Term Paperon
Diamond Porter Analysis of Textile Industry of Pakistan – A Comparative
Advantage
By
Amna Alvi
Term Report – Diamond Porter Analysis of Textile Industry of Pakistan
Table of Contents
Introduction – Textile Industry and Pakistan
o Historical Background
o Current Situation
Competitive Advantage
o Diamond Porter Model
Literature Review
o Competitive factors Confronting Pakistan’s Textile Industry
Conclusion
o SWOT Analysis of Pakistan’s Textile Industry
Policy Implications
Reference
Term Report – Diamond Porter Analysis of Textile Industry of Pakistan
Introduction
Over the years, Pakistan is said to be the single crop economy i.e. cotton and textile that
claims the lion's share in terms of the contribution in the national economy of Pakistan.
Despite efforts to bring in diversification in country's overall economic get-up the textile
sector continues to be the most important segment of the national economy. Its share in
the economy, in terms of GDP, exports, employment, foreign exchange earnings,
investment and revenue generation altogether placed the textile industry as the single
largest determinant of the economic growth of the country.
Despite harsh international economic conditions, Pakistan's textile industry has weathered
the storm by coming out of the international crisis in a very positive manner. During the
year 2006-2007 exports were controlled from falling and significant investment was made in
value-added expansion and in Balancing-Modernization- Replacement (BMR) (Latif, 2000).
About 10 percent of the world cotton crop is produced in Pakistan, making it the fourth
largest producer in the world. The textile industry currently accounts for almost 67% of
Pakistan's exports, 20% of value-added production and employs 35% of manufacturing
labor.
Made of premium quality Cotton, the textile fabrics of Pakistan are distinguished for their
quality, texture, lustrous colour and rich combination of superior designs and competitive
prices.
That is why this sector have been chosen to analyze what are the obstacles that are
affecting the textile industry of Pakistan in achieving competitive edge over other
economies of the world.
Textile Industry and Pakistan – The innate relation:
Textiles, all fabrics made by weaving, felting, knitting, braiding, or netting, from the various
textile fibres. Textiles are classified according to their component fibers into silk, wool, linen,
cotton, such synthetic fibers as rayon, nylon, and polyesters, and some inorganic fibers, such
as cloth of gold, glass fiber, and asbestos cloth. They are also classified as to their structure
or weave, according to the manner in which warp and weft cross each other in the loom.
Term Report – Diamond Porter Analysis of Textile Industry of Pakistan
Value or quality in textiles depends on several factors, such as the quality of the raw
material used and the character of the yarn spun from the fibers, whether clean, smooth,
fine, or coarse and whether hard, soft, or medium twisted. Density of weave and finishing
processes are also important elements in determining the quality of fabrics. The weaving of
carpet and rugs is a special branch of the textile industry1.
Since its inception, Pakistan has its roots in being an agrarian state with indigenous cotton
supply. In 1947, two textile mills were established in the country as a colonial heritage.
However, the Pakistani textile industry has played a crucial role in the country’s industrial
development. Pakistan’s Industrialization began in 1950 with the textile industry at its
centre2.
Over the time, textile industry have depleted due to various complexities. The difficulties
faced by textile industry were partly due to limited focus of the players and partly due to
globalization. (Meier, 2007) During 1984-1990 many of the spinning mills did not go for
upward integration as raw cotton suppliers were adamant in bringing down the prices. And
so with the globalization and ease of trading these intermediaries find it more profitable for
themselves to export primary goods. Having a look at the exports composition of that time
we can see it mainly comprised of yarn, unbleached fabrics, and low quality made-ups that
did not create much demand in the international market. Ideally, Globalization was a mean
to reallocate units and resources, get maximum advantage, and highest value addition, to
attain competitive edge. Nevertheless, Pakistan failed to attract much investment while
other countries reallocated their units to cheaper countries such as Indonesia and Thailand.
