Amidst the global economic slowdown triggered by the war in Ukraine and the increase in energy expenses, Pakistan’s industrial manufacturing sector has also been adversely affected, mirroring the situation in other parts of the world.
The textile industry, which has been a crucial part of Pakistan’s economy since its inception, contributing significantly to the country’s GDP, employment, and exports, faces additional challenges due to the country’s struggling economy and prolonged periods of political instability.
Pakistan’s export profile is not only limited in size but also lacks diversity. The textile industry bears the brunt of this responsibility, accounting for nearly half of all of the country’s exports of goods and services in the last fiscal year, according to data from the State Bank of Pakistan (SBP). It was apprehended that the COVID-19 pandemic will challenge the textile industry drastically in 2020.
Interestingly, during the later stages of the pandemic, our textile sector saw a significant growth spurt, seizing market share as competitors in India and Bangladesh were forced to shut down to control the virus spread. Government incentives and subsidies played a key role in this growth, with textile exports increasing by 12.6% in FY21 and 28% in FY22.
Unfortunately, this upward trend did not continue. In the face of economic challenges and political crises, the textile sector experienced a downturn. As per data released by the State Bank of Pakistan (SBP), textile sector export revenues in November 2023 stood at $1.37 billion, up from $1.5 billion in October this year.
On a year-on-year basis, the sector has once again posted negative growth of 3.51%, with figures in November 2022 recorded at $1.42 billion. From July to November of FY2023–24, the sector’s performance was recorded at $6.9 billion against $7.7 billion during the same period of FY23, showing a decline of 10.14%.
This trend is a stern warning that, without immediate and strategic action, the industry is at risk of further decline. To make matters worse, the global shift from natural to man-made fibers in both consumption and production patterns is an undeniable reality that the Pakistani textile industry is yet to acknowledge and adapt to. This signals an urgent need for an instrument of research and development that can guide the industry toward an innovation-centric sustainable textile model.
It is evident that the textile industry, one of the champions of Pakistan’s economy, is sadly enmeshed in neglect and apathy from the authorities that ought to be its strongest allies. Without a doubt, a replenished and focused approach toward this sector is the need of the hour.
The potential is immense, but the will and vision must meet the understanding of the global shift in market dynamics and the innovation that can enable the possibilities.
A survey by the Lahore School of Economics into innovation in the textile sector in 2016 reported that textiles are a majorly innovative industry in Pakistan. Of 431 manufacturers, 56 were involved in or had introduced innovations.
Overall, Rs 25.4 billion was spent on R&D, with large firms reporting that 10 percent of their budget was directed towards R&D.
These innovations were both technological and non-technological (e.g., new management practices, logistical schemes, and distribution methods).
About 38 percent of producers had introduced new products to the market, and six firms introduced novel products to the world. Roughly 31 percent of the respondents reported new methods of manufacturing, logistics, distribution, and/or ancillary activities that supported the industry.
The last fact displays the importance of forward and backward linkages for knowledge spill overs.
The trend outlined in the study was that innovation rates grew higher up in the value chain. For instance, apparel manufacturers invested more in innovation than textile manufacturers. Given the depth of the textile value chain in Pakistan, there exists both a trickle-down and rising-tide effect for innovation in the sector. Therefore, diversification has a direct impact on innovation, as reaching the advanced rungs of the value chain drives further innovation.
However, innovation cannot take place in a vacuum, and criticizing imports for productive capacity ignores how knowledge spill overs occur.
Even if Pakistan is unable to reproduce these intermediate inputs locally, modernizing capital can lead to non-technological innovations as industries become acclimated to new machinery and processes.
Another worrying factor is the continuing menace of smuggling. We have failed to stop the smuggling of both foreign exchange and commodities. We have a number of excellent laws, but we hardly implement them in the right spirit for the prosperity of the country.
This is mainly because of bad practices on the part of those who are responsible for the implementation of laws in their true spirit. The presence of such elements at the policy level is harmful to the national economy and the growth of the country.
The government must take remedial steps to ensure the welfare of the textile industry, which has the potential to contribute both directly and indirectly to the national economy.
Copyright Business Recorder, 2023
The writer is an economic analyst.
Email: [email protected]
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