Khyber Journal of Public Policy, Summer 2023, Volume: 2, Issue:2 (Special)

Critical Evaluation of Textile Sector Pakistan

and Way Forward
Shahid Iqbal 1, Muhammad Sheeraz2, Taimur Karim3,
Muhammad Saleh4, Syed Zaki Hassan Naqvi5,
Shabidullah Wazir6, Dr. Muqeem ul Islam 7

Abstract:
Citation:
Iqbal, S., Sheeraz, M., Karim, T., The textile industry plays a crucial role in the global
Saleh, M., Naqvi, S. Z. H., &
Wazir, S. & Islam, M. U Critical
economy, with a contribution of approximately US$
evaluation of the textile sector in 2.6 trillion to global GDP and employing 60 million
Pakistan and way forward. Khyber people worldwide. In Pakistan, the textile sector is the
Journal of Public Policy, Summer
2023, 2(2) backbone of the economy, accounting for 60% of
exports and employing 40% of the industrial
Article Info: workforce. Despite this, the sector’s performance
Received: 31/03/2023
Revised: 07/04/2023 remains suboptimal due to challenges such as high
Accepted: 10/04/2023 production costs, energy inefficiencies, and limited
Published: 24/04/2023 access to finance. Pakistan’s textile exports have
Disclaimer:
The opinions expressed in this fluctuated, and though they reached US$ 19.33 billion
publication do not implicitly or in FY 2022, the potential for growth remains untapped.
explicitly reflect the opinions or
views of the editors, members, This paper aims to analyze the sector's capacity, legal
employees, or the organization. The framework, global competitiveness, and identify gaps
mention of individuals or entities
and the materials presented in this through SWOT analysis. Recommendations focus on
publication do not imply any opinion sustainable practices, technological advancements,
by the editors or employees
regarding the legal status of any skills development, diversification, and improvements
opinion, area, territory, institution, or
individual, nor do they guarantee the
in the regulatory and financial landscape. Strategic
accuracy, completeness, or suitability reforms are crucial for realizing the full potential of
of any content or references.
Pakistan's textile sector and driving sustainable
Copy Right Statement:
© 2022 Khyber Journal of Public economic growth.
Policy Key words:
This work is licensed under a Textile Industry, Pakistan, Export Growth,
Creative Commons Attribution 4.0 Sustainability, Economic Development.
International License, which
permits unrestricted use,
distribution, and reproduction in
any medium, provided the original
work is properly cited.

1 Foreign Service of Pakistan, Email: [email protected]

2 Provincial Management Service-Khyber Pakhtunkhwa, Email: [email protected]
3 Pakistan Audit & Accounts Service, Email: [email protected]
4 Provincial Management Service-Khyber Pakhtunkhwa, Email:[email protected]
5 Office Management Group, Email: [email protected]
6 Information Group, Government of Pakistan Email: [email protected]
7 Chief Instructor, National Institute of Management Peshawar, Peshawar,

Email: [email protected]
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Introduction
The contribution of the textile industry to the global economy remains vital.
The estimated value of its contribution to global Gross Domestic Product
(GDP) is around US$ 2.6 trillion, with employment of 60 million people in
various textile-related jobs worldwide. Today, textiles constitute 4.62% of
total world trade (Sattar, 2023). The World Trade Organization (WTO), in its
latest report titled “Textiles World 2021” for the year 2020, ranked Pakistan
as the 6th largest textile exporter, alongside China, India, Bangladesh,
Vietnam, Turkey, Indonesia, Germany, Italy, and the United States. These
countries accounted for 77.5% of the world's textile exports in 2020 (Textile
World, 2021).
The textile sector in Pakistan is considered the backbone of the country’s
economy, with the most intensive backward and forward linkages
compared to any other sector. It is the largest manufacturing industry,
contributing to around 60% of the country’s exports. The sector also
employs around 40% of the industrial labor force and provides employment
opportunities for millions of people, including skilled and unskilled workers
(Sattar, 2023). The sector holds immense growth potential as the country is
abundantly endowed with raw materials, including the world’s best-quality
cotton.
Despite the existence of an elaborate legal, institutional, and administrative
framework and active private sector participation, textile exports have never
exceeded US$ 19.33 billion per annum. Furthermore, an ambitious target of
promoting textile exports to US$ 40 billion/year was set under the
Government of Pakistan’s current Textile Policy (Textile and Apparel Policy
2020-25). This target is likely unattainable due to several challenges,
including power outages, expensive energy, poor infrastructure, limited
access to finance for SMEs and exporters, high production costs, and high
dependence on cotton and its price fluctuations. Additionally, the textile
sector faces challenges such as a lack of focus on research and development,
innovation, and human resource development to compete globally. The
graph below shows the trends of textile exports from 2006 to 2021, which
fluctuated between US$ 10 billion and US$ 16 billion during this period,
with the exception of the lowest exports of US$ 9 billion in FY-2009.
Textile exports witnessed a remarkable increase of 25.5% during FY-2022,
amounting to US$ 19.33 billion, compared to US$ 15.40 billion during FY-
2021 (Annual Analytical Report on External Trade FY 2021-22, Pakistan
Bureau of Statistics). However, this is still far below the sector's actual
potential. According to the latest data from PBS, Pakistan’s overall exports
declined by 7% to US$ 16.5 billion in the first seven months of FY 2022-23,
compared to US$ 17.7 billion in the same period of the previous year,
despite massive currency depreciation and a relief package for export-
oriented sectors.

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To ensure sustainable growth of the textile sector, necessary reforms need to

be undertaken, along with the adoption of an implementation strategy for
the expeditious execution of previous initiatives and measures to promote
textile exports. Moreover, diversification of textile exports (in terms of
commodities and destinations), with a focus on value addition, attracting
foreign direct investment, and reducing the cost of doing business, could
play an important role in this regard.

Statement of the Problem

The textile industry has significantly contributed to the economic growth
and development of various countries. However, the performance of
Pakistan’s textile sector has remained suboptimal over the years, despite the
government’s enhanced focus and priority. Therefore, the situation warrants
an in-depth analysis to identify the gaps and bottlenecks hampering its
progress and to provide concrete recommendations for achieving
sustainable growth in Pakistan's textile sector.

The paper will:

a) Carry out a situational analysis of the capacity, preparedness, and

output of the textile industry in Pakistan, and its contribution to national
economic development.

b) Analyze the legal and institutional framework of the textile industry in

Pakistan.
c) Conduct a comparative analysis of the role of Pakistan's textile
industry with best practices around the globe.

c) Perform a SWOT–EETH analysis of the textile industry in order to

promote a high-tech industry in Pakistan for each related policy, legal,
and institutional framework separately.

d) Carry out a gap analysis in the areas described in a), b), c), and d) above.

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e) After making a plausible conclusion, provide pertinent and pragmatic

recommendations to tackle the issues and challenges identified during a)
to e).

f) Develop a plan using the Log Frame Matrix to find practical and viable
solutions to the issues and problems identified in a) to f).

Significance and Scope

This research aims to analyze the development of the textile sector in
Pakistan over the years, particularly from 2018 to 2022. The study examines
the factors that have hampered the growth of the textile sector in Pakistan,
as well as the efforts and initiatives by the government to promote the
sector. The study also provides recommendations for the sustainable growth
of the textile sector in Pakistan.

Literature Review
The textile sector is the most important manufacturing industry in Pakistan.
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. The sector contributes
nearly one-fourth of industrial value-added and provides employment to
about 40% of the industrial labor force. Barring seasonal and cyclical
fluctuations, textile products have maintained an average share of about
61.24% in national exports (Pakistan Economic Survey 2021-22).
This policy research paper for the simulation exercise of the 36th MCMC at
NIM Peshawar has been undertaken as a narrative review with qualitative
and quantitative analyses of primary and secondary data, including data
from the Ministry of Commerce, research articles, journals, and newspaper
articles. Some of the research articles, papers, and reports consulted
included Textile World 2021, Textile Policy of Pakistan 2020-25, The Falling
Textile Exports (Abdul Sattar, 2023), Encyclopedia Britannica, Global Value
Chain (GVC) Development Report 2021, Beyond Production by the Asian
Development Bank, and The Annual Analytical Report on the External Trade of
Pakistan for the Financial Year 2021-22 by the Pakistan Bureau of Statistics.
Websites of the Ministry of Commerce, TDAP, BOI, PBS, and WTO were
also visited to collect data.

