Last Updated 28 Jan 2021

The Global Impact on Textile Sector

Category Asia, Pakistan, Tax
Essay type Research
Words 1986 (7 pages)
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The textile sector is the most lucrative sector for most countries as most Least Developing Countries depend on this sector for their revenues. Countries such as Mexico, Vietnam, Bangladesh, Pakistan and Philippines which are agro based economies, rely on their textile exports to sustain them. Though in recent years a change has been noted in the imports and exports of the textile products being produced the relative demands have been pretty much constant. Demand for the output from the sector

In the past the major countries exporting textiles where mainly concentrated in the Asian continent. Countries such as Pakistan, India and China were the key players who would supply to the demands of the major part of the world (All Pakistan Textiles Mill Association). The demand for this sector was calculated to be 21,926,000 metric tons as of 1993 globally. The ratio being that 979,500 metric tons being consumed by the Asians, 651,600 metric tons by Europe and 525,100 by the Americas (All Pakistan Textile Mills Association).

The major consumer for this industry was the asian continent due to the high population in countries such as China, India, Bangladesh and Pakistan existing there and providing a strong local demand for the product (D. Anderson, 2000) . In recent years there hasn’t been much change in the demand for the output as Asia still has the largest population of the world. Most of the textile industry also still exists in their countries because of the availability of raw materials from neighboring countries and the availability of cheap unskilled labor which is the major determinant of setting prices of output.

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The governments are also supportive of this industry as it provides a strong financial base to their country and often devaluate their currencies or provide subsidies to aid in decreasing the cost of production, hence providing output at a lesser price. In the future however, it is believed that with the implementation of WTO, China would dominate the market not only as the largest exporter but probably as the largest importer as well. The reason being that it is in proximity to the best available cotton in the market (India grows high count yield cotton which is one the best in the world). Also, overall the demand for textiles is increasing.

So it can be observed that in the future the developing countries will shift to high end products with better value addition and improved use of technology to satisfy local and demands from developed countries whereas the products having low end (low value addition) will be diverted towards the low income countries such as African countries (Invest in China, 2002). Supplies Issue The supply issues can be classified into 1) Physical; 2) Human and 3) Financial. Physical Issues The issues in textile industry relating to physical nature can mainly be the lack of availability of high yield cotton and lack of high quality raw materials.

The number of countries which product cotton is mainly low income-middle income based economies with farmers living on a subsistence wage. They cannot afford to use the latest technologies or invest heavily in their farms. Thus, the output that they produce is mostly of substandard quality. There is also a lack in Research & Development in most countries. The related ministry or government body does not invest heavily in the R&D to create higher yield seeds and improvements in fertilizers or processes. Therefore, most of the cotton grown is not suitable for the demands placed by most countries.

Even though Germany has the best production of textile machineries most textile mills cannot afford them and move towards lower quality Chinese machinery which does not provide the same quality. Human Issues Most of the labor force employed in this sector is unskilled in countries such as Pakistan and India. These workers do not have technical knowledge and thus cannot work on product improvement or development. Countries which have educated their workforce have seen a tremendous improvement in their overall output, such as Korea.

These educated farmers and also manufacturers recognize the need for product development and implement the most efficient processes and use the best quality raw materials to reach higher paying markets such as the United States and European countries. It is not a problem of shortage in labor which is inflicting the industry but more towards the lack of educational facilities and research institutes. There are few proper colleges for education related to the industry. And most of the people living in lower income countries cannot afford such institutions.

Urbanization is one problem of a lesser degree observed with the human capital. Farmers get a very low percentage of the profits of the sales as the middle-man (a person who would act as an agent between farmers and the mills) would take the kings share. In hopes of better livelihoods the farmers move to the urban cities and there is a shortage of the production in that region (Mukhtar, 2008). The governments of these countries play an integral role as well. They work with the management bodies which monitor the industry and they also act as the representatives of the branches of the textile industry.

Inefficient management bodies, lack of concern from the government, and inept channels of communication between these two bodies is a major concern. Financial Issues This sector faces fewer financial issues since most of the products can be accommodated in any market of the world. So even if products are cheap to produce they have their demand in some specific countries. To reach higher demand markets countries often devalue their currencies to make their price appealing to clients. This is not always the best measure as it compromises the quality of the products as well. Legal Issues

The trade between countries causes many legal issues to arise. Different types of taxes (custom tax, excise duty, and various other local taxes) cause monetary losses for the exporters but also lead to loss in timely deliveries (Lakhani, 2003). The government inefficiency is overlapping in this point as most of the taxes are levied by the government and they are the ones deciding on trade agreements and making trade between countries easier and more efficient. Structure of the Industry The industry can be divided into different groups based on the development stage of the cotton.

