An important element of achieving progress and success in production and exports is development through research. The textile and clothing sector in Pakistan could benefit from a multi-dimensional research agenda, whose focus would include the following areas:
-- Establishing coordination between universities/research institutes and industry so that the industry can benefit from latest research to bring some concrete results.
-- Adoption of advanced technology and technology transfer, which requires an understanding of and provision of training in adopting the latest technology.
-- Examining the ways of mechanisation, seed variety, insecticide research and other related areas.
-- Knowledge about consumer demand in different markets and ability to discern and react appropriately to changing patterns, including style and design.
-- Product-wise analysis of cost structures, trade patterns and marketing strategies (which requires specific and appropriate comparative data for Pakistan and its competitors).
-- Study of the practices used by other countries (for warehouse and other quality concerns).
SECURITY CONCERNS IN PAKISTAN:
Travel advisories issued in the EU and the US warn potential visitors from these countries against travel to Pakistan mainly because of the disturbing law and order situation in the country. If buyers do not come, Pakistani exporters have to travel more frequently to obtain export orders.
Thus, the non-arrival of foreign buyers causes Pakistani exporters to bear higher cost of samples, presentations, dispatch of samples for approval and so forth. This is one important reason why Pakistani exports have trouble developing fresh markets.
GIVEN THIS SCENARIO, THE FOLLOWING RECOMMENDATIONS ARE MADE:
-- Improving the law and order situation will obviously help in easing security concerns that are the source of the adverse travel advisories.
-- More education and marketing to emphasise that the perception is worse than the reality with respect to the travel situation in Pakistan. The authorities need to make a convincing case that despite pockets where the law and order situation is brittle, Pakistan is overall a safer place to travel and for buyers to visit the country than appears to be the case.
-- Meanwhile, given the extra challenge that exporters face due to the perceived law and order situation, textile producers suggested that it would be helpful to introduce a travel relief support package for the promotion and marketing of exports internationally. The travel relief package could be targeted particularly toward efforts to promote relatively high value-added exports, such as processed fabric, garments, knitting, home textiles and made-ups. This facility could probably be restricted to exporters who are also manufacturers.
COORDINATION AND PARTNERSHIP BETWEEN PUBLIC AND PRIVATE SECTORS:
Increasing global economic competition and a potent threat from competitors necessitates developing trust and coordination between public (government) and private (industrialist/exporter importer) sectors to tackle the problems arising in the process of production and exports in Pakistan.
There are examples of developing countries like China, Malaysia, South Korea and others where a relationship was established between public and private sector entities to enhance production and exports in different areas of the economy. And, those associations took many forms depending on the nature of the requirements.
BELOW ARE SOME CONSIDERATIONS THAT ROUGHLY DEFINE THE APPROPRIATE ROLES FOR THE PUBLIC AND PRIVATE SECTORS WITH RESPECT TO DIFFERENT AREAS:
-- Policy framework: both public and private sectors need to cooperate in developing a policy framework that would support strong export growth and minimise the adverse effects on long-term development.
-- Investment: public sector in understanding the requirements of different technologies in the development of products and thus providing appropriate incentives; private sector in implementing the incentive process.
-- Infrastructure: public sector in providing facilities like water, waste disposal, electricity/gas, roads, transportation and communication.
-- Human resource development: both public and private sector in providing on-the-job-training.
-- Quality standards: both public and private sector in developing appropriate regulatory processes
-- Environment: public sector in creating awareness about environmental degradation; private sector in implementing the required standards.
-- Research and development: both public and private sector in helping to understand and implement advanced and more modern techniques and ideas.
EU POLICIES AND REQUIREMENTS OF INTERNATIONAL INSTITUTIONS:
There exist some apprehensions among producers and exporters that after the elimination of quantitative restrictions on textiles and clothing, imposition of several other types of limitations by buyers from the EU countries have increased.
It is felt that these limitations are negatively affecting the exports of Pakistan to the EU market, particularly of value added items. The exporters feel that these limitations could create a new era of trade barriers and thus demand that these limitations should be addressed. Below are mentioned the regulations enforced by the EU and other international institutions where Pakistani exporters face problems/challenges in dealing with.