Methodology
This research employs a qualitative approach, utilizing both primary and
secondary data. Primary data has been collected through interviews and
discussions with officials at the Textile Division, Ministry of Commerce &
Textile, Islamabad. Secondary data has been gathered from a variety of
sources, including research papers, news articles, journals, business reports,
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and online platforms. Key secondary data sources include publications from
the Ministry of Commerce, Pakistan Bureau of Statistics, TDAP, BOI, WTO,
and various academic and industry reports. The data collection process has
been designed to provide a comprehensive understanding of the textile
sector's current state, its challenges, and the efforts made to promote its
growth. The methodology incorporates both qualitative analysis of expert
opinions and quantitative data to ensure a thorough examination of the
issues facing Pakistan's textile industry.

Situational Analysis

Overview of the Development of the Textile Sector in Pakistan

The World Trade Organization (WTO) in its 2020 report titled “Textile
World 2021” ranked Pakistan among the top ten textile exporters in the
world. The top textile exporters globally are China, India, Bangladesh,
Vietnam, Turkey, Pakistan, Indonesia, Germany, Italy, and the United
States. They accounted for 77.5% of the world's textile exports in 2020
(Textile World, 2021).

The history of the textile industry in Pakistan dates back to the early 1950s,
with the establishment of the first textile mill in Faisalabad (formerly
Lyallpur). Over the years, the industry has grown significantly, and it is now
the largest manufacturing sector in Pakistan, contributing around 60% to the
country's total exports.

During the 1950s and 1960s, several textile mills were established in the
country, mainly in the Punjab and Sindh provinces, as a result of
government policies and incentives aimed at promoting the textile sector.
The industry's growth received a boost in the 1970s with the nationalization
of the textile sector, which led to the establishment of several state-owned
textile mills. In the 1980s, the government encouraged the private sector's
participation in the industry, and several private textile mills were
established.

In the 1990s, the textile sector witnessed rapid growth due to liberalization
policies and trade agreements with other countries. The industry became
one of the largest employers in the country, with a significant contribution
to Pakistan's exports.

However, the industry faced challenges in the 2000s due to the global
economic slowdown, increased competition, and energy shortages. Despite
these challenges, the sector continued to grow, with the introduction of
modern technologies and the development of value-added products such as
garments and home textiles.
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Today, Pakistan's textile industry is one of the largest in the world,

contributing significantly to the country's exports and employment. The
textile sector contributes 8.5% to GDP and employs 15 million people out of
the 49 million-strong workforce, which is almost 30% of the total workforce.

The industry has diversified into various sub-sectors, including spinning,

ginning, weaving, knitting, dyeing, printing, and finishing.

Pakistan’s textile sector is fragmented into sub-divisions, with 80% being

small industries, 15% moderate production, and only 5% large-scale
processing installations. The government continues to support the industry
through various policies and incentives to ensure its continued growth and
competitiveness in the global market.

Prior to the outbreak of the COVID-19 pandemic, the textile industry was
flourishing, and the sector was expected to grow. However, with the onset
of the pandemic in early 2020, the industry was hit hard as the demand for
textiles decreased due to global lockdowns and disruptions in supply
chains. The industry faced a shortage of raw materials, such as cotton, and a
decrease in orders from international buyers. The pandemic had a
significant impact on the textile sector in Pakistan, and the industry suffered
losses. However, the Government of Pakistan took several measures to
support the industry, including providing financial assistance and
facilitating the export of essential goods.

In the post-pandemic period, the textile sector is slowly regaining its footing
while complying with the requirements of the new normal by implementing
safety measures and focusing on online marketing and e-commerce. Textile
exports witnessed a remarkable increase of 25.5% during FY2022,
amounting to US$ 19.33 billion compared to US$ 15.40 billion during
FY2021. The future of the textile sector in Pakistan remains promising, as the
country has significant potential for growth and innovation in this field.

Significance of the Textile Sector to Pakistan’s Economy

The sector is considered the backbone of the country’s economy as it
employs around 40% of the industrial labor, particularly in rural areas
where textile mills are located. Moreover, the textile industry is a major
source of foreign exchange earnings for Pakistan. The industry exports a
wide range of products, including cotton yarn, fabric, and garments, to
various countries across the world. The sector is particularly important for
Pakistan's trade with countries in the European Union and the United States.

The textiles and apparel sector of Pakistan is the most energetic, dynamic,
and export-oriented, encompassing a unique distinction of having intensive
backward and forward linkages. This translates into an extended value
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chain, starting from cotton ginning to finished products marked by a great

reflection of modern fashion. It provides a platform for large, medium, and
small-scale manufacturing and employment, which are hallmarks of
modern, progressive industrialization. More emphatically, the paramount
importance of the sector can be gauged by the fact that its total exports have
crossed the threshold of US$ 19.3 billion during the fiscal year 2021-22,
despite numerous challenges.

Overall, the textile sector is a vital pillar of Pakistan's economy, providing

employment opportunities, contributing to GDP, and earning foreign
exchange. The growth and development of the industry are crucial for the
country's economic progress and development.

Comparison of Textile Sector Contribution to GDP

Country %age Contribution
Bangladesh 13.0%
Pakistan 8.5%
China 4.0%
India 2.0%
Vietnam 6.2%

Ancillary Textile Industries

The performance of various ancillary textile industries, as per the Economic
Survey of Pakistan, 2021-22, is as follows:

a) Cotton Spinning Sector

The spinning sector is the backbone of textile production. At present,

there are 517 textile units (40 composite units and 477 spinning units)
with 13 million spindles and 198,801 rotors installed. Of these, 11 million
spindles and 126,583 rotors are in operation, with a capacity utilization
of 85% and 64%, respectively.

b) Cloth Sector

This sector produces comparatively low value-added grey cloth, mostly

of inferior quality. Problems in the power loom sector primarily arise
from poor technology and a scarcity of quality yarn. The production of
cotton cloth by the mill sector has slightly increased by 0.29%, while
non-mill performance remained subdued, recording a negative growth
of 0.01% during July-March FY-2022.

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c) Textile Made-Up Sector

As a value-added segment of the textile industry, the made-up sector

comprises different subgroups, including towels, tents & canvas, cotton
bags, bedwear, hosiery, knitwear, and ready-made garments, including
fashion apparel. The total export of the sector in the financial year 2021-
22 was USD 61 million, which is about 12% higher than the preceding
year.

d) Synthetic Textile Fabrics

Artificial silk, such as synthetic fibers like Nylon, Polyester, Acrylic, and
Polyolefin, dominate the market. Currently, there are five major
producers of synthetic fibers in Pakistan, with a total capacity of 636,000
tons per annum. Synthetic textile fabrics worth US$ 344 million were
exported in FY 2021-22, compared to US$ 269.20 million the previous
year, showing an increase of 28%. In quantitative terms, the exports of
synthetic textiles decreased by 34%.

e) Woolen Industry

The main products manufactured by the woolen industry are carpets

and rugs. The exports of carpets during the period July-March FY-2022
totaled USD 7 million.

