Proceedings of the Expert Group Meeting on - Islamic Development ...

ISLAMIC DEVELOPMENT BANK
PROCEEDINGS OF THE
EXPERTS GROUP MEETING ON
“ENHANCING PRODUCTION EFFICIENCY
AND INTERNATIONAL COMPETITIVENESS
IN IDB COTTON PRODUCING
MEMBER COUNTRIES”
IDB Headquarters, Jeddah
12-13 Safar 1426H, (22-23 March, 2005)

© Coordinated by:
Dr. Nosratollah Nafar
Economic Policy & Strategic Planning Department
Islamic Development Bank
P.O. Box. 5925, Jeddah 21432
Kingdom <strong>of</strong> Saudi Arabia
Telephone: 646 7435
Facsimile : 646 7478
E-mail : nnafar@isdb.org
Home Page: http://www.isdb.org
Disclaimer:
The views expressed in this document are those <strong>of</strong> <strong>the</strong>
authors/speakers and do not necessarily reflect <strong>the</strong> views <strong>of</strong> <strong>the</strong>
Islamic Development Bank <strong>Group</strong> or its member countries.
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Establishment
ISLAMIC DEVELOPMENT BANK
The Islamic Development Bank is an international financial institution
established in pursuance <strong>of</strong> <strong>the</strong> Declaration <strong>of</strong> Intent issued by <strong>the</strong>
Conference <strong>of</strong> Finance Ministers <strong>of</strong> Muslim Countries held in Jeddah in Dhul
Q’adah 1393H, corresponding to December 1973. The Inaugural <strong>Meeting</strong> <strong>of</strong>
<strong>the</strong> Board <strong>of</strong> Governors took place in Rajab, 1395H, corresponding to July
1975, and <strong>the</strong> Bank was formally opened on 15 Shawwal 1395H,
corresponding to 20 October 1975.
Purpose
The purpose <strong>of</strong> <strong>the</strong> Bank is to foster economic development and social
progress <strong>of</strong> its member countries and Muslim communities in non-member
countries individually as well as jointly in accordance with <strong>the</strong> principles <strong>of</strong>
Shari’ah i.e., <strong>the</strong> Islamic Law.
Functions
The functions <strong>of</strong> <strong>the</strong> Bank are to participate in equity capital and to grant
loans for productive projects and enterprises besides providing financial
assistance to member countries in o<strong>the</strong>r forms for economic and social
development. The Bank is also required to establish and operate special funds
for specific purposes, including a fund to assist Muslim communities in nonmember
countries, in addition to setting up trust funds.
The Bank is authorised to accept deposits and to mobilise financial resources
through Shari’ah compatible modes. It is also charged with <strong>the</strong> responsibility
<strong>of</strong> assisting in <strong>the</strong> promotion <strong>of</strong> foreign trade, especially in capital goods
among member countries; providing technical assistance to member
countries, and extending training facilities to personnel engaged in
development activities in member countries to foster compliance to <strong>the</strong>
Shari’ah.
Membership
The present membership <strong>of</strong> <strong>the</strong> Bank consists <strong>of</strong> 56 countries. The main
conditions <strong>of</strong> membership are: a prospective member country should be a
member <strong>of</strong> <strong>the</strong> Organization <strong>of</strong> <strong>the</strong> Islamic Conference (OIC), pay its
contribution to <strong>the</strong> share capital <strong>of</strong> <strong>the</strong> Bank and be willing to accept such
terms and conditions as may be decided by <strong>the</strong> IDB Board <strong>of</strong> Governors.
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Capital
Up to <strong>the</strong> end <strong>of</strong> 1412H (June 1992), <strong>the</strong> authorized capital <strong>of</strong> <strong>the</strong> Bank was
two billion Islamic Dinars (ID). (The value <strong>of</strong> <strong>the</strong> Islamic Dinar, which is <strong>the</strong>
accounting unit in <strong>the</strong> Bank, is equivalent to one SDR -Special Drawing
Rights- <strong>of</strong> <strong>the</strong> International Monetary Fund). Since Muharram 1413H (July
1992) in accordance with a Resolution <strong>of</strong> <strong>the</strong> Board <strong>of</strong> Governors, it became
6 billion Islamic Dinars, divided into 600,000 shares, having a par value <strong>of</strong>
10,000 Islamic Dinars each. Its subscribed capital also became ID 4 billion
payable according to specific schedules and in freely convertible currency
acceptable to <strong>the</strong> Bank. In 1422H, <strong>the</strong> Board <strong>of</strong> Governors at its Annual
<strong>Meeting</strong> held in Algeria decided to increase <strong>the</strong> authorized capital <strong>of</strong> <strong>the</strong>
Bank from ID 6 billion to ID 15 billion and <strong>the</strong> subscribed capital from ID
4.1 billion to ID 8.1 billion.
Head Office and Regional Offices
The Bank’s principal <strong>of</strong>fice is located in Jeddah, Kingdom <strong>of</strong> Saudi Arabia.
Two regional <strong>of</strong>fices were opened in 1994; one in Rabat, Morocco, and <strong>the</strong>
o<strong>the</strong>r in Kuala Lumpur, Malaysia. In July 1996, <strong>the</strong> Board <strong>of</strong> Executive
Directors also approved <strong>the</strong> establishment <strong>of</strong> a regional <strong>of</strong>fice at Almaty,
Kazakhstan to serve as a link between IDB member countries and Central
Asian Republics. The <strong>of</strong>fice became operational in July 1997 and is now a
full fledged regional <strong>of</strong>fice. The Bank also has field representatives in eleven
member countries which are: Indonesia, Iran, Kazakhstan, Libya, Pakistan,
Senegal, Sudan, Gambia, Guinea Bissau, Mauritania and Algeria.
Financial Year
The Bank’s financial year is <strong>the</strong> lunar Hijrah Year (H).
Language
The <strong>of</strong>ficial language <strong>of</strong> <strong>the</strong> Bank is Arabic, but English and French are
additionally used as working languages.
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CONTENTS
Preface…………………………………………………………....................
Opening Address…………………………………………….......................
Dato Syed Jaafar Aznan
Vice President (Trade & Policy), IDB
PART ONE
MAJOR CHALLENGES TO IDB COTTON-PRODUCING
MEMBER COUNTRIES
Enhancing Production Efficiency and International Competitiveness
in IDB Cotton-Producing Member Countries.………….…......................
Rafiq Chaudhry
Executive Summary…………………………………………………...
I. Introduction and Background…………………………………………
II. Major Challenges to IDB Cotton-Producing Countries………………
III. Current Cotton Policies in Rich Countries and Their Effects on IDB
Cotton-Producing Countries………………………………………......
IV. Enhancing Efficiency and Productivity in <strong>the</strong> Cotton Sector…………
V. Enhancing Competitiveness in <strong>the</strong> Cotton Sector…………………….
VI. Role <strong>of</strong> <strong>the</strong> Private Sector in Cotton……………………………….....
VII. Framework for Enhancing Cooperation Among IDB Cotton-
Producing Countries………………………...…………………………
VIII. Conclusions and Recommendations……..…………………….......
Appendix 1: Case Study on Cotton Production in Mali……………….........
Amadou Aly Yattara
Appendix 2: Enhancing Production Efficiency and International
Competitiveness in IDB Cotton-Producing Member Countries From <strong>the</strong>
Asia Region………………………………………………………………….
Zahoor Ahmad
PART TWO
COTTON PRODUCTION EFFICIENCY AND
INTERNATIONAL COMPETITIVENESS
COUNTRY EXPERIENCES FROM AFRICAN REGION
The Cotton Sector in Burkina Faso..………………………………………
Traore Seydou Nafoni
I. Introduction……………………………………………………………..
II. International Situation…………………………………………………
III. Competitiveness and Vulnerability…………………………………….
IV. Liberalization <strong>of</strong> <strong>the</strong> Industry…………………………………………..
V. Advice to Producers……………………………………………………
VI. Conclusion……………………………………………………………..
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Report on <strong>the</strong> Benin Cotton Industry ……………………………………
Blaise A. Fadoegnon
I. Cotton Cultivation in Benin……………………………………………
II. Production, Export and Employment in <strong>the</strong> Industry……………….…
III. Policy on Input Supply and Distribution…………………..…………..
IV. Difficulties to Increase Cotton Produce in Benin………...…………....
V. Regulation <strong>of</strong> <strong>the</strong> Use <strong>of</strong> Genetically Modified Cotton………………..
VI. Actions Taken by Benin Regarding Cotton at <strong>the</strong> WTO……………....
Sudan Cotton Research Challenges and Efficiency Enhancement……..
El Fadil Abdel Rahman Babiker and Abdin Mohamed Ali El Faki
I. Introduction…………………………………………………………….
II. Challenges to Cotton Production from Research Perspective……….....
III. Framework for Cooperation Between IDB Member Countries…..……
Uganda's Country Report on <strong>the</strong> Cotton Sector..............……………….
Damalie Lubwama Nabakka
I. Introduction…...………………………………………………………..
II. Major Challenges Faced by Uganda…………………………………...
III. Enhancing Efficiency and Competitiveness…………………………...
IV. Enhancing <strong>the</strong> Role <strong>of</strong> Private Sector in <strong>the</strong> Cotton Sector……...…….
V. Proposals for Enhancing Cooperation Among IDB Cotton-Producing
Countries………………………………………………………………..
COUNTRY EXPERIENCES FROM THE ASIAN REGION
Cotton in Pakistan: an Overview……………………................................
Ibad Badar Siddiqui
Preamble……………………………………………………………….
I. Cotton Production Pattern………………………………………………
II. Cotton Consumption Pattern……………………………………………
III. Cotton Quality Improvement…………………………………………...
IV. Cotton Policy at a Glance………………………………………………
V. Tail Piece……………………………………………………………….
Country Report: Syria……………………………………..........................
Mohamed Nayef Alsalti
I. Introduction…………………………………………………………….
II. Cotton Production Policy……………...…………………………….…
III. Cotton Production, Area and Yield………………………….…………
IV. Cultural Practices………………………………………………...…….
V. Cropping System and Agronomic Management……………………….
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Cotton in Turkey: The Role <strong>of</strong> Cotton Research Institute in
Development <strong>of</strong> Cotton…………………………………………………….
İsa Özkan
Abstract………………………………………………………..............
I. Introduction…………………………………………………………….
II. Improvement in Cotton…………………………………………………
III. Cotton Research Institute……………………………………………….
IV. The Ways <strong>of</strong> Enhancing Productivity and Competitiveness in IDB
Cotton-Producing Member Countries………………………………….
V. Conclusion……………………...………………………………………
PART THREE
ROLE OF PRODUCTIVITY INSTITUTIONS AND PRIVATE
SECTION IN THE COTTON SECTOR
ENHANCING THE ROLE OF NATIONAL INSTITUTIONS
Productivity in Cotton Spinning: Pakistan’s Experience………………
Saquib Mohyuddin and Amina Mahmood
Executive Summary…………...……………………………………….
I. Background…………………………………………………………….
II. Objectives…………………………………………………………...…
III. Outlook <strong>of</strong> Cotton Sector in Pakistan………………………………….
IV. Achieving Higher Cotton Production and Efficiency…………………
V. Initiatives for Enhancing Productivity…………………………………
VI. Cluster Development <strong>of</strong> Weaving Sector……………………………...
VII. National Initiatives…………………………………………………….
VIII. Policy Recommendation……………………………………………....
IX. Conclusion……………………………………………………………..
ENHANCING THE ROLE OF PRIVATE SECTOR
Enhancing <strong>the</strong> Role <strong>of</strong> Private Sector…...………………………………
Masood A. Majeed
I. Introduction…………………………………………………………….
II. The Role <strong>of</strong> <strong>the</strong> Private Sector…………………………………………
III. Cooperation Among IDB Cotton-Producing Member Countries…..….
Cotton Cultivation in <strong>the</strong> Republic <strong>of</strong> Mali………..……………………
Mahamadou Cisse
I. Quality <strong>of</strong> Cotton Production………………………………………….
II. The Private Sector and <strong>the</strong> Production <strong>of</strong> Cotton Seed………………..
III. The Private Sector and Cotton Fiber Classification.…………………..
IV. Conclusion…………………………………………………….……….
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Cotton in Turkey……...……………………………………………............
Tuğrul Yemisci & Hamdi Bagci
I. The Importance <strong>of</strong> Cotton as a Strategic Crop in Turkey……………...
II. Development in <strong>the</strong> Turkish Cotton Sector……………………………
III. Subsidy Policy Being Applied in Turkey……………………………...
IV. Spot Markets and Future Markets in Turkey………………..................
V. Problems <strong>of</strong> Cotton Sector in Turkey………………………………….
VI. Proposals for Improving Cooperation Among IDB Cotton Producing-
Member Countries…………………….……………………………….
PART FOUR
RECOMMENDATIONS AND ACTION PLAN
General Framework and Action Plan for Enhancing Cooperation
Among IDB Cotton-Producing Member Countries……………………..
I. Introduction……………………………………………………………
II. General Framework…………...……………………………………….
III. Action Plan…………………………………………………………….
Closing Remarks…………………………………………………………...
Dato Syed Jaafar Aznan
Vice President (Trade & Policy), IDB
ANNEX
Programme <strong>of</strong> <strong>the</strong> <strong>Expert</strong> <strong>Group</strong> <strong>Meeting</strong>……………………………….
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PREFACE
Cotton is a major cash crop for a large number <strong>of</strong> member countries <strong>of</strong> <strong>the</strong>
Islamic Development Bank (IDB) and plays crucial role in <strong>the</strong>ir economic
growth. In some cases, <strong>the</strong> success <strong>of</strong> <strong>the</strong> economy, in general, and that <strong>of</strong>
exports, in particular, depends almost exclusively on <strong>the</strong> performance <strong>of</strong> <strong>the</strong>
cotton sub-sector. However, despite <strong>the</strong> importance <strong>of</strong> cotton in <strong>the</strong>ir
economies, production efficiency and international competitiveness <strong>of</strong> most
IDB member countries in this area remain generally low and leave a lot <strong>of</strong>
scope for fur<strong>the</strong>r progress. Indeed, <strong>the</strong>re is need to undertake considerable
efforts at national and multilateral levels to realize <strong>the</strong> potentials <strong>of</strong> cotton by
substantially increasing cotton production efficiency and competitiveness <strong>of</strong>
member countries.
Recognizing this need, <strong>the</strong> Bank organized an <strong>Expert</strong> <strong>Group</strong> <strong>Meeting</strong> (EGM)
on "Enhancing Production Efficiency and International Competitiveness
in IDB Cotton-Producing Member Countries" at its Headquarters in
Jeddah, Saudi Arabia on 12-13 Safar 1426H (22-23 March 2005). The
objective <strong>of</strong> <strong>the</strong> meeting was to discuss <strong>the</strong> main issues and challenges faced
by <strong>the</strong> IDB cotton-producing member countries, propose concrete actions to
tackle <strong>the</strong>se issues, and to lay down a General Framework and Action Plan
for enhancing cooperation among <strong>the</strong>se countries. The meeting was attended
by eminent experts from public and private companies and productivity
centers in nine IDB member countries, namely Benin, Burkina Faso, Egypt,
Mali, Pakistan, Sudan, Syria, Turkey and Uganda.
The meeting underlined <strong>the</strong> need for <strong>the</strong> IDB member countries to be ready to
face <strong>the</strong> challenge <strong>of</strong> quota free textile trade. It stressed that <strong>the</strong> cottonproducing
member countries can greatly improve <strong>the</strong>ir production efficiency
and competitiveness by learning from good practices and experiences <strong>of</strong> o<strong>the</strong>r
member countries. Discussing <strong>the</strong> experiences <strong>of</strong> member countries from
both African and Asian regions, <strong>the</strong> meeting highlighted <strong>the</strong> comparative
advantage <strong>of</strong> most IDB cotton-producing member countries in cotton
production. However, it was noted that “comparative advantage” is not <strong>the</strong>
same as "competitive advantage". Competitiveness is a continuous process <strong>of</strong>
innovating, upgrading and increasing value-added activities and it relates to
induced technological changes and innovation. The EGM suggested that IDB
cotton-producing member countries can enhance <strong>the</strong>ir cotton production
efficiency and international competitiveness by learning from each o<strong>the</strong>r’s
experiences. In this context, <strong>the</strong> following four priority areas were identified
for cooperation: production, institutional development, marketing, and
financing.
On <strong>the</strong> subject <strong>of</strong> enhancing <strong>the</strong> role <strong>of</strong> <strong>the</strong> private sector and productivity
institutions in <strong>the</strong> cotton sector, it was pointed out that <strong>the</strong> existing R&D
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facilities in member countries were mostly in <strong>the</strong> public sector with a high
share <strong>of</strong> <strong>the</strong> budget going to administrative costs ra<strong>the</strong>r than to developmental
activities. On <strong>the</strong> o<strong>the</strong>r hand, <strong>the</strong> lack <strong>of</strong> market competition in farm input
supply, output processing, and marketing caused poor producer incentives,
inappropriate use <strong>of</strong> inputs and hence inefficiency. The meeting suggested
that an enabling environment is necessary to increase private investments and
to help cotton companies cope with international competition. It requires a
shared responsibility between producers, ginners, input providers and local
banks to organize <strong>the</strong> sector and safeguard <strong>the</strong>ir common interests.
On behalf <strong>of</strong> <strong>the</strong> Economic Policy and Strategic Planning (EPSP)
Department, I would like to thank Br. Nosratollah Nafar for coordinating <strong>the</strong>
organization <strong>of</strong> <strong>the</strong> EGM. I would also like to thank Brs. Lamine Doghri,
Aftab Ahmad Cheema and o<strong>the</strong>r members <strong>of</strong> <strong>the</strong> EPSP Department for <strong>the</strong>ir
valuable contributions to <strong>the</strong> organization <strong>of</strong> this event. Thanks are also due
to Br. Zafar Iqbal for his technical input in <strong>the</strong> preparation <strong>of</strong> <strong>the</strong>se
proceedings and to Brs. Mohamed Ben Aissa Amza, Syed Abdur Rahman
and Musharaf Wali Khan for typing various documents <strong>of</strong> this meeting.
As expected, <strong>the</strong> EGM generated useful discussion on very pertinent issues
and produced a set <strong>of</strong> recommendations to promote cotton production
efficiency and competitiveness. The IDB is publishing <strong>the</strong> proceedings <strong>of</strong> <strong>the</strong>
EGM in order to disseminate <strong>the</strong> ideas developed in various papers and <strong>the</strong>
views expressed during <strong>the</strong>ir presentations. It is hoped that this publication
will contribute to sensitizing <strong>the</strong> decision makers for <strong>the</strong> need to take concrete
steps aimed at enhancing cotton production efficiency and competitiveness in
<strong>the</strong>ir respective countries.
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Faiz Mohammad
Director,
Economic Policy & Strategic Planning Department

OPENING ADDRESS
Dato Syed Jaafar Aznan
Vice President Trade & Policy, IDB

OPENING ADDRESS
Dato Syed Jaafar Aznan
Vice President Trade & Policy, IDB
In <strong>the</strong> name <strong>of</strong> Allah, <strong>the</strong> Most Gracious, <strong>the</strong> Most Merciful
Distinguished Delegates,
Bro<strong>the</strong>rs and Sisters,
Assalamu Alaikum Warahmatullah Wabarakatuhu
On behalf <strong>of</strong> <strong>the</strong> Islamic Development Bank (IDB), I would like to extend a
very warm welcome to all <strong>of</strong> you at <strong>the</strong> <strong>Expert</strong>s <strong>Group</strong> <strong>Meeting</strong> on
"Enhancing Production Efficiency and International Competitiveness in
IDB Cotton-Producing Member Countries". It is indeed a privilege for <strong>the</strong>
IDB to host a meeting that brings toge<strong>the</strong>r leading experts to brainstorm
practical ways and means to enhance cotton production efficiency and
international competitiveness in IDB member countries as well as
cooperation among <strong>the</strong>m in this crucial area. I would like to take this
opportunity to express our sincere thanks and appreciation to you all for your
cooperation and partnership in organizing this event.
Bro<strong>the</strong>rs and Sisters,
Cotton production and trade is an important economic activity in IDB cottonproducing
countries as it is a significant source <strong>of</strong> <strong>the</strong>ir income. The cotton
sector in some member countries is so vital that <strong>the</strong> success or failure <strong>of</strong> <strong>the</strong>
cotton crop in a single year can have a major impact on <strong>the</strong>ir GDP growth.
This <strong>Expert</strong> <strong>Group</strong> <strong>Meeting</strong> is very important for all <strong>of</strong> us, especially at a time
when global prices <strong>of</strong> cotton have been declining due to high subsidies by
developed countries. This decline in prices has had a serious economic and
social impact on poor populations in developing countries. According to <strong>the</strong>
Food and Agriculture Organization(FAO) <strong>of</strong> <strong>the</strong> United Nations, support for
farmers in industrialized countries is equivalent to 30 times <strong>the</strong> amount
provided as aid for agricultural development in developing countries.
As you are aware, during <strong>the</strong> 5th WTO Ministerial Conference in Cancun,
Mexico, <strong>the</strong>re was a debate on agricultural subsidies in general and cotton
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subsidies in particular. Four IDB member countries namely, Benin, Burkina
Faso, Chad and Mali, raised this issue and called for <strong>the</strong> subsidies to be
eliminated and for compensation to be paid to <strong>the</strong>m for <strong>the</strong> economic losses
<strong>the</strong>y incurred because <strong>of</strong> <strong>the</strong> subsidies. Their proposal received support from
many o<strong>the</strong>r countries and <strong>the</strong> WTO Director-General urged ministers to
consider <strong>the</strong> proposal seriously.
In this context, <strong>the</strong> IDB addressed <strong>the</strong> impact <strong>of</strong> cotton subsidies <strong>of</strong> developed
countries to <strong>the</strong>ir farmers on <strong>the</strong> IDB cotton-producing member countries in
two activities organized in 2003 and 2004. First, in a session during a
Consultative <strong>Meeting</strong> on <strong>the</strong> Doha Round in Geneva on 2-3 December 2003,
which highlighted <strong>the</strong> precarious situation <strong>of</strong> our West African cottonproducing
member countries because <strong>of</strong> <strong>the</strong> resulting decline <strong>of</strong> world prices
<strong>of</strong> cotton caused by <strong>the</strong>se subsidies. Second, a seminar was organized at IDB
Headquarters on 10-11 May 2004, to discuss <strong>the</strong> impact <strong>of</strong> <strong>the</strong> elimination <strong>of</strong>
quotas on <strong>the</strong> exports <strong>of</strong> <strong>the</strong> OIC member countries and to explore practical
ways <strong>of</strong> establishing a cooperation among member countries in this critical
area.
Fortunately, cotton-producing developing countries are approaching <strong>the</strong> time
<strong>of</strong> ending <strong>the</strong> practice <strong>of</strong> subsidies and o<strong>the</strong>r supports which hurts <strong>the</strong>ir poor
farmers and benefits industrial-scale producers in developed countries. As
you are also aware, <strong>the</strong> WTO made an initial ruling last Summer on a petition
by Brazil, supported by some West African cotton-producing countries, that
challenged several types <strong>of</strong> U.S. agricultural support measures, including
financial backing for cotton farmers. The WTO ruled that <strong>the</strong> United States
must stop subsidizing its cotton farmers by July 1, 2005. If <strong>the</strong> ruling stands,
it could give cotton producers in developing countries, particularly in West
Africa, an incentive to increase production and get a fair price.
In this environment, <strong>the</strong> IDB's new strategic framework includes greater
support for <strong>the</strong> development <strong>of</strong> <strong>the</strong> agricultural sector since this has a direct
impact on poverty alleviation in member countries. The share <strong>of</strong> agricultural
sector, in <strong>the</strong> IDB financing has been increasing significantly during <strong>the</strong> past
few years and stood at 16 per cent in 1424H (2003-2004). However, we need
to put in more efforts to assist our member countries in this regard; some <strong>of</strong>
<strong>the</strong>se need technical assistance to address key issues related to production
efficiency and productivity, while o<strong>the</strong>rs need help to access key
industrialized markets.
4

Bro<strong>the</strong>rs and Sisters,
There are a variety <strong>of</strong> challenges facing IDB member countries, <strong>the</strong>
elimination <strong>of</strong> agricultural subsidies and <strong>the</strong> lifting <strong>of</strong> textile quotas will bring
new opportunities for which <strong>the</strong>se countries should be ready. The challenges
are multi-dimensional, ranging from improving productivity and efficiency to
facing increased competition. IDB member countries need to be prepared to
face this situation.The Bank's decision to organize this expert group meeting
on enhancing production efficiency and international competitiveness is a
very timely initiative.
In this regard, <strong>the</strong> IDB is also collaborating with <strong>the</strong> Government <strong>of</strong> Burkina
Faso for organizing a Regional Workshop on cotton. This workshop is
scheduled to be held in Ouagadougou on 18-19 April 2005. The objective <strong>of</strong>
this workshop is to promote cooperation among OIC cotton-producing
member countries and it will mainly focus on issues related to cotton
marketing and trade. The Bank has also recruited an expert to provide advice
to <strong>the</strong> Ministry <strong>of</strong> Trade, Promotion <strong>of</strong> Enterprises and Handicraft <strong>of</strong> Burkina
Faso for organizing this regional workshop. The expert is currently preparing
two studies: one on promotion <strong>of</strong> partnerships in OIC member countries in
order to process cotton, and <strong>the</strong> second on constraints and financing <strong>of</strong> cotton
processing. These studies constitute <strong>the</strong> core topics <strong>of</strong> <strong>the</strong> workshop around
which <strong>the</strong> major discussions will revolve.
Generally, most IDB cotton-producing member countries have comparative
advantage in cotton production. However, "comparative advantage" is not <strong>the</strong>
same as "competitive advantage". Competitiveness is a continuous process <strong>of</strong>
innovating, upgrading and increasing value-added activities and it relates to
induced technological changes and innovation.
Information on different aspects <strong>of</strong> cotton production and trade is <strong>the</strong> key for
successful global competition. This <strong>Expert</strong> <strong>Group</strong> <strong>Meeting</strong> will provide an
opportunity for <strong>the</strong> participating member countries to exchange views on
<strong>the</strong>se issues, develop a mechanism <strong>of</strong> regularly exchanging information, and
to facilitate communication among <strong>the</strong>mselves.
It is a great honor for me to open this <strong>Expert</strong> <strong>Group</strong> <strong>Meeting</strong> with <strong>the</strong> aim <strong>of</strong>
discussing <strong>the</strong> main challenges faced by <strong>the</strong> IDB cotton-producing member
countries, addressing concrete actions to tackle <strong>the</strong>se issues, and lay down a
framework for enhancing cooperation among <strong>the</strong>mselves.
5

Bro<strong>the</strong>rs and Sisters,
It is our firm belief that member countries can achieve much more through
mutual cooperation as compared to what <strong>the</strong>y would be able to do
individually. To this end, <strong>the</strong> IDB looks forward to a successful meeting
which would yield valuable outcomes and recommendations on developing a
suitable framework for enhancing cooperation among cotton-producing
member countries and highlighting <strong>the</strong> possible role <strong>of</strong> bilateral and
multilateral financing institutions, like <strong>the</strong> IDB.
We also hope that <strong>the</strong> proceedings <strong>of</strong> this meeting will be highly useful to <strong>the</strong>
Regional Workshop on cotton in Burkina Faso. This will go a long way in
assisting in <strong>the</strong> realization <strong>of</strong> <strong>the</strong> objectives <strong>of</strong> enhancing productivity and
international competitiveness in IDB member countries.
With <strong>the</strong>se words, I once again welcome you to <strong>the</strong> meeting and wish you
every success in your deliberations.
Wassalamu Alikum Warahmatullah Wabarakatohu
6

PART ONE
MAJOR CHALLENGES TO IDB COTTON
PRODUCING MEMBER COUNTRIES
7

ENHANCING PRODUCTION EFFICIENCY AND INTERNATIONAL
COMPETITIVENESS IN IDB COTTON-PRODUCING MEMBER
COUNTRIES
Rafiq Chaudhry
International Cotton Advisory Committee (USA)
(Working Paper based on country studies for
Mali and Pakistan by Amado Aly Yattara and Zahoor Ahmad)
9

ENHANCING PRODUCTION EFFICIENCY AND INTERNATIONAL
COMPETITIVENESS IN IDB COTTON-PRODUCING MEMBER
COUNTRIES
Executive Summary
Rafiq Chaudhry
International Cotton Advisory Committee (USA)
The farm value <strong>of</strong> world cotton production is approximately US$30 billion
per year, including about US$20 billion earned in developing countries.
Textile export revenues derived from cotton are estimated at US$100 billion,
with most <strong>of</strong> this accruing to developing countries. Member countries <strong>of</strong> <strong>the</strong>
Islamic Development Bank (IDB) share 30% <strong>of</strong> <strong>the</strong> world cotton area and
28% <strong>of</strong> world cotton production. However, 38% <strong>of</strong> cotton traded in <strong>the</strong> world
in 2003/04 was produced in IDB member countries. Cotton is a cash crop and
plays a vital role in <strong>the</strong> life <strong>of</strong> millions <strong>of</strong> farmers around <strong>the</strong> world. Cotton
also plays a significant role in <strong>the</strong> food security program in <strong>the</strong> world,
particularly when food crops follow cotton in rotation systems. This working
paper, “Enhancing Production Efficiency and International Competitiveness
in IDB Cotton-Producing Member Countries,” commissioned by <strong>the</strong>
Economic Policy and Strategic Planning Department <strong>of</strong> <strong>the</strong> Islamic
Development Bank, covers <strong>the</strong> current status <strong>of</strong> cotton production,
consumption and trade in <strong>the</strong> world. The paper also highlights problem areas
that require attention from international institutions like IDB, while also
making a number <strong>of</strong> suggestions for <strong>the</strong> development <strong>of</strong> cotton in <strong>the</strong> world.
World cotton production is going through drastic changes. Cotton yields are
not increasing in most countries while <strong>the</strong> cost <strong>of</strong> production continues to
rise. The Cotlook A Index does not reflect <strong>the</strong> actual prices at which trading
is done, but is <strong>the</strong> strongest indicator <strong>of</strong> international prices. The 30 year
long-term average for <strong>the</strong> Cotlook A Index is US$1.54 per kg <strong>of</strong> lint. But <strong>the</strong>
A Index averaged US$1.50 per kg in 2003/04 compared to US$1.23 per kg
<strong>the</strong> previous year. World cotton prices are not rising in absolute terms. World
cotton consumption increased at <strong>the</strong> rate <strong>of</strong> 0.3% during <strong>the</strong> 1990s and it is
estimated that 50.5 million tons <strong>of</strong> all fibers will be consumed in 2005.
However, demand for cotton continues to perform below <strong>the</strong> demand for
o<strong>the</strong>r fibers and, as a result, cotton is loosing its share against o<strong>the</strong>r fibers. It
is estimated that <strong>the</strong> market share <strong>of</strong> cotton at <strong>the</strong> end use level in 2004 will
be 39.2%. The two most important reasons for <strong>the</strong> decline are lack <strong>of</strong>
promotional campaigns and higher cotton prices compared to syn<strong>the</strong>tic fibers.
11

Cotton is a driving force for economic development in many IDB member
cotton-producing countries. The majority <strong>of</strong> <strong>the</strong> African cotton growers are
small-scale producers and most field operations are performed manually or
by bullock traction. The governments in <strong>the</strong> region are under pressure to
reform <strong>the</strong>ir cotton industries. About 95% <strong>of</strong> production from <strong>the</strong> region is
exported. The Central Asian countries are adapting to <strong>the</strong> private land
ownership system. Sudan operates <strong>the</strong> largest cooperative farm in <strong>the</strong> world
with 1.2 million irrigated hectares controlled by a single management at <strong>the</strong>
Gazira Scheme. In spite <strong>of</strong> small farming systems, cotton production is
mostly mechanized in all IDB member countries in Asia.
Pakistan is <strong>the</strong> largest producer and consumer <strong>of</strong> cotton among IDB member
countries. Cotton consumption continues to grow in Turkey and is expected
to be higher than that <strong>of</strong> <strong>the</strong> USA in <strong>the</strong> next few years. Lifting <strong>of</strong> quota
sanctions in 2005 will bring many changes to <strong>the</strong> international cotton trade.
Elimination <strong>of</strong> quotas will accelerate <strong>the</strong> shift <strong>of</strong> textile manufacturing to
lower cost producing countries. Countries, which now produce or are able to
continue to produce at a lower cost will grab a major share from
industrialized and developing countries. The indications are that, outside <strong>of</strong>
<strong>the</strong> IDB member countries, China (Mainland) and India are going to be at an
advantage after January 2005, when <strong>the</strong> quota systems disappear. Many
governments, including some IDB member governments, provide direct
support for cotton production in various forms. Developing countries used to
subsidize inputs, but most <strong>of</strong> <strong>the</strong>m have stopped doing it. Also, many
countries used to impose duties on imports or exports <strong>of</strong> cotton but most
duties were eliminated by 1991. However, while direct subsidies on inputs
and tariffs have been reduced or abolished, particularly after 1990 as a result
<strong>of</strong> <strong>the</strong> GATT agreement, <strong>the</strong> issue <strong>of</strong> direct payments has become more
serious. According to <strong>the</strong> International Cotton Advisory Committee (ICAC),
direct income and price support provided to <strong>the</strong> cotton industry by various
governments amounted to US$4.8 billion in 2002/03.
U.S. cotton growers heavily depend on government support programs to
continue to produce cotton. Total expenditures by <strong>the</strong> U.S. government in
support <strong>of</strong> <strong>the</strong> cotton industry amounted to $3.3 billion in 2001/02, <strong>of</strong> which
direct income and price support was $3 billion. U.S government support is
estimated to have declined to $3.2 billion in 2002/03. Subsidies in <strong>the</strong> USA
were as high as 47 cents per pound <strong>of</strong> upland cotton in 1986 and again in
2000. Between 1980 and 2002, <strong>the</strong> average subsidy was 19 cents per pound.
The average U.S. upland cotton farm price over those years was 59 cents per
pound. Thus, on average, <strong>the</strong> program benefits accounted for one-third <strong>of</strong> <strong>the</strong>
farm value <strong>of</strong> production. Cotton growers in Spain and Greece are <strong>of</strong>fered
12

assistance through <strong>the</strong> EU Common Agricultural Policy (CAP). The average
benefit per pound <strong>of</strong> production during <strong>the</strong> last six seasons has been 77 cents
compared with an average market price <strong>of</strong> 56 cents per pound for <strong>the</strong> same
period. Thus, benefits to cotton in Greece and Spain averaged 21 cents per
pound, or 37%, over and above <strong>the</strong> Cotton Outlook A Index. International
organizations and governments <strong>the</strong>mselves have studied <strong>the</strong> impact <strong>of</strong>
subsidy programs on international prices and have concluded that <strong>the</strong>se
programs artificially depress international prices.
Genetically engineered Biotech cotton is spreading and it is estimated that
Biotech varieties were planted on 21% <strong>of</strong> <strong>the</strong> world total area and contributed
to 30% <strong>of</strong> world production in 2003/04. Indonesia is <strong>the</strong> only IDB member
country to approve Biotech Bt cotton. In order to remain competitive in <strong>the</strong>
production and marketing <strong>of</strong> cotton, new technologies need to be developed
and adopted. There are a variety <strong>of</strong> challenges facing IDB member countries
and <strong>the</strong> lifting <strong>of</strong> quota systems will bring new opportunities for which IDB
member countries should be ready. The private sector must come forward to
accept its share <strong>of</strong> contributions to <strong>the</strong> national economies, but it is also very
critical that private sector participants be capable and ready to perform
responsibly and successfully. In this regard, governments should play <strong>the</strong> role
<strong>of</strong> assisting different stakeholders to grasp different opportunities and resolve
issues. Governments should be responsible for supervising and working with
<strong>the</strong> private sector to help boost cotton production, consumption and trade in
IDB member countries.
Cotton produced in IDB member countries is valued at about nine billion
U.S. dollars based on <strong>the</strong> 30-year average Outlook A Index price <strong>of</strong> US$1.54
per kilogram <strong>of</strong> lint. Half <strong>of</strong> IDB member countries are involved in cotton
production and cotton is critical to <strong>the</strong> economy <strong>of</strong> many IDB cottonproducing
countries. The success or failure <strong>of</strong> <strong>the</strong> cotton crop steers <strong>the</strong>ir
economies in ei<strong>the</strong>r direction. In some countries like Egypt, Mali, Pakistan,
Sudan, Turkmenistan and Uzbekistan <strong>the</strong> economy is dependent on cotton. In
<strong>the</strong> last chapter, <strong>the</strong> report makes a number <strong>of</strong> recommendations for
enhancing cooperation among IDB cotton-producing countries. There is
much knowledge to be shared among IDB member countries and IDB could
provide an effective forum for such cooperation.
Cotton is confronted with many challenging issues and countries must be
prepared to face <strong>the</strong>se challenges. The challenges are multi-dimensional,
ranging from improving productivity and efficiency to facing <strong>the</strong> postsubsidy
and post-elimination <strong>of</strong> textile quota systems in <strong>the</strong> world. IDB
member countries need to be prepared to face <strong>the</strong> situation and IDB’s
13

decision to organize an expert consultation is a very timely initiative. IDB
will bring its cotton-producing member governments toge<strong>the</strong>r for <strong>the</strong> first
time to discuss cotton issues. The expert consultation will help to solidify
support for <strong>the</strong> initiative taken by Benin, Burkina Faso, Chad and Mali
against subsidies, which is supported by cotton growers in all IDB cotton
producing member countries. IDB will provide a forum where countries will
have <strong>the</strong> option to discuss <strong>the</strong> recommendations made in <strong>the</strong> current working
paper. The recommendations to be considered by <strong>the</strong> expert consultation, if
implemented, will go a long way in streng<strong>the</strong>ning <strong>the</strong> cotton sector,
improving <strong>the</strong> economic situation and reducing poverty in <strong>the</strong> IDB countries.
Unlike some o<strong>the</strong>r crops that have 17 international research centers available,
funded by <strong>the</strong> Consultative <strong>Group</strong> on International Agriculture Research
(CGIAR), cotton has no international research center. Countries depend
entirely on <strong>the</strong>ir own resources and manpower to develop and improve
cotton. There is no forum where a developing country researchers can seek
research guidelines. The limited service/support provided by <strong>the</strong> ICAC is far
below <strong>the</strong> needs in IDB member countries. ICAC is not a research institution
and is also limited by its mandate not to undertake any practical research on
cotton. IDB’s expert consultation on cotton could play an important role in
supplementing national and regional efforts to abridge gaps in <strong>the</strong> area <strong>of</strong>
cotton productivity and competitiveness, as well as streng<strong>the</strong>n <strong>the</strong>
institutional and marketing capacity <strong>of</strong> its member countries.
I. INTRODUCTION AND BACKGROUND
1. World Situation
Cotton is <strong>the</strong> most important natural fiber in <strong>the</strong> world accounting for 40% <strong>of</strong>
all fibers consumed at <strong>the</strong> end use level. Cotton is grown as a fiber crop but
also serves as a food crop by supplementing <strong>the</strong> vegetable oil supply,
particularly in developing cotton-producing countries. When cottonseed is not
processed in oil extracting factories, it is used to feed livestock, an indirect
way <strong>of</strong> cotton’s contribution to <strong>the</strong> food supply chain. On average, cotton is
planted on 34-36 million hectares every year in 60 countries. The farm value
<strong>of</strong> world cotton production is approximately US$30 billion per year,
including about US$20 billion earned in developing countries. Textile export
revenues derived from cotton are estimated at US$100 billion, with most <strong>of</strong>
this amount accruing to developing countries (Townsend 2004). Cotton is a
cash crop and plays a significant role in <strong>the</strong> life <strong>of</strong> millions <strong>of</strong> farmers around
<strong>the</strong> world. Cotton plays a vital role in <strong>the</strong> food security program in <strong>the</strong> world,
14

particularly when food crops follow cotton in rotation systems, which is <strong>the</strong>
case in many cotton-producing countries. Farmers produce cotton, sell it and
buy inputs for food crops. Cotton is intricately woven in <strong>the</strong> every-day life <strong>of</strong>
individuals everywhere on <strong>the</strong> earth.
World cotton production is going through drastic changes. Prices are not
rising in absolute terms, cost <strong>of</strong> production is <strong>the</strong> highest ever, cotton is
loosing its share to syn<strong>the</strong>tic fibers, genetically engineered varieties are
expanding and fiber testing is becoming more and more automated and faster.
According to <strong>the</strong> ICAC, 20.2 million tons <strong>of</strong> cotton was produced in <strong>the</strong>
world during 2003/04 compared to 19.1 million tons <strong>the</strong> previous season
(Esture 2004). Cotton consumption is estimated to be 20.7 million tons in
2003/04, 40% more than 20 years ago. While consumption is expected to
continue to increase in China (Mainland) and some o<strong>the</strong>r countries, declines
in mill use in <strong>the</strong> USA are expected to affect world consumption figures
negatively. Consumption is expected to be 20.6 million tons in 2004/05
(Esture 2004). Driven by increasing exports <strong>of</strong> yarn and fabric over <strong>the</strong> last
four years, Pakistan surpassed <strong>the</strong> USA as <strong>the</strong> third largest cotton consuming
country in <strong>the</strong> world after China (Mainland) and India.
The Cotlook A Index, published by a private company based in <strong>the</strong> UK,
usually measures international cotton prices. The Cotlook A Index does not
reflect <strong>the</strong> actual prices at which trading is done, but it is <strong>the</strong> strongest
indicator <strong>of</strong> international prices. The long-term average for <strong>the</strong> Cotlook A
Index is US$1.54 per kg <strong>of</strong> lint. But at <strong>the</strong> end <strong>of</strong> 2003/04 <strong>the</strong> A Index was
US$1.50 per kg compared to US$1.23 per kg <strong>the</strong> previous year. The latest
ICAC supply and demand estimates suggest that <strong>the</strong> Cotlook A Index will
average US$1.19 per kg in 2004/05 and US$1.24 per kg in 2005/06 (Esture
2004). Trade from China (Mainland) has a significant impact on international
prices. Exports from China (Mainland) depress international prices while
imports result in higher international prices. Cotton consumption in China
(Mainland) continues to grow, but due to higher production in <strong>the</strong> country,
imports by China (Mainland) are expected to decline in 2004/05. Lower
imports by China (Mainland) will result in a lower Cotlook A Index in
2004/05 and <strong>the</strong> year after.
The world average yield was 635 kilograms <strong>of</strong> lint per hectare in 2003/04
(Esture 2004). The highest yield ever achieved in <strong>the</strong> world is 642 kg/ha in
2001/02. Average yield is expected to increase in 2004/05 to a new record.
The world yield grew at <strong>the</strong> rate <strong>of</strong> 2%, or eight kilograms/ha/year, from
1951/52 to 1991/92. There was no increase in yield during <strong>the</strong> 1990s.
However, yields have been higher for <strong>the</strong> last three seasons due to higher
15

yields in Brazil, China (Mainland) and Turkey. Higher yields in Brazil are
due to shifts in cotton area to high yielding areas in <strong>the</strong> south. China
(Mainland) has recovered from <strong>the</strong> insecticide resistance problem, while <strong>the</strong>
GAP irrigation project in Turkey has contributed to increases in yields. No
significant increases in yield are expected for many years unless a new nontraditional
technology is developed and implemented.
On average, world cotton consumption increased at <strong>the</strong> rate <strong>of</strong> 0.3% during
<strong>the</strong> 1990s. Studies done by ICAC in collaboration with FAO forecast that
50.5 million tons <strong>of</strong> all fibers will be consumed in 2005 (ICAC 1999).
However, <strong>the</strong> demand for cotton continues to perform below <strong>the</strong> demand for
o<strong>the</strong>r fibers and, as a result, cotton is losing its share against o<strong>the</strong>r fibers. It is
estimated that <strong>the</strong> market share <strong>of</strong> cotton at <strong>the</strong> end use level in 2004 will be
39.2%. Cotton’s share will continue to drop and is estimated to be only
38.7% in 2005 (ICAC 2003a).
2. Situation in IDB Member Countries
Out <strong>of</strong> <strong>the</strong> total 55 member governments <strong>of</strong> <strong>the</strong> Islamic Development Bank,
29 countries produce cotton. Four o<strong>the</strong>r members consume cotton. Only 20
member governments <strong>of</strong> <strong>the</strong> IDB nei<strong>the</strong>r produce nor have a large textile
industry for processing cotton or yarn. Twenty-nine IDB cotton-producing
countries shared 30% <strong>of</strong> <strong>the</strong> world total area and 29% <strong>of</strong> <strong>the</strong> world total
production in 2003/04. IDB member countries shared 25% <strong>of</strong> total cotton
consumed in <strong>the</strong> world in 2003/04, and in <strong>the</strong> same year <strong>the</strong>y shared 38% <strong>of</strong>
total cotton exports in <strong>the</strong> world. One-third <strong>of</strong> <strong>the</strong> world ending stocks at <strong>the</strong>
end <strong>of</strong> 2003/04 will be located in IDB member countries (Table 4).
Average yields in most IDB member countries, o<strong>the</strong>r than <strong>the</strong> West African
and Eastern African countries, are competitive. The world average yield in
2003/04 was 635 kg/ha, compared to 596 kg/ha in IDB member countries.
The average yield in IDB member countries in <strong>the</strong> West African region is
only two-thirds <strong>of</strong> <strong>the</strong> world average. The region has potential and has tripled
its production in <strong>the</strong> last 20 years, but only due to increases in area. Average
yields in Mozambique and Uganda, where cotton was planted on 445,000
hectares in 2003/04, were only 18% <strong>of</strong> <strong>the</strong> world average.
Average yields in IDB member countries range from 129 kg/ha in Uganda to
1,364 kg/ha in Syria in 2003/04. Syria is able to achieve high yields with
almost no use <strong>of</strong> insecticides. Average yields in Turkey are second only to
Syria, i.e., 1,286 kg/ha from 700,000 hectares planted to cotton in 2003/04.
But, on average, insecticides are sprayed at least 10 times per season in <strong>the</strong>
16

Çukurova region <strong>of</strong> Turkey. Average yields in Central Asian IDB member
countries are only 75% <strong>of</strong> what <strong>the</strong>y achieved 25 years ago. Yields have gone
down slowly during <strong>the</strong> 1980s and significantly since <strong>the</strong>se countries became
independent in <strong>the</strong> early 1990s.
Egypt produces <strong>the</strong> best quality cotton in <strong>the</strong> world. Egypt, along with Sudan
and o<strong>the</strong>r IDB member countries, shared 55% <strong>of</strong> extra-fine cotton production
in <strong>the</strong> world in 2003/04. Pakistan is <strong>the</strong> largest cotton producing country
among IDB members, with 30% <strong>of</strong> total production. Pakistan is also <strong>the</strong>
largest consumer <strong>of</strong> cotton among all IDB members. Pakistan became an
importing country in 1993/94 because production was affected due to <strong>the</strong>
severe attack by <strong>the</strong> leaf curl virus disease (Ahmed 2004). Pakistan overcame
<strong>the</strong> disease problem, but due to a continuous increase in domestic mill
consumption, it is a net importing country. In addition to <strong>the</strong> leaf curl virus
attack that dropped <strong>the</strong> national average yield from 769 kg/ha in 1991/92 to
543 kg/ha <strong>the</strong> next year, Pakistan has successfully overcome <strong>the</strong> problem <strong>of</strong>
heat sterility. Syria has also faced a similar situation and successfully
developed heat tolerant varieties.
Many IDB cotton-producing member countries, small and large, are
dependent on cotton production and trade. Cotton is so intricately woven in
<strong>the</strong>ir economies that <strong>the</strong> success or failure <strong>of</strong> <strong>the</strong> cotton crop steers <strong>the</strong>ir
economies in ei<strong>the</strong>r direction. In some countries like Egypt, Mali, Pakistan,
Sudan, Turkmenistan and Uzbekistan <strong>the</strong> impact is so huge that a poor cotton
crop not only has a direct impact on <strong>the</strong> national GDP but also <strong>the</strong> effect lasts
for many years. Apart from employing a vast majority <strong>of</strong> labor in farming
operations, cotton also employs a large work force in <strong>the</strong> industry that uses it
as a raw material. Countries just cannot afford to lower <strong>the</strong> priority given to
cotton.
Cotton is planted on <strong>the</strong> average on 34-36 million hectares and <strong>the</strong> farm value <strong>of</strong>
world cotton production is approximately US$30 billion per year.
The farm value <strong>of</strong> cotton produced in IDB member countries is approximately US$9
billion.
Twenty-nine IDB cotton-producing countries shared 30% <strong>of</strong> <strong>the</strong> world total area and
29% <strong>of</strong> <strong>the</strong> world total production in 2003/04. IDB member countries shared 25% <strong>of</strong>
total cotton consumed in <strong>the</strong> world in 2003/04, and in <strong>the</strong> same year <strong>the</strong>y shared
38% <strong>of</strong> total cotton exports in <strong>the</strong> world.
17

Diversity in production practices and independent successes in a variety <strong>of</strong>
fields among IDB member countries show that <strong>the</strong>re is a great opportunity for
IDB member countries to share knowledge among <strong>the</strong>mselves. Cotton
producing conditions are similar among many countries within and across
regions, but <strong>the</strong>re is no formal way to share experiences. There is no
international research institute/center on cotton and IDB member countries,
having limited resources, suffer <strong>the</strong> most.
According to <strong>the</strong> WTO Agreement on Textiles and Clothing, <strong>the</strong> quota barriers
imposed by developed countries on international trade in textiles will be eliminated
by January 2005. With <strong>the</strong> emergence <strong>of</strong> <strong>the</strong> new international trade regime on
textiles and clothing under <strong>the</strong> WTO, cotton-producing and -consuming member
countries, whose economies heavily depend on cotton production, will have to
undertake additional efforts to successfully meet <strong>the</strong> new challenges and to remain
globally competitive. They will not only need to enhance <strong>the</strong>ir technical capabilities
to be efficient in producing cotton but <strong>the</strong>y will also need to streng<strong>the</strong>n <strong>the</strong>ir
institutional and marketing capacities.
Many studies carried out by <strong>the</strong> International Cotton Advisory Committee,
universities and independent individuals indicate that direct subsidies depress
international prices. The World Trade Organization has already termed <strong>the</strong>se
subsidies illegal. Some member governments <strong>of</strong> IDB—Benin, Burkina Faso,
Chad and Mali—have raised a strong voice against subsidies which affect
millions <strong>of</strong> cotton growers in IDB member countries. Consequently, at <strong>the</strong> 5th
WTO Ministerial Conference in Cancun, Mexico, <strong>the</strong>re was a debate on <strong>the</strong>
impact <strong>of</strong> current cotton subsidies <strong>of</strong> rich countries on cotton production and
marketing <strong>of</strong> developing countries. Many o<strong>the</strong>r developing countries,
including Brazil and India, called for <strong>the</strong> elimination <strong>of</strong> <strong>the</strong> subsidies, but <strong>the</strong>
four African countries also called for compensation to be paid to <strong>the</strong>m for <strong>the</strong>
economic losses <strong>the</strong>y have incurred because <strong>of</strong> <strong>the</strong> subsidies. They proposed
a solution that would allow <strong>the</strong>m to participate more in <strong>the</strong> international
trading system and to use trade in order to lift <strong>the</strong>mselves out <strong>of</strong> poverty. In
this context, <strong>the</strong> WTO Director-General urged ministers at <strong>the</strong> 5th WTO
Ministerial Conference in Cancun to consider <strong>the</strong> proposal seriously.
Unfortunately, <strong>the</strong> meeting ended without any agreement on <strong>the</strong> matter but
<strong>the</strong> discussion clearly showed that cotton has become an issue that will be
highly influenced by future developments <strong>of</strong> <strong>the</strong> WTO negotiations. Benin,
Burkina Faso, Chad and Mali, along with Brazil and some o<strong>the</strong>r countries
continued pushing <strong>the</strong> issues. Ultimately, on August 1, 2004, <strong>the</strong> WTO
approved a new framework agreement designed to be <strong>the</strong> roadmap for
completing <strong>the</strong> Doha Round. Full negotiations will start in September 2004,
18

and it was also decided that cotton will be a part <strong>of</strong> <strong>the</strong> negotiations and that it
should be handled separately from o<strong>the</strong>r commodities.
IDB member countries should be ready to face <strong>the</strong> challenge <strong>of</strong> quota free
textile trade and must vigorously support its fellow members’ initiative on
subsidies. IDB member countries can greatly improve <strong>the</strong>ir production
efficiency and competitiveness if <strong>the</strong>y learn from each o<strong>the</strong>r’s experience. In
this context, <strong>the</strong> IDB could play an important role in supplementing national
and regional efforts to abridge <strong>the</strong> gap in <strong>the</strong> area <strong>of</strong> cotton productivity and
competitiveness as well as streng<strong>the</strong>n <strong>the</strong> institutional and marketing capacity
<strong>of</strong> its member countries. With <strong>the</strong> same objective, IDB decided to organize an
expert group meeting on "Enhancing Cotton Production Efficiency and
International Competitiveness in Cotton-Producing IDB Member Countries."
The main objective <strong>of</strong> <strong>the</strong> meeting will be to discuss and explore practical
ways and means <strong>of</strong> enhancing cotton production efficiency and
competitiveness and to share experiences and best practices among member
countries in this crucial area.
3. Objective <strong>of</strong> <strong>the</strong> Working Paper
The main purpose <strong>of</strong> <strong>the</strong> working paper is to identify and highlight <strong>the</strong> major
issues related to enhancing <strong>the</strong> productivity and international competitiveness
in <strong>the</strong> cotton sub-sector and to explore ways and means <strong>of</strong> designing a
cooperation framework for sharing experiences amongst <strong>the</strong> cotton-producing
IDB member countries1.
The working paper is organized as follows: Section II describes <strong>the</strong> major
challenges to IDB cotton-producing countries. Current cotton policy in rich
countries and Its effect on IDB cotton-producing countries is presented in
section III. Enhancing efficiency, productivity and competitiveness in <strong>the</strong>
cotton sector are introduced in section IV and V. Section VI analyzes <strong>the</strong> role
<strong>of</strong> <strong>the</strong> private sector in cotton. The framework for enhancing cooperation
among IDB cotton-producing countries is introduced in section VII. Finally,
section VIII presents conclusions and recommendations.
1 The current report has been prepared on <strong>the</strong> basis <strong>of</strong> <strong>the</strong> two regional reports
executed by IDB and undertaken by experts, one each in Africa and Asia, have
provided in-depth analysis <strong>of</strong> various issues faced by IDB member countries.
19

