CONTENTS

INTRODUCTION

VISION

GLOBAL SCENARIO

VISION SUPPORTING FACTORS

STRATEGY TO ACHIEVE THE VISION

POST VALUE ADDITION SCENARIOS

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 INTRODUCTION
The number of countries with significant exports of apparel has increased sharply

over time. In 1980, economies whose exports exceeded $1 billion included only

Hong Kong (China), Taiwan Province of China and the Republic of Korea, along with

China and the United States. A decade later, the list also included India, Indonesia,

Malaysia, Pakistan, the Philippines, Thailand, Turkey (which had emerged as the

world’s fifth-largest apparel exporter) and Tunisia. By 2003, the list had been

extended with yet other entrants, such as Bangladesh, Mexico, Sri Lanka and

several countries of Central and Eastern Europe (CEE).

Historically, textiles and clothing were the entry point and backbone of economic

development and industrialization for many countries before they moved up the value

chain. Hence the great interest in this area of economic activity.

Many developing countries are highly dependent on apparel exports, which may

account for a significant share of their total industrial goods export earnings. The

largest apparel exporters are not necessarily the most dependent on apparel exports,

however.

Korea achieved major growth through focusing on textiles and garments then

switched over to hi-tech value addition and China rapidly built a strong position in

garments, leather products, and toys.

The apparel and textile industries have offered important opportunities for

countries to start industrializing their economies and diversify away from

commodity dependence. They played an especially important role in the export-

oriented development of East Asia – initially in Hong Kong (China), Singapore,

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Taiwan Province of China, the Republic of Korea and Malaysia, and more recently

in China, Indonesia, Thailand, Bangladesh and Viet Nam.

PAKISTAN can acquire a substantial position in global garment / apparel market.

KARACHI in particular has the largest potential (as compared to other cities of

Pakistan) to contribute significantly to country’s positive image in the world market.

The growth of garment/apparel manufacturing industries will provide large-scale

employment, for skilled and even for less skilled labour, and increase incomes and

prosperity in the country. It will also help achieving unbelievable export targets as

well.

The economic performance of the apparel and textiles industries has socioeconomic

implications as well. This relates to employment opportunities for women, the

development of small and medium-sized enterprises (SMEs) and spillovers into the

informal sector.

Achieving this vision is however a major challenge since today we do not have a

well planned, large garment/apparel manufacturing industrial base, specifically

geared towards exports in labour intensive industries.

VISION

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“Making Pakistan a very large, labour intensive, export-

oriented, value addition based Garment / Apparel

manufacturing Country by 2010.”

4
 GLOBAL SCENARIO

Textiles and clothing are the second most dynamic products in world trade with the

growth rate of 13 percent a year, after electronic and electrical goods, which

increased by 16 percent annually.

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20 economies for which apparel exports comprised a large share of total

merchandise exports in 2003 are shown in Table-I.

TABLE-I

In 2003, global Apparel and Textile exports totaled about $421 billion. More

than 140 economies produce apparel and textiles for export, and many are

highly dependent on these exports for employment and foreign exchange.

Although many countries are importers of apparel and textiles, in reality

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developing-country exports of these products go to two principal markets –

the United States and the European Union (EU). The EU was the world’s

largest apparel and textiles importer in 2003 at $154 billion, with the United

States second at $90 billion. However, a large proportion of EU apparel imports

is sourced from among EU members. Excluding such imports, the United

States is the world’s largest single market, some 11% larger than the EU.

Global Apparel exports totaled more than $235 billion in 2003. A handful of

countries dominate the global apparel export market. The 20 largest exporters

(counting the EU as a single entity, and including intra-EU transactions)

accounted for 87% of global apparel exports; three (the EU, China and Hong

Kong (China)) accounted for more than half (58%) with Turkey (4.2%), Mexico

(3.1%), India (2.8%) and Pakistan (1.2%). [Refer Table-1.0].

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With regard to US apparel imports since 1990, North-East Asia experienced a

relative decline in importance as a source region between 1990 and 2003,

from 54% of all imports to 29%.