Major Export Destinations for Pakistani Textiles

From 2019 to 2023, the following are the top export destinations for
Pakistani textiles:

Values in US$ Million

Destination 2019-20 2020-21 2021-22 2022-23
United States 3,103.91 4,383.23 5,846.71 3,026.73
United Kingdom 1,218.10 1,637.71 1,785.23 1,063.22
Germany 963.33 1,135.19 1,371.19 866.70
Netherlands 816.99 1,000.15 1,354.59 835.85
Spain 696.88 743.68 1,080.77 771.57
Italy 501.65 563.28 788.28 522.53
Bangladesh 507.07 514.87 813.06 418.69
Belgium 426.43 479.85 642.78 377.44
China 821.06 827.29 763.43 323.73
France 279.95 308.22 391.16 262.02
Source: FBR, 2021
Textile Sector Export of Pakistan in Different Years (in US$ million)
Product 2018-19 2019-20 2020-21 2021-22

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Cotton & cotton 13031.000 12211.703 15028.852 13890.824

Textile
Synthetic Textile 297.809 314.768 370.421 373.591
Sub-total Textile 13328.807 15526.471 15400.071 14234.415
Wool and Woollen 67.265 54.211 74.201 60.993
Textile
Total Textile 13396.140 12580.682 15474.278 19339.408
Total Export 22979.325 21393.860 25304.441 23354.901
Textile as %age of 58.30% 58.81% 61.15% 61.24%
export
Source: Economic Survey of Pakistan 2021-22
Private Sector Contribution in Development of Textile Sector
The private sector has played a significant role in the development and
growth of the textile sector in Pakistan. Major contributions include:

i) Heavy investments in the development of textile mills and

manufacturing facilities, which helped to increase production
capacity and improve the quality of textile products. This investment
has also created employment opportunities for millions of people in
the country.

ii) Private companies have invested in the latest machinery and

equipment, which has helped to improve efficiency and productivity
in the industry. This has also enabled the industry to produce high-
quality textile products that are competitive in the global market.

iii) Private companies have played a major role in promoting and

marketing Pakistan's textile products in international markets, which
has helped to increase exports and generate foreign exchange for the
country.

iv) The private sector has played a role in research and development,
training and education, and environmental sustainability in the
textile industry.

v) Private companies have taken steps to ensure that their operations

are environmentally sustainable, by adopting eco-friendly
production methods and implementing waste management
practices.

Overall, the private sector has been a driving force in the development of the
textile sector in Pakistan and has contributed significantly to the growth and
success of the industry.

Years Series Total Numbers

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CMI Listed Textiles Large Scale

2015-16 Manufacturing 7503
2021-22 No of Textile Exporters 8051
2021-22 PSX* Listed Textiles Exporters 90
Export Value
Sr. No Name of Exporter
(Billion Rs.)
1 M/S Style Textile (Pvt) Ltd. 112.80
2 Nishat Mills Limited 75.38
3 Artistic Milliners (Private) Limited 73.58
4 Interloop Limited 69.86
5 Soorty Enterprises (Private) Limited 63.31
6 Yunus Textile Mills Limited 63.18
7 Gul Ahmed Textile Mills Limited 54.66
8 Feroze1888 Mills Limited 47.24
9 Masood Textile Mills Limited 46.72
10 Liberty Mills Limited 46.17
Pakistan Stock Exchange

Top Exporters and Export Values (Billion Rs.)

1. M/S Style Textile (Pvt) Ltd. – 112.80
2. Nishat Mills Limited – 75.38
3. Artistic Milliners (Private) Limited – 73.58
4. Interloop Limited – 69.86
5. Soorty Enterprises (Private) Limited – 63.31
6. Yunus Textile Mills Limited – 63.18
7. Gul Ahmed Textile Mills Limited – 54.66
8. Feroze1888 Mills Limited – 47.24
9. Masood Textile Mills Limited – 46.72
10. Liberty Mills Limited – 46.17
Product-Specific Associations of the Textile Sector
There are over twenty product-specific associations in the textile sector,
including:

1. All Pakistan Textiles Mills Associations (APTMA)

2. Pakistan Cloth Merchants’ Association
3. Pak Readymade Garments Manufacturers & Exporters Association
4. Pakistan Cotton Fashion Apparel Manufacturers & Exporters Assn
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5. Pakistan Bedwear Exporters Association

6. Pakistan Gloves Manufacturers & Exporters Association
7. Pakistan Silk & Rayon Mills Association
8. Towel Manufacturers’ Association of Pak
9. Pakistan Yarn Merchants’ Association
10. Pakistan Sports Goods Manufacturers & Exporters Association
11. Pakistan Canvas and Tents Manufacturers And Exporters
Association
12. Pakistan Footwear Manufacturers Assn
13. Pakistan Hosiery Manufacturers Assn
14. Pakistan Knitwear & Sweaters Exporters Association
15. Pakistan Commercial Exporters of Towels Association
16. Pakistan Textile Exporters Association
17. All Pakistan Cotton Power Looms Assn
18. All Pakistan Textile Processing Mills Association
19. All Pakistan Bedsheets & Upholstery Manufacturers Association
20. All Pakistan Handloom & Traditional Textiles Manufacturers &
Exporters Association
21. Pakistan Leather Garments Manufacturers & Exporters Association
and Pakistan Denim Manufacturers & Exporters Association
Regulatory/Legal and Institutional Framework Analysis of Pakistan’s
Textile Sector
The regulatory framework for the textile sector in Pakistan is primarily
governed by the following laws and regulations:

1. The Ministry of Commerce & Textile is responsible for the

development and regulation of the textile sector in Pakistan. Under Rule
3(3) of the Rules of Business 1973, the Ministry of Commerce has been
assigned textile-sector-related functions of formulating policies,
implementing programmes, and ensuring compliance with relevant laws
and regulations.

2. Textile Policy 2020-25: The Textile Policy 2020-25 provides a

comprehensive framework for the development of the textile sector in

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Pakistan. The policy aims to promote investment, increase exports, and

enhance productivity in the sector.

3. Trade Policy: Pakistan's trade policy regulates imports and exports of

textile products. The policy sets out rules and regulations for the import
and export of textile goods and provides incentives for exports.

4. Quality Control: The Pakistan Standards and Quality Control Authority

(PSQCA) is responsible for ensuring that all textile products meet the
required quality standards. The PSQCA has established testing facilities
and certification processes for textile products.

5. Labor Laws: The labor laws in Pakistan regulate employment practices

in the textile sector. These laws cover issues such as minimum wage,
working conditions, and safety standards.

6. Environmental Regulations: The environmental regulations in Pakistan

aim to reduce the environmental impact of the textile sector. The
regulations cover issues such as wastewater treatment, air pollution, and
waste management.

7. Intellectual Property Rights: The Intellectual Property Organization of

Pakistan (IPO-Pakistan) is responsible for the protection of intellectual
property rights in the textile sector. The IPO-Pakistan registers
trademarks, patents, and designs related to textile products.

8. The Ministry of Commerce is also administratively responsible for:

i. Federal Textile Board, Lahore

ii. Textile Commissioner's Organization, Karachi
iii. Textile City Projects in Karachi/Faisalabad
iv. National Textile University, Faisalabad
v. All textiles-related TDAP/EDF funded institutes concerned with
skill development in various sub-sectors of the textile industry
vi. Garment City Projects at Lahore, Faisalabad, and Karachi
vii. Pakistan Cotton Standards Institute, Karachi
viii. Pakistan Textile Testing Laboratory, Faisalabad
Hierarchy of the Textile Division
The Minister for Commerce and Textile is the political head, while the
Secretary of Commerce & Textile Division is the administrative head of the
organization. The Textile Division comprises four wings, namely:

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i. Administrative Wing, headed by Senior Joint Secretary

ii. Training Wing, headed by Joint Secretary
iii. Development & Innovation Wing, headed by Joint Secretary
iv. Textile Research Wing, headed by Director General/Director
The Wings are assisted by an Advisory Cell with textile professionals.

In addition to the Ministry of Commerce and Textile, several other

ministries and departments are part of this regulatory framework. They
include: Ministries of Finance, National Food Security & Research
(MNFS&R), Energy (Power Division), Foreign Affairs, Federal Education &
Technical Education, Industries & Production, NAVTEC/TEVTA, Board of
Investment, State Bank of Pakistan, Federal Board of Revenue.

