Impact of energy crises on textile industry latest updated
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“Independent Study”
Impact of Energy Crises on Textile Industries of Pakistan:
A case study of Energy crises in Pakistan
By:
Mr. Mohammad Waqar Razzaq
Mr. S.M. Raza Ali Rizvi
Ms. Sidra Fareed
Supervised By:
Mr. Shoaib Ahmed
Date of Submission:
8th April, 2014
Institute of Business and Technology (IBT)
P.E.C.H.S, Shahrah-e-Faisal, Karachi
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LETTER OF ACKNOWLEDGEMENT
All praise goes to Almighty Allah, the most beneficent and the most merciful, gave us strength to
compile a Report on “Impact of Energy crises on Textile Industries of Pakistan”.
First, we are very thankful to our respected supervisor, Mr. Shoaib Ahmed. He was very much helpful
and co-operative in the whole research making process, without his support we could not compile this
report completely. He helped us by providing proper guidance to us related to the topic. When we were
working on research, his professionalism and support towards us was really appreciable. He provided
us all required information during this research.
We will highly appreciate for his suggestions for improvement in this Research; we also appreciate our
instructor’s recommendations and comments on its contents. After finalization of research, we also
welcome those recommendations comes from our companions and well-wishers as we strongly believe
that nothing is perfect in this world being human, we all are error prone, many factors may left in our
research but there is always a room for improvement or change in it.
Furthermore, we would like to thanks IBT for providing us an opportunity to work on such research in
a group form, where we utilized our interpersonal skills and learnt necessary theories related to our
topic as well as our personal vision and knowledge improved very much after the research.
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LETTER OF TRANSMITTAL
08th April, 2014
Ms. Sumiyya Lakhani
Coordinator MBA Program,
IBT, EDC Campus,
Karachi.
Acting in accordance with the revised directions, this research conducted on the topic named “Impact
of Energy crises on Textile Industries of Pakistan” submitted here.
The purpose of our research is to identify that how textile business affected due to the continuous energy
crises directly hit the whole textile industry sector of Pakistan.
In this report we tried to cover up most important factors caused by energy crises and our main research
theme based on these prolonged crises with effect on our Gross Domestic Product (GDP),
Unemployment and Exports, where orders cancelled on daily basis due to the consignments could not
ready on time because of no power generation, related to this many other problems currently faced by
this industry listing high power tariff duties, high generator and fuel expenses due to operations running
through generators, poor law and order situation causing no foreign investment as well as foreigners
visitors With these major problems; extortions and strong mafias in big cities causing liquidation or
transfer of textile business, etc.
Though we have tried our best to make this report according to the true facts and figures that we collect
from many different sources as much as possible, but still being humans we are error prone, so we
expect you to forgive us for the mistakes we did in it. We hope you will appreciate our efforts.
Sincerely,
____________ _____________ ____________
S.M. Raza Ali Waqar Razzaq Sidra Fareed
BME-1582 BME-1630 BEM-1175
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Impact of Energy Crises on Textile Industries of Pakistan:
A case study of Energy crises in Pakistan
Table of Content
Topic
S.no
1. Introduction
1.1 Background Study
1.2 Significance of Study
1.3 Problem Statement
1.4 Objective of Study
1.5 Scope of the study
1.6 Limitations
2. ResearchMethodology and Procedures
2.1 Research Design
2.2 Research Methodology
2.3 Samples and Sampling Technique
2.4 Research Instrument
2.5 Treatment of Data
2.6 Presentation Analysis
3. Literature Review
3.1 At a Glance in Energy Sector
3.2 Unemployment measures
3.3 The Economic Value of GDP
3.4 Exports and Market Growth
3.5 Conceptual Framework
3.6 Hypothesis
4. Data Analysis and Presentations
5. Findings and interpretations
6. Conclusions and Recommendations
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7. Area of further study
Anti-Plagiarism DeclarationForm
Declaration:
We certify that this is our own research work. The work has not, in whole or in part, been presented
elsewhere for assessment. Where material has been used from other sources, it has been properly
acknowledged. If this statement is untrue and if I am found guilty of the plagiarism, the punitive actions
against me are taken as per the IBT Anti Plagiarism Policy.
S. M. Raza Ali Rizvi Sidra Fareed
Registration No: BME-1514 Registration No: BEM-1175
Program: MBA Finance Program: MBA Marketing
_________ _________
Signature Signature
Waqar Razzaq
Registration No: BME-1630
Program: MBA Finance
_________
Signature
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1. INTRODUCTION AND BACKGROUND
1.1 Background of the study:
Energy policy is formulated by federal and provincial government in Pakistan, where they
address the issues related to power generation, distribution and consumption of energy by
developing strategies to formulate policies. After the separation from India, a large infrastructure
of electricity was input by the Pakistani Military in 1960 by funds provided by international
monetary sources and various other sources. Most of energy produced by thermal projects at the
time of separation and after that for a long time country’s major dependency was on thermal
power and then lately Hydel power added in the power system. It further expanded through
Pakistan’s first nuclear power plant established in Karachi during 1970’s.
In the era of Government ruling by Pakistan People’s Party (PPP), Prime Minister Mohtarma
Benazir Bhutto launched country’s first and largest energy conservation program for 13,000
Megawatt of electricity production by issuance of 70 Memorandum of understandings (MOU’s)
and letter of Intent to Independent Power Producers (IPP’s). This energy policy puts a diverse
effect on our energy sector as rental power projects put an ultimate negative effect on country’s
power generation process as well as heavy burden on our economy due to the involvement of
complete corruption factors in it.
As we all know, that Pakistan’s Textile industry depends on a non-stop energy supply. As an
agricultural economy, its main crop is cotton where Textile Centre is in Punjab where all major
activities of the industry carries out there continuously, non-stop working all the day and night.
