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Readymade garment industry in Pakistan.

Readymade Garment Industry in Pakistan

Pakistan's garments industry has made a phenomenal progress in the last five years. According to International Trade Statistics Pakistan ranked 26th with exports of garments of $ 399 million in 1987 after Bangladesh, Sri Lanka and Finland with exports of $ 463 million, $ 422 million and $ 420 million respectively. Readymade garments contributed 10.74 per cent to export earnings in 1988-89. Garment has taken full advantage of export incentives. Share of garments in total textile exports has increased from 12.3 per cent in 1985-86 to 18.6 per cent in 1988-89. Projected target for this share is 32.2 per cent in the year 1988-89 while the earnings from export of textiles in all forms has increased at an annual compound rate of 27.9 per cent, it was 35.8 per cent in the case of readymade garments.

Production data is scanty and it remains a major obstacle in working out a policy frame-work. We have estimated production of 1770.0 million pieces in 1988-89. These estimates were worked out according to the method given in Werner's Report. The industry mostly produces cotton and cotton blended skirts, T-shirts, bush shirts, children's suits school uniforms, shirts, blouses and maxies. These are mostly made of cotton blended cloth. Production is according to piecework system which involves completing of the whole garment except cutting, by one person. A few organised and large-scale units also use trolley system in which one garment is prepared by different persons.

Raw material for garment industry is easily available. The major items which are frequently used by the garment industries include cotton and cotton blended cloth, lining, thread, button, zip, labels, and polythene. The raw material both locally produced and imported are readily available in the market. The sources of supply of raw materials are textile mills, wholesalers and non-mill sector. Some garment makers, have their own rooms to manufacture cloth. Such garment units produce special kinds of garments and mark them with their brand names. Payment of advance tax is a deterrent in expanding the export operations. Alternate mechanism should be devised for realising income tax from the local suppliers.

Several incentives are available for the garment industry. An exemption of 55 per cent is available in the income from garment exports. To give further incentives to value added exports articles and made-ups are now eligible for 75 per cent exemption of export income from income tax.

According to 1989-90 budget, only five key industries were made eligible for duty and sales tax free import of their machinery. However, in view of the emphasis on value-added exports and to facilitate requirements of the export oriented industries, it was decided to exempt machinery relating to value-added sector from import duty for a period of five years. The machinery exempted includes among others, machinery for garments, madeup textiles, knitted or crocheted textiles.

In the new Trade Policy, some special facilities have been offered for value-added exports, in addition to the above fiscal incentives. Duty free imports of pattern and design punch cards have been allowed for leather and cotton garments. A rejection allowance has been permitted to cover wastage and breakage of material imported by these industries. Knitting machinery for hosiery in CKD condition would be imported duty free.

It was decided to liberalise the present manufacturing in Bond System by adopting open Bond System. Under the Open Bond Manufacturing System, direct and indirect exporters have access to tax free imported and domestic inputs into exports and control is maintained through documents instead of physical supervision. To begin with new system it was made applicable to the following products: - Garments madeups (bed, table and

kitchen linen), printed or crocheted

apparel. - Leather garments, gloves and madeup


Knit-wear exports are growing at a promising rate. The proposed knit-wear Training Institute would carry this process further. It would be in the private sector and impart training in stitching, cutting, packing and quality control.

The total exports of readymade garments have risen more than eightfold to over Rs. 9,691 million in 1988-89 from Rs. 1294 million in 1981-82. Pakistan mainly exports cotton-made articles which include shirts, T-shirts, bush shirts, coats, pants, maxies, half pants, skirts, blouses, children's suits, outer and under wear garments. Besides, some ladies oriental garments with embroidery work are also exported.

India, which is Pakistan's close competitor was alive to the fierce competition and lost no time in evolving policies to meet the challenges of international competition. India's last year exports went up to one billion dollars and its current year's target has been fixed at 2.5 billion dollars. This is mainly due to the fact that Indian Government allows compensatory rebate on exports of garments to non-quota countries. Shirts command the major share in the export of garments. Share of shirts in the total exports of garments worked out to 31.62 per cent in 1985-86 which increased to 33.57 per cent in 1988-89. USA was the major buyer of shirts particularly made of cotton during 1988-89 taking about 48.9 per cent of the total export of shirts. Other important buyers were UK 11.0 per cent, Federal Republic of Germany 7.6 per cent, USSR 7.3 per cent, Yemen and Canada taking 3.8 per cent each. Shirts of men/boys of cotton constituted 90.5 per cent of total export of garments. Shirts of synthetic fibres are also exported from Pakistan.

EEC has agreed to allow export of 10.282 million pieces of women's dresses from Pakistan for the year 1991. This was decided in an agreement signed after the detailed negotiations. It may be mentioned that India which is the largest supplier of women's dresses to EEC has a maximum limit of 10.29 million pieces for the year 1991. Thus, Pakistan's quota level is almost equal to that of India.

