Musharraf Era Textile Boom Returning to Pakistan?

[Riaz Haq]

Pakistan textile industry is booming with exports soaring 27% to more than $6 billion in the first four months (July-October) of the current fiscal year. “We believe that $5 billion investment (in textile industry) in the Musharraf era would be matched in the next six to eight months”  says Zubair Motiwala, a leading textile industrialist and chairman of Businessmen Group (BMG), as quoted in the Pakistani media reports. Pakistan textile exports more than doubled from $5.2 billion to more than $11 billion during Musharraf years. Exports soared 19.43% in 2001, 20% in 2004, 24.5% in 2005 and 11.23% in 2006, all on President Musharraf's watch, according to "The Rise and Fall of Pakistan's Textile Industry: An Analytical View" published by Javed Memon, Abdul Aziz and Muhammad Qayyum.     

Pakistan Textile Exports Growth. Source: Javed Memon

Pakistani government officials report that the textile sector has invested $3-3.5 billion on modernization and expansion in the last 2-3 years and the investment is likely to match the $5 billion that was witnessed during Musharraf era when the sector was undergoing major modernization, balancing and replacement (BMR). Textile machinery imports jumped 110% in the last four months, according to the Pakistan Bureau of Statistics (PBS). Capital equipment imports are contributing to Pakistan's widening trade gap. 

Pakistan Textile Exports Boom. Source: Bloomberg

All sectors of the textile industry from yarn to fabric to ready-made garments are experiencing double digit growth.  Ready-made garments exports jumped 22.34% during July-Oct 2021,  knitwear exports soared 35.45%, bed-wear posted positive growth of 21.30%, towel exports were up by 14.17%, cotton cloth rose 18.54%. Among primary commodities, cotton yarn exports surged by 71.39%, while yarn other than cotton by 114%. The export of made-up articles — excluding towels — rose by 11.55%, and tents, canvas and tarpaulin dipped by a massive 23.98% during the 4-month period.

International Comparison of Textile Machinery Imports. Source: Busi...

History of Pakistan Textile Machinery Imports 2004-2021 in Millions...

The textile industry is very important for Pakistan's economy. It is a very large employer and contributes nearly 10% of GDP.  Textile exports account for more than half of Pakistan's exports.  Unfortunately, the textile industry has stagnated in the last 12 years. Textile boom is good news for the country's economy. 

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[Riaz Haq]

ESSENTIAL SOURCING GUIDE: The Pakistan apparel sector
Just Style takes an in-depth look at the Pakistan apparel sector which has witnessed many advances and retreats during the last decade.

https://www.investmentmonitor.ai/uncategorized/essential-sourcing-g...

According to Rahim Nasir, chairman of the All Pakistan Textile Mills Association (APTMA), textile and clothing exports grew 23% in 2020-21 year-on-year by earning US$15.4bn, up from $12.5bn in 2019-21. He noted that 70% of these exports were of products where significant processing had been undertaken to produce value-added products, a healthy sign.


Hamid Zaman, the APTMA’s Northern Zone chairman, stressed that Pakistan exports of higher value bedsheets, knitwear and woven garments had increased while lower value yarn exports shrank.

Syed Emad Raza, chairman of the Manufacturers & Exporters Ferozpur Road Association, Lahore, (a manufacturing hub) stressed that international buyers had been alarmed at rising Covid cases in Bangladesh and India: “This panic buying by the international buyers benefited us and they shifted orders from India and Bangladesh to Pakistan.”

There has also been more optimism within the sector under the recently dismissed government of former Prime Minister Imran Khan, led by his Pakistan Tehreek-e-Insaf (PTI) party, that came to power in 2018, which had increased assistance to the sector and had written a detailed Textiles & Apparel Policy, which officially covers 2020-25.

Imran has now been replaced by an opposition alliance led by new Prime Minister Shehbaz Sharif, head of the Pakistan Muslim League (Nawaz), working with its former opponent, the Pakistan People’s Party, which assumed power after a no confidence motion toppled Imran on 10 April. The textile plan should survive, and the vice president of Lahore Chamber of Commerce Haris Ateeq says that political uncertainty is now declining, with the new government likely to remain in place until scheduled elections next July (2023).

