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Over a period of time, textile sector has come to enjoy a central position in the economy of Pakistan. Its contribution to GDP is over 8%, which is tremendous by any standard. It provides direct and indirect employment to approximately 15 million people which indicates a huge livelihood dependence on this sector. It contributes to exports and foreign exchange earnings more than any other sector. Since, the primary input comes out of agriculture sector, it can be stated that textiles is an agro based industry and is vertically integrated into the economy. For Pakistan, which is a leading producer of cotton, the development of textile industry was obvious in order to make use of local resources. The government supported it and out of incentives now there are 1,220 ginning units, 520 yarn spinning units, 125 large units and 425 medium sized units producing basic textile products. Over and above cotton based textiles, synthetic filament units and polyester staple fiber units have also come up and contribute to textile sector.

The textile sector can be divided into distinct sub-sectors, which are as follow:
  Predominantly located in the cotton growing area, which provides the first processing base to the industry. First, of the industrial processing in cotton value chain, it plays an important role by linking agricultural sector to the industrial sector.
2.Filament Yarn:
   The sub-sector consist of small sized units working with small economies of scale as compared to rest of the world. The sub-sector failed to increase its economies of scale as well as to find its niche of working at small to medium level. For a very long time, it survived behind high tariff walls but as soon as these were lowered, the competition became unsustainable. Yet, it provides filament yarn to polyester fabric manufacturers at a very small scale.
   The sub-sector consists of 25 units (most of them closed) manufacturing polyester filament yarn, nylon filament yarn and acetate filament yarn with a total installed capacity of 110,000 MT but with only 5% utilization.
3.Polyester Synthetic Fibre:
   Polyester staple fiber is not only a stand alone input; it also acts as a substitute to cotton whenever needed. This sub-sector has been growing in line with demand of the textile industry but with a few hick ups. Presently, there are five PSF manufacturing units with installed capacity of 640,000 MT per annum, one acrylic fiber unit with installed capacity of 25,000 MT per annum and one acetate rayon unit with 300 MT per annum capacity. The sector could grow even at a better pace, had the spinning lobby not exerted pressure on government for abnormally low tariff protection on PSF.
   The spinning sub-sector has always remained the most vocal, powerful and organized within the textile value chain. At present, it is comprised of 50 composite units and 470 spinning units with 10 million spindles and 120,000 rotors in operation. The capacity utilization is 90% and 70% approximately.
    The operational dynamism of this sub-sector is quite different and has three distinct ways of working. There are totally integrated units having spinning, weaving and further processing being done in-house then there are independent weaving units. Third is the power loom sector. The power loom sector is slowly getting organized and has registered a steady growth over last two decades. However, power looms produce low value added grey cloth. The produce of power loom sector is further processed by down stream industry.
6.Made ups:
 Uptil now this sub-sector has remained most dynamic within the textile value chain. Major product groups are towels, tents, canvas, bags, bed ware, hosiery and knit wear and ready made garments including fashion apparel. This sub-sector has been catering to national demands and is quite competitive in domestic market. Contribution to exports was initially nominal but has been growing with time. 
  The hosiery component consists of approximately 12,500 knitting machines spread over all textile related clusters. The capacity utilization varies with demand and has been from 65% to 75%. This component has substantial value addition and has been attracting investment continuously. The garment industry provides highest value addition within textiles. The garment manufacturing comprises of small, medium and large scale units with most units having 50 or below machines. This sub-sector has growth potential in domestic as well as export market. The question, however, remains of quality. Towels represent another important segment within the made up group. There are approximately 7,500 towel looms in the country both in organized and un-organized sectors. This segment is essentially export based and its growth has been dependent only on this factor. However, higher end towel products with high value addition are produced in small numbers and in most cases low value added products are exported.
7.Art Silk and Synthetic Weaving:
   The art silk and synthetic weaving industry has developed over time on small scale power loom based units comprising of around 10 looms. There are approximately 90,000 looms in operation in this sub-sector. Major activity is concentrated in Karachi, Faisalabad, Gujranwala, Jalal Pur Jattan, Sawat and Bara. This sector has flourished despite non-availability of filament yarn from local manufacturers and depends mainly on imports for its raw materials.
    Pakistan is an important player in world textile trade. However, its share has always been below 2% in world trade mainly because of its involvement in low value addition and the failure to gain market share in garment sub-sector. Its importance for Pakistan\'s economy has always been well pronounced as the largest export group and foreign exchange earner. Last year, the exports were worth US$ 13.8 billion, accounting for 63% of Pakistan\'s total exports.
   The Pakistani textile industry had a golden opportunity to increase market share in value added garments category as Chinese producers were losing market share because of rising wage pressures in China and the appreciation of Yuan, the Chinese currency. But, the local industry failed to seize the opportunity. Instead Bangladesh and Cambodia increased their sales in international market despite the fact that these two countries did not have advantage of having domestic supply base in the value chain. A lot of reasons can be attributed to bad government policies and un-availability of vital utilities and infrastructure. But, the fact remains that even the textile industry itself was not ready and geared towards capitalizing of its position on the basis of comparative advantage. Instead, the countries having competitive advantage based on design capability, knowledge, trained man power and quality management system took over the advantage.
    In this situation, the textile industry has already received a wake up call. The entrepreneurs (as well as textile tycoons) have to do a lot of soul searching. The so called comparative advantage of having local inputs from spinning and weaving units may not remain an advantage, as these would be exported to Bangladesh, Cambodia and other countries on international prices. 
    The advantage which Pakistan\'s textile industry needs to create is the competitive advantage in higher value addition products (made ups, garments). This advantage can only be created if the textile industry improves its management and manufacturing processes. They would have to invest in knowledge, design capability, improved human resource, quality management system and above all in market connectivity with rest of the world. Without becoming pro-active in above mentioned areas, the textile sector of Pakistan can only freeze in time and space while rest of the world would move forward.
   This also remains a very pertinent question for the Pakistani policy makers. The economy is dependent on textile, to a large extent. More then 8% of GDP comes out of it, the sector employs 15 million active labor force, the sector contributes heavily in exports (almost 63%) and it is vertically integrated with agriculture sector and yet its contribution to taxes and revenues of Government of Pakistan is only marginal. What should be more worrying is a kind of total dependence on it. With a stagnating textile sector, the economy would stagnate and if this sector gets sick, the entire economy would become infected. The natural options with policy makers are only two which are as follow:
(i) Make policies to make textile sector competitive in world market by infusing above mentioned but uptil now lacking parameters of competitiveness.
(ii) Make policies to simultaneously develop engineering and chemical sectors so that a total dependence on textiles can be avoided.