Rethinking cotton dominancy
As textile exports start to pick up, the focus should be on keeping the momentum going. Currency depreciation will undoubtedly prove to be a boon but pricing is just one factor. Value-added segments such as knitwear, bed wear and readymade garments have led growth in exports over the recent past, while spinning and weaving have faced dull overseas demand.
But the contribution by value-added segments can be further enhanced if steps are taken by both policymakers as well as the private sector to increase market share. At the firm level, textile exporters are cognizant of the fact that demand for synthetic based textile and garments has increased multi-fold in recent years.
Yet, Pakistan’s textile exports are still predominantly cotton-based. More worryingly, even cotton production has suffered drastically, while prices recently touched a seven-year high at Rs7800 per maund in the local market because of an expected shortage.
The reasons for the fall in production are numerous with poor seed quality, obsolete cultivation practices as well as weather change. More importantly, as this column has highlighted before, the cultivation of sugarcane has been incentivized, which has led to the encroachment of sugarcane crops in areas traditionally reserved for cotton.
Historically, the imposition of both tariff and non-tariff barriers for imported yarn, fabrics as well as trimmings by the government has resulted in the value-added segments being forced to procure the requisite raw materials after a great deal of hassle and higher prices.
On the other hand, local cotton cannot be utilised when it comes to production of higher yarn count thread that utilises imported long staple cotton. How will the value of exports rise if higher value addition is not achieved by using better quality technical fabrics?
Volumetric growth will undoubtedly follow as a result of recovering demand in the EU and the United States, but price growth might get more difficult in the face of stiff competition and lower margins due to limited product range.
The fact that man-made fibers now contribute more than 65 percent of total fiber consumption in the world means Pakistan’s textile and garments industry needs to embrace the change or risk becoming obsolete.