"Pakistan has become the hub of denim," Mirza Ikhtiar Baig, former advisor to PM on textile

In Pakistan, perhaps few industrialists are more accomplished than Dr. Mirza Ikhtiar Baig. A regular columnist, renowned industrialist, author, and Chairman of the Baig Group a multinational conglomerate operating in diversified fields in Pakistan, UAE, and Morocco for the last 30 years Dr. Baig is a former advisor to the PM on textile. He is one of the pioneers of the countrys first textile policy, and is a recipient of the Tamgha-e-Imtiaz in recognition of his contribution to the national economy.

Dr. Baig has done his Masters in Marketing and Doctorate in Business Administration from the US. His company, Pak Denim, is the recipient of the FPCCI Special Export Merit Award for the last 15 consecutive years on export of denim fabric. He has been Chairman Pakistan Textile City and served on the Board of Directors of Pakistan State Oil & Karachi Electric Corporation.

In the newly constructed Baig Tower on Shahra-e-Faisal in Karachi, BR Research met with Dr. Baig to discuss some issues in Pakistans textile industry. Below are edited transcripts of the discussion.

BR Research: You were one of the pioneers of Pakistans Textile Policy (2009-2014). Tell us about it and why was it unsuccessful?

Mirza Ikhtiar Baig: I worked really hard on it. I went all over Pakistan to engage all the various stakeholders and the entire textile value chain before coming up with the document. The Textile Policy (2009-14) was the first document of its kind in Pakistans history that focused solely on textile. Sadly, only 30 percent of it could be implemented. The thing is that in Pakistan, the government not just the PML-N, but successive governments are good at announcing policies and publicising them, but when it comes down to implementation they lack the will.

For instance, take the Technology Upgradation Fund (TUF) a scheme that I introduced. Now you look at India, they copied my idea and their TUF is thriving, while over here it remains largely unimplemented. Its about priorities; the budgeted amount is redirected to other places. They do not give importance to the textile industry. We have a dedicated Ministry of Textile, but its sitting without a Minister for the past three years. Now we are hearing it might get merged into the Ministry of Commerce.

BRR: What is your take on the PMs export package?

MIB: Its an enormous amount far larger than I had expected. Of the Rs180 billion, Rs100 billion is for textiles alone. However, the rebates four percent on yarn and grey fabric, five percent on processed fabrics, six percent on made-ups, seven percent on garments are only valid until July of this year. After that, the rebates will again only be applicable on those exporters that are able to achieve 10 percent growth year-on-year. Is six months enough time to achieve this type of growth? And they were supposed to start it from January 01 but then it got pushed forward till January 17!

Another major issue is that the package is not being extended to commercial exporters. The current package is only for manufacturer-cum-exporters. This excludes an important portion of our export-oriented textile industry.

Finally, the process of getting the refunds is very cumbersome. There is a verification process, and the exporter must obtain the signature from an executive member of their association.

In three years, the cumulative amount with the government that needs to be refunded to the exporters stands at Rs300 billion while the disbursements have been some Rs20 billion in one year, some Rs20 billion the next. The exporters are paying taxes just so the Finance Ministry can shore up its revenues. Look at the Export Development Fund, for instance. Its lying with the Finance Ministry. The Commerce Ministry has to ask for it and gets it in installments.

BRR: You are the Chairman of Pak Textile City in Karachi. Tell us about this project.

MIB: Its shutting down. Pak Textile City is on 12,000 acres near Port Qasim. It was supposed to be a cluster of value-added textile manufacturers. We signed a deal with K-Electric, we got electricity. However, there is no gas there.

Gas is an essential part of the manufacturing process, used in boilers for producing steam. Currently, theres a ban on setting up new gas connections. How can we have a Textile City without gas?

BRR: To what extent is Pakistans textile industry mechanised and up-to-date on the latest production technologies and processes?

MIB: There is a misperception that Pakistans textile mills are outdated. The big textile conglomerates have the latest machinery and equipment, while the smaller firms that dont have the capital usually opt for used machinery. But by used I dont mean this machinery is 20 years old; its just around four to five years old.

We have training institutes, but there is no linkage between academia and industry. Right now, we are in a situation where there is manpower yet the industry cannot find the suitable people. There need to be courses taught in universities. Moreover, there is no research in cotton. You see that in Pakistan, the annual production of cotton has declined. We dont have any high-yielding seeds.

BRR: Recently, theres been a slight improvement in Pakistans readymade garment exports. Whats the reason and can this trend be expected to continue going forward?

MIB: In the US, the demand has fallen. Garment and textile exports from China, Pakistan, India, Taiwan, all have seen a decline. Only one country has maintained its share and thats Vietnam. So, theres no rising trend anywhere. The reason for this is that when Trump said free market access is going to fall, buyers have pulled back orders because of fear of duty being imposed. The demand has fallen because of this.

For Pakistan, regarding readymade garment exports, the EU duty free access has helped us. However, we are still underperforming here; we were expecting $2 billion annually but its not reaching that level. Another reason is denim; denim is a success story, and it makes up around 10 percent of total textile exports.

Pakistan has become the hub of denim in the region. Any great brand wants to buy denim, they look for Pakistan. And our denim industry has crossed a billion dollars. This includes export of denim fabrics and denim garments Artistic Denim Mills, Azgard Nine, etc. Our company, Pak Denims fabrics are nominated by the top international brands; we are making for Zara, Gap, Diesel, Aeropostale. And we started from nothing.

In denim, we are better than India. India is good in heavyweight denim, but in lightweight denim we are number one. Four-pocket jeans for $7.50-8.00 dollars are doing really well!

BRR: How is Pakistan faring in yarn, and how is it capturing emerging trends such as polyester?

MIB: Pakistan operates in cotton. We do have man-made fibres, but not as much. I think the ratio of cotton to man-made fibres should be 50:50, but currently the ratio is around 80 cotton-based: 20 man-made.

India is taking Pakistans share in yarn, especially in China, which is our largest buyer. Indian yarn is cheaper because they have their own cotton and their yield is higher. We have to import cotton from India. With the exception of Bangladesh, I havent seen any success stories of countries that import their raw material and flourish in the global market. We have to improve our supply chain.

The way to do that is to enhance cotton production, and introduce contamination-free cotton. Without a contamination-free cotton certificate, the cottons price falls by around 10-20 percent. The cotton then ends up going to low-end destinations.