March 18, 2010

DAI, Key Stakeholders See Enormous Potential in Pakistan’s Cotton Industry

Upgrades to Pakistan’s large cotton industry could greatly improve its overall productivity, creating jobs, raising local incomes, and contributing substantially to the country’s social and economic development, according to a study funded and conducted by DAI.

The study, endorsed by the country’s Textile Ministry and numerous key stakeholders, found that cotton growers, traders, ginners, and textile manufacturers would all benefit if strategic changes were implemented in the sector.

Specifically, seed quality should be improved, storage and distribution upgraded, ginning modernized, cotton contamination reduced, and trade laws and policies enforced, said Zahid Elahi, Managing Director of DAI Pakistan. Such changes would result in cotton and textiles of consistently higher quality that attract more customers and command better prices.

“Pakistan is the world’s fourth-leading producer of cotton, yet we fall well short of optimizing the industry,” Elahi said. “These fundamental but feasible changes would make long-lasting, positive differences for every Pakistani who is connected to the cotton business.”

Cotton touches an enormous number of Pakistanis. Cotton production supports Pakistan’s largest industrial sector, comprised of more than 400 textile mills, 1,000 ginneries, and 300 cottonseed oil expellers, thus providing an economic livelihood for millions of farmers and those employed along the entire cotton and textile value chain. The sector accounts for 40 percent of Pakistan’s total labor force and nearly 60 percent of exports.

The study is part of a private sector initiative launched by DAI, which has been supporting development efforts in Pakistan since 1982. The initiative seeks to identify and implement sustainable private sector solutions that will simultaneously drive commerce and development. DAI, which has analyzed and improved agricultural value chains worldwide, is focusing on Pakistan’s cotton sector because of its growth potential and the broad impact it already has on large and small businesses and on people throughout Pakistan.

Throughout the value chain—from the farm level to international retailers such as Wal-Mart, IKEA, and H&M—the cotton sector presents an opportunity for an integrated development effort addressing agriculture, water management, counterinsurgency, and governance. Since cotton is handpicked exclusively by women, improving the sector also has the potential to increase employment among women. Cotton sector interventions even offer opportunities for carbon credit market development.

The strategy emerging from the study is in line with Pakistan’s Cotton Vision 2015, Poverty Reduction Strategy, and Medium-Term Development Framework, and is therefore in line with Government of Pakistan policies, so it represents an opportunity for a coordinated donor approach.

“Various government and private sector associations involved in this sector are eager to bring about qualitative improvements,” Elahi said. “We believe the cotton and textile sector can and will be the driver of change in Pakistan’s economy, and we are planning to implement pilot projects in this sector with the support of key institutions and donor agencies.”

Cotton is mostly grown in some of the poorest and most vulnerable areas of Pakistan, Elahi noted, such as southern Punjab province and northern Sindh province. Upgrading the sector could have stabilizing effects in these areas. The study also showed that the Dera Ismail Kahn district of North-West Frontier Province and Zhob district of Balochistan province have potential to grow organic cotton, which commands a premium price on international markets.