The textile sector's vulnerabilities.

Textile exports have been a major source of foreign exchange for Pakistan. Resultantly, the textile sector has been a dominant player in influencing government policies towards granting concessions to the textile sector. Thus, with time, government policies became heavily skewed in favour of the textile sector, putting other industrial sectors at a disadvantage.

The textile sector started in the 60s with low value-added items, and with excellent quality indigenous cotton-main raw material in textile products, our textile sector dominated the Western markets.

However, due to short-sighted government policies and the rent-oriented textile sector, the profits were not ploughed back into upgrading machinery for better productivity. Similarly, efforts were not made to move into higher value-added markets, as learning is always a difficult process and requires investment of time and money. Further, no efforts were made to tap markets other than the USA and Europe. Thus, in sum, we were competing in the international markets on a cost competitiveness basis.

Fast-forward a few decades, competitors came from Vietnam, Sri Lanka and India, who also initially competed in these low-value-added markets on a cost competitiveness basis, and thus began the story of steady decline of our textile sector. With time, many of these countries managed to move to higher value-added markets, leaving space for Pakistan. But then came Bangladesh, and our textile sector again lost share in the international market. China at times imports low-cost yarn and textiles from us, which are further value-added for export to Western markets.

To overcome the sudden onslaught of competition, the textile sector resorted to short-term solutions such as tax exemptions, tax holidays from the government, and favourable concessions from export markets, without addressing its basic vulnerabilities. Unfortunately, successive governments toed the...