The global textiles and apparel trade is witnessing a significant transformation, shifting emphatically towards man-made fibers (MMF), which now constitute approximately 63% of global textiles and apparel trade, earning them the title “fiber of the future”.
However, Pakistan’s textile sector stands at a crucial crossroads, predominantly tethered to cotton-based exports that account for almost 67% of its total textile and apparel exports while MMF based exports account for a mere 12%, thus sidelining itself from the burgeoning MMF market. This reliance on cotton not only highlights a missed opportunity in an evolving industry but also underscores the necessity for Pakistan to diversify and enhance its textile exports towards MMF to overcome economic challenges and enhance its competitiveness in the global textiles landscape.
Despite being among the top 25 textile and apparel exporters, Pakistan has one of the least diversified export baskets. To gauge the idea, around 1% of the product space accounts for around 65% of the exports consisting of denim and non-denim fabrics and apparel, knitwear, socks, home textiles and towels.
Moreover, Pakistan’s textile and apparel exports are highly concentrated in cotton-based products whose share in global trade has shrunk from 40% to 33% between 2007 to 2021while MMF-based textiles and apparels’ share grew from 30% to 35% during the same period. Since 2007, Bangladesh, India, China, and Vietnam have experienced an increase in the share of MMF-based exports, however, Pakistan has not seen an increase in their exports. Also, the share of cotton-based exports has declined for the other countries. For Pakistan, it effectively means that it’s competing for a larger piece of a shrinking pie.
There are two main factors behind the lack of growth in MMF-based exports. First, the industry lacks the production capacity necessary to manufacture MMF-based products. Second, and more importantly, investment in MMF-based manufacturing capacity has been disincentivized by economic distortions, especially in the realm of trade policy.
PSF is the basic raw material required for the MMF production, and purified terephthalic acid (PTA) is the main input for the manufacturing of PSF. As it stands, there is a 5% import duty on PTA and resultantly a cascading import duty of 7% on PSF with an additional anti-dumping duty of 12% on PSF.
The duties on imports were raised from 4% and 6% to 5% and 7%, respectively, in June 2016. However, Pakistan’s sole PTA manufacturing facility, using outdated technology is already........