II. MAJOR CHALLENGES TO IDB COTTON PRODUCING
MEMBER COUNTRIES
Cotton is a driving force for economic development in many IDB member
countries. Cotton is grown in West and Central Africa on approximately 60%
<strong>of</strong> <strong>the</strong> cultivated land, and millions <strong>of</strong> farmers are involved in its cultivation.
Cotton is planted on about 10% <strong>of</strong> <strong>the</strong> cultivated area in Pakistan and only
3% <strong>of</strong> <strong>the</strong> cultivated area in Turkey. In Uzbekistan only 11% <strong>of</strong> <strong>the</strong> total land
area is arable but cotton occupies <strong>the</strong> most cultivable land in summer. A
similar situation exists in most o<strong>the</strong>r Central Asian countries <strong>of</strong> <strong>the</strong> former
Soviet Union. Cotton may be planted on a small percentage <strong>of</strong> <strong>the</strong> arable land
but it plays and important role in <strong>the</strong> economy <strong>of</strong> most IDB countries. The
majority <strong>of</strong> <strong>the</strong> African cotton growers are small-scale producers and most
field operations are performed manually or by bullock traction. The
governments in <strong>the</strong> region are under pressure to reform <strong>the</strong>ir cotton
industries. About 95% <strong>of</strong> production from <strong>the</strong> region is exported.
Central Asian countries are still changing <strong>the</strong> old system <strong>of</strong> “Kolkhoz” and
adapting to <strong>the</strong> private land ownership system. Sudan operates <strong>the</strong> largest
cooperative farm in <strong>the</strong> world with 1.2 million irrigated hectares controlled
by a single management at <strong>the</strong> Gazira Scheme. Mali has slightly larger
growers but in all o<strong>the</strong>r IDB member countries at least 70% <strong>of</strong> cotton farms
are less than five hectares in size. In spite <strong>of</strong> <strong>the</strong> small farming systems,
cotton production is mostly mechanized in all <strong>the</strong> IDB member countries in
Asia. Land holdings are small but facilities are available to hire machinery for
specific field operations. All cotton is hand-picked in Africa. Central Asian
countries used to machine-pick 80-90% <strong>of</strong> <strong>the</strong>ir production but now it has
declined to about one-third in <strong>the</strong> last 15 years. Extra-fine cotton produced in
Egypt, Sudan, Turkmenistan and o<strong>the</strong>r IDB member countries is not suitable
for machine-picking. Scarcity <strong>of</strong> labor in Turkey is forcing <strong>the</strong> country to
adopt machine-picking. It is estimated that almost 100 machines have already
been imported into Turkey. Pakistan faced labor shortages during <strong>the</strong> 1980s
but it does not seem to be a problem any more. No IDB member country
o<strong>the</strong>r than Turkey is in <strong>the</strong> process <strong>of</strong> adopting machine-picking.
Political, economic and ecological conditions vary among IDB member
countries. IDB member countries produce <strong>the</strong> most irrigated cotton in <strong>the</strong>
world and share many common approaches. However, a diversity <strong>of</strong>
production systems in IDB member countries forces <strong>the</strong>m to face a variety <strong>of</strong>
challenges. Challenges are region specific and also specific to countries.
Major challenges can be grouped into production technology, institutional
limitations, and financial limitations.
20

1. Production Technology Limitations
i. Input Supplies
Cotton is a most responsive crop and it requires timely and optimum
application <strong>of</strong> inputs, particularly fertilizers and insecticides. While most
Asian countries have utilized <strong>the</strong> application <strong>of</strong> fertilizers and insecticides in
cotton, fertilizers and insecticides are not sufficiently available to cotton
growers in Africa. Non-availability <strong>of</strong> inputs in <strong>the</strong> open market and lack <strong>of</strong>
affordability to buy inputs are <strong>the</strong> main reasons for low input use in Africa.
The system is changing, though slowly, but <strong>the</strong> fact that cotton companies in
West African countries are <strong>the</strong> only suppliers <strong>of</strong> inputs and <strong>the</strong> buyers <strong>of</strong>
cotton in <strong>the</strong> market has limited African growers to make proper use <strong>of</strong>
fertilizers and pesticides. West and East African countries can improve <strong>the</strong>
sustainability <strong>of</strong> cotton production by improving <strong>the</strong> input supply chain.
Reforms are being implemented to modify <strong>the</strong> organizational structures <strong>of</strong> <strong>the</strong>
cotton industries in Benin, Togo and Ivory Coast, focusing particularly on <strong>the</strong>
partial privatization <strong>of</strong> ginning and marketing operations. Mali is beginning
<strong>the</strong> privatization process, and additional changes to industry structure in o<strong>the</strong>r
countries are inevitable. Accordingly, <strong>the</strong> input supply system is being
decentralized, but <strong>the</strong> historical system based on national cotton companies
has not been replaced with an organized alternative, and many small holders
are experiencing loss <strong>of</strong> access to quality inputs. African cotton growers need
better access to fertilizers, pesticides and machinery.
While African farmers have yet not realized <strong>the</strong> full use <strong>of</strong> inputs, <strong>the</strong> Central
Asian countries’ cotton growers have lost <strong>the</strong>ir access to inputs. The Central
Asian countries shared almost 20% <strong>of</strong> world production in 1990/91, which
has slowly declined to only 7% in 2003/04. Lower yields due to disturbance
in <strong>the</strong> input supply systems affected area and <strong>the</strong>re is a need to stop this trend.
Most o<strong>the</strong>r Asian countries have optimized <strong>the</strong> use <strong>of</strong> inputs but must restrain
from excessive use.
ii. Low Average Yield
It is a common concern among all cotton producing countries <strong>of</strong> <strong>the</strong> world
that <strong>the</strong> average yield <strong>of</strong> cotton is not increasing. Many low yielding countries
have a greater challenge to improve yield compared to those who have
already surpassed <strong>the</strong> world average by 100% or even higher. In many IDB
countries, yields have not increased for many years and <strong>the</strong>re are no
21

indications that <strong>the</strong>y will see an increase any time soon. It is a challenge for
low yielding countries to come up with options and solutions to improve
yields that equal those <strong>of</strong> IDB member countries like Syria and Turkey.
iii. High Cost <strong>of</strong> Production
The cost <strong>of</strong> production continues to increase in spite <strong>of</strong> non-significant or
even no increases in yields. All Central American countries had to stop cotton
production due to <strong>the</strong> fact that <strong>the</strong> cost <strong>of</strong> inputs, particularly insecticides,
became too high and unaffordable. For a long time <strong>the</strong> increases in cost <strong>of</strong>
production were compensated through increases in yields. Now, any increases
in cost <strong>of</strong> production are going to affect farmers’ income. Efficient cotton
production does not mean just higher yields, but higher yields at lower costs.
Sustainable cotton production is a challenge for every cotton producing
country and thus for IDB countries too.
iv. Technology Transfer
The technology transfer system in most IDB countries is obsolete. Training
programs do not exist. Farmers must know <strong>the</strong> behavior <strong>of</strong> plants and <strong>the</strong>
reaction to input use. Cotton production efficiency is low and inputs,
whatever available, are not optimally used.
2. Institutional Limitations
i. Genetic Engineering <strong>of</strong> Cotton and O<strong>the</strong>r New Technologies
Genetically engineered Biotech cotton has been approved for commercial
production in Argentina, Australia, China (Mainland), Colombia, India,
Indonesia, Mexico, South Africa and <strong>the</strong> USA. It is estimated that Biotech
cotton was planted on 21% <strong>of</strong> <strong>the</strong> world total area and contributed 30% <strong>of</strong>
world production in 2003/04 (Chaudhry 2004). Indonesia is <strong>the</strong> only IDB
member country to approve genetically engineered Bt cotton, although it is
not a large cotton producer and only 2-3 thousand hectares were planted to Bt
varieties. Latest news indicates that Monsanto may be closing its activities in
Indonesia. Burkina Faso is conducting trials but <strong>the</strong> government has not made
a final decision on <strong>the</strong> adoption <strong>of</strong> Biotech cotton. No o<strong>the</strong>r IDB member
country is close to adopting Biotech cotton.
The genetic engineering <strong>of</strong> cotton is here to stay. One may be influenced by
<strong>the</strong> aggressive adoption <strong>of</strong> genetic engineering in <strong>the</strong> USA or by <strong>the</strong> over-
22

cautious approach by <strong>the</strong> European countries, but <strong>the</strong> fact <strong>of</strong> <strong>the</strong> matter is that
<strong>the</strong> technology has many and long-term applications. Genetic engineering is a
basic science and <strong>the</strong>re is a need to educate <strong>the</strong> public in this technology.
More specifically, <strong>the</strong> technology can generate many products (like Bt cotton)
and although a particular product could be deemed as being not good, <strong>the</strong>
whole technology cannot be blamed and discarded. Research to a limited
extent is going on in some IDB member countries, more particularly in
Egypt, Pakistan, Turkey and Uzbekistan. Egypt has developed drought
resistant genotypes and Pakistan has developed geminiviruses resistant
genotypes. Egypt has biosafety regulations in place. Private companies own
<strong>the</strong> transgenes and countries cannot afford to launch <strong>the</strong>ir own expensive
research programs. Many IDB member countries are at cross roads on
whe<strong>the</strong>r or not and how to make use <strong>of</strong> <strong>the</strong> genetic engineering technology.
The technology is expensive and in <strong>the</strong> hands <strong>of</strong> <strong>the</strong> private sector. IDB
member countries cannot take advantage <strong>of</strong> this technology that is already in
use 1996/97. Biotechnology is just one example, but it will be repeated with
any new products developed by this technology or any new technology
developed outside <strong>the</strong> IDB member countries.
ii. Promotion <strong>of</strong> Cotton
Cotton prices, like any o<strong>the</strong>r commodity, are determined by supply and
demand. Producing countries are working to increase supply and have done
so successfully in <strong>the</strong> past by increasing production from 6.7 million tons in
1950/51 to 20.2 million tons in 2003/04. All <strong>the</strong> increases have come from
increases in yields. During <strong>the</strong> same time, consumption <strong>of</strong> cotton has also
increased at <strong>the</strong> same pace, but <strong>the</strong>re have been no increases in prices in real
terms. Today’s prices are in fact lower in real terms than 30 years ago. In
order to enhance demand for cotton <strong>the</strong>re is a need to promote cotton as an
environmentally-friendly and comfortable fiber. Studies show that those
countries that have implemented cotton promotion programs have
successfully enhanced <strong>the</strong> share <strong>of</strong> cotton among fibers consumed at <strong>the</strong> end
use level in <strong>the</strong>ir countries. It is in <strong>the</strong> interest <strong>of</strong> producing countries to
initiate demand enhancement programs and reverse <strong>the</strong> trend <strong>of</strong> cotton’s
share being swallowed by syn<strong>the</strong>tic fibers.
iii. Instrument Based Fiber Quality Testing
The price <strong>of</strong> cotton is determined by quality. The first and most important
message from <strong>the</strong> spinning industry is a guarantee that <strong>the</strong>y get what <strong>the</strong>y
buy. If a seller can assure that <strong>the</strong> quality characteristics given at <strong>the</strong> time <strong>of</strong>
signing <strong>the</strong> contract will be truly repeated at <strong>the</strong> mill, <strong>the</strong> spinners are ready to
23

pay higher prices. Traditional manual classing/evaluation is incapable <strong>of</strong>
providing such high confidence to <strong>the</strong> spinner. Producers in more countries
are expanding <strong>the</strong> use <strong>of</strong> instrument testing. Cotton is being classed on highspeed
instruments in many countries and many more are adopting <strong>the</strong>m. The
government <strong>of</strong> Brazil requires that cotton be evaluated on <strong>the</strong> basis <strong>of</strong> <strong>the</strong>
Universal Standards and Brazil will eventually class all cotton with
instrument-based systems. China (Mainland) is working on an ambitious plan
to reform its classing and grading system for cotton, and has asked <strong>the</strong> USDA
for assistance in establishing a reliable cotton classing system. Over 1,700
high-speed machines, mostly from Uster Technologies, Inc. are already
working in <strong>the</strong> world. Two more companies, one each in India and Israel, are
aggressively working on high-speed machines, equivalent to HVI (high
volume instrument), for efficient and reliable fiber quality testing. IDB
member countries have to change <strong>the</strong> classing systems and adopt machine
based efficient methods that provide detailed information on <strong>the</strong> qualitative
value <strong>of</strong> cotton <strong>the</strong>y produce.
iv. Shift in <strong>the</strong> World Trade: An Opportunity for IDB
The lifting <strong>of</strong> quota sanctions in 2005 will bring many changes to <strong>the</strong>
international cotton trade. The elimination <strong>of</strong> quotas will accelerate <strong>the</strong> shift
<strong>of</strong> textile manufacturing to countries with lower textile manufacturing costs.
Countries who now produce or are able to continue producing at a lower cost
will grab a major share from industrialized and developing countries where
<strong>the</strong> cost <strong>of</strong> textile production is higher. The international cotton trade will
experience major shifts, as some countries will lose <strong>the</strong>ir share while o<strong>the</strong>rs
will be able to add to <strong>the</strong>ir share in <strong>the</strong> trade. The indications are that, outside
<strong>the</strong> IDB member countries, China (Mainland) and India are going to be at an
advantage after January 2005 when <strong>the</strong> quota systems disappear. Similarly,
indications on which countries are expected to lose <strong>the</strong>ir share are also clear.
The USA is on <strong>the</strong> top <strong>of</strong> such countries that are expected to reduce <strong>the</strong>ir
share in <strong>the</strong> world textile trade. High cost <strong>of</strong> labor and processing at mills has
already drastically reduced consumption in <strong>the</strong> USA, and liberalization <strong>of</strong>
trade is going to affect <strong>the</strong> industry more vigorously. January 1, 2005 is not
far but efforts are still being made to delay or propose a complete
replacement <strong>of</strong> <strong>the</strong> quota systems. In <strong>the</strong> name <strong>of</strong> fair trade in textiles and
clothing, some countries are calling on <strong>the</strong> World Trade Organization (WTO)
to push back <strong>the</strong> phase-out <strong>of</strong> <strong>the</strong> quota systems or eliminate <strong>the</strong> 10-year
phase-out agreed by GATT in 1995. They may or may not be successful, but
<strong>the</strong> issue is how far are IDB countries prepared to go in dealing with a quota
free marketing system in textiles and clothing.
24

v. Lack <strong>of</strong> Communication
IDB member countries can learn from each o<strong>the</strong>r’s experiences but <strong>the</strong>re is
no system to bring <strong>the</strong>m toge<strong>the</strong>r. Countries do not know what is happening
even in <strong>the</strong>ir neighboring countries. In almost all countries, no national cotton
conferences are held and various segments <strong>of</strong> <strong>the</strong> cotton industry never get a
chance to sit toge<strong>the</strong>r and exchange notes. There is a need to improve
communication among all segments <strong>of</strong> <strong>the</strong> cotton industry within each
country and across countries.
vi. Lack <strong>of</strong> Cooperative Systems
The vast majority <strong>of</strong> cotton growers in IDB countries are small-scale growers
who do not enjoy bargaining leverage in selling <strong>the</strong>ir produce. Inputs are
purchased individually thus <strong>the</strong>y end up paying higher prices. Farmers could
group toge<strong>the</strong>r for buying inputs and selling <strong>the</strong>ir produce.
vii. Lack <strong>of</strong> Marketing Information
Cotton growers in many IDB member countries receive a price that has been
fixed months in advance and before planting, and although prices may
fluctuate <strong>the</strong>y receive <strong>the</strong> set price. In o<strong>the</strong>r countries where farmers sell <strong>the</strong>ir
produce <strong>the</strong>mselves, <strong>the</strong>y might not get a good price because <strong>the</strong>y never study
<strong>the</strong> prices <strong>of</strong> cotton in <strong>the</strong> country. Also, quality incentives are almost nonexistent.
Growers sell seedcotton, which in many countries is not graded.
Varieties are mixed by farmers, <strong>the</strong>n by middlemen before seedcotton reaches
a gin.
viii. Low Private Sector Participation
Almost all research on cotton in IDB member countries is carried out by
public sector institutes entirely funded by governments. IDB countries
seriously lack effective regulatory and enforcement systems in R&D
programs to protect and stimulate private sector investing in technological
research. The amount <strong>of</strong> private research reported in IDB cotton-producing
countries is very limited, leading to a reduced capacity <strong>of</strong> R&D. The public
sector monopolizes many issues and <strong>the</strong> lack <strong>of</strong> competition slows down <strong>the</strong>
development process.
25

3. Financial Limitations
i. Lack <strong>of</strong> Credit Facilities
Cotton is not an intensive crop like vegetables, yet it requires more pesticides
than o<strong>the</strong>r field crops. It is a cash crop but <strong>the</strong> cropping systems are such that
when planting time comes, most farmers have already spent <strong>the</strong> money made
from cotton. When farmers do not have adequate access to credit facilities,
<strong>the</strong> crop suffers due to pest attack and lower than adequate input applications.
ii. Private Sector Investment
Research is conducted and dominated by <strong>the</strong> public sector. Agricultural
research is a long-term investment for which <strong>the</strong> private sector has no
incentive. The private sector needs some kind <strong>of</strong> assurance from governments
that <strong>the</strong>ir money is secure and that no sudden policy changes will affect <strong>the</strong>ir
investment.
iii. Scarcity <strong>of</strong> Funding for Research
Most research institutes are under-funded; <strong>the</strong>ir budget is mostly spent to
meet salaries and very little is actually left for real research. Institutes are not
able to initiate new research programs due to budget limitations.
iv. Bureaucratic Procedures
Funds are limited but it has been seen that sometimes, even when funds are
available from non-governmental sources, researchers cannot make use <strong>of</strong>
<strong>the</strong>m due to lengthy bureaucratic procedures. The long bureaucratic
procedures also limit participation in regional and international events.
Major challenges/limitations are:
1. Production technology limitations - Input supplies in West Africa, low
average yields, high cost <strong>of</strong> production and obsolete way <strong>of</strong> technology
transfer.
2. Institutional limitations – Development/adoption <strong>of</strong> new technologies, lower
demand for cotton, fiber quality evaluation, lack <strong>of</strong>
communications/cooperation and marketing information.
3. Financial limitations – Poor credit facilities, lesser private sector
participation, non-availability <strong>of</strong> funding for research and bureaucratic
procedure.
26

III. CURRENT COTTON POLICIES IN RICH COUNTRIES AND
THEIR EFFECTS ON IDB COTTON PRODUCING COUNTRIES
Cotton policies <strong>of</strong> not only rich but also <strong>of</strong> developing major cotton
producing countries that have an effect on IDB member countries are
discussed in this section. Policies in some IDB member countries also affect
fellow member countries, but <strong>the</strong> impact is minimum compared to that <strong>of</strong>
o<strong>the</strong>r countries discussed here. Because policies in most countries are not
similar, <strong>the</strong>y are discussed country by country. However, a common concern
in many countries regarding government payments to cotton producers in <strong>the</strong>
form <strong>of</strong> direct cash is discussed first.
1. Government Payments on Cotton Production
Many governments, including some IDB member governments, provide
direct support to cotton production in various forms, one <strong>of</strong> which, common
in many countries, is government support to cotton research programs or
extension services. Developing countries used to subsidize inputs, which has
been mostly eliminated. Many countries used to impose duties on imports or
exports <strong>of</strong> cotton, but most duties were done away with by 1991. Thus, since
<strong>the</strong> initiation <strong>of</strong> most tariffs in 1958, <strong>the</strong> cotton industry has realized <strong>the</strong>
damage caused by <strong>the</strong>se tariffs and has slowly been working towards getting
rid <strong>of</strong> <strong>the</strong>se distorting factors. However, while direct subsidies on inputs and
tariffs have been reduced and some even eliminated, particularly after 1990
as a result <strong>of</strong> <strong>the</strong> GATT agreement, <strong>the</strong> issue <strong>of</strong> direct payments has become
more serious.
ICAC has done extensive work on government measures that have distorting
effects on cotton production in many countries. According to <strong>the</strong> ICAC,
direct income and price support provided to <strong>the</strong> cotton industry by various
governments amounted to US$4.8 billion in 2002/03 and US$5.8 billion in
2001/02. Direct support declined in 2002/03 due to lower production in
subsidizing countries and higher international prices, and not due to lower
subsidies. Eight countries <strong>of</strong>fered direct income and price support in 2002/03,
ranging from US$1.3 billion in <strong>the</strong> USA to $7 million in Mexico. Emergency
support provided by six developing countries in 2002/03 is being
discontinued in 2003/04 (ICAC 2003b).
27

The governments <strong>of</strong> most cotton producing countries are heavily involved in
cotton production and marketing issues. Government policies and programs
affect <strong>the</strong> location <strong>of</strong> cotton production, consumption, and prices. These
policies can be grouped into four broad categories:
• Policies designed to boost farm income while interfering as little as
possible with <strong>the</strong> level <strong>of</strong> market prices.
• Policies designed to control <strong>the</strong> cotton sector through extensive state
regulation.
• Policies designed to manage domestic cotton prices in order to boost
exports <strong>of</strong> textiles and apparel.
• Free market policies.
2. Export Subsidies
The second form <strong>of</strong> direct subsidies that have an impact on o<strong>the</strong>r countries
growers’ cotton prices is a price subsidy on cotton exported. In <strong>the</strong> USA,
local cotton consumers are also compensated. The USA and China
(Mainland) provided subsidies to exports in 2002/03 and 2003/04. Overall
assistance in <strong>the</strong> two countries combined reached $316 million in 2002/03
and is expected to decline to US$160 million in 2003/04. Exports are
subsidized in China (Mainland) through direct payments designed to cover
<strong>the</strong> cost <strong>of</strong> buying, ginning and transporting cotton to an export location.
Assistance in <strong>the</strong> USA is provided through <strong>the</strong> Step 2 program <strong>of</strong>fered to both
exporters and domestic consumers <strong>of</strong> raw cotton. In 2002/03, <strong>the</strong> U.S.
government disbursed $266 million to exporters, and 2003/04 payments to
exporters are estimated to decline to US$148 million. The average assistance
per pound exported by <strong>the</strong> USA is expected to decline from 5 U.S. cents per
pound in 2002/03 to 2 cents per pound in 2003/04. The Step 2 program
covers upland cotton, and exports <strong>of</strong> U.S. Pima are covered by a separate
program through which $33 million were paid to exporters in 2002/03. Direct
government support in different countries is given in Table 1.
28

Table 1. Direct Assistance Provided by Governments to <strong>the</strong> Cotton
Sector Through Production Programs*
2001/02 2002/03 2003/04**
Av. Assistance
Av. Assistance
Av. Assistance
Production Assistance to Production Assistance to Production Assistance to
(1,000 per Pound Production (1,000 tons) per Pound Production (1,000 tons) per Pound Production
Country Tons) (US cents) (US$ million) (US cents) (US$ million) (US cents) (US$ million)
USA
China
4,420 31 3,001 3,747 23 1,941 3,975 10 877
(Mainland) 5,320 10 1,196 4,916 17 1,850 4,870 15 1,585
Greece 435 77 735 375 87 718 330 94 687
Spain 107 104 245 100 108 239 95 104 218
Turkey 922 3 59 900 3 57 900 1 22
Egypt 317 3 23 170 9 33
Mexico 92 9 18 41 8 7 68 4 6
Côte
d’lvoire
173 2 8
India 2,686 8 500
Benin 172 5 20
Mali 240 3 14
Brazil 766 1 10
Colombia 26 16 9
Argentina 65 5 7
All
countries:
15,741 17 5,845 10,249 21 4,845 3,395
*Income and Price support programs only. Credit and o<strong>the</strong>r assistance not included.
**Preliminary
Source: 1. International Cotton Advisory Committee (2003b).
2. Attachment I to SC-N-473, A report presented to 473 meeting <strong>of</strong> <strong>the</strong> Standing Committee <strong>of</strong> ICAC, May 18, 2004.
Country
Table 2. Direct Assistance Provided by Governments to <strong>the</strong> Cotton
Sector Through Export Programs
2001/02 2002/03 2003/04*
Av. Assistance
Av. Assistance
Av.
Exports Assistance to Exports Assistance to Exports Assistance Assistance t
(1,000 tons) per Pound Exports (1,000 tons) per Pound Exports (1,000 tons) per Pound Exports
(US cents) (US$ million) (US cents) (US$ million) (US cents) (US$ million)
USA
China
2,395 2 100 2,591 5 266 3,000 2 148
(Mainland) 74 13 21 164 14 50 40 14 12
Total: 2,469 2 121 2,755 5 316 3,040 2 160
*Preliminary
Source:1. International Cotton Advisory Committee (2003b).
2. Attachment I to SC-N-473, A report presented to 473 meeting <strong>of</strong> <strong>the</strong> Standing Committee <strong>of</strong> ICAC, May 18, 2004.
USA
On average, about five million hectares are planted <strong>of</strong> cotton in <strong>the</strong> USA
every year. Significant shifts in area can occur from year to year mostly
depending on cotton prices. About one third <strong>of</strong> <strong>the</strong> total area is irrigated; all
29

cotton in <strong>the</strong> West where yields are <strong>the</strong> highest is irrigated. More recently, <strong>the</strong>
U.S. government has divided <strong>the</strong> cotton producing areas into five different
levels <strong>of</strong> production practices ra<strong>the</strong>r than <strong>the</strong> traditional four geographical
regions. Cost <strong>of</strong> production in <strong>the</strong> USA is one <strong>of</strong> <strong>the</strong> highest in <strong>the</strong> world
ranging from US$1.32 per kg to US$1.75 per kg with a national average <strong>of</strong>
US$1.5 per kg <strong>of</strong> lint. About 25,000 farmers are involved in cotton
production. In addition, 76% <strong>of</strong> <strong>the</strong> area was planted to transgenic varieties in
2003/04, all developed by <strong>the</strong> private sector (Chaudhry 2004).
Farmers heavily depend on government support programs to continue
producing cotton. Total expenditures by <strong>the</strong> U.S. government in support <strong>of</strong>
<strong>the</strong> cotton industry amounted to $3.3 billion in 2001/02, <strong>of</strong> which direct
income and price support was $3 billion. U.S government support is
estimated to have declined to $3.2 billion in 2002/03. A new farm bill became
effective in 2002/03, and will expire in 2007/08. The 2002 farm bill replaced
<strong>the</strong> production flexibility contract payments (PFC) with a direct payment
(DP) and a counter-cyclical payment (CP). Both payments are based on
historical planted area and yield, ra<strong>the</strong>r than actual production. DPs are
independent <strong>of</strong> market prices and are set at 6.67 U.S. cents per pound. CPs
are issued when <strong>the</strong> effective price is below <strong>the</strong> target price. The effective
price is <strong>the</strong> DP plus <strong>the</strong> higher <strong>of</strong> <strong>the</strong> national average market price paid to
producers or <strong>the</strong> loan rate. The loan rate is set at 52 U.S cents per pound and
<strong>the</strong> target price is 72.4 U.S. cents per pound. The loan deficiency payment
(LDP)—issued when world prices adjusted by quality and location are below
<strong>the</strong> loan rate—-continues to be <strong>of</strong>fered in <strong>the</strong> 2002 farm bill. It is estimated
that total direct income and price support in <strong>the</strong> USA amounted to US$2
billion in 2002/03. For Pima, <strong>the</strong> U.S. government announced an export
subsidy <strong>of</strong> 22 U.S. cents per pound on 5th April 2004 (Valderrama 2004).
Subsidies in <strong>the</strong> USA have been as high as 47 cents per pound <strong>of</strong> upland cotton,
once in 1986 and again in 2000. The average subsidy per pound between 1980
and 2002 was 19 cents per pound. The average U.S. upland cotton farm price
over those years was 59 cents per pound. Thus, on average, <strong>the</strong> program
benefits accounted for one-third <strong>of</strong> <strong>the</strong> farm value <strong>of</strong> production. International
organizations and governments <strong>the</strong>mselves have studied <strong>the</strong> impact <strong>of</strong> U.S.
subsidy programs on international prices and concluded that <strong>the</strong> massive cotton
subsidy program <strong>of</strong> <strong>the</strong> U.S. government depresses international prices. The
U.S.'s 25,000 cotton farmers control more than 40% <strong>of</strong> global cotton exports
and affect millions <strong>of</strong> small-scale growers in o<strong>the</strong>r countries. The West African
countries have raised <strong>the</strong> issue at international forums, but a most recent
success came from <strong>the</strong> action initiated by Brazil at <strong>the</strong> WTO, where it argued
that <strong>the</strong> U.S. subsidy program leads to over-supply <strong>of</strong> cotton in <strong>the</strong> world,
30

which in turn depresses world cotton prices. The program is spreading rural
unemployment and poverty in Africa and elsewhere, including IDB cottonproducing
countries. On April 26, 2004, a panel <strong>of</strong> WTO trade judges called <strong>the</strong>
U.S. cotton subsidy illegal. The decision was well received across <strong>the</strong>
developing world but <strong>the</strong> U.S. has appealed <strong>the</strong> decision.
China (Mainland)
Cotton is grown in three regions, <strong>the</strong> Yellow River Valley, <strong>the</strong> Yangtze Valley
and <strong>the</strong> Xinjiang region in <strong>the</strong> northwest. Cotton was planted on 5.0 million
hectares and <strong>the</strong> average yield was one ton <strong>of</strong> lint per hectare in 2003/04.
Average yields in China (Mainland) have been over one ton <strong>of</strong> lint since
1997/98. Yields are higher in <strong>the</strong> Xinjiang region as it is a new cotton area and
pest pressure is still low. The Yellow River Valley was worse hit by
Helicoverpa armigera as it became resistant to many insecticide groups. The
government implemented a vigorous integrated pest management program to
overcome <strong>the</strong> resistance problem that affected yields. Transgenic Bt cotton
from Monsanto with <strong>the</strong> Bt gene Cry 1Ab, and local transgenic cotton resistant
to bollworms helped to tackle <strong>the</strong> problem. Area under genetically engineered
cotton reached 58% in 2003/04. Cotton is heavily fertilized and most operations
are performed manually as each farmer owns only 1/15 <strong>of</strong> a hectare. All cotton
is picked by hand and picking is clean. Every year China (Mainland) is ei<strong>the</strong>r
<strong>the</strong> largest or <strong>the</strong> second largest producer <strong>of</strong> cotton in <strong>the</strong> world.
China (Mainland) has a significant impact on <strong>the</strong> world cotton industry in many
ways. ICAC’s work for many years shows that China (Mainland) is <strong>the</strong> single
country with <strong>the</strong> most significant effect on world cotton prices. The analysis
shows that when China (Mainland) is an importing country, international prices
are higher. In years when China (Mainland) exports, cotton international prices
tend to remain low. Based on <strong>the</strong>se conclusions, countries could plan <strong>the</strong>ir
programs, but extensive information is not available from China (Mainland),
which hinders countries to plan <strong>the</strong>ir programs properly. China (Mainland)
produces cotton at one <strong>of</strong> <strong>the</strong> lowest costs in <strong>the</strong> world, partly because <strong>the</strong>re is
no ginning cost, which is free from <strong>the</strong> government. The low cost <strong>of</strong> production
coupled with subsidies on local consumption and exports put Chinese cotton
growers at an advantage over growers in IDB cotton-producing countries and
elsewhere. Lower cost <strong>of</strong> production and higher returns encourage farmers to
produce more and more cotton. Even during years like 2001/02, when cotton
prices were at <strong>the</strong>ir lowest level in 30 years, China (Mainland) increased its
production to 5.3 million tons (ICAC 2003c).
31

One more way China (Mainland) affects IDB member countries is <strong>the</strong> role <strong>of</strong>
government in maintaining prices at a certain level. Since September 1999, <strong>the</strong>
new policies in China (Mainland) allow domestic cotton prices to be
determined by market factors. The government will set a reference price for
cotton, but <strong>the</strong> actual price is negotiated between <strong>the</strong> buyer and <strong>the</strong> seller.
Government programs are managed in such a way that domestic prices remain
above international prices. Restrictions on cotton imports is one such measure
that keeps local prices above international prices.
European Union
Greece and Spain are <strong>the</strong> only two EU countries that grow cotton. Cotton was
planted on 368,000 hectares in Greece and 94,000 hectares in Spain in 2003/04.
Production is highly mechanized and 90-95% <strong>of</strong> <strong>the</strong> total area has assured
irrigation, mostly sprinkler and drip irrigation. Farming operations are not large
and two-thirds <strong>of</strong> farmers plant cotton on less that 10 hectares. Most cotton is
machine-picked and <strong>the</strong> average yield in both countries has been more than one
ton <strong>of</strong> lint per hectare for <strong>the</strong> last five years. Greece has been producing higher
yields for many years now.
Cotton growers in Spain and Greece are <strong>of</strong>fered assistance through <strong>the</strong> EU
Common Agricultural Policy (CAP). Payments under <strong>the</strong> Common Agricultural
Policy are based on estimated seedcotton production. CAP <strong>of</strong>fers assistance for
a maximum production <strong>of</strong> 782,000 tons <strong>of</strong> seedcotton for Greece and 249,000
tons for Spain, and includes penalties for excess production. The cotton
growing regions in Spain and Greece are among <strong>the</strong> lowest-income regions in
<strong>the</strong> EU, and income support is viewed as a form <strong>of</strong> economic assistance.
Income support in <strong>the</strong> EU amounted to US$979 million in 2001/02 and US$957
million in 2002/03, and estimated at US$905 million in 2003/04 (ICAC 2003b).
The streng<strong>the</strong>ning <strong>of</strong> <strong>the</strong> Euro over <strong>the</strong> last two years has affected EU support
expressed in U.S. dollars. The ICAC Secretariat estimates suggest that <strong>the</strong>
average benefit per pound <strong>of</strong> production during <strong>the</strong> last six seasons has been 77
cents compared with an average market price <strong>of</strong> 56 cents per pound for <strong>the</strong>
same period. Thus, benefits to cotton in Greece and Spain averaged 46 cents
per kg, or 37%, over and above <strong>the</strong> Cotton Outlook A Index.
India
India is <strong>the</strong> largest cotton producing country by area. Cotton was planted on 8.4
million hectares in 2003/04, but <strong>the</strong> average yield was only 314 kg lint per
hectare. India has <strong>the</strong> unique characteristic <strong>of</strong> growing all four cultivated
species <strong>of</strong> cotton and growing about 45% <strong>of</strong> <strong>the</strong> total area under commercial
32

cotton hybrids. In addition, 2003/04 was <strong>the</strong> second year <strong>of</strong> Bt cotton in India,
but only Bt hybrids have been approved for commercial production. Cotton is
part <strong>of</strong> <strong>the</strong> small scale farming system and family members perform many
operations manually. All cotton is hand-picked. The government <strong>of</strong> India has
launched a huge program called “Technology Mission” which comprises four
mini-missions focused in improving research, production, marketing and
processing <strong>of</strong> cotton. India manages domestic cotton prices to increase textile
production and employs a support price for farmers. Support prices for major
varieties are fixed on <strong>the</strong> recommendation <strong>of</strong> <strong>the</strong> Commission for Agriculture
Costs and Prices. Some subsidies are given for various component schemes <strong>of</strong>
<strong>the</strong> centrally sponsored Intensive Cotton Development Program. At farm level,
Cooperative Credit Societies, Cooperative Commercial Banks, and State
Agricultural Departments generally provide financing, although in some areas
private traders may finance <strong>the</strong> crop. Cooperative Credit Societies obtain funds
from State Cooperative Banks which, in turn, obtain funds from <strong>the</strong> National
Bank for Agricultural and Rural Development.
Most ginneries are individually owned, although a few are textile mill owned.
In some areas—Gujarat, Maharashtra, Tamil Nadu, Punjab, and Karnataka—
ginneries are cooperative farmer entities. India employs a mixed cotton
procurement system. In Maharashtra, <strong>the</strong> Maharashtra State Cooperative
Marketing Federation—a public sector entity—purchases all <strong>the</strong> cotton while
ginning companies generally purchase cotton in o<strong>the</strong>r states. In a few instances,
textile mills and private traders may also purchase cotton. The Cotton
Corporation <strong>of</strong> India (CCI), a public sector entity, provides price support in
o<strong>the</strong>r states and purchases cotton for <strong>the</strong> nationalized textile industry. Until
recently, private trade was only involved in <strong>the</strong> export <strong>of</strong> Assam Comilla,
yellow pickings, and Zoda. All o<strong>the</strong>r export activity was handled by CCI, <strong>the</strong>
Maharashtra cooperative, <strong>the</strong> Gujarat State Marketing Federation, and <strong>the</strong> state
marketing federations. The government sets export quotas and minimum export
prices and sales are by tender. CCI is required to buy cotton when local prices
fall below <strong>the</strong> support price, but that rarely happens.
Pakistan
Pakistan is <strong>the</strong> largest IDB cotton-producing member country. Pakistan has
been <strong>the</strong> fourth largest cotton-producing country in <strong>the</strong> world since <strong>the</strong> 1980s.
Pakistan emerged as <strong>the</strong> third largest producer in 1991/92, but <strong>the</strong> leaf curl
virus disease caused by Gemini viruses affected almost all cotton producing
areas and lowered production by 40%. However, breeders quickly understood
<strong>the</strong> gravity <strong>of</strong> <strong>the</strong> problem and reoriented breeding programs, assigning high
priority to leaf curl virus resistance. Susceptible varieties were taken out <strong>of</strong>
33

production and yields have recovered greatly. Yields are higher in <strong>the</strong> Punjab,
which contributes about to 90% <strong>of</strong> production in <strong>the</strong> country. Cotton growers
indirectly sponsor almost half <strong>of</strong> <strong>the</strong> research on cotton by a levy collected at
mills on domestic cotton and on every bale exported, while additional funding
for research and technology transfer comes from provincial governments.
The major subsidized input has been credit, in <strong>the</strong> form <strong>of</strong> interest-free loans <strong>of</strong>
up to 10,000 Pakistani rupees (US$170), which are made available to small
farmers by <strong>the</strong> Agricultural Development Bank <strong>of</strong> Pakistan and by commercial
banks. The government <strong>of</strong> Pakistan has implemented many programs to
safeguard <strong>the</strong> interests <strong>of</strong> farmers as well as local spinners. Domestic prices
were protected through a levy on export duty, and exports were confined to <strong>the</strong>
exportable surplus. However, since 1981, <strong>the</strong> government has implemented <strong>the</strong>
“Support Price” system for cotton seed and lint prices in <strong>the</strong> country. Main
objectives <strong>of</strong> <strong>the</strong> support price are to safeguard <strong>the</strong> interest <strong>of</strong> farmers against
falling prices and stabilize inter-year and intra-year prices. The support price
computation is primarily based on <strong>the</strong> average production costs per unit area
and compensation for any increases in inputs and labor. The system envisages
<strong>the</strong> Trading Corporation <strong>of</strong> Pakistan, a government corporation, to enter <strong>the</strong>
market and buy cotton in case prices tend to fall below <strong>the</strong> support price.
Practically, seedcotton was only once below <strong>the</strong> support price <strong>of</strong> seedcotton, in
2001/02, and <strong>the</strong> market price <strong>of</strong> lint was never below <strong>the</strong> support price during
<strong>the</strong> same time. Low international prices in 2001/02 encouraged Pakistani
spinners to import cotton at prices lower than <strong>the</strong> domestic market.
Brazil
In <strong>the</strong> last two decades, cotton production has stopped in Central America and
has significantly shrunk in all South American countries. Anthonomus grandis
(boll weevil), <strong>the</strong> pest <strong>of</strong> <strong>the</strong> Americas, became widespread. The inability <strong>of</strong>
countries to control <strong>the</strong> pest at economical cost forced <strong>the</strong>m to abandon or
reduce cotton production. Brazil is <strong>the</strong> only country in <strong>the</strong> region that has
recovered some production. The average yield in Brazil has quadrupled since
<strong>the</strong> early 1990s, but this is due to new areas under cotton production.
In 2001/02, domestic prices in Brazil fell below <strong>the</strong> minimum guaranteed price
<strong>of</strong> 36.6 U.S. cents per pound <strong>of</strong> lint and <strong>the</strong> government spent US$9.6 million
to cover <strong>the</strong> difference. Brazilian growers sold cotton at <strong>the</strong> minimum
guaranteed price and <strong>the</strong> government reimbursed buyers for <strong>the</strong> difference
between <strong>the</strong> minimum price and market prices. For 2002/03, market prices
were well above <strong>the</strong> minimum guaranteed price, set at 35 U.S. cents per pound
<strong>of</strong> lint and no assistance was <strong>of</strong>fered. The Brazilian government <strong>of</strong>fered
34

assistance in recent seasons, with a program designed to secure prices above
minimum prices through options exercised by farmers. Funding for this
program is approved each season as needed. In 2001/02, 2002/03 and 2003/04
no expenses were reported through this program.
Turkey
Turkey is <strong>the</strong> sixth largest cotton producing country in <strong>the</strong> world. Cotton was
planted on 700,000 hectares in 2003/04, with an average yield <strong>of</strong> 1,286 kg/ha,
and produced 900,000 tons <strong>of</strong> lint. The cotton area is divided into four regions:
Aegean, Antalya, Çukurova and Sou<strong>the</strong>ast. There is not much difference in
yield among regions, although <strong>the</strong> pest complex is quite different from region
to region. The Sou<strong>the</strong>ast region has emerged as <strong>the</strong> largest cotton producing
area in Turkey due to a huge irrigation project and expansion <strong>of</strong> irrigation
facilities has shifted <strong>the</strong> focus on <strong>the</strong> cotton area to this region. Machinepicking
is increasing. The government <strong>of</strong> Turkey provided a premium <strong>of</strong> 3 U.S.
cents per pound <strong>of</strong> lint to cotton growers in 2001/02, which is US$59 million at
<strong>the</strong> national level (ICAC 2003b). In 2002/03, <strong>the</strong> total premium was equivalent
to US$57 million. In early May 2004, <strong>the</strong> government announced it was
lowering <strong>the</strong> premium to 1 U.S. cent per pound <strong>of</strong> lint for 2004/05.
Australia
Australia is <strong>the</strong> highest or <strong>the</strong> second highest yielding country in <strong>the</strong> world.
Cotton is produced under irrigated conditions in New South Wales, and mostly
under rainfed conditions in Queensland. Rain water is collected and used for
cotton irrigation and dry conditions in <strong>the</strong> last few years have affected cotton
production. The Commonwealth Scientific and Industrial Research
Organization (CSIRO), along with state research institutions, undertakes most
practical research on cotton. The Australian Cotton Growers Research
Association, Inc. funds research on cotton through a levy that is matched by <strong>the</strong>
government on a dollar-to-dollar basis. The Australian Cotton Growers
Research Association organizes <strong>the</strong> Australian Cotton Conference every two
years. The Cotton Research and Development Corporation controls funds, but
all projects are reviewed by <strong>the</strong> Association before <strong>the</strong> Corporation approves
<strong>the</strong>m.
Australia is <strong>the</strong> second largest exporter <strong>of</strong> cotton during normal years. A highly
mechanized farming system coupled with a small number <strong>of</strong> cotton growers
owning large areas ensures high yield. Australia has one <strong>of</strong> <strong>the</strong> most efficient
cotton producing system in <strong>the</strong> world. Cost <strong>of</strong> production is one <strong>of</strong> <strong>the</strong> lowest
among cotton exporting countries. No direct assistance is provided by <strong>the</strong>
35

government to cotton growers, and Australia does not support government
subsidy to cotton production in o<strong>the</strong>r countries.
Central Asia (Uzbekistan)
Cotton is <strong>the</strong> most important crop in Uzbekistan, Turkmenistan and Tajikistan.
It is also grown in Kazakhstan, Azerbaijan, and Kyrgyzstan. Uzbekistan is <strong>the</strong>
fifth largest cotton producing country in <strong>the</strong> world and shares about two-thirds
<strong>of</strong> production in Central Asian countries. The cotton production policy in
Uzbekistan is discussed in detail in this section. The policies <strong>of</strong> Uzbekistan and
Turkmenistan are similar, with <strong>the</strong> major exception being that cotton export
marketing in Turkmenistan is handled by a single state agency named
Turkmenpakhtaexport. Price increases as incentives to promote production
and/or increase efficiency do not exist yet. State production orders, highly
subsidized fixed input prices, and fixed output prices are important
characteristics <strong>of</strong> <strong>the</strong> current production systems. The production order is in <strong>the</strong>
form <strong>of</strong> a production quota with a specified area, variety, and input level
furnished by <strong>the</strong> state. Water is supplied free. The governments are attempting
to introduce market incentives into <strong>the</strong> system in a limited fashion.
Cotton ginning in Uzbekistan comes under <strong>the</strong> Republic Production
Amalgamation (Uzkhlopkoprom), while Cotton Standards and Classing comes
under <strong>the</strong> Republic’s scientific enterprises division <strong>of</strong> Uzkhlopkoprom.
Seedcotton is delivered to collection centers, where it is identified by variety,
divided into four grades and transported to ginneries. The ginning season
extends for ten months just to keep <strong>the</strong> laborers busy. It can be assumed that
production in <strong>the</strong> region could drop as producers are granted more freedom and
resource constraints, formerly obscured by government subsidies, prove
unsupportable in <strong>the</strong> marketplace. Labor is abundant, and water and electricity
are reliable and inexpensive.
O<strong>the</strong>r Countries
A number <strong>of</strong> o<strong>the</strong>r countries also provide direct support to cotton production
that affects world cotton prices. Mexico has a support price mechanism with a
target price <strong>of</strong> 64 U.S. cents per pound <strong>of</strong> lint. The Mexican government paid
US$8 million or 8 cents per pound <strong>of</strong> lint to growers in 2002/03. At <strong>the</strong> same
target price, <strong>the</strong> government paid 4 U.S. cents per pound or US$6 million in
2003/04. The target price has been increased to 67 cents per pound <strong>of</strong> lint in
2004/05. The government <strong>of</strong> Egypt provided US$33 million to growers to cover
<strong>the</strong> difference between market price and <strong>the</strong> price paid to growers in 2002/03.
Market prices remained high and no payments are being made in 2003/04.
36

