Pak-India textile industry synergies

Pak-India textile industry synergies

By Babar Ayaz

Babar Ayaz

Babar Ayaz

Misfortune of devastating floods in Pakistan may open a window between the Pakistan textile industry and the Indian cotton exporters in the immediate future. This is nothing new but this time Pakistan’s demand would be higher.

Reports are that almost 20 per cent of the cotton crop in Punjab and Sindh has been washed away by the floods. Pakistan Textile industry cotton demand is estimated to be around 14 to 16 million bales. In 2009-10 Pakistan produced 12.7 million bales and had to import about 2 million bales to meet the industry’s demand.

This year the market Pundits were hoping that the country would produce 14 million bales. But now with the flood damage reports they have slashed the forecast to about 10 to 11 million bales leaving a wide demand gap of around 3 to 4 million bales at least. On the other hand our neighbour India, according to AFP, is expecting a bumper crop of about 32 million bales, as against a 28 million bales harvest of last year.

Leading businessmen who met last week to form the ‘Aman Ki Asha Textile Forum’, following up on the Pakistan-India Business Meet in Delhi this May said they would need to buy cotton towards the end of the season after having bought the local stocks. I asked them if they would be interested to buy Indian cotton in the future. All agreed that this option would be explored but were wary that like April this year Indian government might pull the plug by banning export of cotton. However, expecting a bumper crop India has now lifted the ban.

This is one good example where it is important that Pakistan Textile Industry can work with Indian cotton exporters to get an assurance from Delhi that there would be no last minute surprises. At present the Indian yarn industry cannot consume all the cotton produced by the country. Hence there would be exportable surplus.

If both the countries’ leaders want trade and industry to play a role in building a peace bridge then cooperation in textile and its auxiliary industry and trade should be encouraged. On Pakistan’s side, textile industrialists said, the land route facilities should be developed for the benefit of both countries. They confided that it is also not easy on our side to get the imported cotton and other things through the Wagah border.

Participants of the meeting were of the view that access to Indian cotton may decline gradually because their Indian counterparts are expanding their yarn spinning capacity rapidly. Even then they felt that Pakistan can import yarn, chemicals, textile machinery and spare parts and save about 20 per cent cost.

One view is that Pakistani leading textile brands should be allowed to open their outlets in India which has a large consumer market. This view is further substantiated by the fact that almost all the leading global brands have opened their outlets in India and are doing booming business. So where is the snag? The answer once again is that our businessmen are afraid that their doing business in India may be not approved by Pakistan’s security managers. Being nationalists they do not want to do anything to upset this powerful lobby.

So what our establishment has to be convinced of perhaps by the Aman Ki Asha proponents is that there is a win-win situation here. Both the countries can benefit from increasing their direct business, instead of going through a third country like UAE at a higher cost. The ultimate sufferer is the common man in whose interest Pakistan and Indian governments claim they are working for.

Former Karachi Chamber of Commerce and Industry (KCCI) President Majyd Aziz is reported to have said in an interview to Central Asia Online that “trade liberalisation with India would end dependence on indirect trade through Dubai and would benefit the businessmen and people of the two countries”. Direct import by sea from India costs US $7 to $8 per ton, as against US $18 to $20 per ton cost from Dubai.

Talking of South Asian business synergies, Executive Director of Centre for Enterprise, Trade and Development, Khalid Mehmood had underlined in his paper that “Pakistan is well poised in cotton yarns and fabrics and is a leading supplier to the world. Bangladesh is a leading garment exporter and simultaneously has developed sizable backward spinning linkages. Sri Lanka is engaged in high end fashion garments and is the only country in the region with higher foreign direct investment and joint ventures. India has a diverse raw material supply chain with global economies of scale with large production capability of other textiles and clothing products. It is also an emerging supplier of textiles spinning machinery, chemicals and dyes for textiles processing”.

The Aman ki Asha supported Pakistan Textile Industry Forum has resolved to study the opportunities and obstacles in the way of promoting trade and investment between the two countries.

In July 2005, the Federation of Indian Export Organizations, a 43-year-old body of exporters and related organizations, released an internal study specifying impediments to bilateral trade relations and remedies that included: (1) Pakistan reciprocating India in granting most-favored nation (MFN) status to India, in accordance with World Trade Organization rules. The MFN status ensures that all trading partners of a country receive equal trade benefits such as low tariffs; (2) A multiple-entry business visa with two-year validity instead of the current six-month validity that India and Pakistan offer; (3) Increasing overland trading routes; and (4) Trading carried out in local currencies at a mutually accepted exchange rate rather than in international currencies, and traders being spared paying exorbitant higher currency rates per business transaction.

But the Pakistani exporters to India complain about the non-tariff barriers in India and feel that while their country has liberalized trade to a great extent, India has still protective policies. Above all businessmen on both sides that I have had an opportunity to talk to say that beyond the rules, regulations and tariff, the need is to change the mind-set of the governments in Pakistan and India. Many studies have put the direct business potential between the two countries to range from $6 to $10 billion a year.

Amin Hashwani who has been struggling to normalize the business relation between the two countries is optimistic and says the realisation that we have to live in peace is gaining strength in both countries. Some of the leading business houses in India, Pakistani businessmen say are interested to invest here in a big way. Our establishment is however afraid of this and looks at such moves with suspicion.

Here, I am reminded of Malaysia’s success leader Mahathir Mohammad who was asked once about the negative implications of rapid foreign investment in the country. He said that don’t forget one who invests in Malaysia has to live here under our laws and under our control. Investment in each other’s country can only strengthen peace between Pakistan and India. The investors would be our lobby in India as they would like to have a stable and prosperous Pakistan in their self-interest. This is the point which Aman Ki Asha Initiative has to drive-in in Islamabad and Delhi.

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