Textile Policies
The first-ever Textile Policy 2009-14 was launched in 2009. The second
Textile Policy 2014-19 was approved in 2015. These policies not only laid
down a plan for five years (each) but also brought coherence among various
support measures and development initiatives of the government aimed at
promoting and uplifting the country's largest industrial sector in the post-
quota scenario. During this period, several budgetary support schemes were
introduced to provide a level playing field to the textile industry of Pakistan.

Previous textile policies were formulated to enhance textiles and apparel

exports to US$ 25 billion and US$ 26 billion, respectively, and set ambitious
targets required to be met through support of fiscal measures. However,
these targets were not fully achieved due to delayed/non-payments under
the respective facilitation schemes and non-allocation of funds for
infrastructure development, vocational training, productivity, and
compliance-related programs.

The latest Textile & Apparel Policy 2020-25 was launched in 2022. It is a
comprehensive policy framework that outlines the government's strategy for
promoting the growth and development of the country's textile and apparel
industry. The policy aims to promote the growth and competitiveness of the
country's textile and apparel industry. Some of the salient features of the
policy are:

 Promotion of exports: The policy aims to increase the country's

textile and apparel exports to US$ 40 billion by 2025. To achieve this,
the policy focuses on enhancing the competitiveness of the industry
by improving productivity, reducing costs, and promoting
innovation.

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 Investment in technology: The policy encourages the adoption of

advanced technologies such as digital printing, artificial intelligence,
and automation to increase efficiency and reduce production costs.

 Development of human resources: The policy emphasizes the need

to improve the skills of the workforce in the textile and apparel
industry. This includes training programs for workers and managers,
as well as initiatives to attract and retain talent.

 Support for SMEs: The policy recognizes the important role that
small and medium-sized enterprises (SMEs) play in the industry and
aims to provide them with support through incentives and access to
finance.

 Sustainability: The policy includes measures to promote sustainable

practices in the industry, such as reducing water consumption,
increasing the use of renewable energy, and promoting recycling and
reuse of materials.

 Cluster development: The policy promotes the development of

textile and apparel clusters in different regions of the country to
promote collaboration and cooperation among industry
stakeholders.

 Market diversification: The policy aims to diversify Pakistan's

textile and apparel exports by targeting new markets, including
Africa, Latin America, and Southeast Asia.

In short, the following are the salient features:

 Competitive energy tariffs for export-oriented units/sectors during

all the policy years

 Amid unusual fluctuations in regional energy prices, tariffs may be

revised according to the average energy prices of regional
competitors like Vietnam and Bangladesh.

 Revision of Duty Drawback Tax rates (DDT) – these will only be

available for value-adding exports such as apparel, technical textiles,
made-ups, and carpets.

 Automation of the duty drawback mechanism; payments will be

made directly into the accounts of exporters through the State Bank
of Pakistan.

 Long-Term Financing Facility and Export Financing Scheme rates are

to be continued at 5% and 3%, respectively, while the SBP can review
the markup rates in view of the monetary policy.
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 Competitive pricing of raw materials for value-adding exporters

 E-commerce policy to be implemented

 Revitalization of Karachi Garments City Company (KGCC)

 Launch of a mass-level training program for industrial stitching

Overall, the Textiles and Apparel Policy 2020-25 aims to transform

Pakistan's textile and apparel industry into a modern, efficient, and
sustainable industry that can compete in the global market.

Comparative Analysis and International Best Practices

The textile sector is a crucial industry for many countries, including China,
India, Bangladesh, and Turkey. Here are some best practices adopted by
these countries to boost their textile industry:

China:

1. China has adopted mass production techniques to lower costs and

increase efficiency in the textile sector.

2. China has invested in advanced technology, such as automation and

artificial intelligence, to enhance productivity and reduce labour
costs.

3. China has a large pool of skilled workers who are trained to operate
advanced machinery and specialize in different textile production
processes.

4. China's government provides various incentives and subsidies to

textile manufacturers, such as tax exemptions and loans.

5. China has established vertically integrated supply chains, where

different stages of the production process are carried out in-house,
allowing for better quality control and cost savings.

6. China has implemented export-oriented policies to promote its

textile exports, such as offering tax refunds for exports and
establishing export processing zones.

7. China has invested heavily in infrastructure development, such as

ports, highways, and railways, to facilitate the movement of goods.

8. Chinese textile manufacturers have established strong brands and

marketed their products globally to increase their market share.

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9. China has diversified its textile production by producing a wide

range of products, such as clothing, accessories, and home textiles, to
cater to different markets.

10. China has emphasized innovation in textile production by investing

in research and development, such as developing eco-friendly
textiles.

India:

1. India's government provides various incentives and subsidies to

textile manufacturers, such as tax exemptions, investment subsidies,
and credit guarantees.

2. India has a large pool of skilled workers who are trained in

traditional textile production techniques.

3. India has a thriving handloom sector, where textiles are produced

using traditional techniques, providing employment opportunities
for rural communities and promoting India's cultural heritage.

4. India is a major producer of cotton, which is a key raw material for

the textile industry.

5. India has established textile clusters, where manufacturers are

located in close proximity to each other, allowing for the sharing of
resources and expertise.

6. India has invested in advanced technology, such as digital printing

and 3D printing, to enhance productivity and improve product
quality.

7. India has implemented various export-oriented policies, such as the

Merchandise Exports from India Scheme (MEIS) and the Export
Promotion Capital Goods (EPCG) scheme, to promote its textile
exports.

8. India has emphasized sustainability in textile production by

promoting the use of eco-friendly materials and production
techniques.

9. Indian textile manufacturers have established strong brands and

marketed their products globally to increase their market share.

10. India has diversified its textile production by producing a wide

range of products, such as clothing, home textiles, and technical
textiles, to cater to different markets.

Bangladesh:
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1. Bangladesh has a cost advantage over other countries due to its low
labour costs and energy costs.

2. Bangladesh's government provides various incentives and subsidies

to textile manufacturers, such as tax exemptions and low-interest
loans.

3. Bangladesh has a large pool of skilled workers who are trained in

textile production processes.

4. Bangladesh has established vertically integrated supply chains,

where different stages of the production process are carried out in-
house, allowing for better quality control and cost savings.

5. Bangladesh has implemented various export-oriented policies, such

as offering tax incentives for exports and establishing export
processing zones.

6. Bangladesh has invested in infrastructure development, such as

ports, highways, and railways, to facilitate the movement of goods.

7. Bangladesh has emphasized sustainability in textile production by

promoting the use of eco-friendly materials and production
techniques.

8. Bangladesh has diversified its textile production by producing a

wide range of products, such as clothing, home textiles, and technical
textiles, to cater to different markets.

9. Bangladeshi textile manufacturers have established strong brands

and marketed their products globally to increase their market share.

10. Bangladesh has emphasized innovation in textile production by

investing in research and development, such as developing new
production techniques and improving product quality.

Export Incentives and Institutions in Different Countries

A comparison of exports and institutions prevailing in major competitor
countries and Pakistan is provided below:

Sr. Export India Pakistan Bangladesh China Vietnam

No. Incentives

1 Duty Drawbacks Yes Yes Yes Yes Yes

2 Concessionary Yes No Yes Yes Yes

Export Finance

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3 Exports Yes No Yes Yes Yes

Insurance &
Guarantees

4 Export Quality Yes No No Yes Yes

Management

5 Export Yes Yes Yes Yes Yes

Processing
Zones

6 Export Yes No Yes Yes Yes

Performance
Requirement

7 Lower Income Yes Yes Yes Yes Yes

Tax

8 Export Yes Yes Yes Yes Yes

Promotion
Agency

9 Export Cash Yes No Yes Yes Yes

Subsidy

Comparative Analysis and International Best Practices

The textile sector is a crucial industry for many countries, including China,
India, Bangladesh, and Turkey. Here are some best practices adopted by
these countries to boost their textile industry:
China:
1. China has adopted mass production techniques to lower costs and
increase efficiency in the textile sector.
2. China has invested in advanced technology, such as automation and
artificial intelligence, to enhance productivity and reduce labor costs.
3. China has a large pool of skilled workers who are trained to operate
advanced machinery and specialize in different textile production
processes.
4. China's government provides various incentives and subsidies to
textile manufacturers, such as tax exemptions and loans.
5. China has established vertically integrated supply chains, where
different stages of the production process are carried out in-house,
allowing for better quality control and cost savings.
6. China has implemented export-oriented policies to promote its
textile exports, such as offering tax refunds for exports and
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establishing export processing zones.