This textile business includes; cotton spinning, hosiery, sizing, dyeing, yarn, fiber and all other
linked industries that are getting effect mainly by power shutoffs, economical breakthroughs,
major change in foreign policies, change in cultural values, security conditions as well as a large
impact by public prosperity and wealth. We focused that how our textile sector goes toward
shutdown or negative market as well as decline in the business and we evaluate that sufficient
power not supplied properly to the Punjab region as well as other areas. When industry face
power shortage, it could not get purchase orders from foreign markets cause customer reduction,
foreign exchange deduction, increase in inflation, GDP decreased and unemployment ratio move
to all-time higher level. In November 2013, Textile exports are about 58 percent of our total
exports among which we figured a sum of 13 Billion dollar. The entire situation discussed above
shows that textile sector with 63 percent of Pakistan’s exports shifting to other countries due to
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tough business conditions created in Pakistan because of poor governance and lack of planning
and research in the energy sector. (Farhan Aziz). It would definitely impact on our GDP,
currency, exports economy as you can say the whole nation gets affected. The textile industry
exports contribute about Nine percent of the Gross Domestic Product (GDP) Mr. Sartaj Aziz
(Economist).
Unemployment:
Unemployment generates when people found jobless in a society or in a particular region, but
actively seeking for employment. Energy crises move a huge labour force towards
unemployment in our country. Textile mills are employing more than 20 percent of the nation’s
workforce and 46 percent of the total labour force of the manufacturing sector where Faisalabad
generates the most tax revenue after Karachi that is the main center of Textiles in Pakistan. The
labour working in textile units, started their day from long and continuous operations, work
together on each workplace, lunch together, form a mutual environment of a cooperative
community of all labour class where they share their issues and hang around with each other till
the late evening and that is the routine of Pakistani labour class practiced from the years. Now
Pakistan stuck between its energy crises and unemployment problem based on these temporary
based crises. Country’s worst energy crises effect brutally on its workforce employed mostly in
textile mills. A process of firing employees from many business sectors continuously effects on
social and economic values of the workforce due to power crises most of the time for the
industries in Punjab Province then mill owners have no option to fire the employees and shut
their business unit off.
Exports:
Pakistan’s Textile industry total export is around 10.2 billion US dollars comprising of 52
percent of total exports, it also represents the principal employment-generating revenue in the
organized and large scale industrial segment. Pakistan has lost the major part of exports due to
electricity shortage and law and order situations. Pakistan has lost the major part of exports due
to electricity shortage and law and order situations. Textile exports in 1999 were $5.2 billion
and rose to become $10.5 billion by 2007. Textile exports managed to increase at a very decent
growth of 16% in 2006. In the period July 2007 – June 2008, textile exports were US$10.62
billion. Textile exports share in total export of Pakistan has declined from 67% in 1997 to 55%
in 2008. It is apparent from the fact that the textile exports contributed 50% of the country’s
total exports in 2012.
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Gross Domestic Product (GDP):
GDP is the total of market value of all finished goods and services in a country for a given
period, equal to total consumer, investment and government spending, plus the value of exports
minus the value of import. Pakistan's industrial sector accounts for about 24% of the total GDP.
Textile and apparel production manufacturing are Pakistan's largest industries, accounting for
about 66% of the merchandise exports.
1.2 Significance of the Study:
This research identifies the factors effect on textile industry decline in Pakistan that includes
decline in Exports as well as GDP and higher unemployment ratio in the country. This research
also analyzes the importance, productivity and performance of Textile Industry where we
analyze the difference examine by comparison of data, facts and analysis.
1.3 Problem Statement:
This research analyzes the important problems of textile industry in Pakistan and the factors
which impact badly on its performance that are caused to Unemployment, GDP growth and
exports of textile industry of Pakistan. It causes reduction in productivity of industry as we did
not seen any regular growth in our textile due to the crises faced by the industry that is against
the trends followed by the textile with concern to GDP growth, unemployment and exports. We
also identify the factors for betterment of these conditions as in future; these crises would cause
huge problems for the country.
1.4 Objective of the Study:
The main objectives of our research are:
Macro Objectives
The textile industry of Pakistan plays an important role in earning foreign exchange, providing
employment to the country. Textile sector is back bone of Pakistani economy in our report we
will emphasize that how energy crises impacts textile industry of Pakistan, its intensity as well
as conditions before and after the severity of conditions gone worse which directly hit to
country’s overall economic conditions because of the variables identify in hypothesis.
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To identify the determinants of shifting of textile industry and impact to, economic contribution,
national income, economic stability, improvement in balance of payment, employment
opportunities, diversification of Economy.
Micro Objectives:
Below are the micro objectives of this study.
To determine how energy crisis contribute in decreasing the export of Pakistan in terms of
textile.
To determine how energy crisis contribute in increasing the unemployment in Pakistan
To determine how energy crisis contribute in decreasing the GDP of Pakistan in terms of textile.
1.5 Scope of the Study:
Scope of this study restricted to impact of energy crises in Pakistan’s Textile Sector. The factors
which are directly affected by current energy crises are our Export that goes on declining, Gross
Domestic Product and Unemployment that goes to the higher level. All the aforementioned
factors are the main problems caused by worst energy crises for the nation. Many projects started
by the former and present Governments of Pakistan but the target is to cover the crises within
two to three years as Pakistan continuously facing huge loss from economic aspect.
1.6 Limitations
The following limitations are to be considered during research:
Data confidentiality policy in textile industries would be a limitation in many cases while
collecting data in different cities.
As we have some concerns on broadness of research area and time constraint, we take the small
sample size.
Interviews, practical experiences and meeting with company staff at different locations are not
possible due to financial limitations so we just focus on some areas within the country such as
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Karachi, Hyderabad and Nuriabad in Sindh and personally visited Faisalabad, Lahore and
Multan Industrial sites.
The collection of data is limited due to broadness of research so we restricted it from 2009 to
the year 2013.
2. RESEARCH METHODOLOGY AND PROCEDURES
2.1 Research Design:
The research is intended to analyze the Textile Sector’s potential of productivity and investment,
more specifically the capacity to generate revenues for the Government of Pakistan in the form
of Taxes. The study highlights the economic effects of the textile industry in the country as a
whole. Our research design consists of both quantitative and qualitative analysis and therefore
data has been collected through both secondary and primary sources.
The study is mainly based on literature review which include references from various books,
researches and articles relevant to the subject have been perused and companies selected for
conducting interviews with their management and survey through questioners and personal
visits with addition of help from research journals, news articles etc., after all thorough thesis is
presented here afterward careful analysis thorough statistical tools to determine the relationship
of factors which impact on performance and productivity of the textile industry of Pakistan.
