Need for local manufacturing of textile machinery
ARTICLE (May 18 2008): Textile, as the single largest industry in Pakistan, represents one of the vital sectors of economy. Yet the industry is totally dependant on imported sources to meet its requirements of machinery, equipment, accessories and spares.
The indigenous facilities for manufacturing of textile machinery items are practically non-existent, though world-wide the sector has been harbinger to the development of capital goods industry.
Efforts were made in 1973 to create an engineering base in the public sector for the local manufacturing of textile machinery. Consequently, Textile Machinery Company was set up at Korangi, Karachi to produce manual and automatic cone winding machines. Spinning Machinery Company was set up at Kot Lakhpat, Lahore to produce ring spinning frames/machines. A nationalised company, Pakistan Engineering Company Ltd (PECO), at Lahore was already manufacturing and marketing power looms.
By early 1990s production of all these textile machinery items came to a halt. Textile Machinery Co was privatised and remains closed after transfer of ownership to the private sector. The production of ring spinning frames at Spinning Machinery Co had to discontinue. Power Loom works at PECO was closed down in the wake of on-going privatisation that has not yet been finalised.
Textile Machinery Co was established in 1975 with an installed capacity to manufacture 50 winding machines annually. Gilbos of Belgium had provided technical know-how under a licensing agreement. Having commenced production in 1978, the company remained grossly under-utilised from its nascent days.
PECO produced automatic shuttle looms, in collaboration with Iwama of Japan. Starting from producing 250 looms of a variety of sizes the company had progressively reached an annual production of 600 looms. Negotiations were also in advanced stage with the global leaders for assembly-cum-manufacturing of modern shuttle-less looms under license. This however did not materialise due to on-going privatisation process of PECO.
Spinning Machinery Co was set up in 1977 to produce ring spinning frames under license from Schubert and Salzer of Germany. It went into commercial production in June 1982 but could not achieve full capacity of producing 250 frames of 476 spindles annually in any given year.
The capacity utilisation remained around 20% maximally as total sales until June 1989, when its production was discontinued, was that of 231 frames valuing Rs 155 million. Obviously, the company lacked economy of scale, suffered higher production cost and thus incurred huge financial losses.
In fact, the textile industry, for the reasons of its vested interest, had never liked to promote domestic engineering industry. As a result of lobbying by the powerful textile industry the government policies too remained non-supportive and inconsistent to engineering industry.
Resultantly, local manufacturing of textile machinery had inadequate tariff protection, and continuous unrestricted import of these equipment was allowed either at nil or at concessional import duties.
This was in spite of comparable quality and selling price of indigenous products versus imported units. Resultantly, the companies failed to capture the market for the respective products. The Chinese and the Japanese manufacturers of textile machinery, with whom the holding corporation State Engineering Corporation was negotiating licensing agreements for future production of machinery in line with the market demand, backed out due to the prevailing environments.
After the closure of operations at Spinning Machinery Co, another public enterprise Pakistan Machine Tool Factory at Karachi ventured into producing ring spinning frames under license from Jingwei Textile Machinery Co of the People's Republic of China. The selected brand/model, having major population of installed units, was already popular in domestic market. It was planned to manufacture 300 frames annually in the final phase, achieving 60% deletion over a period of five years.
The Chinese had transferred almost complete technical know-how for the local manufacturing. But the initial plans faced serious problems, again due to negative attitude adopted by the textile industry and unfavourable tariff structure. Finally, the company launched the product in December 1998. But there has been lack of response from textile industry and the production/sales projections could not be attained, as investors continually preferred to import these units.
Private sector has been hesitant to invest in the engineering sector in a big way. Still, significant contribution has been made by the private sector in recent years towards manufacturing of parts, accessories and some items of textile machinery. Nonetheless, these SMEs in non-organised sector have been unable to achieve sizeable quantum of production.
The long list of locally produced items includes power looms, warping machines, twisting machines, dobbies, winders, washing machines, calendering machines, sizing machines, scouring machines, textile spindles, spinning and twisting rings, fluted rollers, textile shuttles, metallic card clothing, textile inspection machines and air-conditioning and humidification equipment for textile industry.
Local manufacturing of textile machinery remained on the agenda of successive governments, as efforts continued to be made by the public sector engineering industry to diversify their product range to include textile machinery, but without results. ECC of the Cabinet had considered in 1989 a summary on the domestic manufacturing of textile machinery, approving a number of measures to be adopted by the government in this direction, but nothing concrete worked out.
A National Commission on Textiles was created in 1999 that was mandated also to promote indigenous manufacturing of textile machinery. Again, textile industry prevailed and related proposals remained on drawing board only.
Today textile industry has total spinning capacity of 1,550-million kg of yarn, weaving and finishing capacity of 4,368-million sq. meter of fabric, production capacity of 670-million unit of garments, 400-million unit of knitwear and 53-million kg of towels.
The industry is currently facing numerous challenges and its growth has declined considerably. Despite investment to the extent of over $4 billion during last few years under the Textile Vision 2005, the sector may not meet its export target of $13 billion for the year ending 30th June 2008. Still, the industry has great potential for expansion in future, as a result of increasing demand of textiles and made-ups, domestically and globally.
Significant revamping and modernisation of the industry is therefore expected, given the political and economic stability in the country. International suppliers of machinery participating in textile machinery exposition held at Karachi have booked orders for a large number of units. MEGATEX 2008, one of the biggest textile exhibitions, was held during April 15-18, and 160 companies from 22 nations had exhibited their products.
The situation highlights the potential of domestic textile industry that has imported machinery worth $281 million during July 2007-February 2008 under adverse conditions. The City District Government of Karachi has recently allocated land for developing 5 industrial zones exclusively for setting up textile units.
No capital goods industry in a developing country can bring out its products in a short time comparable in quality of similar products of multinational manufacturers having extensive experience gained over decades of research and development.
This equally applies to the manufacturing of textile machinery. Therefore joint venture agreements with renowned international technology partners need to be finalised. The modalities may include having equity participation or licensing arrangement or joint manufacturing under technology transfer agreements.
Besides setting up new industrial units, the existing facilities at various engineering industrial units can be gainfully utilised for undertaking progressive manufacturing of a large variety of equipment required by textile sector, under any of the above arrangements.
These items may include ring spinning frames, automatic winder, blow room equipment, carding machinery, draw frames, shuttle-less/air-jet/water-jet looms, dyeing and sizing machines, bleaching and finishing machines, etc.
In view of the persistent widening trade deficit it becomes of paramount importance for the government to evolve a strategy to progressively reduce dependence on imported textile machinery and encourage indigenous efforts through policy framework to re-create strong foundation for manufacturing of basic textile machinery of a wide range.
The programme should be targeted to achieve implementation within a short span of time not only catering to the needs of national textile industry but also for export marketing.
(The write is former Chairman of State Engineering Corporation of the Ministry of Industries and Production, Government of Pakistan).
Business Recorder [Pakistan's First Financial Daily]
