Key Insights
Essential data points from our research
The textile sector contributes approximately 8.5% to the GDP of Pakistan
The sector comprises 46% of the total manufacturing sector in the country
Textiles constitute over 60% of Pakistan's total national exports
Pakistan is the 5th largest producer of cotton in the world
There are approximately 1,221 ginning units in Pakistan
The annual yarn production capacity is approximately 3.4 billion kgs
The textile industry employs about 40% of the total industrial labor force in Pakistan
The industry provides livelihood to approximately 15 million people directly and indirectly
About 30% of the textile workforce comprises female workers, a higher ratio than other heavy industries
Textile exports reached a record $19.3 billion in Fiscal Year 2022
Pakistan is the 3rd largest consumer of cotton globally
Pakistan has a 2.4% share in the global textile trade
Energy costs account for roughly 35% to 40% of the conversion cost in textile manufacturing
Cotton production declined by 34% in 2020-21 drastically increasing import reliance
The industry faced a shortage of 5 million bales of cotton in 2023 necessitating expensive imports
Challenges, Energy & Raw Materials
- Energy costs account for roughly 35% to 40% of the conversion cost in textile manufacturing
- Cotton production declined by 34% in 2020-21 drastically increasing import reliance
- The industry faced a shortage of 5 million bales of cotton in 2023 necessitating expensive imports
- Gas suspension to textile mills causes an estimated loss of $1 billion in exports annually
- Import restrictions on textile machinery spare parts reduced capacity utilization by 25% in 2023
- Delays in Sales Tax refunds by the FBR have historically blocked up to Rs 300 billion in liquidity
- Electricity tariffs for the textile industry increased from 9 cents to over 14 cents/kWh in 2023
- The 2022 floods destroyed 40% of the standing cotton crop
- High interest rates (22%+) have made working capital financing unviable for 30% of SMEs
- Grey fabric smuggling causes a 15% annual loss to the local organized sector
- The removal of Zero-Rated Industrial status increased production costs by 7%
- Cross-subsidy surcharges on power bills add Rs 100 billion burden to the industry annually
- Water scarcity has increased processing costs by 5% due to the need for treatment plants
- The discrepancy between local cotton prices and import parity prices is often 10-15%
- Obsolescence of technology affects 25% of ginning
- A 1% increase in the policy rate increases the textile sector's debt servicing cost by Rs 20 billion
- Inconsistent gas pressure reduces production efficiency by nearly 20% in winter months
- High freight charges in 2022 increased textile export costs by 300%
- Smugglers supply 60% of the Afghan transit trade cloth back into Pakistani markets dumping prices
- Shortage of dollars for opening Letters of Credit (LCs) halted raw material imports for 5 months in 2023
Interpretation
Like a patient bleeding from multiple wounds, Pakistan's textile industry is being drained by soaring energy costs, gas suspensions and higher electricity tariffs, water scarcity and obsolete machinery that cut efficiency while a collapse in cotton output, floods and a five million bale shortfall force expensive imports amid dollar and freight bottlenecks; add import restrictions, delayed sales tax refunds and 22 percent interest rates that choke capacity and liquidity, plus rampant smuggling that undercuts prices, and the result is a costly, low-resilience sector threatening export revenues and millions of livelihoods.
Economic Contribution & Exports
- The textile sector contributes approximately 8.5% to the GDP of Pakistan
- The sector comprises 46% of the total manufacturing sector in the country
- Textiles constitute over 60% of Pakistan's total national exports
- The value-added textile sector showed a growth of 26% in FY22
- The textile sector pays approximately Rs 3.5 billion in taxes annually
- Knitwear exports contributed $5.1 billion to the economy in FY22
- Readymade garments exports rose by 28.7% in value during FY22
- Bedwear exports generate approximately $3.29 billion annually
- Cotton cloth exports account for $2.4 billion in revenue
- The synthetic textile sector contributes $400 million to exports
- Towel exports stand at approximately $1.1 billion annually
- The textile sector has received $5 billion in fresh investment for expansion during 2018-2022
- Synthetic fiber imports cost the economy roughly $650 million owing to low local production
- Made-up textile articles account for $846 million in exports
- Textile machinery imports rose to $787 million in FY22 indicating modernization
- Value addition per employee in textiles is $3,200 significantly lower than the regional average
- The textile sector utilizes 40% of the total bank credit available to the manufacturing sector
- Per capita textile consumption in Pakistan is approx 5kg
- Contribution of textiles to Large Scale Manufacturing (LSM) growth was almost zero in Q1 FY23
- Cotton Yarn exports dropped by 18% in dollar value in early FY23
Interpretation
Pakistan’s textile sector is simultaneously the country’s cash cow and its paper Achilles’ heel, contributing about 8.5% of GDP, 46% of manufacturing and over 60% of exports and powering strong sub-sectors like knitwear ($5.1 billion), readymade garments (up 28.7%), bedwear ($3.29 billion), cotton cloth ($2.4 billion), towels ($1.1 billion) and made-up articles ($846 million) while attracting $5 billion in fresh investment and delivering a 26% value-added jump in FY22, but it is undermined by low value-added per worker ($3,200), heavy reliance on 40% of manufacturing bank credit, rising machinery and synthetic fiber imports ($787 million and $650 million), a modest Rs 3.5 billion tax contribution, and recent setbacks including almost zero LSM growth in Q1 FY23 and an 18% fall in cotton yarn export value, which together make clear that without deeper local value addition and modernization the sector’s export dominance could prove fragile.
