Textiles, particularly readymade garments, are a significant and growing component of Pakistan’s Economy. This blog, outlines challenges and promising policy ideas facing Pakistan’s textiles and garments sector. Improving policy and industry incentives for the Garments sector has the potential to act as an engine of growth through both jobs and improved trade balances. Exports of readymade garments have increased nearly four times in value from 1990 to 2013, from $1 billion (USD) in 1990 to $ 3.9 billion in 2013.

The growth of readymade garment manufacturing represents a progression towards higher value additions in global textiles chains. Take for example, the value of 50,000 kilograms of cotton fiber. As an input to spinning, weaving, and finishing, the fiber could create up to 400 jobs. Using the same fiber in garment manufacturing, on the other hand, could create 4 times as many jobs. The differential impact of financial investments is even greater. $1Million USD invested in spinning and weaving produces $0.27Million worth of exports. The same investment in garments could produce $3.2Million. In sum, garments have tremendous potential for creating jobs and generating exports for Pakistan.

With rising labor and other production costs in China, Pakistan has an opportunity to meet global demand and compete internationally. In line with this, the European Union (EU) recently granted GSP-plus status to Pakistan, allowing duty free access to Pakistani goods. The EU is now the largest importer of Pakistani textiles and garments and accounted for 28% of Pakistan’s total exports in 2012. For the sector to capitalize on this potential, policies incentivizing the garment industry need to be realigned. Pakistan largely failed to benefit from the opening up of the global textile trade in 2005, due to the prevailing industry structure and policies that hindered and reduced export competitiveness. To date, low or intermediate value-added products make up approximately 69% of Pakistan’s total textile exports, relative to the global average of 32% in 2012. Textile exports have also suffered from Pakistan’s poor security situation. Large Pakistani garment manufacturers face stricter scrutiny by international buyers, and must meet higher standards of compliance to retain or attract large buyers.