News Textiles

Textile: does the mothership speak for everyone? – BR Research


It is said that economic interests – and not geo-politics – is the key driving force in foreign policymaking. How fortunate for some when their economic interests perfectly align with national interests. Pakistanis saw this playout last week, when a proposal to import cotton and yarn from India was rejected by federal cabinet. But whose economic interests did it protect?

Over last month, this newspaper ran a slew of shikwa and jawab-e-shikwa press releases by warring factions within textile value chain, but without calling each other out by name. Their bone of contention? Whether or not to permit raw material import from India.

But whose raw material? In March alone, several trade associations called for permission to import cotton, yarn, and even fabric from India, to meet a shortfall in domestic supply. This comes after raw material prices shot up locally since January, allegedly forcing manufacturers in value-added segment to cancel export orders.

Export demand is on a rise after return of international buyers to Pakistan since last year, while supply of domestic raw material simply isn’t enough. Import of low-cost Indian cotton and yarn through land route would allow exporters to capitalize on the buoyant demand, claim players in the value-add segment. Some have gone further and even demanded a ban on yarn export!

But not everyone seems to agree. The spinning segment insists that it has imported over 3 million bales of expensive and higher quality cotton since July last year, whereas resumption of trade with India will bring local cotton and yarn prices crashing down. There is no yarn shortage locally, as domestic prices are equivalent to landed cost of imports (through sea-routes). Therefore, value-added segment should chin up and oppose the hegemon next door for the sake of greater national interest.

So, what’s really going on? Has the spinning segment truly created a shortage locally by taking advantage of favorable global prices? Pakistan’s 8MFY21 cotton yarn output is virtually flat over last year, while yarn export volume has fallen by 17 percent over the same period. Unit prices of exported yarn have only begun to improve during last quarter. Thus, while spinners may be extracting a better bang for their (exported) buck, why shouldn’t they? Moreover, why should spinners let go off an opportunity to mint dollars, only to keep garment players export competitive?

Except that while the spinning segment demands trade freedom for itself, it simultaneously asks for protection from imported Indian raw materials, to the detriment of value-added segment. Worse still, the spinning segment speaks through the forum of APTMA, which is widely presumed to be the representative organization of all segments within the textile value chain.

But does the mothership truly speak for everyone? Over the past three months, at least 15 national and regional level trade bodies have lobbied for yarn import, while APTMA is almost alone in its opposition. Events over last week may show that the interests of a minority group have carried the day. But should the numerical strength of trade bodies and their members determine national level trade policy?

An argument can always be made that if Pakistan’s textile exports are to ever graduate beyond low-value added yarn and cloth, its policy tilt must shift towards garments, apparel, knitwear and other made-up products. After all, both Bangladesh and Vietnam have come to dominate global textile market by sourcing cheap raw materials regionally, instead of obsessing over indigenous production.

If only things were that simple. On one hand, significant level of overlap exists between registered members of the 15 associations and APTMA members. Moreover, APTMA is also home to 20+ largest composite units in the country that not only manufacture and export yarn but also export value-added denim fabric, garments, and knitwear. Worse still, because a high percentage of (non-APTMA) value-added segment players are privately owned, there is virtually no way of knowing whether these contribute a higher share of textile export dollars, or the APTMA members.

And that’s not all. While several composite units may very well be APTMA members, the loudest ones usually only have spinning operations. Moreover, because APTMA has taken upon itself to fight for regionally-competitive tariffs for the entire value-chain, most shy away from calling it out and going on a collision course publicly.

Spinners may have won this round. But can they also claim it to be a victory for Pakistan’s textile exports?


Source link