Textile Industry Overview

7/29/2019 Textile Industry Overview

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Pakistan's Textile Industry

Overview


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Pakistan is the fourth largest producer of cotton,6th largest importer of raw-cotton, 3rd largest

consumer of cotton and first largest exporter ofcotton yarn.

Textile sector is important for Pakistan because

The share of textile industry in the economy,

its contribution to exports,

employment,

foreign exchange earnings,

investment and value addition makes it the singlelargest manufacturing sector for Pakistan.


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It contributes around 8.5% to GDP

Employs 38% of total manufacturing labourforce

Contributes 55% to total merchandise exports

Pakistans share in the Global textile sector isabout 1.5% and in the world clothing exports isabout 0.7%


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The total contribution of textile exports during the periodof 2010-2011 is 55% of total exports of Pakistan $17.79billion.

With textile exports reaching $ 10.87 billion in 2010-11,

Pakistan is among the major textile exporting countries.

The variety of products ranges from cotton yarn toknitwear.


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Till late 1980s Pakistan was only exporting white bed-sheets to Europe as their domestic industry was

producing printed and higher quality bed linen.

In the 1990s, the export growth remained slow despitethe fact that the European market started importingprinted and higher quality bed linen from Pakistan.

Bed wear exports surged after the European Union gavea duty free excess to Pakistani products and increasedtextile quota by 25% in 2001-02.

Thereafter some problems cropped up.


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EU imposed a duty of 13.1% on imports of

bed linen from Pakistan, just a year priorto the quota free regime.

After long negotiations, this duty wasreduced to 4.8%.

Exports started increasing from US $8.44billion in 2004-05 to US $9.9 billion in2005-06.


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Pakistans textile industry has been heavily investing (US$6.0 billion) for the last six years in modernization and

improvement of production base.

This investment includes both investment through bankloans as well as own sources.

The break down of the investment according to sectorsis as below. Spinning (46%)

Weaving (26%)

Textile processing (10%)

Made-ups (8%)

Knitwear and garments and synthetic textiles (5% each)


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Advantages to Pakistani Textiles

Pakistans textile industry enjoys certainadvantages over its competitors abroad.

The availability of raw material

Relatively cheaper labour force

Investment incentives from the government


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The non-textile exports from Pakistan are mainly

Carpets

Gems & jewelry Leather products

Shrimp

Rice Fruits

Petroleum products and chemicals


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The main factors that have led to losses to this industry are

The event of 9/11

Duty free market access provided by USA to various countries excludingPakistan

EU import regulations for Pakistan

Reduction in duty drawback rates

Increased cost of utilities

Upward trend in cost of finance

Exchange rate appreciation

Low technological levels as compared to other neighbouringcompetitors.

As a result, textile and clothing products from Pakistan are about 20%costlier in the international export markets.


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Due to changes in international scenario,the banking sector has become extracautious while dealing with textile sector.

Anticipating opportunities in post quotaregime, lured by economical mark up

rates, most of the export units opted debtfinancing for expansion, balancing andmodernization.


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While Pakistan was being bogged down by

internal factors, its competitor countrieswere showing tremendous progress.

In the garment sector alone, Indiasexports grew by over 100%, Bangladesh200% and China 900% during the first

quarter after quota elimination, whilePakistans growth in this sector was only14%.


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Pakistan Textile Industry

Process Overview


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Textile Sectors

Cotton growing/Ginning

Yarn Spinning Open End Spinning/Rotor Spinning

Ring Spinning Compact Spinning Heather/Melange/Specialty

Weaving Power Looms Shuttle less Mills

Fabric/Yarn Processing Woven Knit


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Finished Product Vertical Knitwear Denim

Sewing Woven Bottoms Woven Tops Knitwear

Towels Home Textiles

Sweaters

Service Labs Buying Offices Consultants Suppliers Embellishments Garment Washing


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Cotton

In Pakistan its also known as the silver fibre.

Its second most important fibre after wheat.

It is cultivated over about 12% of the total cultivatedland.

The area of cotton has been static for the last ten years.

About 80% of the national production comes fromPunjab


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Pakistan is five years behind India in cottondevelopment.

Pakistans Punjab and Indian Punjab are of same soilcharacteristics, but in India production has increasedmanifolds due to introduction of Bt cotton.

Pakistans cotton is regarded as one of the best amongthe cottons of similar staples grown elsewhere in theworld.

Despite this Pakistani cotton is sold at a much cheaperprice in the international markets in comparison to itscompetitors.