2.2 Research Methodology:
Our research is very conclusive based on Quantitative and qualitative both analyses identify
cause and relationship between energy crises and our textile industry of the country. Due to these
energy based crises; our export, GDP and unemployment level gradually increases. Our research
variables in this research (export, GDP and unemployment level) are validating through
literature review. Three hypotheses are derived by Export, GDP and Unemployment situation in
Pakistan which are described in conceptual framework.
2.3 Samples and Sampling Technique
We will take the sample of our research study belongs to textile companies of Karachi. In
Karachi we will focus on fifteen textile companies named as Gul Ahmed, Nishat Mills, Artistic
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Denim Mills, Ahmed Oriental, Tata, Island, Salfi, Naveena Industries, Nina Industries, QST,
Naveena Exports, Interloop, Feroz and Soorty Textile Mills. Sampling technique of our research
is based on convenience sampling for questionnaire filling. Questionnaire will be filled by the
following designations of the sample companies.
- Directors
- Senior Managers
- Managers
- Assistant Managers
2.4 Research Instrument
The data for the research will be collected through the primary and secondary both sources.
For Primary Data Collection:
- Questionnaire crafted on Likert scale
- Feedback of Textile Industry Managers mentioned, APTMA (All Pakistan Textile Mills
Association), the Small and Medium Enterprises Development Authority – SMEDA,
Pakistan Credit Rating Agency (PCRA).
For Secondary Data Collection:
- Research Journals and past research papers
- Newspaper articles by renowned journalists and economists.
- Internet
- Reports provided by Government and Private Firms.
2.5 Treatment of Data
Raw data is collected through primary and secondary sources, the data then measured on
quantitative as well as qualitative basis. For measuring the quantitative data we use statistical
tools. For determining the impact of research variables, fifteen textile companies from different
areas of Karachi were selected for analysis. Four hypotheses were statistically tested with the
performance of textile industry in Pakistan. Our research focused on how each variable
contribute to the performance of textile industry.
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2.6 Presentation Analysis:
The presentation analysis of the textile sector is mainly focus on energy crises and here we try
to minimize or cover the existing and growing energy crises in the country. If we control the
current Energy crises, our risk in the textile business would cover, business activities then show
a positive graph, industry would at boost and the issues related to exports, economy impact will
resolve. Secondly, we try to improve our textile growth so that we buildup employment and
exports in textile sector.
3. Literature Review:
3.1 Energy Sector at a Glance
In 1994, Pakistan has 11,000 Megawatts total capacity of energy installed in its power system,
but due to lack of research and development in this sector, we faced massive energy crises from
the year 2006 when our domestic users are increased about 40 percent same as our government
and private owned power producers where usage of crude oil extend the maintenance cost as
well as production cost of power. Our 60 percent of power generated by hydroelectric power
plants, and 40 percent generated by thermal and nuclear power plants but this condition was
reversed during 2007 reported by economist Sartaj Aziz. Controversially our dependency on
imported crude oil for power generation increased due to low water flow in rivers in winter
season too as we are also facing water crises and this condition going worst every year.
Floodwater falls directly in the sea without any water saving measures that should be needed
every year to overcome these crises, this continuous fault in our energy system is a result of
worst crises held with us.
A part from these crises, another debating issue arises for a repetitive cycle of load shedding of
gas and electricity in every street and corner of the country, conditions getting better after the
new government quick response to build Neelum-Jehlum power project, Pak-Iran gas pipeline,
but still the issue remains as seen during the winter in 2013, when whole Cng sector closed in
Punjab region. For home use public faced gas shortage. It is due to the reason that our past
government did not take measures for these crises since a long time. Many seminars, sittings,
All parties conferences, meetings, energy policies were discussed to implement for yearly,
quarterly and on monthly basis, but due to no measures taken between 1994 to 2004 and the
resultant crises of this gap we are facing today and we will face these crises several years more
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for a prosperous life without crises. We noticed that water and power crises must be cover by
current and future project inaugurated and planned, were being operational from 2016 to 2018,
working in process to complete them on desired timeframe.
In Pakistan, energy policies regulates by water and power ministry, Alternative Energy
Development Board (AEDB), National Electric and Power Regulatory Authority (NEPRA) with
cooperation of other local government institutions as well. These institutions are also responsible
for issue licenses for generation, transmission and distribution of electric power; establish and
enforce quality as well as safety standards for operation and ultimate supply of electric power to
consumers, approve investment and power acquisition programs of the utility companies and
determine tariffs for generation, transmission and distribution of electric power. Current
government announced an aggressive energy policy for the country after the election in 2013.
Emergency measures must to be following eminently by the new government policies
announced in its various agendas and meetings during energy conference. (1. NEPRA).
Other neighboring countries also taken interest previously with government initiating projects
but due to heavy cost and USA opposition and influence in our policies, China and Iran that
offered severally by taking interest in our energy development stopped many times. According
to the Petroleum Minister, Shahid Khakaan Abbasi’s last visit to Tehran and issued an official
statement where he expressed that Iran is willing to contribute in our part of Gas pipe line for
the Pak-Iran Gas Pipeline Project and for this cause Iran will invest $500 million. Government
also set more negotiable price for the project with an Iranian firm named Tadbir Energy. Its main
goal is to provide energy services to local and international customers. China is also contributing
its part of helping Pakistan in its worst crises by offering a loan of $500 million for our energy
sector on low interest. As it is a 4 billion dollar project divided by 2 billion costs for each side
where Iran managed to arrange its own territorial cost of 2 billion only and our $1 billion
arranged by the government, for the rest of the amount Pakistan is seeking for other sources or
aid by other countries. (2. Dawn, Tribune)
As far as the feasibility concerns, many confliction investigated through examine the analysis
on government and Iranian authorities’ statements. Sustainable Development Policy Institute
(SDPI) Chief Engineer and Energy Advisor, Mr. Arshad H. Abbasi told that Pakistan needs to
re-negotiate the prices of Gas as Japan currently purchasing gas from Turkmenistan on 2 times
low rate which Iran offering us a higher one. (3. Arshad H. Abbasi)
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A report by Petroleum Ministry highlighted the importance of gas project that if we replace oil
based power generation with gas, it results an annual saving of $2.4 billion. The incremental
impact of this project would be just 20 percent on overall gas basket price if 750 million cubic
feet per day of gas imported. So the government measures the every possible task to overcome
these projects of gas for Pakistan’s energy needs.