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China maintained a fairly constant share of around 13% to 17%, while the

other North-East Asian economies recorded a steady decline, from 40% to

13% of US imports. During the same period, Mexico saw its share of US

apparel imports increase from 4% to 14% in 2000 and then fall back to 11% in

2003. Exports by the Caribbean Basin Initiative countries fared somewhat

better, growing from 8% in 1990 to 16% in 2003.

Although the United States and the EU both rely heavily on imports from Asia,

there is clearly a strong regional component to sourcing, with the United

States importing from Mexico, Central America and the Caribbean, Europe

from CEE and North Africa, and Japan from China.

Moreover, Asian exporters provide full-package production, while Mexico,

Central America, the Caribbean, CEE and northern Africa are primarily

involved in assembly activities, namely sewing textiles from the United States

and the EU into garments. Partly owing to rules of origin requirements in

preferential trade agreements, such lower-value-added activities offer less

scope for industrial upgrading and economic development.

MAJOR OPPORTUNITIES LOST BY PAKISTAN APPAREL INDUSTRY

EUROPE
European imports show a similar pattern, with Hong Kong (China) and China

now the leading Asian exporters. Prominent new exporters to Europe include

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Turkey, Tunisia, Morocco, Bangladesh and several CEE countries. While

Tunisia and Morocco engage mainly in assembly, the other countries are

capable of full-package production.

The potentials of Pakistani Garment/Apparel manufacturing Industries are

definitely more promising for performing better than Turkey, Morocco, Tunisia,

Bangladesh and CEE countries. However, we failed to grab our share

because of appropriate vision, efforts for capacity building and developing

infrastructure for modern garment Industries.

JAPAN
Japan, once a major exporter of apparel and textiles, is now the world’s fourth

largest import market (after the United States, the EU and Hong Kong

(China)). In 2003, thanks to a recovering economy, textile and clothing

imports increased by 11%; China accounted for fully 82% of Japan’s clothing

imports in that year and 45% of its textile imports (TI 2004). There are a

number of reasons for China’s prominent role in Japan’s textile and apparel

imports, including inflows of Japanese FDI, geographic proximity to Japan

and, not least, the absence of quotas .

In case of JAPAN we again lost tremendous opportunities because of our

unprepared ness for world class competition and the market completely went

into the hands of China.

PAKISTAN's PRESENT POSITION

As is obvious from the Table-I and Figures 1A & B above, export from

Pakistan has increased three folds but its share in world apparel trade is mere

1.2%.

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Figure-2A presents the performance of Pakistan Textile and Garment sector

in terms of US$/Kg earned for different textile products during the last 03

Years [July 2002-May 2005].

Figure 2.B presents the average US$/Kg Earned from export of different

textile and garment products during last three (03) Years i.e. July 2002-May

2005.

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 US

6.00 13
 Av

From the data presented it is understandable that “ there still exist

tremendous room for PAKISTAN to increase its share in

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World Apparel Business ” using the “ Garment / Apparel ”

manufacturing potential.

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 VISION SUPPORTING FACTORS

The concept of VALUE ADDITION is strongly supported by following factors.

LOW APPAREL to TEXTILE EXPORT RATIO

Table 3.1, below, presents 20 economies that are highly dependent on

export of apparel and textiles.

TABLE-3.1

Analysis of this data reveals one very important fact. All the countries listed

(except Pakistan & Tokelau) have got apparel to textile ratio of more than one.

This simply indicates that almost all the countries relying on textile and

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garment export are more dependent on garment/apparel export rather than

textile export.

This furnishes ample basis for PAKISTAN to set-up Apparel/Garment

manufacturing infrastructure/facilities meeting the international standards

to grab its share in the global arena of Apparel/Garment export.

