In policymaking, outcomes cannot be seen independently of intent. Consider policymakers rediscovered love for textile exports. It appears that all energies are geared in that direction. Yet, something is amiss.
In a country where agriculture employs over 40 percent of labour force, it is not surprising that the government is hoping to use textile revival to create gains throughout the value chain, especially among farmers. This has led to calls for a cotton renascence, with furtive agri-lobbyists arguing that a textile turnaround cannot be staged without providing support to cotton growers.
Yet, lessons from other export-successes from the region tell a different tale. Take Bangladesh’s for instance. World’s second largest apparel exporter has little to no cotton crop of its own.
Look closely at the erstwhile eastern arm’s trade, and one discovers that the country’s lack of cotton crop instead of hampering, has acted as an enabler for investment in products higher up the value chain.
Pakistan exports close to $3.5 billion annually (2017) of low value adding cotton-based exports (HS code 52- series), primarily consisting of cotton-based yarn and woven fabric. But consider this; Pakistan’s single largest export category is nearly half in value of Bangladesh’s imports of same cotton-based goods.
Of course, Bangladesh imports more because it can re-export, with a conversion factor of up to six times as its value-added apparel exports stand at $36 billion. In contrast, Pakistan’s value-added exports are a paltry one-fourth (HS code series 61- to 63).
Should a strong cotton base not allow for strong vertical integration, giving country a comparative advantage along the lines of China? Not necessarily. For one, with no ties to local growers, Bangladesh can import high quality long-staple cotton that is a far cry from low to medium staple mix quality cotton produced in Pakistan and India.
In volume terms, Bangladesh’s annual import of cotton at 1.3 tons (HS code 5201) is close to Pakistan’s total production of 1.8 tons. Yet, in value terms, it is only 30 percent of total cotton imports, which is led by import of woven fabrics, an intermediate good. In terms of political influence, Pakistan’s textile vision remains cotton centric. This makes sense, as the country has over 1,000 ginneries, compared to just 425 textile mills, of which most are yarn spinning units. But if the objective of the renewed focus on textile is to regain share in value, that can never be achieved with a shift in focus higher up the value chain.