The new government will need to work hard to retain support from the Pakistan apparel sector. Zaman argued that the Imran government had helped the industry grow, and was still expanding sales overseas – he hoped exports of clothing and textiles would yield revenues of $21bn by end of the 2021-2 fiscal year, in June.

Increased investments for Pakistan’s apparel sector
Clothing and textile executives told Just Style they were also hopeful of increases in investment as well as exports (comprising just 1.6% of the global textile and clothing trade, according to the APTMA. In February (2022) the government approved the much-awaited Textiles & Apparel Policy, which was approved officially by the Imran-led cabinet.

Its key proposals include a goal of increasing the country’s textile and clothing exports to $25.3bn by 2025 and then $50bn by 2030. This would see Pakistan raise its global share of textile and clothing exports to 3%. As well as limiting energy prices, the plan includes proposals to increase the country’s cotton production to 20 million bales in the next five years, reducing input costs and preserving foreign currency reserves. The plan also commits the government to increasing artificial fibre production at competitive prices by rationalising customs duties and other taxes.

The policy also commits the government to help the textile industry deal with Covid’s disruption of the supply chain. It also aims at attracting domestic and foreign investment in textile value chains and uplift to value-added sectors with special focus on SME sector.

Assuming the clothing and textile plan survives, Abdul Razak Dawood, the ex-PM’s apparel and textile industry advisor, told a press conference before Imran’s fall that its key commitment was to “give the textile industry in writing [a commitment] to ensure that internationally and regionally competitive gas and power rates throughout the policy period”.

[Riaz Haq]

ESSENTIAL SOURCING GUIDE: The Pakistan apparel sector
Just Style takes an in-depth look at the Pakistan apparel sector which has witnessed many advances and retreats during the last decade.

https://www.investmentmonitor.ai/uncategorized/essential-sourcing-g...

Sadly, for an industry that has often complained about high Pakistan energy costs, that commitment does not now include a formal price ceiling. The original plan, said Dawood, promised to freeze existing tariffs until 2025 – for gas at $6.50 equivalent per million BTU – British Thermal Units – and electricity at 0.09 US cents equivalent per unit (kWh – kilowatt hour). But given rising energy prices (which have since skyrocketed because of Russia’s invasion of Ukraine), and limited Pakistan budget resources, the pledge was downgraded to offering international competitiveness. Dawood said that the finance, commerce and energy ministries would determine these competitive rates annually during government budget negotiations.

Despite this set-back, Rahim said industry intelligence anticipated that $5bn new investment was in the pipeline, with 100 new production textile units are likely to open soon.

Emad noted that these investments would be focused on Lahore and Karachi, although Masood Textile and Interloop (a socks and hosiery specialist), both based in Faisalabad plan to install new denim units. Some non-textile companies are eyeing investments in the sector too: Orient Electronics – a leading electronics manufacturing company – is planning to establish a garment unit in Lahore, said Emad, who is also CEO of W.E Apparel Ltd, Lahore.

He noted major Pakistan manufacturers and exporters were also increasing investment in sustainability, reducing their environmental impact, which can boost overseas sales to consumers concerned about buying greener products. “Take the example of my own company where we have installed a water treatment plant with a cost of $0.83m [Pakistani rupees PKR150 million],” he added.

Apparel remains dominant exporting segment for Pakistan
If this capacity expansion is delivered, it would indicate that Pakistan is looking to punch its weight in global clothing and textile markets. According to a report from Asian Development Bank (ADB), released in January (2022), Pakistan – a country of 220 million people – has one of the lowest trade-to-GDP ratios in the world, at just 30%, with clothing and textiles being the dominant exporting segment.

The report stressed how “existing patterns” orient this trade towards the US, Europe and China, and the country “specialises in textiles”. One problem is that Pakistan does not have a significant trading relationship with its neighbours in south Asia, said the ADB report ‘Pakistan’s Economy and Trade in the Age of Global Value Chains’.

According to the Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA), Pakistan’s major clothing and textile exports markets comprise the US 28%; the UK 11%; Germany 7%; the Netherlands 7%; China and Spain 5% each; Italy and Afghanistan 4% each; Bangladesh and Belgium 3% each; and France 2%.

