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Pakistan Cotton Market Pleas for Gov’t Assistance

Still straining to capitalize on the preferential trade status it recently gained from the E.U. under its Generalized System of Preference Plus program (GSP), Pakistan is fortifying its embattled cotton industry.

Minister of Textile Industry Abbas Khan Afridi is requesting that the Pakistani government direct a new tranche of funds to the cotton market to contribute to its stabilization. Afridi stressed that the cotton market is the economic lynchpin of Pakistan’s maturing textile industry, and so a key component of the country’s strategy to become a major textile exporter over the next three years. Over the last ten years, Pakistan’s cotton production has lagged behind the country’s otherwise impressive economic growth, putting a drain on future improvements.

Pakistan’s cotton market was beleaguered by troubles in 2013. The crop missed its target of six million acres, already a figure adjusted down by estimates. In Punjab, acreage dipped to a historic low of 5.4 million. Additionally, unseasonably high temperature in July have decimated many crops. And while the heat wave was partially abated by subsequent rains, the damage was still extensive. And September broughts a challenging combination of unusually high humidity and high temperatures, a disastrous combination for cotton farmers. This period normally lasts some three weeks, but last year it stretched on for nearly twice that.

Maize continues to gain ground against cotton, the two crops perennially pitted against each other in fierce competition. Hundreds of acres of maize is taking over territory previously inhabited by cotton, especially in Lodharan and Okara. Many economists worry that Pakistan’s excessive reliance upon cotton renders the nation vulnerable to its short term vacillations. More than half of all Pakistan’s exports are attributable to cotton and cotton related products. Especially during a period of  delicate political transition and general economic malaise, another underperforming cotton season could have wide reverberations.

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Anxious about Pakistan’s faltering yarn production, Afridi also speculated about the possibility of imposing new duties on yarn imported from India at a recent meeting of the Faisalabad Chamber of Commerce and Industry. Afridi stressed that Pakistan would not even consider an outright ban on Indian yarn imports, raising the possibility that the duties eventually imposed might be prohibitively steep. Some within the industry, including the Pakistan Hosiery Manufacturers and Exporters Association, have denounced the plan, going as far as to request that all fabric imports from India be allowed duty-free access to Pakistani markets.

Winning GSP Plus status from the E.U. is likely to have a huge impact on Pakistan’s still embryonic textile industry. Thirteen textile products are included on the list of those than can be exported duty-free to the twenty-seven members of the E.U., accountable for $231 million worth of goods last year. Some are predicting this will increase Pakistan’s exports to the E.U. by $1 billion.

A deepening of commercial ties with the E.U. is forecast by many to have a transformative effect on Pakistan’s economy. Currently, the E.U. is Pakistan’s primary destination for its textile exports. Overall, Pakistan’s textile exports topped $13.06 billion last fiscal year, including $2.7 billion worth of yarn and $2.5 billion of fabric to Bangladesh, specifically. Pakistan’s exports have grown by approximately 12.5% per year, with a growth of 10.3% to the E.U., in particular. The textile industry accounts for more than 50 percent of the nation’s total exports. While forecasts regarding the full reverberations of the new status for Pakistan vary widely, many predict growth by as much as 100 percent over the next four years.