ISSN 2330-717X

Pakistan: Import Of Cotton, If Not From India From Where? – OpEd

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The reversal of Pakistan’s Economic Coordination Committee (ECC) decision on imports from India by the cabinet shows the absence of coordination within the government. It also exhibits lack of comprehension and prudent thinking about matters of national importance. 

A few days ago, at a press conference, Hammad Azhar, the newly appointed finance minister, had talked about ECC’s decision on trade with India, based on economic factors. Interestingly, the summary moved in this regard was signed by Prime Minister himself. 

The announcement made headlines both at home and in the neighboring country. The decision was viewed as part of recent measures to deescalate hostilities between Pakistan and India. Earlier, there was agreement of ceasefire across the line of control (LoC) as well as speeches were delivered by the Prime Minister and the Army Chief at the Islamabad Security Dialogue. 

Ironically, the Federal Cabinet rejected the idea of opening trade between the two countries, leaving both the nations and the world stunned at the incongruence among the key facets of the government.

The debacle raises several questions that cannot be shrugged off by ministers. It has caused embarrassment. It points to a faulty system and also creates the impression that the key job of decision-making is conducted in a juvenile manner. 

The explanations from Federal Ministers that ECC decisions can be overturned by the cabinet look novice. In fact Azhar at no point gave the impression that the ‘decision’ to trade with India was just a proposal under review.

It has now transpired that the foreign minister and some key members of government are against the idea of trading with India until New Delhi reviews its Kashmir policy and rescinds its decision to revoke special status of Indian held Kashmir. 

While this approach may be in line with Pakistan’s stance on Kashmiris’ right to self-determination, it is also true that historically CBMs have been a part of the Pakistan-India equation. 

The ECC decision may have been ostensibly about trade, but it would have needed input from all government departments, including the security establishment. Any decision having long-term consequences just can’t be made in isolation.

The fiasco is casting a cloud of uncertainty over Khan’s leadership skills. As demonstrated by this latest U-turn, communication problems, an inability to make and stick to decisions and poor conflict-resolution skills are becoming the hallmark of this government. The nation has a right to know who is responsible for this debacle and what action will be taken to avoid such blunders in the future.

Outlook

Pakistan’s imports of cotton for FY21 are forecast at a record 5.3 million bales and are expected to exceed domestic production for the first time. Significantly lower domestic supplies have driven imports to a second consecutive record. Year after year shortfalls in domestic production have depleted supplies significantly.The 2019-20 harvest was the lowest in over 3 decades, and the 2020-21 crop is down 27 percent. Back-to-back declines have propelled imports, mostly supplied by Brazil and the United States. 

Historically, India was a significant supplier to Pakistan. However, after a 2019 border closure between the two countries, Pakistan’s mills have been barred from importing the world’s lowest-priced cotton. With India as the world’s largest cotton yarn exporter, Pakistan’s cotton importers and Yarn Merchants Association have requested that the government allow trade. 

On March 31, the Economic Coordination Committee of the Cabinet proposed permitting imports of cotton lint and yarn from India; however, the proposal was rejected by Pakistan’s cabinet the following day. 

Despite no official direct access to India’s competitively priced supplies, imports are nonetheless projected at a record to support a recovering textile and garment sector. 

In the first 8 months of Pakistan’s fiscal year, the country recorded larger export values of knitwear, bedwear, towels, and readymade garment (RMG) compared with the previous year.

 Pakistan’s stronger exports of textiles and garments are expected to support record 2020-21 cotton imports. The country’s cotton supply chain is essential to its economic recovery from COVID-19; textiles and garments are not only the largest source of export revenue but also comprise 46 percent of Pakistan’s manufacturing sector and 40 percent of the total labor force. 

The April forecast shows slightly lower stocks and production. Consumption is only marginally higher, but trade is up from the previous month and projected at its highest level in 8 years. Higher consumption in Bangladesh and Mexico more than offsets a lower projection for Indonesia. 

Global trade is boosted by greater import demand in China and Bangladesh. Exports for Brazil, the United States, and Egypt are raised on a strong seasonal pace. US ending stocks are forecast at their lowest in 4 years at 3.9 million bales. 

In the US, lower stocks are spurred by stronger exports, which are raised 0.25 million bales to 15.75 million, the highest level in 3 years. The season-average farm price is lowered 1 cent to 68 cents per pound.

Shabbir H. Kazmi

Shabbir H. Kazmi

Shabbir H. Kazmi is an economic analyst from Pakistan. He has been writing for local and foreign publications for about quarter of a century. He maintains the blog ‘Geo Politics in South Asia and MENA’. He can be contacted at [email protected]

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