Current Situation3:
Pakistan is the world’s 4th largest producer and 3rd largest consumer of cotton. The Textile
and Clothing Industry has been the main driver of the economy for the last 50 years in terms
of foreign currency earnings and jobs creation. The Textile and Clothing Industry will
continue to be an important engine for future growth of the economy; there is no
alternative industry or service sector that has the potential to benefit the economy with
1 Amna Alvi (2005), ‘Textile Industry of Pakistan – An Overview’
2 Akbar Zaidi, ‘Issues of Pakistan Economy’
3 Economic Survey of Pakistan (2010)
Term Report – Diamond Porter Analysis of Textile Industry of Pakistan
foreign currency earnings and new job creation, especially if synergy is developed amongst
different sub sectors and efforts are made to aggressively grow the Ready Made Clothing‐ ‐
Sector. Pakistan’s Textile Industry had proved its strength in global market during the last
four decades. It has proved its strength even in post quota era by not only sustaining its
position but, also showing growth during 2005 to 2007, but declined to $11.1 billion in 2008
due to financial and economic melt down globally. The Garment Sector & especially the Knit‐
Garment Sector need special focus in future policies.
It has an overall integrated structure with an important indigenous cotton crop, increasing
man-Made Fibre production, large spinning, weaving, and knitting, dyeing/printing and
finishing capacities as well as expanding garment and home textile industries.
Structure of Textile Industry of Pakistan Source: Textile Commissioner Organization (July 2006)
The Textile & Clothing trade has increased, from US$ 212 Billion in 1990 to US$ 612.1 Billion
in 2008. The clothing trade is growing at a faster rate. Pakistan exported textiles worth
$7.19 Billion and clothing worth $3.9 Billion in 2008. The year 2009 was dismal period. The
industry was confronted with problems of multiple natures. The global economic crisis in
Oct. 2007 had impacted the trade badly. Weaker demand in the developed economies
limited the expansion of global trade. The 12% drop in the volume of world trade in 2009
was larger than most economists had predicted. World trade and output are currently in a
recovery phase. The WTO Secretariat estimates that in year 2010 world exports in volume
terms will grow by 9.5%, developed economies’ exports will expand 7.5%. The current
Term Report – Diamond Porter Analysis of Textile Industry of Pakistan
decline in exports of all manufactured goods including Textile & Clothing is visible in the
quarterly data.
Source: Economic Survey of Pakistan (2010)
US imports of textiles and clothing fell for the second year in succession in 2009, by 7.5% to
46.6 billion square meters equivalent (SME), following a 5.2% drop in 2008—which was the
first decline since 2001. Within the 2009 total, fabric imports fell by 5.4%, imports of apparel
by 6.1%, imports of made up textiles by 8.5% and yarn imports by 18.4%. Of these four‐
categories, apparel continued to account for the highest share of total imports. The average
price of US textile and clothing imports fell for the first time in three years in 2009, to a new
low of US$1.74 per SME.
The period of heavy investment boom in most Textile Industry segments between 2003 and
2007 came to an abrupt end in 2008. This investment boom until 2007 was due to the phase
out of traditional quota regime under WTO – Agreement on Textile and clothing and China’s
integration into WTO structures. Global yarn and fabric productions were continuously
falling since the second quarter of 2008. Despite challenges, there are fundamental aspects
that promise a bright future for the textile industry in general.
Competitive Advantage:
Theory of Competitive Advantage can be traced back to the initial development of
Economics as a separate discipline. Classical Economist such as Adam Smith, Thomas
Malthus, and specially David Ricardo gave immense attention to producing what the nation
is best at and then take advantage of that edge through free trade.
However, all these economists talked about factor endowments (such as Land, Labour, and
Capital) and macroeconomics for the growth and development. Using these factors
effectively would give a country an edge over others.
