Pakis

tan

Text

ile a

nd

Gar

men

t Sec

tor Issues, Prospects and Strategic Recommendations

By:

Salman FahadShawana ZeeshanOvais

Hina Sohail &Hafsa Saadia

James William Lang, Australia For the Ministry of Finance

A case study approach:Understand and estimate Pakistan’s performance in chosen SITC sectorsInvestigate persistent decline in Performance& Sophistication

Analyze the factors that hinder the high levels of high quality (sophisticated) exportsAnalyze the impact of govt support &

subsidies &Recommend Strategies for improvement

The In

tro. Pakistan Textile & Garment Sector

Data

Collect

ion

and

Charac

teris

tics:

• 9 SITCs chosen on the basis of their level of sophistication and considers them more or less as equal • 18 companies and 4 representative industry bodies were formally visited• Discussion intentionally steered away from macro economic factors• Micro issues specific to firm or product that are challenges or concerns for the firm towards better and sophisticated export performances.

Elite – Large scale, fully integrted and efficiently producing and exporting high value products; Middle Rank – Producing low to middle value

product and some higher value products but see their future in exports of higher value items; and Low Rank – Numerous, producing lower value

product with generally stagnant performance , suffer strong competition from India, China and Bangladesh. Won’t survive without govt support.

3 Company/Firm Rankings

and Characteristic

s

Identified

1. Lack of staff Training at all levels (Vocational, graduate and management)2. Development of partnership type relationships with clients that assist to adopt and continually develop new high value items for export.

Issues with

Elites:

Issu

es w

ith M

iddl

e

Ran

kers

:

Up to date Info. On; Latest and Efficient Technology Potential new MarketsTraining staff at all LevelsPartnership relationship with potential clientsAccess to design skill locally for short term assignments &Access to local bank finance on competitive terms

Issues for Middle Rankers +Security IssuesCertification costs &Quality and Cost of Raw Materials

Add

ition

al I

ssue

s

with

Low

Ran

kers

:

Issues

Universal t

o all

RanksTraining staff at all LevelsMarket KnowledgePartnerships with ClientsDelivery of Intermediate and not Final goods specially by lower ranked firms

Selected S

ICTs; a

n

overview o

f

Perform

ance figure

s

6519

6577

6572

6531

6573

Selected S

ICTs; a

n

overview o

f

Perform

ance figure

s Europe 76%, USA 15% and Japan 9%

Decline in

Export

of

Sophisticate

d

products

Pakistan Exports are declining Heavily concentrated in a single SITC 6531 i.e. 80% in 2008 This share of 6531 is declining too.

6519, 6

573, & 6577

growin

g signifi

cantly

Many of the products produced under these three SITCs are technical, specialized or sophisticated products used in specialist applications. Only two firms interviewed stated they were producing these fabrics (Sapphire and Chenab)

size

13 b

illion,

Pakista

n’s 6.7

mill

ion

(200

8).

Focus on th

e final g

oods

SITC 6579 – Special Products – this consists of two products - textile transmission or conveyor belts and textile hose piping. It is a medium sized import sector that is growing steadily over time with growth experienced in

both products.

6579 N

o Export

companies id

entified

Lack o

f focus o

n

growin

g mark

et

trends i.e

6572 and

6577 specially

There are little to no exports from Pakistan in bonded fabrics –the SITC 6572. One reason for the decline in trade in cotton-synthetic mixed fabrics over time is the move to the supply of finished products rather than base

fabrics.

Perform

ance analysis:

Summ

ary o

f declin

ing

reasons

Withdrawal of quotas into the USA market at the end of 2005. Leading to the cease in export of some goodsMove to more fully integrated firms and as

the Middle rank and Elite firms produce more final goods and less intermediate goods their export sales will be found in other SITCs not chosen for analysis in this consultancyPoor market Orientation (6519, 6572, 6573, 6577)

Increased competition from ChinaPakistan exports are heavily concentrated in some export sectors which themselves are globally small and are declining. Pakistan exports are in areas of fabrics with an underlying base of cotton. However

over time the market is shifting away from cotton base fabrics more to manmade fiber based fabrics.

Perform

ance analysis:

Summ

ary o

f declin

ing

reasons

1. The paradox of quality, value and subsidies:• Rather than low rank firms govt must immediately focus on the Middle and Elite ranks to improve Value levels and sophistication.

• Low rank firms must be focused to strategically orient their performances towards high end sophisticated products as we can not compete China and India on the less sophisticated sector keeping in view the macro-economic factors.

Strate

gic

Recomm

endations

2. Through Mutual Co-operation and Govt Support firms must focus improvement in:

A. Staff training levels (Specially vocational)

B. Development of Partnership relationship with clients

Strate

gic

Recomm

endations

C. Information Exchange through facilitation of;• Use of expatriate Pakistanis’ in destination countries and use of their networks into the Pakistan communities in those countries • Attendance at trade shows and exhibitions; and

• Use of the internet

Strate

gic

Recomm

endations

D. Acquisition and Knowledge of the latest Production and Process Technologies and how to use them.

E. Other Issues like certification, water treatment, environmental and waste disposal, energy, financial services

Strate

gic

Recomm

endations

Thnx!!!

Any Qs??