In the light of the textile industry's growing foreign competition, trade deficit and job loss, we estimate its productivity and efficiency for the period 1975-93 utilizing a variable elasticity of substitution production function.

The results indicate that, despite job losses, the industry adjusted by increasing labor productivity and maintaining fairly stable profits. This performance does not warrant protectionist policies.

However, with an elasticity of factor substitution less than one and decreasing, the impact of factor price increases could result in higher apparel prices and preference for cheaper imports.

Furthermore, with an elasticity of capital output rapidly decreasing, significant technological improvements will be required to improve competitiveness since textile production is capital intensive.

Recently revised rules on trade liberalization could increase competition in the industry.

Key words: textile - elasticity of factor substitution – protectionism

The Pakistan Textile Industry - an Overview
The textile industry is one of the most important sectors of Pakistan. It contributes significantly to the country's GDP, exports as well as employment. It is, in fact, the backbone of the Pakistani economy.

Established capacity
The textile industry of Pakistan has a total established spinning capacity of 1550 million kgs of yarn, weaving capacity of 4368 million square metres of fabric and finishing capacity of 4000 million square metres. The industry has a production capacity of 670 million units of garments, 400 million units of knitwear and 53 million kgs of towels.

The industry has a total of 1221 units engaged in ginning and 442 units engaged in spinning. There are around 124 large units that undertake weaving and 425 small units. There are around 20600 power looms in operation in the industry. The industry also houses around 10 large finishing units and 625 small units.

Pakistan's textile industry has about 50 large and 2500 small garment manufacturing units. Moreover, it also houses around 600 knitwear-producing units and 400 towel-producing units.

Contribution to exports
According to recent figures, the Pakistan textile industry contributes more than 60% to the country's total exports, which amounts to around 5.2 billion US dollars. The industry contributes around 46% to the total output produced in the country.

In Asia, Pakistan is the 8th largest exporter of textile products.

Contribution to GDP and employment. The contribution of this industry to the total GDP is 8.5%. It provides employment to 38% of the work force in the country, which amounts to a figure of 15 million. However, the proportion of skilled labor is very less as compared to that of unskilled labor.

Organisations in the industry
All Pakistan Textile Mills Association is the chief organization that determines the rules and regulations in the Pakistan textile industry.

Opportunities available
The world demand for textiles is rising at around 2.5%, due to which there is a greater opportunity for rise in exports from Pakistan.