Factors Affecting the Growth of Textile Sector

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The research reported in this thesis was on “ Factors impacting the growing of the Textile Sector ” . The intent of research was to analyze the micro-environmental factors impacting the growing of the fabric sector so that the consequence of the macro-environmental factors that plague the fabric sector can be countered. The secondary information was collected by audience of literature in the libraries and the cyberspace and besides from the stuff printed by different organisations of Pakistan. The findings suggested that among other variables that affect the Growth of Textile Sector such as figure of looms, Raw Cotton production and Raw Cotton ingestion, the variables Yarn Production and Number of Spindles have a important impact on the growing of the fabric sector.

Chapter 1

Introduction

This thesis identifies the micro environmental factors that have a major impact on the Growth of the Textile Industry. These factors include all those elements in the immediate country of operations of the industry that affect its public presentation such as production, ingestion and supply of natural stuffs. The fabric sector or fabric industry is defined as the industries involved in planing, fabrication, distribution and usage of vesture. The fabric sector is technically considered to be turning or booming ; if the fabric Millss are bring forthing fabric at an increasing rate or the part of the fabric sector to the GDP of the state is increasing ( i.e. production of cotton fabric is increasing in the sector ) . Hence, the relationship associating the growing of the fabric sector with the production degrees of the cotton fabric in the industry. The GDP of a state is defined as “ The Total Value of Goods and Services Produced in an Economy ” , so if the measure of cotton cloth production is increasing or diminishing in Pakistan that straight goes to demo that that the portion of economic part of the fabric sector to the GDP of Pakistan is turning or worsening severally. There are assortments of variables both macro-environmental and micro-environmental that affect the public presentation or growing of the fabric industry such as the political, societal, legal, economic and environmental issues. The fabric sector or any other sector for that affair can merely boom or turn if the policies of the authorities support the operations of the industry on both the micro-environmental degree and the macro-environmental degree. For case if the authorities policies sing the industry are damaging to the cause such as seting a quota to the sum of fabric that can be exported to other states or on a more cardinal degree of the supply concatenation, curtailing the type of cotton that can be used to bring forth fabric in the Millss or if the costs of financing the enlargement is higher such as the conditions prevalent in the economic system that would besides ensue in a negative impact on the growing of the fabric sector or if the rising prices rate is beyond the predicted degrees that would besides do the Pakistani fabric to lose its fight in the markets, both local and international. The macro-environmental factors impacting the fabric industry are enormously diverse such as the illiteracy rate that is prevailing in the state and the problem it causes in the signifier of opposition by persons working in the mills and Millss to follow newer methods of production and engineerings, to the investing insecurity that is present in footings of a worsening economic system partially through hapless authorities policies sing concerns and partially through the prevalent planetary recession that discourages the international investors to put in an economic system that is one of the biggest manufacturers of fabric merchandises, to the physical insecurity that is present due to the jurisprudence and order state of affairs.

This thesis nevertheless would be discoursing the micro-environment variables that affect the growing of the fabric sector. The Textile sector is a major subscriber to the economic system of Pakistan ; hence, it is critical to analyze the factors impacting the growing of this major industry because it reflects the province of the economic wellness and macroeconomic policies that govern the province.

The fabric sector growing is dependent on a figure of variables. The natural cotton production and its degree of ingestion affect the concluding merchandise in the signifier of fabric. The degree of ingestion if of import because it specifies the measure that stays in the economic system or in other words, is non exported to other states. The figure of looms and spindles is another major factor impacting the production of fabric because the larger the figure of looms and spindles bring forthing the fabric and narration severally the higher the green goods of the fabric sector is traveling to be because the narration production is finally in used in bring forthing fabric. All these factors affect the production of cotton fabric.

Chapter 2

LITERATURE REVIEW

The altering profile and map of the EU fabric and vesture industry, this article talks about the changing construction of the European Union fabric and vesture industry. Some of the chief grounds it mentions for the alteration include markets with frequently unstable and quickly altering demand, limited merchandise scope and capable to rapid obsolescence and limited range for economic systems of graduated table. EU still accounts for a big portion of universe exports and employment despite increasing competition worldwide. Some of the fabric and vesture houses were concentrating on merely the design and selling and sub-contracting or out sourcing fabrication, others focused on creativeness, design and the devising and selling through their ain webs.

Due to the absence of economic systems of scale houses tend to stay little, while little houses in bend have limited entree to finance. So all of this leads to why the fabric industry remains a peculiar little size in the EU, neglecting to increase beyond it. ( Dunford, 2002 ” The Changing Profile and Map of the EU Textile and Clothing Industry ” ) .

