Pakistan’s Textile Industry: Having One Bad Day After Another

For years, Pakistan’s Textile and Clothing Industry has been the main driver of the economy in terms of foreign currency earnings and jobs creation. The sector has been playing a significant role in providing employment and raising the standard of living of the people. Currently, it absorbs almost 40% of the total industrial workforce and contributes 62% towards exports. The textile sector contributes 8.5% to the GDP of Pakistan. However, things are getting a bit worse as the textile industry sector is losing its competitiveness at the international level due to a number of challenges. These challenges are not only at the domestic level but also at the global level.

We can’t deny the fact that our textile sector has become regionally uncompetitive. However, we can’t blame the inefficiency of the industry but the reality is that this is because of a non-conducive business environment.

The Downfall in Pakistan’s Textile Industry

So many factors are involved in the downfall of the textile industry including the lack of investment in upgrading technology and innovation in the textile industry. The productive capacity of the sector is stagnant and there is no progress as there is not enough investment in technology.

The high cost of doing business is also discouraging investors to invest in the textile industry of Pakistan as there is an abundance of taxes and regulatory procedures.

Factors that cause Downfall

Let us discuss the factors that are causing the downfall in the textile industry.

1) No Research & Development (R&D) in the Cotton Sector:

In Pakistan, there is a lack of research & development (R&D) in the cotton sector that has resulted in the low quality of cotton. As there is low profitability in cotton crops, farmers are preferring to other crops that can generate income for them. There is also a lack of proper R&D in the pesticide sector.

2) Increase in Production Cost:

Due to the increase in interest rate, double-digit inflation & decreasing value of Pakistani rupee, the cost of production of textile rises. All these factors have increased the cost of production of the textile industry which in return has made it difficult to compete in the international market.

3) Lack of Modernize Equipment:

Our textile industry is not equipped with modern machinery. The lack of modern equipment and machinery is making hurdles for the textile industry to compete in the international market. Obsolete technology increases the cost of production, which is higher than other countries including India, Bangladesh & China.

4) Tight Monetary Policy:

The tight monetary policy has resulted in an increase in production cost. Financing cost has increased due to the high-interest rate which causes a severe effect on production. The withholding tax of
1% also badly affect production. The intensive increase in the rate of interest has increased the high cost of doing business.

5) Energy Crisis:

The electricity load-shedding has decreased the production which in return reduced the
export order. The increase in electricity tariff has risen the cost of production. Due to
load shedding, some mill owner uses an alternative source of energy such as a generator that increases their
cost of production further. Gas load-shedding has also resulted in extraordinary production losses and badly affect the capability of the industry.
Due to all the above-mentioned factors, there is a list of textile mills in Pakistan that have been shut down and discontinue further production.

What the Government Should Do?

It is very necessary to cope up with this worse situation. Government should implement such policies to bring some betterment in this sector. To avoid going to the IMF, we must improve export performance.
Government should provide a viable business environment by maintaining a competitive cost of doing business, promoting competition through an open economy that brings trade opportunities and protects domestic industries through tariff and non-tariff barriers where necessary.
The government should make such policies that support the domestic industry and should act as a regulatory and complementary body in market economies.

Conclusion:

For years, the Pakistani textile industry was considered as the backbone of the economy but presently it is facing new issues and challenges which should be dealt with an iron fist. The textile industry is facing downfall due to high energy prices, struck up refunds and tight monetary policy.  Our country is facing tough competition in the international market. Our government should take serious initiatives to safeguard the textile industry.

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