In Pakistan's major cities, the heat is on designer lawns. All across the big cities, billboards have turned exciting, some even a bit racy, as big and small players flash their designs to cash in on the lawn craze. But behind this colourful picture, there are some serious cracks; left unaddressed for long, and they could potentially paint the picture bleak for the country's textile sector.
No doubt the industry's exports have been increasing over the years; it grew nearly one-fifth in the first seven months of current fiscal year, according to central bank data. But that's largely because of the pricing factor in the wake of soaring global cotton prices. In terms of the quantity of exports, the industry is yet to achieve the pre-crisis levels of 2008.
The blame could be cast upon the energy woes that have been ravaging businesses across the country. But to blame it all on energy would be an under-appreciation of the situation. A plethora of studies reveals a complex web of problems linking the various stages of the value chain.
At the farming end, there have been delays in rolling out of Bt-cotton which is expected to increase the yield manifolds. In the meantime, the traditional way of picking cotton from the fields is causing adulteration of yarn, as elements such as toffee wrappers and other contamination make their way to the factory.
In the factories, labour productivity is far lower than desired levels, a factor that offsets the positive impact of competitive labour cost enjoyed by Pakistan. According to a USAID study titled 'Cost Competitiveness of Pakistan's Textiles and Apparel Industry', hourly labour cost in the country's made-up sector is $0.55 - much less than $1.44 of China and $0.83 of India.
Low labour productivity, however, is creating inefficiencies. "Based on Werner Benchmarking Study...our labour productivity levels are around 40 percent if compared to international benchmarks across the value chain," wrote Secretary Finance, Waqar Masood Khan in a local magazine earlier this month. The Advisor to Minister of Textile, Mirza Ikhtiar Baig, also shares the same opinion. At a workshop held by the Institute of Business Management in January 2011, Baig told the audience that a Pakistani worker makes four jackets a day, whereas a Chinese worker makes 12 jackets; Baig partly attributed this inefficiency to the frequency of intervals taken by a worker.
Masood, who has previously held the position of Secretary Ministry of Textiles Industry, also noted that in Pakistan, every million bale is converted into less than $0.94 billion, whereas China and India are converting every million bale into $3.87 billion and $1.94 billion. Even Bangladesh, which largely relies on imported cotton, converts every million bale into $4.93 billion.
One way to increase efficiency, as Bashir Ali Mohammad, Chairman of Gul Ahmed Textile puts it, is to employ women. "Women are much more efficient in stitching compared to men. Their skills are better, their finishing is better and then over time you can train them to become more efficient," he told BR Research in an interview.
The employment of women and the overall up-gradation of the skills of sweat-shop labourers, however, isn't the only solution. Industry officials say that the country's textile houses also need to appreciate the importance of high end textile workers.
"Textile engineers and experts in supply chain management are essential inputs into a successful business enterprise in this industry. There is a huge shortage of experts for textile in Pakistan, and I feel many entrepreneurs don't even understand this," says Naeem Mukhtar, CEO of Ibrahim Fibres Limited.
CLUSTER FORMATION Mukhtar's argument makes sense. But not every textile player can perhaps afford to hire professionally trained supply chain managers, just as not every player can incur the heavy expense of patenting, licensing, advertising, branding and so forth.
The way forward, therefore, is consolidation. The state of the textile industry's fragmentation can be gauged by the fact that, as business baron Mian Mansha points out, Australia has 30 factories to process 1.3 million bales of its cotton production. In contrast, Pakistan has 2500 factories for 12 million bales. Vertical integration by keeping the various stages of development close to each other is also necessary to become cost effective -- otherwise, the players will continue spending something like 30 percent of their cost as transportation of inputs, according to Mukhtar.
"Officially there are 400 manufacturers but unofficially there are probably more than 4000", said Mukhtar, adding that most of the manufacturers are catering to domestic markets and regional undocumented markets like Afghanistan.
