The global cotton and textile communities are facing historically
volatile times, regardless of which part of the supply chain they belong
to. Without question, the problem our industry faces are significant -
but they are by no means insurmountable. In this new era, success will
require a level of communication and transparency greater than we have
ever had in the past, and this is an opportunity that we can take
advantage of. The Textile Ministry by developing closer ties within the
business organisations and inter-industry platforms, both upstream and
downstream, can do much more than simply survive these dangerous times:
It can proactively build a better, healthier and stronger national
textile industry that can benefit the economy and sustain long-term
export growth, once the current period of market turbulence subsides.
This is a time where it is of paramount importance that by regularly
discussing strategies with the stakeholders, the authorities ensure that
the national cotton trade functions more smoothly in all sectors, so
that we can ensure to not just successfully ride the present crisis, but
also manage ourselves in a way that we can possibly avert one in
future.
Neighbouring India, even after an extreme slowdown, is
still growing at more than 6 percent per year; whereas, Pakistan’s
growth average during the past four years has been barely 2.50 percent.
At least two million new workers enter our labour market every year,
which means that if we cannot match this with corresponding growth, the
problems with unemployment and poverty will compound. The sad reality at
present, however, points to a climate where our industry is instead
operating at about 30 to 40 percent below capacity. The textile sector
accounts for approximately 38 percent of our entire labour force and an
operating level of 60 percent basically means a job loss in this sector
alone of about one million workers.
Ironically, in textiles, not
international demand or global management, inefficiencies have been the
main culprits, but the sheer choking of power (electricity) and energy
(natural gas) has forced closures resulting in the loss of global market
share. Comparing this with 2007, when the industry was operating on
full capacity, it means: Whereas, in four years an extra 3.20 million
fresh young employable workers should have been absorbed in the textile
sector, it is at present accommodating one million than its peak back in
2007! Running an industry per se is becoming untenable, especially in
Punjab, where it is forced to close for nearly 170 days a year for want
of power and energy.
Little wonder that our textile exports are
falling, rather than registering an increase. Based on the figures
recently released by the Ministry and verified by the respective
Chambers, if we compare January 2011 to January 2012 in quantity terms,
the total textile exports have registered a decline of 15.37 percent,
and the sector wise decrease reads as textiles and clothing by 16.81
percent, knitwear by 34.79 percent, bed wear by 30.24 percent, towels by
21.76 percent, readymade garments by 24.46 percent, art silk and
synthetic textiles by 44.29 percent and other made-ups by 28.16 percent.
Even more disturbing is the trend that the exports of higher
value items have fallen at a much higher rate than the less valued ones
and, alarmingly, the products that in competing manufacturing economies
are regarded as ‘raw materials’, have actually gained their share of
exports! For example, raw cotton exports have registered an increase of
397.42 percent, cotton yarn one percent and yarns other than cotton yarn
by 2,287.50 percent. Value addition as we know has been a weakness of
Pakistani textile exports, as we continue to operate at one of the
lowest per kilogram values amongst the principal textile manufacturing
countries of the world.
And it is this very weakness, which our
Textile Ministry needs to guard against and strategise to somehow
overcome. The Indian Ministry as we know goes to great lengths in policy
formation to ensure that the operational framework supports a culture
where the industrial potential of value addition gets maximised - in
spite of no real global or domestic shortage of cotton, we saw India
place a ban last month on its cotton export to see to it that priority
lies with conversion of the basic commodity into finished cum made-up
goods - this in order to generate both additional foreign exchange
revenues and employment. At our end, one is not too convinced that our
policymakers are even thinking through this aspect of our trade
dynamics. Recent key decisions on enhancing trade with India seem to
have been taken in haste and without ensuring the fair element of
reciprocity. While it is understandable to grant the MFN (Most Favoured
Nation) status to India, in doing so we needed to protect our industrial
strengths by guaranteeing fair access to the Pakistani products where
we add good value and enjoy a competitive edge over India, e.g. home
textiles, towelling, cement, sports goods, surgical instruments,
specialised consumer products, processed meat, livestock, etc. Even the
EU concessions’ package does not seem to be that exciting when one takes
into account that the majority of their concessions apply to items that
fall in the category of feeding cheap raw materials to the European
manufacturing, instead of promoting value addition in Pakistan. Also,
the strong growth items for us like bed linen, bulk of home textiles,
towels, etc have either been excluded or have been placed under the
ceiling of tariff related quotas.
So what is the way forward?
First and foremost, we (the Pakistani textile industry) in guidance from
the policymaker (the Textile Ministry) need to be more proactive in our
decision making by focusing on long-term positioning, instead of
current or short-term profit taking. Turkey, India and China started
basing their textile policies on such a premise, way back in the 80s and
see where they are today. Their textile sector continues to grow in all
its dimensions and the sheer strength of product value addition over
time has supplemented the development of their domestic markets and in
helping them to evolve as leading textile machinery suppliers of the
world. Pakistan in this regard still has a long way to go. Further,
going forward our industry needs enhanced transparency, predictable
government policies, better supply chain management and an awareness,
both within the government and the private sector, of using the newly
developed global hedging instruments to achieve stability in cotton and
MMF (Man-made Fibre) supplies, boost production, and to alleviate
possibilities on future tight stock situations.
Second, all
participants in the industry can show leadership by advocating that the
government/Ministry does a better job of statistical reporting.
Companies can also lead by participating in surveys of production,
consumption and stocks when such data is requested. Common use of metric
measures can help all stakeholders to speak one language of statistics
that the bureaucracy can understand.
Third, we need to remember
that there have been notable improvements in the efficiency of trade in
textiles since the ending of the Multifibre Arrangement (MFA) in 2005,
and attempts by anyone (association, lobby group, etc) to take it
backward through requests to the government for trade protection should
be strongly discouraged.
Finally, the Textile Ministry should
take its cue from their Indian, Chinese and Bangladeshi counterparts by
actively collaborating with the World Bank to make use of its initiative
to deliver training to industry managements, trade associations and the
regulatory body on how to effectively use various hedging mechanisms
and devise intra-industry policy frameworks to ensure smooth and
long-term functioning of the entire industry’s supply chain process.
