Appeal to the Pakistan Govt. from the Textile Industry

Appeal to the Pakistan Govt. from the Textile Industry Every single year the Textile Industry publishes similar adds begging the govt. to save them. The add on the left is directly related to the cotton spinning industry, which asks the government yet again to stop exporting cotton on the cheap to regional competitors. Now, there is a lot wrong with the country, what with it being a dictatorship more often than not, but I always thought that even dictators would like to promote local industrial growth. Sadly, that’s not the case in this country.

In April 07 alone the spinning industry imported 47,500 bales from the United States – while at the same time the government was exporting cotton from Pakistan.

Basic economics says that the only sane way to economic growth is to progress up the value chain. Ergo, it makes perfect economic and common sense to take raw cotton grown in this country, process it into shirts and jeans and than export it. Instead, we take raw cotton and export it, while local textile mills run around scrounging for cotton.

It is much easier to buy raw cotton and export it than to deal with all the hassle of processing it and running a business, and even more important, cotton export licenses are a much easier way for the government to transfer huge sums of moneys to various politicians/crooks. Back in the good old days, a raw material license was a goldmine – for you were guaranteed cheap raw goods by the Pakistan govt. and they would sell onwards at international prices. Al Capone and the like used to bribe politicians with briefcases full of money – here we would hand over not just suitcases full of money but also licenses to export x, y & z.

Thus, an entire countries industrialization was held hostage by the government’s need to hand out money to itself and it’s many flunkies. Shaukat Aziz, the Prime Minister of Pakistan just a few days ago:

Pakistan has a competitive edge in the textile sector due to the production of high quality cotton in abundant quantity and the country needs to build on this advantage. […]emphasized that the industry needs to go into the production of high value added goods

The bastard forgets to mention that since the govt. is wholeheartedly exporting this very same cotton, how the hell is local industry supposed to “build on this advantage”? Adding insult to injury, while we export our cotton all over the world, Pakistan can’t import cotton from the closest source – India.

Trying to figure out what is wrong with government policies, the Ministry of Textile Industry has been hiring international consultants from all over the world to study production costs of Pakistani textiles, to thus enable the government to formulate a policy to revitalize the textile industry. Even Dilbert has nothing on this – the most goddamn simple way to figure out “production costs of Pakistani textiles” would be to find out from the textile industry right here in Pakistan, not someone sitting in the top tourist centers of the world! While the Ministry of Textile has to be commended for getting at least one thing right i.e realizing they know nothing about textiles and thus the need to hire other people to do their work, it is a bit suspicious that all the companies they hire are located in places like Switzerland where our textile delegations can have a good time.

Another point on the textile industries add relates to the subsidization of domestic natural gas by industrial user. There is a tax imposed on the sale of gas for industrial use and the money generated from which is used to subsidize the price for domestic gas. Pakistan has a massive shortage of electricity, so all major industry has switched over to gas for generating electricity and running boilers and so on, so even a small increase in price is very harmful. In it’s never ending quest for popularity, the govt. has been subsidizing domestic gas at the expense of industrialization. Energy costs in Pakistan are so much higher than the rest of the world that many industries are becoming un-viable in Pakistan, and asking industrial users to subsidize 165 million domestic customers on top off all this is akin to the final straw which breaks the camels back. This cross subsidy is immensely harmful for industrial growth in Pakistan, for a small hand full of industrial users bear the burden of subsidizing 165 million domestic users.

The domestic subsidy on natural gas has led to the world’s most inefficient gas stoves – millions of which stay on all day as domestic gas is so cheap that it’s cheaper to leave a stove on than light it again with a match when needed. In a country with dwindling gas reserves desperately seeking energy from countries like Iran, it makes no sense to waste energy so prodigiously, while denying it to the industries which need it – but the dog and pony show starring the current govt. of the day must go on, and even dictators need votes.

The current govt. is on its way out, but the chances of the next government actually addressing the fundamental issues ailing Pakistani industry have been asymptotically approaching zero for a long time now.

Cross-posted from KO, everyman’s guide to garbology.