7. China has invested heavily in infrastructure development, such as
ports, highways, and railways, to facilitate the movement of goods.
8. Chinese textile manufacturers have established strong brands and
marketed their products globally to increase their market share.
9. China has diversified its textile production by producing a wide
range of products, such as clothing, accessories, and home textiles, to
cater to different markets.
10. China has emphasized innovation in textile production by investing
in research and development, such as developing eco-friendly
textiles.
India:
1. India's government provides various incentives and subsidies to
textile manufacturers, such as tax exemptions, investment subsidies,
and credit guarantees.
2. India has a large pool of skilled workers who are trained in
traditional textile production techniques.
3. India has a thriving handloom sector, where textiles are produced
using traditional techniques, providing employment opportunities
for rural communities and promoting India's cultural heritage.
4. India is a major producer of cotton, which is a key raw material for
the textile industry.
5. India has established textile clusters, where manufacturers are
located in close proximity to each other, allowing for the sharing of
resources and expertise.
6. India has invested in advanced technology, such as digital printing
and 3D printing, to enhance productivity and improve product
quality.
7. India has implemented various export-oriented policies, such as the
Merchandise Exports from India Scheme (MEIS) and the Export
Promotion Capital Goods (EPCG) scheme, to promote its textile
exports.
8. India has emphasized sustainability in textile production by
promoting the use of eco-friendly materials and production
techniques.
9. Indian textile manufacturers have established strong brands and
marketed their products globally to increase their market share.
10. India has diversified its textile production by producing a wide
range of products, such as clothing, home textiles, and technical
textiles, to cater to different markets.
Bangladesh:
1. Bangladesh has a cost advantage over other countries due to its low
labor and energy costs.
2. Bangladesh's government provides various incentives and subsidies
to textile manufacturers, such as tax exemptions and low-interest
loans.
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3. Bangladesh has a large pool of skilled workers who are trained in

textile production processes.
4. Bangladesh has established vertically integrated supply chains,
where different stages of the production process are carried out in-
house, allowing for better quality control and cost savings.
5. Bangladesh has implemented various export-oriented policies, such
as offering tax incentives for exports and establishing export
processing zones.
6. Bangladesh has invested in infrastructure development, such as
ports, highways, and railways, to facilitate the movement of goods.
7. Bangladesh has emphasized sustainability in textile production by
promoting the use of eco-friendly materials and production
techniques.
8. Bangladesh has diversified its textile production by producing a
wide range of products, such as clothing, home textiles, and technical
textiles, to cater to different markets.
9. Bangladeshi textile manufacturers have established strong brands
and marketed their products globally to increase their market share.
10. Bangladesh has emphasized innovation in textile production by
investing in research and development, such as developing new
production techniques and improving product quality.
Export Incentives and Institutions in Different Countries
A comparison of exports and institutions prevailing in major competitors
and Pakistan is given below:

Sr. Export India Pakistan Bangladesh China Vietnam

No. Incentives
1 Duty Drawbacks Yes Yes Yes Yes Yes
2 Concessionary Yes No Yes Yes Yes
Export Finance
3 Exports Yes No Yes Yes Yes
Insurance &
Guarantees
4 Export Quality Yes No No Yes Yes
Management
5 Export Yes Yes Yes Yes Yes
Processing Zones
6 Export Yes No Yes Yes Yes
Performance
Requirement
7 Lower Income Yes Yes Yes Yes Yes
Tax
8 Export Yes Yes Yes Yes Yes
Promotion
Agency
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9 Export Cash Yes No Yes Yes Yes

Subsidy

Regional Competitiveness
Ready-made garments and made-ups industries are among the largest and
most competitive in the world. Each country has its own unique regional
competitive advantage in this industry based on factors such as labor cost,
quality of raw materials, availability of skilled workers, infrastructure,
government policies, and access to markets.
 Pakistan's regional competitive advantage in the ready-made garments
and made-ups industry lies in its low labor costs and availability of
skilled workers. The country has a large pool of skilled and semi-skilled
workers who can produce high-quality garments at a low cost.
Additionally, Pakistan's government has introduced policies to promote
the textile industry, such as offering tax incentives and subsidies to
exporters.
 Bangladesh's regional competitive advantage lies in its low labor costs
and its position as one of the largest garment exporters in the world. The
country has a large and efficient garment manufacturing sector that can
produce high-quality garments at a low cost. Additionally, Bangladesh
has preferential access to many markets due to its status as a Least
Developed Country (LDC).
 India's regional competitive advantage lies in its diverse range of
fabrics, designs, and embroidery work. India has a long history of textile
production and has developed a reputation for producing high-quality
fabrics and intricate embroidery work. Additionally, the country has a
large and growing domestic market for ready-made garments and
made-ups.
 China's regional competitive advantage lies in its large-scale
manufacturing capabilities, extensive infrastructure, and advanced
technology. China has a highly developed textile industry with
advanced machinery and a large pool of skilled workers. The country
also has extensive transportation and logistics networks that enable it to
export its products to markets around the world.
 Vietnam's regional competitive advantage lies in its low labor costs and
its position as a rapidly growing textile exporter. The country has a large
and efficient garment manufacturing sector that can produce high-
quality garments at a low cost. Additionally, Vietnam has signed
numerous free trade agreements that provide preferential access to
many markets around the world.

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Electricity and Gas Consumption Across Sectors in Pakistan and Region

Pakistan’s industry share in electricity consumption is the lowest in the
region at only 26%, compared with 60% in China and even 53% in Vietnam.
The low industry share in electricity consumption in Pakistan, compared to
China and Vietnam, can be attributed to various factors, such as a relatively
smaller industrial base, lower electricity demand from industries, and a
higher share of other sectors, particularly households, in overall electricity
consumption.
Pakistan's industrial sector is smaller compared to China and Vietnam,
which have larger manufacturing bases and more diversified industrial
activities. This difference in the size of the industrial sector explains the
lower share of electricity consumption by the industry in Pakistan.
Moreover, Pakistan's industry is relatively less energy-intensive compared
to China and Vietnam. The country's industrial activities are mostly
concentrated in low-energy-consuming sectors such as textiles, leather, and
food processing, which require less electricity compared to heavy industries
such as steel, cement, and chemicals.
On the other hand, the higher share of household electricity consumption in
Pakistan, compared to China and India, can be attributed to various factors,
such as lower household income levels, lower energy efficiency of buildings
and appliances, and inadequate electricity supply to meet the growing
demand from households.
In conclusion, the lower industry share in electricity consumption in
Pakistan, compared to China and Vietnam, reflects the size and composition
of the industrial sector, while the higher share of household electricity
consumption in Pakistan, compared to China and India, reflects the need to
improve energy efficiency and expand access to electricity in households.

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Sources: IEA, ADB, MoF Pakistan, Forbes, and Light Castle Bangladesh

Gas Tariff for Industry Across the Region (2021)

The gas tariff for industry varies across the region and depends on various
factors such as the availability of gas reserves, transportation infrastructure,
government policies, and competition among gas suppliers.