Employment & Socio-Economic Impact
- The textile industry employs about 40% of the total industrial labor force in Pakistan
- The industry provides livelihood to approximately 15 million people directly and indirectly
- About 30% of the textile workforce comprises female workers, a higher ratio than other heavy industries
- Wages in the textile sector have increased by 18% on average due to inflation in 2023
- Human capital efficiency in Pakistan's textile sector is 40% lower than in Vietnam
- The textile industry supports 200,000 households in the spinning sector alone
- Textile factories are the primary employer for uneducated rural labor migrating to cities
- Labor productivity in Pakistan's textile sector is estimated at $4,500 per worker annually
- The textile sector covers social security for only 25% of its total workforce due to informal labor
- Technical training institutes for textiles produce 5,000 graduates annually
- Employee turnover rate in the textile sector is high at roughly 20% annually
- Approximately 1 million women work in the cottage textile industry (embroidery) from home
- The textile sector accounts for 30% of banking credit to the private sector
- Compliance with ILO conventions is mandatory for 100% of GSP+ beneficiary factories
- Child labor in the informal textile supply chain is estimated at 1.5% mainly in cotton picking
- ILO Better Work Programme covers 26 major textile exporters improving conditions for 40,000 workers
- Skill premiums for textile engineers have risen by 50% over the last decade
- Textile industrial accidents account for 12% of national occupational hazards
- Implementation of minimum wage laws is only 60% effective in the textile SME sector
- Over 70% of textile workers lack formal written contracts
Interpretation
Sewn into Pakistan’s economic fabric, the textile industry directly and indirectly supports about 15 million people and 40% of the industrial workforce, channels roughly 30% of private sector bank credit and employs 30% women, yet despite an 18% average wage rise in 2023 and a 50% jump in engineers’ skill premiums it trails Vietnam by 40% in human capital efficiency and only manages about $4,500 in annual productivity per worker, provides social security to just 25% of its workforce while over 70% lack written contracts, endures a 20% turnover rate plus safety and child labor concerns including 12% of national occupational accidents and an estimated 1.5% child labor in the informal chain, so its strengths are real but its seams are dangerously fraying.
Global Rankings & Trade Agreements
- Textile exports reached a record $19.3 billion in Fiscal Year 2022
- Pakistan is the 3rd largest consumer of cotton globally
- Pakistan has a 2.4% share in the global textile trade
- Pakistan is the 2nd largest exporter of denim fabric in the world
- Pakistan benefits from GSP+ status with the EU allowing duty-free access for textiles
- Pakistan is ranked as the 4th largest yarn producer in the world
- Pakistan holds a 60% share of the US market for cotton bed sheets
- Pakistan is the world's 2nd largest exporter of home textiles
- About 80% of Pakistan's textile exports go to the EU and USA
- Pakistan is among the few countries with a complete textile value chain from cotton to fashion
- Pakistan ranks 3rd in the world for cotton yarn exports by volume
- Pakistan generally captures only 0.1% of the global technical textile market
- Pakistan faces a 15% tariff disadvantage compared to Bangladesh in the US market
- While China holds 32% of global textile trade Pakistan holds less than 3%
- Pakistan is the 8th largest exporter of textile commodities in Asia
- Pakistan ranks 1st in the import of worn clothing (second-hand textiles)
- Pakistan is the 6th largest exporter of towels globally
- Pakistan's share in the global medical textile market is negligible at under 0.05%
- Pakistan is a signatory to 27 UN conventions to maintain textile trade status with the EU
- Pakistan has the 10th largest pool of textile engineers in the world
Interpretation
Punching above its weight, Pakistan's textile sector spans the full value chain—being the third largest cotton consumer and a world leader in yarn, denim and home fabrics, dominating US bed‑sheet imports and benefiting from EU GSP+—yet despite these strengths it accounts for under 3% of global textile trade, is nearly absent from technical and medical textiles, suffers tariff disadvantages versus rivals and risks being stuck in low‑value segments unless it urgently upgrades and diversifies.
Production Capacity & Infrastructure
- Pakistan is the 5th largest producer of cotton in the world
- There are approximately 1,221 ginning units in Pakistan
- The annual yarn production capacity is approximately 3.4 billion kgs
- Pakistan possesses the 3rd largest spinning capacity in Asia
- There are over 500 textile units currently operating in the organizing sector
- The installed capacity of spindles in the country represents 5% of the global total
- Pakistan has approximately 124 large spinning units
- The industry consumes about 14 million bales of cotton annually
- There are over 9,000 looms in the organized mill sector
- Pakistan has the capacity to process 5.2 billion meters of fabric annually
- The filament yarn capacity of the country is 100,000 tons per annum
- There are approximately 425 small to medium-sized knitting units
- The denim washing capacity in Pakistan is over 300 million pieces per year
- Pakistan has over 200 art silk units
- The installed capacity for finishing touches in textiles is 4.5 billion square meters
- There are currently 21 dedicated yarn merchants associations in the country
- The industry operates 9.7 million spindles
- The shuttle-less loom sector has a capacity of 30,000 units
- Pakistan produces 12 million tons of Polyester Staple Fiber (PSF)
- 65% of the weaving capacity interacts with the power loom sector rather than the mill sector
Interpretation
Pakistan's textile industry is like a bodybuilder with global-size strength—fifth largest cotton output, nearly 10 million spindles, thousands of gins, looms and knitting units and the capacity for billions of kilograms of yarn and meters of fabric—yet it still needs a tailored suit of modernization, consolidation and value addition to truly compete on the world stage.
References
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