All Pakistan Textile Mills Association (APTMA) is one of the largest trade association of Pakistan was founded in 1952 and since then has been the foremost association concerning the textile business in Pakistan.

The textile industry of Pakistan contributes 8.5% of the GDP and employs 38% of the workforce in the manufacturing sector. It is responsible for about 55% of total exports.

Exports statistics show our progress in the last 5 to 6 years and how we foresee huge challenges under the new rules of international trade.

Export of textile products has reached $ 10.62 billion in the year 2007-08 from $ 5.5 billion in the year 2003-04 i.e. an increase of $ 5.12 billion in value term or by 93% and it still have the potential to beat this rate of growth in future.

The question is what we need to do to maintain or improve the growth of this industry?

The way international trade is evolving is neither free nor fair. There is continued downward pressure of unit prices of textile goods, while the raw material prices and cost of doing business are increasing drastically.

Even though, Textile Industry of Pakistan is indeed passing through a very crucial juncture due to the prevailing socio-economic and political climate. In particular, the Textile sector is exposed to extreme competition after the phasing out of quota besides facing resistance from developed countries in the name of Social Compliance, Environmental & Effluent Treatment Plants, Anti-Dumping, Counter-Veiling and Safeguard Accusations. To increase competitiveness and quality of products, textile industry requires investment in technology for meeting the new challenges. Over the last few years the textile sector has invested about US$ 6.0 billion in modernization and higher value addition, but due to continuous rise in cost of doing business resulting from enhancement in the cotton prices, utilities, inflation and bank refinancing rate on exports, Pakistan is becoming uncompetitive and loosing share in the international market.

I strongly feel that the time now is to address questions like why our Industry is vulnerable to these cyclical downturns, why can't we sustain growth and economic performance on a sustainable basis. We need to chalk down a strategy to diagnose and solve issues with a long-term perspective to meet the challenging tasks of the textile sector.

When we talk about issues and evaluate them, we see that these are not new, they have been in existence since a very long time now and relates to fundamentals of the textile business. As the premier industry association of the country, APTMA is very well aware of its commitment to act as a partner in national development. We have helped to set up and support two institutions of technical excellence in textile engineering and design namely National Textile University & Textile Institute of Pakistan and also contribute towards agricultural research vis-à-vis cotton.

Furthermore, APTMA being the largest and well organized institution has the ultimate responsibility to help facilitate an environment and socio-economic climate necessary for the positive performance and viability of our member mills. The need of the hour for APTMA is to address these issues.

COTTON

Cotton is the largest exportable crop of Pakistan's economy as exports of cotton and cotton made products earn 55 percent of total annual export earnings. As such, promotion of cotton means promotion of exports while failure of cotton crop tantamount to heavy damage to Pakistan economy. It would be difficult for our textile industry to compete with textile giants like China, India, Bangladesh, Vietnam and Sri Lanka in export of textiles when we have to import a larger amount of cotton to meet shortfall of our cotton requirements.

Recommendations to Curb Import and Increase Dependency on Local Cotton
1. To adopt better-managed cotton by adapting latest technology in seed breeding to produce hybrid seeds particularly Bt seed varieties and immediate arrangements be made to replace the present poor quality deteriorated seed by new and promising varieties of seed. An arrangement needs to be finalized on a war footing basis to introduce culture of Bt Cotton Seed in Pakistan with the target to increase production of Cotton up to 20 million bales in next 3-5 years.
2. Join world cotton producers effort (spearheaded by ICA) to standardize Cotton Grading on the basis of Instrumentation.
3. To participate and actively promote Better Cotton Program Certification now demanded by top Apparel buyers.
4. Pursue production of organic, Long and Extra Long Cottons in Pakistan if possible.
5. Have all constrains and bottlenecks removed to make Wahga an efficient point for cotton imports from India.
6. Commission a study to ensure judicious use of Cotton Cess paid by APTMA members (in excess of Rs.300 Million annually) to Pakistan Cotton Committee.
7. Initiate a formal program for regular interaction with Growers and Ginners, particularly to improve the spin ability and quality of cotton.
8. Adoption of modern technology for harvesting of cotton crop to minimize losses.
9. All ginning units should be updated and modernized to improve quality and to standardize ginning system. Cotton Standardization should be introduced immediately at ginning stage to improve lint quality to international standards.

B. ENERGY

Pakistan is passing through the most difficult phase of its history due to the energy crisis that is a threat to its export-oriented textile units. During the last few years, the textile exporters have faced serious power crisis in the industrial areas, which caused million of rupees losses to every year especially from December to July as these months are considered the peak seasons of textile export. The Country's energy demand has grown at an annual consumption growth rate of 4.8% that is expected to grow at 8 to 10% per annum till 2010. Therefore, there is dire need to have a sustained growth in energy supply and infrastructure capacity of 7 - 8% per annum to support the steady growth in the Country's GDP.

Recommendations
1. To privatize Public Sector Power Units so that these entities could be managed efficiently.
2. The gas tariffs for textiles units should be freezed at the current level for atleast next 3-5 years.
3. The import of electricity is an option even for short/medium term, to meet the high growth rates of demand in the country.
4. The government should announce the financial packages for the textile industry so that the modern technology be imported to lessen the cost of production viz a viz power generation. Possibility of passing the low interest cost offered by various International Organizations to Government of Pakistan for power projects?
5. Thermal efficiency of WAPDA and other Public Sector Units be enhanced to atleast 60% to 70% so the ultimate savings can be passed on in the form of lower KWH price to the Industry.
6. Coal based power generation to be explored on a priority basis, utilizing the abundant availability of coal reserves.