Term Report – Diamond Porter Analysis of Textile Industry of Pakistan
With the further development of study of Economics and overall economic condition of the
world with massive industrialization and liberalization of trade, classical macroeconomic
theory was insufficient to explain the growth and development of some countries that
lacked the availability of the factors, of the kind mentioned in the theories. Some
economists of that time started to take into consideration other factors that could play
pivotal role in a country’s growth such as Technology, capital-labour ratio etc. Still, no one
thought about giving it a micro level look.
This is what Michael Porter discovered and came up with the six forces model, through
which any country can determine its strengths, weaknesses, opportunities and threats
(SWOT) and then put these into consideration before making any decision. The Diamond
Porter Model so called because the six factors collaboratively work together to give a
country a picture of where it is standing.
Diamond-Porter Model:
Diamond Porter Model is presented by Michael Porter in his book ‘The Competitive
Advantage of Nations’. It helps in understanding the competitive position of a nation in the
global world.
Michael Porter integrated some knowledge of industrial economics and business strategy to
come up with a comprehensive solution to complex problems in competitiveness. He
believed that macroeconomic stability itself does not guarantee prosperity and so tried to
give competitiveness a constantly evolving micro framework unlike macro overview of
traditional theories. He clearly distinguished between the competitiveness of the firms from
that of nations. In contrast to traditional theories of comparative advantage which focuses
on country’s factor endowments of land, labour and capital, the diamond porter theory
attempts to look at factors affecting immediate business environment and productive
capacity of firms; factor input conditions, demand conditions, firm strategy and rivalry, and
the presence of related and supporting industries. According to this theory, the process of
economic development is about improving this diamond so as to achieve higher and
sustainable productivity.
Term Report – Diamond Porter Analysis of Textile Industry of Pakistan
The traditional theories talk about labour specialization and efficient use of available
sources and economies of scale through large scale production; however in view of diamond
porter model the process of specialization cannot be done with one firm, a cluster is needed
that results in efficiency gains. He gave examples of many cluster initiatives that has driven
competitiveness to a new level including Silicon Valley, Financial Services in New York, and
the Hollywood entertainment cluster. Regarding the role of government in this model is to
act as a catalyst, establishing macroeconomic stability and providing stable political, legal
and social institutions to help companies improve their competitive position.
To measure level of competitiveness, Porter introduced Business Competitiveness Index
(BCI) and Growth Competitiveness Index (GCI). BCI captures a country’s standard of living
and a broad perspective about quality of microeconomic environment where as GCI sketch
out economic dynamism pointing towards quality of public institutions and macroeconomic
environment. Both indices though highly correlated are individually critical to the measure
of quality of micro and macro dimension of the economy.
Hence from the diagram it can be clearly seen what six forces have comprised the Diamond
Porter Model:
Term Report – Diamond Porter Analysis of Textile Industry of Pakistan
i) Factor Conditions – Factors of Production such as physical resources, human
resources, capital resources and Infrastructure (Special resources can be created to
compensate for factor disadvantages)
ii) Demand Conditions – both in the domestic and foreign market
iii) Related and Supporting Industries – Supply chain industries (Upward and Downward
linkages e.g. providers of raw material, distributors etc)
iv) Firm Strategy, Structure, and Rivalry – Organizational goal and presence of intense
rivalry
v) Government – Government interventions can affect all of the above factors at local,
regional, national and supranational or international level
vi) Chance – factors that are outside the control of a firm
“A firm is profitable if the value it commands exceeds the costs involved in creating the
product. Creating value for buyers that exceeds the cost of doing so is the goal of any generic
strategy. Value, instead of cost, must be used in analyzing competitive position ...” (Ibid)
To attain the competitive advantage, Michael Porter has catalogued three types of generic
strategies through which competitive advantage can be pursued. These strategies are:
a) Cost Leadership – Firm sets out to become the lowest cost producer in the particular
industry (price wars)
b) Differentiation – Firm seeks to be the best performer in the industry (having a special
attribute in the product or service that others do not offer)
c) Initiative Focus – Firm looks to exploit a niche market (targeting a group within the
market of that industry and create loyalty)
The strategies vary according to the position of the industry in the diamond analysis besides
its organizational structure and culture. For example if a country’s industry is lying in the
Term Report – Diamond Porter Analysis of Textile Industry of Pakistan
factor conditions that is it has advantage over factors of production, then cost minimizing
strategy proposed by the Porter would be the plan to maintain its competitive edge.
