June is almost here and budget is in the air, as almost all industries make recommendations and requests for their fair share. One such industry was in the news earlier this week - Pakistans oft-ignored jute industry.
The FCCPI met with the Pakistan Jute Mills Association and offered its support; both sang each others praises and the PJMA asked the FCCPI to request the government for a business-friendly budget. But what state is the jute industry in exactly?
BR Research spoke to an industry source who highlighted everything that was wrong with the industry today - "Four to five years ago, there were 12 mills operating in Pakistan. Today, theres only five," Abdul Razzaq started off, one of the PJMAs sources.
He said that the industry is in turmoil because in Pakistan, people use plastic over jute for their packaging needs. This is not only hurting business but is also hazardous and goes against international safety standards.
He said that the major buyer is the government, which purchases jute bags for packaging the wheat it procures. However, it chooses to package 70 percent of this wheat in plastic bags, and only allocates 30 percent to jute packaging. Moreover, Razzaq also added that some politicians own plastic factories and actively make efforts to prevent the promotion of jute packaging.
Thats all on the domestic level. Now, coming to the international market, Pakistans jute-related exports are so low, they are barely worth mentioning. The main reason for this is lack of competitiveness.
Firstly, Pakistan does not have jute and has to import it, mostly from Bangladesh, paying a 2 percent duty. This makes it uncompetitive against those countries that grow it indigenously. Secondly, India and Bangladesh, the main players in the market, provide export subsidies. Thirdly, there are supply issues; the occasional flood in Bangladesh, or a labour strike, political turmoil, and the
numbers of exogenous factors have been known to disrupt Pakistans jute imports. Finally, labour in India and Bangladesh is very cheap.
With all this in mind, it may perhaps be time to fall in line with international standards and make jute packaging mandatory for perishables. The government should itself stop using plastic and should also provide import subsidies to jute mills. This should at least stimulate the industry on the domestic level. However, on the international front, perhaps there isn much that can be done.
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