The textile and clothing sector is under stress the world over as the major consuming countries are grappling with high inflation. The Pakistani textile sector is facing the additional pressures of political instability and higher input costs.
It has now been established that the majority of consumers the world over have been forced to reduce buying new clothing to spare their resources for other pressing needs. The vulnerability of different textile exporting countries to global recession varies depending upon various factors. It includes the availability of a complete value supply chain in the country. China is almost self-reliant in this regard. India produces over 80 percent of its supply chain input internally. Bangladesh and Vietnam produce at least accessories like buttons, monograms, or zips in their country. Their reliance on inputs from outside is 60-70 percent. Pakistan is almost fully reliant on supply chain inputs from China. This worked smoothly for years but the frequent lockdowns in China have disrupted the regular supplies of inputs that have added more pressure on our textile sector.
The countries that depend more on their textiles and exporting exports include Bangladesh which exports 80 percent of the textiles they produce. Pakistan exports almost 70 percent of its textile production. These two countries and to some extent Cambodia are highly dependent on exports for the survival of their textile sector. India and China have a robust textile sector that is more dependent on domestic consumption than exports. India for instance exports 25 percent of the textile products it produces while 75 percent are consumed domestically. China disposes of 65 percent of its textile products in its own domestic markets. In case of a high global recession and a sharp decline in exports the textile industries of Bangladesh and Pakistan crumble as their domestic markets are very small. The Chinese and Indian textile industries also suffer but their inhalation is checked by its large domestic markets.
Textile production is mainly confined to Asia. European, the United States, Australia, Canada, and New Zealand are mainly consumers. Their textile production is limited to high-end products. The increase in energy costs has badly impacted whatever production was left behind in these countries. But it is the high inflation in these regions that have reduced the uptake of clothing and textiles in these countries. This is impacting all textile and clothing exporters concentrated in Asia.
In India, the exports are declining for the last five months. In November the decline was over 15 percent over the exports executed during the same month last year (nearly the same as ours). According to the Indian Ministry of Commerce and Industry, the fall in textiles and clothing exports from India started in July this year when exports declined by 17.4 percent, in August the fall reached19.5 percent, then to 28.5 percent in September, 35.4 percent in October and 15.6 percent in November. In comparison, Pakistan’s textile exports posted a decline of 5.1 percent during the same 5 months. Going forward Indians are expected to recover in 2023 but Pakistani textile exports will remain under stress. Bangladesh is a rare example that has weathered the current turmoil in the textile sector more prudently. Its exports are still on a growth trajectory though at a slower pace. Still, there are reports of retrenchments in garment factories whose orders dried from overseas buyers.
Vietnam with textiles and garments exports of $2.8 billion in the month of November 2022 posted a decline of 8 percent compared with exports achieved during the same month in 2021. The decline in exports started in September when textiles and clothing exports registered a decline of by31.9 percent in September according to figures released by Vietnamese Customs. There is panic among Indonesian clothing workers as the layoffs are increasing every day. More than 64000 workers have been shown the door in the past two months. Chairman of the West Java Province Textile Product Entrepreneurs Association (PPTPJB) Yan Mei in a virtual press conference revealed that, there have been reports from 14 regencies and cities in West Java regarding termination of employment or layoffs from a number of textile companies.
The fate of all textile exporting countries depends upon the share these economies can grab in the developed. The State of Fashion 2023 a research report by Mckinsey & Company states it anticipates that the luxury sector will outperform the rest of the industry, as wealthy shoppers continue to travel and spend, and thus remain more insulated from the effects of hyperinflation. Based on McKinsey’s analysis of fashion forecasts, the luxury sector is expected to grow between 5 and 10 percent in 2023, driven by strong momentum in China (projected to grow between 9 and 14 percent) and in the United States (projected to grow between 5 and 10 percent). Europe, on the other hand, is under high pressure from currency rates and a growing energy crisis, which are likely to result in modest sales growth for the luxury sector (projected to grow between 3 and 8 percent).
The report titled ‘Holding onto growth as global clouds gather’, further predicts that, excluding the Fashion sector excluding the luxury sector, will struggle to deliver significant growth in 2023. China and the United States are expected to fare better, growing between 2 and 7 percent and between 1 and 6 percent, respectively. These forecasts are reflective of inflation and are calculated in local currencies, meaning that the real impact for the sector could be more negative than these figures suggest.
There are few textile economies that produce and export high-end fashion garments. Vietnam, Bangladesh and China, and to some extent India among the Asian economies make high-end garments. They might balance the decline in low-cost garments exports with costly high-end fashion garments. But for Pakistan which is mainly into low-cost garment exports, it will be difficult to stop the value decline in textile exports. The basic textile sector is more vulnerable due to high energy costs the orders from overseas would continue to decline more.