3.2 Unemployment
Pakistan ranked 142 in the countries listed with unemployment to the year 2012 data based on a
survey conduct by CIA World Factbook showing a percentage of 5.6% unemployed labour in
the country. It’s not a huge figure to be worried about but the problem arises when we see that
graph of employment decrease as well as unemployment decrease and showing a difference of
double in the figure cause by industrial crises creating a block for a whole sector. The industrial
capital of Pakistan, Faisalabad faced massive energy crises from the year 2009. Our Textile
industry has been gripped in an unspecified power and gas load shedding since 2009 and
according to the analysts, there are more than 600 industries units affected by these crises and
the industry moved towards large scale unemployment of nation’s workforce where 4 million
people were directly or indirectly attached to the textile manufacturing. Exporters, industrialists,
labour right campaigners and workers protested several times with a strong united stance to urge
the government to provide nonstop power plan for industries as the power cutoff schedules
extend to 2 to 5 days in a week forced closure of industry units, rendering thousands of workers
unemployed (4. Farrukh Shehzad).
For analyzing the deep effect on a common man, we experienced that workers lose their daily
wages move towards the protest route and when government restores gas supply, it becomes
useless due to low gas pressure for the industrial as well as domestic user than another lot of
protesters were here in the streets for their cause. In broader aspect, Pakistan Textile industries
form the Sindh and Punjab region faced 2 billion cubic feet per day (bcfd). While, Pakistan
losing 300 to 500 million cubic feet per day from its line loss that shows a figure of 20 billion
of annual losses to gas companies directly. (5. Rashid Lone).
Similarly the electricity shortage also exceeds to 6,000 Megawatt both of these crises causing
industrial crises leading towards thousands of labour and their families deprived for their basic
needs. It is experienced countrywide that thousands of power looms, textile factories either
shutdown or shifted to other countries like China, Srilanka, India and Bangladesh and the result
is a block between textile production and labour as daily wage or salary based workers gone
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jobless. This unemployment move our labour class to act as criminals in the society to fulfill
their basic needs even the qualified, diploma and degree holder experiencing an worthless life
by living hand to mouth while some are involved in small business with least income or their
last chance is to leave the country for any job at any other country in the world. Almost each
and every manufacturing activity had been frozen because of mismanagement by earlier
government and its policies that were unfavorable for country’s overall growth in textile and
energy sector. Lately, labour unions also express their concerns over these prevailing situations
as they highlighting the same situation of cultural instability and poverty over the country. These
energy crises turn into textile industry crises directly effecting 350,000 labours across Punjab
(6. Faizan Usmani).
Unemployment rate in the country was dropped to 6.3% of the work force between January to
March, 2013 as compared to October to December, 2012 quarterly rate of 6.5% of workforce
unemployed during the country’s worst energy crises. This deduction in unemployment was due
to new government schemes in services sectors as well as a hiring season in many private sectors
as well as industries. This was a survey conducted by Pakistan Bureau of Statistics (PBS) named
as Labour Force Survey on 8th April, 2013 (12. PBS).
It is also part of the figures that around 400,000 people are unemployed during the year 2011-
2012 because of these prevailing energy crises, due to less energy production in energy sector
and no major recent installment measured in country’s existing power generation. Thar Coal,
Neelum-Jehlum power projects are upcoming projects of the government but at this time we did
not noticed any major improvement in the sector it means we could not face any desirable change
in unemployment ratio (13. Dr. Samar Mubarak).
Besides theses energy crises, the economic and financial crises create more unemployment by
the time passage starting from the year 2009. Unemployment is higher in Pakistan due to higher
growth rate; workplace and jobs opportunities in our all business sectors are limited and growth
less. Economic conditions for involvement of change in monthly basis as our monetary policy
change every month by State Bank of Pakistan subject to change in discount rates, interest and
markup rates. Investors hesitate to invest huge amount as well as a normal businessman also
calculate every possible measure before investment in Pakistan. Due to poverty, people are
overburdened from expenses with low savings. Another unemployment factor involved our
country’s political instability, poor law and order situation, army’s interference caused to a block
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in our economic growth as well as enrichment of unemployment in the country (14. Mohammad
Annus).
Indeed, the unemployment is our central problem where many other socio-economic distress,
uncertainty in the market among different business factors that are responsible and relating to it
directly and directly by employment issues. It is due to no planning nor do the industrialists or
the government have any plan for compensation of workers job loss while disturbed law and
order situation from several years also triggered the unemployment in the country. We believe
that strategically Pakistan has the potential to respond to the perils faced by the employment
needs revenue to be spent on improvement of infrastructure (15. Amanullah Bashar).
3.3 The Economic Value of GDP
The main parameters of economic growth are the Gross Domestic Product (GDP) and Gross
National Income (GNI). The GDP refers to the value of total actual output produced in the whole
economy over a period, usually within a year. The calculation of the GDP is done by either
adding up total spending (GDP spending based) or adding up total income (GDP income based).
The textile industry exports contribute about Nine percent of the total 3.59 percent of Gross
Domestic Product (GDP) till the end of 2013 and employs 46 percent of the total labor force of
the manufacturing sector. Textile exports are about 58 percent of the total exports from Pakistan.
Pakistan lies among one of the largest textile producer and exporters in the world, shipping
1.3 trillion rupees ($13.8 billion) worth of textile products in the year ended June 30, mostly to
the U.S. and Europe. Textiles account for 63 percent of Pakistan’s exports and textile mills
employ 46 percent of the nation’s workforce. Faisalabad generates the most tax revenue after
Karachi due to textile production activities, accounts half of all textiles shipped from Pakistan.
(8. Aftab A. Khan, Mehreen, Pakistan Bureau of Statistics).
However, currently this industry is facing great decline in its growth rate, Pakistan’s $13.8
billion textile industry is struggling to survive a critical shortage of energy to run its plants, now
these textile producers using generators support for their continuous running process to
overcome their losses by paying high cost which is then add up in the price resulting Pakistan’s
higher cost products in international markets with the existence of a low cost textile products of
India, China, Japan, Bangladesh and other large textile exporters.