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There are several reasons for this

First is bad ginning as a result Pakistans cotton yarnhas earned world-wide as one carrying the highestnon-lint contaminants.

Second reason is the product mix of cotton yarns withalmost all the yarn exported by Pakistan being incoarse and medium counts, which naturally fetches alow value.

The third reason is nearly complete absence of highvalued yarn, like dyed yarn, in exports from Pakistan.


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There is a serious issue of cottoncontamination in Pakistan which hasresulted in heavy loses to the textilesector.

India has overcome this problem byfocused R&D activity


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Main Problems

Low Yield per Acre

Contamination

Poor Grading Standards

Not enough MMF


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Ginning

Stage where lint is separated from seed cotton.

There are around 1220 ginning factories in the country.

Most of these do not adequately follow govt. regulationsand only 750 to 800 units actually function in a season.

Poor management in the ginning process leads to anumber of problems in the next stages of textile chain.


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The machinery used is mostly local and very old, basedon technology introduced in late 40s and 50s.

Consequently the efficiency and productivity of theprocess is only one fifth of that of the machines beingused in China and India.

The ginning factory has a pivotal role for determiningthe quality of cotton fibre as raw material for downstream textile industry.

Yet this component of textile Industry is the mostneglected and antiquated one.


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Ginning sector in Pakistan has the followingshortcomings:-

The ginners do not separate different varieties ofcotton according to the approved grades and hencethe advantage of producing better and longer staplecotton is lost when all the varieties are lumped

together in ginning.

The seed cotton is not properly dried to preserve itsfibre properties and improve its grades. Very fewginning factories are equipped with the artificial

drying system and most use sunshine drying whichdoes not take out moisture completely and exposethe cottonseed to further solid contamination.


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Even few ginners bother to undertake pre-ginning and post-ginning cleaning, as it adds to

their costs.

Very few ginners have the properly covered andclean storage facilities. The seed cotton sacks

are normally piled up, out in the open.

The ginned lint cotton is again packed in borasor jute sacks or plastic bags rather than hessian

cloth. This packing adds to the dustcontamination or chemical particles incase ofpolyester bags which cannot be separate lateron by any process.


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The ginned cotton bales are not marked

according to the variety contained therein.

Hardly any ginning factory has the

services of qualified classers; gin filters ormechanical engineers to ensure theginning process as per the prescribed

modern techniques.


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Man Made Fibres and their Utilizationin Pakistan

The consumption of MMFs such as polyester, nylon, acrylic andviscose etc now has the dominant share in the world textile market.

In 2000-01 the world consumption ratio of cotton and MMF was41:59.

However Pakistan has lagged far behind in this field because of itsoverwhelming dependence on cotton for textile manufacturing.

The significance of MMF was completely ignored while the globalconsumption patterns were rapidly changing in favour of theblended fabric categories.


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Pakistan was late starter in this field.

Its consumption was only 81:19, the lowestamongst all the textile exporting countries.

Pakistan has attracted some foreign investmentfor development of polyester industry to partiallymeet the demand of the polyester staple fibre ofthe spinning sector of the textile industry.


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At present out of the total blended yarnproduced in Pakistan around 70% ispolyester/cotton and the remaining 30% idpolyester/viscose.

The viscose fibre industry in Pakistan has not yetdeveloped and almost all the viscose fibre isbeing imported.

The demand for MMFs is however growingannually by more than 10% and the competingcountries are consuming MMF to the ratio 40%.


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Spinning /Yarns

Spinning is the first stage of value addition to cotton lint and MMF inthe textile chain.

If the spinning industry produces sub-standard yarn, its effect goes

right across the entire value chain.

At the time of independence when many other industries were nonexistent in Pakistan, the spinning sector did exist.

Over the years the spinning sector has rapidly expanded to emergeone of the most developed sub-sectors of Pakistans textile industry.

Out of the total 163 million spindles in the world, 113 million areinstalled in Asia. Pakistan with 8.01 million spindles ranks third inAsia- behind China (with 41.7 million) and India (31.9 million).


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Pakistans spinning sector being the fourthlargest producer of yarn in the world notonly caters for the requirements of thelocal industry but about one third of the

total produces exported.

The average unit price realisation of

Pakistans cotton yarn in the internationalmarket is non the less very low comparedto that of its competitors because:


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The cotton lint provided by Pakistans ginning sector iscontaminated with non-lint components. This results in Productionof contaminated yarn, which fetches very low price.

More than 70% of Pakistans cotton yarn is that of coarse andmedium counts with the least value addition.

