The Pakistan Business Council (PBC) recently released its report on Pakistan’s garment sector which is part of PBC’s “Make-in-Pakistan initiative.” The study identifies the challenges and opportunities the sector faces and makes recommendations on the way forward.
Almost all of the problems being faced by the sector are well documented and have also been discussed at length in this space. The PBC report rightfully identifies a high cost of production, lack of diversification of garment exports- both in terms of product offering as well as geographic location, bias towards low value-added items, low productivity as well as unfavourable trade agreements as some of the major impediments to the sector.
In its recommendations, the study highlights best practices from Vietnam, Bangladesh and Sri Lanka which should be followed by policymakers in Pakistan. Fundamentally, these countries were successful in bringing down the cost of production for garment manufacturers by keeping low prices for utilities while also investing in technology up gradation for the garment sector. The technology up gradation fund in both of Pakistan’s textile policies has been ineffective as it has done little to reduce the risks associated with technology adoption by local firms.
It also cites the ILO funded Better Work program in Vietnam and the BGMEA Institute of Fashion and Technology (BIFT) as effective initiatives that helped have a positive impact for garment firms profit margins as well as improvement in productivity and living standards for garment workers. Something along these lines could also be implemented for improving the capacity and profitability of garment manufacturers in Pakistan.
There is also need to look at future policymaking for the textile sector in context of CPEC and the study correctly points out that “a proactive approach needs to be adopted so that the garment sector can play to its strengths and derive support from China in weaker areas, instead of waiting for China to dictate the terms of this critical economic relationship.” In order to ensure that local industry does not suffer, there is a need to respond to local industry’s reservations.
Lastly, ease of doing business for the garment manufactures needs to be improved which involves making taxation and custom related matters more streamlined. In particular, the report emphasises the need to make the Input Output Coefficient Organisation (IOCO) Lahore well-staffed while also providing it the necessary jurisdiction in order to speed up approvals of imports under the DTRE scheme.
Overall, the study is a good refresher on the problems being faced by the garments sector and the solutions that need to be introduced by policymakers. As always, the implementation will be the hard part given that most of the problems being faced by the industry have been well discussed on multiple forums. To this effect, government and bureaucratic engagement with a will to move towards implementation of the proposed reforms is paramount.
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