Cotton challenges

Can Pakistan’s textile industry take advantage of the recent European Union’s opening of the market for textiles? That this has been done by the present government is laudable but are we geared to making this a success? The past tells us a different history so what has changed. The US is very keen to help Pakistan do well in the export market and for this purpose they have offered help in the Pakistan Strategy project. The debate will be held in this month and the US is desirous that the productivity in cotton is improved to an extent that the comparative advantage and the competitiveness that the sector has, is improved so that the current account deficit is reduced and the macro indicators that are showing galloping inflation is thereby contained. Is it fair to put such hopes on this sector and its ability to deliver? The textile sector is also the lead sector in export earnings and it is now a mature sector. The US feels that BT cotton is a viable option and could lead to productivity increases that could change the comparative advantage in terms of providing cheap raw material to the units. There are a number of other options that are needed and only the Monsanto BT gene is not enough.

The US aid has been trying this for sometime. So why has this not improved the comparative advantage of the sector? Surely cheap raw material is a major advance. The last ten years or so this seed from Monsanto was sought to be brought to Pakistan but one hiccup or another came in the way. First and foremost, Monsanto wanted a subsidy from the Pakistan government that was almost impossible for two reasons – first the amount was huge and second, the IMF agreement was specific about subsidies in the agriculture sector. The moral argument was that even if there was a waiver or a one-time waiver, the mandatory morality given to the IMF would be violated. Punjab government was also tested and there were powerful forces that stood in the way. The third issue was a non-issue as the first two were not being implemented. The third was that they would map the cotton belt for three years and then come out with a viable seed option that would be BT with a considerable price tag/kg. In actual terms what this amounted to was about 60 dollars per kg. That meant that with the weakness of the rupee the cost would keep on escalating. What would be the productivity of cotton? BT gene was to provide the wherewithal. From India the news were damaging and it was felt that the high cost would lead to social dissonance. That in India had led to suicides by BT cotton growers.

In the meantime, one of the agricultural scientists from KPK had developed a hybrid with excellent productivity results. He had developed a cotton hybrid seed that out produced anything that was ever seen in Pakistan. His research farm in Swabi had produced something like 12 tons per hectare as against the 3 or so tons produced in the traditional production areas of the Seraiki belt (southern Punjab). During the course of research, it was also found out that this seed was frost and freeze tolerant. Immediately a crescendo of opposition was started by the mafia. In a major meeting before the chief executive of this country, the entire sector was examined threadbare. The officials and research personnel that attended could not even answer the critical questions. The area of production was also tested and it was found that the crop did well in the area that was from Malakand to Jhelum and it was rain-fed. The yields dependent on the ability of the farmer was between 8 to 12 tons and the crop could go on. In other words, it was indeterminate crop and that meant that the farmer and the industry would both be gainers. Farmers would get fewer prices but would gain on productivity while the industry could now challenge the international competitors in a meaningful way.

Now comes the sad part where one’s benefactors became one’s enemy. There were changes in the bureaucracy brought about by mafia that always operates in agriculture. (There are eight such mafias). Then came the other sensational aspect when a foreign unknown person went to National Agriculture Research Centre and took photographs of the crop to send it to his home country. The success of the sector was completely nullified by one Harvard graduate that was placed in a policy level position. Incidentally that person had gone in for cotton on two hundred acres from where nothing was harvested because the crop had been devastated by Heliothus armigera (commonly known as American bull worm). The lengths of the cotton fibre as well as the other indicators of quality were excellent. Even now the crop can be seen in the barani areas where it is surviving. So how can we handle this common phenomenon of interference by those who are not privy to what is required in the country. Can they allow the sector to make their own mistakes and to recover?

The other issue in the comparative advantage is the capital cost of the unit. There have been reports of over-invoicing of the capital goods in order to siphon-off resources from the loans taken from the financial institutes. The result has been that during the previous years various odd options were exercised that were more cosmetic in nature, eg, textile ministry be set up and for what purpose? That there must be a textile city and that there must be a minister of textile. All these options did little to change the entrepreneurial abilities of the textile managers. The inabilities to handle the new paradigms of world trade were never understood. The successive governments have been hostage to the textile industry for they were the ones that provided the entire foreign exchange earnings (about 12 to 13 billion dollars per year). The current account deficit is growing per year and this amount would have been much worse if foreign remittances from Pakistanis working abroad were not forthcoming. Pakistan’s other exports were in rice and some horticulture products (about 0.03%) of the trade. Pakistan has always worked on commodities and not on products.

So does Pakistan reduce the cost of production and also raise the productivity so that comparative advantage comes its way. There are ways but the decision-making process is so convoluted that US need not worry that its market for raw cotton would be affected. It won’t. Leave it to the Pakistanis they will deliver. I have not spoken of competitiveness but here to Pakistan’s ability to harness the management and make it efficient is pretty poor. The reason is that the textile mill ownership always appoints its relatives in sensitive positions. Pakistan has to go a long way to understand professionalism in management. Why should a competitor nation help? The textile mill owners have always been the darling of the politicians and they do play their egos by annual dinners where the chefs come from Thailand or any other country whose cuisine is preferred by the chief guest.

I am afraid Pakistan has to stand alone and deliver. It cannot depend on others. Simple and it will take a lot of hard work and honest appraisal of one’s own industry. When the WTO came in to position Pakistan’s textiles were slapped with dumping charges. Why for the WTO said that they were selling short and the evidence that was produced was that they were all loss-making units and so how could they export. The fact is that the Inland Revenue was used for avoidance and evasion of income tax. Truth has to be made mandatory and not contingent on cheap gains. Today we are again asking for preferential treatment. Incidentally we always got it whenever the West wanted to use the land of Pakistan for some surreptitious activity. Am I being too harsh on Pakistan and the friends of Pakistan? I hope I am wrong but then someone should state facts as they are. Why are the majority of the shares in the stock market selling short – a ten-rupee share is selling for twelve annas (75 paisas)? Give me a reason. Those who are doing well and there a few that are their share value is high. Time will tell whether they can achieve the $60 billion targets that they talk off. That would be excellent. The preaching and the practice have a wide gap. The mandatory moralities that they have set themselves need to be achieved.