Though Pakistans cotton staple length is not suited for very finecount yarns, it can still easily by used for 40-60 count yarn providedthere is the will and the motivation on the part of the spinners to do

that.

Pakistans competitors are focusing more on the production ofhigher and finer counts of cotton and MMF yarn.

Pakistans low count yarns are mostly used for towel, terry cloth andunder garment production. These products obviously cannot becompared price wise with the higher end textile made-ups andgarments products.


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The textile industry at present is facing anover capacity situation in the spinningsector. The capacity utilisation in the past10 years ranged between 70-80%.


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Fabric Processing

Investment and development of Pakistansweaving sector have been subdued.

The situation of installed capacity andactual utilisation of capacity in weaving

sector is given in the following table


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Category InstalledCapacity (no. of

looms)

EffectiveCapacity (no. of

looms)Integratedtextile units

9,898 4,185 (42%)

Independentweaving units

17,500 15,000 (86%)

Power Loom

sector

225,253 190,000 (84%)

Total 252,651 209,185 (83%)


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The first and second categories fall under the large scaleorganised mill sector.

The third and largest power loom sector equipped withtraditional and largely obsolete machinery actually fallsunder the classification of cottage or small-scale

industry.

This sector is disorganised, fragmented andundocumented.

However, it produces in the region of 5.5 million squaremetres of fabric a year. Most of this fabric is used in thedomestic market.


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Textile made-ups

Garments (Hosiery and Knitwear Industry)

In 2001 there were around 10,000 knitting machines working in thecountry with 60% capacity utilisation.

This sector is third largest foreign exchange earner for Pakistan afteryarn and fabric.

Demand for hosiery and knit wear items is growing faster than theother woven products in the world.

The number of the knitting machines in Pakistan hence is too low whencompared to competing countries.

But before more machines are installed, attention should be focused onattaining total utilization of the already established knitting units.


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Towel Industry

In 2001 there were 6,500 towel looms in both organizedand unorganized sectors.

The industry is mostly export based.

The quality of Pakistans towels is considered low. due to the production from the cottage towel industry which is

from outdated looms.

Modernisation of the machines and set up of large scaleorganised towel industries, pakistans share in the worldmarket can increase significantly As Pakistan has an edge over competitors of having abundant

low count cotton yarns which are required for the production oftowels.


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Bed Linen Industry

In this low value added traditional export sector,Pakistan has been able to more than double itsshare in the world market over the last decade.

Pakistans bed wear products however, fail torealise high unit price because

They lack in quality Not in line with the latest fashion or design Not according to specification of the buyers Common perception in international market that

suppliers from Pakistan cant insure timely shipments.


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Ready made Garment Industry

The garments alone are an annual global marketof around $200 billion.

The US and EU are the two largest markets forgarments and apparel with a combined share of70%.

Pakistans share of the global garment market isonly 0.7%


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Pakistans garment industry is mainlyconcentrated in Lahore and Karachi.

The industry started operation in 1970s.

There are all together 700 vertical knit

facilities and 4000 garment sewing units.


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Tale of Two Cities(Lahore Vs Karachi)

Karachi produces generally fragmented work.

Separate facilities providing fabric, finishing,sewing etc.

The work is generally of poorer quality and, dueto low overheads, cheaper in cost.

Karachi produces knit & woven products andsupplies to the lower end buyers.


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Lahore comprises of Vertical facilities with hugeproduction capacities (upto 10 tones of dyeing

per day).

Sewing exceeds 700 machines per plant.

These plants are self contained in some casesfrom yarn to finished product includingembellishment and washing.

Lahore produces mostly knitwear for brandedcustomers & department stores.


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The garment sector is further divided intothe sub-sectors of

Mens wear (woven or knit)

Womens wear (woven or knit)

Babies wear

Sports wear

T-shirts

Pullovers

hosiery


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While Pakistan has been able to develop asolid base in mens garment segement

with a significant growth, womens wear(which is the largest single category of aglobal market with one third share) has so

far been overlooked.


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Pakistan Textile & Clothing Industry

The Pakistan Textile and Clothing Industry has, in general terms,two types of companies:

A. Manufacturing companies who are themselves direct exportersB. Manufacturing companies who do not export directly but who sell

to commercial exporters or whose capacities are bought by

buyers.- These companies are becoming of less and less interest to buyers.

Presently companies in Group A and B sell large quantities ofcotton yarns and increasingly large quantities of woven greyfabrics, i.e. intermediate textile products of limited value addition,

into the world markets. The importer of these intermediate textile products is to convert

them into value added, consumer products , often for sale into theexport markets in competition with Pakistan exporters.

