When timing could be everything, why are the Pakistani policy makers not making timely policy? Babur Rafiq, a prominent player in Pakistan’s textiles industry raises a red flag…
By Babur Rafiq
akistan’s textile has been the one of the top five cotton producers in the world for the past few decades. The opportunity to build on its strength, is matched by internal counter currents which have incredibly diminished Pakistan’s Global Textile relevance quite effectively. Other countries have moved on, and in fact been able to capitalize on lack of competitive challenge posed by Pakistan. Countries that have been able to buy Pakistani cotton and yarn have emerged as winners, while the entire domestic textile sector has been experiencing a roller coaster ride of sorts. Ironically, the recent yarn price spike, further perpetuates the lack of competitive positioning while a short term windfall is harvested. Once again at an economic cross road of opportunity, the country can take some proactive steps to set up medium and long term success.
As a global cotton demand is confronted with a transition due to China migrating significant hectors to food and premium crops, Pakistan has an opportunity to fill the vacuum but needs to switch to GM/BT sowing cotton significantly and immediately. Shifts to these varieties are already in place in the US, China and India. Pakistan has been lagging behind in adoption due to political issues. A 5 percent yield increase can cause Pakistan to be part of the new equilibrium solution and comes at a great time when prices are up. In fact if this switch had been made already, as it should have been over the past few years aggressively, the country would have already more fully benefited due to the pricing surge. Instead, it remains mired in political and economic arm-wrestling competition between the government, large land holders and international seeds suppliers on the cost, benefits and timing while profits are vaporizing every year.
The need to incent up (stimulate) large, medium and small scale textile enterprise to view this sector as a growth engine is critical. The confidence of the local investor at all levels needs to established. While the security situation appears to be a perennial challenge, large buyers like IKEA (Home Textiles), Levis Strauss & Co. (Apparel) etc. have remained engaged due to emergence of competitive niches. The government needs to ensure that supply of critical inputs into this sector, i.e. yarns both cotton and non cotton (especially) needs to be managed under a long term stable policy which ensures profitability in those sectors and not managed by import and export restrictions to swing the up stream industries artificially. It requires a stable textile policy which is based on global market realities, while creating a local vision and path for local and possibly foreign entrepreneurs to view this sector for the potential it has. The need to support capacity building in the sectors with incentives to the value added sector is critical, while ensuring it does not come at the expense of the upstream sectors is the balancing act which needs to be managed. Most of the times the government policy actions are viewed at the expense of one of the stake holders of the business chain. This has to stop.
Labor Force development, which creates an educated work force at the vocational level and management level in all provinces are critical. Recent demographic changes in the labor forces in India and China in terms of age, mobility and importantly cost increases, make the Pakistani labor competiveness more relevant, provided the challenge of productivity are ready to be met. Infrastructure of education needs a priority which is as equal, if not, more than the security situation. Population is a combustible asset or a liability which can match any security or nuclear priority. A provincial ring of textile educational institutes which target vocational, management and research needs for the industry needs significant investment to match global best in class. A private public partnership to drive this is very important.
Pakistan’s foreign trade policy needs to seek access not just to US and EU market places but aggressively position itself in Asia, Latin America and Africa. One can argue that trade access to countries like Brazil, China, South Africa etc. can deliver better return on time invested vs. the effort some of the western countries require. Also accelerating the relevance of SAFTA ahead of even political resolutions can provide Pakistan the economic benefit in textiles which can form a part of the political leverage for the future. Currently inbound duty structures in ASEAN prefer India over Pakistan. Through ASEAN, China is also giving duty free access to certain countries in Asia in 2010 and at the same time ramping down duties for other like India while Pakistan holds on to its own FTA which is less compelling. Bottom line is that Pakistan needs to join trade blocks not just negotiate one on one deals.
Another key market area is the domestic retail structure. To protect and develop the textile sector, it is import a robust domestic market is evolved which has brands, retail chains and an employment opportunity for the textile community which serves an end to end market place. This area brings market place insights and an upgrading for the value addition by building consumer and product led capabilities. It also builds a buffer to international fluctuations in demand. Building the domestic capabilities can also help test new ideas and can be the foundation of owing brands globally once the capability is in place for the future. The way to do this is to again include this area to be supported by the vocational training needs of retail staff as well as marketing. At the same time creating an efficient retail infrastructure where focus on modern retail not small plots in commercial zones which don’t have consumers in mind. Our current retail structure does not have parking and footfall capacities which are either environmentally nor financially efficient.
So the moment of truth is here, can we get it together in a number of areas to drive this textile harvest? or are we going to watch the world go by… bye.
Photo by guccio at Moleskiner.cn ■
Babur Rafiq is Vice President Product Development and Supply Planning based out of Hong Kong for Levi Strauss & Co.
Pakistan Cotton and Textile Industry:
Research articles by Fareeha Qayoom
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