Literature Review
Term Report – Diamond Porter Analysis of Textile Industry of Pakistan
In this section, the reviews have been organized according to the factor forces of the
Diamond Porter Model.
Diamond Competitive factors Confronting Pakistan’s Textile Industry:
i) Factor Conditions:
As Textiles and Apparel cluster involves diverse set of activities requiring different of
inputs, a detailed analysis of factors conditions across the value chain is required.
The recently announced increase in the minimum wages of the workers has left the
industries with higher cost of production. Once having an edge over cheap
availability of labour, Pakistan no longer holds this competitive advantage since
labour in Bangladesh and Vietnam are more low-priced (Hoekman & Winters, 2005).
And so the costs faced by the industry have largely offset the advantage of cheap
labour. The following diagram4 pictures the factor conditions over the value-chain.
According to a study of Pakistani textile and apparel sector (Raptis, 2009) some of
the garment units were over-staffed by 57 per cent. That was an internal negative
4 Diagram is extracted from one of my previous Assignments during Bachelors of Business Administration (2005)
Term Report – Diamond Porter Analysis of Textile Industry of Pakistan
factor whereas external factors included no duty-free market access to the EU and
negative image and perception of Pakistan abroad.
“Labour productivity is very low. Our regional competitors take 75 minutes to
complete and produce one piece of cloth whereas we take 133 minutes for the same
work. We also waste 30 percent in finishing and 12 percent in washing.”
(Mirza Ikhtiar Baig)
Moreover, the textile looms and other equipments have become obsolete due to
insufficient timely investment and modernization. One of major reason might be the
rising interest rate which has crippled the small investors and made them risk-averse
(Mukhtar, 2008). So, with inadequate capital, textile industry is unable to equip
efficient machineries for effective production. Although in the current fiscal year,
investments in the import of new textile machineries have shown a gradual increase5
(14.2%), showing better trend for future.
The companies are downsizing, production units are shutting down; around 500,000
of the workers have already lost their jobs. After surviving from the load-shedding
scenario the industry has yet to survive the gas load shedding scenario. LESCO has
informed the industry that it would not supply power for the additional load and
only the sanctioned load will be supplied during the winter months (Fayyaz, 2008).
According to Pakistan textile industry association, 90 percent of Pakistan's textile
industry is losing money losses and facing closure. More than two months of
production has been lost due to power cuts and gas shortages.
The lack of Research and Development in the cotton sector of Pakistan has resulted
in low quality of cotton as compared to rest of the South Asia (Mehta, 1996).
Subsequently, due to low profitability in cotton crops, farmers are shifting to other
high return cash crops such as Sugarcane. In Punjab alone, the cotton sown in 2008
was less by 1.14 percent relative to that of last year.
Gaps in skill set of labour force only add to the problem of low productivity. Informal
apprenticeship mechanism (Shagirdi) is the dominant form of skill transfer which
5 Economic Survey of Pakistan (2010)
Term Report – Diamond Porter Analysis of Textile Industry of Pakistan
eventually leads to inconsistencies in product quality. Ultimately, these inhibiting
factor conditions, such as low quality of raw material, poor technology and
insufficient skills, lead to low value addition and high defect rates. For example, 40%
of exported fabric was grey in 2000—an indicator of low value addition. Similarly,
the defect rate at the processing/printing stage was 10% (SMEDA, 2000).
ii) Demand Conditions:
Due to higher costs of production in Pakistan relative to Bangladesh and India,
Pakistan has lost much of its market since it was unable to provide good quality
cheaper raw material. Yet, Pakistan has cheaper inputs of production as compared to
other countries of the world. Owing to the undiversified value added textile goods,
Pakistan does not have a vast network of trading partners. Only a limited number of
markets have been explored with limited number of customers. Some of its trading
partners are: USA, European countries, Middle-East, Hong-Kong, Singapore, and
Thailand etc.
