Addressing the raw cotton supply problem
Saturday, 6 November 2010
BANGLADESH is headed for some difficult times in optimally keeping production activities going in its textile and readymade garments (RMG) sectors. The crisis is from scarcity and climbing prices of the main raw materials for related industries which is cotton. Despite the growth of some backward linkage industries in Bangladesh in the form of spinning and weaving mills, the same are preponderantly dependent on imported cotton to keep them running. The current effective demand for raw cotton is reported to be amend some 0.8 million tons annually whereas local average production is only 13 thousand tons. In the backdrop of this overwhelming import dependence, prices of raw cotton in international markets have been rising sharply. The price of cotton that was some US$ 0.65 only last year have increased to US$ 1.60 recently. Further price escalations of cotton appear inevitable as more and more news break out about substantial underproduction in major producing countries like Russia, Pakistan and some central Asian republics from climatic disasters. Thus, after meeting their own needs, the raw cotton exporting countries are, as the reports said, likely to have a surplus of only 5.0 million tons for export against the worldwide demand for at least 8.0 million tons.
It should be obvious from the above that a country like Bangladesh with its textile and its related sectors being largely dependent on imported raw cotton, should have some strong reasons to be concerned over such developments. It faces the dual challenge of procuring adequate supplies of raw cotton in time and also at affordable prices to prevent its industries from facing severe operational constraints by the end of the year throwing millions into unemployment. Besides, any disruption to production in textile and RMG industries on a large scale would also severely squeeze its main source of export earnings.
Thus, it is imperative for the policy makers to put their heads together to diffuse the gathering cotton crisis. It was a timely move on the part of the Commerce Minister to go to India and get an assurance of supply of some 1.1 million bales of cotton from that country. The Indian government is reported to have already given its consent to export of this amount to Bangladesh relaxing preferentially an export ban that applies to other countries. But this assurance from the Indian government will have to be fruitfully translated into reality on the part of Bangladesh through again timely and properly negotiations with Indian businesses. This is more so because some sections of businesses are otherwise found to be prone to utilize the opportunity of any crisis centred on the commodity to unreasonably increase its prices or dilly-dally in supplying to reap maximum gains. The influence of the Indian government and other bodies on Indian businesses will have to actively sought by Bangladesh to make the most of the offer that has been made by India.
Furthermore, and this is very important, the greatest cooperation of other cotton exporting countries like Uzebikistan, Turkmenistan, USA, South Africa, etc., will have to be proactively pursued by the government and businesses of Bangladesh to ensure a stable supply line of cotton to feed its needs. While greater supply from the Indian source will certainly help to ease the situation, it is important to efficiently procure cotton from the other countries under the present conditions, considering the quality factor. Local spinning and weaving mills have been meeting not only local needs of yarn and fabric, using cotton from such superior sources but are noted for also winning and keeping some decent export market of these products.
This year’s experience should also shake up those who should be concerned about expanding cotton cultivation within Bangladesh to a maximum possible extent on a cost comparative basis. This country is otherwise known to have a suitable climate and soil for producing high quality raw cotton and in the distant past, had the record of exporting raw cotton abroad.
It should be obvious from the above that a country like Bangladesh with its textile and its related sectors being largely dependent on imported raw cotton, should have some strong reasons to be concerned over such developments. It faces the dual challenge of procuring adequate supplies of raw cotton in time and also at affordable prices to prevent its industries from facing severe operational constraints by the end of the year throwing millions into unemployment. Besides, any disruption to production in textile and RMG industries on a large scale would also severely squeeze its main source of export earnings.
Thus, it is imperative for the policy makers to put their heads together to diffuse the gathering cotton crisis. It was a timely move on the part of the Commerce Minister to go to India and get an assurance of supply of some 1.1 million bales of cotton from that country. The Indian government is reported to have already given its consent to export of this amount to Bangladesh relaxing preferentially an export ban that applies to other countries. But this assurance from the Indian government will have to be fruitfully translated into reality on the part of Bangladesh through again timely and properly negotiations with Indian businesses. This is more so because some sections of businesses are otherwise found to be prone to utilize the opportunity of any crisis centred on the commodity to unreasonably increase its prices or dilly-dally in supplying to reap maximum gains. The influence of the Indian government and other bodies on Indian businesses will have to actively sought by Bangladesh to make the most of the offer that has been made by India.
Furthermore, and this is very important, the greatest cooperation of other cotton exporting countries like Uzebikistan, Turkmenistan, USA, South Africa, etc., will have to be proactively pursued by the government and businesses of Bangladesh to ensure a stable supply line of cotton to feed its needs. While greater supply from the Indian source will certainly help to ease the situation, it is important to efficiently procure cotton from the other countries under the present conditions, considering the quality factor. Local spinning and weaving mills have been meeting not only local needs of yarn and fabric, using cotton from such superior sources but are noted for also winning and keeping some decent export market of these products.
This year’s experience should also shake up those who should be concerned about expanding cotton cultivation within Bangladesh to a maximum possible extent on a cost comparative basis. This country is otherwise known to have a suitable climate and soil for producing high quality raw cotton and in the distant past, had the record of exporting raw cotton abroad.