Also, Pakistan textile and clothing exports are less diversified than in next door India, the ADB report said. The APTMA’s Razak agreed that Pakistan’s textile sector lacked diversification in terms of product range and market targets and was exporting 75% of products to just 10 countries. By increasing both its product numbers and markets, the sector could improve its value-addition, he said. According to Razak, the 2020-5 textile and apparel policy does address these issues.

According to Rahim, keeping energy costs down works, highlighting how when in 2019 the Pakistan government reduced the electricity and gas rates paid by the textile and clothing industry, this attracted new investment in the textile sector: “We have witnessed over 20% growth during this period,” he told Just Style.

[Riaz Haq]

ESSENTIAL SOURCING GUIDE: The Pakistan apparel sector
Just Style takes an in-depth look at the Pakistan apparel sector which has witnessed many advances and retreats during the last decade.

https://www.investmentmonitor.ai/uncategorized/essential-sourcing-g...


Zaman is concerned about this cotton production weakness: “In the past three years, the industry had to import due to short production,” with an average of three million cotton bales being imported annually, he noted.

To deal with such shortages the government needs to strengthen research and development in cotton to develop high-yielding, pest-resistant cotton, said Hamid.

Getting more predictability in domestic cotton production would allow Pakistan to play to its strengths. It is the fifth largest producer of cotton and has the third largest spinning capacity in Asia after China and India – contributing 5% to global capacity, according to the APTMA.

According to a Pakistan Board of Investment & Trade (PBIT) report released in 2018, cotton is the real strength of Pakistan’s textile and clothing sector – especially when competing with its south Asian competitors, who lack this key backward linkage. Its popularity as a yarn in Pakistan’s domestic market helps build capacity to better tap export demand. And having a strong fibre sector enables Pakistan to maximise value addition, unlike competitors who cut and sew imported fabric.

Spinning remains the ‘backbone’ of the textile and clothing industry
The PBIT stressed that the country’s spinning sector (output yarn) is the backbone of its textile and clothing industry. At present, the sector comprises 523 textile units, with 40 composite units accounting for 13.269 million spindles and 185,000 rotors and 483 spinning units running 11.083 million spindles and 140,000 rotors, it said. Capacity utilisation is tight, being at 84% for composite textile units and 76% for spinning units during July-March 2017-18, it said. These plants are concentrated geographically, with more than 65% of textile units in Punjab, the largest province, and 25% in Sindh province, 5% in Khyber Pakhtunkhwa, and the rest in Balochistan and Azad Kashmir.

To leverage this strength, more investment in modern equipment is needed, said the report, which highlighted ongoing problems regarding a shortage of quality yarn. This compounds problems in the next phase of the production chain, where the power loom sector suffers from poor technology. It noted that there were 9,084 installed looms in Pakistan cotton textile mills by 2018, with a lower level of utilisation at that time – 6,384, according to the report.

Updated statistics provided by APTMA reveal there are 517 spinning units with 13.4 million installed spindles in Pakistan; 375,000 looms; 400 finishing units – organised and unorganised; 10,000 towelling units; 1,200 knitting units, with 50,000 machines; and 5,000 stitching units, (comprising 200,000 industrial and 450,000 domestic machines).

More investment in modern production equipment might help Pakistan shift away from a reliance on cheaper and low value-added products in exports, which, according to the PBIT make up more than 50% of the value if the country’s exports, by value. Cotton cloth, cotton yarn, bed sheets and lower-end knitwear remain major export generators, it says (the APTMA claims it is 60%.

Despite its difficulties, Pakistan does have strong and innovative manufacturers, notably those developing their own apparel brands have emerged. Some of this has been based on advances in the Pakistan production of fine weave lawn cloth. And Pakistan consumers are becoming more brand conscious, being happy to seek out and wear local labels. Apparel brands, such as Khaadi (of Karachi); Sapphire (Lahore) and Sana Safinaz (Karachi), have focused on value addition and with Pakistan consumers prepared to pay for local quality, high profits have followed, including by developing exports.

[Riaz Haq]

ESSENTIAL SOURCING GUIDE: The Pakistan apparel sector
Just Style takes an in-depth look at the Pakistan apparel sector which has witnessed many advances and retreats during the last decade.

https://www.investmentmonitor.ai/uncategorized/essential-sourcing-g...