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Bangladesh has been offering a lot of incentives, including uninterrupted power supply (at
cheaper rates than in Pakistan), tax-free status for the first 10 years and tariff-free access to
markets in the European Union. These incentives took an offer to convince many Pakistani
businessmen to invest heavily in Bangladesh but now these manufacturers and exporters are
facing critical law and order situation by government because of country discrimination and
relationship from Pakistan. Owner of Tauseef Enterprises, Mr. Salamat Ali for instance, has
already invested Rs. 300 million in setting up a textile factory in Bangladesh. Others like K&M
Textile Mills were considering doing so. Tata Textiles, Naveena Industries already started their
operations from Bangladesh. Every shifting businessman says. “The cost of doing business in
Pakistan is very high, and the textile business is towards decline here but Bangladesh having a
higher risk of life to them, security threat is another factor they are currently facing.” (8. Khan,
Aftab A., Khan Mehreen),
(11. Pakistan Rating Credit Agency).
Pakistan’s economy can be characterized as semi-industrialized. The country’s industrial sector
constitutes 25.1 percent of the country’s gross domestic product (GDP). According to the Labour
Force Survey 2010 to 2011, Pakistan has a labor force of 57.2 million people. As Pakistan is one
of the major producers of cotton, the country has a sound textile industry. It is apparent from the
fact that the textile exports contributed 50 percent of the country’s total exports in financial year,
2012. Apart from being the mainstay of Pakistan’s exports, the sector also represents the
principal employment-generating avenue in the organized and large scale industrial segment (8).
Moreover, during 2010, Pakistan’s textile and clothing exports contributed 2.4 percent of the
world trade (7. ESP).
18. pg. 18
In spite of the rates of utilities in Pakistan being higher than competing countries, their tariffs
are increased on regular basis making the industry un-competitive. The cost of production has
also risen due to instant increase in electricity tariff. As a consequence of load-shedding the
textile production capacity of various sub-sectors has been reduced by up to 30 percent which,
along with other consequences, has also reduced the export order. Due to load shedding some
mill owner uses alternative source of energy like generator which increase their cost of
production further. Due to such dramatic situation the capability of competitiveness of this
industry in international market affected badly (9).
A spokesman for the All Pakistan Textile Mills Association (APTMA) claimed that 60 to 70
percent of the industry had been affected and was unable to accept export orders coming in from
around the globe, as a result of gas load shedding (11).
Another jerk has been given to the industry in the form of a “Two-day weekend” for the
conservation of energy. Either adequate energy resources are unavailable to the industry or the
prices of fuel are out of range of the industry. The textile industry being an energy intensive
sector is vulnerable to a higher rate of energy losses across various production processes
resulting in higher energy bills, and productivity losses- all of which have significant financial
impact (7).
3.4 Exports and Market Growth
The textile sector enjoys a pivotal position in the exports of Pakistan. In Asia, Pakistan is the 8th
largest exporter of textile products. The contribution of this industry to the total GDP is 8.5
percent. It provides employment to about 15 million people, 30 percent of the country work
force of about 49 million. The annual volume of total world textile trade is $18 trillion which is
growing at 2.5 percent. Out of it, Pakistan’s share is less than one percent. The development of
the Manufacturing Sector has been given the highest priority since Pakistan’s founding with
major stress on Agro-Based Industries. For Pakistan which was one of the leading producers of
cotton in the world, the development of a Textile Industry making full use of its abundant
19. pg. 19
resources of cotton has been a priority area towards industrialization. At present, there are 1,221
ginning units, 442 spinning units, 124 large spinning units and 425 small units which produce
textile products (12).
Our industry consists of large-scale organized sector and a highly fragmented cottage / small-
scale sector. The various sectors that are a part of the textile value chain are: Spinning, cotton,
yarn, weaving, denim jeans and finished garments, most of the spinning industry operates in an
organized manner with in-house weaving, dyeing and finishing facilities. Weaving comprises of
small and medium sized entities. The processing sector, comprising dyeing, printing and
finishing sub-sectors, only a part of this sector is operating in an organized state, able to process
large quantities while the rest of the units operate as small and medium sized units. The printing
segment dominates the overall processing industry followed by textile dyeing and fabric
bleaching. The garments manufacturing segment generates the highest employment within the
textile value chain. Over 75% of the units comprise small sized units. The knitwear industry
mostly consists of factories operating as integrated units (knitting + processing+ making up
facilities). The clothing sectors both woven and knits are mainly clustering in Karachi, Lahore
and Faisalabad where sufficient female workers are available.
Now here I must mention the statistics that shows the all-time negative growth during the whole
period of crises. According to Pakistan Bureau of Statistics, textile industry shows a 5.6 percent
of negative growth. In the Yarn export section, we get 51.24 percent of negative growth that is
also a highest in the history. Energy crises are the root cause for all these situation but if we
study in depth we get to know that research and development program is also on hold by our
government, imposition of VAT (Value Added Tax) also put a negative impact on the sector.
High rate on loans providing by banks for machinery import also another attempt to ruin the
exports of the country’s textile.
Pakistan is the world’s 4th largest producer and 3rd largest consumer of cotton. The Textile and
Clothing Industry has been the main driver of the economy for the last 50 years in terms of
foreign currency earnings and jobs creation. The Textile and Clothing Industry will continue to
be an important engine for future growth of the economy; there is no alternative industry or
service sector that has the potential to benefit the economy with foreign currency earnings and
new job creation, especially if synergy is developed amongst different sub sectors and efforts
are made to aggressively grow the Ready-made Clothing Sector. Pakistan’s Textile Industry had
20. pg. 20
proved its strength in global market during the last four decades. It has proved its strength even
in post quota era by not only sustaining its position but, also showing growth during 2005 to
2007, but declined to $11.1 billion in 2008 due to economic meltdown globally and internal
power issues. The Garment Sector and especially the Knit Garment Sector need special focus in
future (7. ESP). From following data we can easily find out total Pakistan Export in Textile
Sector:
EXPORT OF TEXTILE AND CLOTHING (US $ MILLIONS)
Internally the increase in cost of utilities, (Power, Gas, Transport, and Petrol) has impacted
viability. The power & gas outages have further deteriorated capacity utilization.
The lower availability of electricity was also a key constraint for the value-added textile sector.