In Pakistan, the gas tariff for industry varies based on the size of the
industrial connection and the type of gas used. The tariff ranges from PKR
115 per MMBtu for small industrial connections to PKR 600 per MMBtu for
large industrial connections using natural gas. For industries using RLNG
(Re-gasified Liquefied Natural Gas), the tariff ranges from PKR 1145 to PKR
1435 per MMBtu, depending on the price of RLNG in the international
market.
In Bangladesh, the gas tariff for industry is regulated by the Bangladesh
Energy Regulatory Commission (BERC) and is based on a slab system. The
tariff ranges from BDT 7.03 per MMBtu for small industries to BDT 18.35 per
MMBtu for large industries.

In China, the gas tariff for industry is also regulated by the government and
varies based on the type of industry and location. The tariff ranges from
CNY 1.3 per MMBtu to CNY 3.5 per MMBtu for industrial users in the
eastern and central regions, and from CNY 2.7 per MMBtu to CNY 4.9 per
MMBtu for industrial users in the western regions.
In India, the gas tariff for industry varies based on the location and the type
of industry. The tariff ranges from INR 2.45 per MMBtu for small industries
to INR 7.95 per MMBtu for large industries.
In Vietnam, the gas tariff for industry is regulated by the government and is
based on a formula that takes into account the price of imported gas,
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transportation costs, and taxes. The tariff ranges from VND 4,500 per
MMBtu to VND 10,200 per MMBtu depending on the location and type of
industry.
In summary, the gas tariff for industry varies across the region and is
influenced by several factors such as government policies, competition, and
availability of gas reserves.
Pakistan textile industry faces highest gas/LNG tariff in the region—
denting its Competitiveness

Sources: S&P, Statistica, Review UZ, PIDE, M/o Planning India

Electricity Tariff for Industry across the Region (2021)
The electricity tariff for industry varies across the region and is influenced
by several factors, such as the availability of energy resources,
government policies, infrastructure, and demand-supply dynamics.
In Pakistan, the electricity tariff for industry varies based on the size of
the industrial connection and the time of day. The tariff ranges from PKR
14.65 per unit for small industrial connections to PKR 11.09 per unit for
large industrial connections during off-peak hours.
In Bangladesh, the electricity tariff for industry is based on a slab system
and ranges from BDT 8.96 per unit for small industries to BDT 15.63 per
unit for large industries.
In China, the electricity tariff for industry is regulated by the government
and varies based on the region and the time of day. The tariff ranges from
CNY 0.38 per unit to CNY 0.95 per unit for industrial users in different
regions.
In India, the electricity tariff for industry varies based on the state and the
time of day. The tariff ranges from INR 4.40 per unit to INR 8.30 per unit
for different categories of industrial users.
In Vietnam, the electricity tariff for industry is regulated by the
government and varies based on the voltage level and the time of day. The
tariff ranges from VND 1,212 per unit to VND 2,701 per unit for different
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voltage levels and time periods.

Pakistan’s electricity tariff remains the highest in the region, leaving firms
highly uncompetitive. Karachi receives electricity at a non-RCET tariff
(i.e., USD 0.10 per kWh) as it enjoys cheaper indigenous gas. However, the
supply of electricity is not sustainable.
Sources: IEA, ADB, MoF Pakistan, Forbes, and Lightcastle Bangladesh
(data for 2020 and 2021)
Textile Policies
After the abolition of the Multi-Fiber Agreement (MFA) in 2004 and the
enforcement of the Agreement on Textiles and Clothing (ATC), three
textile sector policies in Pakistan have been approved.
The Textile Policies of 2009-2014 and 2014-2019 were formulated with the
aim of enhancing textile and apparel exports to US$ 25 billion and US$ 26
billion, respectively. The objectives of both policies were to fully utilize
the comparative advantage of cotton and the presence of a nearly self-
sufficient, complete value-chain, starting from fiber to finished products.
Both policies proposed several financial and facilitation measures,
including but not limited to the availability of energy at regionally
competitive rates, reduced mark-ups for technology upgradation and
working capital, tariff rationalization, simplification of temporary
importation schemes, improvement of ease of doing business parameters,
and infrastructure and human resource development.
Ambitious targets and financial commitments of Rs. 188 billion and Rs. 65
billion, respectively, were set in the first and second Textile Policies.
However, these targets could not be fully achieved due to delayed or non-
payment under respective facilitation schemes and non-allocation of
funds for infrastructure development, vocational training, productivity,
and compliance-related programs.
During the first policy period, energy was not fully available, and the
textile and apparel value-chain was not allotted the top priority in energy
distribution. High and volatile international commodity prices and high
mark-up rates limited exports during the first policy period.
In the second policy period, energy was available, but not at regionally
competitive prices. Although commodity prices were lower, the industry
was not competitive enough to increase exports due to high utility rates.
Moreover, the zero-rating regime was withdrawn in 2013 without
providing an expeditious refund system that was committed, thereby
creating a liquidity crunch for exporters. The zero-rating regime was
restored in 2016 but withdrawn again in 2019. Similarly, other than sales
tax refunds, customs duty drawbacks and withholding tax refunds were
also not paid on time. The Technology Upgradation Fund (TUF) scheme
was included in previous policies with special provisions to support
SMEs.
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To reduce the cost of doing business, the DLTL scheme was launched in
the first Textile Policy for only two years, but payments were not made on
time. In the second Textile Policy, the scope of the scheme was linked to
incremental increases in exports compared to the previous year.
Furthermore, no new infrastructure and human resource development
programs were initiated in both Textile Policies. On the other hand,
Pakistan Textile City Limited (PTCL), a project of 1,250 acres, was placed
under liquidation. Importantly, cotton production has fluctuated due to
various reasons, and further import duties on cotton were imposed,
thereby increasing the cost of production for the downstream value-chain.
A robust implementation mechanism was not devised, and financial
commitments by the government were considered the only tool for
implementing the policies.
The Textiles and Apparel Policy 2020-25 aims to address the shortcomings
of previous policies through a multipronged strategy as follows:
1. Government’s strong resolve and commitment for the
disbursement of pending liabilities of Rs. 121 billion from
previous governments in the last three years.
2. A market-driven exchange rate is a significant boost to increase
exports and reduce imports.
3. Rationalization of the tariff structure of the textiles and apparel
value-chain under the National Tariff Policy.
4. Revision of customs duty drawback rates.
5. Provision of consistent and long-term financing facility (LTFF) and
export financing scheme (EFS) rates at 5% and 3%, respectively,
during FY 2021-22.
6. A mass-level training program will be launched, especially for
industrial stitching, with a major focus on women.
7. The first-ever e-commerce policy is under implementation, which
will provide open access to the textiles and apparel industry to tap
available business opportunities across the globe. Amazon has
already started registering Pakistani manufacturers and exporters,
including those in textiles and apparel.
SWOT Analysis of the Textile Sector of Pakistan

Strengths:
1. Abundant Raw Material: Pakistan is blessed with the availability
of high-quality cotton, which is the primary raw material for the
textile industry. This makes it easier for Pakistan to produce high-
quality textile products at a lower cost.
2. Competitive Labour Costs: The cost of labour in Pakistan is
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comparatively lower than in many other countries, making the

country an attractive destination for textile manufacturers. This
provides the industry with a competitive edge in the international
market.
3. Skilled Labour: The textile sector in Pakistan has a highly skilled
workforce with technical expertise in various areas of the textile
value chain. This has helped Pakistan produce high-quality textile
products and gain a competitive edge in the global market.
4. Diversified Product Range: Pakistan's textile industry produces a
wide range of products, including cotton yarn, fabric, home
textiles, and garments. This diversification allows Pakistani textile
companies to cater to a broad range of customers across the world.
5. Favourable Government Policies: The Government of Pakistan has
introduced several policies and incentives to promote the textile
industry, including duty-free access to textile products in the
European Union under the GSP+ Scheme and in other countries.
This has helped increase Pakistan's exports of textile products.
Weaknesses:
1. Energy Crisis: The textile sector is highly energy-intensive, and
Pakistan has been facing an energy crisis in recent years, which has
resulted in frequent power outages and increased production costs.
2. Outdated Technology: Many textile factories in Pakistan use
outdated machinery and technology, which results in lower
efficiency and higher production costs.
3. Limited Value Addition: Despite being one of the largest
producers of cotton, Pakistan has limited value addition in the
textile sector. This means the country exports raw cotton and
imports finished textile products, resulting in a loss of potential
revenue.
4. Lack of Innovation: There is a lack of innovation in the textile
sector in Pakistan, with a focus on producing traditional products
rather than developing new and innovative products that could
increase the sector's competitiveness.
5. Compliance Issues: Pakistan's textile industry has faced challenges
with compliance regarding labour rights and environmental
regulations, which has resulted in a negative image for the
industry.
6. Limited Export Destinations: Pakistan's textile industry heavily
depends on a few markets, such as the United States and the
European Union, which makes the industry vulnerable to external
factors that may impact these markets.
Opportunities:

