The textiles industry in Pakistan has failed to fulfill its “historical
mission,” whether judged in terms of promoting rapid and sustained economic
growth, reducing poverty, or providing employment to young women and so
promoting wider social transformation. This paper makes a case for a particular
and targeted form of industrial policy that would help the textiles sector learn and
upgrade. It argues that those factors commonly seen as constraints to industrial
policy—the “China effect,” the global rules of globalization, global value chains,
and the problems of energy and education in Pakistan—do need careful
consideration, but they are not insurmountable obstacles to industrial upgrading.
The key market failure is the risk and uncertainty associated with acquiring and
learning to use new technology. The paper explores a number of policy options,
reviewing the lessons that cannot be learned from the Republic of Korea and India
and one that can from Bangladesh. The latter shows that rapid and sustainable
export growth in textiles can be achieved, even in an economy with a weak,
corrupt, and unstable form of governance