With substantial improvement in quality, Pakistan's textile sector efficiency remained low in the region despite over Rs 50 billion research and development (R&D) support extended by the government since 2005. The federal government has been providing Rs 20 billion annually under the head of research and development (R&D) support, at the rate of 6 percent of the value of exports to EU and USA to units manufacturing and exporting textile garments since 2005.
In June last year, however, the government decided to withdraw this support, gathering a lot of hue and cry from textile sector, particularly the value-added side, so much so that the State Bank of Pakistan (SBP) had withheld release of R&D support for the period of June 25 - 30, 2008 on account of fraud on the part of exporters. It was followed by a long battle, involving the Advisor to Prime Minister on Finance and the SBP Governor, before its settlement in recent past.
The R&D support was made available for research and to some extent to cut down high cost of doing business, which had increased over the years due to increase in bank mark-up, utility bills and raw material. Labour productivity was very low, as the regional competitors took 75 minutes to complete and produce one piece whereas Pakistan took 133 minutes for the same work and also wasted 30 percent in finishing and 12 percent in washing, according to industry circles.
These circles said that Pakistan's regional competitors Bangladesh, India and China were providing R&D to their industry leaving Pakistan a lead of around 15 percent in the cost of doing business. However, after the R&D support, the quality of Pakistan's products improved, but efficiency remains low. Quality is not the issue; efficiency is low, and waste percentage has increased, said industry sources.
The R&D support was given to the sector under agreement in the WTO regime that required high standard of Pakistan's goods. It was given 6 percent on the value of export to the US and European Union on garments and 3 percent on fabrics export. The R&D support of Rs 12 billion was given to textile garments, Rs 8 billion on home textile bed linen and Rs 0.7 billion on denim.
The countries with more support from their governments have been able to give tough time to their competitors. China topped the US market with a share of 36 percent, followed by Bangladesh 21 percent, India 18 percent, Morocco 19 percent, and Pakistan 13 percent. Korea, on the other hand, lost 20 percent USA market share.
Similarly, in the European market, China topped to gain 29 percent, with Vietnam 28 percent, India 19 percent and Pakistan only 1.5 percent, whereas Philippines lost 11 percent. The R&D facility was withdrawn in financial year 2008-09, but the support could not achieve its goals set earlier. The R&D support covered product development, skill development and training, upgrading of information technology and professional consultancy.
Textile circles say that they are facing worst circumstances, especially after withdrawal of R&D support. According to them, at least 30 percent textile and made-ups industry had faced closure, leaving behind a large number of workers jobless. Ninety percent of industry is already operating on one shift, instead of three shifts previously, they added.