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1. Diversification of Products: The industry could explore new and

innovative product lines, such as technical textiles, medical
textiles, and eco-friendly textiles. These products have growing
demand in the global market and could provide new growth
opportunities for Pakistani textile manufacturers.
2. Value Addition: The industry could focus on increasing the value
addition of its products. This could be achieved by developing
new finishing techniques, improving the design and quality of
products, and adopting sustainable manufacturing practices. This
would not only increase the competitiveness of the industry but
also increase the revenue earned per unit of output.
3. Export Market Diversification: Pakistan could explore new export
markets beyond its traditional markets, such as the United States
and European Union. Emerging markets in Africa and Asia offer
significant potential for Pakistani textile manufacturers.
4. Public-Private Partnerships: Collaboration between the
government and the private sector could help address some of the
challenges faced by the textile sector in Pakistan. This could
include investing in research and development, providing access to
modern technology, and developing sustainable manufacturing
practices.
5. E-Commerce: The growth of e-commerce platforms presents an
opportunity for Pakistani textile manufacturers to access new
markets and customers. By leveraging these platforms,
manufacturers can expand their customer base and increase their
exports.
Threats:
1. Global Competition: Pakistan faces intense competition from other
textile-producing countries such as China, India, and Bangladesh,
which have lower labour costs, energy prices, and advanced
manufacturing technology. This competition could affect the
export competitiveness of Pakistan's textile industry.
2. Changes in Global Trade Policies: Changes in global trade
policies, such as trade barriers and import tariffs, could affect
Pakistan's textile exports. The recent US-China trade war and
Brexit are examples of such policies that have impacted the global
textile market.
3. Raw Material Prices: The price of raw materials, especially cotton,
is highly volatile, which can impact the cost of production for
textile manufacturers in Pakistan.
4. Environmental Regulations: Stringent environmental regulations
in developed countries could impact Pakistan's textile exports. If
Pakistani textile manufacturers fail to comply with environmental
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regulations, they could lose access to these markets.

5. Labour Rights Issues: Pakistan has been criticized for its poor
labour rights record, including child labour and poor working
conditions. This could affect the industry's reputation and access to
export markets that prioritize ethical manufacturing practices.
6. Currency Fluctuations: Currency fluctuations can impact the cost
of production and export competitiveness of Pakistani textile
manufacturers. For example, a stronger Pakistani Rupee would
make the country's exports more expensive for foreign buyers.
7. Worldwide Recession: In recent years, the global economy has
grown at a very slow pace, showing signs of recession.
Continuation of such a situation could threaten Pakistan’s export
sector, including textiles.
8. Geopolitical Tensions: Geopolitical events such as the Russia-
Ukraine war have negatively impacted overall global trade.
Gap Analysis of Pakistan’s Textile Sector

Current State Action Plan Desired State

Suboptimal
Performance

Availability of Policy incentives for Availability of

Raw Material enhanced domestic sufficient raw material
(Shifting to other cotton production using to ensure a vertically
cash crops than the best quality seeds integrated supply chain
cotton) (M/o NFS & R, Finance,
Commerce)

Highest energy Ensure continuous Globally and regionally

cost in the region supply of energy at competitive textile
regionally competitive products to enhance
rates (M/o Commerce, foreign exchange
Energy and Petroleum
Divisions, FBR, NEPRA,
Finance, OGRA)

Low financial Devise schemes for soft SME sector will

support to SMEs loans to potential contribute in a befitting
and exporters exporters, especially in manner, and export of
value-added products value-added products
(Finance Div., SBP, M/o will be enhanced.
Commerce)

Delay in opening Include imports for Textile sector will meet

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of L/Cs for the textile inputs in the its export orders timely.
import of raw priority list. (M/o
materials Finance, SBP)

Low focus on Financial incentives for Export of value-added

value-addition export of value-added products will bring
products. (M/o Finance, more foreign exchange
Commerce, SBP) as well as
diversification of textile
mix.

Technological Acquisition of modern Textile sector will

Gaps and efficient technology become technologically
for upgradation of textile competitive in the
processes and products. export of technical
(MOFA, Commerce, BOI, textiles.
etc.)

Institutional Gaps
i. An independent Ministry of Textile Industry was established in 2004 to
address sectoral issues; however, it was not fully empowered, and some
functions of the ministry even remained under the ambit of other
ministries, such as trade negotiations on textiles and apparel under the
domain of the Ministry of Commerce.
ii. Due to a shortage of human resources, the Textile Division could not
pursue projects to achieve set goals.
iii. Lack of effective coordination between the Ministry of Textile and other
relevant ministries/divisions/departments led to the failure to resolve
issues.
After merging into the Ministry of Commerce, the issues faced by the Textile
Division have been significantly addressed, which are reflected in the better
performance of the textile sector.
Regional Competitiveness
The gap analysis of Pakistan's textile sector, compared to its regional
competitors such as China, India, and Bangladesh, is as follows:
i. Energy Supply: Compared to Pakistan, which faces a prolonged energy
crisis, there is a continuous supply of energy to the textile sector of
regional competitors, especially Bangladesh, where there is no shortfall
and subsequent outages.
ii. Energy Competitiveness: Pakistan’s energy tariffs remain the highest in
the region, leaving firms highly uncompetitive.
iii. Regulatory Framework: Pakistan’s ranking in Ease of Doing Business is

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still not in double digits (108/190), mainly due to a complicated

regulatory framework. In contrast, the regulatory frameworks of
regional competitors are digitized, facilitative, and fast.
iv. Technological Differences: Pakistan’s textile sector has not significantly
upgraded its technological infrastructure, whereas regional competitors
are using state-of-the-art technologies for textile production.
v. Export Incentives: Compared to India, Bangladesh, and many other
countries, Pakistan does not offer any of the following to exporters:
 Concessionary export finance, which was withdrawn recently.
 Full export insurance, guarantees, and quality management.
 Export performance requirements for access to incentives.
 Export cash subsidy.
The classic case of an export cash subsidy is that of Bangladesh, where an
export cash incentive of 2% to 20% is offered on 24 export products. The rate
is higher for more value-added exports, emerging exports, and exports to
new markets. India operates a duty scrip scheme.
Issues and Challenges

Based on various analyses of the textile sector, the following are the major
issues and challenges faced by Pakistan's textile industry:
Issues:
i. Obstacles for SMEs include access to concessionary finance, international
marketing, skilled labour, and compliance with international standards.
ii. High cost of doing business, as Pakistan ranks low (at 108/190) in the
Ease of Doing Business and Competitiveness Index.
iii. The demand from the textile sector for the restoration of the zero-rating
status.
iv. Non-availability of cotton and other raw materials.
v. Delay in the release of tax refund claims by FBR.
vi. Inconsistent policies.
vii. Ambitious and unrealistic export targets.
viii. Security and law & order situation (major exporters relocated to
Bangladesh from 2009 onwards due to security concerns and the energy
crisis).
ix. Less focus on fibre and product diversification.
x. High tariffs, especially on raw materials.

