Pakistan Following Roadmap to 2005
November 29, 2004,
As is the case with many home textiles suppliers, manufacturers in Pakistan are looking ahead to the elimination of quota in January with a mixture of eagerness and concern — the latter centering on the direction of pricing and the incursion of new manufacturers into the global market, particularly from China.
“In the last four years, almost $4 billion has been invested by the private sector. A lot of our industry is moving into niches where the mass-market producers are less efficient,” said Tariq Ikram, chairman of the Pakistan Export Promotion Bureau. “Makers of course-count fabrics are moving into mixed yarn counts or higher counts. Towel producers are moving into jacquard designs. Garment manufacturers are moving into more integrated units.”
Among those making investments is Towellers Limited, manufacturer of towels, bed-in-a-bag, sheets, blankets and throws, which has acquired equipment previously owned by Pillowtex. But company president Sheik Mohammed Obaid said he is not expecting explosive growth the moment quotas drop.
“We have to tread very slowly to see how things change in the post-quota era. So we will increase towel production only by 6 million pounds annually, and if things continue, then production capacity will not be an issue,” he said.
Also taking a cautious approach to the coming market opportunities is Lucky Tex, an integrated manufacturer of sheets, bed-in-a-bag, curtains, table linens and decorative pillows. The company exports 50 percent of its capacity — 100,000 meters per day — to Europe and would like to dedicate the other 50 percent to business in the United States. However, CEO Ahmed Tabba wants to engage the U.S. market for the long-term and avoid a post-quota frenzy of unprofitable price-chopping.
“There will be people who jump in and unnecessarily undermine their own pricing,” he predicted. “Let them. I'd rather wait and let them take this unprofitable business — and let their American customers see what they will deliver at those prices. The American market will realize that they have been shown cheese and given chalk. They're not fools.”
Nasatex Buying Services — established earlier this year by a 21-year industry executive — hopes to sort the wheat from the chaff for U.S. and European importers seeking new resources in Pakistan. The company is focused on brokering sheets with high thread counts and specialized constructions such as Lyocell, fabrics with special finishes, and high-quality jacs and yarn-dyed fabrics, according to founder and CEO Farrukh Zubair. He plans to open liaison offices in New York, Toronto and London next year, and to begin attending the New York Home Textiles Market.
“In the coming year, there will be very tough competition from China, but also new competition coming from Pakistan,” Zubair said. “There are many people who have been waiting for the quotas to go to put up new processing units. Survival will be only for those who have complete in-house facilities.”
Towel manufacturers Eastern Textiles and Regal Textile Industries have taken perhaps the most aggressive approach to securing expanded business in the United States after quotas drop — both invested a stake in a significant U.S. client, Revere Mills.
Although Eastern has a 30-year history of exporting to the States — its largest market — the company decided linking production to distribution would be a key component of building its presence after quotas, said Afay Kahn, managing director.
“We have almost doubled our capacity to meet the post-quota situation. Also we have invested in technology to improve the quality of our product to be able to sell to more demanding customers,” he said. “There has been expansion of the industry in Pakistan, and new factories coming up for the last two years — and this continues.”
Pakistan's government is hoping the investment dollars will also flow in its country's direction, and has established a “freight-free” policy to encourage Western manufacturers to relocate their production. The Export Promotion Bureau is currently in talks with four companies — three of them American and one European — and has also received inquiries from Russia and France, Ikram said.
“The issue we face is one of a non-level playing field,” Ikram said, adding he is concerned about preferential arrangements for Mexico under the aegis of NAFTA, European anti-dumping initiatives and the Chinese government's practice of subsidizing its industry. “If the playing field becomes truly level, then it will be survival of the fittest — and Pakistan is prepared for that.”