Colombia did not make any direct payments to growers in 2002/03 and 2003/04
as market prices were higher than <strong>the</strong> minimum price announced by <strong>the</strong>
government. In Côte d’Ivoire, <strong>the</strong> government announced an emergency
assistance <strong>of</strong> 2 cents per pound in 2001/02 and 4 U.S. cents per pound in
2002/03, but no payments have been made in <strong>the</strong> last three seasons due to
political unrest in <strong>the</strong> country.
3. Effect <strong>of</strong> Subsidies on Developing Countries
Direct payments to cotton growers just because <strong>the</strong>y produce cotton has serious
consequences on developing countries where cotton is not subsidized. Many
government programs help and encourage cotton production, but direct cash
payments are <strong>the</strong> most harming to cotton producers in o<strong>the</strong>r countries. The
impact <strong>of</strong> direct payments has direct as well as indirect, short-term and longterm,
consequences. Some <strong>of</strong> <strong>the</strong>se consequences are:
Lower Prices – Multiple studies show that direct payments to cotton growers
keep international prices lower than normal. Lower international prices bring
lower income to exporting countries and, in this regard, West African and
Central Asian countries suffer <strong>the</strong> most, as most cotton produced is exported
from <strong>the</strong>se regions. If subsidies are eliminated, prices (after being higher for a
few years) could bounce back to <strong>the</strong> level prior to <strong>the</strong> elimination <strong>of</strong> subsidies.
Even under such circumstances, higher production in developing countries will
bring higher total revenue from cotton.
Eliminate Growers - Prices are determined by supply and demand. Direct
subsidies encourage oversupply <strong>of</strong> cotton in <strong>the</strong> international market at <strong>the</strong> cost
<strong>of</strong> small-scale farmers in developing countries. The subsidized inefficient
growers continue to produce cotton in developed countries, while keeping
many farmers out <strong>of</strong> business in developing countries.
Increase Poverty - Many farmers in developing countries have no alternate
crops, or <strong>the</strong>ir alternate crops are low-income crops. Eliminating such growers
from cotton production or limiting <strong>the</strong>ir land devoted to cotton production, and
thus <strong>the</strong>ir income, adds to poverty in that country and region.
Lower Efficiency - Direct payments to cotton growers make inefficient cotton
growers. Subsidized cotton growers do not strive as hard to survive in <strong>the</strong>
cotton production business as a non-subsidized cotton grower would do.
Unfair Trade - Subsidies are a source <strong>of</strong> unfair trade on cotton in <strong>the</strong> world.
How can farmers in non- subsidized countries survive in <strong>the</strong> cotton business if
37

farmers in developed or developing countries receive direct payments
equivalent to a significant portion <strong>of</strong> <strong>the</strong> market price?
Consuming Countries Benefit – Currently <strong>the</strong> consuming countries are able to
buy cotton at a lower price because <strong>of</strong> subsidies. But, prices are expected to
go higher (at least for some time) if subsidies are eliminated, <strong>the</strong>refore,
consuming countries like Bangladesh will be affected by <strong>the</strong> elimination <strong>of</strong>
subsidies.
Lower Demand for Cotton – The U.S. cotton industry is spending about 65
million US$ every year on average for enhancing demand for cotton. Higher
demand means higher prices. If subsidies are eliminated, cotton production in
<strong>the</strong> U.S. will decline and <strong>the</strong> U.S. cotton industry may not be able to continue
investing heavily on creating demand for cotton. Lower demand means lower
prices.
Cotton Research and Development – A lot <strong>of</strong> research on cotton in <strong>the</strong>
USA is undertaken in <strong>the</strong> private sector, in addition to research undertaken by
universities and <strong>the</strong> U.S. Department <strong>of</strong> Agriculture. The U.S. is more
advanced in cotton research and shares its research findings with developing
countries through <strong>the</strong> Beltwide Cotton Conferences, collaborative projects
and participation in conferences. Transfer <strong>of</strong> knowledge from <strong>the</strong> U.S. will be
lower under <strong>the</strong> no-subsidies conditions.
4. West African Countries Issue <strong>of</strong> Subsidies
Benin, Burkina Faso, Chad and Mali raised <strong>the</strong> cotton subsidies issue at <strong>the</strong>
WTO General Council and Agriculture Committee. The proposal became a
Ministerial Conference document at <strong>the</strong> 5 th WTO Ministerial Conference held
in Cancún, Mexico, from 10 to 14 September 2003. Benin, Burkina Faso,
Chad and Mali described <strong>the</strong> damage that <strong>the</strong>y believe has been caused by
cotton subsidies in rich countries, and called for subsidies to be eliminated.
The four countries claimed that subsidies in rich countries contribute to
poverty in <strong>the</strong>ir countries. They also claimed that <strong>the</strong>y are competitive but
find it difficult to compete in <strong>the</strong> presence <strong>of</strong> subsidies in rich countries.
Benin, Burkina Faso, Chad and Mali toge<strong>the</strong>r called for compensation to be
paid to <strong>the</strong>m while subsidies are in effect, to cover for <strong>the</strong>ir economic losses.
Argentina, Australia, Bangladesh, Cameroon, Canada, Guinea, India, Senegal
and South Africa supported <strong>the</strong> proposal. In Cancún, Benin, Burkina Faso,
Chad and Mali sought a decision from <strong>the</strong> Cancún Ministerial Conference.
The U.S. government stated that high production, industrial policies that
support production for syn<strong>the</strong>tic fibers and high tariffs on finished products
38

are responsible for falling cotton prices. Distortions in cotton are not only
caused by subsidies but also by o<strong>the</strong>r factors in <strong>the</strong> sector. The U.S. proposed
discussing how to deal with distortions throughout <strong>the</strong> production chain,
including subsidies, tariff and non-tariff barriers on cotton, syn<strong>the</strong>tic fibers
and products made from <strong>the</strong>m. The European Union said that its production
and exports are too small to have an impact on world cotton prices, and that it
is changing <strong>the</strong> program for cotton producers.
The main task <strong>of</strong> <strong>the</strong> 5 th WTO Ministerial Conference in Cancun was to take
stock <strong>of</strong> progress in negotiations and o<strong>the</strong>r work under <strong>the</strong> Doha
Development Agenda. The Conference failed to act on <strong>the</strong> West African
cotton proposal and make a decision.
In July 2004, <strong>the</strong> WTO General Council held two weeks <strong>of</strong> negotiations and
on July 31, 2004, agreed on <strong>the</strong> framework and o<strong>the</strong>r agreements designed to
focus negotiations and raise <strong>the</strong>m to a new level. The important aspect <strong>of</strong> <strong>the</strong>
decision was that cotton will be handled separately from o<strong>the</strong>r commodities
but within <strong>the</strong> framework <strong>of</strong> WTO talks when <strong>the</strong>y resume. The four West
African countries deserve credit for this.
Direct income and price support provided to <strong>the</strong> cotton industry by various
governments amounted to US$4.8 billion in 2002/03 and US$5.8 billion in 2001/02.
Income support provided to cotton growers in Greece and Spain is estimated at
US$905 million in 2003/04. In <strong>the</strong> USA, <strong>the</strong> average subsidy per pound between
1980 and 2002 was 19 cents per pound <strong>of</strong> lint.
The USA and China (Mainland) provided subsidies to exports in 2002/03 and
2003/04. Overall assistance in <strong>the</strong> two countries combined was US$316 million in
2002/03 and US$160 million in 2003/04.
Subsidies lower prices, increase poverty, result in less efficient growers, produce
unfair trade but elimination <strong>of</strong> subsidies also has consequences.
IV. ENHANCING EFFICIENCY AND PRODUCTIVITY IN THE
COTTON SECTOR
Cotton has experienced three major changes in <strong>the</strong> production sector in <strong>the</strong>
last three decades: 1) development <strong>of</strong> short-duration varieties, 2) adoption <strong>of</strong>
pesticides and, 3) precise measurement <strong>of</strong> fiber quality by machines. Shortduration
varieties were developed to better suit cotton in <strong>the</strong> production
systems followed in various countries. The struggle goes on and in IDB
member countries like Iran and Syria, where cotton and wheat still overlap
for over a month, even shorter duration varieties need to be developed.
39

Conditions may become suitable for planting cotton, but wheat is still in <strong>the</strong>
field for <strong>the</strong> next month, thus, cotton does not fit <strong>the</strong> cotton-wheat rotation as
it does in Pakistan, India and many o<strong>the</strong>r countries. Of course, wheat too
could be focused to mature early and spare <strong>the</strong> last couple <strong>of</strong> weeks for
cotton. If <strong>the</strong> cotton crop is in <strong>the</strong> field for a shorter duration, it would require
less water and protection against pests. The pressure to grow more area
under food crops and fur<strong>the</strong>r improve <strong>the</strong> cropping intensity suggests growing
shorter duration varieties. Most countries have already made significant
achievements, but <strong>the</strong> emphasis has to continue in this direction without
sacrificing yields. The role <strong>of</strong> agronomic management <strong>of</strong> <strong>the</strong> crop so that <strong>the</strong>
plant makes <strong>the</strong> fullest and most economical use <strong>of</strong> inputs has been
acknowledged in research, but how to make farmers in developing countries
understand <strong>the</strong> role <strong>of</strong> agronomic management and utilize it optimally needs
to be pursued fur<strong>the</strong>r.
Cotton, like o<strong>the</strong>r crops, has experienced <strong>the</strong> use <strong>of</strong> fertilizers and pesticides,
particularly insecticide. Fertilizers were necessary to supplement depleting
soils year after year. Using soils without adding <strong>the</strong> nutrients taken away by
<strong>the</strong> previous crop brings reductions in yield. There were only two options: to
apply organic matter in <strong>the</strong> form <strong>of</strong> farmyard manure or green manure— but
nei<strong>the</strong>r was efficient enough to meet <strong>the</strong> needs <strong>of</strong> <strong>the</strong> growing plant—or to
apply syn<strong>the</strong>tic inorganic fertilizers. It was easy to convince farmers about
fertilizer use, and non-traditional inorganic fertilizers were adopted quickly
and vigorously due to <strong>the</strong> fact that experience also came from o<strong>the</strong>r crops.
There was an upper limit on <strong>the</strong> quantity <strong>of</strong> fertilizers applied beyond which
<strong>the</strong> cost benefit ratio would decline or even turn negative. Excessive
vegetative growth due to nitrogen, <strong>the</strong> most used element <strong>of</strong> inorganic
syn<strong>the</strong>tic fertilizers, also capped <strong>the</strong> limit. The advent <strong>of</strong> short duration
varieties, particularly in wheat and rice (cotton already mentioned above),
increased <strong>the</strong> use <strong>of</strong> fertilizers, but reports <strong>of</strong> unwanted use <strong>of</strong> fertilizers are
not common because <strong>the</strong> results are significant and easily noticeable.
Fertilizer use has been optimized on cotton in most countries, with <strong>the</strong>
exception <strong>of</strong> Africa in general and West Africa in particular. While additional
application <strong>of</strong> fertilizers in West African countries would improve cotton
production efficiency and productivity, timing and perfection in fertilizer
application in o<strong>the</strong>r countries could still bring fur<strong>the</strong>r improvement.
Pesticides were adopted as a measure to save losses from pests. However,
now more insecticides are used on cotton than on any o<strong>the</strong>r crop. In fact,
cotton covers 2.4% <strong>of</strong> <strong>the</strong> world's farmland but uses 24% <strong>of</strong> all insecticides
applied globally. Even developed countries like <strong>the</strong> USA are helpless and it is
estimated that cotton consumes 60% <strong>of</strong> all insecticides applied in <strong>the</strong> USA. In
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o<strong>the</strong>r countries, cotton consumes even a higher percentage, or <strong>the</strong> most
pesticide use in agriculture. Pesticides were adopted not as a choice but as a
necessary input, because no o<strong>the</strong>r efficient and cost effective pest control
method was available, and this is still true. The use <strong>of</strong> pesticides has been
more cautious than that <strong>of</strong> fertilizers because pesticides are much more
dangerous chemicals compared to fertilizers. But unfortunately, pesticides
were promoted as vigorously as fertilizers, first by governments <strong>the</strong>n by giant
multinational chemical companies. Companies hired qualified entomologists
and put <strong>the</strong>m in direct contact with researchers and farmers. The strategy
worked well and <strong>the</strong> cotton production technology was converted into a
chemical-based production technology. Farmers became obsessed with
insecticides and used <strong>the</strong>m extensively without looking into <strong>the</strong>ir many longterm
consequences. The most important repercussions that have been
recognized, even by <strong>the</strong> chemical companies, are <strong>the</strong> development <strong>of</strong>
resistance by insects, resurgence <strong>of</strong> secondary pests as major pests, and <strong>the</strong>
increasing cost <strong>of</strong> insecticides. Consequently, pesticide effectiveness proved
short-lived before insects developed resistance, necessitating additional
pesticide applications more frequently until <strong>the</strong>y have little or no effect. The
small gains in yield were quickly replaced by significant increases in
production costs. The cost <strong>of</strong> insect control operations is a major cost in <strong>the</strong>
cotton production systems <strong>of</strong> most countries.
Table 3. Insect Control / Costs in Some Countries
Country Insect Control / Costs
(% <strong>of</strong> Total Costs) *
Australia (irrigated) 38
Benin (North Zone) 12
Brazil (Cerrado) 24
Burkina Faso 29
China (Mainland) 15
Egypt 4
India (North) 15
Iran 10
Mali 12
Nigeria 10
Pakistan (Punjab) 28
Sudan (Gezira) 29
Syria 1
Tanzania 16
Turkey (Aegean) 11
Uganda 14
USA 21
Zimbabwe 19
* Ginning economic and fixed costs not included
41

The percentage share <strong>of</strong> insecticide spraying is low in Egypt due to <strong>the</strong> high
cost <strong>of</strong> land rent. Syria is <strong>the</strong> only country where insecticide use has been
almost eliminated from over 50% <strong>of</strong> <strong>the</strong> cotton area that used to be sprayed in
1979. Insecticide use has also been contained in Australia and to some extent
in China (Mainland), but none <strong>of</strong> <strong>the</strong> IDB countries o<strong>the</strong>r than Syria has been
able to reduce <strong>the</strong> use <strong>of</strong> insecticides. The variability in <strong>the</strong> share <strong>of</strong>
insecticides among production costs and <strong>the</strong> number <strong>of</strong> times cotton is
sprayed indicates <strong>the</strong> potential to reduce insecticide use to grow cotton and
improve its production efficiency.
One <strong>of</strong> <strong>the</strong> serious aspects <strong>of</strong> cotton production that has been ignored is <strong>the</strong>
high toxicity effect <strong>of</strong> insecticides on humans and o<strong>the</strong>r living organisms. The
most notorious example is <strong>the</strong> banning <strong>of</strong> DDT, but a number <strong>of</strong> o<strong>the</strong>r
products have been banned due to <strong>the</strong>ir high toxicity and link to cancers and
reproductive and neurological disorders. One <strong>of</strong> <strong>the</strong> most recent examples is
<strong>the</strong> use <strong>of</strong> endosulfan in Australia. Endosulfan is important in Australia due to
its detection in 1994 in meat from cattle fed on cotton gin trash from crops
sprayed with endosulfan. Under Australian “‘Best Management Practices,”
cotton growers should inform <strong>the</strong>ir neighbors in writing about <strong>the</strong> date and
time <strong>of</strong> spraying endosulfan. The formulation <strong>of</strong> endosulfan to be sprayed and
<strong>the</strong> method <strong>of</strong> application should be included in each letter, along with a map
<strong>of</strong> <strong>the</strong> farm and specific areas to be sprayed. Many such reports and examples
are available linking cotton to <strong>the</strong> consequences <strong>of</strong> spraying insecticides.
What is <strong>the</strong> way-out or what o<strong>the</strong>r options are available? Effectiveness and
cost benefit ratio still favor using insecticides unless farmers are willing to
sacrifice some yield at least for <strong>the</strong> first few years and <strong>the</strong>n follow <strong>the</strong>
example <strong>of</strong> Syria. However, countries have adopted insecticides to <strong>the</strong> extent
that it may not be as easy to get rid <strong>of</strong> <strong>the</strong>m as it was for Syria. There are
options that need serious considerations.
The use <strong>of</strong> agrochemicals coupled with <strong>the</strong> impact <strong>of</strong> those inputs on
productivity, and <strong>the</strong> cotton plant’s high response to input use have turned
cotton into a technical crop compared to all o<strong>the</strong>r field crops. The interaction
among inputs, including irrigation, fertilizers, pesticides and growth
regulators, has a drastic effect on <strong>the</strong> plant and its ability to form fruit.
Optimum fruit formation and retention on <strong>the</strong> plant in a healthy condition are
no doubt complex, but not impossible. The efficiency and productivity <strong>of</strong>
cotton cannot be improved if <strong>the</strong> interaction among inputs is not properly
understood. This is where <strong>the</strong> awareness <strong>of</strong> growers to growing cotton
successfully comes in. Most IDB countries follow a traditional approach <strong>of</strong>
educating farmers in cotton growing. The farmer who is undoubtedly
42

interested in increasing <strong>the</strong> productivity and efficiency <strong>of</strong> cotton requires a
convincing argument to change <strong>the</strong> traditional way <strong>of</strong> growing cotton that he
has followed for years. Pakistan adopted <strong>the</strong> “Cotton Maximization Projects,”
starting in <strong>the</strong> late 1970s, and more than doubled its productivity during <strong>the</strong>
1980s. Extension workers were especially trained in cotton production
technology and <strong>the</strong>n extension activities were intensified in <strong>the</strong> project areas.
Government did not provide any additional finances or inputs, but ra<strong>the</strong>r
convinced farmers to follow <strong>the</strong> recommended production technology, which
showed a significant difference in productivity between <strong>the</strong> project and <strong>the</strong>
adjoining non-project areas. Project areas were comprised <strong>of</strong> localities and
frequently moved throughout <strong>the</strong> cotton producing areas in <strong>the</strong> cotton
producing provinces. A slightly modified version <strong>of</strong> a similar approach has
been implemented in Iran. Differences in yields are drastic.
Cotton is unique in many respects and that also includes its marketing. Cotton
prices are based on fiber quality parameters including length, strength,
micronaire, trash, length uniformity, color and o<strong>the</strong>rs. Thus, all cotton
produced must be classed not only for <strong>the</strong> sake <strong>of</strong> fixing <strong>the</strong> price but also for
<strong>the</strong> sake <strong>of</strong> getting <strong>the</strong> best out <strong>of</strong> fiber quality. A spinner is unable to <strong>of</strong>fer
<strong>the</strong> best price if he has a fear <strong>of</strong> under-spinning <strong>the</strong> cotton he is buying. For
<strong>the</strong> sake <strong>of</strong> its best use, cotton must be described as much as possible in terms
<strong>of</strong> <strong>the</strong> quality parameters that could affect <strong>the</strong> spinning process and that could
have consequences on <strong>the</strong> finished product. Visual classing that took into
consideration color, trash and preparation is obsolete and does not assess <strong>the</strong>
real qualitative value <strong>of</strong> cotton. Instrument-based testing must be adopted to
attract <strong>the</strong> best price for quality cotton.
1. Best Production Practices Model
Cotton production conditions and practices are so different among IDB
member countries that it is not possible to devise a uniform production
technology package. But, lessons can be learnt from <strong>the</strong> past and present
systems among member countries as well as from non-member countries. The
objective <strong>of</strong> cotton production is not only to improve yield and quality, but to
make it sustainable. Sustainability <strong>of</strong> cotton production must be improved
making it more efficient and affordable. Higher yields do not always mean
higher efficiency if <strong>the</strong> cost <strong>of</strong> production is high. Cotton production should
also concentrate on not harming <strong>the</strong> environment. A number <strong>of</strong> suitable
practices put toge<strong>the</strong>r can constitute <strong>the</strong> best production practices model.
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2. High Yielding Varieties
Though not many, <strong>the</strong>re are multinational seed companies dealing with
cottonseed. All countries must develop and grow locally developed varieties
as much as possible. Cotton is a sensitive plant and always shows high
response to growing conditions. Breeders must develop and find <strong>the</strong> best
varieties suitable for local conditions. Countries must develop <strong>the</strong>ir own
varieties that are best suited to <strong>the</strong> local conditions.
3. Pure Certified Seed
Seed is <strong>the</strong> most basic input for harvesting good yields. Unlike o<strong>the</strong>r crops,
even in small production systems in developing countries, farmers have to
sell seedcotton for ginning and thus surrender <strong>the</strong>ir option to keep seed for
planting <strong>the</strong> next year. Small wheat or corn growers have <strong>the</strong> option to retain
seed for <strong>the</strong> next crop, but this is not possible in cotton. Cotton growers in
IDB countries must have access to high quality certified seed. Certified seed
can be provided by <strong>the</strong> public or private sector, but farmers must have full
confidence in its quality, meaning high germination and high purity that
meets seed certification standards set by <strong>the</strong>ir respective governments.
Pakistan provides one <strong>of</strong> <strong>the</strong> best examples where a public corporation
competes with a number <strong>of</strong> private companies in <strong>the</strong> Punjab province.
4. Least Use <strong>of</strong> Pesticides
Cotton is naturally vulnerable to a variety <strong>of</strong> pests, and insecticides have to be
used throughout <strong>the</strong> world to control insects. The most critical issue in <strong>the</strong>
cotton production system is <strong>the</strong> quantity <strong>of</strong> insecticides used to control
insects. In Syria, less that one percent <strong>of</strong> <strong>the</strong> cotton area is sprayed with
insecticides compared to over 10 sprays per season (non-Bt cotton) in
Australia and China (Mainland). In India, most area is sprayed with
insecticides 7-8 times per season on average. Syria provides <strong>the</strong> best model
on pesticide use.
5. Biological Control
Uzbekistan and o<strong>the</strong>r Central Asian countries have developed one <strong>of</strong> <strong>the</strong> best
biological control systems in <strong>the</strong> world. At one time, 120 bio labs were
44

working in Uzbekistan to cover all cotton areas in <strong>the</strong> country, limiting <strong>the</strong>
number <strong>of</strong> insecticide sprays to 1-2 per season. Biological control is one way
<strong>of</strong> reducing insecticide use and improving production efficiency without
sacrificing <strong>the</strong> environment and sustainability <strong>of</strong> cotton production.
6. Agronomic Management
Availability <strong>of</strong> high yielding local varieties, high quality seed and o<strong>the</strong>r
inputs do not guarantee high yields unless inputs are used properly. Proper
use <strong>of</strong> inputs assures lower cost and high efficiency. Soil types vary among
countries, as do varieties and <strong>the</strong>ir needs. The exact same quantity <strong>of</strong> inputs
applied ei<strong>the</strong>r at <strong>the</strong> best time or at an unsuitable time can produce different
results. No uniform doses <strong>of</strong> inputs can be recommended for all countries,
and <strong>the</strong> critical issue is that <strong>the</strong> plant should nei<strong>the</strong>r be under-nourished nor it
should be over-nourished. Farmers must also be aware <strong>of</strong> <strong>the</strong> interaction
among inputs.
7. Transfer <strong>of</strong> Knowledge
Most IDB countries continue to follow a traditional way <strong>of</strong> extending
production technology to farmers. In Australia where <strong>the</strong>re are only large
growers, each grower hires a private crop consultant to advise him on
production technology in spite <strong>of</strong> <strong>the</strong> fact that every grower has Internet
access. In <strong>the</strong> USA, <strong>the</strong> extension system puts cotton growers directly in
touch with researchers through <strong>the</strong> Beltwide Cotton Conferences held every
year in early January, though o<strong>the</strong>r extension services remain available during
<strong>the</strong> cotton season. Iran and Pakistan have tried a different system wherein
<strong>the</strong>y have intensified extension activities in certain areas and produced highly
successful results. The “Cotton Maximization Projects” model used in
Pakistan, which more than doubled yields during <strong>the</strong> 1980s, could be used as
a model in o<strong>the</strong>r countries.
IDB member countries can enhance productivity and efficiency by learning from
each o<strong>the</strong>r’s experiences.
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V. ENHANCING COMPETITIVENESS IN THE COTTON SECTOR
1. Cotton’s Share Among Fibers Consumed in <strong>the</strong> World
Cotton faces tough competition from syn<strong>the</strong>tic fibers. Cotton comprised 68% <strong>of</strong>
textile fibers consumed in <strong>the</strong> world at <strong>the</strong> end use level in 1960. Since <strong>the</strong>n, <strong>the</strong>
share <strong>of</strong> cotton is on <strong>the</strong> decline and, according to <strong>the</strong> ICAC, <strong>the</strong> share <strong>of</strong> cotton
among all fibers consumed in <strong>the</strong> world at <strong>the</strong> end use level declined to 39% in
2003. The two primary reasons for this decline are lack <strong>of</strong> cotton promotion
against syn<strong>the</strong>tic fibers and lower syn<strong>the</strong>tic fiber prices. Demand for cotton is
increasing and during <strong>the</strong> same period, cotton consumption increased from 10.2
million tons in 1960 to 20.7 million tons in 2003 (ICAC 2003c). Cotton
demand expanded in all regions and some more recent statistics show that <strong>the</strong>
demand for cotton registered higher gains in developing countries compared to
developed countries. ICAC work indicates more than a 60% increase in
consumption from developing countries, 25% in industrialized countries and
10% in Central and Eastern Europe and <strong>the</strong> former Soviet Union countries in
<strong>the</strong> last five years. However, demand for non-cotton fibers has increased at a
faster rate in developed and developing countries. Demand for textile fiber is
increasing with <strong>the</strong> increase in population, but preference for syn<strong>the</strong>tic fibers is
driving <strong>the</strong> cotton share to new lows.
Percent
80
60
40
20
SHARE OF COTTON IN FIBER USE
(End Use Consumption)
0
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004
Source: International Cotton Advisory Committee (2003a).
Major uses <strong>of</strong> cotton are men’s wear, ladies’ wear, towels, bedding and fabric
for furniture. O<strong>the</strong>r natural fibers are not comparable with cotton due to coarse,
irregular and hard fibers difficult to process, and also <strong>the</strong>ir production is low.
46

Cotton has dominated <strong>the</strong> natural fiber market and will continue to do so.
Cotton also has multifarious advantages over man-made fibers, <strong>the</strong> most
advocated being wear comfort. The cotton fiber is fine, s<strong>of</strong>t, has low friction,
no electrostatic charge and can absorb humidity. Cotton can be produced in
large quantities and processed at high speeds but still <strong>the</strong> share <strong>of</strong> cotton is
declining.
2. Lack <strong>of</strong> Promotion
Cotton is a fine fiber but no international institution has <strong>the</strong> mandate to promote
cotton. Experience shows that <strong>the</strong> share <strong>of</strong> cotton has not declined and if so it
has declined only a little in countries that have implemented programs to
promote cotton against syn<strong>the</strong>tic fibers. The International Institute <strong>of</strong> Cotton,
funded by cotton producing countries, which promoted cotton for years, was
closed in 1994, after years <strong>of</strong> serious financial constraints. Individual countries
have undertaken programs, but <strong>the</strong> number <strong>of</strong> such countries is limited. Serious
efforts backed by huge financial contributions by <strong>the</strong> private sector have been
made in <strong>the</strong> USA, where <strong>the</strong> share <strong>of</strong> cotton among fibers consumed
domestically has increased.
Slow growth in demand caused by competition with syn<strong>the</strong>tics reduces <strong>the</strong>
income potential from cotton production. There is abundant research showing
that when consumers are aware <strong>of</strong> fiber content, <strong>the</strong>y consistently choose cotton
products. However, only 59 out <strong>of</strong> 166 countries surveyed have laws requiring
that fiber content be labeled in products sold at retail. Consequently, many
consumers are not able to readily identify <strong>the</strong> fiber content <strong>of</strong> products <strong>of</strong>fered
for sale in <strong>the</strong>ir countries, thus inhibiting efforts to boost retail level demand for
cotton. The support <strong>of</strong> <strong>the</strong> international community to require fiber content
labeling <strong>of</strong> products sold at retail can help to boost demand for cotton.
3. Affordability
Cotton has not been able to maintain its strong position due to <strong>the</strong> price at
which syn<strong>the</strong>tic fibers can be produced. The price <strong>of</strong> cotton has not increased in
real terms but <strong>the</strong> price <strong>of</strong> syn<strong>the</strong>tic fibers has declined. Studies suggest that <strong>the</strong>
price factor is responsible for 30% <strong>of</strong> <strong>the</strong> decline in cotton’s share while all
o<strong>the</strong>r factors toge<strong>the</strong>r contributed to a 70% decline in cotton’s share. The
consumer has a choice, but higher prices for cotton goods, particularly in
47

developing countries, limit his buying power to non-cotton goods. Easy care <strong>of</strong>
syn<strong>the</strong>tic fibers also attracts <strong>the</strong> low-income consumer.
4. International Forum for Cotton Promotion
ICAC considered various options to enhance cotton demand by promoting it
along <strong>the</strong> lines <strong>of</strong> <strong>the</strong> U.S. programs. In <strong>the</strong> USA, Cotton Incorporated has <strong>the</strong>
exclusive responsibility <strong>of</strong> promoting cotton. A variety <strong>of</strong> programs have been
implemented that are truly pr<strong>of</strong>essional and target specific. The slogan “The
Fabric <strong>of</strong> Our Lives” is popular and recognized in <strong>the</strong> USA. The idea <strong>of</strong>
launching a similar global program is expensive and has been already
abandoned by governments. However, a much smaller scale effort has been
started under <strong>the</strong> auspices <strong>of</strong> ICAC, but it is entirely supported by private
companies and membership is voluntary. The International Forum for Cotton
Promotion (IFCP) was established in 2000 with <strong>the</strong> mandate to initiate
proactive efforts on behalf <strong>of</strong> <strong>the</strong> cotton industry to increase cotton's share <strong>of</strong>
domestic fiber markets at <strong>the</strong> consumer level. The International Forum for
Cotton Promotion is a non-governmental body composed <strong>of</strong> national and
international cotton industry organizations. The Forum serves as a
clearinghouse for information about proven techniques <strong>of</strong> cotton promotion,
best practices in retail-level communication, and cost-effective measures <strong>of</strong>
boosting consumer demand. Since its initiation, <strong>the</strong> Forum has undertaken a
number <strong>of</strong> initiatives in support <strong>of</strong> its mission, including research into
international fiber labeling laws, updates on ongoing national promotional
programs, and presentations at various forums. Currently, <strong>the</strong> International
Forum for Cotton Promotion includes eighteen member organizations from
fifteen countries.
5. A Tough Competition with Syn<strong>the</strong>tics
There is no generic promotion from <strong>the</strong> chemical fiber industry. However,
each chemical fiber producer promotes his own brand and each brand <strong>of</strong>
fibers has a separate budget. No exact statistics are available, but it is
estimated that <strong>the</strong> total budget spent on promoting <strong>the</strong> chemical fiber industry
runs into hundreds <strong>of</strong> millions <strong>of</strong> dollars. The chemical fiber industry is
fighting tough to compete with cotton. One <strong>of</strong> <strong>the</strong> latest approaches in <strong>the</strong>
chemical fiber industry has been <strong>the</strong> preferred character <strong>of</strong> chemical fibers
adding to <strong>the</strong>m <strong>the</strong> unique characteristics <strong>of</strong> cotton, like comfort. One such
product is Supplex, which comes in various types, light weight, wrinkle free,
48

flexible, does not shrink or fade, fast drying, carefree and strong. Cotton is
losing in active lifestyle and sports wear to polyester, where stretch,
micr<strong>of</strong>ibers, antimicrobial and non-wovens are gaining popularity. Staple and
filament polyester producers are trying to expand horizontal uses <strong>of</strong> polyester
products for opening new markets. Polyester producers are also trying hard to
beat <strong>the</strong> s<strong>of</strong>t feel and appearance <strong>of</strong> cotton. The chemical fiber is developing
specific products with special characteristics to suit specific uses.
The chemical fiber industry experiments and develops new products in labs
as opposed to field and natural conditions in <strong>the</strong> case <strong>of</strong> cotton and o<strong>the</strong>r
natural fibers. Not only <strong>the</strong> conditions are different but also <strong>the</strong> experiments
and developments take much longer in natural fibers compared to manmade
fibers. The manmade fiber industry has a much higher flexibility to develop
new products. Some latest developments <strong>of</strong> chemical fibers that do not use
petroleum-based products are a new area that favors chemical fibers. The
manmade fiber industry has <strong>the</strong> disadvantage <strong>of</strong> being expensive in certain
conditions. There is no international organization for chemical fibers, like <strong>the</strong>
ICAC for cotton, and <strong>the</strong> chemical fiber industry is a small group compared
to <strong>the</strong> millions <strong>of</strong> cotton growers spread over 60 countries. The chemical fiber
industry will continue to invent new technologies and consumer oriented
products, and promote <strong>the</strong>m for specific segments <strong>of</strong> <strong>the</strong> market.
In order for cotton to remain competitive with manmade fibers and retain its
current level <strong>of</strong> market share, cotton must find new uses and technologies to
improve <strong>the</strong> performance properties <strong>of</strong> yarn. Yarn producing technology must
be reoriented to produce yarn that is most suited to specific end use products,
<strong>the</strong> approach followed in <strong>the</strong> chemical fiber industry. Similarly, efforts need
to be made to infuse into cotton some <strong>of</strong> <strong>the</strong> best qualities <strong>of</strong> manmade fibers
like easy care, quick dry and lightweight. The cotton industry must also work
with <strong>the</strong> chemical fiber industry to find more uses for cotton and chemical
fiber blends. The future <strong>of</strong> cotton lies in <strong>the</strong> compatibility with syn<strong>the</strong>tic
fibers in quality, pricing, performance and advertising. O<strong>the</strong>r measures that
could contribute to <strong>the</strong> competitiveness <strong>of</strong> cotton are:
• Governments must make concerted efforts to enhance cotton
consumption in <strong>the</strong>ir countries.
• The public sector should actively involve <strong>the</strong> private sector in
expanding <strong>the</strong> consumption <strong>of</strong> cotton.
• Governments in collaboration with <strong>the</strong> private sector should work
toward increasing yields for reducing <strong>the</strong> cost <strong>of</strong> production.
• Cotton quality should be improved particularly with respect to
contamination <strong>of</strong> cotton with non-cotton material.
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Share <strong>of</strong> cotton among fibers consumed in <strong>the</strong> world is declining.
Lack <strong>of</strong> promotion <strong>of</strong> cotton is affecting demand for cotton.
Cotton should be improved in quality to better compete with syn<strong>the</strong>tic fibers.
VI. ROLE OF THE PRIVATE SECTOR IN COTTON
Cotton production and processing is a long chain involving varied inputs and
operations. Countries have tried to amalgamate all <strong>the</strong>se operations in <strong>the</strong>
public sector and failed. What is needed at this time is <strong>the</strong> public sector
working with <strong>the</strong> private sector so that both benefit from each o<strong>the</strong>r.
However, responsibilities must be assigned and well determined because
<strong>the</strong>re has to be a relative role for each sector. It would be wrong to believe
that <strong>the</strong> private sector can flourish without support from <strong>the</strong> public sector.
Governments started nationalization processes but soon reverted to <strong>the</strong>
private sector and, at this time, <strong>the</strong> trend is that both sectors share
responsibilities. For quite some time now international lending agencies have
been imposing economic liberalization policies that require <strong>the</strong> restructuring
<strong>of</strong> <strong>the</strong> cotton sectors in many countries. With respect to cotton, some famous
cases are Egypt and many African countries. In most cases, <strong>the</strong> agenda has
been left incomplete, while in o<strong>the</strong>r cases good progress has been made and
<strong>the</strong> sector is well on <strong>the</strong> way to liberalization.
The breakup <strong>of</strong> <strong>the</strong> former Soviet Union and <strong>the</strong> lack <strong>of</strong> readiness <strong>of</strong> <strong>the</strong>
private sector to takeover responsibilities have taught us many good lessons.
The private sector must come forward to accept its share <strong>of</strong> contributions to
<strong>the</strong> national economies, but it is also critical that private sector participants be
capable and ready to perform responsibly and successfully. In this regard,
governments should play <strong>the</strong> role <strong>of</strong> assisting different stakeholders to grasp
different opportunities and resolve issues and problems. On <strong>the</strong> o<strong>the</strong>r hand,
<strong>the</strong>re is no doubt that governments should be responsible for supervising and
defending <strong>the</strong> social and environmental dimension <strong>of</strong> cotton production.
It is <strong>the</strong> responsibility <strong>of</strong> governments to create conditions where economic
investment is secure, o<strong>the</strong>rwise, <strong>the</strong> private sector will not be able to invest
with confidence. The private sector needs to be encouraged and assured that it
will not be deprived <strong>of</strong> ownership and management <strong>of</strong> its industrial
enterprises built over a period <strong>of</strong> hard work. There is no doubt that <strong>the</strong> private
50

sector is motivated by economic interests that cannot be compromised, and
that is how governments could work with <strong>the</strong> private sector to help boost
cotton production, consumption and trade in IDB member countries. The long
chain <strong>of</strong> cotton production and processing provides ample opportunities for
<strong>the</strong> private sector. Many partnerships can be quoted as successful examples in
<strong>the</strong> world including IDB member countries. While <strong>the</strong> nationalization process
badly failed in Pakistan, <strong>the</strong> cotton ginning industry and <strong>the</strong> textile industry
successfully managed to flourish in <strong>the</strong> private sector. Some o<strong>the</strong>r members
<strong>of</strong> <strong>the</strong> IDB, in particular <strong>the</strong> Central Asian countries, are still struggling to
establish a chain <strong>of</strong> private input supply systems. Slightly different but a close
exercise is needed in <strong>the</strong> West African countries.
The textile industry is <strong>the</strong> most private industry in IDB member countries.
Expected consumption <strong>of</strong> 5.2 million tons or 25% <strong>of</strong> world consumption in
2003/04 is almost all in <strong>the</strong> private sector, which has adapted to <strong>the</strong> changing
new technologies in <strong>the</strong> spinning industry very fast in order to remain
competitive in <strong>the</strong> market. Public sector units in countries like Sudan have
been inoperative for years now. Ginning and input supply are comparatively
less controlled by governments, but ultimately <strong>the</strong>y would have to be shifted
to <strong>the</strong> private sector. Implementation <strong>of</strong> government controlled systems in
Africa, particularly in West African countries, where cotton companies,
government departments or agencies are <strong>the</strong> only source <strong>of</strong> input supply, have
had consequences because input supplies are not adequate and farmers have
no choice in choosing inputs. Fertilizers are diluted and directed to o<strong>the</strong>r
crops. The private sector is more flexible and potentially better suited to
adjust to <strong>the</strong> changing circumstances.
The private sector has already played a successful role in <strong>the</strong> pesticide
industry in many IDB countries and o<strong>the</strong>r cotton producing countries. The
pesticide business was handed over to <strong>the</strong> private sector, which employed
well-educated and experienced entomologists and carried out aggressive
campaigns through contacts with cotton growers to educate <strong>the</strong>m in <strong>the</strong> right
use <strong>of</strong> various products. While pesticide companies were promoting <strong>the</strong>ir
products, <strong>the</strong>y were also educating farmers in production technology.
Companies employed young and good communicator entomologists and
provided <strong>the</strong>m with extensive training before sending <strong>the</strong>m to field duties.
Some discouraging stories can be reported, but when all is said and done,
pesticide companies can rightly claim <strong>the</strong>ir share <strong>of</strong> <strong>the</strong> success stories in
many countries.
Cotton planting seed is in <strong>the</strong> hands <strong>of</strong> <strong>the</strong> public sector in most IDB
countries. Even if private farms are used for multiplication, quality control,
51

processing, handling and sale <strong>of</strong> planting seed is controlled by government
agencies. Private companies could perform <strong>the</strong> same functions too. Instead <strong>of</strong>
only one public sector company or government department, healthy
competition among several companies could improve quality. More than half
<strong>of</strong> <strong>the</strong> seed used in India to plant an average <strong>of</strong> 8.5 million hectares every
year is supplied by <strong>the</strong> private sector. All seed supplied in Australia and <strong>the</strong>
USA is also in private sector hands.
In IDB countries, only government departments, whe<strong>the</strong>r in <strong>the</strong> federal or
state governments, are responsible for developing new varieties. Breeding <strong>of</strong>
new varieties can be easily transferred to <strong>the</strong> private sector under basic
standards set by governments. IDB countries are not ready to enforce selfassessment
quality standards yet. Thus, governments could retain control <strong>of</strong>
quality standards and invite private companies to breed varieties and submit
<strong>the</strong>m for approval as commercial varieties. The variety approval process,
which is already established in most countries, could be tuned to <strong>the</strong> new
situation, and public sector funds could be directed to o<strong>the</strong>r areas that deserve
attention. There is also a need to bring toge<strong>the</strong>r <strong>the</strong> process <strong>of</strong> development <strong>of</strong>
new varieties and production <strong>of</strong> planting seed. Such a system does not exist in
IDB cotton-producing member countries, but is <strong>the</strong> right way to follow.
Support <strong>of</strong> <strong>the</strong> private sector and cooperation with private enterprises has to
be an integral part <strong>of</strong> cotton production and development. The private sector,
as <strong>the</strong> engine for growth and <strong>the</strong> main provider <strong>of</strong> employment, has a key role
to play in sustainable cotton development and integration into <strong>the</strong> cotton
economy. After studying <strong>the</strong> new private economies, it is true that cotton
farmers do not get accustomed quickly to a private input supply system.
Likewise, participants in <strong>the</strong> private sector do not have experience working
directly with small-scale producers. In addition, extension systems for <strong>the</strong>
provision <strong>of</strong> information to farmers, which were formerly supported by <strong>the</strong>
national cotton companies, have broken down, and farmers have nowhere to
go for advice on production practices. The nature <strong>of</strong> problems varies among
countries depending upon <strong>the</strong> status <strong>of</strong> reforms already implemented. In many
cases, farmers are experiencing increases in <strong>the</strong> cost <strong>of</strong> production and
insufficient access to inputs.
Many government efforts made to diversify <strong>the</strong> productive capacities <strong>of</strong>
developing countries <strong>of</strong>ten face serious impediments due to lack <strong>of</strong> adequate
marketing infrastructure. A reliable and well functioning private financial
sector can be a precondition for economic development at all levels. Private
sector involvement, however, will depend on expected rates <strong>of</strong> return.
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The role <strong>of</strong> <strong>the</strong> private sector must be recognized and <strong>the</strong> public and private
sectors should work toge<strong>the</strong>r for <strong>the</strong> development <strong>of</strong> cotton.
VII. FRAMEWORK FOR ENHANCING COOPERATION AMONG
IDB COTTON PRODUCING COUNTRIES
Most IDB countries face deficiencies in essential infrastructure such as weak
management capacity, insufficient institutional development, low levels <strong>of</strong>
technology, inefficient communication, and marketing channels that
undermine trade efficiency and development. In addition to generating lower
prices, <strong>the</strong>se factors play a large part in <strong>the</strong> non-competitiveness <strong>of</strong> many
developing IDB countries. These factors are also responsible for an economic
structure predominantly founded on commodity production and commodity
exports. Some IDB member countries have achieved tremendous success in
exporting value added goods, while many o<strong>the</strong>r members are working hard to
achieve <strong>the</strong> same goal. Countries are interested but limited due to many
reasons including insufficient institutional development apart from financial
limitations. On <strong>the</strong> production side, <strong>the</strong>re is a great deal <strong>of</strong> experience to share
among IDB countries. Some IDB member countries have acquired success
comparable to none o<strong>the</strong>r in <strong>the</strong> world. The following actions are proposed to
IDB for improving productivity and competitiveness <strong>of</strong> cotton and
cooperation among IDB member countries.
1. Share Experiences
IDB member countries can learn from <strong>the</strong>ir fellow member countries in
many fields. Uzbekistan has one <strong>of</strong> <strong>the</strong> most successful biological control
systems as a result <strong>of</strong> which pesticide use remains at an average <strong>of</strong> 1-2 sprays
per season. Cotton yields have come down due to disruptions in <strong>the</strong> input
supply system and poor soil fertility, but <strong>the</strong> production system is quite
efficient. In Syria, less than one percent <strong>of</strong> <strong>the</strong> cotton area is sprayed with
insecticides, which is unique in <strong>the</strong> world. The average yield in Syria in
2003/04 was 1,364 kg lint/ha, <strong>the</strong> third highest in <strong>the</strong> world and 215% <strong>of</strong> <strong>the</strong>
world average. Turkey has a very successful farmers’ cooperative system and
yields are also high: 1,286 kg lint/ha in 2003/04. Pakistan has a very strong
breeding program and one <strong>of</strong> <strong>the</strong> best seed production systems among cotton
producing countries in <strong>the</strong> world. At present, <strong>the</strong>re is hardly any sharing <strong>of</strong>
information among IDB member countries, something that needs to be
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enhanced. IDB member countries could greatly benefit if IDB could provide
a framework for sharing experiences among member countries.
2. Exchange <strong>of</strong> Germplasm
In <strong>the</strong> absence <strong>of</strong> an international institute for cotton research, <strong>the</strong>re is no
formal way to exchange cotton germplasm. Good germplasm is <strong>the</strong> basis for
any successful breeding program. Unfortunately, <strong>the</strong>re is no information
available on what kind <strong>of</strong> germplasm is available in different countries. The
International Plant Genetic Resources Institute <strong>of</strong> <strong>the</strong> Consultative <strong>Group</strong> on
International Agriculture Research (CGIAR) does not deal with cotton, and
nei<strong>the</strong>r <strong>the</strong> most recently agreed International Treaty on Plant Genetic
Resources includes cotton in <strong>the</strong> Multilateral System. Lack <strong>of</strong> access to
germplasm is hampering breeders’ efforts and narrowing <strong>the</strong> genetic base in
most countries. There is a need to establish an international germplasm bank,
and maybe one <strong>of</strong> <strong>the</strong> IDB member countries could take <strong>the</strong> lead to establish
such a facility and volunteer to serve <strong>the</strong> IDB member countries. Such a
facility should collect elite germplasm from all countries, maintain it and
supply it on demand to researchers. The protocol to supply and receive
specific accessions could be decided separately by a panel <strong>of</strong> experts.
3. Genetic Engineering Technology
It is estimated that 21% <strong>of</strong> <strong>the</strong> world cotton area was planted to genetically
engineered varieties in 2003/04, sharing about 30% <strong>of</strong> world production and
34% <strong>of</strong> world trade. Eight countries have commercialized genetically
engineered varieties but, with <strong>the</strong> exception <strong>of</strong> Indonesia, none <strong>of</strong> <strong>the</strong> o<strong>the</strong>r
IDB cotton-producing countries have commercially adopted <strong>the</strong> technology
yet. The genetic engineering technology is scientific compared to o<strong>the</strong>r
disciplines <strong>of</strong> research on cotton, expensive, and dominated by <strong>the</strong> private
sector. The technology is not consumable, it is here to stay and will find its
way into multiple uses. The high cost <strong>of</strong> <strong>the</strong> technology and <strong>the</strong> lack <strong>of</strong>
biosafety protocols/regulations is limiting its access in IDB member
countries. The nature <strong>of</strong> future products, uncertain at this stage, is going to
change, but <strong>the</strong> products developed so far using this technology are
environmentally and technically safe. In order for IDB member countries to
remain competitive in <strong>the</strong> international cotton market, <strong>the</strong>y have to make use
<strong>of</strong> such technologies. IDB could help member countries in <strong>the</strong> development
<strong>of</strong> biosafety regulations while educating <strong>the</strong> public at <strong>the</strong> same time.
54

4. Cotton Network
The lack <strong>of</strong> an international research center on cotton is harming developing
countries <strong>the</strong> most. In an effort to bring researchers toge<strong>the</strong>r, ICAC supports
world cotton research conferences and regional networks. The world cotton
research conferences, held every 4-5 years, are <strong>the</strong> only events where cotton
researchers from across regions get to meet. Unfortunately, participation is
limited due to lack <strong>of</strong> funding. IDB may consider establishing and sponsoring
its own cotton research network and starting a cotton newsletter, on-line or
hard copy, to keep IDB countries connected to each o<strong>the</strong>r.
5. Training on Ginning
Cotton has to be ginned before it is processed in a spinning mill or used in
domestic products. Unfortunately, ginning is one <strong>of</strong> <strong>the</strong> least researched areas
in cotton. The old system <strong>of</strong> saw ginning, developed by Ely Whitney in 1793,
is still used for separating seeds from lint. Many new methods like Cage
ginning and Templeton ginning have been tried, but none could be used on a
commercial scale. However, significant improvements have been made in
operations related to <strong>the</strong> actual process <strong>of</strong> ginning. Cleaning <strong>of</strong> cotton prior to
and after ginning is one such area <strong>of</strong> improvement. New systems like
“IntelliGin” have been commercialized and provide an optimum use <strong>of</strong>
moisture, temperature and cleaning. IntelliGin is a computerized, on-line
fiber quality measuring system that monitors, controls and optimizes <strong>the</strong>
cotton ginning process. Still, ginning inevitably causes some damage in
quality. In order to best preserve <strong>the</strong> quality <strong>of</strong> <strong>the</strong> cotton produced in <strong>the</strong>
field and cause <strong>the</strong> least damage during ginning, trained and qualified persons
should operate gins. Gin machinery should be properly maintained by
qualified people on an annual basis. Unfortunately, <strong>the</strong>re is no center were
people could be trained in <strong>the</strong> best ginning practices. Training could include
personnel in managerial skills, electrical work and repair <strong>of</strong> machines. Any
help from <strong>the</strong> IDB to establish such a training center will improve quality and
generate better prices to IDB member countries.
6. Fiber Quality Evaluation
Cotton is sold based on its quality and any efforts to best assess it are in <strong>the</strong>
interest <strong>of</strong> cotton producers. Spinners are willing to pay higher prices for <strong>the</strong>
reliability <strong>of</strong> <strong>the</strong> data on quality, which is <strong>the</strong> basis for negotiating prices.
55