The key is to have consolidation at the top, with SME players working below. "A small player cannot hold an exhibition in a foreign country, or invest in research and testing and product development and so forth. Instead, we (the big players) can invest in all that and they can produce according to our standards," says Bashir citing successful examples from Japan, China and Germany.
Bashir adds that the organised sector in the domestic textile value-added industry is only 20 percent; the rest is unorganised and thrives on producing counterfeit and low quality designs of local and foreign brands. And since, the unorganised easily escapes the tax net, the incentives to remain undocumented are quite attractive.
Issues like these are big tasks that require collective thinking; something that the industry isn't really famous for, given the acrimonious ad campaigns between the different textile associations.
OVER-LAPPING BODIES Currently, there is no single body to represent interests of entire industry and to co-ordinate with both the government and the private sector. On the government side, there is the Ministry of Textile, Board of Investment, TDAP, Ministry of Commerce, and Smeda.
The textile industry on the other hand is also represented by numerous associations; Pakistan Yarn Merchants Association, All Pakistan Textile Mills Association, Pakistan Denim Manufacturers and Exporters Association, Pakistan Textile Export Association, Pakistan Readymade Garments and Exporters Association, and Pakistan Hosiery Manufacturer Association.
Juggling through this cobweb of self-interested associations is not an easy job for any government. The solution, therefore, as adopted by Sri Lanka and India in the region, is to have a unified body of private and government stakeholders tasked to plan, execute and oversee continuous reforms.
The oversight body should have all representatives from various textile segments as well various government departments and authorities. The body can have a range of sub-committees staffed with full-time professionals handling each division or project -- focussing on specific areas like marketing, logistics infrastructure, small and medium enterprises, technology and productivity, trade and finance and so forth.
Aside from performing these functions, the body should be considering the three-hit combo of capacity and image building to expand the outreach of the industry. One, is to pool in financial resources and improve the skill set required at various processes such as dyeing and pattern design, knitting etc. The pooling-in can also help medium size firms to benefit from such trainings, which they could not do on their own. Other moves to boost capacity should involve marketing and sales training as well as consulting services to improve process efficiency and raise productivity.
Second, is the creation of positive image of Pakistani apparel industry and disseminate facts on business/security environment to counter the country's negative perception. Tools to implement this may include the development of web-based marketing and information sharing campaign led by professional marketing firms.
Lessons could be drawn from the success of Sri Lanka's private-led industry implementation body called Joint Apparel Association Forum. JAAF developed a campaign with four key partners, including Sting Marketing Consultants to develop framework for the Sri Lanka industry brand, market testing of proposed brand approaches through AC Nielson, and execution of ideas and campaign implementation by Grey Colombo. On a related note, Pakistani authorities must step up their trade lobbying both in and outside the US and the EU.
Cases should be built around Pakistan's increasingly important role in the war against terror, as Bashir aptly puts it, where increasing outreach to textile state legislators in the US and collaboration should be sought with the Members of the Congress to foster business relationship of Pakistani textile players with US buyers like JCPenny, Walmart and the likes.
Third, a collective move towards the setting up of warehousing and retailing facilities in Dubai should also form a part of the agenda. The textile composite Nishat Mills Limited is already working on plans to launch Dubai operations before the end of this fiscal year - but the move has to be collective to facilitate overall growth of the industry.
While numerous foreign buyers of Pakistani apparel have cited concerns over visiting Pakistan, Dubai seems to be a mutually acceptable moot point. And since, it's more cost effective to have a shared set up in Dubai than to fly down every now and then, stakeholders should be stepping up to ensure their presence in that market.
These proposals, of course, may be easier said than done, but hands must be joined and egos must be set aside for mutual benefit - otherwise the fate of small and scattered, untrained, textile players of a war on terror-hit country may be blown to the wind.
The writer works as Research Editor at Business Recorder. He can be reached at sohaib.jamali@br-mail.com