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xi. High dependence on conventional textile products.

xii. The highest energy costs in the region, along with power outages.
xiii. Lack of centers for innovation and improvement of products and
processes.
Challenges:
i. Pakistan, despite being the 5th largest cotton producer, faces the biggest
challenge of restoring the profitability of cotton farmers by increasing
per-acre cotton yield through the introduction of the latest seed
technology.
ii. The second major challenge is product diversification via improvements
in fibre mix, focusing on Man-Made Fibres (MMF), artificial or synthetic,
to enhance competitiveness and produce goods more in line with global
demand.
iii. Tariff escalation in the value chain, intended to encourage domestic
value addition, has only made the sector more uncompetitive. Due to
high tariffs on value-added products, domestic manufacturers end up
importing more MMF rather than fabric, while countries such as
Vietnam and Cambodia import MMF fabric and sell more value-added
products in the international market. Rationalization of tariffs is
imperative to ensure a more equal distribution of profits and encourage
the industry to invest in improving productivity.
iv. Pakistan is a major supplier of raw materials and semi-processed raw
materials. Hence, there is a need to shift to value-added products, such
as garments and made-ups, along with performance-based technical
textile products. Due to the lack of state-of-the-art infrastructure, such as
textile/garment parks, the industry must invest in infrastructure
components, particularly in captive power generation and effluent
treatment plants.
v. Foreign Direct Investment (FDI) has not been attracted to textiles due to
inconsistent policies, including exchange rate issues, lack of
infrastructure facilities, and the unavailability of energy at competitive
prices. The challenge will be to restore the confidence of international
investors through the implementation of textile policies in letter and
spirit.
vi. Improving the productivity and sustainability of the textile sector,
especially increasing garment exports, is also a major challenge. This
requires the initiation of mass-level training programs, particularly in
industrial stitching, with a focus on SMEs.
Conclusion

The textiles and apparel sector occupies a pivotal position in Pakistan’s

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economy, with the most intensive backward and forward linkages

compared to any other sector. It is considered the backbone of the country’s
economy and employs around 40% of the industrial labour. Pakistan’s total
textile exports crossed the threshold of US$ 19.3 billion during the fiscal year
2021-22, despite numerous challenges. There are several issues and
challenges to the growth of the sector, including the unavailability of seed,
minimal to no export incentives, high energy costs, low ease of doing
business, currency fluctuations, lack of access to credit financing for SMEs,
security and law & order issues, among others. The sector holds immense
potential to contribute to the country’s economy, and exports could reach as
high as US$ 80 billion with necessary reforms and support in areas such as
financing, regulatory framework, market access, export diversification, and
improving the business climate. Overall, the textile sector is a vital pillar of
Pakistan's economy, providing employment opportunities, contributing to
GDP, and earning foreign exchange. The growth and development of the
industry are crucial for the country's economic progress.
Recommendations And Way forward

Following recommendations are made:

To ensure sustainable growth of Pakistan's textile sector, the following
measures should be taken:
General:
1. Focus on sustainable practices: The textile sector should adopt
sustainable practices such as reducing water and energy
consumption, minimizing waste, and promoting the use of eco-
friendly materials.
2. Investment in technology: The sector should invest in advanced
technologies such as automation, robotics, and digitalization to
enhance productivity and product quality while reducing
environmental impact.
3. Skills development: The government should invest in the
development of the workforce by establishing training institutes and
providing financial support to textile workers for their education and
skill development.
4. Diversification: The sector should diversify its product range to cater
to different markets and customer needs, including technical textiles
and high-value products.
5. Branding and marketing: The sector should focus on branding and
marketing its products globally by participating in textile fairs and
exhibitions and using digital platforms for promotion.
6. Collaboration: The sector should foster collaboration between the
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government, academia, and the private sector to develop innovative

solutions, promote sustainable practices, and enhance
competitiveness.
7. Infrastructure development: The government should invest in the
development of infrastructure such as ports, highways, and railways
to improve logistics and reduce transportation costs.
8. Access to finance: The government should provide financial support
to textile manufacturers, particularly small and medium-sized
enterprises, to access credit and investment.
9. Regulatory environment: The government should simplify
regulatory procedures and introduce online services to reduce
bureaucratic hurdles for textile manufacturers.
10. Compliance and governance: The sector should comply with
national and international standards for environmental
sustainability, labor practices, and corporate governance. This will
enhance the sector's reputation, reduce risks, and improve market
access.
Specific:
Short Term:
1. Reduce Cost of Doing Business i. Concessional energy rates for
export-oriented sectors, i.e., Electricity at US cents 9/kWh and RLNG
at US$ 6.5/MMBtu all-inclusive during FY 2021-22, with
continuation of the concessionary regime at regionally competitive
rates after deliberation with stakeholders. ii. Drawback of Local
Taxes and Levies (DLTL) only for value-added products – Garments,
Technical Textiles, and Made-ups. iii. Continuation of duty-free
import of textiles and apparel machinery with the addition of spare
parts (not manufactured locally). iv. Restoration of Tax Credit for
Investment. v. Tariff rationalization of the entire Textiles and
Apparel chain. vi. Continuous review of customs duty drawback
rates for textiles and apparel products, including additional customs
and regulatory duties. vii. Simplify temporary importation schemes
from the perspective of SMEs. viii. Pursue FBR to devise a new
temporary importation scheme to cater to fast fashion trends. Action
by: (Ministry of Commerce, FBR, Ministry of Finance, State Bank of
Pakistan)
Medium Term:
2. Financial Support i. LTFF Mark-up to continue at 5%. ii. Enhance
LTFF disbursements by PKR 100 billion per annum. iii. Inclusion of
indirect exporters and construction for the Apparel and Made-ups
sectors under LTFF. iv. Export Finance Scheme (EFS) mark-up to
continue at 3%. v. Revival of sick textile units. vi. Initiation of Back-
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to-Back L/C. vii. Credit line for Brand Development and Acquisition.
3. Sector-Specific Initiatives i. Introduce the latest seed technology. ii.
Cotton hedge trading. iii. Introduce a quality/grading-based
marketing mechanism for cotton. iv. Initiate Clean Cotton Program.
v. Launch a Special Technology Upgradation Scheme for ginning. vi.
MMF not manufactured locally should be duty-free.
Market Access:
i. Facilitate international buying houses to open offices in Pakistan. ii. GSP+
status for upcoming years to avail preferential tariffs in the EU. iii.
Negotiations with developed/developing economies for market access.
Action by: (Ministry of Foreign Affairs, Ministry of Commerce)
Regulatory Regime and International Compliances:
i. Stock-taking of the entire regulatory regime to highlight changes and
adapt international best practices. ii. Digitization of the regulatory
framework. iii. Expedite the implementation of the National Single Window.
iv. Initiate compliance programs for SMEs, including compliance with
environmental and human rights laws and conventions. Action by:
(Ministry of Commerce, Ministry of Industries & Production)
Long Term:
6. Infrastructure Development:
i. Establish new garment cities. ii. Revitalize Karachi Garment City
Company (KGCC). iii. Add new buildings in Lahore Garment City
Company (LGCC) and Faisalabad Garment City Company (FGCC). iv.
Establish new expo centers. v. Grant SEZ status to existing and new garment
cities. Action by: (Ministry of Commerce, Board of Investment)
7. Research and Product Development:
Establish an R&D fund to introduce new products and improve the quality
of existing products. Action by: (Ministry of Commerce, Higher Education
Commission)
8. Human Resource Development:
i. Review labor laws, especially to allow women to work in three shifts,
aiming for increased female participation.
ii. Mass-level, female-exclusive textiles and apparel training programs,
especially in apparel stitching.
iii. Scheme for women, disabled, and handicapped individuals on
incremental increases in employment. Action by: (Ministry of OP &
HRD, Ministry of Finance)

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