Even though there are many factors at play in the demise of
Pakistan’s textile sector, an often overlooked reason is the failure to
invest in balancing, modernisation and replacement activities by textile
firms.
As the world moves on to fabric improvement using the latest
technologies, and the use of synthetic fibres disrupts conventional
apparel industries, Pakistan’s textile industry has struggled to keep
pace with modern developments.
A look at the historical context will help. The Textiles Policy
2014-19 made by the Ministry of Textile Industry (MoTI) rightly points
out that the textile industry development in Pakistan was shaped in a
large part by the Multifibre Arrangement (MFA) which imposed quotas on
textile exports from developing countries to developed countries.
The spinning sector attracted more investment due to a higher quota
in this segment while woven garments and other value added sectors such
as weaving did not see the same influx of investment due to
non-availability of quotas.
Once the MFA ended, Pakistan’s textile sector had an issue of uneven
capacities across the textile value chain with higher capacities in
lower value added segments. The lack of investment in readymade garments
and quality fabric production has now necessitated up-gradation of
obsolete machinery.
According to the Research, Development and Advisory Cell (RDA) of the
MoTI, the investment pattern remained the same following the end of the
MFA where processing, apparel and readymade garments got less than 22
percent of new investment.
As the graph highlights, textile machinery imports reached their
highest in FY05 which can be attributed the local industry investing for
capacity up-gradation to prepare for a post-MFA era. The State Bank of
Pakistan’s scheme for Long Term Financing for the Export Oriented
Projects in 2004 also proved to be a catalyst. The scheme offered
long-term loans for machinery imports at interest rates ranging from 5-8
percent.
There was an up tick in textile machinery imports during FY10-FY14
which industry stakeholders attribute in some part to the Textile Policy
2009-14. The policy brought back the long term financing facility and
introduced measures such as DLTL, Export Finance Mark-up facility as
well as the Technology Up-gradation Fund. A transition from conventional
power looms to shuttle-less and air jet looms also helped fuel textile
machinery imports during this period.
However, the past two years have seen a steep plunge in imports of
textile machinery once again. Textile machinery imports for FY18 clocked
in at $325 million which is the lowest since the bottom of $252 million
in FY09. Declining textile exports due to a high cost of production and
the inability to adapt to evolving international consumer trends have
not provided any incentive for further up-gradation to textile firms
particularly the small and medium sized ones.
In the long-run, the textile sector needs to continue investing in
modern technology and up-gradation of existing infrastructure if it is
to remain relevant in the modern world. Competitor countries including
Vietnam and Bangladesh have witnessed a sharp increase in textile
machinery imports owing to their robust growth in textile exports. While
it might be true that large textile units in Pakistan might be at par
with their regional peers in BMR activities, it is the SME’s that are
most at risk of becoming obsolete.
Source: Business Recorder, Pakistan Thursday, 11 October 2018