Pakistan’s Textile Sector Contributes Only 3.4% to Total GDP: ADB Report

The textile sector of Pakistan makes a contribution of only 3.4 percent to the country’s total gross domestic product (GDP) and it is considerably low as compared to different other countries.

According to a report titled, “Global Value Chain [GVC], Development Report 2021 – Beyond Production” by the Asian Development Bank (ADB), the textile sector accounts for 3.4 percent of Pakistan’s GDP as compared to the sector’s contribution of 7.5 percent to GDP in Bangladesh, 5.1 percent in Sri Lanka, 12 percent in Cambodia and 3.5 percent in Turkey.

The report further reveals that the textile sector accounts for 54.7 percent of Pakistan’s gross exports and 3.4 percent of its GDP compared to 79.7 percent and 7.5 percent for Bangladesh, 31.3 percent and 5.1 percent for Sri Lanka, 52.8 percent and 12 percent for Cambodia, and 17.5 percent and 3.5 percent for Turkey respectively.

It has been noted in the report that Bangladesh is a curious case which, despite stellar 10.5 percent annual growth in indirect exports over 2010-2019, remains a laggard in the GVC participation, appearing near or at the bottom for both rates. One explanation is that its GVC trade is highly concentrated in a particular sector, i.e., textiles and garments. This sector accounts for 79.7 percent of Bangladesh’s gross exports and 7.5 percent of its GDP, the highest and the second-highest respectively, out of the 62 economies.

For textiles and garments, Bangladesh’s participation is actually above the world average, beating Pakistan and Sri Lanka. This is because of a development strategy that is based on wise use of Bangladesh’s abundant pool of cheap, low-skilled labor that allows it to achieve an average real GDP growth rate of 7.4 percent over 2015-2019 and to be among the few economies to grow in 2020.

The report further notes that Bangladesh’s textiles and garments industry remains confined to relatively low-value-added segments like cutting and sewing and its cost advantage may have been gained at the expense of labor welfare.

GVCs not only transmit shocks within domestic economies but also play an important role in cross-country transmission. When suppliers in source countries are affected by disasters, it is not uncommon for firms to report production delays and profit losses as their suppliers fail to provide parts and components on time, it added.

Most of the researches on GVCs focuses on manufacturing production, in other words, on the breaking up of production processes into many discrete steps with a resulting explosion of trade in parts and components. Nonetheless, there are aspects of GVCs that go beyond manufacturing processes. In fact, value-added and employment generation in GVCs are depending less on manufacturing production.

Source: Pro Pakistani

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