Cotton textile Industry of Pakistan

COTTON TEXTILE

THE ROLE OF COTTON TEXTILE IN THE ECONOMIC GROWTH OF PAKISTAN

PRESENTED BY: SIDRA RAFIQ

IntroductionGross Domestic productionCotton textileexports

Review of LiteratureMethodology & resultsReferences

Introduction GROSS DOMESTIC Product PRODUCT COTTON TEXTILE EXPORTS REVIEW OF LITRATURE

ABSTRUCT

METHODOLOGY

RESULTS

Contents Abstract IntroductionLiterature review Objectives Methodology RecommendationsConclusion References

“cotton is an economic asset of Pakistan, it is a natural fiber used primarily as a raw material in textile industry. cotton is a unicellular, natural fiber composed of almost pure cellulose. As taken from plants, the fiber is found in lengths of 3/8 to 2 inches’’.

COTTON

''the textile industry is one of the most important sectors of Pakistani. It contributes significantly to the country's 8.5% GDP, exports as well employment. it is, in fact, the backbone of the Pakistani economy''.

TEXTILE INDUSTRY

ABSTRUCTTextile industry plays a vital role in the economic affairs of Pakistan by providing at both micro and macro level. The cotton textile industry is being the backbone of the Pakistan’s economy. Now Pakistan’s economy is participating significantly in the export sector more than before which is very beneficial for economic growth.

Conti….

The purpose of this research is to estimate the role of textile in the economic growth by using time series data for the period of 1975 to 2011. This data examined by using an econometric model with the help of eviews software. ARDL technique is used to check long run relation and ECM is used to find out short run relationship among variables

INTRODUCTION

The Textile industry is often considered the backbone of the Pakistan's economy.

Pakistan's textile industry is the fourth largest cotton producer.

6th largest importer of raw cotton the third largest consumer.

The half of the country’s manufacturing foundation is made up by a cotton- process and textile industries.

Conti….

The T&C (textile and cotton) industry is the oldest, biggest and most universal industry in the world. It is the classic ‘starter’ industry for export-orientated industrialized countries and is labor-oriented.

There are 75 cotton producing countries in the world but the top five countries (China, 6324, 5770 MT, USA, 5062, 5201 MT, India, 4121, 4148 MT Pakistan 2482, 2089 in 2004-05 and 2005-06 respectively) produce more than 70 percent of the total cotton.

Value chain of textile industry

RAW MATERIAL

APPAREL PLANTS

DISTRIB. CENTRES

TEXTILE PLANTS SPINING WEAWING DYING PRINTING

ASSESSORIES

RETAIL STORES

COSSTOMERS

12%

20%

3%

28%

29%

8%

Sales

1st Qtr2nd Qtr3rd Qtr4th Qtr5th Qtr6th Qtr

1st Qtr 12% Pakistan: 2nd Qtr 20% India: 3rd Qtr 3% Others: 4th Qtr 28% China: 5th 29% USA: 6th 8% Uzbekistan: Source: SMEDA

Textile industry is the foundation of Pakistan’s export trade so lies at the heart of its economy. It helps the country to raise foreign exchange reserves by making significant contributions in exports.

Production of cotton generally depends on yield per hectare and region allocated for this crop. Theoretically, this study assumes that the cotton growers follow a two-step decision making process.

The first step is that they decide which crop to be planted and how much land to be allocated for each crop. In the second step the grower decides about the levels of inputs for each crop. Two separate models for yield response and land were analyzed to assess the production of cotton.

Conti….

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015-5000

50010001500200025003000350040004500

gdpctex

COTTONTEXTILE

COTTONTEXTILE

LITRATURENREVIEW

(Beenish et al., 2013) describe the contrast of pre-crisis time (2005 to 2006) and post crisis time (2007 -2010) Cotton textile plays an important function in the progress and industrialization course of countries and their combination in the world market

Malik (2000) experienced the developing country assumption for demand for textile and clothing exports of Pakistan by co-integration regression procedure. Annual data for the period 1973-1996 was used.

Imran (2011) explained that the effect of universal economic disaster on the cotton textile industry of Pakistan. For that target he used 141 factories in Faisalabad, Pakistan.

Research Objectives

To investigate the role of textile industry in the development of Pakistan

Policy Recommendation

METHDOLOGY

The Data has been collected from secondary sources.

The study is used to investigate the role of textile industry in the development of Pakistan from 1975 to 2011.

The main objective of this paper is to investigate the role of textile industry in the development of Pakistan.

The dependent variable is GDP the cotton textile is independent variable and the control variable is export in the models. Quantitative data examined by using Econometric models with the help of Eviews software.

Data sources

I have used data on crime and education of primary, secondary and high school during the period of 1973 -2010 to investigate the impact of crimes on education in Pakistan. The data used for the study is collected from the World Bank Indicator (WDI) and the economic survey of Pakistan 2014.

