Avais Mazhar Hussain, the CEO of Angora Textiles, gave a presentation at NIPA to government policy makers on the state of garment industry. He stressed an urgent need for human resource development and course correction in government policies to stop the progress of the sudden decline in Pakistani apparel industry in post quota 2005.
GLOBAL APPAREL TRADE AND PAKISTAN
“Silver fiber is the silver lining to the dark clouds of poverty engulfing Pakistan,” he said in his opening statement. “Our fabric processing is poor. If we look at capital investment ratio, China is 28% of total global apparel market. Pakistan is the strongest in comparison, about 20% for USA in category 338 men’s knitted apparel and 339 – women’s knitted apparel alone.”
“Under WTO regime, the apparel industry is going down in Pakistan,” he said as he explained the global textile trade, walking the audience through the facts and figures on global apparel and textiles in comparison to Pakistan. The world produced 165 billions in textile goods, 225 billions in apparel, totaling 390 billion dollars worth of textile and apparel goods. He discussed Pakistan’s textile exports by category in the year 2004 and 2005, citing figures he remarked that Pakistan’s textiles industry is doing well in the global market place if you just look at exports of raw materials — cotton, cotton yarn, unprocessed fabrics (knitted and woven), and home textiles but the apparel business is not doing as well as expected or as it should from the perspective of a indigenous cotton producing country. “Even Bangladesh has become a better player than Pakistan – the sequence of apparel export reads now as follows: China ($43,010 Million), India ($ 5,467 Million), Bangladesh ($3,579 million) and Pakistan ($ 2,172 million),” he said.
Bangladesh’s ranking seems surprising since it’s not a cotton producing country and has to import raw materials like fabric from Pakistan, India and China for their apparel industry. Pakistan’s total textile exports including all sectors like yarn (45.51%), cotton cloth (40%), bed linen (42.36%), woven garments (65.54%), and knitwear (26.33%) in the period of July 2004 to August 2005 grew by 13.4% but knitwear in the period of January to June 2005 declined by 5%. Explaining these figures, he said, it was a “Sad reflection on the industry, governance, and the country.”
MARKET SEGMENTATION AND PAKISTAN’S QUOTA POLICY
Discussing the customer market segmentation, he explained that Pakistan was competing at the low end of the market only. “Pakistan is ideally suited for market segments 3 & 4 (departmental stores and mass market retail chains), since Lahore and Faisalabad have vertically integrated industry, however, Pakistan is operating at 6 and 5 (mass retail chains and discount chain stores), partially at 3 & 4 (first tier specialty shops and better department stores),” he said.
Explaining the reason for the industry’s move in this direction, he cited government’s quota policy. “Back in 1991, the quota was awarded on performance and value. In 1994, government changed it back to performance. The average price in 1994 was $48 per dozen. In 2004, it was $40 per dozen. This policy change affected our performance – it forced the exporters to pursue low priced, high volume supply strategy– from competing with middle tier suppliers: Hong Kong, Turkey, Egypt, Korea, Taiwan, Indonesia, Malaysia, it made them compete with the low end — main land China, India, Sri Lanka, South Africa and Bangladesh. The government was entirely responsible, since if you give a certain direction, the exporters have no choice but to comply.”
PAKISTAN’S INDUSTRIAL STRENTHS AND WEAKNESSES
Discussing Pakistan’s strengths, he said, “Pakistan has abundant supply of cheap labor, a well developed spinning industry and availability of raw materials. Even though Pakistan’s labor cost is $0.38 per hour, (Germany has the highest labor cost in the world, in spite of high costs, their growth rate in the first 7 months of 2005 was 16% and Italy was 6%), this cost advantage is almost nullified by an undisciplined and unproductive labor force,” he said.