Skills and fight: Can Pakistan Break out of the low-level accomplishments trap? This paper argues that Pakistan needs to brood into the higher value added, skill intensive and technologically advanced sectors alternatively of the current low-level accomplishments trap. Currently Pakistan is merely concentrating on turning cotton and increasing it output but that is non plenty if Pakistan has to vie with a technologically advanced universe. The chief challenge to make that is to alter the head set and develop establishments which recognize the value of puting in people. ( Rashid Amjad, 2005 “ Skills and fight: Can Pakistan Break out of the low-level accomplishments trap? ” )

Demand for fabric and vesture exports of Pakistan, this article states that fabric and vesture remain an of import component in economic development of states and in Pakistan it is the largest industrial sector with regard to investing, employment and export. The paper high spots assorted understandings which enhanced the entree of fabric merchandises of state to assorted markets around the universe. It compares the public presentation of fabric industry of Pakistan with other developing states in footings of exports. The major purchaser of Pakistan fabric merchandises is U.S.A. Though the portion of Pakistan ‘s exports in universe market has increased to 1.1 % , other developing states had a significant addition of upto 5 % . The paper states the characteristics of Pakistan fabric industry that major ball of narration produced in state is exported in its natural signifier where it can be utilized for production of quality merchandises such as cloth. Despite holding the advantage of cotton and yarn production of superior quality the industry faces challenges in signifier of deficiency of investing, capacity and qualified work force. The paper builds a theoretical account on the fabric industry of Pakistan and provides with the policy recommendations in signifier of monolithic restructuring in this liberalized and competitory trade environment.

This article focuses on the fabric industry of Pakistan for it has played an of import function in the economic development of this state, therefore it needs to be built upon and undergo monolithic restructuring to go capital intensive like it has been in the West for a piece now. There is a demand to concentrate on the quality of finished merchandises alternatively of whirling activity. The finished merchandises include production of the all right quality fabric in fabric Millss. Reliance on low engineering power looms for the production of cloths should be reduced and the figure of bird less looms should be increased which have the capacity to bring forth wider breadth superior quality cloth for the international market.

The ground for concentrating on the quality of finished merchandises and the development of quality fabric which is at the terminal of the fabrication procedure is because apparels/garments provides the highest value added merchandise among the fabric points, hence maximal focal point should be towards the units bring forthing garments, nevertheless, the addition in cotton monetary values ensuing in proportionate addition in yarn monetary value coupled with the addition in the cost of other inputs such as fiscal alterations, electricity, labour, etc. has crippled the fiscal viability of the bird less weaving sector in Pakistan. To exchange to more capital intensive production in the fabric industry, Pakistan needs to add sufficient good developed substructure in footings of communicating, services, export processs, suitably trained work force, stuff inputs and conveyance installations. To increase the Pakistan ‘s portion in the planetary market would otherwise be hard.

The article gives the illustrations of Hong Kong, South Korea and Japan. Pakistan has about 15000 looms whereas states like South Korea and Japan has more than 50,000 looms. But there is more to them than merely Numberss. Developed states depend more than anything on the supply factors of international fight. E.g. merely low rewards can non vouch a cost advantage in fabric production but there are many other factors like low capital costs and low energy costs. ( Afia Malik, 2005 “ Demand For Textile And Clothing Exports of Pakistan ” ) .

Aftab A. Khan and Mehreen Khan in the article “ Pakistan Textile Industry Facing New Challenges ” highlight the importance of fabric industry of Pakistan as one of the most conducive industry to the state ‘s GDP. It identifies the major variables ensuing in the diminution of industry which includes planetary recession, internal security menaces, high cost of production, higher funding cost, depreciation of rupee, and rising prices rate. The paper provides with statistics on fabric industry of Pakistan and suggests that 60-70 % of machinery demands replacing in order for achieving better quality of production and cost efficiency. The ruin of industry contributed by the terrible energy crisis in state, along with the fiscal crunch and devaluation of rupee lead to higher costs of merchandises imported for production intents. This all lead to unemployment in state and diminution in textile exports. The paper provides with the hope that fabric industry can b revived and rebuilt if authorities supports the industry and certain steps are taken for its improvement. It includes subsidies, consciousness plans, energy options, preparations and geographic expedition of new possible markets. ( Aftab A. Khan, Mehreen Khan, 2010 “ Pakistan Textile Industry Facing New Challenges ” ) .

