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Monday, April 15, 2024

Resilience and Renewal: Pakistan’s Textile Industry Outlook

Amidst a landscape of challenges brought about by the pandemic, economic crises, and political shifts, Pakistan's textile industry has shown remarkable resilience. In the face of adversity, key stakeholders, including the Pakistan Textile Exporter Association (PTEA), have collaborated to navigate the changing dynamics of the global market.

In our section “What’s going on in…?” we want to sharpen the view on key garment production centers and talk to experts about current developments, exciting topics and innovations in these countries. For Pakistan, we speak with Azizullah Goheer, Secretary General, of the Pakistan Textile Exporter Association (PTEA).

 

Read more: Marks & Spencer seeks to enhance its textile imports from Pakistan

The textile industry in Pakistan has faced significant challenges in recent times, including the impact of the pandemic, economic crisis, and political unrest. Could you provide us with an overview of the current situation of the Pakistani textile sector and the key challenges it is facing?

In our business, especially in the manufacturing, export and textile industries, Pakistan has coped very well with the pandemic. With the closure of China, we had the opportunity to diversify businesses during this period. The Pakistani government at that time supported us very well. There were many new policies and plans to promote the industry. There was the human resources loan because the government wanted us to sustain the labor force and the workforce in COVID times. In those two years, our textiles export from Pakistan exponentially increased. At last count, we received $19.6 billion in textile exports from Pakistan. Then suddenly the political scenario changed. The new government came and in this situation some of the financial support to the textile industry was suspended. For example, the long-term financing program was stopped in last year’s budget just like the technology and modernization fund. This was very discouraging for the textile industry.

Next came many closures, inflation, and the global recession that affected so many in Pakistan. The Russia-Ukraine war also had a big impact on the energy sector. It became expensive to import raw materials. On top of that, subsidies for gas and electricity for the industry were cut. The textile industry has gone through a very difficult time in Pakistan. Our production costs are still very high today. Another factor that hit Pakistan’s textile sector hard was the unexpected change in the exchange rate. In recent years, the Pakistani currency has depreciated so much. This affects our business because 60 to 70% of our production is based on imported materials. These include energy, chemicals and dyes. There have been many problems for the industry, not only for the textile industry but for the whole manufacturing and export industry.

Read more: Revitalizing Pakistan’s Textile Sector: Overcoming Challenges for Growth

The textile industry plays a vital role in Pakistan’s economy and the global supply chain. What initiatives are being implemented to attract investment and strengthen the competitiveness of the Pakistani textile sector, considering the current challenges and the evolving dynamics of the global market?

The political situation has stabilized a little bit, we are now in a dialogue phase with the government to review its policies and to review some regulations that have already been discontinued or withdrawn, to reintroduce them to promote exports and production and attract the world market. In the pandemic period, we have had so many brands, so many orders, so many buyers. The problem is that inflation, high import rates, and low or no profitability in the market, are having a negative impact on the business.  We are trying to overcome these issues with the government.

In light of the economic challenges and the political unrest, what is your outlook for the future of the textile industry in Pakistan? What are the key factors that will determine the industry’s recovery and growth?

In the last four years, industry and government have invested more than $5 billion in the textile industry to enhance our capacity for new developments, new industries and some expansions. We are very hopeful that we can get this situation back on track and revive the industry and exports. I think that the current situation is only temporary, because of the change of government and the political unrest. We are confident to find a way forward to revive the industry and our capacity and exports in Pakistan. We have the capability. We have the infrastructure. We have the scale. We have the resources. The only thing we’re waiting for is to reconcile these things, to find a good way forward, to create a supportive environment and better working conditions for the textile industry.

The layoffs of millions of workers, especially women, have been a major consequence of the economic crisis. How has this affected the garment and textile supply chain in Pakistan, and what measures are being taken to address the social and economic implications of these job losses?

In our industry, we are fortunate to have a considerable number of highly qualified women working in sewing. Our focus lies not only on retaining them within our company but also on providing support and opportunities for their growth in other units. However, the current circumstances present several challenges. The financial crisis, termination of policies, fluctuating exchange rates, and their subsequent impact on companies have made it increasingly difficult. Nevertheless, I want to reiterate that within our sector, we remain committed to supporting our skilled employees. It is important to note, though, that when it comes to government policies, there haven’t been any notable new initiatives or support specifically targeting our industry.

How is PTEA working towards enhancing the awareness and knowledge of workers about their rights, and what support mechanisms are in place to address grievances and ensure fair treatment within the industry?

The PTEA has dedicated several years to addressing these concerns, actively engaging in various initiatives. We are proud to be a part of the Better Work Program and have actively participated in the Decent Work Program. Additionally, we collaborate with organizations such as GIZ, ILO, WWF, and numerous others to further our efforts. We are now planning a seminar in Faisalabad in collaboration with the private sector textile manufacturers and exporters. The seminar will specifically focus on gender discrimination issues and international labor standards, aiming to shed light on these crucial topics and promote a more inclusive and equitable work environment.