Pakistan has a very low share of the international textile market. China tops the US
market with a share of 36 percent followed by Bangladesh 21 percent, India 18
percent, and Pakistan 13 percent. Additionally, in the European market, China tops
again with a share of 29 percent, Vietnam 28 percent, India 19 percent, and Pakistan
only 1.5 percent (Baig, 2009).
However, on the bright side of current events, because of a global shortage in
availability of cotton, largely due to a shortfall in Chinese crop, the foreign demand
for Pakistan’s cotton yarn has risen exceptionally in the current fiscal year of 2009-
10. Chinese, in particular, have procured huge quantities of yarn from Pakistan, even
though they are the fiercest competitor of Pakistan in the world market. Textiles are
exported in the form of Yarn, Fabric, Readymade Garments, and Bed Wear & Made
Ups. Past Global Export performance of Pakistan’s textile can be viewed in following
table.
Export of Textile and Clothing (Us $ millions)
Term Report – Diamond Porter Analysis of Textile Industry of Pakistan
1990 2000 2004 2005 2006 2007 2008
World Textile 104,354 157,295 195,541 202,657 220,367 240,364 250,198
World Clothing 108,129 197,722 260,569 276,802 309,142 345,830 361,888
Total 212,483 355,017 456,110 479,479 529,509 586,194 613,086
Pakistan Textile 2,663 4,532 6,125 7,087 7,469 7,371 7,186
Pakistan Clothing 1,014 2,144 3,026 3,604 3,907 3,806 3,906
Total 3,677 6,676 9,151 10,691 11,376 11,177 11,092
% of World Trade 1.73% 1.88% 2.01% 2.23% 2.15% 1.91% 1.81%
Source: Ministry of Textile-09
After the reduction in the quota in March 2010, local production and demand has
been improved but that has not contributed in the windfall gain due to rising costs of
production and loss of production units due to laying-off of workers and load
shedding.
iii) Related and Supporting Industries:
The growth of related industries in the textile cluster has largely taken place in the
informal sector in a very haphazard manner. There are examples of organic
clustering but a conscious effort on the part of industry players or government to
Term Report – Diamond Porter Analysis of Textile Industry of Pakistan
promote a cluster based approach have always lacked. Generally, the capacity of
related and supporting industries is often weak with some exceptions. Such as,
Faisalabad—one of the largest textile producing cities in Pakistan gives a good
examples of organic clustering and interconnection amongst the members. The
upward and downward linkages of the textile firms come under this caption.
Spinners, weavers, looming sector, jute etc are examples of the downward linkages
of the firms that provide raw materials to the firms; whereas Apparels Garment,
Towels, Hosiery etc are all examples of the upstream (textile made-ups) industries
that add value to the yarn. These industries play a vital role in providing employment
opportunities for minority (women). Some of these ancillary industries are
operational at both large scale, and small and medium scale level (Rehman, 2010).
Source: (Islam, 2006)
A few of these industries can be briefly discussed as follows:
a. Cotton Spinning Sector: The Spinning Sector is the most important segment in
the hierarchy of textile production. At present, it is comprised of 521 textile
units (50 composite units and 471 spinning units) with 10.1 Million spindles
and 114 thousand rotors in operation with capacity utilization of 89 percent
and 60 percent respectively, during July – March, 2008 09.‐
b. Cloth Sector: The objective is to convert yarn into grey cloth that can be later
dyed according to the demand. However, this often has resulted in weaving
of low quality cloth due to variety of problems including poor technology,
scarcity of quality yarn, lack of communication facilities, and lack of
institutional financing for its development from unorganized sector to an
organized one.
c. Textile Made-up Sector: This is the most dynamic segment of Textile Industry.
