Pakistan: Basic textile is at a crossroad as there is no chance of revival of over 100 closed mills, while the surviving mills know upgrading technology is the only option. Pakistan is likely to add half a million new spindles this year.Some of the closed mills have sold their entire spinning machinery and are pleased that the leftover high-priced land and buildings, after clearing their liabilities, would leave them with enough capital to start some other business. They told this scribe that operating mills with old technology was not feasible.
They admitted that they had the opportunity to upgrade technology in phases but they squandered this chance and do not have the resources to replace the obsolete machines. The bigger players after realising that they are being booted out of the global and domestic markets have made elaborate plans to replace older machines with state of art technology. They realise that time is running out and they cannot wait for government facilitation that has not come in last two years.
It has been learnt that all major mills have placed orders for around 500,000 state-of-art spindles that are faster, consume much less power and 1/3 workforce. They know that with this technology they can regain their lost markets.
The comparative advantage that Pakistan enjoyed a decade back would again be available as Pakistan enjoys advantage of own cotton and highly skilled workforce in basic textiles. These players were shocked to find that a novice country like Vietnam that imports cotton and lacks skilled basic textile workers has emerged as yarn exporter on the strength of new technology. They feared that soon other countries with similar drawback would become yarn exporters by edging out Pakistani yarn.
They also realised that these countries would be no match for Pakistani spinners if they operated with the same technology. Another factor that worried the big players was that if the technology void was not filled, the Chinese would come in a big way with latest technology and wipe out the local basic textile industry.
These players did not take seriously the oft repeated apprehensions of some experts that the Chinese would establish basic textile units at the huge industrial complex adjacent to Pakistani border with China. They reasoned that it makes no business sense to make such huge investment to establish lowest value-added textile factories.
Moreover, they pointed out that the basic textile viability declines when the per capita income of a country crosses $4,000. Currently, they added the per capita income in China was above $10,000. Chinese even with subsidies would not be able to compete with Pakistani spinners operating with same technology.
This thinking is shared across the basic textile industry, but the surviving smaller players that even have resources, are waiting for the government to come up with some investment incentives. They also want export rebate for a while till the technology is replaced.
They do realise that they cannot bank on government subsidy for a longer period. They also admit that even after government subsidies they would be able to put a stop on the slide in basic textile exports, but substantial increase in exports may not be possible.
They understand that the government would be forced to withdraw the export package if exports failed to pick up. Majority of the mills are operating with average 30,000 spindles. The sale value of these machines is junk. They will have to upgrade or close down.