Read more: Sustainable water management in Pakistan’s textile industry

The Pakistan Textile Association, along with other relevant associations, is actively engaged in addressing these issues, particularly because we are an exporting industry. Our responsibility extends not only to the people and the government but also to our buyers/brands. To ensure compliance and uphold ethical standards, our factories undergo regular audits. We are fully committed to meeting all necessary requirements and regulations, continuously working towards improving our practices in this regard.

The G+T industry is the backbone of Pakistan’s economy, but this also comes at a huge environmental cost. How is Pakistan dealing with these challenges and what further laws and enforcement mechanisms are needed?

Climate change confronts the entire industry with environmental challenges. As exporters and manufacturers, we are subject to stringent scrutiny from our customers regarding these matters. In Pakistan, specifically regarding carbon footprint and wastewater concerns, we actively engage with and receive guidance from the Punjab Environment Department. While we faced water treatment challenges in the past, we have diligently worked to improve the situation with the support of organizations such as GIZ and other development entities. Our industry is now very aware of these environmental issues and is actively addressing them to mitigate their impact.

When we talk about climate and environmental problems, industrial zones can help to reduce the negative impact on the climate. But in Pakistan, these zones are not much promoted by the government. There are some zones in Lahore and Karachi, but if you look at the whole country, you see that this practice is not followed. What is your opinion on this?

I think you are right. Unfortunately, I can’t tell you why there is not more investment in industrial zones. However, this underscores the importance of seeking collaborative solutions in conjunction with the government. While we cannot impose our will on the government, it is crucial to engage in constructive dialogue to address this issue collectively.

Many manufacturers in the country are making investments in low carbon and greener production in line with brand requirements and (UN-led) global climate goals. But not all firms can afford to make the necessary adaptations. How is the government supporting garment and textiles manufacturers to transition to greener business models?

In this situation, I don’t think we can hold only ourselves or the government responsible for these investments in the environment and labour. The biggest part of these investments is still missing. That is on the side of the buyers. Buyers are not interested in raising their prices because we are participating in the Better Work program. But the Better Work Program comes at a price. Buyer brands ask us to participate in these programs, but they don’t support us financially through the business. This area is still missing in Pakistan. The government is doing something; they are supporting this area with 50% financially. Another 50% comes from the private sector or member industry. But again, the buyer part is still silent. They are just asking to do this, do that or do more. But they are not participating in our financial costs and don’t offer enough support.

Improved environmental standards can yield better social outcomes. How crucial is the concept of the Just Transition for the sector’s future? And how does the Pakistani government approach the environmental and social sustainability challenges in the G+T sector?

In Pakistan, the jurisdiction over environmental departments lies with the provinces under the 18th Amendment Act. Currently, the government is actively working on this matter and has devised new plans to address environmental concerns. Collaborative projects with district governments are also underway, in which we actively participate, conducting regular inspections and audits. In recent statements, a more ambitious approach towards environmental issues was discussed, including initiatives such as tree planting, forest creation, and efforts to reduce the carbon footprint. While some of these projects are already operational, others are still in progress or temporarily on hold. Meanwhile, the private sector is individually addressing these issues for their companies and communities, although the level of overall interest from the private sector in these matters remains uncertain. Nonetheless, there are government guidelines in place, indicating a framework for addressing environmental concerns.

In the context of the digital age and increasing sustainability concerns, how is the Pakistani textile industry adapting to new technologies and sustainable practices? What steps are being taken to enhance the industry’s competitiveness and align with the evolving demands of international buyers and consumers?

In the last four years, we have invested almost $5 billion in the textile and garment industry for new expansion, new technology and to enhance our capacity. We are part of the big textile fairs around the world and notice that people are moving more and more towards e-commerce. We are also developing our e-commerce business in textiles. In Pakistan, it is already very well-known and widespread – we are working with Amazon. And most of our small and medium members are connected with Amazon and other suppliers. Things are changing. Traditional business is becoming a part of the global business environment. I think that we are at the cutting edge of technology, machinery, industry.  We have everything, including infrastructure and the latest technology. However, a stable political situation remains a crucial missing piece for us to fully leverage our industry’s potential.

Looking ahead, what is your vision for the future of the Pakistani textile sector?

The past year has been fraught with numerous unfortunate events that have severely impacted Pakistan. Climate change, conflicts, energy shortages, global recession, high inflation rates, and political instability have collectively taken a toll. Despite these challenges, Pakistan possesses the necessary capacity, infrastructure, and skilled workforce to accomplish significant strides in the coming five years. I think we will manage by the end of this year to put Pakistan’s textile sector back on a good track.

 

Azizullah Goheer, who is currently serving as the Secretary General of Pakistan Textile Exporters Association (PTEA), is a certified PMP (Project Management Professional) and certified director under SECP Code of Governance. He has been associated with project management and the textile sector for 25 and 12 years respectively. In the last 25 years, he has worked for various government and international organizations/companies and regularly writes articles for The News, Business Recorder and other national and international newspapers/magazines on economics and business.