Manufacturing in Pakistan: Is It A Good Option for Importers?

by | Sep 9, 2020 | Sourcing

Are you manufacturing your products in China but considering alternatives?

A Gartner survey of “260 global supply chain leaders in February and March 2020 found that 33% had moved sourcing and manufacturing activities out of China or plan to do so in the next two to three years.”

Pakistan is one of the areas that we’ve seen our customers shift their attention to recently. We’ve received an increasing number of inspection and audit requests there — particularly for products such as apparel, bedsheets, and other soft goods.

What do you need to know about Pakistan if you’re considering making your products there?

In this article, we provide information about the country’s top export categories, infrastructure, and labor force. We also provide some quality control management tips.

You can use this information to help you make an informed decision when considering Pakistan as a manufacturing destination.

What are Pakistan’s Top Export Categories?

In 2019, Pakistan exported a total of $20.8 billion worth of goods, primarily to countries in Asia, Europe, and North America.

Blue and green shirts hanging on a rack

Pakistan is a major exporter of textiles.

It’s top 10 exports were:

  1. Miscellaneous textiles, worn clothing: US$4.2 billion (20% of total exports)
  2. Clothing, accessories (not knit or crochet): $3.5 billion (16.7%)
  3. Knit or crochet clothing, accessories: $3.3 billion (16.1%)
  4. Cotton: $1.8 billion (8.4%)
  5. Cereals: $1.2 billion (5.9%)
  6. Leather/animal gut articles: $716.7 million (3.5%)
  7. Copper: $596.7 million (2.9%)
  8. Optical, technical, medical apparatus: $421 million (2%)
  9. Mineral fuels including oil: $393.8 million (1.9%)
  10. Fish: $372.5 million (1.8%)

(Source)

The manufacturing sector in Pakistan is heavily focused on textile products. And in February — as China was battling the initial coronavirus outbreak — textile manufacturers were pushed to full capacity as many orders were diverted there.

Overall, the country presents many opportunities for soft goods importers who are looking to diversify their supply chains.

Whether importing textiles or other products, importers need to think about infrastructure.

Infrastructure and Transportation in Pakistan

According to the World Economic Forum’s 2019 Global Competitiveness Report, Pakistan is ranked 105th in the world for infrastructure. This puts Pakistan in the bottom 26% of countries.

For comparison, China’s infrastructure is in the top 26% of countries, ranked 36th.

It’s worth noting, though, that its infrastructure ranking is mainly dragged down by low access to utilities — electricity and safe drinking water. Pakistan’s utility infrastructure is ranked 114th in the world.

However, its transportation infrastructure is actually somewhat developed — it comes in at 69th. This puts it in the top 50% of countries and on par with Vietnam (66th).

Cranes at Gwadar Port

Gwadar Port in Pakistan (Wikimedia Commons)

Pakistan has seen significant infrastructure development in recent years, mainly due to its close relationship with China. Often referred to by Chinese officials as China’s “iron brother,” the country has benefitted from the China–Pakistan Economic Corridor (CPEC) plan.

Its Gwadar Port is the deepest seaport in the world and went into operation in 2016. The port is operated by the China Overseas Port Holding Company — a Chinese state-owned enterprise.

While Pakistan’s transport infrastructure is not as developed as China’s, it is developing.

Before your products can be shipped overseas, however, they must first be produced by the Pakistani labor force.

About the Country’s Labor Force

Pakistan is a large country — the 5th most populous in the world — with more than 200 million inhabitants. That creates a large pool of potential workers to draw from.

It has a minimum wage of 16,000 rupees (a little under $100 USD) per month, which means significant cost savings are possible.

For comparison:

  • Vietnam’s minimum wage ranges from VND 3,070,000 ($132 USD) to VND 4,420,000 ($190 USD) per month.
  • China’s minimum wage ranges from 1,150 CNY ($163 USD) to 2,480 CNY ($361 USD) per month.

One potential item of concern is Pakistan’s unskilled workforce. According to the Global Competitiveness Report, Pakistan is ranked 125th overall for the skills of its workforce. For that reason, it makes sense to only engage manufacturers of low-skill products, like textiles.

In order to get the best quality out of your manufacturers, you’ll need to take certain steps to manage quality control.

Managing Quality Control in Pakistan

To manage quality control effectively, you need to do a good job of managing your relationship with the factory.

Similar to China, communication can sometimes be a challenge. For example, manufacturers may answer your questions with a “yes” when they should really answer with a “no.”

Neon sign that says

Don’t expect the word “Yes” to always mean “Yes” in Pakistan.

Expect that if you have never worked in the country, there will be a learning curve when it comes to communication.

If you’re thinking about conducting product inspections or factory audits at smaller facilities, keep in mind that you may get some pushback at first.

Factories that don’t have as much experience working with Western customers may need a little more explanation of the process to get on board.

Overall, if you’re thinking about shifting some production away from China and are producing soft goods, Pakistan is worth considering. Just be sure to do your due diligence and hold manufacturers accountable.

This means conducting audits to ensure the suitability of manufacturers, inspections to hold them accountable, and lab tests to ensure compliance with regulations.

When considering manufacturers in low-cost countries, you need to approach sourcing and quality control the right way.

For more information about how to do this, we recommend the following guide.

5 Product Sourcing Mistakes Cover

Free Download: 5 Product Sourcing Mistakes

When you work with a new supplier in a low-cost country, you need to understand what you’re getting yourself into and take all the necessary precautions.

There are certain mistakes that we see importers making all the time — mistakes that can be avoided with the proper mindset and preparation. Learn what they are and how to avoid them.

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