According to State Bank’s quarterly report, unfortunately, due to circular debt local refineries
could not provide required Furnace Oil quantity to power generation companies. As a result,
import burden has increased significantly for Furnace Oil provision. The growth seen in July
to December financial year, 2010 period will be challenging to sustain in the remaining months
of financial year, 2010 given the inadequate energy balances in the country. For instance, the
increase of 0.5 percent in gas exploration during July to November financial year, 2010 period
21. pg. 21
does not seem sufficient to fuel a quick recovery. It must be noticed here that gas constitutes
more than 50 percent of total energy consumption by industries. Similarly, scanty power
investments in recent years allowed only a small increase in electricity generation capacity;
which too often remains under-utilized due to water shortages or insufficient provision of gas
and/or furnace oil. For instance, as winter rains remained low in financial year 2010, the Hydel
generation capability declined sharply in January, 2010. Similarly, gas sales to power sector
also declined during financial year, 2010. Consequently, the use of furnace oil (FO) for thermal
generation increased. The gas load shedding to textile industries for 1 day in a week decreases
the production of textile finished products due to dyeing process.
The textile industry of Pakistan plays an important role in earning foreign exchange, providing
employment to the country. But due to electricity problems, Pakistan textile loses share in
world trade of textile products. Pakistan textile products will have a big potential to capture big
share of world trade but there are lots of reasons which forces to step back from using the full
capacity of textile machinery to earn more and more foreign exchange for the country. In
upcoming year, Pakistan textile exports are 10-11 billion US dollars approximately.
Government of Pakistan is not serious in resolving problems like shortage of electricity and
gas which forces the textile exporters not to take orders because not fulfill the orders on time.
With these reasons import of Textile machinery declined year on year basis. With all these
reasons, many of textile industries owners use old machinery which is less efficient and not up
to the mark with the competing countries. If, Government of Pakistan does not take immediate
steps to counter all these problems then Pakistan trade deficit will raise more as compared to
financial year, 09-2010 due to this Pakistan rupee will depreciate more (11. SMEDA).
With the advancement in the crop technology over the years, world’s cotton production has
also increased despite reduction in the cultivation area. In spite of decline in the cotton crop
during last few years, China continues to contribute highest proportion in the total world
production and consumption followed by India.
23. pg. 23
Pakistan’s textile industry is going through one of the toughest period in decades. Depreciation
of Pakistani Rupee has raised the cost of imported inputs. Pakistan textile exports have gone
down during last three years as exporters cannot effectively market their products since buyers
are not visiting Pakistan due to adverse travel advisory and it is getting more and more difficult
for the exporters to travel abroad. Although we are 4th largest producer and 3rd largest consumer
of cotton but unfortunately now we are at number 12 in the international trade of textile products
(7).
The workers working in Textile Industries are not satisfied with their working conditions, their
wages are not up to the mark. Even the environment provided in the industries is very injurious
to their health.
The textile industrialists were greatly concerned over the adverse publicity inflicted on the
country's image as a consequence of the events of 11th September, 2001 and the recent terrorist
attacks within the country. Undue war risk surcharge has been levied by all foreign shipping
lines on consignments from and to Pakistan and fewer airlines are touching Pakistan airports
due to which freight cost of exports has considerably increased. They urged the government to
formulate and earnestly implement business friendly and export facilitating policies.
Moreover, critics argue that the textile industry has obsolete equipment and machinery. The
inability to timely modernize the equipment and machinery has led to the decline of Pakistani
24. pg. 24
textile competitiveness. Due to obsolete technology the cost of production is higher in Pakistan
as compared to other countries like India, Bangladesh and China.
Textile crisis is becoming severe in the Country due to overall recession and slow down of
economies around the globe. Our Textile sector is heavily export oriented. International sales in
Textile Markets suffered a lot as a consequence of which manufacturers and traders who supply
goods & services to exporters have suffered heavy losses.
3.5 Conceptual Framework:
3.6 Hypothesis Testing:
H1: Energy crises impacts on increase in unemployment level by textile industry.
H2: Reduction in Exports creates a negative effect on textile sector performance.
H3: Reduction in Gross domestic product puts another negative effect on textile industry
performance.
4. Data Analysis and Presentation
Our research is a perception based study determine to perceived impact of high energy crises,
high unemployment, reduction in Exports as well as GDP on the textile sector of Pakistan. For
determining the impact of these variables, we select 60 textile companies from different area of
Sindh such as Karachi, Nooriabad, Hyderabad and Kotri were selected for analysis. Three
Exports
Unemployment
Gross Domestic
Product (GDP)
25. pg. 25
hypotheses were statistically tested with the performance of textile industry in Pakistan. Our
research focused on how each variable contribute to the performance of textile industry.
Below mentioned chart shows the descriptive analysis of primary data collected from 80 textile
industry.
Descriptive Summary Of Data
PARTICULARS ST.AGREE AGREE NUTRAL DISAGREE ST. DISAGREE TOTAL
Q1. ENERGY 1 69.3% 27.7% - 1.5% 1.5% 100.0%
Q2. ENERGY 2 52.3% 36.9% 6.2% 4.6% - 100.0%
Q3. EXPORTS 1 44.6% 49.2% 3.1% 3.1% - 100.0%
Q4. GDP 1 4.6% 35.4% 29.2% 24.6% 6.2% 100.0%
Q5. UNEMPLOYMENT1 18.5% 38.5% 26.1% 15.4% 1.5% 100.0%
Q6. ENERGY 3 12.3% 44.6% 26.2% 15.4% 1.5% 100.0%
Q7. ENERGY 4 63.1% 23.1% 4.6% 9.2% - 100.0%
Q8. ENERGY 5 38.5% 43.0% 6.2% 12.3% - 100.0%
Q9. ENERGY 6 46.2% 44.6% 7.7% 1.5% - 100.0%
Data analysis and Interpretation
Primary data are collected through questionnaire from 60 textile companies of different area of
Sindh like Karachi, Nooriabad, Hyderabad and Kotri. The respondents from which data was
collected are Directors, senior level managers, Managers of textile companies. There are total
80 respondents and their classification on the basis of designation and experience is shown
below through the bar chart.