-- Problems occur in obtaining visa
-- Issue of the new Generalised System of Preferences (GSP) plus scheme
-- Imposition of anti-dumping duties
-- Subsidies and countervailing duties
-- Technical Barriers to Trade (TBT)
-- Sanitary and Phytosanitary Standards (SPS)
-- Environment and health standards
-- Labour laws
Pakistan being a member is bound to respect WTO regulations and owns the ratification of the ILO conventions related to labour laws. However, it needs to be mentioned that the information propagated through print and electronic media by taking some specific cases where the WTO regulations were not followed does not represent the entire industry.
Nevertheless, they do create problems for the entire industry. According to the textile and clothing producers in Pakistan, explanation of these areas has enough ambiguity and there exist a lot of grey areas. The EU buyers provide their code of conduct (policies and standards) regarding these regulations and Pakistani producers fulfil it to the best of their abilities.
According to our understanding, textile and clothing industry of Pakistan consists largely of small and medium sized enterprises and for them adhering many of the social clauses would imply becoming unviable.
The foremost difficulty with these units is the lack of financial resources, in addition to factors like lack of awareness, lack of fulfilment of capacity due to limited managerial capabilities and lack of technical know-how. Given this fact some allowances need to be made in this regard. For example, Pakistan needs a 3-5 year period where it is treated at par with its competitors (to some extent, if not fully) to enable its textile industry to survive in a competitive quota free environment.
PRESENT POLICY OUTLOOK:
At this moment, it is practical to look at the policy measures undertaken by the GoP that address the problems and issues identified in sections 2 and 3. Some key policy measures announced in Trade Policy 2006-07 related to textile and clothing sector are mentioned below.
-- The Ministry of Commerce and the Ministry of Textile Industry have been concentrating on promoting the production of standardised and clean cotton. In 2005, the Ministry of Textile Industry through the involvement of the Trading Corporation of Pakistan (TCP) launched a cash incentive programme. Under this programme, ginning factories in Punjab, Sindh and Balochistan were selected where the TCP by giving its resources and expertise distributed a premium to farmers who supplied clean cotton to ginners. The TCP will continue to lend its support in this regard.
-- The GoP efforts in expanding the scope of Pakistan School of Fashion Designing (PSFD), established by the Ministry of Commerce, beyond fashion designing of apparel to textile design, accessories and product design and fashion marketing and promotion is laudable. The PSFD will now provide training in a broad range of disciplines, like sports wear, men's wear, carpets, marketing, merchandising, media studies, event management and packaging.
-- The Ministry of Commerce has initiated the establishment of a Textile Skill Development Board for providing training to workers producing garments, terry towels and bed linen.
-- The GoP has been continuously undertaking efforts to overcome the problem of security compliance in order to ease Pakistani export cargoes in terms of facing clearance delays at foreign ports due to security concerns.
-- The GoP has been taking initiatives in establishing the Preferential Trade Agreements (PTA) with different countries, particularly with neighbouring countries in order to gain market access and hence to increase exports.
-- The GoP has decided to continue the provision of a concessionary rebate as R&D support for readymade garments and knitwear at a rate of 6 percent till June 2007 and then at a rate of 3 percent till June 2008. In addition, dyed/printed fabrics and white home textiles (both woven and knitted) will get this support at a rate of 3 percent while dyed/printed home textiles (woven and knit) at a rate of 5 percent till June 2008.
-- The GoP in collaboration with the provide sector has increased its efforts on marketing of products through events like EXPO Pakistan, participation in trade fairs outside Pakistan and by organising seminars.
These policy measures indicate that, although, progress has been made in implementing these measures but its pace so far has remained very slow. It also needs to be mentioned at this point that the Textile Vision 2005, a study conducted by the Small and Medium Enterprise Development Authority (SMEDA) in 2000-01, is a comprehensive document and presents a long-term policy for the upgradation of textile and clothing sector in terms of physical and human capital, production and exports.
It pointed out a list of structural problems the sector has been faced with. These include: quality of cotton, outmoded technology in high value-added textiles, inadequate processing facilities, weak marketing techniques, lack of human resource and poor country image. It is very unfortunate that nothing concrete, to date, has been implemented regarding the recommendations made in that document.