The major product groups are Towels, Tents & Canvas, Cotton Bags, Bed‐
Wear, Carpets and Hosiery & Knitwear & Readymade Garments including
Fashion Apparels. If efficiently functioned, this sector can earn huge profits
for Pakistan through value addition.
iv) Firm Strategy, Structure, and Rivalry:
Term Report – Diamond Porter Analysis of Textile Industry of Pakistan
Most of the firms are operating at small and medium level also termed as cottage
industries, making the textile industry highly fragmented. Another important
characteristic of the textile industry is that firms are largely dominated by family
owned businesses which although may ensure trust and cost minimization but it also
adheres that government supports may rest in the hands of selected few who has
the power to control major part of the textile products (Islam, 2006). Additionally,
some lobbyists exist in the current systems, who are engaged in practises that would
give them discretionary power to control input prices, making it expensive for the
firms. They can deliberately form a cartel to create artificial shortages to raise the
prices for higher windfall gains. Firms do not only face competition from rival firms,
rather rivals also include smuggled goods. Most firms in the textile industry of
Pakistan have adopted cost cutting strategies so that they could charge competent
prices. Major players6 of the textile industry of Pakistan are as follows:
a. Pakistan Textile Industries –
Abdullah Apparels (Pvt.) Ltd
Afroze Textile Industries (Pvt.) Ltd
Al-Karam Textile Mills (Pvt.) Ltd
Crescent Garment Industries (Pvt.) Ltd
Baig Spinning Mills Ltd
Dawood Cotton Mills Ltd
Dewaan Textile Mills Ltd
Al-Ameen Denim Mills (Pvt.) Ltd
Ishaq Towel Factor
Feroze Textile Mills (Pvt.) Ltd
b. Textile Industry Associations –
All Pakistan Textile Mills Association-APTMA
Pakistan Cotton Ginners Association
All Pakistan Cloth Exporters Association
Towel Manufacturers Association
6 Extracted from the website of APTMA (www.aptma.org.pk)
Term Report – Diamond Porter Analysis of Textile Industry of Pakistan
Pakistan Readymade Garments Manufacturers and Exporters
Association
c. Agriculture Universities and Colleges –
Pakistan Agricultural Research Council/ National
Agricultural Research Centre
Nuclear Institute for Agriculture and Biology
Central Cotton Research Institute Multan
National Textile University
Textile Institute of Pakistan
Pakistan Institute of Fashion Design
Garment Weaving and Finishing Institute
d. Textile specific Research and Development Institutes –
Pakistan Central Cotton Committee
Textiles Commissioners Organization
Pakistan Cotton Standards Institute
v) Government:
Due to imposition of high duties, Pakistan’s textile has no choice but to raise its
prices. Pakistan is purchasing cotton at higher prices with the additional 15% duty on
its import. And then along with the rising costs of production and government’s
contemplation, to charge export duty to ensure local availability of yarn, have made
it impossible for Pakistan to compete against other major players of textile in the
global market such as China, Nepal, Bangladesh and India. As a result of this, 50
textile units have been shut down because of the declining and negative profits of
the textile firms (Ahmed, 2010).
Despite of this, the tightening on monetary policy and corresponding expansion of
the fiscal policy have drastically increased the interest rates, due to which firms are
lacking the availability of capital and credit. And for up gradation of the obsolete
textile units, more capital investment is needed.
Term Report – Diamond Porter Analysis of Textile Industry of Pakistan
Subsidies provided by the government are inefficient to bring a trickledown effect to
the lower level workers. This could be the reason of inefficient, un-willing and un-
authoritative role of government, and high levels of corruption.