26. pg. 26
Reliability Analysis
Cronbacch’s alpha shows the internal consistency (Reliability) or average correlation of items
in a survey. The value of alpha rages from 0 to 1, the higher the value, we found the more reliable
scale. Here the value of alpha for our 9 items is 0.633 suggesting that the questions have
relatively high internal consistency and the alpha of 0.60 or higher is considered as good or
acceptable.
Reliability Statistics
Cronbach's
Alpha
Cronbach's
Alpha Based on
Standardized
Items
N of Items
.633 .664 9
Testing of Hypotheses
As mentioned above, three hypotheses were drawn for analyzing the impact of energy crises on
the performance of textile industry. Performance of textile industry is in term of exports,
unemployment and GDP are variables which are impacting the performance. Each of above
variable was separately tested against the productivity for analyzing the impact and relationship
among them. SPSS is used for testing hypothesis and determining the statistical relationship.
27. pg. 27
H1: Energy crises impacts on increase in unemployment level by textile industry.
In this hypothesis a model is developed between textile industry performance and
Unemployment. The productivity of employment is dependable on textile sector of the country.
The productivity of textile industries is dependable on energy. As energy crises increases the
performance of textile industries decreases and unemployment in the region increases. A table
shows the frequencies of Unemployment variables mentioned below:
Unemployment
Frequency Percent Valid Percent Cumulative
Percent
Valid
Neutral 18 9.0 9.0 9.0
Agree 96 48.0 48.0 57.0
Strongly Agree 86 43.0 43.0 100.0
Total 200 100.0 100.0
Most of the respondent strongly agreed that the textile industries showing negative figures in
term of business. From the above table we can see that 65% respondents strongly agreed and
around 26% of respondents agreed. On the basis of above frequency table we conclude that most
of respondent agreed that due to the decline in textile sector of Pakistan, a direct impact hit the
Labour unemployment in the region.
28. pg. 28
By applying T-test model following outcomes are obtained
One-Sample Statistics
N Mean Std. Deviation Std. Error Mean
Unemployment 200 4.34 .638 .045
The mean respondent about the energy crises is 4.34 which show that most of the respondents
are agreed.
One-Sample Test
Test Value = 4
t df Sig. (2-tailed) Mean
Difference
95% Confidence Interval of the
Difference
Lower Upper
Unemployment 7.542 199 .000 .340 .25 .43
One sample T-test is used to determine if the mean of a sample is different from a particular
value. Here test value which we select is 4 which show that the respondent are agree. If the
mean of sample is less than test value than value of T-test is less than significance value and if
the mean is equals or greater than the sig value than the value of T-test must be positive. In
this model the T value is 7.54 which is positive and shows that most of respondent are strongly
agreed that unemployment shows a higher figure because of worst crises faced by our textile
sector due to energy crises.
H2: Reduction in Exports creates a negative effect on textile sector performance.
In this hypothesis a model is developed among textile sector performance and reduction in
exports. The performance of textile industries is dependable on export sales as well as local
sales. As shortage in provision of power sources increases the operational loss of the sector
and it can not only meet its local demand were huge export sales orders cancellation takes
place performance of textile decreases. Mentioned below table shows the frequencies of Poor
situation of textile exports variable:
29. pg. 29
Effect on Exports
Frequency Percent Valid Percent Cumulative
Percent
Valid
Agree 107 53.5 53.5 53.5
Strongly Agree 93 46.5 46.5 100.0
Total 200 100.0 100.0
Most of the respondent strongly agreed that the poor exports situation negatively impacting the
performance of textile industry. From the above table we can see that 46.5% respondents
strongly agreed and around 53.5% respondents agreed. On the basis of above frequency table
we conclude that more than 90% of respondent agreed that due to poor exports situation
performance of textile industries behave negatively. Mostly the respondent from Karachi
strongly agreed that sales order received less after the energy crises held in the country and the
situation badly impact on their businesses operations and productivity.
By applying T-test model following outcomes are obtained
One-Sample Statistics
N Mean Std. Deviation Std. Error Mean
Effect on Exports 200 4.47 .500 .035
30. pg. 30
Here the value average mean is 4.47 which means that average response of respondent is
towards agree.
One-Sample Test
Test Value = 4
t df Sig. (2-tailed) Mean
Difference
95% Confidence Interval of the
Difference
Lower Upper
Effect on
Exports
13.152 199 .000 .465 .40 .53
In this model the T value is 13.1 which is positive and shows that most of respondent are
agreed that poor situation of exports is playing negative contributions to the performance of
Pakistan’s textile industry. The test value for this model is also 4 which mean that if the
average response of respondent is equals or greater than 4 so that model should not be rejected
because most of respondent agreed the variable negatively impacting their businesses
operations. In this model null hypothesis should be rejected and alternative hypothesis should
not be rejected.
H3: Reduction in Gross domestic product puts another negative effect on textile
industry performance.
In this hypothesis a model is developed among Gross Domestic Product of the country and
textile industries of Pakistan as low productivity and performance cause decline of the textile
sector throughout the country. The Textile sector contribute a major part in our GDP hence it’s
depending on the productivity and performance of textile sector. This is due to energy crises in
the country, main reason that is the main independent variable of our research and this
situation have negatively impact on the performance of textile industries which ultimately
cause worst performance of the textile sector.
Effect on GDP
Frequency Percent Valid Percent Cumulative
Percent
Valid
Neutal 23 11.5 11.5 11.5
Agree 119 59.5 59.5 71.0
Strongly Agree 58 29.0 29.0 100.0
Total 200 100.0 100.0
31. pg. 31
In this model most of the respondents are agreed that textile industries are shifting from
Pakistan to other foreign countries because of low performance and productivity. From the
above table we can see that 59.5% respondents are agreed. From above table we conclude that
the average response of respondents is agreed that low productivity and performance of
nations GDP causes unfavorable conditions for textile business in Pakistan.
By applying T-test model following outcomes are obtained
One-Sample Statistics
N Mean Std. Deviation Std. Error Mean
Effect on GDP 200 4.18 .613 .043
The average mean of this model is 4.1% which mean that most of respondent are agreed.
