Every major textile economy serving global consumers is facing bottlenecks caused by increase in the cost of raw materials, infrastructural deficiencies, supply chain disruption and environmental challenges. Current global recession is not helping their cause.
India and China are the two countries that are self-sufficient in fibers (both cotton and manmade fibers). The textile players in these countries are under as much strain as the countries where there is shortage of raw materials. There is a yarn glut in global markets that has pulled down yarn prices below the production cost. The global recession has checked the usual flow of orders of value-added textiles in developed economies.
Europe and the United States are in recession. These two markets account for around 45 percent of the total apparel consumed worldwide. China, the largest textile player, depends on orders from Western economies. India, Bangladesh, Vietnam, Pakistan, and Cambodia export around 50 percent of their textiles and clothing to Europe and the United States. Besides decline in orders recession has another flip side and that is the danger importers of textiles in these regions going bankrupt. In that case the entire payment of the textile consignment would be struck-up. It has caused many exporters in Bangladesh and India irreparable damage.
Pakistani exporters are also vulnerable to bankruptcy risk of their buyers. Apparel exporters in Pakistan mostly are small self-made players.
They lack the capacity to absorb total loss of any consignment due to bankruptcy or default of their buyers.
The competition in apparel trade globally is so sharp that most of the SMEs involved in apparel exports operate on thin margins. This is particularly true for those that produce low value-added apparel. During recession there is comparatively high demand for low value garments, still the demand is much less than normal times. These garment producers must operate at high risk of their buyers going bankrupt.
Normally prices go down sharply during recessions but in case of textiles the rates of inputs like cotton have gone high and that of finished products gone down. All global apparel producers are facing the dilemma of buying raw materials at high prices and selling the finished goods at loss.
The global competition in apparel trade has intensified as supplies and capacities are higher than demand. Most governments try to protect their value-added apparel sectors through incentives, concessional loans, and subsidies. This is because bulk of the employment in textiles is created by apparel producers. Protecting the apparel sector also protects millions of jobs. The Textile apparel sector provides jobs to over 90 million workers worldwide. Majority of these workers are women. In Pakistan the subsidies in the textile sector are provided across the board.
Government must come up with special incentives for apparel exporters.
