‘Intensified competition with China’ dents Pakistan’s textile sector: Economic Survey 2023-24

Intensified competition with China and weakened external demand hit Pakistan’s textile sector, which remained at the receiving end during the outgoing fiscal year, albeit its contraction was lower.

“The textile sector witnessed a dip of 8.3% during July-March of 2024, compared to a contraction of 16% in the same period last year,” read the Economic Survey 2023-24, released on Tuesday.

As per the survey, significant decline was seen in cotton yarn at 12.2%, and cotton cloth at 7.3%, which account for more than 80% of the textile sector.

“The leading cause of reduced production was the drop in the unit value of exports amidst weak external demand for textiles, coupled with intensified competition from China,” the survey highlighted.

“Additionally, increased power tariffs following the removal of energy subsidies for export-oriented sectors, high cost of imported raw materials, the phasing out of the Export Finance Scheme, and high interest rates were among the significant factors affecting textile output,” it added.

The textile sector remains Pakistan’s most critical manufacturing sector. The sector contributes nearly one-fourth of industrial value-added and employs about 40% of the industrial labor force.

“Barring seasonal and cyclical fluctuations, textile products have maintained an average share of about 54.5% in national exports,” read the survey.

The Economic Survey found that the country’s cloth sector produces comparatively low value-added grey cloth of mostly inferior quality due to poor technology, scarcity of quality yarn, and lack of institutional financing.

The production of cotton cloth decreased by 5.54% during the fiscal, clocking in at 5.9 billion square meters in FY23-24, as compared to 6.2 billion square meters in the same period last fiscal.

Meanwhile, the exports increased in quantity only, whereas value-wise cotton cloth only $1.42 billion in FY24, as compared to $1.53 billion in FY23, down 7.5%.