According to the current status, government has taken some initiatives to reduce the
cost of doing business by introducing export loan scheme by the name of Long Term
Financing of Export Oriented Projects (LTF-EOP); marketing and business facilitation
through Expo centre and exhibitions by Export Promotion Bureau to attract potential
buyers from all over the world; and for infrastructural development Special Export
Zone has been setup in Karachi called as Textile City, Garment city has been
established in Lahore, Faisalabad and Karachi, and Skill development institute have
been initiated to train workers in the production of contamination free cotton
(Meier, 2007).
vi) Chance:
Pakistan’s textile industry has had many opportunities to explore new markets and
penetrate into largest market segments than the current concentrated one.
However, what seems to be lacking is the will power of the firm owners. They always
have this opinion that government should provide them tax credits and subsidies so
that they could have more capital at hand for re-investments. By improvising on the
quality of cotton yarn and fabric, Pakistan can reduce its costs, improve its exports
and gain its comparative advantage over other countries.
Conclusion
SWOT analysis of Textile Industry of Pakistan:
Term Report – Diamond Porter Analysis of Textile Industry of Pakistan
It can be inferred from the literature that Pakistan is laying at the first force, i.e. Factor
Conditions with limited or insufficient focus on other forces. And so, to attain competitive
advantage the appropriate strategy according to Porter Model would be Cost minimizing
Strategy. By Cost-minimizing strategy the textile industry of Pakistan would be in a better
position to compete in the world market and can then proceed to the next level i.e. product
differentiation strategy to increase the product and market base. For further examination of
what can be inferred from the study about the textile industry of Pakistan, SWOT analysis is
done. SWOT will draw a picture of the industry as a whole about its strengths, weaknesses,
threats and opportunities.
i) Strength
Largest foreign exchange earner
Largest employer of Labour force
Availability of low-cost Labour and Land
Abundant in raw material (particularly Cotton)
Availability of low-cost machinery
Major part of textile goods are from man-made fibre rather than synthetic one
ii) Weakness
low-price image and reliability
Incompetent marketing
Noncompliance to Environmental and social regulation
Inadequate infrastructure, including power, water
Poor road network not able to provide foundation for a dynamic industrial sector
Deficient technology and outdated machinery leading to low productivity and
poor quality
Lack of considerable up gradation of human resource skills
Term Report – Diamond Porter Analysis of Textile Industry of Pakistan
Poor coordination among cluster players
Lack of finance and capital to small enterprises
iii) Opportunities
The state-of-the-art facilities at the Textile City which is being set up at Karachi, is
a good opportunity to help increase production and competitiveness of textile
products
Enhanced market accessibility for Pakistan Textile products in the Global Market
Rising cost of China’s cotton due to excess of demand, is an opportunity for
Pakistan to take advantage of high priced world market price
With technological advancements, the textile industry can ensure
uncontaminated good quality cotton and cloth
Pakistan is abundant in man-made cotton fibre that assures good quality cloth.
But the firm owners and investors must think of ways synthetic textiles can be
made so as to control the rising prices of raw material
The Textile Asia Exhibition provide opportunities to SMEs, especially who instead
of having the need to go abroad and see various markets themselves are able to
interact with all foreign delegates, industrialists present here and showcase their
products
Textile engineering sector will generate employment opportunities. There is
ample scope for qualified engineers in mechanical, electric and electronics
disciplines to boost this sector
iv) Threats
Declining world share in export of textile products means Pakistan is losing some
markets in the hands of others
Term Report – Diamond Porter Analysis of Textile Industry of Pakistan
Limited Value Addition and low product differentiation
Endemic issue of Political and Social volatility in the country
Poor governance would repeal the Foreign Direct Investments
India and China are giving hard time to Pakistan in terms of advancements in
technological innovation with strong engineering process
Insufficient investment in infrastructure and workforce would result in efficiency
loss and create impediments in future as well
Lack of quality production would make customers switch to other countries
reducing the market segment
Rise in prices of inputs due to IMF policies, would further deteriorate the
condition
Policy Implications
The need for improving business environment cannot be overemphasized. Without
improving the country’s image, enhancing the effectiveness of legal and regulatory
institutions, and upgrading the physical infrastructure, direct incentives to local and foreign
investors are less likely to yield desirable results. The current government is well cognizant
of this need and has shown some visible progress in the macroeconomic management to
restore the confidence of investors and businesses. However, there is need to do more on
improving the governance side.