Despite its difficulties, Pakistan does have strong and innovative manufacturers, notably those developing their own apparel brands have emerged. Some of this has been based on advances in the Pakistan production of fine weave lawn cloth. And Pakistan consumers are becoming more brand conscious, being happy to seek out and wear local labels. Apparel brands, such as Khaadi (of Karachi); Sapphire (Lahore) and Sana Safinaz (Karachi), have focused on value addition and with Pakistan consumers prepared to pay for local quality, high profits have followed, including by developing exports.

Khaadi is a case in point. This luxury fashion house started international sales as long ago as 2010 in the United Arab Emirates (UAE), and now sells into Saudi Arabia, Australia, the US, Mexico, Malaysia, Canada and the UK. Another successful Pakistan-based company has been J. Junaid Jamshed Pakistan, which has successfully opened stores in Europe and the GCC (Gulf Co-operation Council) region.

The Ferozpur Road Association’s Emad said the developing of local brands was strengthening the overall profile of Pakistan’s textile industry.

These branded companies have benefited from a growth in e-commerce sales within Pakistan, which is generating major revenues for online retailers. With an annual revenue of $50m Lahore-based Limelight.pk was the biggest store in 2021, followed by Karachi-based Gul Ahmed $48m and Khaadi $29m revenue).

The challenges facing Pakistan’s apparel sector
Looking ahead, aside from the political uncertainties, the Pakistan clothing and textile sector may have to deal with other external surprises. One concern highlighted by Emad was that Pakistan’s 2023 GSP+ (Generalised Scheme of Preferences) status for privileged trade access to the European Union (EU) may expire in 2023. If this happens, it could spark a 12% increase in exporters’ costs through additional duties, he said. There is also concern about a potential blacklisting of Pakistan by global anti-money laundering organisation the Financial Action Task Force (FATF) over alleged weaknesses in the country’s control of dirty money. The country is already on FATF’s grey list – a blacklisting would mean international banks will have to impose special checks on transactions to and from Pakistan and extensive de-risking by financial institutions could hinder financial flows: “If we go from grey to black list, we will be in great trouble,” said Emad.

As well as addressing this “sword of Damocles”, said Emad, the government could help the industry prosper by withdrawing customs duties and taxes on import of certain important raw materials, including finishing chemicals, zips and specialist yarns.

Raza Baqir, executive director of APTMA, said the government should continue to support the overall economy, which has struggled with the Covid pandemic – shrinking 0.9% in 2020, according to the World Bank. The State Bank of Pakistan financed $2.39bn (PKR435bn) under the relief fund for all manufacturers, including the textile sector, during Covid, although this programme expired in 2021.

[Riaz Haq]

ESSENTIAL SOURCING GUIDE: The Pakistan apparel sector
Just Style takes an in-depth look at the Pakistan apparel sector which has witnessed many advances and retreats during the last decade.

https://www.investmentmonitor.ai/uncategorized/essential-sourcing-g...


If Pakistan can stabilise its economy and politics, its clothing and textile sector can grow sustainably, said Raza. With a strategic location, closer to Europe than east Asia, deep seaports and solid air transport services, Pakistan is also close to the major emerging textile and clothing markets of China and India, said the APTMA executive director. With a 220 million population, an increasingly large and prosperous middle class, and 35.7% of the population aged 15 years or younger, Pakistan will support a growing domestic fashion industry that can serve as a basis for major export sales, he predicted.

[Riaz Haq]

IFC will invest the equivalent of $25 million in Pakistani rupees for a minority stake in Khaadi Corporation, which has 57 retail outlets spread across Pakistan and presence in UK and GCC countries.

https://mettisglobal.news/ifc-to-invest-around-25mn-in-khaadi/

May 27, 2022: International Finance Corporation (IFC) is all set to invest around $25 million in Pakistan’s top fashion retailer Khaadi Corporation to create jobs, promote gender equality, and support the country’s crucial textiles sector post-pandemic, said a press release issued on Friday.

Khaadi has 57 retail outlets spread across Pakistan and a presence in the UK and GCC countries. The funding will help the company accelerate its growth by expanding its retail footprint and online global sales. It will also indirectly support the retailer’s suppliers in Pakistan, many of whom are smaller businesses.