17
18
%Share of

19
 %Sh

20
International Market for Garment Products

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Garment Products are one of the labour intensive goods for which a large

international market exists. For example the apparel exported worldwide in 2003

amounted to US$ 235825 million of which Pakistan’s share was only US$1028

million (1.2%). Refer Table-3.1 to compare the shares of India, Bangladesh,

Turkey, China and other countries.

TABLE- 4.2

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 Figure-4D
U.S.A
Market Share for Clothing Before Quota Elimination

China
18%
Rest of World
28%

Turkey
9%

C&
E Europe Bangladesh
9% 3%
Indonesia
North Africa 5%
Morocco
6%
Hong Kong Poland 5%
India
6% 5%
6%

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 Figure-4F
EUROPEAN UNION
Market sharefor clothing before quota elimination

China
18%
Rest of World
28%

Turkey
9%

C&
E Europe Bangladesh
9% 3%
Indonesia
North Africa 5%
Morocco
6%
Hong Kong Poland 5%
India
6% 5%
6%

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Pakistan’s International Presence in Garments Product

Cotton, cloth, knitwear, bed wear, readymade garments and cotton

yarn achieved exports in excess of US$ one billion each during 2004-

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2005. Export target of US$ 17.0 billion was proposed to be fixed for

2005-06. This target shows an increase of about 18% over the export

of US$ 14.4 billion achieved during 2004-05.

The fact that Pakistan is one of the world’s leading cotton producers,

furnishes ample basis for the aspiration of apparel/clothing industry’s

development.

However, the sector has serious weaknesses—including outdated

technology, poor quality and low productivity—although significant

gains in output have been made over the last ten years. A high

proportion of operations are in small and medium sized companies

which tend to be inefficient and lack the resources to effect an

improvement of MEGA level. Foreign investment is rising, but from a

very low level.

Despite all these challenges, a mega opportunity is ahead of the road

provided garment export industry of Pakistan is optimized in terms of

value addition and volume increase. It is a great challenge but can be

mitigated with appropriate mix of Vision, Technology and Planning.

The 1st step of a strategic plan to reap the fruits of mitigating the

challenges and grabbing the opportunities that exist in the Global

Garment Export Sector is to go ahead for the clusters of “ GARMENT

CITY”. It is a tested strategy that China India, Bangladesh, Turkey and

many other countries of the world are adopting to tap the tremendous

potential of Global Garment Export Sector. The strategy can provide

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long term sustainable support and growth for the economy of our own

country.

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 STRATEGY TO ACHIEVE
THE VISION
The Apparel/Garment products are the highest value added segment of the
textile value chains( Fig - 5.1). Much more foreign exchange can be generated
through the export of garments than the export of cotton, yarn or fabric. Garment
manufacturing is also one of the most labour intensive activities in the value
addition chain of textile industry.

FIGURE-5.1 TEXTILE VALUE CHAIN

Following Six (06) key steps are anticipated as the basis for the strategy to be
adopted to transform the VALUE ADDITION vision into a working reality.

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Foreign Direct Investment (FDI)

Pakistan is in great need of foreign investments. Table 4.3 reveals

the trend of Foreign Direct Investment in some of the Garment

exporting countries.

Table-5.3

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Infrastructure Building

Many countries like Korea, Taiwan, Vietnam and China, have

effectively used focused development efforts such as setting up export

specific Manufacturing facilities called EPZ’s/Parks/City to spur exports

and to attract foreign investment. This approach was particularly useful

in the initial stages of their exports drive, when these countries did not

have the technical or administrative capacity to develop a country-wide

system (Clusters) that would support exports growth. This can only be

achieved if the cooperation within the state, its institutions and the

private sector deepens and resources are combined.

Capacity Building

The success of VALUE ADDITION will heavily rely on building up

of institutional capacities, training of teachers and personnel for

garment production and merchandising for export oriented

apparel/garment industry and to increase the cooperation between

the state, its institutions and the business community. The motto

behind capacity building will be

“No economic development without innovation, no

innovation without scientific research”.

