Karachi for which Hohenstein Textile Institute of Germany has provided technical
advice.
All these foreign consultants have emphasized on human resource development and
technical education through out the industry and especially in the value added garments
sector, which, all of them agree, has a great potential, provided the industry is re
structured on a more scientific basis.

DEREGULATION OF COTTON TRADE

Deregulation of cotton trade has allowed manufacturers to import cotton in periods of
low cotton output or in periods of excess demand. As mentioned before, the cotton
being an agricultural product, its production and supply in any given year cannot be
predicted accurately.
FUTURE OPPORTUNITIES :
PROSPECTS FOR EXPORTS AND GROWTH OF READY-MADE GARMENTS
Pakistans ready-made garments industry has achieved significant progress and has
acquired capability of producing a large volume of quality garments for domestic
consumption as well as for exports. Exports of woven garments have grown rapidly in
recent years and now account for over 50% of Pak garment exports.
GROWING POPULARITY OF THE KNITTING INDUSTRY
Within the textile sector, knitted apparel has emerged as the largest sub-sector. Knitted
apparel earns about $ 750 million from exports. Overall this sector has made impressive
improvement in quality and volume growth, particularly since 1991.
Pakistan seems to have created a competitive edge in knitted apparel internationally.
Brand names like Nike, Tommy Hilfiger, Calvin Klien, Chaps, Ralph Lauren, Timberland,
Gear for Sports etc are all sourcing from Pakistan. The main centers producing this
merchandise are Lahore, Karachi, Islamabad, Multan and Sialkot. In terms of plant and
equipment, building layout, safety and health conditions, labor practices and
environmental sensitivity, we have probably the best manufacturing facilities in south
Asia.
CHEAP LABOR AND DOMESTIC RAW MATERIAL AVAILABILITY:
So far, unfortunately, Pakistan has not been able to take advantage of its cheap labor
and domestic raw material availability to capture a significant share of the worlds T&C
market. However, the opportunity still exists and can be exploited as was done by
Bangladesh and India.
MARKET IN AFRICA
An opportunity of a new market exists for Pakistan in African countries. A recent
combined report of UN and USA research groups has predicted a serious problem of
water availability for the countries in the next 10-15 years and identified 25 flash points
at various rivers. So Pakistan can avail the opportunity of tapping this market in the next
10-15 years.