Value-Added Textile Exports Raise Alarm as Competitiveness ErodesRising costs, policy uncertainty and liquidity pressures push sector towards critical threshold

By Muhammad Shahzad
Lahore, Pakistan
Pakistan’s value-added textile industry, a key pillar of the national economy and one of the country’s largest sources of employment and foreign exchange, is facing intensifying pressure as manufacturers warn that global competitiveness is eroding at an alarming pace.
Industry representatives say a convergence of soaring energy costs, delayed tax refunds, liquidity constraints and unpredictable policy shifts is undermining exporters’ ability to compete in international markets. The mounting strain has already translated into factory slowdowns, workforce reductions and the gradual loss of overseas buyers, despite steady global demand for textile products.
Manufacturers across the value-added chain say rising production costs have moved beyond a long-term concern to become a daily operational challenge. Energy tariffs, in particular, have emerged as a decisive factor, with sharp and unpredictable fluctuations making it increasingly difficult to plan production cycles or offer stable pricing to international clients.
Exporters note that global buyers operate on thin margins and place a premium on cost certainty and delivery reliability. Even marginal price disadvantages, they warn, can result in lost orders in highly competitive markets. As a result, several factories with confirmed orders and installed capacity are struggling to remain viable.
Reflecting these concerns, the Pakistan Hosiery Manufacturers Association (PHMA) has cautioned that the textile export sector is approaching a critical tipping point and requires immediate, coordinated intervention. PHMA Zonal Chairman Abdul Hameed said exporters are facing severe financial stress on the factory floor.
He said hosiery manufacturers, despite having orders and production capacity, are being squeezed by escalating energy costs, delayed refunds and frequent policy changes. “Pakistan is being priced out of global markets where buyers demand competitive rates and consistent delivery schedules,” he said, warning that continued inaction could result in the loss of hard-earned market share to regional competitors with more stable cost structures.
Former PHMA Chairman Shehzad Azam Khan described the decline in textile exports as a broader economic warning rather than a sector-specific issue. He said value-added textiles are among the few industries capable of generating large-scale employment and foreign exchange simultaneously, making them critical to economic stability.
Any sustained contraction in exports, he said, directly affects foreign exchange reserves, exchange rate stability and inflation, with spillover effects across the wider economy. He criticised what he termed short-term and ad hoc policy measures, arguing that they have failed to address the structural issue of competitiveness.
According to Shehzad Azam Khan, exporters cannot plan long-term investments, modernise technology or retain international buyers in an environment marked by uncertainty. While competing countries have aligned industrial, energy and trade policies around export growth, he said Pakistan continues to treat exporters as a fiscal buffer during periods of economic stress.
Industry representatives also point to frequent changes in duties, withdrawal of incentives and delays in tax adjustments as factors eroding confidence among international brands. Global buyers, they note, increasingly prioritise policy stability alongside pricing, favouring sourcing destinations where regulatory frameworks remain consistent over several years rather than shifting within months.
Shehzad Azam Khan warned that Pakistan’s stop-start policy approach has weakened its credibility at a time when buyers are seeking long-term partnerships, discouraging both new orders and future commitments from existing clients.
Former PHMA Zonal Chairman Naseer Butt highlighted the acute liquidity crunch affecting the hosiery segment, particularly small and medium-sized enterprises. He said blocked refunds and rising financing costs have constrained working capital, forcing many units to operate below capacity or temporarily shut down.
Such disruptions, he warned, have a cascading impact across the textile value chain, affecting yarn suppliers, processors, transporters and thousands of workers dependent on steady production. He stressed that the export slowdown is not demand-driven, noting that global buyers continue to seek diversified sourcing options.
According to Naseer Butt, Pakistan is losing ground because its cost structure has become increasingly unpredictable. Volatile energy tariffs, combined with uneven tax treatment across the value chain, have made it difficult for exporters to quote competitive prices or commit to long-term contracts.
Industry leaders are calling for regionally competitive and predictable energy pricing, streamlined and automated refund mechanisms, and a stable policy framework that allows manufacturers to plan investments with confidence. Without such reforms, exporters warn, Pakistan risks falling further behind at a time when global opportunities remain available but increasingly contested.