Half a Million Jobs & Billions Lost as Textile Industry Faces Crunch

The textile industry used to be the back bone of Pakistan’s exports and our country’s name as a textile brand was known around the world a few years ago. Leading cloth brands used to outsource their raw material and finished products from Pakistan.

These days, textile factories stand vacant, opposite of the hustle and bustle which was a prominent feature a few years ago. Recent years have seen hundreds of small and medium sized textile factories shut down, contributing further to already declining exports.

What happened? Why did things come to such a low? We take a look at the reasons.

The Current Situation of Textile Industry

All of this has been caused by the energy crisis and the government’s lack of support to these industries. The effect, however, is not limited to small and medium sized factories, even the biggest textile factory in the northern industrial area of Pakistan is no longer operational.

It is hard to believe how a workshop which consisted of over 7,600 employees could have reached such a state.

Pakistan’s textile industry used to account for half of the country’s exports, but according to the exporters, the buyers have now shifted to Bangladesh and Vietnam since power outages prevented the factories from meeting their deadlines.

More than 500,000 people have lost jobs in the textile industry since 2014

Despite the government’s submission to an IMF program in 2013, which asked to avert balance of payment crisis, Pakistan’s exports have fallen as international demand declines and energy shortage acts as a major hurdle in any economic growth.

Pakistan’s Textile Exports

Pakistan’s overseas shipments have declined to $21 billion, the lowest since 2010, stated Pakistan Bureau of Statistics in a recent report. About 100 member factories have halted operations and at least 500,000 people have lost jobs in the past two years alone, says Saleem Saleh, Acting Secretary General of All Pakistan Textile Mills Association.

pakistan exports

Hundreds of factories have shut down and exports have fallen to a six-year low

Nearly two-thirds of the Pakistan Bedwear Exporters Association have stopped working since 2011, confirms the PBEA Head, Shabir Ahmed.

Issues Faced by Textile Industry

Most factories cannot afford to setup their own energy sources and long power outages prevent them from meeting any client demands. While some larger factories have invested in their own power solutions and diesel generators, the problem still persists in terms of added costs.

Harald Finger, the IMF’s mission chief for Pakistan said:

“The continued decline in exports is a cause for concern, to a good extent that’s due to a fall in international prices for cotton and other commodities.”

About half of Pakistan’s exports are shipped to only six countries and 40 percent of total textile exports are primary commodities. According to World Bank data Pakistan’s textile industry grew at half the rate when compared with Bangladesh and Vietnam during 2005 to 2012. The country’s security situation is another factor which puts off many potential clients.

Is There Any Hope?

However, there may be a light of hope at the end of the tunnel as the government is finally realising that exports need a boost. The current government plans to end power shortage in less than two years and IMF has asked to improve the country’s exports.

The government has therefore reduced taxes on some export items and is planning on arranging a duty-free import of five million bales to fulfill domestic shortage this year. Borrowing has also become more attractive and there’s a chance that at least the remaining factories will somehow manage to sustain themselves soon if the government fulfills their promises.

Via: Bloomberg

He is the Editor at ProPakistani.