To reach the target of acquiring billions of US$/year, a trained work

force comprising of hundreds of thousands of people is required. It

is necessary to develop a training system excellent in quality and

quantity in order to meet the global needs. There is going to be an

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ever increasing demand for professional fashion designers,

technicians (line leaders, technical team head), and merchandising

staff for the industry in order to keep track with its global

competitors.

In addition, the existing training facilities of the possible partner like

TTCs will be upgraded in order to train teachers and staff in the

field of mechanics and electronics, a component that will

complement the training with a focus on maintenance and repair of

modern apparel and garment manufacturing machines.

The practical and theoretical training of the teaching staff and staff

from the industry partner in several fields of modern garment

production and merchandising will be carried out by international

experts.

To start the courses/programs at this training centre, international

curricula will be adapted to meet industrial requirements and over

the period of three years - the proposed institute will be functional in

all respects.

To develop and upgrade skills and hence improve labour

productivity, and to ensure a constant supply of skilled labour, the

proposed training institutes shall offer advanced courses for

tailoring and design, fashion design and shop floor management.

Research facilities for CAD/CAM, testing and quality control shall

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 also be provided since firms and companies working iwill have to

ensure that their products meet international quality standards.

Technology Road Mapping & Support (TRM) is a need-driven,

technology planning process to help identify, select and develop

technology alternatives to address specific development needs.

The proposed institute shall have a complete set-up for this.

There has to be an advisory board comprising of technocrats to

a. Round up the achievements of this training centre

overall goal,

b. Improve cooperation between the state, the training

institution and the industry.

c. To establish institutional relations with other international

players.

Product Identification

One of the most neglected research areas in Garment Export Sector of

our country is “ product identification ” based on international

market survey. During 2002-2005, the average US$/kg earned against

export of various textile and garment entities is given in Figure-5.2.

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The prevailing average prices of different high value addition

apparel/garment products are given in Figures-5.3 & 5.4.

In Figure-5.5 a visual comparison of what Pakistan is earning

(US$/Kg) now by exporting Textile and Garment product and what

could be earned by by exporting high value addition apparel/Garment

products. It can be noted explicitly from these data that an increase of

several folds in US$/kg of Textile and Garment export is possible just

by identifying appropriate products and their international markets. This

identification is a dynamic process and a continuous effort is required

in this regard.

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 A

FIGURE-5.2

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FIGURE-5.3

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FIGURE-5.4

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FIGURE-5.5

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2
Product Marketing

This has been the prime responsibility of the EPB now TDAP, but the only

marketing technique so far used was through the international exhibitions.

The role of commercial consulates and their participation in the country’s

export figures of today is almost negligible.

In most of the cases the commercial consulates are non-professionals,

selected from the existing bureaucracy. An element of political expediency

can usually be found in such selection.

A proper marketing department working under these professionals, will have

the responsibility of doing the market research, product identification and

would evaluate the identified product requirement, its suppliers, quality and

volume, which would be transferred to Garment City marketing cell. Either the

garment city marketing cell or the concern commercial consul would appoint a

person or a team of that particular local market, having the best expertise and

contacts, being finally paid by the appointing authority and cost be transferred

to the manufacturer in Pakistan either on monthly basis or percentage in the

form of commission.

The other direction of marketing would again be based on the same aspects,

but ware houses be made in the markets of Europe, U.S.A. and Russia, with

direct supplies be made to the commercial consuls or the garment city office

under commercial consul, the duty and all the related expenses be paid by

the concerned ware house authority transferred to the suppliers and the

supplier will be paid back with profit sharing after deducting the expenses. In

this particular case a policy has to be made by the State Bank of Pakistan

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with reference to the foreign exchange, i.e. permission to be granted for direct

export to company working under garment city.

POST VALUE ADDITION

SCENARIOS

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The graphs on the following pages present the scenarios after various garment cities are made

functional. Expected foreign exchange earnings in billions of US$ against factory productivities

of 50%, 60%, 70%, 80% and 90%, and the required bales of cotton (in millions of cotton

bales) to earn this foreign exchange are presented graphically.

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