- Factory closures are caused by a scarcity of high-quality cotton.
- Larger firms are less affected since they are better prepared.
- Mill closures underline the problems of the sector, which employs approximately 10 million people.
Khurram Mukhtar, president of the Pakistan Textile Exporters Association, the closure of small textile mills is due to a shortage of good-quality cotton, high fuel costs, and difficulties collecting payments from clients.
According to The News, citing Bloomberg, Pakistan’s small companies making bedsheets and towels for export to the US and Europe have begun to decline as a consequence of the floods that destroyed the cotton harvest.
Mukhtar claims that larger suppliers to major firms such as Nike, Adidas AG, Puma SE, and Target Corp. are adequately supplied and hence less harmed.
The mill closures underscore challenges confronting the sector, which accounts for more than half of the country’s export income, employs over 10 million people, and accounts for approximately 8% of GDP.
Recent floods that flooded a third of Pakistan, killed over 1,600 people, and destroyed about 35% of the cotton crop have exacerbated their predicament.
The latest setback comes at a difficult time for the South Asian nation, which is already dealing with growing inflation and dwindling foreign currency reserves.
The shutdown of enterprises such as AN Textile Mills Ltd, Shams Textile Mills Ltd, JA Textile Mills Ltd, and Asim Textile Mills Ltd might exacerbate the country’s job issue and reduce export income.
According to Mukhtar, demand for products from bigger firms is likely to fall by roughly 10% by December as a consequence of a slowdown in Europe and the United States.
AN Textile, the company’s mills have been temporarily shut down due to an “unexpected decline in the market and shortage of good quality cotton” as a consequence of the recent floods and extreme storms.
According to Mukhtar, Pakistan may produce 6.5 million bales (each weighing 170 kilogrammes) of cotton this year, down from the expected 11 million. According to Gohar Ejaz, patron-in-chief of the All Pakistan Textile Mills Association, it might force Pakistan to pay roughly $3 billion to acquire cotton from countries such as Brazil, Turkey, the United States, East and West Africa, and Afghanistan.
Cotton and electricity shortages, according to Ejaz, have hampered roughly 30% of Pakistan’s capacity to create textiles for export.
Pakistan’s textile sector, which exports over 60% of its production, is also facing sluggish domestic demand as a result of the country’s dire economic circumstances.
Following the floods, which inflicted losses of roughly $30 billion, the gross domestic product is expected to fall by half from 5% in the fiscal year ending in June. Pakistan secured a $1.1 billion loan from the International Monetary Fund in August to prevent a potential default.