One-Sample Test
Test Value = 4
t df Sig. (2-
tailed)
Mean
Difference
95% Confidence Interval of
the Difference
Lower Upper
32. pg. 32
Effect on
GDP
4.035 199 .000 .175 .09 .26
In this model the T value is 4.035 which is positive and greater than the significance value
which shows that most of respondent are agreed that GDP is depending on our textile sector as
many other items are also including in our GDP but along them, but there is a significant
contribution of textile sector in our GDP. The test value for this model is also 4 which mean
that if the average response of respondent is equals or greater than 4 than model should not be
rejected because most of respondent agreed that shifting cause due to low performance. In this
model the significance value is greater the 4% which means null hypothesis should be rejected
and alternative hypothesis should not be rejected.
Results and Discussion
This response of the first question supports the hypothesis No.1 “Energy crises impacts on increase
in unemployment level by textile industry”, although the respondents said that energy crisis situation
in Punjab and Sindh is different but overall it reduces the performance of textile industry. Most of the
companies have shut down their operations due to this power crisis and many of them shifted abroad.
They said that the companies have formed their own power plants to run their business but to have their
own power plants it needs a lot of investment and extra cost to the production so the large scale
businesses can have power plants but the small and medium scale industries cannot afford this heavy
investment. In response of second question the hypothesis H3: “Reduction in Gross domestic product
puts negative effect on textile industry performance” is accepted because most of the respondents
agreed that the poor distribution of power creates a block on our production in Textile sector impacts
on Exports and increasing the figures of unemployment in the country discourages foreign investors to
invest which is reducing the yearly production quantum of textile sector and also acting as a barrier in
capitalizing the opportunities. Like energy crisis there is instability in country’s economic condition
also faced this is due to lack of expected production and performance in the sector caused by law &
order situation, strikes in labour divisions of different textile sectors in collaboration with associations.
“Yes” there was a strongly positive answer to the question No.3 that accepts the hypothesis H2.
“Reduction in Exports create a negative effect on textile sector performance”, respondents said
there is major decline in sales from the exporters from Pakistan to other countries. Bangladesh is the
major destination where industry is moving because their government offering incentives like
33. pg. 33
uninterrupted power supply, free market access to the European Unions, tax benefits, cheap and skilled
labor, these all factors encourages the business to move in Bangladesh that cut down our exports badly.
Appendix I
This survey is conducted for the academic purpose only. All your personal information
will be kept confidential and will not be misuse by anyone.
Strongly Agree Agree Neutral Disagree Strongly Disagree
5 4 3 2 1
S# Questions Strongly
Agree
Agree Neutral Disagree Strongly
disagree
5 4 3 2 1
1 What is your opinion about energy
crises impact on our textile
industries?
2 Are these crises hit Punjab and
Sindh significantly different?
3 What are your opinion about exports
of textiles industries gets effected
because of our energy crises?
Name: ______________________________
Organization:________________________________________
Years in Organization: 1. Less than 1 2. 1 to 5 3. 6 to 10 4. More than 10
Designation: 1. Director 2. Senior Manager 3. Manager 4. Assistant Manager
Department: 1. Marketing 2. Finance 3. R&D 4. Supply Chain 5. Other
34. pg. 34
4 What do you think any impact on
our GDP by textile industries
performance?
5 What is your opinion about the
unemployment caused by these
energy crises? Are they worst in
whole textile sector?
6 What should do textile industries to
overcome the energy crises to cover
and increasing their sales? Should
they adopt personal efforts to deal
with current crises?
7 Are the companies operation
disturbed worst by the situation
going on by these crises?
8 According to you, any measures
should be taken by government to
overcome these crises, what
measures should be taken initially
for the future?
9 Do you think current efforts that are
taken by the government are helpful
and productive for the industrial
growth in the country?
Appendix II
S# MILLS NAME S# MILLS NAME
1 A.A. SPINNING MILLS LTD. 41 APOLLO TEXTILE MILLS LTD.
2 A.J. SPINNING MILLS (PVT.) LTD. 42 ARAIN FIBRES LTD.
3 A.J. TEXTILE MILLS LTD 43 ARAIN MILLS LTD.
4 ABDULLAH TEXTILE MILLS (PVT.)
LTD.
44 ARAIN TEXTILE MILLS LTD.
5 ABU BAKAR TEXTILE MILLS 45 ARSHAD CORPORATION (PVT) LTD.
6 ACME MILLS (PVT) LTD. 46 ARSHAD TEXTILE MILLS LTD.
7 ACRO TEXTILE MILLS LTD. 47 ARTISTIC MILLINERS (PVT) LTD
40. pg. 40
Farrukh Shehzad Friday, 30 Dec 2011/
http://www.pakistantoday.com.pk/2011/12/30/news/profit/gas-crisis-generating-
unemployment/
Rashid Lone (Managing director of Sui Northern Gas Pipelines Limited)
http://thediplomat.com/2013/08/pakistans-energy-crisis/
Faizan Usmani on May 2012
http://www.utrade.co/Magazine/Utrade-Magazine.aspx?Key=392&Title=Textile
Economic Survey of Pakistan (ESP) 2011-12
Khan, Aftab A., Khan Mehreen, “Pakistan Textile Industry Facing New Challenges” Euro
Journals.
http://www.eurojournals.com/rjis_14_04.pdf (accessed Dec 21, 2011).
The Small and Medium Enterprises Development Authority – SMEDA Act & Rules
Yaseem Ahmed, “Textile Industry of Pakistan”, Horizon Securities SMC, Pvt. Ltd.,
http://horizonpak.com/db/Reports/research.pdf (accessed Dec 21, 2011.)
Pakistan Credit Rating Agency, “Sector Study – Textile Sector FY2011”, Mar2011,
http://www.pacra.com/pdf/Textile%20Sector10.pdf (accessed Dec 21, 2011).
Shahbaz Rana Tribune (accessed 9th April, 2013) on survey of PBS.
http://tribune.com.pk/story/533033/every-one-out-of-10-is-jobless-survey/
Dr. Samar Mubarak
http://www.thenews.com.pk/TodaysPrintDetail.aspx?ID=55691&Cat=6
Muhammad Annus
http://pakobserver.net/detailnews.asp?id=200910
Amanullah Bashar March 22.
http://www.pakistaneconomist.com/database2/cover/c99-15.asp
Mr. Sartaj Aziz, the economist, Tuesday, 23 Apr 2013.
http://www.pakistantoday.com.pk/2013/04/23/comment/who-is-responsible-4/