There is no doubt that cotton should be classed using rapid instrument based
testing. The most amount <strong>of</strong> information on <strong>the</strong> qualitative value <strong>of</strong> cotton
always helps to bring higher prices and results in fewer disputes among
buyers and sellers. The establishment <strong>of</strong> a high standard reputed classing lab
in <strong>the</strong> West African countries will help <strong>the</strong>m to get better prices and improve
cotton competitiveness. West African countries are going through a
transitional stage <strong>of</strong> privatization and <strong>the</strong> establishment <strong>of</strong> such a lab could
become a part <strong>of</strong> <strong>the</strong> new system. The data generated at <strong>the</strong> classing lab could
be used as an electronic platform for <strong>the</strong> on-line trading <strong>of</strong> cotton.
7. Cost <strong>of</strong> Production
Many countries are at <strong>the</strong> verge <strong>of</strong> stopping cotton production due to <strong>the</strong> high
cost involved. There are two ways to deal with <strong>the</strong> issue: increase yields
without increases in <strong>the</strong> cost <strong>of</strong> production or reduce <strong>the</strong> cost <strong>of</strong> production
without a loss in yield. Nei<strong>the</strong>r is easy but both have a potential and only new
technologies can help. IDB member countries must explore and utilize new
technologies to reduce <strong>the</strong> cost <strong>of</strong> production and increase yields in order to
improve production efficiency.
8. Find New Uses <strong>of</strong> Cotton
All cotton-producing countries wish to expand <strong>the</strong> demand for cotton. Higher
demand means expectations <strong>of</strong> higher prices for producing countries. Apart
from promotional campaigns, which IDB member countries should start on
<strong>the</strong>ir own or with <strong>the</strong> help <strong>of</strong> international organizations, cotton producing
and consuming IDB members must work toge<strong>the</strong>r to find more uses for
cotton. More uses for cotton are not only found in <strong>the</strong> manufacture <strong>of</strong> pure
cotton products, but also in mixes with manmade fibers. The finishing and
dyeing <strong>of</strong> pure and mixed cotton products is a way to best meet users’
demands and an integral way <strong>of</strong> enhancing <strong>the</strong> demand for cotton. IDB could
help its cotton-producing members by sponsoring small projects that are
helpful to improve <strong>the</strong> competitiveness <strong>of</strong> cotton production and its use in
spinning, weaving and textiles.
9. Elimination <strong>of</strong> Textile Quotas
The elimination <strong>of</strong> quotas in 2005 will bring many changes in <strong>the</strong>
international textile industry affecting both, IDB cotton producing and
56

consuming countries. The textile trade is expected to become more quality
cautious and price competitive. Many countries, particularly China
(Mainland), India, Pakistan and Turkey, have expanded <strong>the</strong>ir textile industry
and grabbed a larger share <strong>of</strong> <strong>the</strong> textile market. Elimination <strong>of</strong> quotas will
provide an opportunity for large competitive textile producers to increase
<strong>the</strong>ir market share. However, <strong>the</strong> elimination <strong>of</strong> quotas will also affect some
IDB member countries like Bangladesh, who were guaranteed a specific
share <strong>of</strong> <strong>the</strong> textile market. Elimination <strong>of</strong> quotas will intensify competition in
<strong>the</strong> open market, and low cost textile industries will benefit over non-efficient
industries. The end <strong>of</strong> quotas will lower <strong>the</strong> barriers to entry by new exporters
with a wider range <strong>of</strong> products. IDB member countries must be ready for <strong>the</strong>
changes expected to come from <strong>the</strong> elimination <strong>of</strong> quotas and IDB could help
to prepare its members for <strong>the</strong> changing textile trade world.
10. Input Supply and Pricing
It is important to talk about <strong>the</strong> West African countries as a group. The West
African countries are <strong>the</strong> largest number <strong>of</strong> cotton producing countries among
IDB member countries, and <strong>the</strong>ir production system has great similarity. The
input supply system must be improved through <strong>the</strong> introduction <strong>of</strong> a private
sector responsible for <strong>the</strong> supply <strong>of</strong> seed, fertilizers and insecticides.
Countries are in <strong>the</strong> process <strong>of</strong> doing it, but progress has been slow. There is a
need to expedite <strong>the</strong> process and cotton growers must have free and easy
access to inputs.
Cotton companies are <strong>the</strong> only buyers in <strong>the</strong> West African countries. There is
no competition in pricing and <strong>the</strong> current system in most countries provides
only a limited number <strong>of</strong> seedcotton grades. The pricing system needs to be
improved through <strong>the</strong> introduction <strong>of</strong> more buyers, more seedcotton grades
and encouragement to produce contamination-free cotton. Price discounts
based on contamination <strong>of</strong> cotton, not from trash (very low in hand-picked
West African cotton) but from non-plant material must be eliminated.
Convincing farmers not to use polypropylene, jute or plastic material in
picking and handling <strong>of</strong> cotton is <strong>the</strong> solution. Countries should be
encouraged to initiate model projects and implement <strong>the</strong>m on a larger scale.
11. Fight Against Subsidies
It is recognized that subsidies have a negative effect on international cotton
prices. Low international prices affect millions <strong>of</strong> cotton growers in IDB
57

cotton producing countries. At <strong>the</strong> international level, <strong>the</strong> collective action
initiated by West and Central African countries in Cancun and at o<strong>the</strong>r
international forums should be pursued. On August 1, 2004, WTO member
governments agreed that IDB could be <strong>of</strong> help in streng<strong>the</strong>ning <strong>the</strong> support
against subsidies, which is in <strong>the</strong> ultimate interest <strong>of</strong> cotton producing
countries.
12. International Cotton Research Center
There is no international institute/center for research on cotton. Many
countries share similar production conditions and <strong>the</strong>re are many areas <strong>of</strong>
research where an international center could serve better than isolated and
diluted efforts in IDB member countries. It is strongly recommended that
IDB establish an international research institute for cotton with a specific
mandate. The institute should undertake research on common issues related to
most IDB countries and serve as an international training center for
researchers and o<strong>the</strong>r participants <strong>of</strong> <strong>the</strong> cotton industry.
13. National Cotton Conferences
National cotton conferences are held regularly in many countries like
Australia, Brazil, Colombia and <strong>the</strong> USA. The purpose <strong>of</strong> <strong>the</strong> conferences is
to bring toge<strong>the</strong>r all segments <strong>of</strong> <strong>the</strong> cotton industry and get feedback for
improving programs in ei<strong>the</strong>r direction, from farmer to research to <strong>the</strong>
industry and vice versa. No such conferences are held in IDB member
countries and <strong>the</strong> few meetings held in some <strong>of</strong> <strong>the</strong> countries are not
effective. IDB member countries should be encouraged to organize
annual/biannual conferences on regular basis.
Many IDB member countries have success stories to share with o<strong>the</strong>r members.
The access to cotton germplasm needs to be improved.
IDB member countries should have better access to new technologies.
IDB member countries should form a cotton network.
The West African countries need a better cotton classing and grading system.
Cost <strong>of</strong> production should be reduced and new uses <strong>of</strong> cotton should be found.
Elimination <strong>of</strong> quota systems will change <strong>the</strong> cotton trade in <strong>the</strong> world and IDB
countries should be ready for it.
Efforts against direct support programs (subsidies) should be streng<strong>the</strong>ned.
There is a need to establish an international institute <strong>of</strong> cotton research.
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VIII. CONCLUSIONS AND RECOMMENDATIONS
Member governments <strong>of</strong> IDB share 30% <strong>of</strong> world cotton area, 28% <strong>of</strong> world
production and 38% <strong>of</strong> <strong>the</strong> raw cotton traded in <strong>the</strong> world. Almost half <strong>of</strong> <strong>the</strong>
IDB member countries are involved in cotton production and cotton is a
critical crop for many <strong>of</strong> <strong>the</strong>m. In countries like, Benin, Egypt, Mali, Pakistan
and Uzbekistan cotton plays a vital role in <strong>the</strong>ir economies. Cotton is a major
source <strong>of</strong> foreign exchange and <strong>the</strong> success and failure <strong>of</strong> <strong>the</strong> cotton crop has
serious consequences. Currently, cotton is confronted with important issues.
Cost <strong>of</strong> production continues to rise to uneconomical levels, yields are not
increasing, new technologies (like biotechnology) require heavy investment,
and subsidies continue to harm IDB member countries. The international
cotton scenario is going to change with <strong>the</strong> elimination <strong>of</strong> quota systems
starting January 2005. The elimination <strong>of</strong> quota systems is a challenge as well
as an opportunity for IDB member countries.
Many IDB member countries have a great deal <strong>of</strong> information to share with
<strong>the</strong>ir fellow members but, unfortunately, <strong>the</strong>re is no system to bring countries
toge<strong>the</strong>r to share experiences. Benin, Burkina Faso, Chad and Mali raised <strong>the</strong>
issue <strong>of</strong> subsidies on <strong>the</strong>ir own at <strong>the</strong> General Council and Agriculture
Committee <strong>of</strong> WTO. The issue was discussed at <strong>the</strong> 5 th WTO Ministerial
Conference held in Cancún, Mexico in September 2003, but WTO member
governments failed to make a decision. More countries joined <strong>the</strong> proposal
and WTO has decided to consider cotton subsidies separately from o<strong>the</strong>r
agriculture issues. IDB decided to hold an expert consultation to discuss
issues mentioned above and prepare its member governments for <strong>the</strong>
changing situation. For <strong>the</strong> same purpose, IDB launched three studies, one
each in Africa and Asia, and <strong>the</strong> third a consolidation <strong>of</strong> regional reports. It is
hoped that <strong>the</strong> IDB expert consultation will help IDB member countries to
improve cotton production efficiency and competitiveness. The three studies
made <strong>the</strong> following recommendations:
Production
1. Good germplasm is <strong>the</strong> basis for any successful breeding program. In
<strong>the</strong> absence <strong>of</strong> an international institute for cotton research, <strong>the</strong>re is no
formal way to exchange cotton germplasm. It is recommended to
establish an international cotton germplasm center in one <strong>of</strong> <strong>the</strong> IDB
member countries.
2. It is recommended that West African countries improve <strong>the</strong> input
supply system in <strong>the</strong> region.
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Institutional
3. At present, <strong>the</strong>re is hardly any sharing <strong>of</strong> information among IDB
member countries, something that needs to be enhanced. IDB member
countries could greatly benefit if an institution like IDB could provide a
framework for sharing experiences among member countries.
4. Cotton biotechnology is expensive and dominated by <strong>the</strong> private sector.
In order for IDB member countries to remain competitive in <strong>the</strong>
international cotton market, <strong>the</strong>y have to make use <strong>of</strong> <strong>the</strong> new
technology. IDB member governments should develop biosafety
regulations and, at <strong>the</strong> same time, educate <strong>the</strong> public about <strong>the</strong> new
technologies.
5. It is recommended that IDB member countries establish a network <strong>of</strong>
cotton researchers and start a cotton newsletter, on-line or hard copy, to
keep <strong>the</strong> IDB countries connected to each o<strong>the</strong>r.
6. Ginning is an integral part <strong>of</strong> <strong>the</strong> cotton production chain. Close to
1,500 gin factories operate in IDB member countries but <strong>the</strong>re is no
training school on ginning o<strong>the</strong>r than a small facility in Uganda.
Training could include personnel in managerial skills, electricity work
and repair <strong>of</strong> machines.
7. The elimination <strong>of</strong> quotas in 2005 will bring many changes in <strong>the</strong>
international textile industry affecting both IDB cotton producing and
consuming countries. IDB member countries should prepare
<strong>the</strong>mselves for <strong>the</strong> changing textile trade world by organizing events
related to <strong>the</strong> issue.
8. Benin, Chad, Burkina Faso and Mali raised <strong>the</strong> subsidies issue with <strong>the</strong>
WTO on <strong>the</strong>ir own. IDB member governments should help to
streng<strong>the</strong>n support against subsidies, which is in <strong>the</strong> ultimate interest <strong>of</strong>
cotton producing countries.
9. IDB member countries should develop a strong policy toward
intellectual property rights.
10. Countries must develop an effective approach to cooperate with <strong>the</strong>
private sector and get it involved in research and development on
cotton.
Financial
11. West African countries are going through a transitional stage <strong>of</strong>
privatization. It is recommended that a regional high-class cottonclassing
lab be established in <strong>the</strong> region.
12. It is recommended that IDB help its member governments by
sponsoring small projects related to production research. The projects
60

could cover o<strong>the</strong>r areas and be approved after thorough evaluation.
ICAC is <strong>the</strong> recognized International Commodity Body on cotton and
sponsors projects funded by <strong>the</strong> Common Fund for Commodities (an
intergovernmental organization). A similar relationship could be
initiated between ICAC and IDB.
13. There is a strong need for an international research center for cotton.
The center should undertake research on issues <strong>of</strong> concern to member
countries, new technologies (like biotechnology), maintain a high class
fiber quality testing lab and serve as an international training center for
IDB countries.
61

1
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5
6
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27
Annexe 1
Islamic Development Bank Member Countries
Afghanistan
Arab Republic <strong>of</strong> Egypt
Azerbaijan Republic
Brunei Darussalam
Burkina Faso
Democratic & Popular Republic <strong>of</strong>
Algeria
Great Socialist People’s Libyan
Arab Jamahiriyah
Hashemite Kingdom <strong>of</strong> Jordan
Islamic Republic <strong>of</strong> Iran
Islamic Republic <strong>of</strong> Mauritania
Islamic Republic <strong>of</strong> Pakistan
Kingdom <strong>of</strong> Bahrain
Kingdom <strong>of</strong> Morocco
Kingdom <strong>of</strong> Saudi Arabia
Kyrgyiz Republic
Malaysia
People’s Republic <strong>of</strong> Bangladesh
Republic <strong>of</strong> Albania
Republic <strong>of</strong> Benin
Republic <strong>of</strong> Cameroon
Republic <strong>of</strong> Chad
Republic <strong>of</strong> Côte d’Ivoire
Republic <strong>of</strong> Djibouti
Republic <strong>of</strong> Gabon
Republic <strong>of</strong> Guinea
Republic <strong>of</strong> Guinea Bissau
Republic <strong>of</strong> Indonesia
62
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
Republic <strong>of</strong> Iraq
Republic <strong>of</strong> Kazakhstan
Republic <strong>of</strong> Lebanon
Republic <strong>of</strong> Maldives
Republic <strong>of</strong> Mali
Republic <strong>of</strong> Mozambique
Republic <strong>of</strong> Niger
Republic <strong>of</strong> Senegal
Republic <strong>of</strong> Sierra Leone
Republic <strong>of</strong> Somalia
Republic <strong>of</strong> Sudan
Republic <strong>of</strong> Suriname
Republic <strong>of</strong> Tajikistan
Republic <strong>of</strong> Gambia
Republic <strong>of</strong> Togo
Republic <strong>of</strong> Tunisia
Republic <strong>of</strong> Turkey
Republic <strong>of</strong> Turkmenistan
Republic <strong>of</strong> Uganda
Republic <strong>of</strong> Uzbekistan
Republic <strong>of</strong> Yemen
State <strong>of</strong> Kuwait
State <strong>of</strong> Palestine
State <strong>of</strong> Qatar
Sultanate <strong>of</strong> Oman
Syrian Arab Republic
Union <strong>of</strong> Comoros
United Arab Emirates

Table 4. Supply and Use <strong>of</strong> Cotton in IDB Member Countries, 2003/04
Area Yield Prod Beg Stk imports Cons Exports End Stks S/U *
Country 000 ha Kgs/Ha 000 Metric Tons Ratio
ALGERIA 5 20 20 5 0,.27
EGYPT 226 883 200 106 75 195 125 61 0.19
MOROCCO 2 513 1 10 43 44 10 0.24
SUDAN 179 435 78 74 5 101 47 0.45
TUNISIA 6 15 15 6 0.37
Sub total 408 684 279 201 153 279 226 129 0.26
BENIN 323 421 136 45 5 128 48 0.36
BURKINA FASO 415 506 210 79 4 201 84 0.41
CAMEROON 208 480 100 58 3 106 50 0.46
CHAD 252 190 48 38 1 67 18 0.27
COTE D’IVOIRE 200 425 85 144 5 182 43 0.23
GUINEA 24 329 8 4 9 3 0.36
MALI 549 480 264 155 4 296 119 0.40
NIGER 3 431 1 0 1 0.14
SENEGAL 45 489 22 7 1 21 7 0.34
TOGO 189 349 66 34 77 23 0.30
Sub total 2,208 426 940 564 23 1,086 395 0.36
MOZAMBIQUE 230 114 26 15 2 24 16 0.61
UGANDA 225 129 29 4 1 18 14 0.75
Sub total 455 121 55 19 3 42 30 0.67
AZERBAIJAN 61 639 39 12 3 36 12 0.32
KAZAKHSTAN 185 676 125 11 2 8 119 11 0.08
KYRGYZSTAN 35 725 25 8 3 3 25 8 0.28
MOLDOVA 2 3 3 2 0.77
TAJIKISTAN 285 604 172 51 20 152 51 0.30
TURKMENISTAN 525 381 200 73 77 124 73 0.36
UZBEKISTAN 1,394 657 915 210 1 250 666 210 0.23
Sub total 2,484 594 1,476 367 9 363 1,122 367 0.25
INDONESIA 10 534 5 61 470 475 61 0.13
MALAYSIA 13 45 45 13 0.29
Sub total 10 534 5 74 515 520 74 0.14
AFGANISTAN 20 367 7 5 4 4 5 0.61
BANGLADESH 50 300 15 73 305 320 0 73 0.23
PAKISTAN 3,037 571 1,734 642 400 2,100 40 636 0.30
Sub total 3,107 565 1,756 720 705 2,424 44 714 0.30
iRAN 145 745 108 33 20 110 51 0.46
IRAQ 20 350 7 1 5 12 1 0.10
SYRIA 203 1,364 277 115 135 186 71 0.22
TURKEY 700 1,286 900 537 450 1,300 70 517 0.38
Sub total 1,068 1,210 1,292 686 475 1,557 256 640 0.35
TOTAL 9,740 596 5,804 2,631 1,856 5,169 2,775 2,348 0.30
% OF WORLD 30 94 28 31 26 24 38 30
WORLD TOTAL 32,135 635 20,420 8,586 7,231 21,100 7,231 7,906 0.37
*/ Ending stocks divided by consumption plus exports.
World total includes countries not shown.
Source : International Cotton Advisory Committee (2003c).
63

Table 5. Supply and Use <strong>of</strong> Cotton in Non-IDB Member Countries, 2003/04
Area Yield Prod Beg Stks Imports Cons Exports End Stks S/U *
Country 000 ha Kgs/Ha 000 Metric Tons Ratio
CANADA 9 70 68 11 0.16
CUBA 4 269 1 5 9 10 5 0.50
DOM. REP. 2 2 0.33
MEXICO 58 1,188 68 229 361 410 20 229 0.53
USA 4,858 818 3,975 1,172 11 1,350 3.000 808 0.19
Sub total 4,919 822 4,044 1,416 453 1,840 3,020 1,054 0.22
EL SALVADOR 5 22 22 5 0.24
GUATEMALA 5 22 22 5 0.23
HONDURAS 1 4 4 1 0.19
NICARAGUA 2 538 1 1 0.18
Sub total 2 538 1 11 47 48 11 0.23
ARGENTINA 253 398 101 57 55 115 15 83 0.64
BOLIVIA 5 462 2 3 4 4 2 3 0.40
BRAZIL 1.030 1,262 1,300 551 105 800 240 916 0.88
CHILE 11 26 26 11 0.43
COLOMBIA 55 810 44 21 66 105 27 0.25
ECUADOR 4 436 2 2 13 14 2 0.13
PARAGUAY 270 389 105 22 0 6 65 56 0.79
PERU 63 698 44 40 33 75 2 40 0.52
URUGUAY 1 4 4 1 0.15
VENEZUELA 17 340 6 23 3 15 2 14 0.81
Sub total 1,696 945 1,604 730 308 1,164 326 1,151 0.77
CENT.AFR. REP. 12 167 2 8 10
MADAGASCAR 20 405 8 5 4 4 5 0.61
Sub total 32 313 10 13 4 4 15
ANGOLA 2 285 1 1 0.14
ETHIOPIA 113 177 20 13 13 7 12 0.62
GHANA 20 250 5 3 2 7 3 0.46
KENYA 50 97 5 8 17 22 8 0.35
NIGERIA 400 250 100 31 9 65 25 50 0.56
SOUTH AFRICA 38 663 25 27 35 60 0 27 0.48
TANZANIA 375 231 87 22 0 16 53 40 0.58
CONGO. DR 11 265 3 2 6 8 2 0.26
ZAMBIA 176 228 40 19 0 14 28 17 0.40
ZIMBABWE 330 321 105 75 0 27 102 51 0.39
Sub total 1,515 257 390 200 69 233 215 211 0.47
BULGARIA 9 254 2 9 18 19 1 9 0.44
CZECH REP. 27 48 48 1 26 0.54
SLOVAK REP. 4 11 11 4 0.32
HUNGARY 4 11 11 4 0.36
POLAND 10 50 51 10 0.19
ROMANIA 6 17 17 6 0.34
FR. YUGOSLAVIA 6 14 14 6 0.43
Sub total 9 254 2 66 170 171 2 64 0.37
NORWAY 1 1 0.32
SWITZERLAND 2 19 18 1 2 0.13
Sub total 2 20 19 1 3 0.15
64

Table 5. Supply and Use <strong>of</strong> Cotton in Non-IDB Member Countries, 2003/04(Cont’d)
Area Yield Prod Beg Stks Imports Cons Exports End Stks S/U *
Country 000 ha Kgs/Ha 000 Metric Tons Ratio
AUSTRIA 6 26 26 6 0.24
BELGIUM 17 35 28 13 11 0.27
DENMARK
FRANCE 8 72 65 7 8 0.12
GERMANY 12 90 80 12 10 0.11
GREECE 368 871 320 130 5 124 223 108 0.31
IRELAND 1 1 0.23
ITALY 32 225 225 32 0.14
NETHERLANDS 1 3 0 3 1 0.38
PORTUGAL 18 85 85 19 0.22
SPAIN 92 1,033 95 23 10 70 35 23 0.22
SWEDEN 1 6 6 1 0.15
UNETED KING. 1 1 0.20
Sub total 460 902 415 249 559 710 293 220 0.22
ARMENIA 1 260 1 1
BELARUS 4 12 12 4 0.31
ESTONIA 7 25 25 7 0.29
GEORGIA 0 0
LATVIA 15 11 4 7 15 1.42
LITHUANIA 7 17 12 5 7 0.44
MOLDOVA 2 3 3 2 0.77
RUSSIA 2 501 1 41 310 300 51 0.17
UKRAINE 4 16 11 5 4 0.29
Sub total 3 667 2 81 392 366 17 92 0.24
CHINA (Mainland) 5,110 953 4,870 1,566 1,850 7,000 37 1,249 0.18
CHINA (Taiwan) 103 201 234 71 0.30
CHINA (Hong Kong) 40 45 65 3 17 0.24
Sub total 5,110 953 4,870 1,709 2,96 7,299 40 1,336 0.18
AUSTRALIA 185 1,656 306 295 20 360 222 0.58
JAPAN 63 168 181 50 0.27
KOREA D.R. 19 534 10 6 5 15 6 0.41
KOREA REP. 59 290 300 49 0.16
PHILIPPINES 2 448 1 10 34 35 10 0.28
SINGAPORE 1 3 3 1 0.24
THAILAND 33 400 13 159 380 400 3 149 0.37
VIETNAM 25 371 9 23 101 110 23 0.21
Sub total 264 1,288 340 615 981 1,061 366 509 0.36
INDIA 8,000 354 2,831 783 200 2,873 116 825 0.28
MYANMAR 270 206 56 34 44 11 34 0.61
SRI LANKA 8 28 28 8 0.27
Sub total 8,270 349 2,886 824 228 2,945 127 866 0.28
ISRAEL 10 1,730 17 11 1 1 22 7 0.29
Sub total 10 1,730 17 11 1 1 22 7 0.29
TOTAL 22,28
9
654 14,58
2
*/ Ending stocks divided by consumption plus exports.
World total includes countries not shown.
Source : International Cotton Advisory Committee (2003c).
5,927 5,324 15,862 4,434 5,538 0.27
% <strong>of</strong> world 69 103 71 69 74 75 61 70
WORLD TOTAL 32,13
5
635 20,42
0
8,586 7,231 21,100 7,231 7,906 0.37
65

Table 6. Supply and Use <strong>of</strong> Extra-Fine Cotton in <strong>the</strong> World
Area Yield Prod Beg Stks Imports Cons Exports End Stks
Country 000 ha Kgs/Ha 000 Metric Tons
AUSTRALIA 1 1,667 1 2 1 2
CHINA
(Mainland)
50 1,400 70 12 25 53 37 17
EGYPT 226 872 197 91 123 120 45
INDIA 80 22 50 130 22
ISRAEL 4 1,900 8 8 13 3
PERU 9 402 4 7 4 10 4
SUDAN 107 374 40 44 70 14
TAJIKISTAN 32 603 19 12 3 20 8
TURKMENISTAN 100 300 30 8 1 24 13
UNITED STATES 72 1,312 94 53 9 14 114 28
UZBEKISTAN 30 534 16 6 4 12 6
OTHERS 10 887 4 11 7 1 10
TOTAL 639 881 562 275 88 345 412 172
*/ Ending stocks divided by consumption plus exports.
Source : International Cotton Advisory Committee (2003c).
66

References
Ahmed, Zahoor. May 2004. Enhancing Production Efficiency and International
Competitiveness in IDB cotton Producing Member Countries from <strong>the</strong> Asian Region,
A report executed by <strong>the</strong> Economic Policy and Strategic Planning Department,
Islamic Development Bank, P. Box. 5925 Jeddah 21432 Kingdom <strong>of</strong> Saudi Arabia.
Chaudhry, M. Rafiq. 2001. Survey <strong>of</strong> <strong>the</strong> Cost <strong>of</strong> Production <strong>of</strong> Raw Cotton.
International Cotton Advisory Committee, 1629 K Street, Suite 702, Washington DC
20006, USA. September 2001.
Chaudhry, M. Rafiq. 2004. Update <strong>of</strong> genetically engineered cotton, THE ICAC
RECORDER. Vol. XXII, No. 2., June 2004.
CUTS. 2003. Economiquity. Cancun Collapse: Opportunities and Threats, published
by CUTS Centre for International Trade, Economics & Environment, D-217, Bhaskar
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Estur, Gérald. 2004. COTTON: Review <strong>of</strong> <strong>the</strong> World Situation. International Cotton
Advisory Committee, 1629 K Street, Suite 702, Washington DC 20006, USA. Volime
57, Number 5, June 2004.
Guitchounts, Andrei. 2004. World Cotton Demand and <strong>the</strong> Outlook for <strong>the</strong> Cotton
Textile Industry. A paper presented at <strong>the</strong> conference “The Egyptian Cotton Industry –
Growth Through Private Sector Investment” held in Cairo, Egypt on May 15, 2004.
International Cotton Advisory Committee (ICAC). 1999. The World Cotton Market:
Projections to 2005. International Cotton Advisory Committee and Food and
Agriculture Organization <strong>of</strong> <strong>the</strong> United Nations, September 1999.
International Cotton Advisory Committee (ICAC). 2002. Reports on Injury Due to Low
Cotton Prices. International Cotton Advisory Committee,1629 K Street, Suite 702,
Washington DC 20006, USA, 2002.
International Cotton Advisory Committee (ICAC). 2003a. World Textile Demand.
International Cotton Advisory Committee, 1629 K Street, Suite 702, Washington DC
20006, USA. September 2003.
International Cotton Advisory Committee (ICAC). 2003b. Production and Trade
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K Street, Suite 702, Washington DC 20006, USA. September 2003.
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STATISTICS, Bulletin <strong>of</strong> <strong>the</strong> International Cotton Advisory Committee. 1629 K Street,
Suite 702, Washington DC 20006, USA. September 2003.
Townsend, Terry. 2003. Subsidies Beyond 2006. Presented to <strong>the</strong> Liverpool Cotton
Association, October 2, 2003, Liverpool, UK.
67

Townsend, Terry. 2004. Cotton: An Engine <strong>of</strong> Economic Growth, A statement from <strong>the</strong>
International Cotton Advisory Committee as a part <strong>of</strong> <strong>the</strong> panel discussion during a
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Issues on Competitiveness. <strong>Proceedings</strong> <strong>of</strong> <strong>the</strong> 25 th International Cotton Conference,
Bremen Cotton Exchange, Bremen, Germany.
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Yattara, Amadou Aly. May 2004. Cotton Production in Mali – Enhancing Production
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Saudi Arabia.
68

Overview
Appendix 1
69
(Original in French)
CASE STUDY ON COTTON PRODUCTION IN MALI
Amadou Aly Yattara
Mali is a landlocked country in West Africa. Its land area is 1.24 million km2
51% <strong>of</strong> which is desert. Its population was estimated at 9.8 million
inhabitants in 1998 and more that 80% <strong>of</strong> <strong>the</strong>m live in <strong>the</strong> rural area. The
population is very young, approximately 50% are under <strong>the</strong> age <strong>of</strong> 15.
Women constitute 51% <strong>of</strong> <strong>the</strong> population.
Mali is rated one <strong>of</strong> <strong>the</strong> least developed countries in <strong>the</strong> world by <strong>the</strong> UNDP's
development indicator. The majority <strong>of</strong> <strong>the</strong> population (69% in 1998) are
poor. The economy depends heavily on <strong>the</strong> rural area, which provides 45% <strong>of</strong>
<strong>the</strong> GDP (1994-48), involves 80% <strong>of</strong> <strong>the</strong> active population and provides 80%
<strong>of</strong> export earnings, which come mainly from cotton and livestock. Cotton is
also <strong>the</strong> main source <strong>of</strong> income in <strong>the</strong> rural area. It increased regularly,
between 1995/96 and 1997/98, from 72 billion to 81 billion. The country’s
cotton production has increased considerably in recent years. However, it
came as a result <strong>of</strong> an increase in <strong>the</strong> number <strong>of</strong> producers and <strong>the</strong> size <strong>of</strong> <strong>the</strong>
land area for cotton production. At <strong>the</strong> same time, earnings from cotton have
stagnated.
The impact <strong>of</strong> cotton cultivation on <strong>the</strong> entire Malian economy and its
stakeholders was felt after cultivation was boycotted in May/June 2000. The
grain and fibre <strong>of</strong> cotton production dropped by more than 50% during <strong>the</strong>
2000/01 trade season compared to that <strong>of</strong> 1999/2000. The decline in
production compounded <strong>the</strong> financial difficulties <strong>of</strong> <strong>the</strong> Malian Textile
Development Company (CMDT), and <strong>the</strong>ir cotton industry and <strong>the</strong> Malian
economy. Consequently, producers income also diminished.
The decline in <strong>the</strong> world market price <strong>of</strong> cotton, because <strong>of</strong> a drop in world
consumption and over-production due to subsidies granted by rich countries
(United States and <strong>the</strong> E.U.) to cotton producers, also had adverse effects on
<strong>the</strong> situation. In view <strong>of</strong> <strong>the</strong> impending collapse <strong>of</strong> <strong>the</strong> cotton industry, which
is <strong>the</strong> mainstay <strong>of</strong> <strong>the</strong> Malian economy, <strong>the</strong> government began to readjust and

estructure <strong>the</strong> industry. After <strong>the</strong> forum on cotton in April 2001, before an
audience composed <strong>of</strong> all <strong>the</strong> stakeholders <strong>of</strong> <strong>the</strong> industry and many
producers, <strong>the</strong> government acted. The measures are outlined in <strong>the</strong> cotton
policy paper (LPDSC). The paper outlines guidelines to reform <strong>the</strong> cotton
industry in line with <strong>the</strong> economic liberalization policy, which requires that
<strong>the</strong> government stay away from all productive, industrial and commercial
activities in <strong>the</strong> private sector and local communities. The objectives <strong>of</strong> <strong>the</strong>
reform are:
• control production costs
• increase farm yield
• revive farmers’ associations
• ensure greater participation <strong>of</strong> <strong>the</strong> private sector, producers and local
communities
• increase <strong>the</strong> industry’s contribution to <strong>the</strong> economy
• help in <strong>the</strong> fight against poverty
• fix prices that are determined by <strong>the</strong> agents concerned.
The strategies outlined in <strong>the</strong> paper are:
• relink <strong>the</strong> Malian Textile Development Company (CMDT) to activities
<strong>of</strong> <strong>the</strong> cotton industry
• ensure greater participation <strong>of</strong> producers in <strong>the</strong> management <strong>of</strong> <strong>the</strong>
cotton industry
• liberalization <strong>of</strong> <strong>the</strong> cotton and vegetable oil industry
The aim <strong>of</strong> <strong>the</strong> measures is to ensure <strong>the</strong> sustainability <strong>of</strong> cotton production, <strong>the</strong>
mainstay <strong>of</strong> <strong>the</strong> national economy, improve <strong>the</strong> quality <strong>of</strong> cotton yarn so that
<strong>the</strong> technical factors <strong>of</strong> production can be more competitive, and introduce
institutional reforms pending <strong>the</strong> outcome <strong>of</strong> <strong>the</strong> actions <strong>of</strong> West and Central
African countries at <strong>the</strong> World Trade Organisation (WTO). The actions are
designed to get <strong>the</strong> WTO to remove <strong>the</strong> subsidies that <strong>the</strong> US and <strong>the</strong> EU grant
to <strong>the</strong>ir producers, or pay compensation for <strong>the</strong> loss incurred by <strong>the</strong> economies
<strong>of</strong> <strong>the</strong> countries concerned. The actions that must be taken are as follows:
• maintain and even increase production
• continue to devise techniques that can help sustain production under
viable economic conditions, which requires that researcher be allocated
more resources
• ensure permanent consultation between all <strong>the</strong> stakeholders <strong>of</strong> <strong>the</strong>
industry so that <strong>the</strong>y can share information and reconcile <strong>the</strong>ir <strong>of</strong>ten
conflicting interests
70

• reverse <strong>the</strong> decline in farm yield in several countries and reduce <strong>the</strong>
productivity gap in <strong>the</strong> region, which requires greater incentives for
investments in advanced technologies and efficient systems <strong>of</strong>
distributing inputs
• make cotton ginning more efficient by involving new actors in <strong>the</strong>
industry for better results, because <strong>the</strong> aim here is to reduce <strong>the</strong>
production cost <strong>of</strong> <strong>the</strong> cotton yarn
• process locally most national produce by developing <strong>the</strong> textile industry
and o<strong>the</strong>r sectors
• focus on <strong>the</strong> essential activities <strong>of</strong> <strong>the</strong> industry
• build <strong>the</strong> capacity <strong>of</strong> stakeholders, especially producers who should fully
participate in production
• continue to transfer skills as part <strong>of</strong> <strong>the</strong> ongoing restructuring and
privatization exercises in <strong>the</strong> various countries.
All this should be done without adversely affecting production and impeding
<strong>the</strong> institutional development <strong>of</strong> <strong>the</strong> cotton industry.
I. INTRODUCTION / GENERAL INFORMATION
Mali is a landlocked country that is situated between <strong>the</strong> eleventh and <strong>the</strong>
twenty-fifth parallel north. Its land area is 1.24 million km2, 51% <strong>of</strong> which is
a desert. In 1998, <strong>the</strong> population was estimated at 9.8 million inhabitants with
80% in <strong>the</strong> rural area. Approximately, 50% <strong>of</strong> <strong>the</strong> population is below <strong>the</strong> age
<strong>of</strong> 15. Women constitute 51% <strong>of</strong> <strong>the</strong> population.
Mali is classified among <strong>the</strong> least developed countries <strong>of</strong> <strong>the</strong> world by <strong>the</strong>
UNDP development indicator. The bulk <strong>of</strong> <strong>the</strong> population (69% in 1998) are
poor. The proportion <strong>of</strong> <strong>the</strong> poor is higher in <strong>the</strong> rural area (76%) than in <strong>the</strong>
urban area. The poverty index in <strong>the</strong> provinces shows that, apart from <strong>the</strong>
District <strong>of</strong> Bamako, more than half <strong>of</strong> <strong>the</strong> population <strong>of</strong> each province suffer
from poverty (life expectancy, living conditions, education). Cotton
production has increased sharply over <strong>the</strong> past five years. However, <strong>the</strong>
increase was mainly due to an increase in <strong>the</strong> number <strong>of</strong> producers and land
for cotton farming. At <strong>the</strong> same time, <strong>the</strong> yield <strong>of</strong> a cotton seed has stagnated
at nearly one ton a hectare, while that <strong>of</strong> corn has increased to two tons a
hectare. Millet and sorghum yields have not increased much (900-950kg/ha).
The stagnation <strong>of</strong> and even decline in cotton and grain yield (millet and
sorghum) are a matter <strong>of</strong> concern in all cotton production areas, especially in
<strong>the</strong> old cotton basin (Koutiala and Fana), where farming has not been
71

diversified. The system <strong>of</strong> production is <strong>of</strong> <strong>the</strong> agro-forestry-livestock type
with <strong>the</strong> predominance <strong>of</strong> rain-fed crops (cotton and grains). It centres around
cotton production, which is <strong>the</strong> main cash crop. This type <strong>of</strong> farming is
practiced in <strong>the</strong> entire sou<strong>the</strong>rn and western parts <strong>of</strong> <strong>the</strong> country in rotation:
cotton-sorghum-millet or groundnut or cotton-grains. The cotton farming area
has diverse climatic conditions.
In fairly humid areas (Koutiala, Skasso) production is relatively highly
because <strong>of</strong> very good farming skills, quantity <strong>of</strong> equipment and <strong>the</strong> high use
<strong>of</strong> inputs. Livestock breeding is less productive because <strong>of</strong> poor pasture.
Overburden and to much pressure on <strong>the</strong> land are serious problems in this
area. In areas such Koutiala and Sikasso, nearly 80% <strong>of</strong> <strong>the</strong> land is cultivated
permanently. It is <strong>the</strong>refore practically impossible to extend <strong>the</strong> farmland for
fear <strong>of</strong> farming fragile land. Although cotton is cultivated in <strong>the</strong> north (San
and Bla), low rainfall and climatic conditions do not encourage cotton
cultivation. Grains (millet and sorghum) are <strong>the</strong> dominant crops. They are
cultivated in rotation with groundnut, which is also a cash crop but barely or
not at all monitored by extension workers. The yields <strong>of</strong> crops because inputs
and agricultural implements are scarcely used. The breeding <strong>of</strong> small
ruminants is widespread. The land area is not enough and has deteriorated
considerably. O<strong>the</strong>r areas such Bougouni and Kita, where cotton cultivation
was recently introduced, have potential for crop cultivation as far as <strong>the</strong>
favourable climate and land extension are concerned, while <strong>the</strong>re is pressure
on land elsewhere. In this area, <strong>the</strong> production system is done in rotation
(cotton-corn-groundnut or black-eyed bean) or (cotton-corn-sorghumgroundnut
or black-eyed bean).
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II. THE IMPORTANCE OF COTTON PRODUCTION FOR MALI
AND THE NEED TO MAINTAIN IT
Until recently, cotton has been <strong>the</strong> main export <strong>of</strong> Mali. In 1995/96, cotton
accounted for 80% <strong>of</strong> tax revenue. It is also <strong>the</strong> major source <strong>of</strong> income in <strong>the</strong>
rural area. It increased systematically from 62 to 81 billion between 1995/96
and 1997/98. The importance <strong>of</strong> cotton cultivation for <strong>the</strong> entire Malian and
for <strong>the</strong> stakeholders became apparent after <strong>the</strong> May/June 2000 cotton
cultivation boycott. It led to a sharp drop in cotton grain and yarn production
by 50% in 2000/01 compared to 1999/2000 as shown in Table 1.
Table 1. Trend in <strong>the</strong> Production <strong>of</strong> Cotton Seed 98/99-2000/01
98/99 99/00 00/01
CMDT OHVN Total CMDT OHVN Total CMDT OHVN Total
Area (ha) 468,5 35,85 504,43 442,49 39,80 482,30 211,72 16,18 227,91
Output T/ha 1032 1085 1065
Cotton Production 483,68 34,68 518,36 429,98 29,13 459,12 229,64 13,08 242,73
(T)
(-1.4%)
(-47.8%)
Source: CMDT/OHVN
The decline in production compounded <strong>the</strong> financial problems <strong>of</strong> CMDT and
affected <strong>the</strong> entire cotton industry and <strong>the</strong> economy <strong>of</strong> Mali (Table 2).The fall
in world prices because <strong>of</strong> less demand also made matters worse. The fall <strong>the</strong>
in world prices had a major impact on African countries in <strong>the</strong> franc monetary
zone that produce cotton. These countries were affected by production costs
because <strong>of</strong> <strong>the</strong> high cost <strong>of</strong> transportation. The field price <strong>of</strong> <strong>the</strong> commodity
represents 2/3 <strong>of</strong> <strong>the</strong> factory price. The sale price <strong>of</strong> cotton yarn became well
below its production cost.
Table 2. Trend in <strong>the</strong> Current Balance <strong>of</strong> Payments 1998-2000
(in Fcfa million)
Item /Year 1998 1999 2000
Imports (FOB) 3329,337 372,821 421,539
Exports (FOB) 328,131 351,573 388,130
Covered. Import/Export % 99.6 94.3 92.1
Trade Balance -1,206 -21,248 -33,409
Net Services -159,235 -161,313 -167,906
Net Pr<strong>of</strong>its -29,968 -43,135 -69,901
Current Net Transfers 67,588 69,941 -90,001
Current Balance -122,821 -155,755 -181,214
Source: MEF/BCEAO, Balance <strong>of</strong> Payments <strong>of</strong> Mali, December 2001
73

Because <strong>of</strong> CMDT’s financial difficulties, it could no longer maintain <strong>the</strong>
ceiling price <strong>of</strong> 185F and <strong>the</strong> discount that <strong>the</strong> Trade Union <strong>of</strong> Cotton
Producers and Food Producers (SYCOV) secured after negotiations with
various partners in all production area. Consequently, <strong>the</strong> overall producer
price was fixed at CFA150 a kilogramme. As a result, <strong>the</strong> producers’ sources
<strong>of</strong> income diminished (table 3). Their income comes mainly from cotton and
grains, which are <strong>the</strong> major crops.
Table 3. Trend in Monetary Revenues <strong>of</strong> Producers by CMDT Zone
(in Fcfa. million)
Income/source Rural Cotton Cereals Groundnuts Total
1998/99 64,871,234 11,395,628 6,062,540 82,329,402
1999/00 41,221,452 20,392,655 7,553,070 70,167,087
2000/01 24,647,334 6,654,501 7,247,610 38,384,922
Source: CMDT –DTDR/DPCG, Position as at November 2000
Overall grain produce also dropped by 13.5% during <strong>the</strong> boycott. Farmers did
not convert to grain farming on cotton farmlands as expected. Ano<strong>the</strong>r reason
is <strong>the</strong> lack <strong>of</strong> inputs, especially for corn.
Table 4. Trend in <strong>the</strong> Production <strong>of</strong> Cereals (CMDT zone)
Maize Millette/Sorgho Rice
Area Output Product. Area Output Product. Area Output Product.
(ha) (T/ha) (T) (ha) (T/ha) (T) (ha) (T/ha) (T)
1999/99 212,78 1920 408,51 625,58 948 593,30 62,54 1617 101,11
1999/00 239,25 2070 495,24 685,13 1020 698,62 66,98 1724 115,48
2000/01 198,48 1730 343,32 756,43 903 683,39 74,98 1402 105,13
Source: DTDR/CMDT
Because <strong>of</strong> its inability to resort to stabilisation funds provided in such cases
and <strong>the</strong> discontent <strong>of</strong> <strong>the</strong> rural population, SYCOV was condemned by its
supporters and a crisis committee was set up. Later a new union called
SYVAC was established. O<strong>the</strong>r unions were also established. Since <strong>the</strong>n <strong>the</strong>
unions help to organise certain economic functions such as <strong>the</strong> supply <strong>of</strong> nonstrategic
inputs (millet and sorghum inputs) but are aware that it is not <strong>the</strong>ir
real role. Subsequent developments led to <strong>the</strong> GSCVM i.e. <strong>Group</strong>ing <strong>of</strong>
Cotton and Foodstuffs Unions <strong>of</strong> Mali. Fur<strong>the</strong>rmore major producer
organisations are members <strong>of</strong> <strong>the</strong> AOPP i.e. <strong>the</strong> Association <strong>of</strong> Farmers’
Pr<strong>of</strong>essional Associations within which a specialised cotton commission was
set up.
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The boycott <strong>of</strong> cotton cultivation had a considerable impact on many people
and sectors <strong>of</strong> <strong>the</strong> national economy, directly and indirectly. As a result <strong>of</strong>
financial difficulties, <strong>the</strong> CMDT outlines in its bidding procedures for inputs
suppliers a payment deadline <strong>of</strong> at least 180 days which excludes small local
suppliers. Transporters were affected by <strong>the</strong> decline in <strong>the</strong> volume <strong>of</strong> tonnage
transported. For local craftsmen, <strong>the</strong> drop in <strong>the</strong> income <strong>of</strong> producers marked
<strong>the</strong> end <strong>of</strong> <strong>the</strong>ir activities.
Credit unions such as BNDA, CMDT, Kafo Jiginew, which are highly
involved in input distribution and o<strong>the</strong>r agricultural financing needs had to
address issues such as rescheduling credits and <strong>the</strong> decline in repayment
rates. Because <strong>of</strong> all <strong>the</strong>se difficulties and <strong>the</strong> risk that <strong>the</strong> cotton industry
might collapse, <strong>the</strong> government <strong>of</strong> Mali carried out recovery and restructuring
measures after <strong>the</strong> forums that took place in April 2001. The forums were
well attended by all <strong>the</strong> stakeholders <strong>of</strong> <strong>the</strong> industry and producers. After <strong>the</strong>
proceedings, <strong>the</strong> Malian government prepared a policy paper on cotton
(LPDSC).
The LPDSC spells out <strong>the</strong> guidelines to reform <strong>the</strong> cotton industry in line
with <strong>the</strong> liberalisation policy <strong>of</strong> <strong>the</strong> economy i.e. <strong>the</strong> government’s
disengagement from productive, industrial and commercial activities in <strong>the</strong>
private sector and local communities. The objectives <strong>of</strong> <strong>the</strong> reform are:
• Control production costs
• Increase farm output
• Ensure that farmer associations are dynamic
• Increase <strong>the</strong> involvement <strong>of</strong> <strong>the</strong> private sector, producers and local
communities
• Increase <strong>the</strong> cotton industry’s contribution to <strong>the</strong> national economy
• Help fight poverty
• Help ensure that agents negotiate and determine prices for <strong>the</strong>
industry
The strategies worked out by <strong>the</strong> LPDSC are:
• The CMDT should refocus cotton related activities;
• Producers should participate in <strong>the</strong> management <strong>of</strong> <strong>the</strong> cotton
industry;
• The cotton and edible oil industry should be liberalized.
75

III. THE VARIOUS STAKEHOLDERS OF THE COTTON
INDUSTRY AND THEIR RESPONSIBILITIES
The various stakeholders <strong>of</strong> <strong>the</strong> industry at present are as follows:
1. The Producers
The producers belong to two types <strong>of</strong> groupings:
i. Cotton Producer Unions (SYCOV, SYVAC, SYPAMO AND SPCK)
The four unions were established to safeguard <strong>the</strong> interests <strong>of</strong> producers. In
fact <strong>the</strong> unions are directly involved in <strong>the</strong> management <strong>of</strong> <strong>the</strong> industry. They
help determine <strong>the</strong> level <strong>of</strong> produce to be sold and producer prices, and
monitor viable agricultural land through village technical teams. They also
supply cotton factories with cotton seeds as soon as marketing starts. As for
<strong>the</strong> management <strong>of</strong> inputs, <strong>the</strong> unions also help to prepare input procurement
specifications, consider bids and give out procurement contracts.
ii. Village Associations
Village associations that <strong>the</strong> CMDT established in 1984 play a major role in
streamlining cotton production. The associations are assigned to determine
cotton inputs (fertilisers and insecticides) that producers need, take loans to
buy inputs, ensure that cotton produce is properly weighed and distribute sale
benefits.
2. The CMDT and <strong>the</strong> OHVN
The CMDT and <strong>the</strong> OHVN are <strong>the</strong> development bodies in charge <strong>of</strong> cotton
produce. The CMDT is <strong>the</strong> main enterprise <strong>of</strong> <strong>the</strong> cotton industry. It aims to
develop cotton production areas, improve <strong>the</strong> farmers’ living standards,
particularly by developing cotton cultivation.
The government owns 60% <strong>of</strong> its capital and DAGRIS owns <strong>the</strong> remaining
40%. The CMDT gives advise on cotton farming techniques, supplies inputs
and agricultural implements, buys, collects and distributes cotton seeds and
exports cotton yarn. From 1985/1986 to 1999/2000, relations between <strong>the</strong>
CMDT, <strong>the</strong> government and producers were governed by a contract that
76

outlined <strong>the</strong> role <strong>of</strong> stakeholders and <strong>the</strong> distribution <strong>of</strong> resources <strong>of</strong> <strong>the</strong>
industry. The contract dealt with <strong>the</strong> following issues:
• Taxation concerning <strong>the</strong> industry;
• Ways <strong>of</strong> funding public missions;
• Conditions <strong>of</strong> setting producer prices;
• Debt service;
• Farmers’ compliance with <strong>the</strong> CMDT’s production plans;
• Mode <strong>of</strong> payment for cotton seeds;
• Remuneration and stabilisation mechanisms;
• Integrating <strong>the</strong> management <strong>of</strong> inputs into <strong>the</strong> industry.
Before <strong>the</strong> cotton industry was restructured, it used to perform two closely
related tasks: integrated development <strong>of</strong> <strong>the</strong> industry and public missions. The
development mission aimed to enhance activities related to cotton produce
systems including extension, literacy, research, seed production, upkeep <strong>of</strong>
cotton assembly points and monitoring/ evaluation <strong>of</strong> <strong>the</strong> above activities.
Public missions consist in carrying out rural development activities that <strong>the</strong>
government assigns to <strong>the</strong> CMDT. The plan <strong>of</strong> <strong>the</strong> Ministry <strong>of</strong> Rural
Development is divided into two categories:
i. Rural development and works
- Building and rehabilitating feeder roads
- Village water supply
- Local development: local policy and programme management
- Water and agricultural development (plains and lowlands).
ii. Support Missions for <strong>the</strong> Rural Area
- Diversification <strong>of</strong> sources <strong>of</strong> income in <strong>the</strong> rural area.
- Development <strong>of</strong> water and agricultural facilities (plain and lowlands).
- Gender and development.
The CMDT supplies inputs for <strong>the</strong> coming season depending on <strong>the</strong> needs <strong>of</strong>
producers (seeds, insecticides and fertilisers). Moreover, it trains and equips
blacksmiths who work with agricultural implements (planters, ploughs etc).
The CMDT supplies seeds free <strong>of</strong> charge. The o<strong>the</strong>r inputs are sold to <strong>the</strong>
farmers at cost (distribution included). Since 1994/1995, <strong>the</strong> transfer price has
been less than <strong>the</strong> cost price. This means that <strong>the</strong> CMDT indirectly subsidies
<strong>the</strong> purchase <strong>of</strong> inputs, especially a part <strong>of</strong> <strong>the</strong> taxes.
77

The OVHN is active in areas such as Koulikoro, Kati, Kangaba, <strong>the</strong>
surroundings <strong>of</strong> Bamako. In 1991, it became public administrative institution
that promotes food and industrial crops in its area <strong>of</strong> activity. The OVHN
promotes production, manages natural resources and land, develops, equips
and organises <strong>the</strong> rural area and monitors and assesses development activities.
As a result <strong>of</strong> <strong>the</strong> restructuring, <strong>the</strong> CMDT resorted to cotton and <strong>the</strong> supply
<strong>of</strong> cotton inputs. Government duties were transferred to government technical
services. Unions supply non-strategic inputs for cotton.
3. The Institute <strong>of</strong> Rural Economics (IER)
It is through such specialised services (programmes, cotton, research,
production and management system <strong>of</strong> natural resources, sector economics)
charged to generate technologies for cotton development in Mali. It has made
several achievements, especially with regard to cotton varieties such as <strong>the</strong>
NTA series, <strong>the</strong> existing typology at <strong>the</strong> CMDT etc.
4. HUICOMA
HUICOMA (Cotton Oil Plants <strong>of</strong> Mali) is a limited liability company that is
engaged in cotton seed grinding, o<strong>the</strong>r oleaginous produce, oil production and
o<strong>the</strong>r related products from <strong>the</strong>se raw materials. The main products are
refined oil, soap and animal feed. HUICOMA also markets its products in
both Mali and abroad. Based on an agreement with <strong>the</strong> CMDT, HUICOMA
buys cotton seeds and uses <strong>the</strong>m only for grinding.
5. COMATEX
COMATEX (Malian Textile Company) produces, markets, imports and
exports textile products such as thread, clothing, furniture material, industrial
material and imports and exports thread and unbleached linen. A number <strong>of</strong>
investments have been made to replace part <strong>of</strong> <strong>the</strong> equipment and facilities as
part <strong>of</strong> a loan agreement between China and Mali. Within <strong>the</strong> framework <strong>of</strong>
an agreement between <strong>the</strong> Government <strong>of</strong> Mali and COMATEX, <strong>the</strong>
government lobby <strong>the</strong> EDM and <strong>the</strong> CMDT to grant acceptable commercial
conditions to COMATEX as soon as possible.
6. ITEMA
Produces and markets cotton yarn, unbleached linen and printed linen. Like
with COMATEX, <strong>the</strong> government promotes negotiations with ITEMA
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(Malian Textile Industries) and EDM in order to secure acceptable
commercial conditions, taking into account <strong>the</strong> specifics <strong>of</strong> <strong>the</strong> textile
industry.
7. FITINA-SA
(Natural Yarn and Fabric <strong>of</strong> Africa) This weaving company came into being
in 2004 as a result <strong>of</strong> collaboration among Malian economic operators and
Mauritian and French industrialists. It aims to make use <strong>of</strong> local raw material
to produce fabric mainly for export.
8. COPACO (The Parisian Cotton Company)
It is a branch <strong>of</strong> <strong>the</strong> CFDT, which concluded with <strong>the</strong> CMDT an agreement to
assist in <strong>the</strong> marketing <strong>of</strong> cotton yarn. In accordance with <strong>the</strong> agreement,
COPACO shall negotiate cotton yarn sale contracts under <strong>the</strong> best terms and
help to formulate and implement <strong>the</strong> commercial policy <strong>of</strong> <strong>the</strong> CMDT. In <strong>the</strong>
event o<strong>the</strong>r traders or businessmen request sales directly, COPACO shall
send such requests to <strong>the</strong> CMDT. COPACO shall receive 0.5% <strong>of</strong> a contract
value as a fee for <strong>the</strong> service rendered. CMDT opened an <strong>of</strong>fice in 1989 in
Paris, which monitors transactions.
9. Stakeholders in Transport
Transport is provided by <strong>the</strong> CMDT and private operators. The CMDT
standardises transport fares between <strong>the</strong> closest farms and fur<strong>the</strong>st ones from
processing units. According to <strong>the</strong> CMDT’s audit report on transport,
standardisation protects <strong>the</strong> most distant producers from higher fares.
However, such a measure requires a centralised structure, which no private
individual has <strong>the</strong> means to fulfil. Price is a determining factor in <strong>the</strong>
enthusiasm <strong>of</strong> truck drivers. The fare conceded by <strong>the</strong> CMDT is only 65 CFA
francs/tkm. During marketing, cotton seeds are transported at <strong>the</strong> same time
with inputs, yarn, seeds and o<strong>the</strong>r products. Yarn produced by factories
situated in <strong>the</strong> south is transported by private carriers to <strong>the</strong> port <strong>of</strong> Abidjan.
On <strong>the</strong> o<strong>the</strong>r hand, <strong>the</strong> CMDT transports seeds to <strong>the</strong> oil processing factories
<strong>of</strong> HUICOMA. It should be noted that <strong>the</strong> government has decided <strong>the</strong>
CMDT must pull out gradually from transport. The CMDT is still
transporting most <strong>of</strong> <strong>the</strong> cotton seeds from <strong>the</strong> farms to <strong>the</strong> factories until <strong>the</strong>
private sector can optimally supply factories during <strong>the</strong> cotton ginning
season. It is for <strong>the</strong> same reason that <strong>the</strong> CMDT has reservations about <strong>the</strong>
Malian Shipping Company (SONAM) given <strong>the</strong> magnitude <strong>of</strong> <strong>the</strong> market, 30
billion CFA francs.
79

10. Stakeholders in Financing (<strong>the</strong> banking pool)
Rural credit has been <strong>the</strong> preserve <strong>of</strong> <strong>the</strong> CMDT for quite a long time in
sou<strong>the</strong>rn Mali. In <strong>the</strong> early eighties, <strong>the</strong> government <strong>of</strong> Mali, assisted by <strong>the</strong>
Caisse Francaise de Developpement (CFD) set up a national agricultural
credit fund, namely <strong>the</strong> National Agricultural Development Bank (BNDA). It
was designed to be a decentralised institution that collects farmers’ savings
and would gradually replace <strong>the</strong> CMDT as far as credit was concerned.
In general, <strong>the</strong> industry is funded by local banks, chief among <strong>the</strong>m is <strong>the</strong>
BDM, which is supported by foreign banks. The BNDA grants loans to
Village Associations to buy agricultural inputs. Its has gained momentum
over recent years. Indeed, it replaced <strong>the</strong> CMDT gradually, which used to
grant loans directly to village associations. For instance, in 1997/1998,
approximately 60% <strong>of</strong> <strong>the</strong>se associations did welcome <strong>the</strong> BNDA. A loan is
granted only after it is approved by <strong>the</strong> CMDT. This is a precaution that
ensures that cotton is paid for by a transfer to <strong>the</strong> accounts <strong>of</strong> village
associations. Consequently, <strong>the</strong> BNDA is refunded directly by deducting <strong>the</strong>
due sums from <strong>the</strong> proceeds <strong>of</strong> producers.
11. The Savings Network and <strong>the</strong> Decentralised Kafo Jiginew Credit
Union
Because <strong>of</strong> <strong>the</strong> shortcomings <strong>of</strong> <strong>the</strong> CMDT credit system and <strong>the</strong> actions <strong>of</strong>
<strong>the</strong> BNDA, <strong>the</strong> decentralised network project proposed by <strong>the</strong> Cooperative
Credit Union was supported by <strong>the</strong> authorities (including <strong>the</strong> CMDT and <strong>the</strong>
BNDA) and some donors.
After <strong>the</strong>y became aware <strong>of</strong> <strong>the</strong> shortcomings <strong>of</strong> <strong>the</strong> BNDA and considered
carefully <strong>the</strong> diversification <strong>of</strong> credit institutions, <strong>the</strong>y decided to have a
network <strong>of</strong> savings and credit unions that are in line with <strong>the</strong>ir needs. This is
how Kafo Jiguinew (federation <strong>of</strong> seed stores in Bamana – <strong>the</strong> most widely
spoken national language in Mali) was established in 1988 as a customary
law association with headquarters in Koutiala. It has been supported since its
inception by <strong>the</strong> European Consortium for Cooperative Credit (CECCM),
which is a group <strong>of</strong> European NGOs. The European Union finances half <strong>of</strong>
support project.
80

