Weaknesses, Threats and Issues of Pakistan Textile Industry

Essay by theseawolfUniversity, Bachelor'sA, June 2008

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Weaknesses of the textile industry•The government is unwilling to provide further subsidies to the textile industry. The government is of the view that the textile industry has been 'pampered" enough and that they have provided the desired amount of incentives and concessions. They think that it is about time the industry resolve its own issues and bring about significant changes to ensure the sustenance and progress of the industry.

•High cost of production. The cost of doing business is the highest in the south Asian region which comprises of:Excise duty imposed on bank servicesExcise duty increased on insurance premiumsIncreased electricity and gas tariff ratesMinimum wages of workers have increased by 33%Rising of interest ratesPakistan fails to impress in the cost comparisons with the regional competitors. In Bangladesh a 42000 spindle mill has a total gas bill per month of Rs 20 lakhs while in Pakistan it is of Rs 60 lakhs.

The minimum wage in Bangladesh is Rs 800 compared to Rs. 4000 in Pakistan which has just been recently announced. Likewise, the normal wage that a garment worker demands is Rs. 1500 in Bangladesh compared to Rs. 7500 of Pakistan respectively.

The rising interest rates which have increased by about 150 % have proved very detrimental to the industry. It has discouraged the firms from taking loans from major financial institutions and gave birth to loan defaults which have become very prominent in the badly hit knitting sector.

Costs of inputParticularsChinaIndiaBangladeshPakistanPower rates per unit (in cents) cost per Kilogram0-3.04.7Gas Tariff per MMBTU in dollars0-1.834.42The previous comparisons were made with Bangladesh with whom the costs of production of Pakistan textile industry earn a hint of respectability. Compared to India and China, the gravity of the situation is realized. China is exempted from electricity and gas tariffs while these...