Industrial Organization and Technological Change: The Decline of the British Cotton Industry, this article by William Lazonick once more focuses on the fact that failure to accommodate to and vie with the alterations in the international competition. The British industrialists were divided amongst themselves and failed to place the construction and economic conditions of international competition. This survey of the British cotton industry suggests that a cardinal cause of Britain ‘s comparative diminution from the late 19th century was the inability of its capitalists, divided as they were by competition and markets, to accommodate Britain ‘s nineteenth-century economic construction to the conditions of twentieth-century international competition. The construction of industrial organisation which arose in the context of Britain ‘s undisputed domination of universe markets in the mid-nineteenth century left the subsequent coevalss of capitalists powerless, both separately and jointly, to supplant the market so as to develop the co-ordinated managerial constructions and present the high throughput production processes that qualify the modern capitalist endeavor.

The article “ Hike in POL monetary values to raise cost of production ” from the “ Pakistan Textile Journal ” , Feburary-2010 issue highlights the inauspicious impacts of addition in crude oil monetary values on the fabric industry of Pakistan. The article speaks on the jobs faced by the fabric industry of Pakistan throughout its being. It states that with an impaired perceptual experience of being a terrorist province, the export based economic system has suffered to a greater extent along with the planetary recession. Furthermore with less purchasers taking Pakistani fabric markets and economic convulsion has forced the fabric exports to travel down by 30 to 40 % in a clip span of 3 old ages in measure footings, along with an extra negative growing in all sub sectors of fabric industry. Rising rising prices, lower investing rate in fabric sector, lifting grade ups with higher cost of production and power outage with higher energy costs, all rendered to a greater trade shortage for state and less international demand in last few old ages. The exports in 2008-2009 slumped to $ 9.95 billion where the mark was of $ 12 billion. Lastly it states that along with all issues faced by fabric industry of Pakistan, power deficit and higher crude oil monetary values would farther increase jobs for the industry as it will do merchandises less competitory and increase the cost of production as monetary values of all trade goods will hit up.

hypertext transfer protocol: //www.ptj.com.pk/Web-2010/02-10/Islamabad-Outlook.htm

The article “ Pakistan faces a terrible fabric crisis ” is a statistical study from “ emerging textiles.com ” 6th December, 2006, ponders on the state of affairs faced by Pakistan fabric industry. It states that Pakistan fabric industry has experienced a dual figure growing which is now over and several factors have contributed in this diminution of fabric industry, though the authorities has provided with an initial research and development support to back up the industry but lifting energy and funding costs could non forestall the industry from a terrible crisis. It besides highlights the increasing competition faced by other fabric exporting states like India, Bangladesh, China and Vietnam with their low cost merchandises. Import duties on fabric merchandises and switching from the policy of using more narrations of state for value added merchandises to export of natural narration has once more intensified the crisis state of affairs for the industry. The article provides with complete statistics of Pakistan fabric exports from July2005 to June 2006.

hypertext transfer protocol: //www.emergingtextiles.com/ ? q=art & A ; s=060906Pmark & A ; r=free & A ; n=1

In another article of Report on Textile Industry of Pakistan it claims that the grounds for the diminution of fabric industry of Pakistan include rise in the rates of ( EFS ) export finance strategy from 8.5 % to 9.5 % which is a rise of a 100 footing points. The 2nd major ground it mentions is the rise in energy duties adding to the low handiness of the electricity. Adding to that was the fact that refineries could non supply furnace oil in the needed measure to the power coevals companies which led to the low on the job hours of the fabric Millss straight or indirectly. Another major blow came from the rise in narration monetary values, the natural stuff feeding the fabric Millss. The cotton monetary values addition from 2000 to 6600 per 40 kilograms due to the export of narration, the narration export will amount to 614 million kilogram ( which represents 14 % of fabric exports in 2010 versus 11 % in 2009 ) .

Some of the other factors act uponing the fabric industry include addition in minimal pay, Double cargo for Punjab & A ; Khyber Pakhtunkhwa fabric Millss, Lack of transit installations and Tariffs & A ; trade understandings. ( Yasin Ahmed, 2010 “ Textile Industry of Pakistan ” )

In another article “ Pakistan slowdown behind in Technical Fabrics ” it is argued that the proficient and economical impact of proficient fabrics in the industrially developed states and their future part to the development of economic sciences of freshly developing states, such as China, South East Asia, and North Africa etc. Pakistan still lags behind in proficient fabric merchandises as neither the authorities nor the fabric industry has made any serious attempts towards synchronising fabric merchandises with the emerging demands of the universe market by developing higher value-added merchandises. Although the fabric sector is the anchor of Pakistan ‘s economic system, the Government every bit good as the fabric industry has kept their focal point on conventional fabrics, disregarding proficient fabrics and knowledge-based merchandises. ( Noor Ahmed Memon, Noor Zaman, 2007 “ Pakistan slowdown behind in Technical Textiles ” ) .