C. MARKET ACCESS

Market access is critical for economic survival and growth, especially for nations that have small internal markets, limited domestic resources, and/or rely heavily on intl. trade for economic survival and growth.

Once in a lifetime history provides a window of opportunity, which if availed, can change the destiny of nations. The window, available today, is to capture the outposts which are being abandoned by the Western textiles and which our regional competitors have already marshaled their forces to capture. Once lodged, it will be almost impossible to overthrow them. We are positioned to capture them ourselves provided the required strategies and technical support is in place.

We should focus to retain our position as a leading textile producer and to get greater market share in the coming years. We have concerns over our ability to continue with the present rate of growth as long as the region does not provide an even playing field.

We are trying to seek advantages in the quality of our market and access to the leading consumers of textiles and apparel. In the post quota era, we must use the World Trade Organization regulations to our benefit and ensure that measures other countries are taking to boost their respective industries are WTO compliant. Pakistan operates under some of the lowest tariffs in the region but we must continue to develop bilateral trade agreements to give us preferential market access. 60% of the world trade is still conducted under bilateral arrangements.

Recommendations
1. Pursue the concept of Reconstruction Opportunity Zones (ROZs) with the United States.
2. Free Trade Agreement (FTA) with the European Union, USA and other Markets.
3. Anti Dumping Duty and other Countervailing Measures to be tackled with a long-term perspective.
4. New & Non-Traditional Markets to be tapped.
5. Establishment of Warehouses and Display Centres
6. Preferential Treatment to Regional Competitors
7. Trade Instead of Aid
8. Creation of the Post of Trade Negotiator.
9. GSP Plus issue to be pursued with the European Commission.

D. MERGER & ACQUISITION

International trade is getting increasingly competitive in phenomenon of globalization paradigm shift. For new demanding world, textile sector has stepped in when it has also reached at its maturity. Maturity promises optimum productivity but it also requires that the productive system must have been grown in full. Merger and acquisition is the indication of same economic reality that brings together scattered parts for collective survival and to exploit the opportunity with the greater strength.

APTMA as a figurehead of textile sector of Pakistan urgently need to build a strategy where we combine together smaller or weaker units lest they die their own.

Benefits / Challenges
1. Synergy: To avoid duplication and increase profit margin.
2. Increased Market Share: To absorb a major competitor and thus increase its power to set prices.
3. Cross Selling: A manufacturer can sell complementary products to the same customer.
4. Economies of Scale: Geographically contiguous industries can avail the benefits of economies.
5. Taxes: A profitable company can buy a loss maker to use it for reducing their tax liability.
6. Resource Transfer: Resources can create value through either overcoming information asymmetry or by combining scarce resources.
7. Diversification: This may hedge a company against a downturn and investment in other sectors.
8. Empire Building: Managers have larger companies to manage and hence more power.
9. Vertical Integration: The supplier may find more difficulty in supplying to competitors of its acquirer because the competition would not want to support the new conglomerate.

E. COST OF DOING BUSINESS

Cost of doing business specifically for textiles is subject to a very high operating and financial leverage. It accounts for 18 per cent of the total credit disbursed in the economy. During the last recent years, our Country's economic scenario has adversely affected the viability of the textile industry and retarded its growth and sustainability. The investment made during the past 5 - 7 years by all sub sectors in textiles ranging from spinning, weaving, finishing and fabrication is under serious threat.

It is to be noticed that there has been reduction of 12.86% in investment in Textile Machinery in terms of US Dollar this year as compared to the corresponding period last year. If inflation is also factored in, the drop in fresh investment in Machinery will be in the vicinity of 11% to 12%.

This has all resulted because of the slow down in further investment in the Textile Industry due to high cost of capital borrowing and increased pressure from regional competition.

The financial viability of the textile sector relies on the following factors:

1. Self-sufficiency in better-managed cotton crop.
2. Viable financial cost for working capital and long-term financing.
3. Availabity of hedging mechanism for commodities. (Cotton hedging).
4. Protection mechanism for Pakistani exporters against the new payment terms being dictated by Western Customers like D/A, DP and open terms.

F. HUMAN RESOURCE DEVELOPMENT

Development of Human Resource be considered as an asset for the organization because lesser number of skilled and trained employees are more beneficial for a company rather than number of un-skilled and illiterate workers. Following measures should be adopted to enhance the productivity of the company as well its employees:

1. Human Resource Development: Focus on education, training and skill development.
2. Respect for human Rights, gender balance, and eradication of child, bonded labour and promote dignity of labour.
3. Harmonized labour management relations.
4. Productivity and development based work culture.
5. Vocational training outside all industrial estates.

CONCLUSION

Textile trade in the world is estimated to be around US$ 300 billion currently. Industry experts predict that by 2014 when the facilities in the West will close down and they will source their textiles from more efficient areas of the world resulting in the trade volume of around US$ 800 billion. Pakistan's share of the current trade volume is around 3.5%. If we are to maintain our current share of this larger pie, our textile exports alone are potentially targeted to reach US$ 28 billion.

We are willing to be the best in the region and anxious to have the highest rate of growth in the region but for that we have to ensure ways to keep our competitive edge as compared to key regional players.

With a growing exportable surplus, our existing road and rail infrastructure will soon be inadequate to transport our exportable surplus from upcountry industry clusters. We also need to streamline passage to our ports. We look to the democratic government of Pakistan in ensuring that our trade corridor is developed as soon as possible and as efficiently as possible.

I would like to assure you that we at APTMA are committed to the growth and strengthening of Pakistan. APTMA stands for employment, exports and value addition. We are proud of our contribution to the Pakistani economy and will continue to play a part in the achievement of Pakistan's goal and ideals.