Category: General
Country: Pakistan
27th Dec 2025
Pakistan’s textile industry, long regarded as the backbone of the national economy, is confronting what many industry leaders describe as the most severe crisis in its history. Once celebrated for its export potential and capacity to drive industrial growth, the sector is now grappling with a convergence of structural, economic, and logistical shocks that have eroded competitiveness, shuttered factories, and destabilised livelihoods across the value chain. From collapsing cotton production to soaring energy costs, from regional competition to policy missteps, and now a nationwide transport strike, the industry stands at a critical inflection point.
The Pakistan Textile Exporters Association (PTEA) has repeatedly sounded the alarm. For the fourth consecutive month, textile exports have declined, deepening concerns about the sector’s long-term viability. PTEA General Secretary Azizullah Goheer noted that Pakistan has failed to surpass, or even maintain, the FY2021 export benchmark of US$19.3 billion. Instead, exports slipped to $18 billion, then $17 billion, and continue to fall. Between July and November 2025 alone, exports dropped by 6.39%, from $13.721 billion to $12.844 billion, signalling a persistent downward trajectory.
Despite possessing the capacity to double export volumes and meet rising demand in North American markets, Pakistan’s textile sector is losing ground to regional competitors. The high cost of doing business—particularly energy tariffs, taxes, and financing costs—has eroded Pakistan’s competitiveness. Exporters warn that the country is steadily ceding market share to Bangladesh, India, China, and Vietnam, all of which offer lower production costs and more stable policy environments.
The PTEA’s monthly trade summary paints a stark picture: lower orders, underutilised capacity, layoffs, and diminishing investor confidence. As factories operate below capacity, long-term investment prospects weaken, and Pakistan’s foothold in key export markets slips further. Regional competitors, unburdened by Pakistan’s cost structure, are rapidly capturing markets once dominated by Pakistani exporters.
At the heart of the crisis lies the collapse of Pakistan’s cotton economy. Outdated agricultural practices, poor seed quality, and inadequate research investment have led to a dramatic decline in cotton production and quality. Cotton Ginners Forum Chairman Ihsanul Haq reports that more than 100 spinning mills and 400 ginning factories have already shut down. National cotton output, once around 15 million bales, has plunged to 5.5 million bales, with nearly 800,000 unsold bales stuck with ginners due to weak demand. Cotton prices have crashed to Rs 8,000 per 40 kg, pushing farmers into financial distress and accelerating the shift from cotton to sugarcane cultivation. This shift threatens to increase Pakistan’s reliance on edible oil imports, further straining foreign exchange reserves.
The ginning sector is suffocating under a staggering 86% combined sales tax on cotton, cottonseed, oil, and oilcake. Meanwhile, textile units are being asked to clear decade-old gas dues, compounding liquidity pressures. The situation has been worsened by recent amendments to the Export Facilitation Scheme (EFS). Previously, exporters could import raw materials duty- and tax-free. The new rules exclude cotton, yarn, and grey cloth from zero-rating, forcing exporters to pay taxes upfront. This has tightened liquidity and raised production costs at a time when the industry can least afford it.
Adding to the turmoil is the unchecked influx of imported yarn, much of it under-invoiced, which has devastated domestic spinning mills. Despite formal warnings from the All-Pakistan Textile Mills Association (APTMA), authorities failed to curb these imports, accelerating the collapse of local industry. As one industry leader lamented, instead of receiving relief to revive cotton production and boost exports, the sector is being “crushed under heavy taxes and prohibitive power tariffs,” leaving hundreds of thousands of families jobless.
Energy costs remain one of the most crippling burdens. Industrial electricity tariffs are projected to reach 12 cents per kWh by FY26, far higher than the 5–9 cents per kWh paid by competitors in the region. Exporters argue that this disparity alone makes Pakistani textiles uncompetitive in global markets. Compounding the problem are frequent power outages, voltage fluctuations, and grid instability, which damage machinery and disrupt production schedules.
External market dynamics further complicate the landscape. The United States has imposed a 29% effective tariff on Pakistani textiles—far higher than tariffs applied to China or Vietnam—making Pakistani products significantly less competitive. Flood damage to cotton crops, combined with policy inconsistencies, has further weakened the sector’s resilience.
Pakistan’s export performance starkly lags behind regional rivals. In FY2024–25, Pakistan’s textile exports stood at $17.88 billion, compared to Bangladesh’s $40.22 billion and India’s $36.61 billion. Despite Pakistan’s strong historical position, the high cost of doing business continues to erode its global standing.
The industry’s overreliance on a narrow set of markets adds another layer of vulnerability. During July–August FY26, the European Union remained Pakistan’s largest textile destination, with exports rising modestly to $1.303 billion. The United States, however, remained stagnant at $878 million, a pattern unchanged for five years. This concentration leaves Pakistan exposed to external shocks and shifts in demand.
Just as the industry struggles to navigate these structural challenges, a nationwide cargo transporters’ strike has brought the export supply chain to a standstill. Now in its fifth day, the strike has stranded thousands of consignments across the country. With average monthly textile exports of $1.5 billion, the sector loses roughly $50 million per day. In five days, losses may have exceeded $250 million, with broader economic damage likely far higher. The complete breakdown of inbound and outbound logistics has halted production cycles, delayed shipments, and paralysed export-oriented industries.
The standoff between provincial authorities and transporters has escalated into a national logistics crisis, compounding the woes of an already fragile sector. For an industry already battling high energy tariffs, liquidity constraints, delayed refunds, and mounting cost pressures, the strike represents yet another blow to its survival.
Courtesy: dailymirror.lk
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