In this last article of “ Development of Textile Industrial Clusters in Pakistan ” it mentions the grounds for diminution of the cotton industry as out-of-date engineering, hapless machinery, deficiency of skilled labour and trust on the traditional Ustaad-Shagird manner of preparation and due to which there is a high defect rate. ( Muhammad Shahzad Iqbal et al. , 2010 “ Development of Textile Industrial Clusters in Pakistan ” )

Chapter 3

Methodology

Research Type

The research is quantitative in nature. Basically it takes into consideration the information which is numerical in nature and the relationship strictly depends on the information figures of the variables such as Number of Looms, Number of Spindles, Yarn Production, Raw Cotton ingestion and Raw Cotton production.

Data Type & A ; Research Period

This research is entirely dependent on secondary informations analysis. Multiple Regressions would be run on the information of Number of Looms, Number of Spindles, Yarn Production, Raw Cotton ingestion and Raw Cotton production.

Beginnings of Datas

Datas on Number of Looms, Number of Spindles, Yarn Production, Raw Cotton ingestion and Raw Cotton production will be collected from World Development Indicators, Economic Survey of Pakistan and APTMA.

Dependent Variable:

Factors impacting the growing of the Textile Sector

Independent Variables:

Number of Looms

Number of Spindles

Narration Production

Raw Cotton ingestion

Natural Cotton production

OPERATIONAL DEFINTIONS

Fabric Sector

The fabric sector or fabric industry is defined as the industries involved in planing, fabrication, distribution and usage of vesture. Although there is no 1 known manner of mensurating this growing. Sometimes the measure of export of fabric is taken to be a step of the growing of the fabric sector but technically that there is no 1 manner because there is a immense sum of informal sector that goes unrecorded in the fabric sector. The fabric sector in this thesis is considered to be turning or booming ; if the fabric Millss are bring forthing fabric at an increasing rate or the part of the fabric sector to the GDP of the state is increasing ( i.e. production of cotton fabric is increasing in the sector ) .

Narration Production

Narration production fundamentally refers to the measure of yarn that is being made utilizing the cotton that is grown and harvested. It is the entire measure of the Yarn that is being produced in an economic system. It is a direct step of the Thread that is being made from the cotton that is collected and farther down this procedure of the supply concatenation the fabric is being produced from this really Yarn. Yarn Production is measured in ( 000 Kgs ) . Generally it should hold a positive impact because this independent variable is straight related to the dependant variable.

Cotton Production

Similarly the cotton production is merely the sum of cotton that is being produced in an economic system. This should besides hold a direct consequence on the growing of the fabric sector since both are positively related as the cotton production would travel up so would the growing of fabric sector.

Cotton Consumption

This variable fundamentally measures the measure of cotton that is being produced and consumed in the local economic system. Since Pakistan is a cotton bring forthing state, this variable step the measure of cotton that is being consumed and processed by local ginneries and Millss alternatively of being exported as Raw Cotton to other states. Technically this should hold a positive consequence on the growing of fabric sector as cotton ingestion in the local economic system goes up so would the growing of fabric sector.

Number of Spindles

This variable fundamentally refers to the measure of Yarn bring forthing spindles that are runing in the economic system. This should besides hold a positive relationship between the growing of fabric sector because as the figure of yarn bring forthing spindles goes up so does the ability of the Millss to bring forth fabric and hence the growing of the fabric sector.

Number of Looms

This is similar in nature to figure of Spindles ; the lone difference is that it measures the measure of fabric bring forthing Looms that are being used in an economic system. If the Number of Looms would increase so would the cloth production and the growing of fabric sector

Hypothesis

Narration Production

H0: There is a important relationship between Yarn Production and the growing of fabric sector

H1: There is an undistinguished relationship between Yarn Production and the growing of fabric sector.

Cotton Production

H0: There is a important relationship between Cotton Production and the growing of fabric sector.

H1: There is an undistinguished relationship between Cotton Production and the growing of fabric sector.

Cotton Consumption

H0: There is a important relationship between Cotton Consumption and the growing of fabric sector.

H1: There is an undistinguished relationship between Cotton Consumption and the growing of fabric sector.

Number of Looms

H0: There is a important relationship between Number of Looms and the growing of fabric sector.

H1: There is an undistinguished relationship between Number of Looms and the growing of fabric sector.

Number of Spindles

H0: There is a important relationship between Number of Spindles and the growing of fabric sector.