Discussing Pakistan’s industry weaknesses, he said, “We cater to the low end of the global market because of skill deficiencies in manufacturing and design, furthermore, we have to contend with poor country image. It’s a desperate situation. The weakest link in our value chain is dyeing and fabric processing. You can’t find a single dyeing technician/Chemist in Pakistan who can dye polyester and spandex (Lycra) satisfactorily. We have better equipment than China and India. Garment technology is a proper science. India produces industrial scientists in fifteen months flat since they have schools that offer industrial training. In Pakistan, totally clueless people are leading the factories fabric processing facilities. Some of our technicians do not even know how to use hydrogen peroxide for example!
We have had to import ex-patriots to sort these problems out and do cross training in our factory. Finding them is not a problem, moving them to Pakistan is a problem, they don’t stay long– anyway, one of the ex-pats, a Spanish gentleman, conducted a study in our factory for me, only 48% of the garments being produced were first time right. 52% is a high rejection rate, considering Angora is an approved source for many first tier customers. Our dye-houses are one of the most expensive facilities in terms of costs in the world. We have the state of art computerized machinery but what can technology do if you don’t have qualified technicians to run your machines? We need to set up schools urgently; investment must be done in this area. There is an urgent need to develop our human resources.
Even though, our woven industry is growing right now, after 9/11 incident, the knitwear industry is steadily going downhill. We can not rule out the same possibility for our woven industry. Garment technologists and industrial scientists are needed urgently by the knitwear and woven apparel industry. We must strengthen our manufacturing and design capabilities. Our sewing technology is twenty years behind Sri Lanka. On the design front, we are no where. Pakistan School of fashion Design (PSFD) is a good school but its output and contribution in the industry is comparatively very low, since its establishment in 1998, it is only producing 18 students per year,” he said.
“Industry is being driven by individuals. We need to make an effort at the macro level,” he said. “One of the pioneering knitwear plants in Lahore closed down last week. Other factories will soon follow in its wake if steps are not taken to correct these issues by the government policy makers. By the end of the year, one third of the people will be unemployed in the textile sector of Knitwear alone because of large scale factory shut downs. Currently the apparel sector employs 300,000 people in US$ 1.5 billion industry,” he said.
Expanding on the poor country image, he read out an excerpt from the letter sent by MOD’SPE Paris to PSFD.
“Pakistan has the image of a somewhat unstable country suffering from internal tensions and confrontations, relayed by the Western media. This does not help the influx of buyers into the country and can hinder the purchase of “Made in Pakistan” clothing by Western consumers. This is notably not the case for India, a country perceived as peaceful and open, and which enjoys a good image with buyers & stylists all over the world. India is consequently considered as a country of inspiration, ideal for sourcing. To conclude, it appears that Pakistan is no longer well placed in terms of value for money. This is especially significant as its positioning is on the products where the price factor is all important in the purchasing decision: Basic Products, Sportswear and Cotton Jeanswear.”
“Pakistan ought to be the clothier of the world in the middle/upper segments of the global marketplace,” he said. “Pakistan’s biggest asset is its location at the meeting place of the Indian and middle-eastern cultures. In a world where authenticity is increasingly sought after, Pakistan should have a bright future if it can build on its identity and propose brand alternatives inspired by this identity,” he said.
“India has 100 percent industrial growth, textiles is one of their leading industries, precisely because India’s country image is better in comparison to Pakistan. Their tourist industry is thriving too. Our port behavior leaves much to be desired. Buyers don’t come to Pakistan. We have to meet our buyers in some neutral territory like Hong Kong or Singapore each time they visit this part of the world. Convincing them to come to Pakistan is non-starter. There is a travel advisory on Pakistan. If some buyer comes to Pakistan, they are harassed by the port officials. It’s a sad story,” he said relating couple of anecdotes on buyers’ recent visits to Pakistan.
“Customers require value for money; unfortunately, Pakistan is failing to provide a viable value proposition to its customers,” he said in conclusion.
First published in the print edition, The Knit-Xtyle Fashion Review, issue 13, 2006