As mentioned above, Trade Policy 2006-07 talks about granting premium to farmers for supplying clean cotton and concessionary rebates for R&D, there exists a concern that how much it would be easier to get access to these schemes eg how convenient would be the procedures to obtain these concessions. It can be argued that besides giving premium to farmers, for sustainable long-run development of the sector, supply of clean cotton to ginners requires improvement in labour skills by providing training on advanced methods of cotton picking and technology up-gradation.
And, this requires investing in this area. The Trade Policy 2006-07 did not mention that how much would be investment to meet different policy targets and what would be the priority areas for investment and development. However, the GoP efforts towards allocating funds in collaboration with its development partners for infrastructure development, particularly the construction of roads, are commendable.
CONCLUSION:
This policy brief has attempted to look at the issues that the production and export of the textile and clothing sector of Pakistan is faced with as a result of domestic policies, the policies of importing countries such as the EU countries and the obligations levied by certain international institutions, particularly the WTO and the ILO.
Based on the research findings and discussions with leading textile producers/exporters and governmental officials, the major areas of concern touched upon and emphasised with respect to domestic policy framework include: across-the-board investment requirements, efficiency in production, productivity of factors, quality of products, infrastructure bottlenecks, product and market diversification, research and development, security concerns and public sector and private sector co-ordination.
According to a study by the WB (2006), the other factors that hurt production and competitiveness include macroeconomic instability, inadequate supply of quality education/skilled manpower, weak economic governance (including burdensome regulations), pockets of high protection, food deficiency and safety standards. The brief recommends formulating a comprehensive state-of-the-art strategy for the textile and clothing sector by taking into account all these concerns and factors.
Industrialists made an unprecedented investment amounting to $5 billion in the textile and clothing sector during 1999-2004 for Balancing, Modernisation and Replacement (BMR) and also for introducing new products aimed at increasing exports. Of this, 46 percent went to spinning sector, 24 percent to the weaving sector, 12 percent to the processing sector, 8 percent to made-ups, 5 percent to knitwear and garments and 5 percent to synthetic textiles.
But, at the same time (ie in the phase out period of 1995-2004) other exporters of textile and clothing were also investing and preparing to make inroads into the world market after the abolition of quotas. Hence, as evident from the data shown in Charts 1 and 2, things did not come out as positive as were predicted since Pakistan could not make significant increase in exports compared to its competitors after January 2005.
Certainly, sizeable investment is a prerequisite in order to achieve these objectives. The textile and clothing sector comprised different components or sub-sectors, including cotton crop, cotton picking, ginning, spinning, weaving, processing, dyeing and printing, garments and other value added sectors. Investment is required by giving due consideration to each component.
On the basis of performance of the sector and the complaints made by the producers, it can be stated that there has been a lack of strategic planning as far as setting investment priorities for the entire sector are concerned. For example, substantial amount of investment is required to control contamination in cotton, improve the method of cotton picking, replace the old technology with advanced and sophisticated technology in ginning, install capacity and provide training in spinning (to produce finer or higher count yarn), weaving, processing and in the value-added sector.
Strengthening of synthetic yarn manufacturing is imperative to move not only towards value-added yarns but also towards value-added fabrics and garments. For this, it is required to support synthetic yarn manufacturing, synthetic textile weaving and other auxiliary industries by investing in plant, machinery and processes.
Investment is also needed in developing a strong multi-fiber base with potential of product upgradation and diversification. Besides physical capital, investment in human capital is also a key priority, without which physical capital investment will not pay high returns and which, so far, has largely been neglected.
One of the weaknesses of the textile and clothing industry in Pakistan is that the industry largely consists of family businesses and has not turned up a system which is run by professional managers. In contrast, the Indian government, for example, has classified this sector as an engine of employment generation and a foreign exchange earner.
An important aspect to realise, by both the government and the producers, is to understand their due roles. The theory suggests that public investment stimulates private investment. Thus, to initiate private investment, the need of the hour is that the GoP must invest in providing appropriate infrastructure and in improving the law and order situation. At the same time, the private sector has to focus on eliminating the inefficiencies in the system, practising competitive policies and applying innovative approaches through R&D.
Lastly, the Brief also emphasised some issues in the context of the EU policies due to which Pakistani producers feel a threat for their exports to the EU market. It is therefore, demanded that the EU needs to address these issues.
(Concluded)