H1: There is an undistinguished relationship between Number of Spindles and the growing of fabric sector.

Technique

Simple statistical technique of Multiple Regression will be used for the analysis of this secondary information. Multiple arrested developments will explicate the consequence of independent variables on growing of fabric sector.

DATA ANALYSIS

For analysing the information statgraphics will be used. Alongside explicating the relationships between variables and the sum of fluctuation that each variable is doing, it will besides supply the graphical analysis in graphical signifiers.

DATA INTERPRETATION

Statistical package such as Statgraphics which will be used in this thesis to construe informations. The P-values indicate the cogency of the theoretical account and of each independent variable and the R-squared will explicate the grade of fluctuation caused in the growing of the fabric sector through the variables Number of Looms, Number of Spindles, Yarn Production, Raw Cotton ingestion and Raw Cotton production.

Chapter 4

RESULTS AND ANALYSIS

The dependant variable is growing of fabric industry and the independent variables that are micro-environmental include Yarn Production, Consumption of Raw Cotton, Cotton Production, the entire figure of spindles and the entire figure of looms in Pakistan. The Yarn production has been chosen as an independent variable because theoretically talking the production measure of narration is straight relative to the measure of fabric that is produced. After that the ingestion of Raw Cotton has been chosen as an independent variable because it is a important representation of the measure of cotton that stays in the economic system and is consumed by the population of Pakistan and non exported to other states. Although the ingestion of cotton specifies both the factory and non-mill use of cotton, the non-mill use of cotton is undistinguished because it largely represents the utilizations of cotton without any value add-on for case uses of natural cotton for domestic utilizations such as cotton balls used in hospitals for patients. So most of the cotton ingestion technically shows the sum of cotton that is processed in Millss to bring forth fabric or fabric. The Cotton Production once more is a critical independent variable because it is straight relative to the growing of the fabric sector. The cotton produced is foremost ginned to divide the fibre from the seed, the fibre goes on to be twined and twisted to bring forth narration and the narration is so used to bring forth cloth so higher the measure of cotton produced in an economic system, the more the fabric industry is apt to bring forth fabric. Multiple Regression analysis has been used as the statistical tool to develop and judge the grade of significance of the relationship between the dependant variable and five independent variables.

The Regression equation is:

Growth of Textile = -20.4196 + 0.00338711*Consumption of Raw Material

+ 0.00128728*Number of Looms + 0.00227119*Number of Spindles +

0.0191763*Raw Cotton Production + 0.00932286*Yarn Production

The dependant variable ( Y ) over here in the above mentioned equation is the “ Growth of Textile Industry ” which is being predicted or explained. The independent variable represented by ( X ) explains the Variance in Y. Every independent variable has its ain beta coefficient that explains the comparative importance. The beta coefficient explains the comparative alteration in the dependant variable if the independent variable is changed by 1 % . All variables show a positive relationship which is right because all other independent factors are positively related to the dependant variable that is Growth of Textile Industry. If we analyze the beta coefficients, a one per centum alteration in the Number of Looms would do a.0012 per centum growing in the fabric industry, if there is a one per centum addition in the Number of Spindles it will do a 0.022 per centum growing in the fabric industry. Equally if there is a one per centum addition in the narration production it would do a 0.009 per centum addition in the growing of the fabric industry. A one per centum addition in the ingestion of natural cotton would increase the growing of the fabric industry by 0.03 per centum, which is a important per centum. Last, the one per centum alteration in cotton production would do a 0.019 per centum addition in the growing of the fabric industry.

The R-Squared statistic indicates that the theoretical account as fitted explains 95.5788 per centum of the variableness in Growth of Textile. The adjusted R-squared statistic, which is more suited for comparing theoretical accounts with different Numberss of independent variables, is 91.1576 % . The P-value of the theoretical account is 0.0021. Since the P-value is less than 0.01, there is a statistically important relationship between the variables at the 99 per centum assurance degree. The single p-values of the independent variables will find the relationship between each independent variable and the dependant variable. If the value is above 0.1 so the relationship is undistinguished and the alternate hypothesis will be rejected. Harmonizing to the theoretical account, Number of Spindles and Yarn Production have p-values less than 0.1. The p-value of Number of Spindles is 0.0070 and the p -value of Yarn Production is 0.0022. Hence the void hypothesis ( H0 ) for these two variables are rejected and the alternate hypothesis ( H1 ) will be accepted. Harmonizing to the consequences, the p-value of Consumption of Raw Materials, Number of Looms and Raw Cotton Production is more than 0.1 so the void hypothesis for these variables is accepted and the alternate hypothesis will be rejected.