Resurgence in global textiles - lets not miss the bus

All told, projections are for healthy growth in cotton trading this year (2010-11), with 114 million bales of production worldwide (25M MT), up from 102 million bales (22M MT) in 2009-2010. Pent up demand for cotton goods appears to be breaking through the logjam as the global economy begins its swing in a positive direction. Pakistan being a country with a highly dependent economy on cotton and textiles should try to optimise this opportunity by forming meaningful linkages and developing global synergies for its textile industry. However, we see that our Textile Ministry thus far has failed to live up to the challenge, whereas the Indians seem to be maximising this opportunity by taking some very proactive and positive steps to ensure that not only do the Indian textiles consolidate their gains, but also the projected benefits get reflected in an even stronger Indian economy. Lets try and analyse some of the key investments and policy measures taken by the Indian Government vis-a-vis its cotton and textile industry: a) Fourteen new integrated textile parks have been launched across the country, with the largest one being in Himachal Pradesh, costing Ind Rs. 1.20 billion, These parks were designed to provide employment to at least 30,000 people. As an incentive, the government provided them interest subsidy on purchase of new machines and outright grant of 40 percent of the cost required to build any additional infrastructure. b) TUFA: Subsidy on technology up-gradation. The budget outlay for TUFA in the next fiscal year has been increased to Ind Rs 50 billion. c) The area under BT cotton has increased from 29,000 hectares in 2002-03 to 80 lakh hectares in 2009-10. The average yield of BT cotton has also increased from 300 kg per hectare in 2001-02 to 560 kg per hectare in 2007-08. Active support by the Indian government in promoting the cultivation of BT cotton has resulted in 31 percent increase in yield, 39 percent reduction in pesticide usage and more than 80 percent increase in profitability of the Indian farmers. d) The impact of the Indian Budget 2010-11 will also be very positive on the textile sector as the 2 percent interest subvention on pre- and post-shipment export credit has not only been extended by a year, but has also been revised downwards to 2.50 percent. e) A comprehensive textile policy will be announced by the Indian government by end July 2010 to make sure that supply is guaranteed to all sectors in the textile manufacturing chain, cartels, and sector specific profiteering is discouraged, whereas national exports are maximised. Give me a one-armed economist This was the exasperated plea of the former US President Harry Truman in the late 1940s. Truman grumbled that whenever his economists advised him, they would inevitably say, On the one hand...but, on the other ..... accounting for the ambiguities of economic indicators. Likewise, the Nobel-Prise-winning Irish playwright, G. Bernard Shaw, said, If all economists were laid end to end, they would not reach a conclusion. Economic prognosticators, who are really interpreting and predicting collective human behaviour, infamously rely on their simplifying assumptions. An economist may assume an efficiently functioning free market, characterised by perfect information for all players. He is also apt to freeze certain economic elements to isolate the effects of specific forces, assuming ceteris paribus (all else being constant). Of course, no one has perfect information, free and efficient markets do not exist, and innumerable simultaneous forces influence human economic behaviour. All of that conspires to confound economic predictions - whether about the global economy or the future price of cotton in Karachi. On the one hand, certain signs clearly point to economic recovery and a more robust cotton market. In the US, the worlds largest consumer economy, employment has grown in each of the first four months of 2010, returning more than 500,000 jobs to an economy that had lost 3.5 million. In April, US manufacturing experienced its greatest growth in six years. In March, major US clothing retail chains saw their sales jump a surprising 12 to 24 percent compared to March of 2009. The economies of China and India both grew by almost 9 percent last year and are perceived to be heating up in 2010. China may well raise its cotton-import quota by 60 percent, to 3 million tons. On the other hand, fears abound that the debt crisis in Greece could ripple through Europe and the world, reversing a fragile economic recovery. Still, by and large, there seems to be a consensus amongst the textile pundits that at least the textile trade will remain bullish for the coming 2-3 years. In this context, I have already listed some of the Indian measures to strengthen its textile industry in order to fully reap the significantly increased gains expected in the coming years. While we see the Indian Government eyeing to capitalise on a resurgent textile global trade, the Chinese are not sleeping either and are also taking serious steps to support and protect their textile industry. Through a number of support measures undertaken during the year 2008-09 and realising that going forward, there is profit to be made from the increasingly lucrative global textile trade, they have already reversed the declining trend by posting growth in their key textile export categories in 2010 over 2009: garment exports by 12 percent, general textile products by 24.20 percent, garment accessories by 9 percent, shoes by 6.40 percent and apparel by 8.48pc. Now where does this leave us? Amidst a growing opportunity in a sector where Pakistan has its largest investment, what one sees is an uncertain, chaotic and confused policy direction of the Textile Ministry. There is no vision or clear roadmap cum strategy to cap the chance that has arisen after a long gap for Pakistans largest sector to finally make good its potential and earn revenue for the country. There is a need for the related ministries, especially the Textile Ministry, to involve all stakeholders, brainstorm and quickly evolve a clear strategy on how the textile trade in Pakistan will be managed and carried out in the next twelve months to ensure that while all sectors within the textile manufacturing chain are protected, the ultimate gainer should be national revenues and not a particular lobby or group. Some just might quote here the famous US Economist, John Kenneth Galbraith (who did a lot of work on agriculture in North America). Economics is extremely useful, albeit as a form of employment for economists and nowhere more so than in the cotton trade. Well, even so, the thing is that good work never hurt anyone, and only through sound policy decisions at this stage we can ensure that we do not end up missing the bus, yet again kamalmannoo@hotmail.com.

The writer is an entrepreneur and economic analyst. He can be contacted at kamal.monnoo@gmail.com

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