IV. FACTORS AND CONDITIONS OF ENHANCING PRODUCTIVITY
AND COMPETITIVENESS OF THE INDUSTRY
1. The Technical and Institutional Factors Necessary to Enhance
Productivity <strong>of</strong> Cotton Cultivation
Previous analyses have indicated that <strong>the</strong> country’s economy relies heavily on
cotton produce. It is nearly <strong>the</strong> only source <strong>of</strong> income for most producers.
One can imagine <strong>the</strong> socio-economic impact this can have. Consequently, it is
important to ensure cotton produce is sustainable and that both its quantity
and quality are improved in <strong>the</strong> best possible conditions <strong>of</strong> competitiveness.
Among <strong>the</strong> most important technical factors that ensures and sustains cotton
production is <strong>the</strong> soil, which should be kept fertile. This is even more
important because soil fertility is seen as one cause <strong>of</strong> low yield in major
crops over recent years. The decrease in soil fertility is worrying because <strong>the</strong>
medium and long term future <strong>of</strong> sou<strong>the</strong>rn Mali’s production potential on
which <strong>the</strong> country’s economy partly relies is under threat. Indeed <strong>the</strong> increase
in cotton production this year was not due to an increase in yield but to an
expansion <strong>of</strong> farmland thus exerting pressure on natural resources and <strong>the</strong> use
<strong>of</strong> all agricultural land in some provinces.
Because <strong>of</strong> <strong>the</strong> dire need to ensure proper soil management so as to improve
sustainable production systems while protecting <strong>the</strong> environment, Mali has
joined <strong>the</strong> Soil Fertility Initiative (IFS), which promotes rural development
and food security in sub-sahran countries. It is backed by an association <strong>of</strong>
international agencies and some countries. This membership is imperative
and in line with <strong>the</strong> national policy on poverty reduction, which is supported
by Mali’s development partners. The objectives <strong>of</strong> <strong>the</strong> initiative are:
• Draw up a national policy on <strong>the</strong> sustainable management <strong>of</strong> soil
fertility
• Promote sustainable production systems by restoring, maintaining
and improving soil productivity and proper management <strong>of</strong> water
resources
• Establish and develop a market that can supply inputs, especially
fertilisers and o<strong>the</strong>r soil enriching agents
• Train <strong>the</strong> major players to become pr<strong>of</strong>essionals
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The strategies are:
• Support national institutions
• Help farmers’ organisations to promote sustainable productive
systems through an integrated approach to <strong>the</strong> management <strong>of</strong> soil
fertility, land ownership and integration <strong>of</strong> agriculture and livestock
breeding
• Monetarise agriculture by promoting commercial speculation and
increase <strong>the</strong> added value <strong>of</strong> agricultural produce and livestock
products <strong>of</strong> farmers
• Make farmers and stakeholders more pr<strong>of</strong>essional.
Back up measures are necessary to create greater incentives. Therefore, <strong>the</strong>
government should take measures on prices for agricultural produce,
infrastructure development, enhancement <strong>of</strong> information systems on markets
for inputs and agricultural produce.
The major factor effecting cotton productivity is technical. A joint cotton
programme <strong>of</strong> <strong>the</strong> IER and <strong>the</strong> ESPGRN <strong>of</strong> Sikasso entitled “ Identifying <strong>the</strong>
impediments to greater cotton cultivation in <strong>the</strong> province <strong>of</strong> Sikasso” brought
to light <strong>the</strong> major factors. They include <strong>the</strong> date <strong>of</strong> planting, date <strong>of</strong> singling,
number weeding sessions, quantity <strong>of</strong> grass to weed out, mineral or organic
fertilisation, planting with mineral fertilisation and phytosanitary protection.
Findings have shown that 69% <strong>of</strong> yield/ha variability is due to <strong>the</strong> abovementioned
farming techniques (Sanogo and al, 1990). The findings <strong>of</strong> <strong>the</strong>
same study have also shown that <strong>the</strong>re are close links between <strong>the</strong> decrease in
fertility on <strong>the</strong> one hand and <strong>the</strong> lack <strong>of</strong> anti-erosive mechanisms or a
cultivation <strong>of</strong> a string <strong>of</strong> grain crops (millet/sorghum) on <strong>the</strong> o<strong>the</strong>r hand.
Erosion is a real environmental scourge.
Ano<strong>the</strong>r study (Fok et al, 1999) that <strong>the</strong> IER and CIRAD conducted in 1997,
1998 and 1999 on <strong>the</strong> diversity <strong>of</strong> farming practices in cotton producing areas
<strong>of</strong> Mali indicated that <strong>the</strong> techniques applied are very diverse. The
shortcomings highlighted in <strong>the</strong> survey are more concerned with <strong>the</strong>
application <strong>of</strong> o<strong>the</strong>r techniques that can increase yield than with chemical
inputs. It appeared that such practices are due, at least in part, to various
constraints that <strong>the</strong> countries are faced with such as <strong>the</strong> availability <strong>of</strong> seeds
before <strong>the</strong> rainy season, <strong>the</strong> farming schedule, inadequate manpower,
insufficient and/or lack <strong>of</strong> agricultural implements (particularly carts to carry
manure) etc. The widespread use <strong>of</strong> cattle (over 2,000,000) is one <strong>of</strong> <strong>the</strong>
techniques that boosts agricultural output in cotton production areas. It has
helped to increase organic matter for <strong>the</strong> preparation <strong>of</strong> compost. However,
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its production is slow compared to <strong>the</strong> increase in cultivated land area. There
is a greater need for organic matter with <strong>the</strong> expansion <strong>of</strong> cultivated land
areas for cotton and corn. Indeed <strong>the</strong>se crops require a lot <strong>of</strong> organic-mineral
fertilisers.
Crop variety enhancement and phytosanitary protection are also among <strong>the</strong>
factors that contribute to greater productivity. Crop variety enhancement has
solved various agricultural and climatic constraints (resistance to or tolerance
to diseases and insects), producers’ demands concerning productivity and its
components, industrialists through fibre yields, ginning, which continues to
grow at least in West Africa and finally <strong>the</strong> technological requirements <strong>of</strong>
spinning through crop varieties that have met <strong>the</strong> requirements over time.
In Mali’s case, all <strong>the</strong> varieties developed so far have met <strong>the</strong> requirements <strong>of</strong>
<strong>the</strong> variety enhancement programme, i.e. coming up with varieties that are
productive and adapted to <strong>the</strong> changing conditions <strong>of</strong> <strong>the</strong> area and having
better yarn yield during ginning and good technological features. So each
developed variety has improved <strong>the</strong> previous variety. This is why <strong>the</strong>
cultivation <strong>of</strong> variety B 163, introduced in 1972 was generalized in 1981/82
to replace BJA SM 67 with a low yarn yield during ginning (37.5%) and a
low germination rate (55 to 60%) thus making <strong>the</strong> industry unpr<strong>of</strong>itable.
Because <strong>of</strong> <strong>the</strong> length and excellent grade, among o<strong>the</strong>rs, <strong>of</strong> this variety,
which has been cultivated for 10 years, Malian cotton is considered to be <strong>of</strong>
good quality.
However, its yarn proportion, originally 40.1%, dwindled to approximately
38% <strong>the</strong>reby making <strong>the</strong> industry unpr<strong>of</strong>itable. ISA 205 was <strong>the</strong>n introduced
in 1988/89 mainly because <strong>of</strong> its high proportion <strong>of</strong> yarn during ginning.
Despite <strong>the</strong> length <strong>of</strong> its silk and its nepposity, since it was adopted <strong>the</strong>
industry has been rescued and variety requirements have been enhanced.
Consequently, a variety with at least an equal proportion <strong>of</strong> fibre <strong>of</strong> good
quality and productivity had to be found. Such a variety was finally found.
NTA 88-6, which was obtained from cross-breeding B.163 and N 205-3 (ISA
205), was cultivated on <strong>the</strong> entire land area <strong>of</strong> cotton production in Mali. This
variety has many advantages (hardiness, productivity, high fibre yield <strong>of</strong>
44%, long fibre: 1’1/8 <strong>of</strong> over 80%). Nowadays <strong>the</strong> CMDT rejects <strong>the</strong> variety
on <strong>the</strong> grounds that its clients claim that it is too yellowish. So untested
foreign varieties that are acclaimed to be white are being adopted regardless
<strong>of</strong> <strong>the</strong> hazards <strong>of</strong> such a practice.
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Finding a variety that is similar to NTA 88-6 in terms <strong>of</strong> its agronomic and
technological qualities toge<strong>the</strong>r with a less yellowish colour (+b) is a major
challenge that <strong>the</strong> country is faced with.
The recommendations <strong>of</strong> <strong>the</strong> various experiments on cotton plants have
helped to ease labour and increase <strong>the</strong> farmland area, <strong>the</strong> yield and <strong>the</strong>
quality. Fur<strong>the</strong>rmore, with <strong>the</strong> new recommended produce <strong>the</strong> toxicity <strong>of</strong> <strong>the</strong>
produce and its attendant hazards have declined. The phytosanitary protection
<strong>of</strong> cotton plants is now widespread and is conducted according a timetable <strong>of</strong>
5 to 6 foliar treatments. The treatment starts when <strong>the</strong> plants start blossoming
and lasts for 14 days. However, <strong>the</strong> following criticisms are leveled against
<strong>the</strong> treatment:
• A rigid system that does not take into account <strong>the</strong> parasitic level <strong>of</strong>
<strong>the</strong> crop
• High protection cost
• The use <strong>of</strong> some dangerous and active substances
• ULV spraying has limits and is ineffective on certain pests such as
insects that produce honeydew
The system <strong>of</strong> combating pests called Lutte Etagee Ciblee, which is a median
solution between <strong>the</strong> classical schedule and intervention thresholds, which
started in <strong>the</strong> farming community in 1993, will gradually replace <strong>the</strong>
scheduled treatment and will cover <strong>the</strong> entire cotton production area. It helps
to provide for reasonable protection <strong>of</strong> crops and is changeable according to
<strong>the</strong> pressure <strong>of</strong> <strong>the</strong> pest. The applications are conducted with a quantity <strong>of</strong>
products reduced by half compared to <strong>the</strong> current timetable i.e. 0.5 l/ha
instead <strong>of</strong> 1 1/ha thus providing economics <strong>of</strong> scale. The methodology is
based on <strong>the</strong> observation <strong>of</strong> 25 plants across a plot by <strong>the</strong> farmers <strong>the</strong>mselves,
who have been trained in this regard. The rationale <strong>of</strong> such a method is <strong>the</strong>
tolerable permissible residue. The thresholds also called economic thresholds
or intervention thresholds correspond to <strong>the</strong> maximum level <strong>of</strong> pest
population that a crop can tolerate without <strong>the</strong> need for phytosanitary
treatment.
However, since 1997 in Mali and even in <strong>the</strong> West African sub-region, <strong>the</strong>
population <strong>of</strong> some pests, mainly Helicoverpa armigera Hubner has been less
sensitive to some active substances and insecticides, so <strong>the</strong>y are difficult to
control. At present, a solution has been found by <strong>the</strong> PR-PRAO project
(Regional Prevention and Management <strong>of</strong> <strong>the</strong> Resistance <strong>of</strong> Helicoverpa
armigera to Pyrethrinoids). This technical innovation called “window”
programme is based on <strong>the</strong> limited use <strong>of</strong> <strong>the</strong> first two treatments with
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endosulfan and o<strong>the</strong>r alternative products whose durability depends on <strong>the</strong>
farmers’ self discipline to limit its use with time. This self discipline suggests
new ways <strong>of</strong> conducting research in close collaboration with farmers’
associations, and to a larger extent, with all <strong>the</strong> players concerned with
agriculture taking into account <strong>the</strong> interests <strong>of</strong> everybody.
The consultation initiated by <strong>the</strong> Rural Economics Institute (IER) in <strong>the</strong> early
90s between research programmes <strong>of</strong> <strong>the</strong> CNU (Regional Commission <strong>of</strong>
Users <strong>of</strong> Research Findings) at <strong>the</strong> national level, and <strong>the</strong> CRU (Regional
Commission <strong>of</strong> Users) at <strong>the</strong> regional level illustrates <strong>the</strong> foregoing. This
initiative should have helped not only to take into account producers’ needs
and priorities, but also a better dissemination <strong>of</strong> research findings. Now we
have realized that <strong>the</strong> aforementioned actions have not yielded all <strong>the</strong> results
expected, due to many reasons. First <strong>of</strong> all, <strong>the</strong> CRUs do not have enough
time to disseminate <strong>the</strong> findings. Fur<strong>the</strong>rmore, <strong>the</strong>y are somewhat isolated
from <strong>the</strong> majority <strong>of</strong> producers even though <strong>the</strong>ir members are from
recognized farmers’ associations. National research would be advantageous if
it focuses on federative organizations <strong>of</strong> producers such as <strong>the</strong> Associations
<strong>of</strong> Pr<strong>of</strong>essional Farmers’ Organisations (AOPP), which have greater
legitimacy compared to all <strong>the</strong> farmers’ organizations (OPs), and fur<strong>the</strong>rmore
has <strong>the</strong> resources to direct all <strong>the</strong> activities <strong>of</strong> <strong>the</strong> industry during this phase <strong>of</strong>
in-depth restructuring <strong>of</strong> <strong>the</strong> cotton sector.
It should be noted that <strong>the</strong> government and o<strong>the</strong>r partners whose national and
international institutions are involved in <strong>the</strong> ongoing reforms have high
regards for <strong>the</strong> AOPP, which comprises a cotton commission. It should be
recalled that, until recently, <strong>the</strong> CMDT, like all <strong>the</strong> o<strong>the</strong>r cotton companies <strong>of</strong>
<strong>the</strong> sub-region, was <strong>the</strong> only institution dealing with research. This role was
played by <strong>the</strong> CMDT with such ease that it used to be involved directly or
indirectly in all levels <strong>of</strong> <strong>the</strong> industry. Its activities used to cover all
agricultural forms <strong>of</strong> production including livestock breeding, construction <strong>of</strong>
feeder roads, ginning, marketing <strong>of</strong> yarn, etc. The transfer <strong>of</strong> skills, which is
demanded by various partners and donors, requires institutional reforms that
are in line with ongoing privatization; <strong>the</strong> training <strong>of</strong> new players who will
carry out all <strong>the</strong> activities required for <strong>the</strong> sustainability <strong>of</strong> <strong>the</strong> industry.
Those concerned, in <strong>the</strong> first place, are <strong>the</strong> OPs, which must be trained and
<strong>the</strong>ir capacities streng<strong>the</strong>n to negotiate and implement <strong>the</strong> institutional
development <strong>of</strong> <strong>the</strong> sector. The OPs should take up certain roles <strong>of</strong> <strong>the</strong> sector,
especially by encouraging <strong>the</strong> emergence <strong>of</strong> properly managed pr<strong>of</strong>essional
structures that have a solid technical and economic base. Consultative
frameworks should be set up to share information with <strong>the</strong> players <strong>of</strong> <strong>the</strong>
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industry. Such frameworks would help to ga<strong>the</strong>r, compare and validate data
from <strong>the</strong> OPs, research institutions, financing bodies, <strong>the</strong> CMDT, all
economic operators that operate in cotton production areas, and <strong>the</strong>
authorities concerned with rural development so that technical and economic
developments can be monitored.
In addition to <strong>the</strong> OPs, <strong>the</strong>re are operators in <strong>the</strong> private sector whose impact
is preponderant on cotton production such as suppliers <strong>of</strong> inputs (fertilizers
and pesticides), transporters and financing and credit organizations. All <strong>the</strong>se
players are concerned with <strong>the</strong> supply <strong>of</strong> inputs, which is one <strong>of</strong> <strong>the</strong> most
critical functions <strong>of</strong> agricultural production. The outcome <strong>of</strong> such supply
depends, to a large extent, on <strong>the</strong> outcome <strong>of</strong> <strong>the</strong> agricultural season. Input
supply depends mainly on agricultural credit, without which <strong>the</strong>re will be no
supply. The National Agricultural Development Bank (BNDA) is <strong>the</strong>
financial institution that handles agricultural credit and decentralized
financial services i.e. savings and credit funds such as KAFO JIGUINEW,
which are <strong>the</strong> most prominent. This network <strong>of</strong> agricultural credit unions had
5.6 billion CFA francs as savings and granted 6.1 billion CFA francs as credit
from 124 funds in <strong>the</strong> entire cotton production zone by 31/12/2001.
The CMDT also grants agricultural credit, especially for inputs after
purchase, depending on <strong>the</strong> needs <strong>of</strong> producers, which are identified by its
decentralized structures (training by <strong>the</strong> CMDT, technical teams <strong>of</strong> Village
Associations and APCs. Finally, NGOs are also involved in <strong>the</strong> inputs supply
and distribution network. In general, <strong>the</strong>y intervene in areas that are
insufficiently covered by <strong>the</strong> Office <strong>of</strong> Rural Development.
The OPs play a major role in agricultural credit because <strong>of</strong> collective
guarantees. As stated earlier, <strong>the</strong>y ga<strong>the</strong>r and analyse information to
determine <strong>the</strong> inputs needed. They help to distribute inputs and recover loans.
The role <strong>of</strong> <strong>the</strong> OPs has been growing since <strong>the</strong> launch <strong>of</strong> <strong>the</strong> empowerment
process and <strong>the</strong> shift <strong>of</strong> responsibilities advocated by <strong>the</strong> government since
<strong>the</strong> 80s and <strong>the</strong> cotton forums <strong>of</strong> April 2001. Because <strong>of</strong> <strong>the</strong> high risks <strong>of</strong>
agricultural credit, which are related to climatic conditions thus leading to
serious default payments, commercial banks, apart from <strong>the</strong> BNDA, rarely
engage in it. It should be recalled that for two years now a group <strong>of</strong> national
and foreign banks, chief among <strong>the</strong>m is <strong>the</strong> BDM, mobilized <strong>the</strong> entire credit
required for <strong>the</strong> marketing <strong>of</strong> cotton seeds at a very difficult time for <strong>the</strong>
cotton sector. All <strong>the</strong> activities stated above are some <strong>of</strong> <strong>the</strong> major concerns
<strong>of</strong> PASOP (Support Programme for <strong>the</strong> Agricultural Sector and Farmers’
Organisations). Its major aim is to promote among farmers a sense <strong>of</strong>
responsibility through a policy <strong>of</strong> consultations (consultation forums),
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contractualisation <strong>of</strong> services, streng<strong>the</strong>ning channels <strong>of</strong> information and
training producers via chambers <strong>of</strong> agriculture, unions and pr<strong>of</strong>essional
organizations. The programme is financed by <strong>the</strong> World Bank through <strong>the</strong>
Adaptable Loan Programme (APL) over a period <strong>of</strong> 11 years with 3 phases <strong>of</strong>
three, four and four years respectively. The main objective <strong>of</strong> <strong>the</strong> first phase
is to set up an institutional framework to support farmers efficiently, by
encouraging private operators to get involved and by streng<strong>the</strong>ning <strong>the</strong> OPs.
PASOP’s main objectives are to:
• Refocus government services on <strong>the</strong>ir essential missions
• Work out a long term strategy and medium term plan <strong>of</strong> action for
rural training and information
• Draw up an effective and sustainable agricultural research
programme that can meet demand
• Set up an efficient technical board that involves <strong>the</strong> producers
• Conduct a pilot action <strong>of</strong> contractualised agricultural boards with <strong>the</strong>
producers
• Streng<strong>the</strong>n <strong>the</strong> national programme <strong>of</strong> fighting AIDS in <strong>the</strong> rural area
• Help OPs improve services for <strong>the</strong>ir members and help formulate
agricultural policies.
This being <strong>the</strong> case, <strong>the</strong>re should be collaboration between PASOP, which
deals with <strong>the</strong> whole <strong>of</strong> Mali, and PASE (Farming System Improvement
Prgramme in Cotton Production Areas), which has been designed to ensure
development in cotton production areas. This would help Malian <strong>of</strong>ficials to
set up a new organization in <strong>the</strong> industry that is adapted to <strong>the</strong> local situation
and does not jeopardize <strong>the</strong> success achieved so far. The objective <strong>of</strong> <strong>the</strong>
PASE project is to help set up an efficient cotton sector that is based on both
an institutional organization adopted by all players and sustainable efficient
production systems. PASE’s three main objectives are to:
• Build <strong>the</strong> capacity <strong>of</strong> Malian players to devise, negotiate and apply
ways to ensure <strong>the</strong> institutional development <strong>of</strong> <strong>the</strong> sector; emphasis
will be laid on <strong>the</strong> involvement <strong>of</strong> producers in <strong>the</strong> reflections
• Build <strong>the</strong> capacity <strong>of</strong> OPs so that <strong>the</strong>y can take up some functions <strong>of</strong>
<strong>the</strong> sector by encouraging <strong>the</strong> emergence <strong>of</strong> properly managed
pr<strong>of</strong>essional structures that have a solid technical and economic base
• Improve farming systems so as to be more efficient and sustainable.
In a nutshell, all <strong>the</strong> players must play <strong>the</strong>ir role fully.
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2. Qualitative and Organizational Factors Required for Greater
Competitiveness <strong>of</strong> <strong>the</strong> Country’s Cotton Production
We have already pointed out that cotton is really a strategic produce on which
our economies depend heavily. Consequently, cotton must be maintained by
all means and its competitiveness enhanced constantly. Such an ambition is
not wishful thinking. Statistics <strong>of</strong> <strong>the</strong> ICAC indicate that West African rainfed
cotton has a good yield, which stands at 600 kg/ha (ICIC 2000),
compared to <strong>the</strong> world average <strong>of</strong> <strong>the</strong> same types <strong>of</strong> cotton. This yield
coupled with <strong>the</strong> potential yield <strong>of</strong> yarn <strong>of</strong> <strong>the</strong> varieties cultivated, which are
among <strong>the</strong> highest in <strong>the</strong> world (43 to 46%) have a higher fibre percentage
per hectare. In order to generate pr<strong>of</strong>it, production must be ensured by
making sure that all technical factors <strong>of</strong> production have attained <strong>the</strong> required
level, which must be used efficiently to reduce production costs. In this
regard, hopes are high as far as research is concerned. The challenge is to
shift from crass technologies to technologies adapted to agro-climatic
conditions and even socio-economic conditions that are targeted well with
greater production expectations.
The same thing applies to <strong>the</strong> quality <strong>of</strong> products expected, especially yarn.
Indeed, cotton is one <strong>of</strong> <strong>the</strong> rare products that is sold before it is sown. It is a
known fact that commercial transactions between both parties (seller and
buyer) are conducted on <strong>the</strong> basis <strong>of</strong> <strong>the</strong> features <strong>of</strong> varieties (length, grade
etc). The features are mostly genetic despite a high probability <strong>of</strong>
environmental effects. It is <strong>the</strong>refore very important that a fibre renowned for
its constant technological features be placed in <strong>the</strong> market. In order to attain
such an objective, a concerted effort is necessary. Such a requirement is well
understood in Mali. This is why, at a workshop organized on 3 and 4 October
in Sikasso between all <strong>the</strong> partners <strong>of</strong> <strong>the</strong> sectors, <strong>the</strong> main problems that
impede quality were identified in all areas <strong>of</strong> activity. The workshop helped
us to draw up a priority plan <strong>of</strong> action to improve <strong>the</strong> quality <strong>of</strong> <strong>the</strong> fibre
produced. The need to acquire new equipment to control quality arose. In this
particular area, Mali, which is presently <strong>the</strong> largest producer <strong>of</strong> cotton in
Africa, has to make major efforts. Indeed, <strong>the</strong> country does not have any
functional facilities to analyse cotton fibre. It depends entirely on external
researchers for <strong>the</strong> conduct <strong>of</strong> all analyses. This is at a time when <strong>the</strong>re is a
trend to generalize HVI measures in most cotton producing countries to
enhance <strong>the</strong>ir cotton.
With regard to <strong>the</strong> plan <strong>of</strong> action that has been drawn up, <strong>the</strong> major areas <strong>of</strong>
action identified are:
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• Produce seedlings, on which depends <strong>the</strong> entire agricultural activity,
by choosing a good variety, storing and managing at all levels <strong>of</strong>
production.
• Improve harvest techniques <strong>of</strong> cotton-seed to avoid pollution.
• Enhance production and use organic matter that would help to
improve <strong>the</strong> management <strong>of</strong> soil fertility.
• Maintain roads so as to facilitate <strong>the</strong> transport <strong>of</strong> harvests and avert
<strong>the</strong> adverse effects <strong>of</strong> <strong>the</strong> sun and pollution risks.
• Transport <strong>the</strong> means <strong>of</strong> production and harvest.
• Cotton ginning by applying guidelines on <strong>the</strong> smooth operation <strong>of</strong>
factories and compliance with <strong>the</strong> procedures to acquire on time
spare parts <strong>of</strong> good quality.
• Improve skills in order to increasingly involve <strong>the</strong> marketing
department <strong>of</strong> <strong>the</strong> CMDT in <strong>the</strong> transport and sale <strong>of</strong> cotton fibre
(until recently, <strong>the</strong> bulk <strong>of</strong> <strong>the</strong> CMDT’s cotton fibre has been
marketed by COPACO).
At <strong>the</strong> regional level, UEMOA has felt <strong>the</strong> need to improve quality for greater
competitiveness. Apart from <strong>the</strong> measures taken to increase <strong>the</strong> volume <strong>of</strong>
processed cotton in <strong>the</strong> sub-region, it also aims to improve <strong>the</strong> quality <strong>of</strong> <strong>the</strong>
African cotton to ensure greater competitiveness. In order to do so, a study on
working out a regional plan <strong>of</strong> action on <strong>the</strong> quality <strong>of</strong> <strong>the</strong> cotton produced in
<strong>the</strong> UEMOA region was initiated recently with <strong>the</strong> support <strong>of</strong> UNIDO. The
study, which will be conducted in five countries i.e. Benin, Burkina Faso,
Mali, Niger and Togo, will seek to :
• Assess <strong>the</strong> rating and quality <strong>of</strong> cotton production
• Ga<strong>the</strong>r and update data on production and sale
• Listen to all <strong>the</strong> players involved in quality production
• Understand <strong>the</strong> convergence and divergence <strong>of</strong> positions between <strong>the</strong>
players and <strong>the</strong> countries on <strong>the</strong> objectives and conditions <strong>of</strong> a better
quality
• Draw up a plan <strong>of</strong> action
3. Competitiveness Indicators
Since <strong>the</strong> devaluation <strong>of</strong> <strong>the</strong> CFA francs, <strong>the</strong> quality <strong>of</strong> cotton improved
because 98.67% <strong>of</strong> production was rated first choice in 1995/96. It stood at
97.13% in 1999/00 i.e. a drop <strong>of</strong> 1.65%. This rating, which is based on two
major criteria: <strong>the</strong> purity <strong>of</strong> <strong>the</strong> cotton (absence <strong>of</strong> residue, stones and dust in
<strong>the</strong> cotton) and <strong>the</strong> colour (degree <strong>of</strong> yellowness), seems to be efficient
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according to SOFRECO (December 2000, page 10). It should also be noted
over recent years <strong>the</strong> CMDT indicated major differences between classes <strong>of</strong>
choice <strong>of</strong> cotton supplied by producers and <strong>the</strong> rating <strong>of</strong> <strong>the</strong> fibre after it is
processed. It is <strong>the</strong> producers <strong>the</strong>mselves who rate <strong>the</strong> cotton. This has to be
monitored closely in order to avert any trend that is harmful to <strong>the</strong> sector.
Better quality <strong>of</strong> cotton also depends on <strong>the</strong> command <strong>of</strong> farming techniques
by producers and on storing conditions. Marketing value and <strong>the</strong> durability <strong>of</strong>
<strong>the</strong> sector also depend on <strong>the</strong> type <strong>of</strong> cotton seed bought.
As for production cost, <strong>the</strong> structure is as follows: producer price, collection
cost, market cost, interest on o<strong>the</strong>r loans, CFDT technique assistance,
overheads, training expenses, research expenses, OHVN (Office <strong>of</strong> Upper
River Niger) expenses and miscellaneous expenses. Since <strong>the</strong> real costs are
close to <strong>the</strong> estimated production costs <strong>of</strong> cotton fibre, a comparative analysis
was conducted between <strong>the</strong> real costs and <strong>the</strong> estimated costs <strong>of</strong> cotton fibre
on <strong>the</strong> one hand and between <strong>the</strong> real cost and <strong>the</strong> sale price <strong>of</strong> cotton price
on <strong>the</strong> o<strong>the</strong>r hand. This is illustrated in <strong>the</strong> following table over <strong>the</strong> two
seasons: 1996/1997 and 1997/1998.
Table 5. Trend in Average Cost and Sale Price During Crop Season
ITEM Crop Season Crop Season Average
1996/1997 1997/1998
1- Cost/objective (plan) 632.0 634.0 633.0
2- Estimated cost (fibre) 635.8 636.6 636.2
3- Actual Cost price (C&F) 669.2 779.9 724.6
4- Average sale price 877.1 922.0 899.5
Gap (2)-(1) 3.8 2.6 3.2
Gap (3)-(2) 33.4 146.3 88.4
Gap (4)-(3) 207.9 252.8 119.6
One can see that <strong>the</strong> gap between <strong>the</strong> production cost and <strong>the</strong> estimated cost
is increasing: from 33.4 to 146.3 per kilogramme. This indicates that certain
costs <strong>of</strong> <strong>the</strong> CMDT are increasing such as <strong>the</strong> purchase <strong>of</strong> cotton seed,
collection cost, training, road maintenance and ginning. The same thing
applies to <strong>the</strong> gap between <strong>the</strong> average sale price and <strong>the</strong> real production cost
but less than <strong>the</strong> previous one.
Nominal protection coefficient (producer price ratio/world price) indicates
that during <strong>the</strong> periods 1989-93 and 1996-97 <strong>the</strong> Malian producer earned less
than 50% <strong>of</strong> <strong>the</strong> world price but a bit more than <strong>the</strong> African price. However,
<strong>the</strong> producers <strong>of</strong> o<strong>the</strong>r countries <strong>of</strong> <strong>the</strong> sub-region such as Benin, Burkina
Faso and Chad and for <strong>the</strong> qualities <strong>of</strong> similar cotton received 51 and 54% <strong>of</strong>
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<strong>the</strong> world price on average over <strong>the</strong> period 1989/1993 (see table). This
indicates a high level <strong>of</strong> explicit taxation on Malian producers compared to
<strong>the</strong>ir peers <strong>of</strong> <strong>the</strong> above countries. This is due (apart from Benin, a coastal
country) to <strong>the</strong> high levy on cotton, which is a real tax resource, and <strong>the</strong>
unsatisfactory management <strong>of</strong> <strong>the</strong> sector, especially by <strong>the</strong> CMDT.
V. POLICIES DESIGNED TO SUPPORT THE COTTON INDUSTRY
These are measures that are designed to support national production. They are
measures taken at <strong>the</strong> borders i.e. through customs duties and internal support
measures. Like o<strong>the</strong>r countries, we have resorted to a combination <strong>of</strong> two
types <strong>of</strong> measures in Mali.
1. Internal Support: latest and expected developments
i. Research, Training and Extension
The cotton research programme is governed by <strong>the</strong> IER-CMDT Protocol,
which is in <strong>the</strong> annex <strong>of</strong> <strong>the</strong> contract-plan. According to <strong>the</strong> provisions <strong>of</strong> <strong>the</strong>
protocol regarding cotton, research-development is conducted in <strong>the</strong>
following areas:
• Selection and improvement <strong>of</strong> varieties
• Agronomy and farming techniques
• Fight against pests and devising protection techniques related to it
Pr<strong>of</strong>essional training concerns target groups:
• The village technical teams that undergo training each in a specific
discipline
• Farming: producers are trained on technical <strong>the</strong>mes <strong>of</strong> general
importance
• Resource persons <strong>of</strong> farmers’ organizations i.e. <strong>of</strong>ficials <strong>of</strong> village
associations, groupings, socio-pr<strong>of</strong>essional associations managing
women’s groupings
• Rural craftsmen and partners nominated by <strong>the</strong> village for
specialization in a specific area.
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ii. Investment Policy
The investment policy concerns research, training, extension, credit, real
estate, processing, rural engineering and transport.
iii. State Subsidies for <strong>the</strong> Sector
In return for <strong>the</strong>se missions, <strong>the</strong> CMDT receives farming subsidies from
government and aid agencies. In connection with <strong>the</strong> reduction <strong>of</strong> tax
exemptions outlined in <strong>the</strong> SAP (Structural Adjustment Programme), <strong>the</strong>
current trend is <strong>the</strong> gradual return <strong>of</strong> certain links <strong>of</strong> <strong>the</strong> sector to general law
because <strong>of</strong> <strong>the</strong> 1 st April 2000 reform <strong>of</strong> <strong>the</strong> General Tax Code. They are
mainly <strong>the</strong> CMDT and <strong>the</strong> BNDA, apart from <strong>the</strong> current grace period
granted to <strong>the</strong> latter for some taxes because <strong>of</strong> <strong>the</strong> crisis.
As for <strong>the</strong> BNDA, which is exonerated from Service Tax (TPS), <strong>the</strong> cost <strong>of</strong>
agricultural credit is charged because <strong>of</strong> <strong>the</strong> new tax on financial activities
(TAF) at a rate <strong>of</strong> 15%. Because <strong>of</strong> <strong>the</strong> high indebtedness and <strong>the</strong> low income
<strong>of</strong> producers, it is advisable to fur<strong>the</strong>r reflect on ways and means <strong>of</strong>
increasing <strong>the</strong> solvency <strong>of</strong> farmers (rescheduling, settlement <strong>of</strong> arrears by <strong>the</strong>
government or all o<strong>the</strong>r partners, increase in producer prices, etc). The
mechanism <strong>of</strong> fixing prices guaranteed for producers through <strong>the</strong> floor price
system although it is problematic nowadays because <strong>of</strong> depletion <strong>of</strong> <strong>the</strong>
stabilization fund (replaced with reserves because <strong>of</strong> price fluctuation) would
be an indication <strong>of</strong> a support measure <strong>of</strong> <strong>the</strong> (orange type) not notified to <strong>the</strong>
WTO despite denial by <strong>the</strong> farmers.
iv. Internal Taxation
The exceptional regime enjoyed by <strong>the</strong> cotton sector is crumbling in <strong>the</strong> face
<strong>of</strong> <strong>the</strong> general law regime, which is making a come back because <strong>of</strong> <strong>the</strong>
ongoing economic reforms. This trend is also noticeable in <strong>the</strong> cotton sector
<strong>of</strong> o<strong>the</strong>r countries <strong>of</strong> <strong>the</strong> sub-region (Burkina Faso and Benin).
CMDT is not entitled to Temporary Importation; it is <strong>the</strong>refore at a
disadvantage compared to o<strong>the</strong>r cotton producers. Fur<strong>the</strong>rmore, <strong>the</strong> special
tax was a burden on <strong>the</strong> agricultural account <strong>of</strong> <strong>the</strong> CMDT until <strong>the</strong> 2001
crisis. Add to this registration and service fees for taxes, which stands at 2
billion CFA francs. As for new investments <strong>of</strong> <strong>the</strong> CMDT, <strong>the</strong>y are
considered extensions; <strong>the</strong>refore it does not enjoy <strong>the</strong> privileges <strong>of</strong> <strong>the</strong>
Investment Code. However, <strong>the</strong> CMDT is granted a grace period for some
taxes in a bid to help it overcome <strong>the</strong> crisis.
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2. Support at <strong>the</strong> Borders
It is a special type <strong>of</strong> taxation i.e. in Mali <strong>the</strong>re is no support mechanism such
as export subsidies for <strong>the</strong> cotton sector. With this type <strong>of</strong> taxation, custom
duty is levied on <strong>the</strong> value <strong>of</strong> goods that come through land borders. Three
types <strong>of</strong> duty were levied i.e. (DD) custom duty, (DFI) importation tax, (PCS)
community solidarity levy. When <strong>the</strong> (TEC) common external tariff came
into force, <strong>the</strong> DD and <strong>the</strong> DFI rates were merged and goods were grouped in
four categories: category 0 (medicines and school stationery), category 1 (raw
materials and capital goods), category 2 (intermediary goods and inputs) and
category 3 (consumer goods).
On 1 st January 1999, merged rates were 0,5,10, and 25% respectively. They
were later fixed at 0,5,10, and 20%. The contract-plan stipulates that <strong>the</strong>
government shall handle taxation regarding rural development and shall apply
<strong>the</strong> general law on <strong>the</strong> inputs sub-sector, which <strong>the</strong> government has
undertaken to favour as far as taxation <strong>of</strong> finished products, raw materials and
spare parts is concerned. The fact that <strong>the</strong> reform maintains exemption from
<strong>the</strong> VAT granted on cotton seeds, fertilizers, agricultural insecticides,
fungicides, herbicides and agricultural equipment is a testimony to <strong>the</strong>
government’s commitment. The taxation is neutral because <strong>the</strong> only change is
<strong>the</strong> replacement <strong>of</strong> <strong>the</strong> CPS at <strong>the</strong> rate <strong>of</strong> 5% with <strong>the</strong> ISCP at <strong>the</strong> rate <strong>of</strong> 5%.
The reform also had something to do with <strong>the</strong> 3% tax increase on cotton
seeds (except seedlings), oil products (oil, soap, fodder) and textile because
<strong>the</strong> VAT rate rose from 15% to 18%. It should also be noted that <strong>the</strong>
implementation <strong>of</strong> <strong>the</strong> TEC brought about greater tax pressure on inputs and
category 1 equipment that come from non UEMOA countries (rising from 6%
to more than 11%).
Table 6. Changes in VAT, CPS and ISCP
Local sales – Imports (Percent)
Products Before 1st April 1999 Since 1st April 2000
TVA CPS TVA CPS
Fertlizers Exo 5 Exo 5
Insecticides, Pesticides, fungicides
and o<strong>the</strong>rs
Exo 5 Exo 5
Agricultural Equipment Exo 5 Exo 5
Cotton seeds Exo n/a
Crop seeds Exo Exo Exo 5
Cotton seeds – o<strong>the</strong>rs 15 5 18 n/a
Cotton fibre 10 5 Exo n/a
Oil Products 15 Exo 18 n/a
Textiles Products 15 Exo 18 n/a
Source: Fiscal potential <strong>of</strong> cotton sector, Working paper (revised version), PAMORI, July 2000
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VI. INTERNATIONAL COMPETITIVENESS AND EFFECTS OF
SUBSIDY POLICIES OF AFFLUENT COUNTRIES ON THE
COTTON SECTORS OF AFRICA
Dwindling cotton prices in <strong>the</strong> international market is reducing millions <strong>of</strong>
African producers, whose major income is linked to this crop alone, to
increasing poverty. It is compounded by <strong>the</strong> adverse effects <strong>of</strong> dumping,
which is practiced by affluent cotton producing countries, particularly <strong>the</strong>
United States.
Because <strong>of</strong> subsidies, producer prices in <strong>the</strong> United States and <strong>the</strong> European
Union were respectively higher by 90% and 154% than <strong>the</strong> world price in
2001/2000. This has a direct impact on cotton production in such countries.
Owing to <strong>the</strong> subsidy and <strong>the</strong> price <strong>of</strong>fered for cotton, cotton production has
increased in <strong>the</strong> United States, thus cotton became more pr<strong>of</strong>itable than soya,
corn or sorghum. Equally in Europe, because <strong>of</strong> US$ 700 million <strong>of</strong> subsidies
granted as part <strong>of</strong> PAC, <strong>the</strong> production <strong>of</strong> cotton seed in Greece and Spain
increased sharply (OXFAM, 204, No.58).
Because <strong>of</strong> this policy <strong>of</strong> affluent countries, losses incurred by African
countries are estimated at US$ 250 million. In <strong>the</strong> face <strong>of</strong> such an alarming
situation for <strong>the</strong> economies <strong>of</strong> <strong>the</strong>ir countries, <strong>the</strong> governments <strong>of</strong> Benin,
Burkina Faso, Mali and Chad subscribed, with <strong>the</strong> support <strong>of</strong> some NGOs
(OXFAM), to <strong>the</strong> notion <strong>of</strong> removing subsidies during <strong>the</strong> WTO ministerial
conference in Cancun in September 2003. They also demanded reparations
for <strong>the</strong> harm caused on <strong>the</strong>ir economies. These concerns were not shared by
<strong>the</strong> United States, which suggested African countries diversify <strong>the</strong>ir
production. However, <strong>the</strong>y are very good at cotton cultivation, whose prices
could have been very competitive had it not been for <strong>the</strong> subsidies. Despite
all this, <strong>the</strong>y provide for millions <strong>of</strong> people who are <strong>the</strong> poorest among <strong>the</strong>
poor.
The Europeans do not share <strong>the</strong> view <strong>of</strong> removing subsidies. They believe
that, unlike <strong>the</strong> United States, <strong>the</strong> EU is a minor player in terms <strong>of</strong>
production, which accounts for only 2% <strong>of</strong> cotton production. Consequently,
<strong>the</strong> EU’s influence on price formation in <strong>the</strong> international market is marginal.
However, in terms <strong>of</strong> volume, <strong>the</strong> EU’s production accounts for 70% <strong>of</strong> <strong>the</strong>
exports <strong>of</strong> West and Central Africa. Since it acknowledges that <strong>the</strong> cotton
issue is vital for African countries, <strong>the</strong> European Union supports ra<strong>the</strong>r <strong>the</strong>
idea <strong>of</strong> a partnership with Africa, which would seek to provide full, structural
and sustainable support for <strong>the</strong> development <strong>of</strong> <strong>the</strong> cotton sector.
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The proposed partnership has two objectives:
• Secure fairer trade conditions in <strong>the</strong> international market for cotton
• Support for cotton producing regions and countries <strong>of</strong> Africa
VII. PROSPECTS OF MAINTAINING AND ENHANCING COTTON
SECTORS IN AFRICA
The importance <strong>of</strong> cotton production for both <strong>the</strong> people and <strong>the</strong> economies
<strong>of</strong> West and Central Africa cannot be overemphasized. The production,
however, depends on many environmental factors, various resources and <strong>the</strong>
commitment <strong>of</strong> all <strong>the</strong> players, who should arrive at a consensus because <strong>of</strong>
<strong>the</strong>ir divergent interests. In order to render <strong>the</strong> production sustainable, <strong>the</strong>
following actions should be streng<strong>the</strong>ned and/or envisaged:
• Maintain and enhance <strong>the</strong> productive potential
• Pursue technical innovations that would help sustain production in
viable economic conditions. This requires that researchers be
provided with greater and adequate resources
• Permanent consultation between all <strong>the</strong> players <strong>of</strong> <strong>the</strong> sector so as to
share information and harmonise interests, which are <strong>of</strong>ten divergent
• Reverse <strong>the</strong> recent decline in farm yield in several countries and
abridge <strong>the</strong> productivity gaps in <strong>the</strong> region. This requires greater
investment incentives in improved technologies and efficient inputs
distribution systems
• Increase <strong>the</strong> efficiency <strong>of</strong> ginning sectors by bringing in new players
into <strong>the</strong> sector so as to make good use <strong>of</strong> this activity. The objective
in so doing is to scale down <strong>the</strong> production cost <strong>of</strong> cotton fibre
• Process a greater part <strong>of</strong> <strong>the</strong> local produce by developing <strong>the</strong> textile
industry and o<strong>the</strong>r sub-sectors
• Refocus on major activities <strong>of</strong> <strong>the</strong> sector
• Build <strong>the</strong> capacity <strong>of</strong> players, particularly producers, who should
fully participate in <strong>the</strong> production process
• Pursue <strong>the</strong> transfer <strong>of</strong> skills in connection with <strong>the</strong> ongoing
restructuring and privatization exercises in <strong>the</strong> various countries
All this should be done without any adverse effect on production and in
harmony, as soon as possible, with <strong>the</strong> institutional development <strong>of</strong> <strong>the</strong>
existing cotton sectors. The form <strong>of</strong> organization to promote and <strong>the</strong> type <strong>of</strong>
reform to introduce in <strong>the</strong> sectors can be assessed through <strong>the</strong> Regional
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Monitoring Mechanism for Cotton Sectors in Sub-Saharan Africa (Resocot),
whose pilot phase ended in July 2003. Indeed, it helped to develop a method
and tools that shaped modes <strong>of</strong> organization in <strong>the</strong> cotton sector. This tool
was devised and applied in line with a common grid on <strong>the</strong> cotton sectors <strong>of</strong>
six countries (Mali, Benin, Burkina Faso, Cote d’Ivoire, Cameroon and
Ghana). It has helped to assess performance and <strong>the</strong> progress made.
The relation between forms <strong>of</strong> organization and performance has so far
depended on a basis <strong>of</strong> information that is extremely weak. Comparison was
limited mainly to <strong>the</strong> FOB price percentage (free on board) received by <strong>the</strong>
producers in various countries.
At <strong>the</strong> international level, <strong>the</strong> collective action initiated by West and Central
African countries in Cancun should be pursued. The support and vigilance <strong>of</strong>
NGOs and civil societies will be most welcome so that <strong>the</strong> United States
would not compel governments <strong>of</strong> West and Central Africa to abandon <strong>the</strong>ir
claims for an urgent reform <strong>of</strong> agricultural subsidies. This would help <strong>the</strong>
United States to leave <strong>the</strong>ir subsidies intact, and would help <strong>the</strong> WTO water
down an embarrassing and apparently unsolvable issue <strong>of</strong> <strong>the</strong> negotiations
on agriculture. (OXFAM, 58).
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Appendix 2
ENHANCING PRODUCTION EFFICIENCY AND INTERNATIONAL
COMPETITIVENESS In IDB COTTON PRODUCING MEMBER
COUNRIES FROM THE ASIA REGION
Zahoor Ahmad
I. INTRODUCTION
Cotton is <strong>the</strong> most important cash crop <strong>of</strong> many Islamic Development Bank
(IDB) member countries in Asia particularly Pakistan, Uzbekistan and Syria.
The Asian member countries <strong>of</strong> IDB share about 18 percent <strong>of</strong> <strong>the</strong> world total
area and production.(Table-1). Cotton is a major part <strong>of</strong> <strong>the</strong> GDB growth rate.
Cotton production not only affects <strong>the</strong> GDB growth rate but it also influences
<strong>the</strong> countries balance <strong>of</strong> payments. The cotton crop is also <strong>the</strong> major
employer <strong>of</strong> industrial and rural labour in <strong>the</strong>se countries. Major cotton
producing countries like Pakistan have been affected in textile trade through
<strong>the</strong> imposing <strong>of</strong> a quota system. Where as non-cotton producing countries
like Bangladesh have been exempted from such restrictions and have made
tremendous growth in textile exports. Cotton has become <strong>the</strong> major foreign
exchange earner. With <strong>the</strong> WTO agreement <strong>the</strong>se restrictions will be lifted in
January, 2005 and countries like Pakistan benefit because <strong>the</strong>y are not only
cotton producers but also major cotton consumers and fabric producers.
With <strong>the</strong> enactment <strong>of</strong> WTO quality will be a big problem for many countries
where contamination has discounted <strong>the</strong> international prices. These countries
have to produce quality cotton to compete in <strong>the</strong> international trade. The
ginning industry has to be improved in countries like Pakistan, Uzbekistan
and o<strong>the</strong>r central Asian countries to produce quality cotton. The enactment <strong>of</strong>
WTO will be a blessing for <strong>the</strong>se countries because <strong>the</strong>ir cotton quality will
improve and <strong>the</strong>y will be able to compete in <strong>the</strong> international market in
January, 2005. IDB member countries have a good opportunity to improve
<strong>the</strong>ir production. The yield per hectare can be increased in countries like
Pakistan by following proper production practices, implementing an
Integrated Pest Management (IPM) programme and producing contamination
free cotton. Pakistan probably can improve yield per hectare to almost 50
percent because in 1990 and 1991 <strong>the</strong> yield per hectare was 615 and 768 kg
per hectare respectively, whereas in Punjab province <strong>the</strong> achievement was
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848 kg per hectare from 2.5 million hectares. The judicious use <strong>of</strong> water,
fertilizers and pesticides will help to increase yield per hectare.
Recently a break through has been made in <strong>the</strong> cotton breeding programme
by developing Bt-cotton resistant to a boll worm attack. Bt-cotton is sold in
<strong>the</strong> international market as Bollgard and Ingard having resistant genes. This
will reduce <strong>the</strong> cost <strong>of</strong> production and will increase <strong>the</strong> income <strong>of</strong> farmers. In
major developed countries like <strong>the</strong> USA, China, Australia, South Africa,
Brazil and India, <strong>the</strong> area under Bt cotton cultivation is increasing. This
programme is far behind in IDB member countries in Asian region. With an
increase in population, <strong>the</strong> pressure to develop more <strong>the</strong> food crops is
growing because markets are in favour <strong>of</strong> <strong>the</strong>se crops. The competition for
land, labour o<strong>the</strong>r inputs and <strong>the</strong> rising production cost <strong>of</strong> cotton have not
been matched by increased prices. Cotton production will depend largely on
developing appropriate technology that encompasses biological environment,
and social economic dimensions to ensure sustainable production <strong>of</strong> fibre that
is competitive in quality and price with alternatives. Achievements <strong>of</strong> <strong>the</strong>se
objectives will depend on <strong>the</strong> development and distribution <strong>of</strong> varieties with a
satisfactory yield potential and fibre characteristics that meet <strong>the</strong> needs <strong>of</strong>
new developments in <strong>the</strong> textile industry.
II. MAJOR CHALLENGES TO IDB COTTON PRODUCING
COUNTRIES FORM THE ASIAN REGION
The importance <strong>of</strong> cotton in <strong>the</strong> national economy will remain at a priority
level because it involves a major labour force at both <strong>the</strong> industrial and rural
levels, a major part <strong>of</strong> export earning and it’s <strong>the</strong> main source <strong>of</strong> raw material
for textile, edible oil and animal feed. Hence <strong>the</strong> governments <strong>of</strong> <strong>the</strong>se
countries are trying to improve cotton production. The cotton crop has been
affected by <strong>the</strong> cotton leaf curl virus in Pakistan and out breaks <strong>of</strong> cotton
pests in many countries. Pesticide resistance in pests is increasing adding to
<strong>the</strong> cost <strong>of</strong> production. The quality <strong>of</strong> cotton and its marketing needs special
attention. All <strong>the</strong>se factors are discussed below:
1. Cotton Production
i. Cotton Leaf Curl Disease
Cotton Leaf Curl Disease is caused by a Geminii group <strong>of</strong> viruses transmitted
by <strong>the</strong> whitefly (Bemesia tabaci). Since 1988 cotton leaf curl virus has been
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increasing and damaging considerable cotton crop areas in Pakistan. In <strong>the</strong>
1992 crop season about 300,000 acres were completely damaged by <strong>the</strong>
cotton leaf curl virus. In <strong>the</strong> 1993 crop season it was estimated that more than
500,000 acres were completely damaged by this disease whereas millions <strong>of</strong>
acres were partially affected. At present, <strong>the</strong> cotton leaf curl virus has become
<strong>the</strong> key problem in cotton production and <strong>the</strong> present decline in production is
highly related to <strong>the</strong> cotton leaf curl virus. Since 1988, Pakistan has lost more
than US $1.5 billion on raw cotton alone. The ultimate solution lies in <strong>the</strong>
evolution <strong>of</strong> resistant varieties to <strong>the</strong> virus and management <strong>of</strong> whitefly.
ii. Genetic Engineering
Latest techniques <strong>of</strong> genetic engineering to introduce new desirable
characters in <strong>the</strong> cultivars are yet in <strong>the</strong> developmental stage in most IDB
member countries in Asia and it has to be streng<strong>the</strong>ned. These are urgently
required for introducing characters like Cotton Leaf Curl Virus resistance and
o<strong>the</strong>r desirable traits which cannot be handled by traditional hybridization
programme. This development has to be taken as a challenge by <strong>the</strong> cotton
breeders/biotechnologists.
iii. Management <strong>of</strong> Cotton Insect Pests
Management <strong>of</strong> Cotton Insect Pests is a major challenge for <strong>the</strong> sustainability
<strong>of</strong> <strong>the</strong> cotton crop. The following aspects will need emphasizes in this
connection.
Selective use <strong>of</strong> pesticides - Chemical pesticides will remain <strong>the</strong> most useful
and powerful tool for <strong>the</strong> control <strong>of</strong> cotton pests. However, many problems
like insect resistance, flare ups <strong>of</strong> secondary pests and reduction in natural
enemies are <strong>the</strong> outcome <strong>of</strong> excessive or indiscriminate use <strong>of</strong> pesticides. It is
extremely important that special attention should be given to <strong>the</strong> use <strong>of</strong>
selective pesticides which are toxic to insect pests but safe to natural enemies.
This will help not only to control <strong>the</strong> target pests but will eliminate <strong>the</strong>
chances <strong>of</strong> a resurgence <strong>of</strong> pests like whitefly, aphids, army worm, cotton
bollworms, etc.
Pesticide resistance management - With <strong>the</strong> increased use <strong>of</strong> pesticides,
<strong>the</strong>re are indications that whitefly and American bollworm have developed
resistance to many insecticides. If necessary measures are not taken for <strong>the</strong>
management and use <strong>of</strong> pesticides, resistance will increase and it may
become more difficult to control pests.
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Spray machinery - Most spray machinery has been designed and
manufactured locally. The machinery is good but spray nozzles and pumps
are defective. There is no concept <strong>of</strong> droplet size. The quality <strong>of</strong> <strong>the</strong>se
machines has to be improved to increase <strong>the</strong> efficiency <strong>of</strong> <strong>the</strong> spray and <strong>the</strong>
control <strong>of</strong> pest.
Ultra low volume sprays - It has been found that under Pakistan’s hot
conditions ultra low volume sprays are not very effective and generally result
in <strong>the</strong> flare up <strong>of</strong> whitefly and mites compared to high volume conventional
sprays. The improvement in application technique is necessary to avoid
secondary pest problems.
iv. Improvement in Fibre Characters
With <strong>the</strong> improvement <strong>of</strong> modern machinery in spinning, cotton fibres will
need higher strength. Similarly, improvement has to be made in <strong>the</strong>
micronaire and uniformity ratio. Strength <strong>of</strong> 100 tppsi and micronaire <strong>of</strong> 4-4.5
with over 50% uniformity ratio may be ideal for future requirements. The
breeding programme will have to be directed to achieve this aim.
v. Cotton Picking
Cotton seed picking is an emerging problem along with scarce female labor.
Immediate experiments with mechanical picking are necessary to discover a
feasible alternate way to overcome this difficulty.
vi. Sustainable Cost <strong>of</strong> Production
The high cost <strong>of</strong> inputs is imposing ano<strong>the</strong>r challenge. The solution will be
mainly in working out <strong>the</strong> most optimum level <strong>of</strong> inputs <strong>of</strong> mechanical
power, fertilizer use, chemical insecticides, etc., to ensure economic
sustainability <strong>of</strong> crop production. Availability <strong>of</strong> easy credit should be a part
and parcel <strong>of</strong> this package. The inputs should be provided at reasonable costs.
2. Marketing
i. Ginning
The present ginning machinery, mostly a copy <strong>of</strong> <strong>the</strong> imported centennial
type should be reformed to preserve <strong>the</strong> original fibre characters and to
prepare cotton with <strong>the</strong> proper grade suitable for spinners. There is a need to
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undertake research on ginning from this stand point. The establishment <strong>of</strong> a
Ginning Research Institute is very desirable to achieve this objective.
ii. Grading
To improve <strong>the</strong> grade <strong>of</strong> cotton, <strong>the</strong> government must devise a system to
introduce a grading system with attractive premiums for better grades.
Pakistan Cotton Standards Institute at Karachi, established in 1987, has come
up with a grading system that has been accepted by <strong>the</strong> international market.
It is proposed that <strong>the</strong> government in collaboration with textiles, ginners,
traders and cotton growers would arrive at agreed premia and discounts
permissible for various grades and fibre characteristics <strong>of</strong> cotton. Purchases
will be made on <strong>the</strong>se grades <strong>of</strong> premia and discounts.
iii. International Trade
Research in marketing is absolutely essential for ensuring <strong>the</strong> proper
marketing <strong>of</strong> produce. This should include items <strong>of</strong> quality demand in main
importing markets, present world viability <strong>of</strong> <strong>the</strong>se qualities, scope <strong>of</strong> valueadded
products and <strong>the</strong>ir international demand, diversification <strong>of</strong> market, etc.,
etc. Most <strong>of</strong> <strong>the</strong> spinning is 20 count yarns whereas <strong>the</strong> exporters can get
much higher price if <strong>the</strong> yarn is spun at 30 and 40 counts. Similarly, cotton
made products <strong>of</strong> Pakistan are selling very cheaply in <strong>the</strong> international market
whereas <strong>the</strong> same products made in Korea and China are selling at almost 10
times <strong>the</strong> Pakistan price.
iv. Taxation Policies
The regulation <strong>of</strong> lint prices through <strong>the</strong> export duty <strong>of</strong> lint and yarn should
be so designed that <strong>the</strong> Textile Sector does not earn at <strong>the</strong> same cost <strong>of</strong>
grower or <strong>the</strong> nation. It should ensure equitable returns to <strong>the</strong> grower and
should encourage <strong>the</strong> production <strong>of</strong> quality cotton.
3. Challenges to Textile Industry
Cotton prices are linked to supply alone with no regard for quality and
international linkage. Hence <strong>the</strong> level <strong>of</strong> production determines <strong>the</strong> price <strong>of</strong>
cotton. Fluctuations in production (which are natural) create violent price
fluctuations to <strong>the</strong> detriment <strong>of</strong> ei<strong>the</strong>r <strong>the</strong> growers or <strong>the</strong> industry. Falling
international prices and poor quality in domestic cottons make exports un-
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competitive. Local industry is geared for low quality cotton and cannot
sustain quality premiums.
• Cotton arrivals are concentrated in three months but consumption is year
long. The absence <strong>of</strong> forward trading and hedge markets adds to <strong>the</strong>
volatility <strong>of</strong> prices, and makes markets susceptible to manipulation in <strong>the</strong>
hands <strong>of</strong> those who have access to liquidity.
• Middle markets are virtually non-existent. Ei<strong>the</strong>r <strong>the</strong> ginners or <strong>the</strong>
spinners have to carry stocks, distracting <strong>the</strong>ir cash flows from <strong>the</strong>ir main
line <strong>of</strong> business and increasing <strong>the</strong>ir inventory costs.
• The majority <strong>of</strong> growers are small and cannot afford to market <strong>the</strong>ir
cotton lint and seed separately after contract ginning. Ginners have to
operate as processors and traders concurrently, giving <strong>the</strong>m a
manipulative advantage on one hand and a handicap <strong>of</strong> risk on <strong>the</strong> o<strong>the</strong>r,
especially in <strong>the</strong> absence <strong>of</strong> a hedge market. With a large number <strong>of</strong>
small, uneducated growers it is difficult to manage quality since many
intermediary marketing agents are involved from <strong>the</strong> farm to <strong>the</strong> ginning
factory. This factor exaggerates quality deterioration in <strong>the</strong> absence <strong>of</strong>
strict regulations and price sensitivity to quality.
• Ginners have a limited capacity to hold cotton – 1.5 million bales at most
at one time. Arrivals far exceed uptake during <strong>the</strong> months <strong>of</strong> November
to January by at least one million bales per month. Financing becomes a
limiting factor in <strong>the</strong>ir operations. Price fluctuations, especially
downward shifts, fur<strong>the</strong>r reduces <strong>the</strong>ir liquidity and holding capacity.
Therefore <strong>the</strong>re is a need for ei<strong>the</strong>r public sector agency to carry stocks or
private sector warehousing companies.
4. Ginning
• Contamination free, quality cotton with proper grading can only be
achieved at <strong>the</strong> ginning level.
• Liquidity problems <strong>of</strong> ginners must be resolved, specially in <strong>the</strong> years
when <strong>the</strong>re is slow uptake due to low international prices and ginners
have to carry large inventories.
• A ginning research institute needs to be setup that provides technological
support to <strong>the</strong> industry to help improve <strong>the</strong>ir efficiency and reduce costs.
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• The establishment <strong>of</strong> ginning standards through amended Provincial
Cotton Acts and enforcing <strong>the</strong>m strictly will improve <strong>the</strong> quality <strong>of</strong>
ginned lint.
5. Spinning
Spinning is <strong>the</strong> first process in <strong>the</strong> cotton value chain that adds value to cotton
by converting it into a new product i.e. conversion from ginned cotton into
cotton yarn. Since spinning is in <strong>the</strong> beginning <strong>of</strong> value chain, all <strong>the</strong> later
value added processes <strong>of</strong> weaving, knitting, processing, garments and madeups
are dependent upon this process. The effect <strong>of</strong> a sub-standard yarn
production by spinning goes right across <strong>the</strong> entire value chain.
i. Low Unit Price Realization
The average unit price realization for Pakistani cotton yarn in <strong>the</strong>
international market is very low compared to that <strong>of</strong> its competitors. There
are two major reasons for this. First is cotton quality. Cotton provided by
ginning is contaminated with non-lint components. This results in <strong>the</strong>
production <strong>of</strong> contaminated yarn that sells at a lower price. The second reason
for low unit value realization is <strong>the</strong> product mix <strong>of</strong> Pakistani cotton yarn.
More than 70% <strong>of</strong> <strong>the</strong> total yarn production is <strong>of</strong> coarse and medium count
yarns. In yarn exports, this percentage is about 99%. Coarse and medium
counts fetch a lower price compared to fine and super fine counts that
ultimately manifests in low unit value realization. Moreover, <strong>the</strong> share <strong>of</strong>
o<strong>the</strong>r high value added yarns like dyed yarns is also very small in total
exports. There is a need for intervention in this sector by providing incentives
to <strong>the</strong> exporters <strong>of</strong> high value added yarns. These incentives can be in <strong>the</strong>
form <strong>of</strong> providing export refinancing only to exporters <strong>of</strong> high value added
yarns.
ii. Lack <strong>of</strong> BMR
The Pakistani Spinning industry showed a high rate <strong>of</strong> growth till 1994 when
<strong>the</strong> total number <strong>of</strong> installed spindles reached 8.4 million. After this period,
<strong>the</strong>re were successive cotton crop failures in <strong>the</strong> country that resulted in an
over-capacity situation in <strong>the</strong> industry. Many units were closed and <strong>the</strong> total
number <strong>of</strong> spindles in 1999 decreased to 8.3 million. This situation resulted in
inhibiting <strong>the</strong> flow <strong>of</strong> investment in this sector. This decrease was not limited
to new investment only but also for BMR investment. Currently a major
portion <strong>of</strong> <strong>the</strong> spinning industry requires investment for BMR. The
government should facilitate provisions <strong>of</strong> credit for BMR and <strong>the</strong> spinning
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industry at easy terms. Ano<strong>the</strong>r facilitation can be created by providing relief
from import duties on machinery for BMR purposes.
iii. Low Capacity Utilization
Currently, <strong>of</strong> <strong>the</strong> 8.3 million installed spindles, only 6.6 million are working
which translates into a capacity utilization <strong>of</strong> 79%. The rest <strong>of</strong> <strong>the</strong> spindles
are closed due to variety <strong>of</strong> reasons. There is a need to revive this dead
investment. According to an estimate, <strong>of</strong> <strong>the</strong> total 1.7 million closed spindles,
about 0.5 million can be revived.
iv. Low Share <strong>of</strong> Man-made Fibers
In today’s textile world, <strong>the</strong> incremental demand created each year due to
population growth is being met through manmade fibers, since cotton
production is finite. Although <strong>the</strong> Pakistani spinning industry is also moving
in this direction, it is heavily dependent on local cotton. However, it needs to
increase <strong>the</strong> share <strong>of</strong> manmade fiber yarns in its total production. Currently,
<strong>the</strong> spindle utilization for man-made fibers is 18%, which is much lower than
those <strong>of</strong> its competitors. Moving to manmade fibers will decrease <strong>the</strong>
dependence <strong>of</strong> <strong>the</strong> spinning industry on cotton <strong>the</strong>reby reducing its threat due
to bad cotton crop.
One <strong>of</strong> <strong>the</strong> major reasons for <strong>the</strong> low share <strong>of</strong> man-made fiber yarns is <strong>the</strong>
protection given to <strong>the</strong> polyester industry in <strong>the</strong> shape <strong>of</strong> import duties. There
is a need to rationalize this duty structure. Along with polyester, <strong>the</strong>re are
many fibers that are not produced in Pakistan. Availability <strong>of</strong> such yarns
should also be made easier for <strong>the</strong> industry. Along with <strong>the</strong> spun blended
yarns, <strong>the</strong> share <strong>of</strong> filament yarn needs to be increased. Globally, cotton yarn
exports is only one fourth <strong>of</strong> total yarn exports, whereas its share in
Pakistan’s total yarn exports is more than 90%. There is a need to diversify
<strong>the</strong> product mix <strong>of</strong> yarn exported from Pakistan and increase <strong>the</strong> share <strong>of</strong>