Thus, the industry can be broken down into import/export of Cotton, import/export of yarn and import/export of cloth. Cotton is the raw material used for the production of textiles. When it is processed to make threads it is called yarn. Finally the yarn is spun into cloth. At each stage large volumes of output is observed which is either exported to other countries for value addition or imported to help sustain their local industry. The cotton industry consumes 19. 6 million tons as of 2001. It is required that the growth would be of 1. 6% from 2000 to 2010 to accommodate the growth in population.

Asia is the biggest consumer of cotton with China having the highest consumption while India is in the second place with Pakistan being third. Cotton is produced in the United States and Brazil in the Americas. Whereas in Asia India and Pakistan are the highest producers. These are the major players in the cotton industry. Yarn is mostly produced in China, India and Pakistan in the Asian countries. Other major producers are Egypt, Mexico and Brazil. Germany, Italy and Portugal are also producers but they do not hold the sheer volume as that of the previous mentioned countries.

Finally, the cloth sector can be analyzed by taking a look at the major exporting and importing countries. As far as the exporting countries are related the United States, Belgium, France, Germany, Italy, India and Pakistan are the main exporters. However, an interesting fact to be observed as that as the production process heads towards value addition the volume decreases just as quickly. The major importers of cloth are the United States, Belgium, France, Germany, Italy, the United Kingdom, China and Japan.

These countries use the cloth to fuel their garment industries (All Pakistan Textile Mills Association, 2000). Competition in the Industry The competition in the industry on national scale depends on two factors. First, the Quality of the product, and secondly the Price of it. To help give their country’s textile industry an edge the governments often help in the cost cutting measures and helping in the improvement of the quality but providing subsidies of import on textile machinery and high quality seeds and raw materials.

Since currently there is a quota system established countries aren’t fiercely competitive but in the light of the WTO it is feared that many countries would not be able to hold onto their market share due to the absence of quality control standards and fixed high prices. Even on the lower levels, with competition existing between specific companies in the local industry of a nation there is little to no competition taking place as everyone has his own specific market share and they do not have any threat of their competitor stealing away their business.

Return on Investment in Textile Sector Getting specific values for returns on investment is very difficult in this sector as individual corporations have different ROIs whereas there is a noticeable difference in the various countries ROIs as well. This is mainly due to the lack of standardization as countries such as Pakistan occasionally devalue their currency to retain their market share which leads to an increase in the return on investment in that country whereas other countries do not indulge in that act.

However, a general trend of decreasing return on investments can be observed globally due to the current economic crisis which has led to a decrease in the imports by the biggest buyers, such as the United States and European countries. it is getting increasingly more difficult to unload goods in the market due to the restraints placed by the economies in their dire economic states.

But before the whole mortgage crisis began and its effects were still non-existent the return on investments in textile industry were very high as labor in most producing countries was cheap (due to abundance of unskilled labor willing to work at subsistence wages) and generally low manufacturing costs (government aided subsidies to help promote and sustain the sector). Conclusion The textile sector is a very lucrative sector with possibility of high returns, and global demand. Clothing apparels and other cotton and artificial fibers have high demand and will always be so as clothes and garments are necessities.

They can also be viewed as luxury products at times so hence can be priced in a premium manner and bring high profits to manufacturers. A global demand exists which allows neighboring countries to do business with each other and create an existent market at all times no matter what the economic conditions. It is also the largest industry in the world thanks to its agricultural base. It is also the highest employment industry in the world and can help countries with their unemployment problems. Overall the global environment aids the growth and the prosper of the textile industry over all other industries. References

All Pakistan Textile Mills Association. (n. d. ). Global Imports of Cloth. Retrieved November 11, 2008, from PakSearch. com: http://www. paksearch. com/Government/STATISTICS/aptma00/5-12. html All Pakistan Textile Mills Association. (2000). Textile Industry Statistics. Economic Survey of Pakistan . All Pakistan Textiles Mill Association. (n. d. ). Global Export of Cloth. Retrieved November 11, 2008, from PakSearch. com: http://www. paksearch. com/Government/STATISTICS/aptma00/5-11. html D. Anderson, C. (2000). Globalization and Textiles. In The Social Consequences of Economic Restructuring in the Textile Industry (pp.

37-40). Taylor & Francis. Invest in China. (2002, November 17). 2002 Global Textile Industry Survey. Retrieved November 11, 2008, from Economy: http://www. fdi. gov. cn/pub/FDI_EN/Economy/Sectors/Manufacturing/Textiles/t20060422_25158. htm Lakhani, A. W. (2003). Problems of textile industry. Economic Review . Mukhtar, A. (2008, April 17). Insight into the Problems Facing Pakistan’s Textile Industry. Retrieved November 12, 2008, from CHUP! - Changing Up Pakistan: http://changinguppakistan. wordpress. com/2008/04/17/contribution-insight-into-the-problems-facing-pakistans-textile-industry-by-abida-mukhtar/

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