There are two sets of demand projection of readymade garments. IACP estimated that future demand of garments would rise by 10 per cent in the domestic market and 20 per cent in exports. Based on this assumption the total demand in 1992-93 has been projected to increase to 2172 million pieces, which includes 1730 pieces for domestic use and 443 million pieces for export. According to this projection, with supplies standing at 1252 million pieces and demand rising to 2173 million pieces the gap will emerge as 921 million pieces and therefore justifies creation of new capacity.

According to IRS, estimates the export will rise at the rate of 20 per cent in the next five years and it will give an export demand of 702.9 million pieces in 1993-94. Based on the historical increase IRS projected domestic demand at the rate of 25 per cent. This gave a domestic demand of 3593.2 million pieces in 1993-94. The demand supply gap will emerge as 2830.0 million pieces assuming the existing supply as static at 1472.2 million pieces. This projection also justifies a large investment in the garments industry.

One of our drawbacks has been that all along, Pakistani exporters have just focused on the developed world for exports. Given the protectionist policies of the USA and the EEC, coupled with their overwhelming technological superiority, Pakistan textiles would certainly be at a disadvantage in their markets. It would be worthwhile to reorient export strategy and concentrate on Third World markets, notably Africa! This would be a far more lucrative proposition.

A unit to produce 1500 pieces per day will require a capital cost of Rs. 8.00 million and working capital of Rs. 3.80 million. These estimates were prepared before the announcement of the budget for 1990-91. There is likely to be a cost escalation of 10 per cent.

There is need to give urgent attention to the problems of garments industry. The industry has a potential of becoming the top foreign exchange earner of the country.

Global Outlook

There is wide demand for readymade garments in the world. Total exports of garments showed a rise of 71.89 per cent in the last three years up from $ 31.514 billion in 1984 to $ 59.464 billion in 1987. Average annual growth rate of exports worked out to 23.96 per cent. The items included in readymade garments were men's outerwear, women's outerwear (not knit), undergarments (not knit), outerwear (knit non-elastic) undergarments knitted and Textile clothing. Table-II gives the details.

Table : Table-II World Trade of Garments

($ billion)
Year Exports Imports
1984 31.514 39,694
1985 34.728 42,511
1986 45.340 55,512
1987 59.464 71,907

Average growth rate per annum 23.96% 22.80%

Source: International Trade Statistics Year Book 1989.

Import of readymade garments has also showed a rise of 68.40 per cent up from $ 39.694 billion in 1984 to $ 71.907 billion in 1987. Average annual growth rate worked out to 22.80 per cent. World major exporters of readymade garments are Hongkong, Italy, Korea, Japan, Germany, France, UK, Belgium, Netherlands and USA.

Men's Outerwear

Exports of men's outerwear during the last four years almost doubled up from $ 6.692 billion in 1984 to $ 11.30 billion in 1987. Almost 59.5 per cent of the exports of men's outerwear is shared by Italy (14.2%), Hongkong (13.8%), Korea (11.3%), Germany (7.6%), Belgium (4.7%), France (3.5%) and Portugal (4.4%). Shares of Hongkong, Italy, Korea and Germany have declined over the years while share of Portugal was increasing.

Women's Outerwear (Not Knit)

Exports of women's outerwear during the last four years increased from $ 10.146 billion in 1984 to $ 16.907 billion in 1987. Both men's outerwear and women's outerwear are widely traded. Hongkong, Korea, and India are the major exporters with shares of 22.2%, 16.3% and 6.7% respectively. Bangladesh, Turkey and Indonesia have not only entered the world market but have appreciably increased their share.

Undergarments (Not Knit)

Exports of undergarments (not knit) has shown a rise of 66.26 per cent up from $ 2.469 billion in 1984 to $ 4.105 billion in 1987. Main exporters of undergarments are: Hongkong (22.24%), Korea (16.2%), India (6.69%), Portugal (4.35%). Pakistan's share was quite meagre only (0.75%). It is interesting to note that Bangladesh has remarkably increased its share from 1.74% in 1984 to 4.21% in 1987. As against this Pakistan's exports have declined from $ 34.75 million in 1984 to $ 30.796 million in 1987. Pakistan export of undergarments was the highest at $ 65.085 million in 1986. After that there was a steep fall to $ 30.796 million possibly due to withdrawal of export rebate from all exports. Outer Garments (Knit Non Elastic)

World export of outer garments (knit non-elastic) increased from $ 8.451 billion in 1984 to $ 17.014 billion in 1987 showing a rise of 101.30 per cent. Hongkong, Korea, Federal Republic of Germany, UK, France and Portugal are the leading exporters of outer garments commanding a share of 45.8 per cent. Among the above named companies only share of Portugal showed a rise from 2.8 per cent in 1984 to 4.3 per cent in 1987. Share of Hongkong declined from 21.4 per cent in 1984 to 18.6 per cent in 1987. Other countries like Germany, U.K., France and Korea have also shown a declining trend. Pakistan's export of outergarments increased from $ 5.507 million in 1984 to $ 61.322 million in 1987. This may be compared with the export of Italy $ 3.619 billion and Hongkong $ 3.161 billion in 1987. Undergarments (knitted)