yarns o<strong>the</strong>r than cotton yarn in total yarn exports. Not only in exports, but
from <strong>the</strong> domestic garment industry’s point <strong>of</strong> view, filament yarn is very
important for uplifting <strong>the</strong> women’s apparel sector.
v. Woven Fabric and Weaving Industry
Global trade in woven fabric can be classified into two broad categories,
cotton and blended fabrics and syn<strong>the</strong>tic and artificial fabric, commonly
referred to as man-made fabric. World trade <strong>of</strong> woven fabric is around US $
43 billion, <strong>of</strong> which <strong>the</strong> man-made fabrics constitute 57% <strong>of</strong> <strong>the</strong> overall
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export value. The Asian region enjoys a significant position with regards to
woven fabric, as almost 50% <strong>of</strong> world cotton and blended fabric exports are
originated from this region. The shift <strong>of</strong> man-made fiber production over <strong>the</strong>
past few years from Europe and o<strong>the</strong>r developed regions towards Asia has
also resulted in <strong>the</strong> healthy growth <strong>of</strong> syn<strong>the</strong>tic and artificial fabric exports
from <strong>the</strong> region. Asia currently accounts for almost 48% <strong>of</strong> <strong>the</strong> global exports
in <strong>the</strong> man-made fabric category.
vi. Pakistan and Woven Fabric Exports
The textile industry <strong>of</strong> Pakistan has traditionally relied on <strong>the</strong> manufacturing
<strong>of</strong> pure cotton fabric. Whereas global mill consumption is rapidly moving
towards <strong>the</strong> usage <strong>of</strong> a diverse range <strong>of</strong> staple fibers artificial and syn<strong>the</strong>tic
filaments. This is also reflected in Pakistan's export <strong>of</strong> woven fabric, where
Pakistan accounts for almost 7% <strong>of</strong> <strong>the</strong> world exports in cotton and blended
fabrics. On <strong>the</strong> o<strong>the</strong>r hand its share in manmade fabric exports is limited to
2% only.
vii. Product and Market Mix
Processing is <strong>the</strong> weakest link in Pakistan's textile value chain, which leads to
high exports <strong>of</strong> unprocessed fabric. Greige fabric dominates <strong>the</strong> export
product mix, accounting for almost 40% <strong>of</strong> <strong>the</strong> total fabric exports from
Pakistan. Lack <strong>of</strong> proper dyeing and processing facilities can also be
considered to have a negative impact on <strong>the</strong> development and growth <strong>of</strong> <strong>the</strong>
down stream industry. Hong Kong, a major player in world apparel trade, is
<strong>the</strong> largest importer <strong>of</strong> woven fabric from Pakistan. An important feature <strong>of</strong>
Pakistan's fabric exports is <strong>the</strong> Bangladeshi market which imports more than
US $ 50 billion worth <strong>of</strong> fabric from Pakistan. By being a major converter <strong>of</strong>
fabric into high value added garments, Bangladesh has streng<strong>the</strong>ned its
position in international apparel markets. In <strong>the</strong> global fabric markets
Pakistan is perceived as a low quality fabric supplier, this translates into a
low unit price realization when compared with competitors.
viii. Domestic Weaving Industry
The induction <strong>of</strong> shuttle-less weaving machines in <strong>the</strong> recent years has
resulted in a higher growth in fabric production. Currently <strong>the</strong> shuttle-less
weaving sector is believed to be <strong>the</strong> largest consumer <strong>of</strong> cotton yarn in <strong>the</strong>
country. The power loom weaving sector, although quite large in number,
contributes to export earnings through <strong>the</strong> production <strong>of</strong> low quality sheeting
fabric. Quality improvement in fabric production is directly related to <strong>the</strong>
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upgrading <strong>of</strong> technology in <strong>the</strong> weaving sector. Future success in <strong>the</strong> weaving
industry is highly dependant upon <strong>the</strong> flexibility <strong>of</strong> <strong>the</strong> industry to cater to <strong>the</strong>
diverse range <strong>of</strong> fabrics required by <strong>the</strong> international as well as local markets.
ix. Issues in Weaving Industry Development
The growth in world production <strong>of</strong> cotton fabrics has been stagnant for <strong>the</strong>
last ten years. Success <strong>of</strong> <strong>the</strong> weaving industry in Pakistan is associated with
<strong>the</strong> diversified usage <strong>of</strong> blends in fabric along with <strong>the</strong> enhanced consumption
<strong>of</strong> numerous man-made textile fibers. A move in this direction is also likely
to pave <strong>the</strong> path <strong>of</strong> success for <strong>the</strong> domestic apparel industry by eliminating
<strong>the</strong> imbalances in <strong>the</strong> export product mix. Reduction in <strong>the</strong> level <strong>of</strong> protection
<strong>of</strong>fered to <strong>the</strong> domestic man-made fibers and filaments. Producers can play an
instrumental role in facilitating this shift to blended and syn<strong>the</strong>tic fabrics.
Improvement in export product mix and unit price realisation is possible
through technology improved in <strong>the</strong> sector, particularly <strong>the</strong> power loom
sector is in dire need <strong>of</strong> upgrading its equipment. For this purpose mark-up
rates on credit facilities, both long and short-term, including export refinance
should be manipulated in favour <strong>of</strong> high value added products. A cascaded
system <strong>of</strong> credit allocation can act as a catalyst in bringing <strong>the</strong> desired change
through product diversification and product mix optimization. Sustainable
growth <strong>of</strong> <strong>the</strong> weaving sector can only be ensured through aggressive
development <strong>of</strong> <strong>the</strong> domestic apparel industry.
6. Processing
Fabric processing is <strong>the</strong> most critical stage <strong>of</strong> value addition in <strong>the</strong> entire
value chain. The processing sector took <strong>of</strong>f in early eighties and investments
were made in <strong>the</strong> sector during that period. But despite this, it remains <strong>the</strong>
weakest link <strong>of</strong> <strong>the</strong> entire textile value chain. Woven or knit fabric can ei<strong>the</strong>r
be dyed or printed depending upon <strong>the</strong> requirements <strong>of</strong> <strong>the</strong> customer who is
<strong>the</strong> garment or made-ups manufacturer. About 40% <strong>of</strong> <strong>the</strong> fabric exported
from Pakistan is unprocessed. Dyed fabric is only 14% <strong>of</strong> total fabric exports.
Exports <strong>of</strong> unprocessed fabric results in low unit value realization.
i. Scarcity <strong>of</strong> Trained Manpower
Availability <strong>of</strong> trained manpower is a very acute problem in <strong>the</strong> processing
industry. The industry is heavily dependent on manpower that does not have
proper training, such manpower is not capable enough to produce quality
fabric, resulting in a low unit value realization. The processing industry
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equires a dedicated modern training institute in order to align itself according
to <strong>the</strong> demand <strong>of</strong> international markets.
ii. Technology
Currently, <strong>the</strong>re are about 600 processing units <strong>of</strong> which only 5% are in <strong>the</strong>
integrated mill sector. The rest are independent commercial dyeing and
printing units. Current levels <strong>of</strong> technology in <strong>the</strong> processing industry is low
and most <strong>of</strong> <strong>the</strong> machinery is old.
iii. Dyes and Chemicals
Dyes and chemicals form <strong>the</strong> most important input for <strong>the</strong> processing
industry. Duty structure on dyes and chemicals and <strong>the</strong> raw materials for
manufacturing dyes needs to be rationalized.
7. Made-ups
After garments, made-ups is <strong>the</strong> second highest value-added sub-sector <strong>of</strong> <strong>the</strong>
Textile sector. It includes items like bedwear, table sheets, towels, curtains,
tents, bags, etc. Bedwear and towels are <strong>the</strong> two larger product categories in
terms <strong>of</strong> production and exports. Made-ups manufacturing involves many
processes including weaving, knitting, processing and stitching. The type <strong>of</strong>
skills required for manufacturing made-ups are much more diversified
compared to o<strong>the</strong>r sectors.
i. Bedwear
Bedwear is an important value-added sub-sector <strong>of</strong> Textile sector. The
products include bed sheets, pillow covers, quilts etc. Amongst all <strong>the</strong> made
ups, bedwear is <strong>the</strong> largest sector in terms <strong>of</strong> production and exports. Total
global exports <strong>of</strong> bed linen was $2.9 billion in 1997. Pakistan’s exports were
$487 million translating into 16.7% global market share. Pakistan is second
only to China in <strong>the</strong> row <strong>of</strong> bedwear exporters. A major chunk <strong>of</strong> <strong>the</strong>
Pakistani bedwear industry is in <strong>the</strong> informal sector. There are 150 units in
<strong>the</strong> organized sector and <strong>the</strong> rest in <strong>the</strong> unorganized sector. Pakistani
manufacturers need to manufacture products for <strong>the</strong> upper market segment.
This is <strong>the</strong> only way to survive in an environment in which <strong>the</strong> margins in
traditional bedwear products are shrinking very rapidly. Higher value added
products will increase <strong>the</strong> pr<strong>of</strong>itability <strong>of</strong> <strong>the</strong> manufacturer.
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ii. Towels
The total global market <strong>of</strong> towels was $3.8 billion in 1997. Pakistan held
second position in <strong>the</strong> global export <strong>of</strong> towels with exports <strong>of</strong> $305 million an
8% market share in 1997. There are no major technology issues in this
operation.
8. Apparel
The apparel segment is <strong>the</strong> highest value added link in <strong>the</strong> entire textile value
chain. Trade in this sector accounts for 53% <strong>of</strong> <strong>the</strong> total value <strong>of</strong> global textile
trade and has consistently grown over <strong>the</strong> last two decades. According to
WTO estimates with <strong>the</strong> elimination <strong>of</strong> quotas in <strong>the</strong> year 2005, total trade <strong>of</strong>
textiles and clothing will exceed <strong>the</strong> US $ 500 billion mark. This growth will
be driven primarily by <strong>the</strong> clothing sector, which will constitute almost 70%
<strong>of</strong> <strong>the</strong> total trade. Pakistan has been a major Asian player in <strong>the</strong> garment
export market especially during <strong>the</strong> 1980s and early 90s. Total apparel
exports from Pakistan were to <strong>the</strong> tune <strong>of</strong> US$ 1.24 billion in 1998. The
importance <strong>of</strong> <strong>the</strong> apparel sector in <strong>the</strong> overall economic perspective is two
fold. On <strong>the</strong> one hand <strong>the</strong> sector has <strong>the</strong> potential to be <strong>the</strong> engine <strong>of</strong> Pakistani
textile export growth, while on <strong>the</strong> o<strong>the</strong>r <strong>the</strong> sector is <strong>the</strong> largest source <strong>of</strong>
creating low cost employment in <strong>the</strong> country at all levels. According to our
estimates <strong>the</strong>re are currently seven hundred thousand people, both skilled and
unskilled, employed only in this sub-sector and <strong>the</strong>re is a potential <strong>of</strong>
increasing this employment by more than one hundred percent over <strong>the</strong> next
five years given <strong>the</strong> conducive business environment for export growth.
i. Emerging Global Trade Patterns
Global textile trade has witnessed certain shifts in <strong>the</strong> recent times. It is
noteworthy that over <strong>the</strong> past decade, clothing trade has advanced at a faster
rate as compared to textile trade. The textile trade increased at an overall
growth rate <strong>of</strong> 3.2%, whereas clothing trade increased by almost 82% from
1990 through 1998. O<strong>the</strong>r revealing developments are <strong>the</strong> changing world
trading patterns and preferences that can have serious impacts on those
countries which fail to align <strong>the</strong>mselves quickly with <strong>the</strong>se evolving market
conditions.
While <strong>the</strong> USA and <strong>the</strong> European Union remain to be <strong>the</strong> largest markets for
garments and o<strong>the</strong>r apparel products with a combined share <strong>of</strong> 73% in total
global clothing trade, apparel production centres are shifting, particularly
favoring countries with lower production cost or strategic geographic
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locations. Asian countries have <strong>the</strong> advantage especially in <strong>the</strong> first case with
lower wage rates and indigenous production <strong>of</strong> some <strong>of</strong> <strong>the</strong> raw materials. In
1997, over 59% <strong>of</strong> textile exports and 70% <strong>of</strong> clothing export originated from
Asia. However this competitive advantage in Asia is vulnerable to two basic
developments; one is <strong>the</strong> emerging regional trade blocks that allow for
preferential trade treatments and <strong>the</strong> o<strong>the</strong>r is <strong>the</strong> threat from countries that are
located on <strong>the</strong> borders <strong>of</strong> major markets. Apparel is a rapidly changing
business with very short product life cycles, consumer preference depends not
only on seasons but also on numerous o<strong>the</strong>r factors. Responding quickly to
<strong>the</strong>se changing demands is vital for <strong>the</strong> success <strong>of</strong> garment exports. Countries
like Mexico and Turkey have <strong>the</strong> advantage <strong>of</strong> minimal lead times and are
expected to give tough competition to <strong>the</strong> exporters from Asia. On <strong>the</strong>
demand side syn<strong>the</strong>tics and garments made <strong>of</strong> specialized fabrics are taking
away <strong>the</strong> larger share <strong>of</strong> <strong>the</strong> market. Women and men's garments are
gradually giving way to garments made for special usage.
Sportswear, industrial wear and fashion garments for women are some <strong>of</strong> <strong>the</strong>
products that <strong>of</strong>fer increasing opportunities to export countries like Pakistan
specially in terms <strong>of</strong> high values. Ano<strong>the</strong>r major factor, which garment
manufacturers and exporters from developing countries like Pakistan will
have to guard for, is <strong>the</strong> introduction <strong>of</strong> non-tariff trade barriers. While <strong>the</strong>
free trade regime is increasingly gaining foothold in <strong>the</strong> international export
arena, developed countries are becoming increasingly selective in <strong>the</strong>ir
import preferences. Issues like compliance to environmental standards and a
self-defined working environment can severely restrict exports from <strong>the</strong>
developing countries. These changing global trade patterns <strong>of</strong>fer more
opportunities than it poses threats. The need now is to gear garment
manufacturers and exporters from Pakistan to exploit <strong>the</strong> tremendous
opportunities that <strong>the</strong> global apparel market <strong>of</strong>fers.
III. CURRENT COTTON POLICY IN RICH COUNTRIES AND ITS
AFFECTS ON COTTON PRODUCING COUNTRIES FROM THE
ASIA REGION
Government measures in many countries prevented a drop in <strong>the</strong> cotton area
commensurate with <strong>the</strong> collapse in international prices in 2001. Prices at <strong>the</strong>
time <strong>of</strong> planting were at <strong>the</strong>ir lowest level, in nominal terms, at that period <strong>of</strong>
<strong>the</strong> year since 1973. Fur<strong>the</strong>r, prices were considerably below <strong>the</strong> cost <strong>of</strong>
production for most producers. Never<strong>the</strong>less, <strong>the</strong> world cotton area declined
by only 11 percent in 2002/03 to just below 30 million hectares <strong>the</strong> lowest
since 1986/87. The governments <strong>of</strong> most cotton producing countries are
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heavily involved in cotton production and marketing. Government policies
and programs affect <strong>the</strong> location <strong>of</strong> cotton production, consumption, and
prices. These policies can be grouped into four broad categories (ICAC
1993c):
• Policies designed to boost farm income while interfering as little as
possible with <strong>the</strong> level <strong>of</strong> market prices;
• Policies designed to control <strong>the</strong> cotton sector through extensive state
regulation;
• Policies designed to manage domestic cotton prices so as to boost
exports <strong>of</strong> textiles and apparel; and
• Free market policies.
Hence, cotton production is directly or indirectly affected by <strong>the</strong> policies <strong>of</strong>
supply control, price and income stabilization in many countries, by some
form <strong>of</strong> subsidy in all countries and by effective price minimums in most
countries. In all countries, farmers receive some form <strong>of</strong> subsidized assistance
or preferential allocation <strong>of</strong> production inputs such as planting seed,
fertilizers, pesticides, and irrigation water, including Australia and <strong>the</strong> United
States, where water is indirectly subsidized. According to <strong>the</strong> estimates <strong>of</strong> <strong>the</strong>
International Cotton Advisory Committee, direct income and price support
provided to <strong>the</strong> cotton industry was $5.8 billion world wide in 2001/02 and is
estimated to have declined in 2002/03 to $3.8 billion. Lower levels <strong>of</strong> support
are <strong>the</strong> result <strong>of</strong> lower production and higher market prices. Eight countries
<strong>of</strong>fered direct income and price support in 2003/04, ranging from $2 billion in
<strong>the</strong> USA to $7 million in Mexico. Government support given to farmers in
different countries is given in table 2 and discussed below:
USA
Total expenditures by <strong>the</strong> U.S. government in support <strong>of</strong> <strong>the</strong> cotton industry
amounted to $3.3 billion in 2001/02, <strong>of</strong> which direct income and price
support was $3 billion. U.S government support is estimated to have declined
to $3.2 billion in 2002/03. New legislation came into effect last year, and <strong>the</strong>
2002 farm bill now determines support for <strong>the</strong> cotton industry in 2002/03 and
<strong>the</strong> following 5 years. The 2002 farm bill replaced <strong>the</strong> production flexibility
contract payments (PFC) with a direct payment (DP) and a counter-cyclical
payment (CP). Both payments are based on historical planted area and yield,
ra<strong>the</strong>r than actual production. DPs are independent <strong>of</strong> market prices and are
set at 6.67 U.S. cents per pound for 2002/03. CPs are issued when <strong>the</strong>
effective price is below <strong>the</strong> target price. The effective price is <strong>the</strong> DP plus <strong>the</strong>
higher <strong>of</strong> <strong>the</strong> national average market price paid to producers or <strong>the</strong> loan rate.
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In 2002/03, <strong>the</strong> loan rate is set at 52 U.S cents and <strong>the</strong> target price is 72.4
U.S. cents. The loan deficiency payment (LDP)-issued when world prices
adjusted by quality and location are below <strong>the</strong> loan rate--continues to be
<strong>of</strong>fered in <strong>the</strong> 2002 farm bill. It is estimated that total direct income and price
support in <strong>the</strong> USA amounted to $ 2 billion in 2002/03. The US government
announced an export subsidy <strong>of</strong> 22 US cent per pound on 5th April,2004.
China (Mainland)
The stock-reduction policy <strong>of</strong> <strong>the</strong> government <strong>of</strong> China (Mainland) resulted
in local prices declining more rapidly than international prices, and
government expenditures to assist cotton growers are estimated to have
declined by 37% to $1.2 billion in 2001/02. A fur<strong>the</strong>r reduction in stocks, and
reduced production, resulted in an estimated $750 million spent by <strong>the</strong>
Chinese government in support <strong>of</strong> growers in 2003/03.
European Union
Cotton growers in Spain and Greece are <strong>of</strong>fered assistance through <strong>the</strong> EU
Common Agricultural Policy (CAP). Payments under <strong>the</strong> CAP are based on
estimated seed cotton production. The CAP <strong>of</strong>fers assistance for a maximum
production (782,000 tons <strong>of</strong> seed cotton for Greece and 249,000 tons for
Spain) and includes penalties for excess production. The cotton growing
regions in Spain and Greece are among <strong>the</strong> lowest-income regions in <strong>the</strong> EU,
and income support is viewed as a form <strong>of</strong> economic assistance. Income
support in <strong>the</strong> EU amounted to $979 million in 2001/02 and is estimated at
$957 million in 2002/03. The streng<strong>the</strong>ning <strong>of</strong> <strong>the</strong> Euro over <strong>the</strong> last two
years has affected EU support expressed in U.S. dollars, and while estimated
support for 2002/03 represents a 2% decline in dollars, in Euros support
represents a 5.7 % decline.
Egypt
As prices declined during 2000 and 2001, <strong>the</strong> government <strong>of</strong> Egypt provided
$2.3 million a year during <strong>the</strong> last two seasons. In 2002/03, <strong>the</strong> government
budgeted $33 million to help finance <strong>the</strong> difference between market prices
and prices paid to producers.
Turkey
Lower prices moved <strong>the</strong> Turkish government to <strong>of</strong>fer a premium <strong>of</strong> 3 U.S.
cents per pound <strong>of</strong> lint to cotton growers in 2001/02, equivalent to $59
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million. The premium resulted in $57 million in support <strong>of</strong> growers in
2002/03.
Brazil
In 2001/02, Brazilian domestic prices fell below <strong>the</strong> minimum guaranteed
prices, which were 36.6 U.S. cents per pound and <strong>the</strong> government spent
US$9.6 million to cover <strong>the</strong> difference. Brazilian growers sold cotton at <strong>the</strong>
minimum guaranteed price and <strong>the</strong> government reimbursed buyers for <strong>the</strong>
difference between <strong>the</strong> minimum price and market prices. For 2002/03,
market prices were well above <strong>the</strong> minimum guaranteed price, set at 35 U.S.
cents per pound <strong>of</strong> lint and no assistance was <strong>of</strong>fered. The Brazilian
government <strong>of</strong>fered assistance in recent seasons with a program designed to
secure prices above minimum prices through options exercised by farmers.
Funding for this program is approved each season as needed. In 2001/02 and
2002/03 no expenses were reported through this program.
Mexico
In 2001/02, assistance to cotton growers was provided by <strong>the</strong> government <strong>of</strong>
Mexico at a rate <strong>of</strong> $194 per hectare, equivalent to $ 18 million. For 2002/03,
<strong>the</strong> government approved legislation to <strong>of</strong>fer a support price mechanism with
a target price <strong>of</strong> 64 U.S. cents per pound, which results in an estimated
payment <strong>of</strong> 8 U.S. cents per pound, or $ 7 million.
Cote d’Ivoire
In Cote d Ivoire, <strong>the</strong> government provided US $ 8 million in emergency
assistance to cotton growers in 2001/02, equivalent to 2 U.S. cents per pound.
In 2002/03, given that political unrest in <strong>the</strong> country greatly affected <strong>the</strong>
cotton growing region in <strong>the</strong> north, <strong>the</strong> government increased assistance to
US$ 14 million, or 4 U.S. cents per pound.
Pakistan
In Pakistan, <strong>the</strong>re is no subsidy on cotton and textile. However <strong>the</strong>
government announces every year a minimum support price to encourage
farmers to plant cotton. The Trading Corporation <strong>of</strong> Pakistan (TCP) may be
asked buy <strong>the</strong> government to by cotton if prices fall below <strong>the</strong> minimum
support price. So far, TCP has not come to <strong>the</strong> rescue <strong>of</strong> farmers, even when
<strong>the</strong> prices were below minimum support price. So in effect, at present <strong>the</strong>
cotton trade is free from production to vale addition. During <strong>the</strong> 80s, <strong>the</strong>
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percentage <strong>of</strong> quality seed used increased by four to five percent per annum,
reaching 82 percent in 1985/86, and plant protection coverage has also
increased. These two factors account for most <strong>of</strong> <strong>the</strong> increase in yield.
Production has also been influenced on <strong>the</strong> input side, by subsidies
amounting to about three US cents per pound <strong>of</strong> lint. The major subsidized
input has been credit, in <strong>the</strong> form <strong>of</strong> interest free loans <strong>of</strong> up to 10,000
Pakistani Rupees, which are made available to small farmers by <strong>the</strong>
Agricultural Development Bank <strong>of</strong> Pakistan and by <strong>the</strong> commercial banks.
Ginners also provide credit facilities to permanent customers. Private
agencies and dealers supply fertilizers and pesticides. Ginneries are owned by
<strong>the</strong> private sector.
It is necessary to review <strong>the</strong> old Pakistani cotton export policy in order to
understand <strong>the</strong> current policy. The government monopoly on exports
terminated in 1988 when <strong>the</strong> Cotton Export Corporation (CEC) was
abolished. With this change, two important prices were introduced to control
exports and establish a cotton price for Pakistani spinners. The Minimum
Export Price (MEP) represents <strong>the</strong> cheapest level at which Pakistani cotton
can be bought, and is <strong>the</strong> only value that affects <strong>the</strong> international cotton
market, and <strong>the</strong> Benchmark (BM), which is <strong>the</strong> maximum internal price paid
for cotton. The MEP is set daily (in a manner similar to <strong>the</strong> AWP in <strong>the</strong>
United States), while <strong>the</strong> BM is generally set for each season, but can be
altered. The export duty is calculated as a percentage <strong>of</strong> <strong>the</strong> difference
between <strong>the</strong> BM and MEP. However, this percentage is variable, as
demonstrated by <strong>the</strong> rates for Oct 91 <strong>of</strong> 100 percent, Nov 91-90 percent, Dec
91-75 percent, and Jan 92-60 percent, a rate that applied through <strong>the</strong> change
in policies. The new crop MEP is typically not announced until December,
hence, exporters cannot forward sell new crop cotton without using <strong>the</strong> New
York Futures Market, and domestic buyers have first option on new crop
purchases. The new crop MEP is normally set relative to <strong>the</strong> old crop MEP to
move old crop cotton first.
In August 1992, Pakistan’s Economic Coordination Committee approved a
major change in <strong>the</strong> 1992/93 cotton policy. The benchmark system for
calculating export duty was abolished and a duty was levied on MEP above
45.00 cents per pound, with increments <strong>of</strong> two cents for each cent above that
level. The old export duty was essentially replaced by an export tax that is set
as a progressive benchmark, which is applied to a rising export price above a
benchmark MEP, with a constant gin yard cost subtracted. The gin-yard price
can be increased to keep farmers happy and <strong>the</strong> new variable can be set at 100
percent. The benchmark MEP under this regime was 45.00 cents per pound, a
three cent increase from <strong>the</strong> previous BM, which was 42.00 cents per pound.
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The new structure stabilized <strong>the</strong> internal cost <strong>of</strong> cotton in Pakistan and in <strong>the</strong>
case <strong>of</strong> rising prices, <strong>the</strong> duty kept cotton in Pakistan for domestic
consumption. The new policy does not define <strong>the</strong> impact in a depressed
market, i.e. when <strong>the</strong> MEP is lower than <strong>the</strong> benchmark MEP, in which case
<strong>the</strong> tax rate would be zero and no duty would apply to exports. However, <strong>the</strong>
duty is still a variable levy which can be changed, if need be to help move
cotton or keep it in <strong>the</strong> country.
Obviously, <strong>the</strong> subsidization <strong>of</strong> <strong>the</strong> Pakistani textile industry gives Pakistan a
large comparative advantage over o<strong>the</strong>r spinners since abut 50 percent <strong>of</strong> <strong>the</strong>
yarn cost is accounted for by cotton. This is reflected in <strong>the</strong> explosion <strong>of</strong> yarn
exports from Pakistan, which increased from 292,253,000kgs in 1988/89 to
502,672,000 kgs in 1990/91. In 1995-96, cotton policy was changed and free
exports and free imports was allowed. The bench mark and MEP were
waived. In 1996-97 <strong>the</strong> government imposed a general sales tax, at <strong>the</strong> rate <strong>of</strong>
15% on cotton. This 15% GST is refundable if <strong>the</strong> product has been sold for
spinning or weaving. Exports were exempted form GST. In 2001 <strong>the</strong>
government imposed GST on fertilizers and pesticides. So truly, speaking
Pakistani cotton has no subsidy at any stage.
India
India manages domestic cotton prices to increase textile production and
employs a support price for farmers. The support prices for major varieties
are fixed on <strong>the</strong> recommendation <strong>of</strong> <strong>the</strong> commission for agriculture costs and
prices. Some subsidies are given for <strong>the</strong> various component schemes <strong>of</strong> <strong>the</strong>
centrally sponsored Intensive Cotton Development Program. The cost <strong>of</strong>
major inputs for demonstrations and cultivation expenses for <strong>the</strong> production
<strong>of</strong> Breeders and Foundation Seed are met by <strong>the</strong> scheme. At <strong>the</strong> farm level,
Cooperative Credit Societies, Cooperative Commercial Banks, and State
Agricultural Departments generally provide financing, although in some area
private traders may finance <strong>the</strong> crop. Cooperative Credit Societies obtain
funds from States Cooperative Banks, which, in turn, obtain funds from <strong>the</strong>
National Bank for Agricultural and Rural Development.
Most <strong>of</strong> <strong>the</strong> ginneries are individually owned, although a few are textile mill
owned. In some areas, Gujarat, Maharashtra, Tamil Nadu, Punjab, and
Karnataka, ginneries are cooperative farmer entities. India employs a mixed
cotton procurement system. In Maharashtra, <strong>the</strong> Maharashtra State
Cooperative Marketing Federation, a public sector entity, purchases all <strong>the</strong>
cotton while ginning companies generally purchase <strong>the</strong> cotton in <strong>the</strong> o<strong>the</strong>r
states. In a few instances, textile mills and private traders may purchase <strong>the</strong>
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cotton. The Cotton Corporation <strong>of</strong> India (CCI), a public sector entity,
provides price support in o<strong>the</strong>r states and purchases cotton for <strong>the</strong>
Nationalized Textile Industry. Until recently, private traders were only
involved in <strong>the</strong> export <strong>of</strong> Assam Comilla, yellow pickings, and Zoda. All
o<strong>the</strong>r export activity was handled by CCI, <strong>the</strong> Maharashtra cooperative, <strong>the</strong>
Gujarat State Marketing Federation, and <strong>the</strong> state marketing federations.
Export quotas and Minimum Export Prices are set by <strong>the</strong> government and
sales are by tender. Forward sales are permitted in all <strong>of</strong> India except Punjab
and <strong>the</strong> Union Territories <strong>of</strong> Delhi and Chandigarh. Contracts are generally
between <strong>the</strong> farmer and ginner or a private merchant. They are nontransferable
and are governed by <strong>the</strong> forward Contract (Regulation) Act,
1952.
Central Asia (Uzbekistan)
Cotton is <strong>the</strong> most important crop in Uzbekistan, Turkmenistan and
Tajikistan. It is also grown in Kazakhstan, Kyrgyzstan, Azerbaijan, and
Kirghizia. However, civil wars are contributing to production declines in both
Azerbaijan and Tajikistan. Since Uzbekistan produces around two-thirds <strong>of</strong>
FSU cotton and Turkmenistan produces roughly one-sixth <strong>of</strong> FSU cotton only
cotton production policy in Uzbekistan is discussed in detail in this section.
The policies <strong>of</strong> <strong>the</strong>se two states are very similar with <strong>the</strong> major exception
being that cotton export marketing in Turkmenistan is handled by a single
state agency.
Uzbekistan
Price increases as incentives to promote production and /or increase
efficiency have been non-existent. State production orders, highly subsidized
fixed input prices, and fixed output prices determine artificial pr<strong>of</strong>it. The
production order is in <strong>the</strong> form <strong>of</strong> a production quota in a specified area,
variety and input level furnished by <strong>the</strong> state. Water is supplied free. The
government is attempting to introduce market incentives into <strong>the</strong> system in a
limited fashion. The amount <strong>of</strong> cotton that can be marketed by <strong>the</strong> collective
farm subject to an export license has increased to 5, 15, and 20 percent
respectively in <strong>the</strong> past three years. However, this only applies if <strong>the</strong> quota is
met and exports are subject to a tax if proceeds are not used to purchase hard
currency inputs.
Cotton marketing in Uzbekistan is both for barter and cash, and “fragmented”
and apparently not coordinated. Decisions on cotton marketing are made on a
quarterly basis, quarterly shipment orders by ginnery, grade, and buyer are
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egarded as “State Secrets.” Pre-1991, marketing <strong>of</strong> Uzbekistan cotton was
<strong>the</strong> responsibility <strong>of</strong> <strong>the</strong> USSR State Agency, Nova Export. This agency
established barter agreements with Eastern Europe, o<strong>the</strong>r socialist trading
partners (Cuba, Vietnam and N. Korea) and USSR republics. Excess cotton
was sold in hard currency and amounted to around 200,000 mt annually. No
payment was made for exports to Eastern Europe and o<strong>the</strong>r socialist
countries, Instead Uzbekistan and o<strong>the</strong>r Central Asian cotton producing
republics were allowed to accumulate non-convertible currency credits for <strong>the</strong>
procurement <strong>of</strong> items from a list <strong>of</strong> selected goods which were rarely
available. Since all goods flowed between USSR Republics, it is difficult to
ascertain whe<strong>the</strong>r or not <strong>the</strong> trade flow was positive or negative for
Uzbekistan. However, Uzbekistan received 60 percent <strong>of</strong> <strong>the</strong> proceeds from
<strong>the</strong>se sales in hard currency if <strong>the</strong> cotton shipped to <strong>the</strong> ports was inferior to
selected specifications. The probably resulted in ginneries being able to
produce a specific fibre grade from variable seedcotton lots, a process that
continues today. Generally speaking, <strong>the</strong> grades exported to o<strong>the</strong>r Republics
or to s<strong>of</strong>t currency markets were inferior to those exported to hard currency
markets. Selected countries, in particular Hungary and to a more limited
degree East Germany, developed <strong>the</strong> ability to receive cotton in excess <strong>of</strong>
spinning needs and to sell <strong>the</strong> top grades for hard currency; a process known
as creaming.
The current marketing system involves barter and cash, barter agreement with
former USSR Republics reportedly involving primarily grains, oil and
fertilizers, and barters with international cotton merchants involving grain in
addition to barters for steel with a Korean firm. Since <strong>the</strong> value <strong>of</strong> grain is
fairly well established in international markets price discovery (whe<strong>the</strong>r or
not hard currency denominated) is probably fairly efficient. Barters with <strong>the</strong>
former USSR republics are ano<strong>the</strong>r matter entirely. Obviously, this exchange
is mutually beneficial from <strong>the</strong> viewpoint <strong>of</strong> cost due to <strong>the</strong> low
transportation cost that is fixed in terms <strong>of</strong> rubles. The question <strong>of</strong> nonperformance
with trading partners is ano<strong>the</strong>r question entirely.
Cotton ginning in Uzbekistan comes under <strong>the</strong> Republic Production
Amalgamation (UZKHLOPKOPROM), while cotton Standards and Classing
(SIFHAT) comes under <strong>the</strong> Republic Scientific Enterprises (NPO) division <strong>of</strong>
UZKHLOPKOPROM. Seed cotton is delivered to collection centers, where it
is identified by variety and divided into four grades based on trash and
moisture. Payment is based on net weight adjusted for both. The cotton is
transported from collection centers to ginneries where it is stored in single
varieties <strong>of</strong> single grade stacks weight adjusted for both. The cotton is
transported form collection centers to ginneries where it is stored in single
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variety; single grade stacks weighing up to 450 mt each. The stacks are
covered with canvas and can be aerated through a tunnel in order to control
moisture. The ginning season extends for ten months, but high moisture
stacks are ginned first and seed cotton deterioration does not appear to be a
significant problem. The large, single variety, single grade stacks ensure long
runs <strong>of</strong> up to 750 bales <strong>of</strong> homogenous cotton.
Uzbekistan’s textile industry is indeed strong and displays enormous
potential. The 40-percent increase in cotton consumption over <strong>the</strong> past five
years in due primarily to export-oriented foreign investment, attracted by <strong>the</strong>
quality, reliability and low price <strong>of</strong> inputs (cotton, labor and energy) and by
<strong>the</strong> political and financial support <strong>of</strong> <strong>the</strong> government. Major foreign partners
have well-established international marketing relationships that virtually
assure continued textile exports, and in at least one important case, foreign
partners have signed agreements that will require dramatic increases in textile
output over <strong>the</strong> next few years. Surprisingly, nei<strong>the</strong>r investors nor <strong>of</strong>ficials
are counting on fellow Commonwealth <strong>of</strong> Independent States (CIS) markets
for export growth in <strong>the</strong> near term, but are looking instead to <strong>the</strong> European
Union and Asia.
It is conceivable that Uzbekistan’s cotton production will drop as producers
are granted more freedom, and resource constraints, formerly obscured by
government subsidies prove unsupportable in <strong>the</strong> marketplace. In that case,
cotton imports may be necessary to keep <strong>the</strong> spinning industry busy. The
opposite outcome appears much more likely. There is enormous potential for
increased cotton production in Uzbekistan with existing resources, and even
limited liberalization will almost certainly lead to major advances in
production and processing efficiency, with higher returns at all stages. In
<strong>the</strong>ory, recent reforms make this possible, and <strong>the</strong> strategies, ambitions and
influence <strong>of</strong> private investors already breaking into <strong>the</strong> market make it likely.
Uzbekistan will likely have a large exportable supply <strong>of</strong> cotton for a long
time, despite growth in domestic consumption. Fur<strong>the</strong>rmore, quality control
issues are being resolved by a new classing agency, and <strong>the</strong> growing use <strong>of</strong>
auctions to export cotton is warmly received by international traders. The
competitiveness <strong>of</strong> Uzbek cotton in <strong>the</strong> international market is improving as a
result. Uzbekistan produces large quantities <strong>of</strong> good cotton. Labor is
abundant, well educated and inexpensive at about $30-35/month. Water and
electricity are reliable and inexpensive. Communications, banking and legal
infrastructure is well developed. As a result <strong>of</strong> textile industry development in
recent years, spare machinery parts are available in Uzbekistan. However,
<strong>the</strong>re is concern about <strong>the</strong> cost <strong>of</strong> transport to export markets: The country is
doubly landlocked, and neighboring countries can charge high transportation
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fees. Ano<strong>the</strong>r important factor contributing to Uzbekistan’s competitiveness
is solid government support, political as well as financial. Higher value-added
exports are seen as <strong>the</strong> way to increase <strong>the</strong> inflow <strong>of</strong> foreign currency and
resolve many economic and social issues, so cotton processing has become a
top economic priority. Textile production provides one-fifth <strong>of</strong> GNP and
employs one-third <strong>of</strong> <strong>the</strong> workforce.
Incentives for foreign investors include pr<strong>of</strong>it tax and property tax
exemptions, as well as deep discounts on local cotton. Direct investments are
exempted from income and value added taxes, and investors may use
combined forms <strong>of</strong> payment to purchase existing plants from <strong>the</strong> government:
hard currency, local currency and technology transfers. The government is
eager to address even minor cotton quality problems experienced by foreign
investors. Since Kabul textile first came to Uzbekistan 7 yeas ago, <strong>the</strong>
discounts on cotton have fallen slightly, but o<strong>the</strong>r support is as good as ever.
The company has assurances from <strong>the</strong> government that cotton discounts and
o<strong>the</strong>r support will continue for many years. Uzbek cotton farmers use
relatively high rates <strong>of</strong> seed-some 60 to 80 kg/ha versus 15 kg/ha in Australia
and <strong>the</strong> United States. They face a relatively short planting season, have linty
seeds that stick toge<strong>the</strong>r during handling and planting, salty land in many
areas, and lack efficient planting equipment, all <strong>of</strong> which makes planting
risky.
There are also problems with <strong>the</strong> seed distribution system. The Ministry <strong>of</strong>
Agriculture and Water Resources coordinates how much and what variety <strong>of</strong>
seed is needed in which regions, and seed is distributed accordingly to
regional authorities. Unfortunately, <strong>the</strong>re have been problems with mixed
seed and availability. The Central Asian Seed Company (CASC) was
established in Uzbekistan in 1998, as part <strong>of</strong> <strong>the</strong> World Bank project to
improve <strong>the</strong> local cotton seed market. With acid de-linted cotton seed and
precision planters, CASC farms have reduced <strong>the</strong>ir seeding rates to about 20
kg/ha. Ano<strong>the</strong>r important recent development that will lead to lower seeding
rates is planting under plastid cover. This allows for earlier crop
establishment and protection from wea<strong>the</strong>r during <strong>the</strong> initial growth phase.
The practice has raised returns by 25 to 30 percent and over <strong>the</strong> past two
years, <strong>the</strong> area cultivated under plastic has increased by 144 percent. Fertilize
and o<strong>the</strong>r inputs intended for cotton fields are being diverted to o<strong>the</strong>r, more
pr<strong>of</strong>itable uses, including smuggling across <strong>the</strong> border. Uzbekistan does not
currently plant biotech cotton, but is studying <strong>the</strong> technology very closely.
Typically, Uzbek gins have a relatively low outturn ratio (about 32 percent,
compared to 35-.36 percent in <strong>the</strong> U.S. and about 40 percent in West Africa),
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and gin approximately six bales/hour on old soviet equipment (versus 25-35
bales/hour in <strong>the</strong> U.S.). Presently more than 80 percent <strong>of</strong> <strong>the</strong> ginning
equipment dates to Soviet times. Cotton is transported five tons at a time in
tractor-pulled buggies. Storage areas may be up to 15 km from <strong>the</strong> farm, and
gins may be 10 km from <strong>the</strong> storage area. Huge hills <strong>of</strong> approximately 300
tons are constructed in storage areas. Because ginning equipment is <strong>of</strong> poor
quality, <strong>the</strong> hills are necessary to allow <strong>the</strong> seed to harden. After maturing,
<strong>the</strong> cotton is transported to a gin where new hills are constructed. Because <strong>the</strong>
handling is so slow, gins could not operate any faster even if <strong>the</strong>y were better
equipped. By contrast, <strong>the</strong> CASC hauls 15 tons at a time in <strong>the</strong> form <strong>of</strong>
modules and gins 22bales/hour on modern American equipment. Clearly,
adoption <strong>of</strong> module building and hauling technology (CASC currently has <strong>the</strong>
only such equipment in Uzbekistan) accompanied with gin modernization
will lead to faster, cheaper cotton production and will greatly increase
processing capacity.
In <strong>the</strong> past, Uzbekistan’s classing system was very different from that <strong>of</strong> o<strong>the</strong>r
major exporting countries. The old method s was labor intensive and only 10
percent <strong>of</strong> cotton was classed. Too many fiber characteristics resulted in
unnecessary discounts, and traders made a fortune re-classing and selling at
higher prices. In a 1993 trial using USDA standards, cotton got $ 150 more
per ton. By 1995, new standards were widely adopted similar to U.S.
standards. As in <strong>the</strong> United States, <strong>the</strong>re are five color grades, and trash
grades with each color grade. SIFAT (<strong>the</strong> certification agency) was
established in 1999 as part <strong>of</strong> <strong>the</strong> World Bank project, and runs an operation
very much like <strong>the</strong> USDA system. Classers are trained in both USDA and
Uzbek standards, which are easily comparable. They work in pair to reduce
<strong>the</strong> likelihood <strong>of</strong> unintentional and intentional errors. Five percent <strong>of</strong> cotton
classed using HVI equipment in 13 labs across <strong>the</strong> country is rechecked in <strong>the</strong>
central lab; samples are kept for three months, and a central database is
accessible for a fee. Until this year, technical data was not very concise;
sometimes, buyers would reject <strong>the</strong> cotton at <strong>the</strong> ports, and prices would have
to be reduced in order to move <strong>the</strong> lots. SIFAT has solved this problem by
obtaining a government requirement for 100 percent classing, which means
that customs cannot let cotton leave <strong>the</strong> country unless it has a SIFAT tag.
Today, almost no cotton is rejected at <strong>the</strong> ports, which has resulted in higher
prices. Solving this problem was worth $80 million according to SIFAT.
In conclusion, we should not doubt Uzbekistan’s competitiveness in <strong>the</strong>
international textile market, nor should we underestimate <strong>the</strong> country’s
potential to increase cotton production and improve <strong>the</strong> competitiveness <strong>of</strong> its
raw cotton exports. At present, no one knows exactly how <strong>the</strong> recent reform
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policies-especially <strong>the</strong> “farmers” 50 percent” rule and <strong>the</strong> “independence” <strong>of</strong>
<strong>the</strong> state cotton export companies-will work in practice. However, it appears
that <strong>the</strong> government <strong>of</strong> Uzbekistan has finally committed to real steps towards
liberalization <strong>of</strong> <strong>the</strong> cotton industry. Over <strong>the</strong> next few years, developments in
Uzbekistan will be closely followed.
O<strong>the</strong>r Countries
Countries that <strong>of</strong>fered emergency assistance due to lower prices in 2001/02
are not providing direct income or price support this season. Notably, in India
and Colombia, countries that have a minimum support price mechanism in
place, market prices were above minimum support prices in 2002/03 and no
assistance was <strong>of</strong>fered.
Direct Assistance to Exports
China (Mainland) and <strong>the</strong> USA provide subsidies to exports <strong>of</strong> cotton.
Overall assistance provided by <strong>the</strong>se two countries amounted to US$121
million in 2001/02, and is estimated at US$ 317 million in 2002/03. Exports
are subsidized in China (Mainland) through direct payments made by <strong>the</strong>
central government to exporting agencies. The direct payments are designed
to bridge <strong>the</strong> difference between international market prices and <strong>the</strong> internal
cost <strong>of</strong> buying, ginning and transporting cotton to an export location.
Assistance in <strong>the</strong> USA averaged 2 U S. cents per pound in 2001/02. Between
August 2002 and 21 March 2003, <strong>the</strong> U.S. government disbursed US$65
million to exporters under <strong>the</strong> Step 2 program, and <strong>the</strong> total disbursement for
2002/03 is estimated at US$267 million, for an average assistance <strong>of</strong> U.S.
cents per pound exported. In 2003-04 <strong>the</strong> average assistance was around 2
cent per pound for million staple cotton. For PIMA variety <strong>the</strong> subsidy varied
from 4 to 28 cents per pound and under <strong>the</strong> step 2 programme every Thursday
<strong>the</strong>se subsidies are announced. On 8 th April <strong>the</strong> subsidy was 22.39 cents per
pound on PIMA exports.
IV. ENHANCING EFFICIENCY AND PRODUCTIVITY IN THE
COTTON SECTOR IN ASIA
The major cotton producing countries are Pakistan, Uzbekistan, Tajikistan
and Syria in IDB member countries. Cotton is generally planted after
harvesting <strong>the</strong> wheat crop. The planting time <strong>of</strong> cotton is affected if wheat
harvesting is delayed. Recently sunflower, soybean and canola are also being
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used in cotton rotation. The cotton plant is indeterminate in nature and thus
has a huge potential to produce a higher yield. Higher yields achieved in <strong>the</strong>
world have come from agronomic and protection improvements and not from
<strong>the</strong> ability <strong>of</strong> <strong>the</strong> plant to produce a higher yield. The indeterminate nature <strong>of</strong>
<strong>the</strong> cotton plant enables this plant to produce at much higher yields than
before. Cotton yields have undoubtedly increased in <strong>the</strong> world particularly
since 1952-1991. During this period, <strong>the</strong> average increase in yield is
estimated at 2 % or 8kgs per hectare per year. Most <strong>of</strong> <strong>the</strong> cotton crop is
planted after wheat in Pakistan.
1. Breeding
Conventional breeding is generally based on <strong>the</strong> art <strong>of</strong> selecting <strong>the</strong> most
suitable plant after making cross breeding. More recently genetic engineering
is becoming <strong>the</strong> major source <strong>of</strong> plant breeding. Breeders will have to share
<strong>the</strong> credit for <strong>the</strong> so called development <strong>of</strong> higher yielding varieties with
biotechnologist. Contributions from genetic engineering will be undeniable.
Conventional breeding will continue to play <strong>the</strong> dominant role but specific
changes through insertion <strong>of</strong> specific genes will be prominent. The science <strong>of</strong>
genetic engineering is going to play a major role in developing a cotton plant
<strong>of</strong> desired characteristics.
Countries like <strong>the</strong> USA, India, China, Australia, Brazil and South Africa have
already introduced genetically modified Bt cotton on a larger scale. At
present, about 11 million hectors are under Bt cotton all over <strong>the</strong> world. This
has reduced <strong>the</strong> cost <strong>of</strong> production and increased <strong>the</strong> yield and pr<strong>of</strong>it <strong>of</strong>
farmers. The uses <strong>of</strong> insecticides in <strong>the</strong>se countries have been reduced. This
field has not received due importance in <strong>the</strong> IDB member countries in Asia
compared to developed countries. The pace <strong>of</strong> progress in <strong>the</strong> development <strong>of</strong>
Bt cotton in Pakistan is very slow. The private sector in Pakistan has not
taken any interest in <strong>the</strong> development <strong>of</strong> varieties resistance to insecticides.
These countries must invest in genetic engineering because <strong>of</strong> its bright
future.
2. Insect Control
Insecticides have become an integral part <strong>of</strong> <strong>the</strong> cotton production systems in
<strong>the</strong> world. One cannot think <strong>of</strong> having a successful cotton crop without <strong>of</strong>
extensive use <strong>of</strong> insecticides. Insecticides are quick in action and <strong>the</strong>y kill
insects as <strong>the</strong> crop develops. Insecticides are cost affected. Cotton production
systems cannot afford continued increases in <strong>the</strong> cost <strong>of</strong> insecticides. Insects
are developing resistance and adding to <strong>the</strong> cost <strong>of</strong> spraying in countries like
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Pakistan whose efficiency in <strong>the</strong> use <strong>of</strong> pesticides is just 50% because <strong>of</strong>
defective application, lack <strong>of</strong> calibration, wrong pesticides, untimely
application etc., Moreover pressure is building up against <strong>the</strong> residue <strong>of</strong>
pesticides on cotton and consumers from developed countries are reluctant to
use lint contaminated with pesticides.
3. Application <strong>of</strong> Fertilizer
The efficiency <strong>of</strong> availability <strong>of</strong> fertilizer can be enhanced by placing <strong>the</strong>
fertilizer near <strong>the</strong> root system. The practice <strong>of</strong> applying fertilizer with
irrigation water has shown that majority <strong>of</strong> <strong>the</strong> fertilizers is not availed by <strong>the</strong>
plant because <strong>of</strong> misplacement. The best way to apply <strong>the</strong> fertilizer is after
irrigation in moist soil and placing <strong>the</strong> fertilizer near to <strong>the</strong> roots <strong>of</strong> <strong>the</strong> plants.
This will help to increase <strong>the</strong> yield <strong>of</strong> cotton.
4. Contamination Free Cotton
At present Pakistani cotton is graded as <strong>the</strong> most contaminated and hence
discounted. The contamination includes poly-propylene, plastic sheets,
human hair, biscuits raps, jute strings etc., etc. The government is now giving
encompasses on contamination free cotton by <strong>the</strong> promulgation <strong>of</strong> ordinance.
Contamination free cotton will fetch a high price and more pr<strong>of</strong>it to <strong>the</strong>
farmers.
5. Irrigation
Due to a shortage <strong>of</strong> water in <strong>the</strong> future, <strong>the</strong> agronomy <strong>of</strong> <strong>the</strong> plant has to be
restructured by manipulating planting methods, plant type, resistance to insect
control etc. During <strong>the</strong> year, <strong>the</strong>re are certain periods when water is abundant
and can be stored to meet urgent needs <strong>of</strong> <strong>the</strong> cotton plant. The cotton plant
uses a minimum amount <strong>of</strong> water among all <strong>the</strong> cash crops and hence is
extremely suitable in water deficient areas. The government is encouraging
<strong>the</strong> planting <strong>of</strong> cotton on beds to maximize irrigation efficiency.
6. Yields
There is a large scope for <strong>the</strong> improvement <strong>of</strong> yields in countries like Pakistan
and Uzbekistan. The yield can be increased by adopting proper agronomic
practices, judicious use <strong>of</strong> agro chemicals and strong pest scouting servos to
make a timely decision on pest control and its evaluation.
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V. ENHANCING COMPETITIVENESS IN COTTON SECTOR IN
ASIA
1. Competition <strong>of</strong> Cotton with O<strong>the</strong>r Crops.
Cotton crops face competition for labor and time from sugarcane, rice and
maize. This competition is acute during <strong>the</strong> months <strong>of</strong> August and September
when plant protection and fertilizer applications are made. On <strong>the</strong> o<strong>the</strong>r hand,
<strong>the</strong> demand for labor during <strong>the</strong>se months for rice and maize is also at a
maximum, as transplanting <strong>of</strong> rice, fertilizer application, granule application
and thinning <strong>of</strong> maize are done during <strong>the</strong> months <strong>of</strong> August and September.
If we can mechanize <strong>the</strong> competing labor intensive operations <strong>of</strong> maize and
rice, this will result in more availability <strong>of</strong> labor for plant protection, fertilizer
applications and o<strong>the</strong>r crucial cotton operations during <strong>the</strong> months <strong>of</strong> August
and September. Ano<strong>the</strong>r severe competition is during <strong>the</strong> month <strong>of</strong> May when
harvesting <strong>of</strong> spring maize, hoeing, <strong>the</strong> application <strong>of</strong> fertilizers and
pesticides to <strong>the</strong> sugarcane crop give serious competition to <strong>the</strong> labor required
for seed bed preparation and <strong>the</strong> sowing <strong>of</strong> cotton. Wheat harvesting and
threshing during <strong>the</strong> months <strong>of</strong> April and May adds serious competition to
cotton labor, during this period <strong>the</strong> seed bed preparation and sowing
operations <strong>of</strong> cotton are in progress. Weed control during <strong>the</strong> month <strong>of</strong> July
faces competition from o<strong>the</strong>r cotton operations like gap filling, fertilizer
application and thinning. Competition from rice and maize is acute where
<strong>the</strong>se two crops are grown in larger areas. Competition from sugarcane is
strong where sugar mills are located and where, sugarcane is <strong>the</strong> main crop.
Competition for wheat is throughout <strong>the</strong> cotton belt because it is grown
throughout <strong>the</strong> cotton producing area. In <strong>the</strong> central cotton zone, where
wheat-cotton is <strong>the</strong> main rotation crop, competition from wheat for labor, etc.,
becomes more prominent during <strong>the</strong> planting time <strong>of</strong> cotton when tractor
power is needed for tillage and sowing bed preparation.
In Pakistan, market outlets for cotton and alternate crops do not vary with <strong>the</strong>
types <strong>of</strong> production units (small or large scale holder). The entire cotton
produce goes to <strong>the</strong> ginning factory for marketing and <strong>the</strong> alternate crop goes
to markets directed by <strong>the</strong> government where <strong>the</strong>y are sold on <strong>the</strong> open
market. Rice is generally grown in high rainfall areas not suitable for cotton.
In <strong>the</strong> main cotton area, only sugarcane is <strong>the</strong> real competing crop where
sugar mills have been installed and <strong>the</strong>re is no marketing problem for
sugarcane. Cotton <strong>of</strong>ten replaces it due to less water requirements and
because sugarcane is more labor and input intensive and is being supported
artificially by a levying import duty on sugar. A tendency to grow sugarcane
increases if cotton yields become low in certain areas due to disease/insect
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attack, etc. If <strong>the</strong> present water rate system is shifted from an area to a volume
basis, farmers will prefer growing cotton as <strong>the</strong> delta <strong>of</strong> water for cotton is 2-
3 times less than that <strong>of</strong> sugarcane.
2. Competition within Cotton Sector
Government measures that insulate producers form variation in market prices
are contributing to <strong>the</strong> current imbalance between <strong>the</strong> cotton supply and
demand in <strong>the</strong> world. The level <strong>of</strong> direct assistance to cotton production
provided by different countries rose from US$ 3.8 billion in 2000/01 to $5
billion in 2001/02. An estimated 73% <strong>of</strong> world cotton production benefited in
2001 from a direct income or price support program. Many countries provide
support in <strong>the</strong> cotton sector, and many countries provide support to an
estimated 160 agricultural commodities besides cotton. The issue <strong>of</strong>
agricultural support is complicated by <strong>the</strong> existence <strong>of</strong> state trading
organizations, <strong>the</strong> use <strong>of</strong> export credits and credit guarantees, tariffs and tariff
rate quotas on agricultural products, food aid and o<strong>the</strong>r agricultural issues.
Fur<strong>the</strong>r, many countries impose tariffs on textile and apparel products, and
<strong>the</strong> quotas under <strong>the</strong> Multi Fiber Arrangement (MFA) are still being phased
out. Therefore, negotiations to reduce government measures in cotton involve
complex trade<strong>of</strong>fs, and <strong>the</strong> mechanism to achieve reductions in trade
distorting subsidies and tariffs is <strong>the</strong> discussion on agriculture in <strong>the</strong> WTO.
The WTO is <strong>the</strong> sum <strong>of</strong> <strong>the</strong> countries that participate in it. In order to advance
<strong>the</strong> interests <strong>of</strong> agricultural trade liberalization, countries must unify and work
effectively to articulate a positive program <strong>of</strong> mutual benefit during <strong>the</strong>
agriculture talks being conducted under <strong>the</strong> auspices <strong>of</strong> <strong>the</strong> WTO. Cotton is
an important agricultural commodity, and <strong>the</strong> concerns <strong>of</strong> cotton merit
attention in <strong>the</strong> WTO. The decline in cotton prices during 2001/02 led to
direct losses <strong>of</strong> $14 billion in income to <strong>the</strong> cotton sector. Income from cotton
provides money for school fees, rural transportation and health care for farm
families in many developing countries. More than 100 million farming units
are engaged directly in cotton production, and when family labor, hired farm
labor, and workers in auxiliary services such as transportation and ginning are
considered, total involvement in <strong>the</strong> cotton sector reaches one billion people.
Cotton cultivation contributes to food security and improved life expectancy
in rural areas <strong>of</strong> developing countries.
In January 2005, cotton will be in traded freely because <strong>of</strong> WTO. Pakistan
will gain in all textile products because most <strong>of</strong> <strong>the</strong> competing countries are
subsidizing <strong>the</strong>ir industry and Pakistan has already removed all subsidies
since 1996. Pakistan will see a boom in exports and will become one <strong>of</strong> <strong>the</strong>
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top foreign exchange earners in cotton trade. The potential <strong>of</strong> value addition
in Pakistan for <strong>the</strong> year 2008 is given in table 4. The top ten Asian countries
in cotton trade are given in table 6. Due to free trade from January 2005, <strong>the</strong>
most subsidized country will not lead. Cotton producers like Pakistan will
also become a main foreign exchange earner. The success factor will be free
trade, higher technological orbit, human resource development, a shifting
focus to value added products, development <strong>of</strong> international standard cotton,
no subsidies and emphasis on man made fibres.
VI. ROLE OF PRIVATE SECTOR IN COTTON SECTOR IN ASIA
The role <strong>of</strong> <strong>the</strong> private sector in <strong>the</strong> cotton economy is extremely important
because <strong>the</strong> public sector can not compete in <strong>the</strong> international market
efficiently. The private sector is now becoming more responsible and mature
and has <strong>the</strong> confidence to make fur<strong>the</strong>r investments. Even in 100 % public
sector countries like Syria and Uzbekistan, <strong>the</strong> policies are now changing in
favour <strong>of</strong> privatization. To encourage <strong>the</strong> private sector, <strong>the</strong> government
should issue guidelines on <strong>the</strong> minimum export price <strong>of</strong> <strong>the</strong> products so that
<strong>the</strong> mall practices in <strong>the</strong> trade are minimized. The cotton grading system and
its application in export can eliminate mall practices in cotton trade. The
government should also try to facilitate <strong>the</strong> investment in <strong>the</strong> cotton sector by
eliminating red tape and making it a one window operation. For example, in
Pakistan <strong>the</strong>re are 22 departments dealing with <strong>the</strong> textile industry and trade
every department has a different price. This discourages <strong>the</strong> private sector to
invest and competition to produce quality. The recent steps taken by <strong>the</strong>
government to reduce <strong>the</strong> mark up <strong>of</strong> banks will definitely encourage <strong>the</strong>
private sector to invest in cotton.
VII. FRAMEWORK FOR ENHANCING COOPERATION AMONG
IDB COTTON PRODUCING COUNTRIES FROM THE ASIAN
REGION
There is a good opportunity for cooperation among IDB cotton producing
countries from Asian region. These countries scan share <strong>the</strong> knowledge <strong>of</strong>
crop production, pest management, textiles and marketing. Cotton is grown in
<strong>the</strong>se countries in varied climates and hence can be helpful in providing
training to o<strong>the</strong>r countries. Similarly, <strong>the</strong> economic cooperative organization
<strong>of</strong> CIS countries will benefit Pakistan, Iran and Turkey and is a good
beginning on <strong>the</strong>se lines. Some <strong>of</strong> <strong>the</strong> suggestions to enhance cooperation are:
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1. Trading House
A cotton trading house may be established at appropriate places to encourage
cotton export. Recently, Pakistan has announced <strong>the</strong> establishment <strong>of</strong> textile
cities in Karachi and Lahore to promote textile made ups in International
trade. The trading house may be a step in this direction.
2. Ginning Research Institute
There are no training facilities in Asia in <strong>the</strong> field <strong>of</strong> ginning. This needs
improvement. Most <strong>of</strong> <strong>the</strong> cotton in Pakistan, Uzbekistan and o<strong>the</strong>r states are
discounted in <strong>the</strong> international market because <strong>of</strong> poor ginning. The
establishment <strong>of</strong> a ginning research institute will provide training and
improve ginning machinery. The problem <strong>of</strong> lint contamination can also be
over come through a ginning research institute.
3. Cotton Grading Facilities
There is no well established cotton grading training facility in <strong>the</strong> Asian
region. Non- cotton producing countries like Germany and England are
provided this training at a very high price. This facility can easily be
established which will provide training in grading and act as an arbitrator in
international trade.
4. Gene Pool Exchange
Excellent material for cotton breeding is available in countries like
Uzbekistan which some times becomes difficult to get for research purposes
due to poor communication. If such a facility is established under an
international organization, than many o<strong>the</strong>r countries can benefit from this
gene pool.
5. Information Centre
Information on all aspects <strong>of</strong> cotton research, production marketing and <strong>the</strong>
textile industry may be made available amongst participating cotton growing
countries in Asia. For this purpose, research journals and newletters may be
published or <strong>the</strong> information for <strong>the</strong>ir research workers and people involved
in business. Australian cotton growers are a good example <strong>of</strong> serving <strong>the</strong>
cotton industry in that country.
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Table 1. Cotton Area, Production and Yield in Islamic Countries in Asia
Countries
Source: ICAC
Area (1000 hectares) Production (1000 tons) Yield (kg/ha)
2002 2003 2002 2003 2002 2003
Pakistan 2718 3037 1700 1615 625 532
Uzbekistan 1421 1393 1033 915 727 657
Syria 186 203 245 277 1318 1364
Turkmenistan 500 500 148 200 296 400
Tajikistan 269 285 165 172 613 604
Kazakhstan 165 185 114 120 691 649
Iran 160 145 90 100 562 690
Azerbaijan 62 55 31 37 500 673
Kyrgystan 28 32 25 29 900 906
Bangladesh 48 50 15 15 317 300
Iraq 55 20 19 7 519 350
Afghanistan 20 20 7 7 367 367
Indonesia 9 10 5 5 534 537
Total 5141 5935 3607 3499 639 589
World 30020 32542 19142 20112 638 618
% <strong>of</strong> world 18.8 18.2 18.8 17.4 100 95.3
́
Table 2. Level <strong>of</strong> Direct Assistance Provided by Governments
to The Cotton Sector Through Production Programs *
Country
2001/02
2002/03*
Exports Average Assistance to Exports Average Assistance
(1000 tons) Assistance Export (1000 tons) Assistance Export (US
per Pound (US$ Millions)
per Pound Millions)
Exported
Exported
(US cents)
(US cents)
USA 4,420 31 3,001 3,747 24 1,996
China
(Mainland)
5,320 10 1,196 4,920 7 750
Greece 435 77 735 370 88 718
Spain 107 104 245 100 108 239
Turkey 922 3 59 900 3 57
Egypt 317 3 23 291 5 33
Côte
d́ ‘Ivoire
173 2 8 150 4 14
Mexico 92 9 18 41 8 7
India 2,686 8 500
Benin 172 5 20
Mali 240 3 14
Brazil 766 1 10
Colombia 26 16 9
Argentina 65 5 7
All
Countries
15,741 17 5,844 10,519 16 3,814
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Table 3. Potential <strong>of</strong> Value Addition in Pakistan Target up to Year 2008
Textile Sectors Projected for year-
2004 (US $)
Percentage
<strong>of</strong> Export
128
Projected Export
Potential (US$)
Total Export
(US $)
Cotton Yarn 931.82 12.25 931.82
Cotton Fabric 1,467.46 19.29 1,467.46
Knitwear (Hosiery) 1,407.26 18.50 2,703.21 4,110.47
Bed wear 1,355.18 17.81 2,603.17 3,958.35
Towels 364.70 4.79 700.56 1,065.26
Ready Made Garments 1,037.57 13.64 1,993.06 3,030.63
Art Silk and
Syn<strong>the</strong>tic
564.82 7.42 564.82
Tents and Canvas 50.14 0.66 50.14
Made-up Articles
(Including o<strong>the</strong>r
Textiles)
429.34 5.64 429.34
Total $7,608.29 $8,000.00 $15,608.29
Source: SMEDA-cotton textile vision 2005
Rank Country Total
1 China 39,485
2 Korea 15,577
3 Hong Kong 10,980
4 Turkey 9,900
5 India 9,275
6 Japan 6,260
7 Thailand 4,965
8 Pakistan 4,897
9 Indonesia 4,862
10 Bangladesh 3,571
Source: SMEDA Textile vision
Table 4. Top Ten Asian Countries
1998 ($ Million)
2005 ($ Million)
Rank Country Total
1 China 55,641
2 India 21,533
3 Korea 16,733
4 Turkey 16,416
5 Pakistan 13,815
6 Hong Kong 10,611
7 Bangladesh 6,581
8 Thailand 5,083
9 Japan 4,949
10 Indonesia 4,893

