‘Increased competition with China’ hurts Pakistan’s textile sector: Economic Survey 2023-24 – Markets

Intensified competition with China and weakened external demand have hit Pakistan’s textile sector, which remained unfavorable in the past financial year, although it contracted less.

“The textile sector recorded a contraction of 8.3% during July-March 2024 compared to a contraction of 16% during the same period last year,” said the Economic Survey 2023-24 released on Tuesday.

According to the study, a significant decline was recorded in the case of cotton yarn – 12.2% and cotton cloth – 7.3%, which constitute over 80% of the textile sector.

“The main reason for the reduction in production was the decline in the unit value of exports in conditions of weak external demand for textiles combined with increased competition from China,” the study emphasized.

“Additionally, significant factors affecting textile production included increased electricity tariffs following the removal of energy subsidies for export-oriented sectors, high costs of imported raw materials, the withdrawal of the export finance program and high interest rates.” .

The textile sector remains Pakistan’s most important manufacturing sector. The sector produces almost a quarter of industrial value added and employs around 40% of the industrial workforce.

“Leaving aside seasonal and cyclical fluctuations, textile products maintain an average share in national exports of approximately 54.5%,” the study reads.

An economic study showed that the country’s clothing sector produces gray fabrics with relatively low added value, mostly of lower quality due to poor technology, shortage of high-quality yarns and lack of institutional financing.

Cotton cloth production declined by 5.54% during the fiscal to 5.9 billion square meters in FY23-24 compared to 6.2 billion square meters in the same period of the previous fiscal.

Meanwhile, exports only increased in quantity, while in value terms, cotton fabric in FY24 was only $1.42 billion compared to $1.53 billion in FY23, a decline of 7.5%.