The Role of Textile in the

development of an economy
Bilal Iqbal
Ali Ammar
Research Papers
• Contribution of the RMG Sector to the Bangladesh Economy 2008
Debapriya Bhattacharya, Mustafizur Rahman, Ananya Raihan
• The role of textile and clothing industries in growth and development strategies 2002.
Jodie Keane and Dirk Willem te Velde
• The Garment Industry in Bangladesh 2012
Mohammad Yunus and Tatsufumi Yamagata

• Young innovative companies and employment creation, evidence from the Pakistani textiles sector
2016
Waqar Wadho and Azam Chaudhry

• The Textiles and Garments Sector: Moving Up the Value Chain 2014
Naved Hamid, Ijaz Nabi, and Rafia Zafar
What is economic development?
• Economic development is the process by which the economic well-
being and quality of life of a nation, region or local community are
improved.
Factors that lead to development of
textile industry
• Trade Policy
• WTO and removal of the Multifibre Agreement (MFA) Quota system
• Everything but Arms Scheme (EBA)

• Economic Policy
• Removal of income taxes and import duties
• Establishing Export Processing Zones (EPZ)
How Bangladesh’s textile industry
developed
• Korean firms
• Promotions by government
• Threat of MFA phase out
• Technology adoption
Why is the textile industry
important?
• Economic aspects
• Social aspects
Economic aspects
• Trade
• GDP
• Employment
• Forward and backward linkages
 Trade
• The WTO (2006) notes that in 2004, developing countries accounted for
more than half of all world exports of textiles and clothing and that in no
other category of manufactured goods do developing countries enjoy such
a large net-exporting position.
• Textile and clothing accounted for 4.5% of the total world manufactured
goods.
Historical background of the RMG’s
in Bangladesh
• The export-oriented readymade garments (RMG) sector in
Bangladesh, started its journey in late 1970s as a small non-traditional
sector of export.
• Bangladesh exported RMG worth only US$ 69 thousand when Reaz
Garments exported its first consignment to USA in 1978.
• By FY2002, within a span of about two decades exports have gone up
to US$4.5 billion.
• Over the past decade alone, the sector registered a phenomenal
growth rate of 15 percent per annum.
• Such high growths also enjoyed a robust expansion, from less than 50
factories in 1983 to more than 3,400 in 2002.
• The number of RMG workers reaching approximately 1.5 million.
• Her share in total US imports of apparels was 3.2%; in EU it was 3.3%
and in Canada it was 3.0%.
Share of T&C in manufacturing and
total GDP
Contribution to GDP and Export
Earnings
Bangladesh
• RMG is predominantly an export oriented industry, with 95 per cent
of the woven and 90 per cent of the knit exports being directed to
foreign markets.
• The cumulative foreign currency earnings by the sector, since 1978,
when first export was registered, is estimated at 36.6 billion dollars.
• In 2002 this sector contributed 76.6% of the total Bangladesh export
of 5.9 billion dollars.
• RMG export in FY2002 was equivalent to 9.5% of Bangladesh’s GDP.
Share of T&C in Employment
Backward and forward linkages
• Banking and insurance
• Shipping and Logistics
• Transport Communication
• Professional firms (CA firms, legal agencies)
• Engineering sector
• Utility service
• Real Estate
• Hotel and tourism
• Information technology
Bangladesh
• Banking and Insurance
In Fiscal Year 2002 the banking sector earned 37 million dollars from
businesses with RMG sector in the form of interest rates and LC charges
In Fiscal Year 2001 commercial banks lent 4400 crores to textile sector
Premium paid to insurance companies averages about 6 million dollars
each year
• Shipping and Logistics

RMG sector has contributed to the shipping business and stimulated

setting up of container yards, expansion of port and storage facilities.
RMG sector contributed about $65 million in FY2002 to earnings of
shipping businesses (Port Charges, freight, forwarding charges etc).
Social aspects
• Wages
• Female Participation
• Child Labor
Wages in T&C compared with other
sectors
Gender
• T&C contributes significantly to the empowerment of women.
• Job creation in the T&C sector has been particularly strong for women
in poor countries who previously had no income opportunities other
than the household or the informal sector.
• A survey conducted by BIDS in 1997 showed that for 96% of the
female workers in the non EPZ areas, work in the garment industry
was the maiden wage employment.
Child Labor
ILO convention called for the elimination of child labor in the export
manufacturing industries.
As a consequence many garment industries had to retrench child
workers.
Retrenched children ended up doing more strenuous jobs
Bangladesh RMG sector in collaboration with ILO and UNICEF
developed a program which ensured education to all these children
Textile industry of
Pakistan
Importance of textile industry
• The textile industry in Pakistan is the largest manufacturer
industry in Pakistan.

• Most importantly, the sector accounts for, on average, 60 percent of

national exports.
• In Asia, Pakistan is the eighth largest exporter of textile products.
• Pakistan is the 2nd largest supplier of cotton yarn with 26%share of
the international market.
• The textile sector employs 40% of overall labor force, with 38% of the
manufacturing Workers employed under textile sector.
• The textile industry contributes approximately 46percent to the total
output or 8.5 percent of the country GDP.
Role of innovation in textile sector

• Recent study find that 56 percent firms introduced technological or

nontechnological innovations and 38 percent introduced new
products.
• The innovation rate increases with firm size; large firms have an
innovation rate of 83 percent, medium firms have 68 percent and
small firms 39 percent.
• Six enterprises introduced products that were new to the world.
How innovation help in economic
growth
• Innovation leads to increasing productivity, reducing costs, creating
more and better jobs, diversifying industrial composition, increasing
incomes, better marketing techniques.
• The world exports of textiles and clothing increased from $482 billion
in 2005 to $797 billion in 2014. At the same period, Pakistani textile
exports increased from $10.7 billion to $14 billion.
• For competing in global markets, Pakistan needs to have a continuous
flow of innovation is required to at least maintain its share of world
trade.
Problems face by textile
industry
• Electricity crisis
• Gas shortage
• Lack of Research and Development in Cotton Sector
• Lack of Modernize equipment
• Increasing cost of production
• Lack of new investment
• Effect of inflation
• Internal issues pose a Larger Threat for Pakistan’s Textile Industry
• Removal of subsidy on textile sector
Lack of innovation
Causes
•  Political unrest, poor law order situations, lack of infrastructure and
transportation facilities are also some of the causes behind downfall
of Pakistan's textile industry. All factor increases the cost
of production which decreases the exports consequently increasing
unemployment level.
• Financial instability in the country which became the reason of the
decrease in foreign investment.
• Our utility rates are too much high to compare with the regional countries.
• Pakistan is the member of the WTO and sign’s many international
agreements like intellectual property rights and international arbitration
Conclusion
• Energy crisis and lack of innovation is the most important factor that
adversely affects the textile production in Pakistan.
• Unemployment level has risen due to downfall of textile industry
resulting from the energy crisis.
• HRM and performance of employee enhance the growth rate and
investment facilities and energy crisis, productivity, financial crisis,
exports, taxes and productivity decrease the output.
Suggestions
• Removal of energy crisis.
• Need to innovate for improving textile production and to compete in
the world market.
• Awareness of international quality standards.
• HRM development
• Young innovative companies and employment creation, evidence
from the Pakistani textiles sector

• The Textiles and Garments Sector: Moving Up the Value Chain