PART TWO
COTTON PRODUCTION EFFICIENCY AND
INTERNTIONAL COMPETITIVENESS
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130

COUNTRY EXPERIENCEES FROM THE
AFRICAN REGION
131

132

I. INTRODUCTION
THE COTTON SECTOR IN BURKINA FASO
Traore Seydou Nafoni
The Burkinabe Textile Fibre Company
133
(Original in French)
The economy <strong>of</strong> Burkina Faso is mainly based on agriculture and animal
husbandry, which toge<strong>the</strong>r provide over 30% <strong>of</strong> <strong>the</strong> gross domestic product
and account for 80% <strong>of</strong> exports. About 86% <strong>of</strong> <strong>the</strong> working population is
employed in agriculture in animal husbandry and 5.8% in o<strong>the</strong>r rural
activities. Cotton occupies 5% <strong>of</strong> <strong>the</strong> cultivated land area <strong>of</strong> Burkina Faso.
Nearly 200,000 firms located in <strong>the</strong> west, centre and <strong>the</strong> east <strong>of</strong> country are
used for cotton farming. Although <strong>the</strong> production <strong>of</strong> cotton grain is affected
by fluctuating rainfall and parasites, it rose from 100,000 tons in 1985 to over
500,000 in 2004. Cotton grain yield rose from 135 kgs per hectare on
average in 1960 to 1061 kilo grams per hectare in 2000. The fiber yield per
hectare increased ten-fold during <strong>the</strong> same period. Thanks to greater farm
productivity and a greater ginning rate. Cotton grain sales is <strong>the</strong> major source
<strong>of</strong> revenue in rural areas. It is also <strong>the</strong> primary export <strong>of</strong> Burkina Faso i.e. it
accounts for 50% to 60% <strong>of</strong> <strong>the</strong> country's hard currency.
Figure 1. Share <strong>of</strong> Cotton Exports in Burkina Faso Total Export

About 97% <strong>of</strong> fiber produced is exported to <strong>the</strong> following markets:
• South East Asia (India, Thailand, Indonesia, Vietnam, Taiwan): 66%,
• Europe (Germany, Italy, Portugal, Switzerland): 21%,
• Latin America (Colombia, Venezuela): 2%
• The domestic market: 3%
II. INTERNATIONAL SITUATION
More than 50% <strong>of</strong> <strong>the</strong> world's cotton comes from countries where its
production is directly subsidized (USA, Greece, Brazil, Spain, Egypt, China,
Turkey, Mexico). So market competition in cotton and <strong>the</strong> price adjustments
between supply and demand are thwarted. Africa is <strong>the</strong>refore no longer rated
among <strong>the</strong> 5 cheapest sources <strong>of</strong> cotton production used to calculate <strong>the</strong>
Cotlook A index. This reflects <strong>the</strong> sale aggressiveness <strong>of</strong> competitors such as
<strong>the</strong> Chinese, Uzbek, Greek Syrian and Spanish producers. Quality is more
than ever before topical in such a very high competitive market. Ano<strong>the</strong>r
important factor is <strong>the</strong> contamination <strong>of</strong> raw cotton by alien objects <strong>the</strong>reby
prompting yarn and textile buyers to make claims. In order to stave <strong>of</strong>f such
risks, weavers tend to prefer <strong>the</strong> sources <strong>of</strong> cotton that are reputed to be
uncontaminated, although very expensive. The Burkina cotton industry,
which exports approximately 98% <strong>of</strong> its produce, has no o<strong>the</strong>r choice but to
promote excellence because, despite <strong>the</strong> quality <strong>of</strong> Burkina cotton, Burkina
Faso has to meet <strong>the</strong> challenge in order to safeguard its portion <strong>of</strong> <strong>the</strong> market
and face stiff competition on <strong>the</strong> international market.
III. COMPETITIVENESS AND VULNERABILITY
The cotton industry <strong>of</strong> Burkina Faso is very competitive. However, its future
in <strong>the</strong> medium term may be jeopardized by <strong>the</strong> subsidies granted to producers
in industrialized countries. In 2001 and 2002, <strong>the</strong> Burkina cotton industry
closed its accounts without receiving subsidies while, because <strong>of</strong> subsidies,
<strong>the</strong> producer prices <strong>of</strong> <strong>the</strong> United States and <strong>the</strong> European Union were higher
by 90% and 154% respectively than <strong>the</strong> world prices in 2001 and 2002.
1. Trends <strong>of</strong> <strong>the</strong> Burkina Cotton Industry
• Producers (UNPCB) are better organized, <strong>the</strong> cotton company
SOFITEX is efficient and <strong>the</strong>re is harmony between <strong>the</strong> parties;
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• Controlled privatization toge<strong>the</strong>r with relevant consultation
mechanisms that involve <strong>the</strong> entire industry;
• The banking system is involved because <strong>of</strong> <strong>the</strong> sound financial
management <strong>of</strong> <strong>the</strong> industry; and
• Increased production <strong>of</strong> quality fiber.
2. Weaknesses
• Bad state <strong>of</strong> repair <strong>of</strong> rural roads;
• High cost <strong>of</strong> inputs and lack <strong>of</strong> equipment;
• Inadequate counseling;
• Stagnant yield since 1985/86 because <strong>of</strong> low fertility and on <strong>the</strong> o<strong>the</strong>r
hand <strong>the</strong> resistance <strong>of</strong> pests to insecticides; and
• Dependency <strong>of</strong> prices on exports because <strong>of</strong> <strong>the</strong> low capacity <strong>of</strong> <strong>the</strong>
local weaving industry to use <strong>the</strong> cotton produced (3% only <strong>of</strong> <strong>the</strong>
fiber produced).
3. The Threats are:
• Soil and environmental degradation; and
• Fall in export price and price volatility.
4. The Opportunities are:
• Improved production machinery;
• Institutional innovation; and
• Stable microeconomic framework and fruitful partnership.
5. Strategy <strong>of</strong> <strong>the</strong> Cotton Industry and <strong>the</strong> Fight Against Poverty
90% <strong>of</strong> <strong>the</strong> poor live in <strong>the</strong> rural area and half <strong>of</strong> <strong>the</strong>m live below <strong>the</strong> poverty
line i.e. nearly 127 euros an adult a year. According to surveys conducted by
<strong>the</strong> National Statistics and Population Institute (INSD), poverty in <strong>the</strong> rural
area stood at 51% in 1994 and 1998 but rose to 52.3% in 2003. From 1994 to
1998, increasing poverty in <strong>the</strong> rural areas that do not produce cotton (51.5%
to 53.4%) was <strong>of</strong>fset by a sharp decline in <strong>the</strong> cotton production areas (50.1%
to 42.4%). The decline was due to <strong>the</strong> fact that <strong>the</strong> overall income <strong>of</strong> cotton
producers and <strong>the</strong> revenue per hectare increased respectively by 162% and
65% from 1994/1995 to 1997/1998. However from 1997/1998 to 2002/2003,
overall income increased by only 9%; revenue per hectare (whose increase is
indicative <strong>of</strong> an increase in producer income) dropped by 21%, half <strong>of</strong> which
135

was due to a fall in prices. Since subsidies brought about depression in world
prices, <strong>the</strong>y contributed to greater poverty in Burkina Faso.
The expansion <strong>of</strong> cotton farming did not take place at <strong>the</strong> expense <strong>of</strong> food
crops. Because <strong>of</strong> fertilizers acquired through loans, a good quantity <strong>of</strong> corn
was produced and thus increased food security. Fur<strong>the</strong>rmore, <strong>the</strong> technical
output <strong>of</strong> cotton producers and <strong>the</strong> food crop yield (2/3 <strong>of</strong> cultivated land)
increased markedly <strong>the</strong> yield <strong>of</strong> this produce in cotton production areas. The
flow <strong>of</strong> revenue from <strong>the</strong> sales <strong>of</strong> cotton grain has been attractive in <strong>the</strong> entire
cotton zone. Physical and social infrastructure has improved (schools and
health centers). It has also helped improve accessibility because <strong>of</strong> <strong>the</strong>
improvement <strong>of</strong> rural roads. Approximately 2 million individuals live directly
or indirectly on cotton revenue which accounts for 60% <strong>of</strong> <strong>the</strong> export
revenue <strong>of</strong> Burkina Faso. Cotton plays a key role in <strong>the</strong> fight against poverty
and in <strong>the</strong> development strategy <strong>of</strong> <strong>the</strong> country. However despite its rapid
growth, <strong>the</strong> cotton industry needs support. The measures necessary have been
studied with all <strong>the</strong> parties concerned and <strong>the</strong> major objective <strong>of</strong> <strong>the</strong> strategy
can be summed up as follows:
• organize producers better. The Burkina national cotton producer
union (UNPCB), established in 1998, bought 30% <strong>of</strong> <strong>the</strong> capital <strong>of</strong>
SOFITEX in 1999 and obtained <strong>the</strong> majority <strong>of</strong> seats on <strong>the</strong>
management committee <strong>of</strong> <strong>the</strong> industry setup within <strong>the</strong> framework
<strong>of</strong> <strong>the</strong> Government-SOFITEX-UNPCB inter-pr<strong>of</strong>essional agreement.
The technical assistance that <strong>the</strong> UNPCB received enabled it to
analyze issues better and to manage <strong>the</strong> industry efficiently.
• liberalize by preserving <strong>the</strong> advantages <strong>of</strong> <strong>the</strong> integrated industry.
SOFITEX's monopoly came to an end when two new companies
were established in <strong>the</strong> eastern and central zones. However, <strong>the</strong>
strength <strong>of</strong> <strong>the</strong> integrated cotton industry has been safeguarded;
supply <strong>of</strong> inputs <strong>of</strong> good quality to GPCs at <strong>the</strong> village level, thanks
to a credit guaranteed through <strong>the</strong> delivery <strong>of</strong> cotton grain, remove
from <strong>the</strong> villages <strong>the</strong> entire cotton produce at a flat price announced
before <strong>the</strong> sowing and before fiber research and quality control are
financed.
• increase productivity by advising <strong>the</strong> producers and providing loans
for <strong>the</strong> purchase <strong>of</strong> equipment.
• defend <strong>the</strong> interest <strong>of</strong> producers internationally, especially at <strong>the</strong>
WTO.
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IV. LIBERALIZATION OF THE INDUSTRY
The creation <strong>of</strong> two new areas requires <strong>the</strong> setting up <strong>of</strong> new institutions,
specially <strong>the</strong> Inter-Pr<strong>of</strong>essional Cotton Association, which will be assigned to
manage some critical tasks <strong>of</strong> <strong>the</strong> industry. As it is <strong>the</strong> case with SOFITEX,
UNPCB will own part <strong>of</strong> <strong>the</strong> authorized capital <strong>of</strong> each <strong>of</strong> <strong>the</strong> two companies
and shall be represented on <strong>the</strong>ir boards <strong>of</strong> directors. The DAGRIS group
established a company called SOCOMA based in <strong>the</strong> east <strong>of</strong> Burkina Faso.
DAGRIS owns <strong>the</strong> majority <strong>of</strong> shares. The UNPCB is also a major
shareholder <strong>of</strong> <strong>the</strong> company's capital.
The same thing applies to <strong>the</strong> PAUL REINHARTAGA/SOBA/AMEFERT
group, whose head <strong>of</strong>fice is in Ouagadougou. The group controls <strong>the</strong> cotton
production zone <strong>of</strong> <strong>the</strong> central region. It operates through a company called
FASO COTTON. The UNPCB equity participation in this company is similar
to that <strong>of</strong> SOCOMA in <strong>the</strong> east. The liberalization <strong>of</strong> <strong>the</strong> cotton industry <strong>of</strong>
Burkina Faso will help not only to increase production but also to improve
<strong>the</strong> marketing <strong>of</strong> Burkina cotton. Each <strong>of</strong> <strong>the</strong> two companies has its own
cotton fiber marketing network.
V. ADVICE TO PRODUCERS
SOFITEX provides support to producers through cotton correspondents (CC)
and cotton technical agents ( ATC). However <strong>the</strong> support is inadequate (1 CC
for more than 1,500 farmers and 1 ATC for more than 500 farmers). With <strong>the</strong>
assistance <strong>of</strong> <strong>the</strong> French Development Agency (AFD) and <strong>the</strong> European
Union (EU), SOFITEX set up a team that has already trained 28 management
advisors, who have carried out technical follow-up for 1450 producers. A
team <strong>of</strong> financial management advisors has also been set up within <strong>the</strong>
UNPCB and, it needs to be streng<strong>the</strong>ned.
1. Infrastructure and Equipment
Approximately 1000 kms <strong>of</strong> roads to be constructed at <strong>the</strong> cost <strong>of</strong> 15,000
euros per km were identified in 2002. However since <strong>the</strong>n cultivated cotton
farms has increased by 35% i.e. currently <strong>the</strong>re is a delay that should be
compensated for. This would require major external assistance but <strong>the</strong>
maintenance <strong>of</strong> <strong>the</strong> roads will be an assignment <strong>of</strong> <strong>the</strong> cotton companies.
Fur<strong>the</strong>rmore 150 stores for inputs toge<strong>the</strong>r with 50 community centres have
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een built with EU assistance at a cost <strong>of</strong> 10,000 euros per unit. Half <strong>of</strong> <strong>the</strong>
investment was provided by <strong>the</strong> EU and <strong>the</strong> remainder by SOFITEX and <strong>the</strong>
UNPCB. Programmes have been set to provide equipment for cotton
producers. The programs entails loans granted by Banks with an interest rate
<strong>of</strong> nearly 15% and an advance <strong>of</strong> 20% for <strong>the</strong> operation. The candidates are
shortlisted by an association composed <strong>of</strong> <strong>the</strong>ir peers. The equipment is a
plough, a cart and a pair <strong>of</strong> bulls.
2. Research
The cotton company pays to <strong>the</strong> INERA a contribution to finance research
designed to enhance technology that will enable <strong>the</strong> company to safeguard its
share <strong>of</strong> <strong>the</strong> international market and increase <strong>the</strong> productivity <strong>of</strong> <strong>the</strong> industry
for all <strong>the</strong> players. However, some aspects regarding <strong>the</strong> restoration <strong>of</strong> soil
fertility and environmental protection are not adequately addressed. The
challenge for cotton cultivation is more complex and more ambitious
because:
• Cotton is <strong>the</strong> only cash crop that provides regular income for farmers,
because <strong>the</strong> producer prices are fixed and <strong>the</strong> yield relatively stable;
• The income derived from cotton helps <strong>the</strong> farmer not only to cover
production costs and personal expenses but to accumulate capital in
<strong>the</strong> form <strong>of</strong> livestock, real estate and equipment;
• The steady growth <strong>of</strong> cotton production has accelerated development
through diversified and modernized agriculture (intensive farming <strong>of</strong>
food crops through <strong>the</strong> use <strong>of</strong> oxen-drawn ploughs and motorized
agriculture);
• Organizing production in village groupings; boosting <strong>the</strong> o<strong>the</strong>r
sectors <strong>of</strong> activity (trade, crafts, agro industries etc) ; improving
living conditions <strong>of</strong> <strong>the</strong> people through <strong>the</strong> construction <strong>of</strong>
infrastructure such as schools, dispensaries and water points.
• These achievements are indicative <strong>of</strong> <strong>the</strong> dynamism <strong>of</strong> <strong>the</strong> cotton
industry, on <strong>the</strong> one hand, and <strong>the</strong> performance <strong>of</strong> cotton research on
<strong>the</strong> o<strong>the</strong>r hand. The Cotton Programme <strong>of</strong> <strong>the</strong> Environment and
Agricultural Research Institute (INERA) has always received <strong>the</strong>
financial support <strong>of</strong> <strong>the</strong> cotton industry and <strong>the</strong> government <strong>of</strong>
Burkina Faso. Thanks to such funding, cotton research has made
available to producers between 1980 and 2000 a dozen <strong>of</strong> improved
varieties and a huge technological improvement. Formulas <strong>of</strong> mineral
and organic manure as well as technical methods have been
developed.
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Programmes designed to ensure phytosanitary health have been introduced
after <strong>the</strong> emergence <strong>of</strong> <strong>the</strong> resistance <strong>of</strong> Helicoverpa armigera to <strong>the</strong> chemical
family <strong>of</strong> pyrethrinoids. As a result, collective efforts were made in <strong>the</strong>
sou<strong>the</strong>rn region under a project called <strong>the</strong> Regional Management and
Prevention Project on <strong>the</strong> Resistance <strong>of</strong> Helicoverpa armigera to
Pyrethrinoids in <strong>the</strong> West Africa (PRPRAO). The project helped to arrest <strong>the</strong>
resistance and to increase cotton yield (grain and fiber) and thus enhanced
<strong>the</strong> performance <strong>of</strong> <strong>the</strong> cotton industry as a whole.
3. Quality Enhancement
SOFITEX has built two new ginneries. It has just set up a second lint removal
unit and also distributes bags for harvest and tarpaulin to prevent <strong>the</strong> cotton
fiber from being contaminated by o<strong>the</strong>r products. The African cotton
association is also seeking to promote an African label.
4. Horizontal Diversification
The cotton/corn rotation system has been efficient but it can be improved by
introducing legumes (niebe), which provide nitrogen necessary for cotton as
well as vegetable cover, which protects soil from erosion. Fur<strong>the</strong>rmore,
developing o<strong>the</strong>r promising sectors (niebe, fruits vegetables, vegetable oil and
animal husbandry) must be encouraged in areas where agricultural and
environmental conditions are favorable.
5. Vertical Diversification
Factories have been established to process cotton grains, which used to be
treated as waste, into table oil, soap and apple cakes for <strong>the</strong> domestic market.
Although <strong>the</strong>se products have increased rapidly, <strong>the</strong> demand for apple cakes
as animal feed has outstripped supply. Thanks to greater production, <strong>the</strong>
company's revenue from grain sales has tripled since 1995. However such
experience has not been as good in <strong>the</strong> textile industry. FILSAH, <strong>the</strong> only
weaving company remaining after <strong>the</strong> closure <strong>of</strong> Faso-Fani, received a loan
<strong>of</strong> 1 million US dollars from BEI in 1997. However, it is facing difficulties
after it has lost its major outlet in Cote d'Ivoire.
6. Risk Management
By combining installment sale and back-up fund, Burkina Faso has been able
to manage price risk up to a certain limit. But this practice showed its limits
when prices fell to <strong>the</strong>ir current level. In order to overcome this difficulty, <strong>the</strong>
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ack up fund has to be restructured. Fur<strong>the</strong>rmore, <strong>the</strong> national system should
be supported at <strong>the</strong> regional level in <strong>the</strong> event <strong>of</strong> major fluctuations <strong>of</strong> cotton
fiber revenue denominated in euros.
7. Multilateral Negotiations
Burkina Faso, toge<strong>the</strong>r with o<strong>the</strong>r countries concerned, is taking all measures
possible at <strong>the</strong> WTO to maintain <strong>the</strong> specific character <strong>of</strong> cotton and ensure
<strong>the</strong> rapid removal <strong>of</strong> subsidies, which has caused depression in <strong>the</strong> world
price <strong>of</strong> cotton. Burkina Faso loses 257 CFA francs per kilogram as a result
<strong>of</strong> subsidies i.e. more than 50 billion CFA francs in <strong>the</strong> company's mark up.
A coordination and follow up unit implementing <strong>the</strong> WTO agreement
(CNCS/OMC) has been set up with <strong>the</strong> support <strong>of</strong> <strong>the</strong> development partners.
For a better follow up Burkina Faso has recently opened an embassy to this
effect in Geneva.
At <strong>the</strong> sub-regional level, UEMOA countries <strong>of</strong> <strong>the</strong> WTO presented at <strong>the</strong>
extra-ordinary session <strong>of</strong> <strong>the</strong> agriculture committee <strong>of</strong> 26 September a
summary <strong>of</strong> <strong>the</strong>ir negotiation positions (G/AG/NG/W/188). The initiative was
in accordance with Chapter 5 <strong>of</strong> Additional Protocol II on sectoral policies <strong>of</strong>
<strong>the</strong> Union, which outlines <strong>the</strong> implementation <strong>of</strong> a common agricultural
policy designed to achieve food security within <strong>the</strong> Union, increase
agricultural productivity, use optimally production factors, improve market
conditions <strong>of</strong> agricultural produce, livestock and fisheries. The common
negotiation positions are based on <strong>the</strong> fact that <strong>the</strong> implementation <strong>of</strong> <strong>the</strong>
agreement on agriculture has not yielded <strong>the</strong> desired results i.e. greater
demand for <strong>the</strong> liberalization <strong>of</strong> agricultural policies by developed countries
and more measures in favor <strong>of</strong> developing countries and least developed
countries. The measures related to this concern market access policies,
internal support measures and export subsidies.
8. Prospects
The two major objectives consist in increasing producer income by boosting
productivity and in ensuring <strong>the</strong> sustainability <strong>of</strong> <strong>the</strong> industry by managing
soil degradation and increasing yield. Therefore emphasis should be laid on:
• Managing farm land
• Improving infrastructure and equipment
• Managing soil and environmental degradation
• Managing risks and securing fair prices after <strong>the</strong> removal <strong>of</strong> subsidies
• Exploring agricultural biotechnologies
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VI. CONCLUSION
Developing countries faced many challenges in <strong>the</strong>ir struggle for food
security. For many <strong>of</strong> <strong>the</strong>se countries, <strong>the</strong> objective <strong>of</strong> food self-reliance is
jeopardized by a population growth rate higher than that <strong>of</strong> food production.
Moreover resources are limited, lack <strong>of</strong> growth and development enhancing
technology, poor biodiversity and environmental degradation. According to
<strong>the</strong> FAO, one has to resort to all <strong>the</strong> solutions available such as using
phytosanitary treatment, soil improvement, fertilizers, crop choice and
rotation, irrigation, variety selection and resort to biotechnologies. Since <strong>the</strong>
majority <strong>of</strong> <strong>the</strong> people in developing countries leave in rural areas and depend
directly on agriculture for livelihood, this sector is <strong>the</strong> most important sector
<strong>of</strong> <strong>the</strong>ir economies. Using genetic engineering and trans-genesis,
safeguarding biographical diversity and protecting a viable environment seem
to open new and interesting avenues. Burkina Faso, in its quest for
productivity, has set up, since 2003, through its cotton industry and INERA,
a regulatory framework in order to help introduce genetically modified cotton
varieties for experiment in research stations.
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142