Why cannot Pakistan exporters fill more of the supply chain?


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Group A: Manufacturing Companieswho are themselves direct exporters

These companies are often at leastpartially integrated in more than one

activity with superior management temaand equipment.

As they export directly, they understandthe dynamics and the driving forces in themarkets.


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Whether for knitwear or for woven, the trend is forvertical integration.

These manufacturing units are generally large (morethan 1,000 workers, some cases more than 10,000)

These units have laboratories that conform to ISOstandards.

Some clients require these units to conform to certaineconomic obligations, commitments to improve workingconditions and even certain social duties. Such as Creation of canteens Schools Hospitals Recreation centres Healthcare


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Companies exporting directly on their own

accounts are generally more attractive tobuyers as suppliers than manufacturersusing commercial exporters.

However, and in spite of having a directinvolvement in the markets, manyPakistani companies are seem content to

serve the lower, highly price sensitivesegments of the market with basicproducts.

Group B


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Group BThe subcontractor / buying office / brand

and branded store sector

This approach seems to be the mostwidespread in Pakistan, and is probably

adopted by the majority of companies.

It consequently involves the largestnumber of jobs.

Each link in the chain plays a specific role


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The manufacturing companies in this group are unlikelyto be in control of their destinies as they are beholden tothe commercial exporters.

They are unlikely to have the correct managementstructures and modern equipment.

Importantly they are not in direct contact with the

markets.

They are certain to be under persistent price pressureand without product development that could enablethem to become direct exporters.

The opportunities for manufacturing companies toprogress are inhibited by the commercialexporter/buying house.


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Brands and branded retail stores

The branded retail stores, mostly American,does not have its own manufacturing unit.

It relies on networks of manufacturers spreadacross several different countries, includingPakistan.

The contribution of these retail stores in theproduct development activities is fundamental


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Their marketing expertise play the key role in enablingto develop products to full fill the consumer needs.

It is the market knowledge of these retailers whichenables them to produce very precise product demands.

The design phase is entirely handled by the brand.

The retailers determine The collection, i.e. the models, the materials and the colours The grade of quality required

They do not deal directly with the suppliers, but via theintermediary of the Pakistani buying office, or even itsown liaison office


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Buying House/Liaison Office

They form a link between the design office ofthe retailers and the sub-contractors whomanufacture the products.

Their role is fundamental if the manufacturingactivities are to function correctly.

They intervene as a liaison between the twoparties at several levels:


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Initial contact

To a certain extent, they act as sales representative

for the manufacturer. They also save time for the branded retail store by

selecting the most appropriate suppliers.

Quality Control

Their role is to find the best balance between theclients requirements and the manufacturingcompanys know-how.

Assuring quality standards are met at the

manufacturing stage Meeting shipment deadlines and any specific delivery

requirements (labeling, packaging, delivery etc)


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Additional Services

The core objective of buying offices is to ensure that

the delivery of an order complies with the clientsneeds.

However, additional services can be carried out

depending upon the contractors requirements. Suchas

Drawing up precise technical data sheets (if not fully suppliedby the contractor)

Sourcing supplies for the client

Proposing additional designs to the client (materials ormodels)

Proposing additional training courses to sub-contractors,notably in terms of quality


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They buying offices look after the sub-contractors sales and marketing

requirements as well as part of the buyingand production monitoring requirementsof the brands and branded stores.

Certain brands, e.g. Levis, which over theyears have developed major supply flowsfrom Pakistan, have set up a permanent

office that is totally dedicated to theirneeds (liaison office)


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Sub-contractor or Manufacturer

The sub-contractor concentrates on the manufacturingfunction.

For them, the sales and design functions do not exist.

They receive orders via the buying offices.

Contacts with the contractors are made via visits to the

sites by the branded stores buying teams.

The sub-contractors only very rarely meet the productdesign team (if at all)


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The manufacturing quality is high for most oftheir products.

Pakistani manufacturing units are supplying tothe biggest American and certain European ,sportswear and jeanswear brands, as well as forthe major branded stores ( Calvin Klein, Tommy

Hilfiger, Diesel, Macys, Nike, Ralf Lauren PoloJeans, Zara, Springfield, Abercrombie & Fitchetc)

The level of manufacturing quality they mustattain, together with the respect for deadlinesand service-quality, are consequently alignedwith international standards.

Documents

Textile Industry Overview