World exports of undergarments increased from $ 3.590 billion in 1984 to $ 7.301 billion in 1987 showing a rise of 103.37 per cent. Hongkong, Korea and Italy are among the leading exporters having a share of 14.3%, 10.0% and 8.3% respectively. Hongkong share in the world export for undergarments knitted was declining. Similar is the case of Korea. Share of Italy in the last three years was static. Pakistan has come up very nicely by increasing its exports of undergarments (knitted) from $ 38.411 million in 1984 to $ 106.773 million in 1987. Turkey, Thailand and Macau are far ahead of Pakistan in this respect. Textile Clothing

World exports of textile clothing increased from $ 1.627 billion in 1984 to $ 2.831 billion in 1987 showing a rise of 74 per cent. As against this Pakistan's exports of textile clothing after increasing from $ 26.309 million in 1984 to $ 30.354 million, in 1987 took a reversal and sharply declined to $ 21.367 million. Major exporters of textile clothing were Italy (25.4 %), KOrea (10.9%), Hongkong (9.1%), Germany (9.7%), France (7.2%) and Japan (5.6%).

It is interesting to note that in the world production of clothing, the developed countries' share fell from 92 per cent to 75 per cent. This decline was compensated by an increase in the share of the developing countries from 8 per cent to 25 per cent. The high increases in the shares of the developing countries notwithstanding, the situation even at the end of 1980, was that the production in developing countries, both of Textiles and Clothing, was still less than one-third of the world output. The fact that their share in volume terms was higher, points up a setback in the terms of trade for the developing countries as a whole, relative to the developed countries.

The exports in clothing, as a percentage of the total manufactured exports of the developing countries, was 13.6 per cent compared with the corresponding share of 1.9 per cent for the developed countries. These statistics clearly evidence the high importance of the exports of Textiles and Clothing for the economies of the developing countries.

In 1987, world textile exports increased in value terms by 19.5 per cent while the value of clothing exports rose higher, by 28.5 per cent. Thus clothing exports were the highest growth sector in world trade, exceeding the value of textile exports. Statistics also show that clothing exports from developing countries rose faster than those from another major supplier.

Table : Table-I Top Exporters of Garments 1987
Rank Country Value %age of
 ($ Million) World Total
1. Hongkong 8,953 15.0
2. Italy 8,427 14.1
3. Korea 5,914 9.9
4. W. Germany 4,544 7.6
5. France 2,838 4.8
6. U.K. 2,185 3.7
7. Portugal 1,853 3.1
8. Turkey 1,508 2.5
9. India 1,450 2.4
10. Yugoslavia 1,390 2.3
11. Belgium 1,280 2.1
12. Netherlands 1,265 2.1
13. Singapore 992 1.7
14. U.S.A. 954 1.6
15. Austria 874 1.5
16. Thailand 831 1.4
17. Philippines 820 1.4
18. Greece 649 1.1
19. Morocco 630 1.0
20. Japan 589 1.0
21. Malaysia 578 0.9
22. Tunisia 538 0.9
23. Finland 463 0.7
24. Sri Lanka 422 0.7
25. Bangladesh 420 0.7
26. Pakistan 399 0.7

Source: International Trade Statistics 1989

Table : Readymade Garments Export by County Including Hosiery - Percentage Share in 1987-88
- U. S. A. 34
- Federal Republic of Germany 15
- United Kingdom 8
- France 6
- Saudi Arabia 5

Table : Profile of Readymade Garments Industry 1990

World Exports of Garments in 1987 ($ billion) 59.464

World Imports of Garments in 1987 ($ billion) 71.907

Top Exporter of Garments in

1987 ($ billion) Hongkong 8.953

Pakistan Exports of Garments
in 1987 ($ billion) 0.399
Pakistan's rank in World Exports 26th

- Production of Garments in

1988-89 million pieces 1770.0 - Industrial Sewing Machines in

Operation (Nos) in 1988-89 170,692 - Production of Cotton Cloth

(000 sqm) in 1988-89 268.317 - Exports of Readymade

Garments (Rs. million) 9,691.88 - Share of Outergarments

in total exports (%) 20.71 - Share of shirts in total

exports (%) 28.61 - A garment unit having a

capacity if 1500 pieces

per day will cost 11.80 - Domestic Consumption of

Readymade Garments

(million in 1988-89 pieces) 1177.5 - Exports of Readymade Garments

(mil. pieces) in 1988-89 282.5 - Projected Local Demand for

Readymade Garments

(million pieces) in 1993-94 3593.2 - Projected Export Demand of

Readymade Garments

(million pieces) in 1993-94 709.9 - Demand/Supply Gap in

1993-94 (million pieces) 2830.9
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Author:Haidari, Iqbal
Publication:Economic Review
Date:Aug 1, 1991
Previous Article:Self reliance through export performance.
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