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Textile Vision is going foggy
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Quo
Vadis For this new series of columns, I have symbolically chosen the title from the call of the Roman guards when they addressed passers by: Quo Vadis, where are you going? In the previous series, 'Inside view' I took a retrospective approach, dilating upon many areas that affect our lives by dint of institutional management of the country. While responding positively many readers complained that I was finding faults but not proffering solutions. In this series, I am taking a prospective view of things where we can look at the paths ahead and the choices available. There is no certainty in determining destiny but it certainly helps knowing a little about the paths ahead. Iqbal
Mustafa. |
A National Budget is invariably a snapshot of a government's perception about its economic condition. This year's budget is no exception; it reflects a sense of recovery and an expanding elbow room to provide relief to the people; in two areas specifically viz. to the poorer with fixed incomes and to the investors and business community in general. The fruits of pasts four years of good housekeeping and opportune cash inflows have been equitably distributed. Within a fixed framework of budgetary priorities in traditional wisdom, it is the best that could be done. It is not dynamic or revolutionary but pragmatic and safe. Provided the economy stays on path, the budget will usher in the second phase of structural reforms in the country. This week, let us have look at the most critical component of the economy. Often, Pakistan's economy has aptly been described as a 'cotton economy' or 'one crop economy'. Unlike India which has produced considerable diversity in its export profile over the past ten years, Pakistan's fortunes stay pinned to export of cotton products. Textiles constitute between 68 to 72 percent of total exports. When Rice and Leather products are added then the three sectors account for 80 percent of total exports. It is a precariously narrow export base. Actually, top ten export products to top ten countries form over 90 percent of exports. Keeping in view this situation, the economic revival plan of General Musharraf's government in the year 2000 put textile sector on the anvil as its top priority. Textile Vision 2005 was prepared to answer a looming question: What will happen to Pakistan's textile exports when the termination of Multi Fibre Agreement will dismantle quota systems in global markets? And what could be done to prepare Textile Industry to avert threats and avail opportunities under the new trade regime that will replace the MFA. Over 10,000 man-days were spent by officials of related ministries, Textile industry stakeholders and SMEDA experts to produce a holistic road map for the future of Pakistan's cotton and textile value chains. The Textile Vision analysed the whole value chain, beginning from agricultural production of cotton through its various processing stages to the variety of end products and global markets. It highlighted the weak links at various stages in the five basic areas - market access, technology, human resources, credit and regulatory framework. Then it laid out a long list of measures to be taken to remedy the weaknesses at each point in the value chain and assigned responsibilities to relevant agencies for taking those measures. Coordination is often a serious constraint in the implementation of any such comprehensive and complex strategies. For that the Vision 2005 recommended setting up of the Textile Board with all the stakeholders to be chaired by the Minister of Industries, who happened to be the Minister of Commerce too in that regime. The Vision 2005 concluded that Pakistan had a favourable comparative advantage in cotton and textiles. With right measures, Pakistan could take a fast track to growth in this sector. To be realistic, it provided three scenarios - a low road, which meant nothing radically different and assumed past trends; a doable scenario and a high road scenario that spelt out ideal conditions. Under the high road scenario Pakistan could increase its textile exports to $ 13.8 billion in year 2005 and rank 5th amongst Asian countries. The Low road projected exports of $ 7.4 billion and Pakistan held its current ranking of 8th amongst Asian countries. Under the doable scenario Pakistan could reach textile exports of $ 10.1 billion and rank 6th amongst Asian countries. The difference between doable and high road was that of 'probable' and 'possible'. The basic parameters of the proposed strategy were 1)To increase domestic cotton production, improve its lint quality through genetics and improved ginning. 2) Invest in high quality spinning machinery. 3) Improve weaving technology. 4) Invest in dying and finishing processes. 5) Make a major shift towards garments and made-up finished cotton goods. 6) Provide incentives and remove impediments in use of synthetic fibres from spinning all the way to garments. However, the sequencing of growth was top driven. The strategy recommended providing a major push in the garments sector that would provide the pull for higher quality fabrics, yarns, cotton lint and synthetic fibres down the line. The prime object should be to move towards value addition. i.e. instead of exporting cotton, yarn and unfinished cloth we should be exporting garments and textile made-ups - bed linen, towels, hosiery and high quality knitwear. Ideally Pakistan should not be exporting any yarn or cloth at all. The Textile Board was set up to meet on a monthly basis to take up ownership and steer the strategy through its long implementation phases. The Board was too 'bureaucrat heavy' didn't appear to have the fire in the belly for the task. One of the leading, industry stake holders called the Vision 2005 a still-born baby in frustration when implementation of the strategy began to flounder. After two years, a mid-term review of the Vision 2005 indicated that hardly 30 percent of the measures recommended had been instituted. Textile exports did begin to revive after a stagnation of many years during the late nineties. By 2002-03 textile exports had achieved 112 percent of low road targets, 90 percent of doable targets and 78 percent of high road targets. However the shift towards value added sectors and garments had begun to materialise progressively. Then came the change of government and an elected, graduate Assembly took over. The leadership of Ministries of Industry and Commerce was bifurcated, each having its own Minister and a new set of bureaucrats to assist them. The ownership of Textile Vision 2005 evaporated. The Textile Board that used to meet almost every two months hasn't met more than couple of times in the past year and many of the initiatives taken in production of cleaner cotton, ginning up-gradation, power loom up-gradation, Cotton Standards implementation, investment in dying & finishing and in garments have all been abandoned. This year's export figures indicate a reversal of trends to past patterns. All investment has gone into spinning. Exports of garments and value added products are going down. Exports of yarn and cloth are up. Cotton production has hit a glass ceiling of 10.5 million bales (target was 13 million bales by 2005) and Pakistan is slipping back into a producer of semi-finished materials for our competitors. With quota regime gone, the competition is going to heat up intensely and per unit prices are going to drop. Pakistan may hold its own in export value but with higher volumes at lower margins that will drive many textile units into red. Textile Vision has gone foggy and someone should revisit the original strategy to take up its ownership otherwise Pakistan's economy tethered to textiles will hobble along as one of the 'wanna-bees', doomed to remain a low-income country for keeps. Iqbal
Mustafa
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