We are excited to begin the next chapter of our growth transformation with IFC’s first investment in the Pakistan fashion retail sector. We envisage this investment will help us set new benchmarks in organizing the retail sector in Pakistan and beyond, through strategic initiatives to drive growth, corporate governance, and diversity,” said Shamoon Sultan, founder, and CEO of Khaadi Corporation.

IFC’s investment is designed to support the development of Pakistan’s retail and textiles sectors, which provide 40 percent of employment and account for about 9 percent of the country’s gross domestic product. About 30 percent of those who work in the textiles sector are women and supporting the industry will help promote gender equality in Pakistan.

The textiles and retail industry is a core part of Pakistan’s economy and a major employer of women, especially in the garment sector,” said Zeeshan Sheikh, IFC Country Manager for Pakistan and Afghanistan. “By channeling financing and advisory support into the industry and partnering with innovative companies like Khaadi we can help the sector grow, formalize, become more sustainable, and create greater economic employment opportunities for women.”

Along with the investment, IFC will advise Khaadi Corporation on enhancing its corporate governance structures, sustainability, and gender diversification programs.

[Riaz Haq]

Our Favorite Top Retail Fashion Brands In Pakistan
By
Kainaat Maqbool
December 9, 2020


https://dnd.com.pk/our-favorite-top-retail-fashion-brands-in-pakist...

Sapphire.
Khaadi.
Gul Ahmed.
J. by Junaid Jamshed.
Sana Safinaz.
Outfitters.
Limelight.
Bonanza – Satrangi.

[Riaz Haq]

According to Marketplace Pulse research, Pakistan is currently the No. 3 top country among new sellers that joined Amazon’s marketplace in the U.S. in 2022.

https://www.marketplacepulse.com/articles/pakistan-sellers-are-gett...


Unsurprisingly, the U.S. and China top the list. The thousands of Pakistani sellers dwarf in comparison to the two largest locations, but that’s more than the rest of the countries in the world, including export hubs like India and neighboring countries like Canada.

Rank Seller Country
1 United States
2 China
3 Pakistan
4 United Kingdom
5 Turkey
6 Canada
7 Vietnam
8 India
9 Brazil
10 Japan
A lot more sellers are coming. Pakistan is home to the world’s largest Amazon seller groups: “eCommerce by Enablers” with over 1.2 million members, “Extreme Commerce by Sunny Ali” has more than 1.1 million members, and “Ecommerce Success Pakistan” has nearly 200,000. The groups started years before Pakistani sellers were officially allowed to sell on Amazon.

[Riaz Haq]

Textile exports were recorded at $19.35 billion in the outgoing FY22, showing an upsurge of 26% YoY when compared to $15.41bn in FY21, according to the data issued by All Pakistan Textile Mills Association (APTMA) today.

The year-on-year increase in exports remained strong due to the resumption of economic activities, and strong demand in the West while rerouting orders out of China and regional countries.

In the month of June 2022 alone, textile exports just inched up by 4% YoY to $1.73bn as compared to $1.66bn in June 2021.

https://mettisglobal.news/textile-exports-crosses-19bn-mark-in-fy22/

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Ali khizar
@AliKhizar
Proof is in the pudding !

https://twitter.com/AliKhizar/status/1543929658739023872?s=20&t...

[Riaz Haq]

Arif Habib Limited
@ArifHabibLtd
Highest ever oil import bill during FY22 amid a 71% YoY jump in Arab Light prices along with 19% YoY volumetric growth.

https://twitter.com/ArifHabibLtd/status/1549436102188081153?s=20&am...

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Arif Habib Limited
@ArifHabibLtd
Balance of Trade FY22

Historic high trade deficit during FY22, up by 56% YoY

Exports: $ 31.79bn; +26% YoY
Imports: $ 80.18bn; +42% YoY
Trade Deficit: $ 48.38bn; +56% YoY

https://twitter.com/ArifHabibLtd/status/1549433873347579904?s=20&am...

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Arif Habib Limited
@ArifHabibLtd
Historic high textile exports during FY22, increased by 26% YoY to USD 19.33bn

https://twitter.com/ArifHabibLtd/status/1549430609520508931?s=20&am...