Variable verification

GDP (Gross Domestic Product)

COTTON TEXTILE

The economy of Pakistan is highly dependent on its cotton and textile sectors, which face significant challenges and opportunities in an environment of fluctuating world prices, macroeconomic instability, and changes in the global trade regime for textiles and apparel. Yet there is limited systematic analysis available that can help us understand the linkages between these sectors and the effects of their performance on the country’s economy

Exports play a pivotal role in economic affairs of Pakistan by providing benefits at both macro and micro economic level. The textile industry being the backbone of the Pakistan’s economy is participating significantly in the export sector of Pakistan.

EXPORTS

Econometrics Model

The unit root test is used to test stationary of variables. A quality of a statistical model of a time series whose autoregressive limitation is” one” called as unit root. Unit root is used to check the stationary of time series data.

In unit root test, use ADF test and DF generalized least square method.

Methodological frameworks

GDP=βo+β1CT+ β2EX+µt  Whereas: GDP=gross development productionCT=cotton textileEx=exportµt= error term HypothesisH0: β1= 0 CT did affect the GDP.H1: β1 ≠0 CT did not affect the GDPH0: β2= 0 EXP did affect the GDP.H1: β2 ≠0 EXP did not affect the GDP.

VARIABLES RESULTS OF AUGMENTED DICKEY FULLER

STATIONARITY

GDP -9.534917 1% -4.252879 5% -3.548490 10% -3.207094

At level

CT -7.984084 1% -4.243644 5% -3.544284 10% -3.204699

At 1st difference

EX -6.251025 1% -4.243644 5% -3.544284 10% -3.204699

At level

Long Run Equation

Short Run Equation

01 1

.k k

it i i t i ti i

GDP CT EX

11 1

...m m

t i t i i t i t ti i

GDP CT EX ECM

ARDL Model

Lagrange Multiplier Statistic

CHSQ (3) 10.8864

Likelihood Ratio Statistic

CHSQ (3) 13.1219

F Statistic F (3, 26) 4.0819

Table 2 Variable Addition Test (OLS case)

The above results of the variable addition test verified that their exit long run relationship between GDP and Cotton textile. F-statistic shows no co-integration because of rejection of null hypothesis.

Regressor Coefficient Standard Error

T-Ratio Prob

CT .065838

.029792 2.2099 .035

EX .0014397 .0010056 2.4317 .003

C 2.1537 .45389

4.7449 .000

Table 3 Autoregressive Distributed Lag selection

ARDL (1, 1, 2) selected based on Akaike Information Criterion The Dependent variable is GDP 35 observations used for estimation from 1977 to 2011

There is a positive relationship between the GDP and cotton textile means that because of the increase in the cotton textile the GDP of the country increase. The results show that one unit change in GDP leads to increase the .065838 units in the CT and .0014397 units in EX are statistically significant.

Calculated value > table value

We reject the null hypothesis and accept the alternative and results are significant

Error Correction Representation for the Selected ARDL Model

Regressor Coefficient

Standard Error

T-Ratio Prob

dCT -.9208E-4

.011211

-.0082141 .994

dEX -.3747E-4

.4074E-3

-.091993 .927

dEX1 .6502E-3

.3803E-3

1.7096 .098

dC 1.5085

.48677

3.0990 .004

ecm(-1) -.70043

.14395

-4.8657 .000

ARDL (1, 1, 2) selected based on Akaike Information Criterion Dependent variable is dGDP 35 observations used for estimation from 1977 to 2011

Once identifying the reality of the long - run relationship between GDP and cotton textile; therefore in command to set up the short-run dynamics we used the Error-Correction Model (ECM).

Table, elaborates the ECM model results that verify the reality of a short-run relationship between GDP and cotton textile in Pakistan. Error correction model (ECM) what shows the speediness of convergence which is close to concerning .70043.

The value of the ECM shows that 70 % (per cent) convergence get position in one year.

Table, elaborates the Error correction model results that verify the reality of a short-run relationship between GDP and cotton textile. The negative value of the Error correction model (ECM) .value shows the speediness of .70043 convergence, and divergence shows positive value mean the economy has left away from the learning begin point.

R-Squared

.67547 R-Bar-Squared

.60593

S.E. of Regression

1.5357 F-stat. F ( 4, 30) 14.5696

Mean of dependent variable

-.024000 S.D of Dependent Variable

2.4464

Residual Sum of Squares -

66.0364 Equation Log-likelihood

-60.7729

Akaike Info. Criterion

-67.7729 Schwarz Bayesian Criterion

-73.2166

DW-statistic

1.8314

RECOMMENDATIONS

Pakistan must enter high quality textile market

improve quality standards

move into production of synthetic fiber

invest in R&D of different types of cotton, especially long staple superior variety

Technology up- gradation &capacity building

interest rate should be low down in order to survive this industry

CONCLUSION

there is a positive relation between the cotton textile, GDP and exports.

COTTON TEXTILEGDP EXPORTS

we conclude that there is a positive relation between the cotton textile and GDP. It means when textile sector grow, then our economy will be increased.

According to observed results cotton textile variable has a major effect on GDP.

The textile industry of Pakistan plays an important role in earning foreign exchange, providing employment to the country. Pakistan’s textile industry is going through one of the toughest periods in decades

Our textile sector needs to capitalize on the new emerging opportunities by technologies, better supply chain management while trying to reach global value chains.

References

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Diversification: still a route to growth for Low income

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