Key Challenges faced by Textile Cluster
Factor Conditions• Availability of quality raw material• Lack of skills• Poor technology
Demand Conditions• Increasing sophistication of demand e.g. product and process standards• Increasing global competition
Related and Support Industries• Gaps in the quality of local supplies• Poor coordination among cluster players• Lack of finance to small enterprises
Context for Firm Strategy & Rivalry•Highly fragmented and unorganized sector• Cumbersome regulatory procedure• Very low foreign direct investment
Term Report – Diamond Porter Analysis of Textile Industry of Pakistan
i) Addressing the Country Level Challenges:
Following steps are needed to address the critical issues that the country as a whole
is facing:
Restore the autonomy of legal institutions
Bring reforms in government agencies
devise and launch a global communication program with the help of
international media to improve the image of the country
Encourage private sector, increase public expenditure, and work with
international institutions such as the World Bank and Asian Development Bank to
improve the infrastructure particularly Energy by exploiting the huge
hydroelectricity and coal-power potential available in the country
Diversify the export portfolio by facilitating the development of multiple clusters
particularly in the areas of logistics and communication, medical devices,
horticulture, and tourism
Term Report – Diamond Porter Analysis of Textile Industry of Pakistan
ii) Addressing the Cluster Level Challenges:
As noted before, the current government has taken some very important steps to
upgrade the Textiles and Apparel cluster in Pakistan.
The emphasis of newly instituted policies and programs is to increase the
productivity and unit value realization through increase uptake of better
technology
Greater value addition and product diversification
Need for greater involvement of other actors by developing a shared vision such
as supporting industries and IFCs to accelerate the progress
iii) Involvement of Private Sector and other IFCs:
A transition from the existing low-end product concentration towards a more
diversified one
High unit value product portfolio through easy access to quality raw material,
technology up gradation, skill development, and R&D in product and process
development
A further shift towards facilitative role of government through enhancing its role
in financing R&D in product and process development, promoting public-private
partnerships, and reducing the barriers to trade
As textile sector is the major foreign exchange earner, therefore we should
increase our exports by improving both the quality and quantity to meet the
challenges of the post quota era
We must increase the quantity by increasing the capacity of the existing mills and
also by opening new textile mills. We should also improve the quality of the
existing machines
APTMA and the government should join hands for bridging the skill gap as there
was a need to promote public-private partnership in this regard to achieve the
desired results
Term Report – Diamond Porter Analysis of Textile Industry of Pakistan
Regular National Exhibitions can be very helpful in bringing out the skills, the
range of products and opportunities of group collaboration. It will help the
planners and large scale engineering industry in defining the way for developing
skills in order to make this sector strong and viable
The Ministry of Textiles Industry needs to be founded on active private-public
collaboration. It should be consumer-friendly and services-oriented
The Pakistan Government also needs to focus on the country’s image building in
the global market and Pakistan Consulate in various countries need to play their
pivotal role rather than enjoying the Foreign Service benefits at the cost of the
tax payers
Another resolution demanded that knitwear classes should be introduced in the
National Textile Engineering College, Faisalabad, so that hosiery products of
international standard could be produced
Stressed is laid upon the government to direct authorities concerned for
installing master treatment plants in industrial areas so that effluent released by
factories could be utilized for irrigation purposes
The tariffs should be reduced to control the prices of textile goods
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