Mindful of the role of cotton in the initial economic development of nations, Pakistan government is mulling a textile package, in consultation with various stakeholders, to reap benefits from GSP plus.

According to Australian economist J.A. Schumpeter, England owes its ascendance to a single industry -- the textiles. The same can be said of Japan, China and the rest of East Asia. Japan used cheap labour to surpass England to become the leading exporter of cotton garments by 1930. When Washington forced Tokyo to accept ‘voluntary’ quota in 1955, Japanese investors’ instinct to stay in business impelled them to fund garment companies in Hong Kong, Taiwan and South Korea. Japanese intervention in East Asia led to the upgradation and modernisation of garment industry in the region. In due course, labour-intensive garment factories laid the seeds for broad-based industrialisation in East Asia, working spectacularly in China’s initial economic success.

But, now China is facing Japan-like dilemma because of increase in its per capita income, which has crossed $6,600. To cope with this issue, China has two options: either bid adieu to textile business or relocate its industries to retain its grip on the global textile market. China seems to have opted for the second option and now seems to be engaged in efforts to relocating its basic textile industries and low value apparel factories to low cost countries like Pakistan where per capita income is around $1,300 against China’s $6,600.

In the first phase, China plans to relocate its basic textile industries and low value-added apparel factories to Pakistan and other low cost countries. This way, China will be in a position to maintain its footprints in the global textiles for a long time. As far as low-cost countries are concerned, this approach offers these developing nations a good opportunity, enabling them to enlarge the range of their garments for export.

For preparing the textile package, Pakistan’s Ministry of Textiles has already carried out a detailed study on the problems facing the textile industry and it plans to share results of this survey with stakeholders before fine-tuning a long-term textile policy. The results of this study are in line with the issues raised by APTMA (All-Pakistan Textile Mills Association), stated Abbas Shah Afridi, Federal Minister for Textile Industry while addressing APTMA members in Lahore on April 5, 2014. These issues and problems, in particular, pertain to high cost of doing business and shortage of gas and power supply. The minister assured APTMA members that the government would ensure sustained supply of gas and electricity to the textile industry with a view to maintaining 15 per cent textile export growth. Meanwhile, he said, the government would ensure that the textile exports crossed $15 billion this year.

APTMA members have been urging the government to reduce the cost of doing business and make it compatible with the regional competitors, like India, Bangladesh, Vietnam and Sri Lanka. The main factors of high cost of business in Pakistan are raw material, finance, human resource, power, technology, infrastructure and supporting institutions.

As of today, daily wages per hour in Pakistan are $0.51, whereas these are $0.20 in Bangladesh, $0.22 in Sri Lanka and $0.30 in Vietnam. In Pakistan, the discount rate is 10 per cent against 7.75 per cent in Bangladesh, 8 per cent in Sri Lanka and 9 per cent in India and Sri Lanka. Similarly, electricity tariff in Pakistan is $0.17, whereas it is $0.13 in India, $0.09 in Bangladesh and Sri Lanka and $0.073 in Vietnam.

APTMA Group Leader Gohar Ejaz compared cotton yarn and fabric with hanging fruits ready for value addition to double textile exports. Out of 16 million bales of cotton annually consumed in Pakistan, four million bales are utilised for value-addition, fetching eight billion dollars in foreign exchange. Some ten million cotton bales made insignificant addition to the country’s foreign exchange earnings because six million bales are used to produce yarn for export and four million bales are consumed in export of processed and grey fabric; while two million cotton bales are consumed for domestic products.

Presently, the Chinese entrepreneurs remain engaged in exploring the possibilities of setting-up composite textile packs having spinning, weaving and garments units as well as viscose plants. China’s Shandong Ruyi Group has already acquired majority shares in Masood Textile Mills Faisalabad; while it has expressed its intention to establish a 600,000 spindle spinning mills in Faisalabad. Shandong Ruyi Group has also offered to establish a textile park, involving an investment of two billion dollars, in partnership with Punjab Industrial Estates Development and Management Company (PIEDMC), according to the latter’s chairman, SM Tanveer. To ensure smooth and globally compliant operations of the proposed textile park, Shandong Ruyi Group also proposes to set up a coal-based power project and a common water treatment plant. Representatives of many other Chinese groups visited Pakistan recently to explore the possibility of relocating their business in this country.

Presently, over 60 countries are exporting garments to the West. Analysts believe that in the post-quota regime, several dozen of them, in particular the least developed countries, are likely to be driven out of the textile trade as manufacturing consolidates in nations that do it the best. China has come on the top in a battle for control of over $360 billion textile industry because of the high quality of its garments, managerial skills of its entrepreneurs, state-of-the-art factories and rapid strides in communication.

With an average annual production of over 12 million bales, Pakistan is the fourth largest producer of cotton in the world, producing about 10 per cent of the total global production of cotton. Cotton provides raw material to Pakistan’s over 340 textile mills, 1500 ginning factories and 5000 oil mills. Cotton and its value-added industry contribute over 54 per cent to Pakistan’s annual export income. A couple of indigenous industries, such as pharmaceutical, soap, chemical and feed industries, rely on cotton by-products. Besides, cotton provides livelihood to 1.5 million farming families and jobs to over 40 per cent of the country’s labour force. Therefore, it can rightly be called as the life-blood of Pakistan’s economy.

Once, the South Asia Subcontinent was the world leader in cotton textile exports. However, the Subcontinent’s position faded in the 18th century when the British Empire created a monopoly for its own manufacturers at home, choking the textile centres in the areas now constituting Pakistan, Bangladesh and India. In addition to China, countries in the Subcontinent - Pakistan, Bangladesh and India - have the potential and are, therefore, poised to reappear on the globe as important exporters of cotton products, once again.

In fact, Bangladesh has already emerged as a huge success story whose exports surged to US$24 billion in FY 2012 against US$2 billion in FY 1992. Growing at a heady pace of 13 per cent annually, this is a superb performance by most developing countries’ standards.

In Bangladesh, the export boom was led by one product group -- the readymade garments (RMG) sector. The RMG exports have surged from US$1 billion in FY 1992 to a whopping US$19 billion in FY 2012, accounting for 79 per cent of total goods exports and some 49 per cent of total export earnings of Bangladesh. Accounting for 80 per cent of exports and employing 40 per cent of industrial workforce, Bangladesh’s garment sector specialises in low-end clothing and is the impoverished nation’s main industry.

But, to attain this position in the global market, where styles change constantly, Pakistan’s textile sector needs to cut the time it takes to introduce new styles and also establish transport links that can meet the global demand. In this regard, Pakistan must copy China’s massive investments in improving infrastructure and capacity-building of factories. In this era of severe competition, nations with low labour costs, chemical and fibre-producing industries, strong transportation infrastructure and access to large ports are expected to be the big winners.

If the country succeeds in reducing the cost of doing business, ensuring uninterrupted supply of power and improving the infrastructure, Pakistan’s textile industry can become a catalyst for broad-based industrialisation, thus paving the way for Pakistan’s rapid progress and prosperity.