REPORT ON THE BENIN COTTON INDUSTRY
(Original in French)
Blaise A. Fadoegnon
Director, Cotton and Fibres Agricultural Research Centre
I. COTTON CULTIVATION IN BENIN
1. Importance <strong>of</strong> Cotton Cultivation in Benin
The cotton plant is <strong>of</strong> utmost economic importance in Benin. It is <strong>the</strong> second
major cash crop after palm oil. The cotton industry is <strong>the</strong> mainstay <strong>of</strong> <strong>the</strong>
rural and agro-industrial economy in Benin. Its contribution in terms <strong>of</strong> added
value is estimated at 13% <strong>of</strong> <strong>the</strong> GDP. It accounts for 80% and 90% <strong>of</strong> export
revenue and 35% <strong>of</strong> tax revenue (apart from customs duties). For <strong>the</strong>
government, <strong>the</strong> cotton industry is a strategic tool in <strong>the</strong> fight against poverty.
70 billion CFA francs worth <strong>of</strong> cotton grain is bought annually and supplied
to over 300,000 farmers. This indirectly provides 3 million individuals out <strong>of</strong>
Benin’s 6.5 million population with income.
2. Growth <strong>of</strong> <strong>the</strong> Cotton Industry in Benin (Case 1)
The Cotton Industry was insignificant during <strong>the</strong> colonial period but gained
momentum between 1960 and 1997. It underwent many fluctuations, mainly
because <strong>of</strong> shifts in development strategies and <strong>the</strong> way <strong>the</strong> industry is
organized. There have been five distinctive phases:
• Phase I (1960–1972): Cotton cultivation grew steadily toge<strong>the</strong>r with
<strong>the</strong> area <strong>of</strong> farmland and <strong>the</strong> correct use <strong>of</strong> phytosanitary treatments.
• Phase II (1973 – 1980): The agricultural policy focused on food crop
increase. So cotton production dropped from 50,000 tons in 1972 to 16
tons in 1997.
• Phase III (1981–1989): Cotton cultivation was revived through major
rural development projects. The yield increased from 15,000 tons in
1981 to a record level <strong>of</strong> 133,000 ton in 1986. It <strong>the</strong>n dropped to
105,000 tons in 1989 as a result <strong>of</strong> <strong>the</strong> cotton crisis on <strong>the</strong> world
market, <strong>the</strong> fall in cotton producer price, farmland reduction policy and
bad climate.
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• Phase IV (1990–1997): Record yields were broken each year except in
1992 when bad climate and parasites led to a minor drop in yield. The
most remarkable growth was that <strong>of</strong> 1993 when <strong>the</strong> yield exceeded by
71% that <strong>of</strong> <strong>the</strong> previous year and by 20% <strong>the</strong> industrial capacity. Such
growth was mainly due to an increase in farmland area.
• Phase V (1998 onward to date): Because <strong>of</strong> resistance, <strong>the</strong> growth <strong>of</strong>
cotton yield noticeable over two decades slowed down. The increase in
yield that took place in 2001 is an indication that <strong>the</strong> programme to
manage resistance initiated by <strong>the</strong> national agricultural research was
successful.
Unfortunately, <strong>the</strong> 2001 success was followed by new crises in <strong>the</strong> industry,
especially among pr<strong>of</strong>essionals. The cost <strong>of</strong> inputs continued to rise and <strong>the</strong>
market price <strong>of</strong> cotton dropped sharply.
Production ( Tons)
450000
400000
350000
300000
250000
200000
150000
100000
50000
0
1961-1962
1964-1965
Figure 1. Cotton Production in Benin, 1961-2004
II. PRODUCTION, EXPORT AND EMPLOYMENT IN THE
INDUSTRY
In Benin, cotton is produced on 300,000 small farms occupying a land area <strong>of</strong>
380,000 hectares in 1997 It later shrunk to 314,096 hectares in 2003 with a
144
1967-1968
1970-1971
1973-1974
1976-1977
1979-1980
1982-1983
1985-1986
1988-1989
1991-1992
1994-1995
1997-1998
2000-2001
2003-2004

yield <strong>of</strong> 332,500 tons <strong>of</strong> seed cotton. The yield <strong>of</strong> cotton fibre and seed stood
at 140,262 tons and 177,266 tons respectively <strong>the</strong> same year. The average
yield <strong>of</strong> ginned cotton during <strong>the</strong> same year stood at 42.50% for <strong>the</strong> fibre and
53.71% for seed. The major purchasers <strong>of</strong> Benin cotton are <strong>the</strong> following
firms:
- Dunavant : (Geneva, Switzerland)
- L’aiglon : (Geneva, Switzerland)
- Cotton Distributor Corporation (CDI) : (Lausanne, Switzerland)
- Paul Reinhart : Winterthour : (Switzerland)
- Devcot : (Lilles, France)
- COPACO : (Paris, Fance)
- Louis Dreyfus : (Belgium)
- Rally Bro<strong>the</strong>rs : (England)
- Mambo Commodities : (France)
- Well Bro<strong>the</strong>rs : (Paris, France)
Out <strong>of</strong> <strong>the</strong> entire seed cotton yield, only about 5% <strong>of</strong> ginned cotton is
consumed by <strong>the</strong> textile industry and oil producing factories in Benin. So
Benin does not have any cotton reserve. Jobs in <strong>the</strong> industry are occupied by
cotton farmers, mainly composed <strong>of</strong> family members or labourers from towns
or neighbouring countries and on <strong>the</strong> o<strong>the</strong>r hand input distributors and <strong>the</strong>ir
staff, transporters and <strong>the</strong>ir apprentices, ginners and <strong>the</strong>ir staff, back-up staff
recruited by <strong>the</strong> DPQC, <strong>the</strong> entire staff <strong>of</strong> <strong>the</strong> three major farmers’
associations (AIC, CSPR and CAGIA) and many staff members <strong>of</strong> farmers’
organizations. Fur<strong>the</strong>rmore, revenue from cotton is <strong>the</strong> driving force <strong>of</strong> entire
rural micro-economy (food, clothing, education, health, etc.)
1. Major Cotton Facilities in Benin
Most <strong>of</strong> <strong>the</strong> cotton industry, which was entirely state-run, has gradually
moved into <strong>the</strong> hands <strong>of</strong> <strong>the</strong> private sector because <strong>of</strong> government divestiture.
So <strong>the</strong> government and <strong>the</strong> private sector are both involved in <strong>the</strong> industry in
some cases. The following diagram illustrates <strong>the</strong> institutional structure <strong>of</strong> <strong>the</strong>
industry. The three new management entities are in bold. The dotted lines
indicate financial flows between <strong>the</strong> players. In order to carry out reforms and
perform tasks shifted to <strong>the</strong>m by <strong>the</strong> government, private firms <strong>of</strong> <strong>the</strong> industry
set up pr<strong>of</strong>essionals organizations operating in every segment <strong>of</strong> <strong>the</strong> industry,
and established technical entities assigned to perform <strong>the</strong> main tasks <strong>of</strong> <strong>the</strong>
industry.
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In <strong>the</strong> beginning <strong>the</strong> various players <strong>of</strong> industry used to belong to three
pr<strong>of</strong>essional organizations:
• Benin Federation <strong>of</strong> Producers (FUPRO) is <strong>the</strong> supreme body <strong>of</strong> <strong>the</strong>
network <strong>of</strong> farmers’ organizations in villages, counties and districts.
FUPRO’s role is to support production and coordinate <strong>the</strong> marketing
<strong>of</strong> cotton seed through CAGIA and its main facilities (GV, UCP and
UDP) and protect producers’ interests. It is <strong>the</strong> producers’ forum <strong>of</strong>
consultation.
• Benin Association <strong>of</strong> Pr<strong>of</strong>essional Ginners (APEB) is <strong>the</strong> ginners’
forum <strong>of</strong> consultation. It buys and gins <strong>the</strong> entire cotton seed
produce.
• Benin Association <strong>of</strong> Agricultural Input Distributors (GPDIA) is <strong>the</strong>
forum where input distribution firms consult each o<strong>the</strong>r. It represents
input distributors at inter-organizational negotiations.
Some breakaway farmers’ organizations have also been established. They are
among o<strong>the</strong>rs <strong>the</strong> Association Producer <strong>Group</strong>ings (AGROP), <strong>the</strong> National
Federation <strong>of</strong> Agricultural Producers (FENAGROP) and <strong>the</strong> National
Federation <strong>of</strong> Cotton Producers (FENAPROC). O<strong>the</strong>r input distribution firms
have also created <strong>the</strong> Benin Association <strong>of</strong> Agricultural Input Distributors.
With government’s assistance and <strong>the</strong> support <strong>of</strong> development partners, <strong>the</strong>
original organizations stated here above set up three technical entities to run
<strong>the</strong> affairs <strong>of</strong> industry. They are:
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• Cooperative <strong>of</strong> Agricultural Input Supply and Management
(CAGIA). Its role is to centralize <strong>the</strong> input needs cotton producers,
and organize <strong>the</strong> selection <strong>of</strong> input distribution firms that supply
producers.
• Payment and Recovery Union (CSPR-GIE). It ensures that producers
are paid for cotton <strong>the</strong>y sell to ginners and <strong>the</strong>y pay for inputs lent to
<strong>the</strong>m by input distributors so that needs for input during following
season can be satisfied.
• Inter-organizational Cotton Association (AIC). It fosters ties among
stakeholders <strong>of</strong> <strong>the</strong> industry, and dialogue between <strong>the</strong>m and <strong>the</strong>
government. It also determines, manages and provides funding for all
activities and functions that ensure <strong>the</strong> industry’s sustainability and
viability (research, seed production, training <strong>of</strong> producers, cotton
farms, etc.)
In addition to <strong>the</strong> above-stated players, many o<strong>the</strong>r government bodies
technically support <strong>the</strong> cotton industry such as <strong>the</strong> Ministry <strong>of</strong> Agriculture,
Animal Husbandry and Fisheries. Agricultural Research Centre – Cotton and
Fibre (CRA-CF/INRAB) is under <strong>the</strong> Benin National Agricultural Research
Institute (INRAB). It designs and innovates new agricultural techniques for
farmers, enhances plant variety and provides phytosanitary protection for
cotton cultivation.
The CRA-CF increases and manages cotton seeds supplied to farmers, helps
to devise technical specifications <strong>of</strong> fertilizers and phytosanitray products to
be imported, controls <strong>the</strong> quality <strong>of</strong> imported inputs, test products proposed
by suppliers, makes recommendation to <strong>the</strong> National Phytopharmaceutical
Products Control and Licensing Commission (CNAC) on standard
agropharmaceutical formulas and trains trainers and <strong>of</strong>ficers <strong>of</strong> some input
distributing private companies. CRA-CF has an entomology laboratory in
Cana, Bohicon and a 20 saw small ginnery in Parakou.
• Quality and Standards Promotion Department (DPQC): It
handles technical assistance concerning quality and standards. It
specifically controls seed quality before distribution, monitors farms
designed for cotton seed cultivation, inspects cotton markets,
monitors <strong>the</strong> technical quality <strong>of</strong> ginning and controls cotton
processing and export.
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• Plant Protection and Phytosanitary Control Service (SPVCP): It
is under <strong>the</strong> Department <strong>of</strong> Agriculture and ensures that standards are
complied with when it comes to <strong>the</strong> use <strong>of</strong> phytopharmaceutical
products and phytosanitary control. Under its purview falls <strong>the</strong>
CNAC, which it heads and whose secretariat it houses. It approves all
phytopharmaceutical products all over <strong>the</strong> country before <strong>the</strong>y are
used by farmers.
• Department <strong>of</strong> Training and Extension Work (DIFOV): It is
directly under <strong>the</strong> Ministry <strong>of</strong> Agriculture, Animal Husbadry and
Fisheries and conducts <strong>the</strong> affairs <strong>of</strong> CeRPAs. It also handle
agricultural extension, trains trainers and producers, ensures that
trainers monitor closely <strong>the</strong> producers and monitors, supports and
advises trainers.
• Regional Centres for Agricultural Promotion (CeRPA): There is
one in each province. Their task is to:
- enhance agricultural produce (plants, animals and forestry)
- improve related infrastructure (rehabilitation <strong>of</strong> wetlands, well
construction in villages and gardens, training <strong>of</strong> farmers to
market agricultural produce and to recover loans
- agricultural extension
The various units <strong>of</strong> CePRA are represented in every cotton farming area. An
area extension supervisor monitors one or several districts while an extension
worker (APV) handles training in one or several villages.
National Agricultural Produce Price Control Bureau (ONS): It controls
<strong>the</strong> prices <strong>of</strong> agricultural produce, especially cotton. However, <strong>the</strong> price
control mechanism now questioned since ginning was open to private firms
and entrepreneurs. The need to control prices is generally accepted but it
function remains to be determined. So <strong>the</strong> principles <strong>of</strong> a new price control
mechanism that is in consonance with <strong>the</strong> new set-up should now be laid
down.
III. POLICY ON INPUT SUPPLY AND DISTRIBUTION
The Benin Cooperative <strong>of</strong> Agricultural Input Supply and Management
(CAGIA-Benin) is <strong>the</strong> farmers’ institution that is in charge <strong>of</strong> selecting and
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assessing input distributors in line with <strong>the</strong> standards set by <strong>the</strong> Cotton Input
Commission. The agricultural services under <strong>the</strong> Ministry <strong>of</strong> Agriculture
exercise <strong>the</strong>ir prerogatives in accordance with <strong>the</strong> existing relevant laws and
regulations. At <strong>the</strong> beginning <strong>of</strong> every agricultural season, CAGIA invites
Benin agricultural input distribution private firms to make bids for <strong>the</strong> supply
<strong>of</strong> cotton inputs to village cotton producer associations.
1. Marketing <strong>of</strong> Cotton Inputs
The marketing <strong>of</strong> cotton inputs is done by national private firms selected to
distribute inputs. Only one firm sells cotton inputs to farmers <strong>of</strong> <strong>the</strong> same
district. Upfront sales are done by both cotton farmers’ village associations
and individual farmers. But sales on credit are done by cotton farmers’ village
associations only on <strong>the</strong> basis <strong>of</strong> order form. District farmers’ organizations
have 30 calendar days, starting on <strong>the</strong> date <strong>the</strong> ceding price <strong>of</strong> cotton inputs is
set, to collect and distribute to village associations input order forms. The
price must be set at least 21 days after distributors have been notified <strong>of</strong>
selections. Distributors selected have a maximum <strong>of</strong> 120 days to deliver to
cotton farmers’ associations <strong>the</strong> inputs ordered. They must transmit to <strong>the</strong>
President <strong>of</strong> CAGIA at least 30 days after receiving order forms from cotton
farmers’ village associations at least pro<strong>of</strong> <strong>of</strong> order from a manufacturer
(acknowledgement <strong>of</strong> receipt issued by a manufacturer, copies <strong>of</strong> letter <strong>of</strong>
credit, copies <strong>of</strong> bill <strong>of</strong> lading, copies <strong>of</strong> test certificates, etc.). If <strong>the</strong>y fail to
do so, <strong>the</strong>y are considered wanting and <strong>the</strong>refore replaced.
2. Type and Quality <strong>of</strong> Cotton Inputs
CRA-CF is <strong>the</strong> only competent authority that determines <strong>the</strong> type,
composition, quality, packaging and labeling <strong>of</strong> cotton fertilizers for
marketing in Benin. In accordance with existing legislation, CNAC and
CRA-CF are <strong>the</strong> only competent bodies that determine <strong>the</strong> type, composition,
quality, packaging and labeling <strong>of</strong> pesticides for marketing in Benin. The
CRA-CF and <strong>the</strong> SPVCP are <strong>the</strong> bodies competent to control <strong>the</strong> quality <strong>of</strong>
inputs. CAGIA checks <strong>the</strong> quality <strong>of</strong> cotton inputs before <strong>the</strong>y are transported
out <strong>of</strong> <strong>the</strong> factory for distribution. CRA-CF and SPVCP also inspect <strong>the</strong>m
before <strong>the</strong>y are used. Once <strong>the</strong> quality control results are out, distributors are
authorized to distribute <strong>the</strong> inputs. However, CRA-CF and SPVCP can
tentatively authorize <strong>the</strong> distribution <strong>of</strong> inputs based on <strong>the</strong> first quality
control results. In case <strong>the</strong> results <strong>of</strong> <strong>the</strong> second test and counter-tests are
below standard, <strong>the</strong> distributors concerned must withdraw all <strong>the</strong> defective
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inputs at <strong>the</strong>ir own expense. The cost <strong>of</strong> <strong>the</strong> tests are borne by <strong>the</strong> distributors.
CAGIA has <strong>the</strong> authority to take samples <strong>of</strong> <strong>the</strong> inputs for testing when <strong>the</strong>y
are distributed among <strong>the</strong> cotton farmers’ village associations. It has absolute
powers to inspect and test inputs and recommend, if need be, to that <strong>the</strong>
Cotton Input Commission repeal a distribution contract.
3. Sale Price <strong>of</strong> Cotton Inputs
The upfront and credit sale price <strong>of</strong> cotton inputs are fixed by <strong>the</strong> Cotton
Input Commission and <strong>the</strong>oretically authorized by <strong>the</strong> government 21 days
after price proposals are made. All cotton fertilizers, just like cotton
insecticides, are sold at a uniform price throughout Benin. The price <strong>of</strong>
processing machines is also <strong>the</strong> same all over <strong>the</strong> country. Since price
equalization has been made necessary because <strong>of</strong> uniform prices <strong>of</strong> goods all
over Benin, a specific loan repayment price for input is fixed toge<strong>the</strong>r with
expenses specific to <strong>the</strong> area <strong>of</strong> every distributor plus a mark-up <strong>of</strong> 3% <strong>of</strong> <strong>the</strong>
turnover.
4. Recovery <strong>of</strong> Loans for Inputs
During every agricultural season, input distributors grant to cotton producers
loans that <strong>the</strong> distributors have acquired from banks through a guarantee. The
loans are <strong>the</strong>n recovered by <strong>the</strong> Loan Payment and Recovery Bureau (CSPR)
and paid to <strong>the</strong> distributors by 16 December <strong>of</strong> every year after payments to
farmers' organizations are deducted on <strong>the</strong> same day. The payments are added
to <strong>the</strong> payments made by ginners to producers before <strong>the</strong>y start delivering
cotton-grains. The CSPR levies a fee <strong>of</strong> 1% on <strong>the</strong> loans recovered as
contribution to <strong>the</strong> operation costs <strong>of</strong> <strong>the</strong> CSPR and CAGIA-BENIN.
5. Selection <strong>of</strong> Distributors <strong>of</strong> Cotton Inputs
A sole input distributor is posted to each district. So aspiring distributors
must first <strong>of</strong> all be selected by farmers' organizations. They must prove to
CAGIA-BENIN that <strong>the</strong>y have requisite technical and financial ability to
fulfill producers' needs. A distributor is considered selected for a district if,
by a simple majority, <strong>the</strong> farmers' organizations notify him that he can buy or
has been reselected. In case <strong>the</strong> farmers' organizations fail to reach a majority,
<strong>the</strong> Vote Counting Commission shall deliberate to select a distributor for <strong>the</strong>
district. The distributors selected must be able to supply all <strong>the</strong> fertilizers and
insecticides. They must also indicate <strong>the</strong>ir CAF COTONOU prices. After
distributors have provided pro<strong>of</strong>s <strong>of</strong> <strong>the</strong>ir technical and financial abilities,
CAGIA-BENIN will, at first, shortlist those selected by farmers'
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organizations. Both previous and new candidates are shortlisted. The
shortlisting <strong>of</strong> previous candidates is done through a copy <strong>of</strong> a reselection
application form filled in by a farmers' organization as well as <strong>the</strong> original <strong>of</strong>
a CAGIA-BENIN form. A distributor cannot be shortlisted if all <strong>the</strong> districts
that chose him as distributor account for less than 5% <strong>of</strong> <strong>the</strong> cotton farms <strong>of</strong>
Benin.
Fur<strong>the</strong>rmore, CAGIA-BENIN considers <strong>the</strong> financial indicators provided by
<strong>the</strong> distributors shortlisted and fixes per produce a reference CAF price,
which will be ei<strong>the</strong>r <strong>the</strong> lowest CAF price acquired among <strong>the</strong> prices
proposed by shortlisted distributors or <strong>the</strong> CAF price acquired from <strong>the</strong>
international market. CAGIA-BENIN <strong>the</strong>n requests each shortlisted
distributor to align his CAF prices with <strong>the</strong> CAF reference prices. Short listed
candidates are finally selected only if <strong>the</strong>y align all <strong>the</strong>ir CAF prices with <strong>the</strong>
CAF reference prices.
Shortlisted distributors and/or reselected distributors who have <strong>of</strong>fered <strong>the</strong>
lowest CAF price per hectare for fertilizer and insecticide receive allocations
as bonuses from <strong>the</strong> districts depending on <strong>the</strong> distributor’s indicated
financial ability. During each farming season, a contract is signed between
farmers' organizations and <strong>the</strong> distributor <strong>of</strong> <strong>the</strong> district. The contract is
endorsed by <strong>the</strong> Cotton Inputs Commission. The contract can be renewed for
<strong>the</strong> following season at <strong>the</strong> written request <strong>of</strong> farmers' organizations. It is
addressed to <strong>the</strong> distributor with a copy and acknowledgement <strong>of</strong> receipt to
<strong>the</strong> President <strong>of</strong> CAGIA-BENIN. Such a request is usually approved by
CAGIA-BENIN so as to ensure that contracts are indeed renewed.
6. Purchases by Farmers' Organizations
Each farmers' organization chooses its cotton inputs distributor. So each
farmers' organization expresses to its chosen distributor its intention to buy or
to renew a contract. If a distributor acquires a simple majority <strong>of</strong> individuals
expressing <strong>the</strong>ir desire to purchase from him or <strong>the</strong> farmers' organizations <strong>of</strong>
a district expressing <strong>the</strong>ir desire to renew his contract, he is <strong>the</strong>refore
considered <strong>the</strong> distributor selected by all <strong>the</strong> farmers' organizations <strong>of</strong> that
district. In case <strong>the</strong>re is failure to choose a distributor by an outright
majority, <strong>the</strong> Vote Counting Commission shall deliberate to choose a
distributor for <strong>the</strong> district. Selection and contract renewal standards as well as
<strong>the</strong> planned supply <strong>of</strong> inputs every year are clearly spelt out in <strong>the</strong> terms <strong>of</strong>
reference.
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IV. DIFFICULTIES TO INCREASE COTTON PRODUCE IN
BENIN
Four agricultural seasons after <strong>the</strong> introduction <strong>of</strong> reforms in <strong>the</strong> cotton
industry, <strong>the</strong> following difficulties impede an increase in cotton produce in
Benin:
• lack <strong>of</strong> a regulatory framework after divestiture;
• non-compliance by some players with <strong>the</strong> rules by <strong>the</strong> various
pr<strong>of</strong>essions;
• outcome <strong>of</strong> bids for <strong>the</strong> selection <strong>of</strong> input distributors are always
contested and parallel agricultural inputs are provided by some
unlicensed operators;
• increase in <strong>the</strong> delivery prices <strong>of</strong> inputs;
• poor training <strong>of</strong> grassroots producers after <strong>the</strong> introduction <strong>of</strong> reforms
in <strong>the</strong> rural sector by <strong>the</strong> World Bank thus affecting production;
• ginners disagree on <strong>the</strong> distribution <strong>of</strong> cotton-grain because <strong>of</strong> overginning
(587,500 tons) compared with 350,000 tons <strong>of</strong> national
produce, which continues to decline;
• some ginners have refused to gin because <strong>of</strong> a drop in world prices <strong>of</strong>
cotton;
• poor management <strong>of</strong> some farmers' organizations thus bringing
complaints on <strong>the</strong> way <strong>the</strong> loans are manned (guarantee mechanism
in most village groupings);
• lack <strong>of</strong> grassroots' confidence in <strong>the</strong> managers <strong>of</strong> farmers'
organizations;
All <strong>the</strong>se disputes and <strong>the</strong>ir attendant disruptions adversely affect <strong>the</strong>
efficiency <strong>of</strong> <strong>the</strong> entire cotton industry in Benin. They are for instance:
• agricultural inputs are belatedly ordered bring about higher costs, late
supply <strong>of</strong> inputs, vulnerability <strong>of</strong> cotton plants to parasites and low
yield;
• long delay in paying producers for <strong>the</strong>ir cotton-grain;
• arrears estimated currently at 9 billion CFA francs;
• dwindling resources for important activities such as research,
farmland, extension, training, quality control, etc…);
• disrupted production, marketing, ginning and seed distribution;
• disrupted activities <strong>of</strong> management institutions <strong>of</strong> <strong>the</strong> cotton industry
such as <strong>the</strong> AIC and <strong>the</strong> CSPR.
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V. REGULATION OF THE USE OF GENETICALLY MODIFIED
COTTON
Genetically modified organisms have become, over <strong>the</strong> past few years, a
burning and controversial issue on <strong>the</strong> international scene. In fact several
familiarization and sensitization meetings were organized in 2001 by <strong>the</strong>
National Agricultural Research Institute <strong>of</strong> Benin (INRA B). Since 6 March
2002, <strong>the</strong> government <strong>of</strong> Benin has been compelled to abide by a five-year
FAO moratorium imposed on African countries. The moratorium requires a
media campaign and a national committee that ensures <strong>the</strong> application <strong>of</strong>
measures concerning genetically modified organisms, studies and bills to
parliament. All <strong>the</strong>se activities are financed by <strong>the</strong> FAO. The tasks outlined in
<strong>the</strong> moratorium are being carried out:
• Researchers <strong>of</strong> <strong>the</strong> National Agricultural Research Institute <strong>of</strong> Benin
(INRAB) actively takes part in brainstorming sessions on genetically
modified organisms at both national and international levels;
• INRAB houses many documents on genetically modified organisms
and has initiated several familiarization ga<strong>the</strong>rings;
• The National Bio-security Committee has already been set up.
VI. ACTIONS TAKEN BY BENIN REGARDING COTTON AT THE
WTO
On 24 April 2003, Benin pushed with Brazil for legal action against <strong>the</strong>
United States to secure compensation for <strong>the</strong> damages caused by <strong>the</strong> heavy
farm subsidies that America grants to its cotton producers, which brought
about an imbalance in member countries <strong>of</strong> <strong>the</strong> WTO.
Since <strong>the</strong>n Benin has tabled a resolution soliciting <strong>the</strong> solidarity <strong>of</strong> ACP and
ECOWAS countries affected by <strong>the</strong> American cotton subsidies. Moves have
been made to ensure Benin's active participation in all negotiations within <strong>the</strong>
WTO to argue <strong>the</strong> case for cotton. In this regard, Benin has participated in
several meetings including <strong>the</strong> ministerial meeting on regional consultations
on <strong>the</strong> cotton industry in <strong>the</strong> UEMOA area, which took place in
Ouagadougou from 16 to 20 June 2003 and <strong>the</strong> 5
153
th WTO ministerial
conference, which took place from 10 to 14 September 2003 in Cancun.
Fur<strong>the</strong>rmore, Benin hosted <strong>the</strong> workshop on cotton organized in Cotonou
from 23 to 24 March 2004 by <strong>the</strong> WTO secretariat.

On 1 st August 2004, <strong>the</strong> WTO General Council adopted major decisions on
cotton concerning not only Benin but all developing countries that are
member countries <strong>of</strong> <strong>the</strong> WTO. The decisions are <strong>the</strong> backbone <strong>of</strong> <strong>the</strong>
negotiations that have taken place to date. The decisions are mainly as
follows:
• The Doha Ministerial Declaration requires that all forms <strong>of</strong> export
subsidies be reduced and be gradually removed. Member countries
have agreed to work out ways <strong>of</strong> removing all forms <strong>of</strong> export
subsidies and o<strong>the</strong>r export measures at a reasonable deadline.
• The start <strong>of</strong> <strong>the</strong> current phase <strong>of</strong> negotiations on agriculture is <strong>the</strong>
mandate outlined under Paragraph 13 <strong>of</strong> <strong>the</strong> Doha Declaration. The
mandate is based on a long-term reform <strong>of</strong> <strong>the</strong> agreement on
agriculture, which requires that a fair trade system be established and
market-oriented through a fundamental reform programme.
• In order to achieve this goal, <strong>the</strong> approach must consist <strong>of</strong> a special
treatment for developing countries <strong>of</strong> <strong>the</strong> WTO. Since agriculture is
<strong>of</strong> major significance for developing member countries, such
countries must conduct agricultural policies that support <strong>the</strong>ir
development objectives, poverty reduction strategies, food security
and livelihood.
• The General Council recognizes <strong>the</strong> importance <strong>of</strong> cotton for some
countries, especially developing countries and least developed
countries. So cotton will be dealt with emphatically during
negotiations on agriculture. The provisions <strong>of</strong> <strong>the</strong> framework
identified as well as <strong>the</strong> sectoral initiative on cotton are a basis for
this approach. The extraordinary session <strong>of</strong> <strong>the</strong> Agricultural
Committee will give priority to <strong>the</strong> cotton issue regardless <strong>of</strong> o<strong>the</strong>r
sectoral initiatives. A sub-committee on cotton shall meet regularly
and shall report to <strong>the</strong> extraordinary session <strong>of</strong> <strong>the</strong> Agricultural
Committee, which will consider <strong>the</strong> progress made. The deliberations
will address all policies that distort trade in <strong>the</strong> cotton sector,
particularly market access, internal support and export competition as
stipulated under <strong>the</strong> Doha Declaration.
• Coherence will be at <strong>the</strong> centre <strong>of</strong> negotiations. The undertakings and
measures outlined shall be carried out according to a specific
schedule and modalities. The undertakings shall be carried out at
specific periods. The schedule shall be coherent with <strong>the</strong> internal
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eforms <strong>of</strong> member countries. In this regard, <strong>the</strong> General Council
shall instruct <strong>the</strong> Director General to consult with relevant
international organizations, including <strong>the</strong> Bretton Woods institutions,
<strong>the</strong> Food and Agriculture Organization and <strong>the</strong> International Trade
Centre to gear existing programmes and all additional resources
toward <strong>the</strong> development <strong>of</strong> economies in which cotton is <strong>of</strong> utmost
significance.
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156

Abstract
SUDAN COTTON RESEARCH CHALLENGES AND
EFFICIENCY ENHANCEMENT
El Fadil Abdel Rahman Babiker
Coordinator Cotton Research Program, &
Abdin Mohamed Ali El Faki
General Director, Sudan Cotton Company Ltd.
The year 2004 marked <strong>the</strong> Massey Jubilee <strong>of</strong> <strong>the</strong> cotton research program with
more than 50 varieties and improved lines had been released, in addition to
varying recommendations on cultural practices and pest management. In spite <strong>of</strong>
this, <strong>the</strong> average lint yield is 420kg/ha as compared to <strong>the</strong> world average <strong>of</strong> 635
kg/ha. Hence, for <strong>the</strong> Sudan to remain competitive in cotton industry, future
research perspective should be cost effective, best fitted into <strong>the</strong> integrated crop
management strategy, generating technologies that are highly adoptable and
commercially appealing. The need for international or regional cotton forums
under <strong>the</strong> auspices <strong>of</strong> IDB to enhance scientific interaction and commodity
promotion, should be a focused priority.
I. INTRODUCTION
Though, <strong>the</strong> year 2004 marks <strong>the</strong> 100 th anniversary <strong>of</strong> <strong>the</strong> Cotton Research
Program, commercial cotton had been grown in <strong>the</strong> Eastern Sudan (Tokar Delta)
since 1867 where traditional organic farming is still in practice. Since <strong>the</strong>n, cotton
has historically acquired strong presence in Sudanese agriculture, both as a
leading cash crop and as a foreign exchange earner for <strong>the</strong> national economy. The
objectives <strong>of</strong> <strong>the</strong> research program have been problem oriented, measuring up to
<strong>the</strong> emerging challenges and can be summarized as follows:
• Varietal improvement for higher yields, earliness, disease and insect
resistance.
• Improvement and diversification <strong>of</strong> fibre quality by breeding new
varieties, matching <strong>the</strong> progress in <strong>the</strong> textile and spinning technology.
• Vertical upgrading <strong>of</strong> productivity via generation <strong>of</strong> cost effective
technological packages that fit into <strong>the</strong> integrated crop management
(ICM) strategy .
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Today, however, cotton production is subjected to crucial challenges such as:
stagnating low yields, escalating costs <strong>of</strong> production, low cotton prices, inefficient
pest management, stickiness, yield variability within <strong>the</strong> same location, late cotton
picking, subsidies in <strong>the</strong> developed countries, diminishing finances and
competition from o<strong>the</strong>r crops that have sometimes challenged <strong>the</strong> merits <strong>of</strong>
continuing cotton cultivation. Yet, all <strong>the</strong> parties involved in cotton production
are optimistic that Sudanese cotton would regain and even surpass its former
position, through enhancement and implementation <strong>of</strong> technology. For this
prospect to become reality, significant improvements in productivity ,institutional,
policy and financial aspects must be made if <strong>the</strong> cotton industry is to prosper and
achieve competitiveness in <strong>the</strong> global economy. These improvements have to be
taken as challenges by <strong>the</strong> whole spectrum involved in cotton sector i.e.
researchers, extensionist, production agronomist, economist and policy makers.
II. CHALLENGES TO COTTON PRODUCTION FROM RESEARCH
PERSPECTIVE
1. Stagnating Low Yields
The number <strong>of</strong> released varieties to date totaled above 50 . However, <strong>the</strong> average
lint yield is about 420 kg/ha, estimated to be 1 /3 <strong>of</strong> research plots and 2 /3 <strong>of</strong> <strong>the</strong>
world average ( 635kg/ha) and by far less than that <strong>of</strong> Egypt and Syria as
exhibited in figure 1.
Lint yield kg/ha
1600
1400
1200
1000
800
600
400
200
0
2. Diseases
Figure 1. Average Lint Yield
Sudan Eygpt Syria Congo World Mean
158
90/91
94/95
2000/1
2001/2
The three major diseases are leafcrul, bacterial blight and fusarium wilt with <strong>the</strong>
outbreak <strong>of</strong> leaf curl and bacterial blight diseases, <strong>the</strong> program was geared towards

developing resistant varieties utilizing <strong>the</strong> available gene pool. The gene
combination B2B6 gave adequate and durable protection against <strong>the</strong> prevailing
bacterial blight race. The appearance <strong>of</strong> a new race in <strong>the</strong> late sixties has been a
great challenge that prompted <strong>the</strong> search for new genes combinations. Sources <strong>of</strong>
resistance were identified and different gene combinations conferring satisfactory
resistance are on final evaluation. The leafcurl, however, was controlled in <strong>the</strong>
barbadense material through <strong>the</strong> incorporation <strong>of</strong> a single partially dominant gene.
Fusarium wilt resistance was also fitted into <strong>the</strong> newly released barbadense
material.
3. Pest Management
The major insects pest are : Bollworms, Jassids, thrips, flea beatles, whiteflies and
aphids. The chemical pesticides have been <strong>the</strong> main method <strong>of</strong> control but has <strong>the</strong>
following problems:
• Highly costive (30-40% <strong>of</strong> total cost).
• Non-selectivity <strong>of</strong> insecticides used, being toxic to both insects and natural
enemies.
• Flare up <strong>of</strong> secondary pests i.e. Bollworm used to be secondary pests in <strong>the</strong>
1960’s and now it is <strong>the</strong> major pest.
• Pesticides resistance where insects like bollworms and whiteflies are
developing resistance.
Pest management has been a challenging problem to researchers, hence, FAO
sponsored IPM Project was executed in <strong>the</strong> 1980-1990 with precise
recommendations on:
• Economic threshold level (ETL)
• Gradual adoption <strong>of</strong> non-sprayed cotton strategy.
• Pesticides management to be cost effective.
• Insecticides should be as components into IPM strategy but not <strong>the</strong> only
method <strong>of</strong> control.
4. Yield Variability within <strong>the</strong> Same Location
Farmers in <strong>the</strong> same location usually obtain varying yields, despite using <strong>of</strong> <strong>the</strong>
same inputs. The variability is in <strong>the</strong> range <strong>of</strong> 300-1200kg/ha <strong>of</strong> lint . Thus
efficient agronomic management <strong>of</strong> <strong>the</strong> basic cultural practices and <strong>the</strong>
understanding <strong>of</strong> <strong>the</strong> inputs (Water, fertilizers. Insecticides) interactions (i.e.
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avoiding rank growth and unnecessary use <strong>of</strong> insecticides) by production
agronomist and farmers is <strong>the</strong> decisive factor in enhancing <strong>the</strong> productivity.
5. Stickiness
The problem started in <strong>the</strong> early 1960’s but <strong>of</strong> little importance. The main
contaminant causing <strong>the</strong> stickiness was <strong>the</strong> honeydew secretions <strong>of</strong> <strong>the</strong> whitefly
(Bemisia tabaci). During <strong>the</strong> 1980’s it became more serious and constituted a
bottle-neck to <strong>the</strong> marketability <strong>of</strong> Sudan cotton. The problem is more pronounced
on sprayed cotton as compared to <strong>the</strong> non-sprayed one. This reflects <strong>the</strong> use <strong>of</strong>
non-selective insecticides that are toxic to both insects and natural enemies . It can
also be controlled by adopting <strong>the</strong> recommended seed rate, timely planting,
optimum irrigation, early picking and <strong>the</strong> recommended crop rotation.
6. High Cost <strong>of</strong> Production
This continue to increase, even though yields are stagnating. To sustain cotton
production, we have to increase yield more efficiently by decreasing <strong>the</strong>
production cost. Accordingly, farmers characterization according to <strong>the</strong>ir
agronomic management is very important . Thus research recommendations
should be farmers specific tailored to <strong>the</strong> management ability, efficient use <strong>of</strong>
inputs, understanding <strong>of</strong> plant-input interaction and <strong>the</strong> projected yield level
ra<strong>the</strong>r than blanket recommendations for all farmers, This will result in reduction
<strong>of</strong> cost <strong>of</strong> production, hence, committed farmers will produce high yields
efficiently at lower cost whereas non-committed farmers will be supplied with
relatively low inputs levels (low cost), since <strong>the</strong>y are producing low yields
anyway. Generation <strong>of</strong> multi-disciplinary technological packages fitting <strong>the</strong> ICM
with concomitant reduction <strong>of</strong> production cost, has been one <strong>of</strong> <strong>the</strong> major
objectives <strong>of</strong> <strong>the</strong> cotton research program. Implementation <strong>of</strong> this objective,
however, needs a wide scope pr<strong>of</strong>essional vision and understanding via <strong>the</strong>
production agronomists.
7. Machine Planting and Picking
Both cotton planters and pickers had been well researched and even commercially
adopted by some schemes during <strong>the</strong> 1970’s and 1980’s were abandoned due to
socioeconomic reasons. Today, however, shortage <strong>of</strong> labour is a chronic problem,
hence, re- introduction <strong>of</strong> machine planting and picking is <strong>of</strong> great need.
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8. Instrument Based Fiber Quality Testing
The price <strong>of</strong> cotton is determined by quality and <strong>the</strong> spinners are more confident
in instrument based testing as compared to <strong>the</strong> traditional manual classing. Sudan
started adopting HVI classing system, however, personnel training and more
instruments are needed.
9. Private Sector Involvement in Research
Cotton research is performed via a government run corporation (ARC.) Private
sector involvement in research is not possible at <strong>the</strong> present time because it is a
long time investment with unpredictable financial consequences. Therefore, no
local private company is ready to be up to this challenge, unless pr<strong>of</strong>itability is
granted.
10. Biotechnology
We do believe that new technologies must be investigated and researchers should
measure up to <strong>the</strong> standard <strong>of</strong> <strong>the</strong>ir colleagues in <strong>the</strong> more developed countries.
Genetic engineering being a basic science, should <strong>the</strong>refore be studied for <strong>the</strong>
emerging future needs, hence, Sudan has biosafety regulations in place. As far as
Bt cotton is concerned, we have varying insects combinations (Bollworms,
Jassids, thrips, flea beatle, whiteflies and aphids) that have to be sprayed anyway
.Moreover , <strong>the</strong> feasibility <strong>of</strong> adopting Bt cotton in <strong>the</strong> Sudan is questionable due
to <strong>the</strong> expensive patency fees Bt genes are monopolized by private sector and <strong>the</strong>
low yields <strong>of</strong> <strong>the</strong> Sudan cotton at present time need an agronomic perfection ra<strong>the</strong>r
than high technology. Never<strong>the</strong>less, biotechnological studies were started via
establishing a molecular markers laboratory at ARC. Two components <strong>of</strong>
biotechnological applications were approved to be sponsored under <strong>the</strong> IAEA
project. These are:
Production <strong>of</strong> doubled haploid cotton: Doubled haploid technology provides
powerful tool for acceleration <strong>of</strong> breeding program. What needs 5-7 years in <strong>the</strong>
conventional breeding can be achieved in one year by DH technology. DH
increases efficiency <strong>of</strong> selections, recessive characters can be identified and
selected. We are especially interested to incorporate this technology in our hybrid-
breeding project. Through DH, we can fix <strong>the</strong> hybrid vigor and overcome <strong>the</strong>
problem <strong>of</strong> hybrid seed production.
Molecular tagging <strong>of</strong> useful traits for marker- assisted selection: This
technology is <strong>of</strong> special significance in selection <strong>of</strong> traits which are o<strong>the</strong>rwise
phenotypically inaccessible. It is also useful in pyramiding <strong>of</strong> genes. For instance,
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you can tag a number <strong>of</strong> genes for a given trait and select for that trait using <strong>the</strong>ir
respective molecular markers. We are planning to use this technology in tagging
useful mutants (fusarium wilt resistance and <strong>the</strong> low seed to fibre attachment
force) and also follows introgressed genomic segments <strong>of</strong> blight resistance wild
species in <strong>the</strong> commercial cultivars.
11. Technology Transfer
Need to be streng<strong>the</strong>ned in order to solve <strong>the</strong> above challenging problems.
Varying technology transfer mechanism had been tried before i.e. Training and
visits and school farmers but <strong>the</strong>y last only with <strong>the</strong> financed project . Therefore,
sustainable technology transfer depending on local budgets with granted support,
and believe from policy makers can only be effective in handling <strong>the</strong> challenges.
12. Lack <strong>of</strong> Communication
Diversity in production practices and individual achievement in IDB countries
need to be known by o<strong>the</strong>r members. Success stories <strong>of</strong> developing heat tolerant
varieties, non-sprayed cotton with high yield, biotech drought resistance varieties
and <strong>the</strong> yield maximization project in some countries should be shared. Sudan,
had already started this by sending representative cotton sector delegation to Syria
and <strong>the</strong> visit had been very productive.
13. Scarcity <strong>of</strong> Funding for Research
The budget for research is very poor and mostly spent to meet <strong>the</strong> salaries.
However, 80% <strong>of</strong> <strong>the</strong> working budget is furnished by <strong>the</strong> Sudan Cotton Company.
14. Limited Participation in <strong>the</strong> Regional and International Conferences
This was attributed to lack <strong>of</strong> funding in <strong>the</strong> ARC. Moreover, international
research institute for cotton to help in this regard is not availed. However, <strong>the</strong> ongoing
activities <strong>of</strong> scientific visits and participation in some conferences is only
funded by <strong>the</strong> Sudan Cotton Company but for small number <strong>of</strong> researchers.
15. Research Capacities
Shortage in laboratory equipment, chemicals and spare parts is a problem. Also,
technical experts for repairing <strong>the</strong> instruments are not up to <strong>the</strong> standards.
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III. FRAMEWORK FOR COOPERATION BETWEEN IDB MEMBER
COUNTRIES
International Research Institute for Cotton : This need to be established and
taken as <strong>the</strong> first priority. The mandate <strong>of</strong> this institute should cover all specialties
related to cotton i.e. production technology, ginning, fibre testing, marketing and
promotion. This would be a model forum where expertise in cotton sector can
seek training and research guidelines.
The Islamic Cotton Journal: We all know that <strong>the</strong> only cotton journal that had
been specialized in cotton is <strong>the</strong> Cotton Growing Review and had not been
published since 1970’s. The Cotton Growing Review was an internationally
recognized Journal that linked all researchers. Establishing Islamic Cotton Journal
will abridge <strong>the</strong> gap being created by <strong>the</strong> absence <strong>of</strong> <strong>the</strong> Cotton Growing Review.
Yield Maximization Projects : This needs to be executed and particularly in <strong>the</strong>
lower yielding IDB African member countries. Such projects would be poverty
alleviating and can also be used as pilot farms for enhancing technology transfer.
Cotton Research Network (IDB): Needs to be established for complete
interaction between researchers and should have periodic conferences (i.e. every
2or 3 years) depending on funds.
Participation in <strong>the</strong> International and Regional Research Conferences: Our
participation in <strong>the</strong>se conferences is very low. Researchers have to participate and
learn from <strong>the</strong>se conferences but due to unavailability <strong>of</strong> funds, only limited
chances are availed, IDB member countries can help to solve this problem.
Training <strong>of</strong> Technical Staff in Biotechnology Ginning and Fibre Testing
Instruments: This needs to be done as early as possible, because o<strong>the</strong>r countries
are ahead <strong>of</strong> us in <strong>the</strong>se areas.
Project Related to Production Research: IDB can follow <strong>the</strong> ICAC-CFC model
targeting IDB members where production /ha is low and cost is high.
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164

UGANDA’S COUNTRIY REPORT ON THE COTTON SECTOR
I. INRODUCTION
Damalie Lubwama Nabakka
Cotton Development Organization
Cotton was introduced to Uganda as a cash crop in 1903 and is one <strong>of</strong> <strong>the</strong>
major export commodities currently accounting for 3.6% <strong>of</strong> <strong>the</strong> country’s
foreign exchange receipts. The Sector employs over 2.5 million people
directly and indirectly. In 1994, marketing and processing <strong>of</strong> cotton were
liberalized while Government retained <strong>the</strong> regulatory and promotional roles
implemented by Cotton Development Organisation (CDO).
II. MAJOR CHALLENGES FACED BY UGANDA
• Land fragmentation - this has led to persistent small-scale production
characterized by use <strong>of</strong> rudimentary tools especially <strong>the</strong> hand hoe. It also
makes it difficult to quantify, with a high degree <strong>of</strong> accuracy, area under
cotton production.
• Dissemination <strong>of</strong> production technologies-inadequate and inefficient
extension service for transfer <strong>of</strong> recommended production technologies to
farmers and farmers’ problems to research (feedback).
• Lack <strong>of</strong> organized cotton farmers’ groups, which makes service delivery
difficult.
• Low levels <strong>of</strong> agricultural mechanisation.
• High costs <strong>of</strong> production without accessible and affordable credit for
rural farmers.
• Low soil fertility in some parts <strong>of</strong> <strong>the</strong> country, especially in Eastern
Uganda.
• Over dependence on rain-fed cotton production.
• Low and fluctuating farm gate prices, which result from low levels <strong>of</strong>
local Value Addition to lint and <strong>the</strong> subsequent dependence on World
Market determined prices.
• High cost <strong>of</strong> local borrowing, which leads to dependence <strong>of</strong> <strong>the</strong> Private
sector i.e. Ginners on pre-financing by International Merchants. This
results into fixed prices <strong>of</strong> lint to <strong>the</strong> ginners and in turn translates into
reduced prices to farmers.
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• Heavy subsidies <strong>of</strong>fered by developed countries to <strong>the</strong>ir cotton sectors
which make low developed countries less competitive on <strong>the</strong>
international market.
• Low levels <strong>of</strong> local Value Addition to lint which expose Ugandan
farmers to fluctuating World Market prices for lint.
III. ENHANCING EFFICIENCY AND COMPETITIVENES
1. Enhancing Production Efficiency
Research and breeding: Ugandan researchers have developed superior high
yielding varieties with good fibre characteristics. Improved agronomic and
technological packages for increasing production, productivity and quality
have also been developed.
Dissemination <strong>of</strong> production technologies: The Ginners are supporting
cotton targeted extension services to farmers based on demonstration plots
(each serving 15 – 30 farmers), which are aimed at increasing productivity
and improving quality.
Seed for planting: The Government (CDO) toge<strong>the</strong>r with <strong>the</strong> Ginners have
installed five seed delinting and grading machines to ensure that only high
quality seed is availed to farmers thus minimising seed wastage and making
mechanised cotton planting possible.
Mechanization <strong>of</strong> land opening: Ginners are promoting use <strong>of</strong> animal
traction and tractors to ensure that farmers open up <strong>the</strong> minimum economical
acreage.
Introduction <strong>of</strong> commercial farms: Block Farms managed by small
individual farmers and single investors have been established in Busitema
(Busia District) and Kigumba (Masindi District) respectively, to promote
large-scale commercial cotton production. Kazinga Channel area is already
practicing Block farming and <strong>the</strong> practice is catching on in Bunyolo and West
Nile Regions. CDO encourages this model because it is cost effective for
service delivery to small-scale farmers.
Provision <strong>of</strong> production inputs: Under <strong>the</strong> Ginners Production Support
Program, Ginners are subsidizing cotton pesticides, which are a major input
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for cotton production. They are also promoting use <strong>of</strong> herbicides and
fertilizers under <strong>the</strong> Demonstration plots program.
Irrigation: CDO has embarked on establishment <strong>of</strong> a pilot small-scale
irrigation system at Busitema to address effects <strong>of</strong> drought on cotton
production.
Formation <strong>of</strong> farmers’ groups: The success <strong>of</strong> <strong>the</strong> demonstration plots,
which serve 15 – 30 farmers, is expected to promote formation <strong>of</strong> <strong>the</strong> much
desired cotton farmers’ groups which will in turn ease extension service
delivery, facilitate access to inputs and production credit, and give <strong>the</strong>
farmers higher bargaining power.
2. Enhancing International Competitiveness
Lint quality - intensive research and breeding has produced cotton varieties
whose lint has high values <strong>of</strong> fibre thickness, fineness, strength, staple length
and bright white colour which makes <strong>the</strong>m suitable for <strong>the</strong> most modern
spinning technology. These unique qualities have given Uganda a Niche
market and <strong>the</strong> lint earns a premium <strong>of</strong> 5 – 8 US cents per pound on <strong>the</strong>
International market. In addition, CDO, working in close collaboration with
<strong>the</strong> ginners, have maintained <strong>the</strong>ir vigilance and quality observance both at
farm and ginnery levels in order to eliminate lint contamination. As a result,
75% <strong>of</strong> our lint trades in <strong>the</strong> grades <strong>of</strong> Middling and above.
Export markets - Uganda is one <strong>of</strong> <strong>the</strong> 35 Sub-Saharan countries eligible to
export garments and textiles to <strong>the</strong> U.S.A. under <strong>the</strong> African Growth
Opportunities Act (AGOA). Uganda also has access to <strong>the</strong> European market
under <strong>the</strong> ‘Everything but Arms Initiative (EBA)’.
IV. ENHANCING THE ROLE OF PRIVATE SECTOR IN THE
COTTON SECTOR
Marketing, processing and exporting - in 1987, <strong>the</strong> Government <strong>of</strong> Uganda
embraced a macro-economic reform policy geared at promoting healthy and
sustainable economic development. Thus <strong>the</strong> marketing, processing (ginning)
and export functions <strong>of</strong> <strong>the</strong> cotton industry were totally liberalized while
Government retained <strong>the</strong> regulatory and promotional functions.
Support to production related activities - in 2003, <strong>the</strong> Ginners’ Cotton
Production Support Strategy was initiated. The Strategy involves Ginners
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supporting production related activities in a bid to supplement Government
efforts. The activities mainly focus on training small-scale farmers on <strong>the</strong> best
cotton agronomical practices using demonstration plots with a view to
increasing production, productivity and quality. In <strong>the</strong> one year that <strong>the</strong>
Strategy has been implemented, lint production has risen from 20,350 MT in
2002/03 to 29,600 MT in 2003/04 and is estimated to reach 37,000 MT in <strong>the</strong>
2004/05 season.
Production inputs – importation and/ or manufacture and distribution <strong>of</strong>
inputs has been in <strong>the</strong> hands <strong>of</strong> <strong>the</strong> Private Sector since <strong>the</strong> late ‘80s with
Government monitoring quality and standards. Ginners are working directly
with input suppliers to avail inputs to farmers, sometimes at subsidized rates
(pesticides).
Demonstration plots – <strong>the</strong> demonstration plots mentioned earlier are c<strong>of</strong>unded
by <strong>the</strong> ginners and <strong>the</strong> USAID’s Agriculture Productivity
Enhancement Program (APEP).
V. PROPOSAL FOR ENHANCING CO-OPERATION AMONG IDB
COTTON- PRODUCING COUNTRIES
• Improving communication among IDB member countries by sharing
information and/ or net-working and formation <strong>of</strong> regional/ subregional
cotton bodies.
• Joint research and breeding. Incorporate modern biotechnology into
local research and seed breeding.
• Ex-change visits and study/training programs. The Ginning Training
School here in Uganda could be boosted by support from o<strong>the</strong>r IDB
countries to raise it to international standards.
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COUNTRY EXPERIENCES FROM THE
ASIAN REGION
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170

Preamble
COTTON IN PAKISTAN: AN OVERVIEW
Ibad Badar Siddiqui
Vice President, Pakistan Central Cotton Committee
In Pakistan, cotton crop occupies a unique position in <strong>the</strong> national economy
on account <strong>of</strong> bulk <strong>of</strong> <strong>the</strong> export receipts being accrued through cotton and
textiles. As such, this cash crop is believed to be <strong>the</strong> life line <strong>of</strong> <strong>the</strong> national
economy. In 2003-04, <strong>the</strong> gross export receipts were estimated at $ 12.273
billion, <strong>of</strong> which cotton and textiles accounted for $ 8.137 billion or 66.3
percent. As a matter <strong>of</strong> fact, cotton has invariably been important for
economic growth and development in <strong>the</strong> country. In 1947-48, when Pakistan
appeared on <strong>the</strong> world map, <strong>the</strong> country was producing merely 1.16 million
bales <strong>of</strong> cotton and only two textile mills were in existence. Soon after
independence, <strong>the</strong> process <strong>of</strong> development <strong>of</strong> <strong>the</strong> textile industry had started
and in <strong>the</strong> year 1948 one more textile mill was setup. The number <strong>of</strong> cotton
bales and <strong>the</strong> textile mills thus kept on increasing in <strong>the</strong> following years.
Over <strong>the</strong> years, <strong>the</strong>re has been visible improvement in <strong>the</strong> cotton production
and <strong>the</strong> country is now also producing long staple cotton <strong>of</strong> 1-1/8” and even
longer, whereas in <strong>the</strong> early years <strong>the</strong> bulk production was <strong>of</strong> 1” staple or
less. The area under cotton has also increased considerably to over 3 million
hectares. The increase in cotton production has also been instrumental in
expanding <strong>the</strong> textile industry. The progress made in cotton sector over <strong>the</strong>
years may be enumerated as Table1.
Table 1. Cotton and Textile Sector Growth in Pakistan
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1947-48 2003-04
Area (ml. ha) 1.23 3.00
Production (ml. bales) 1.16 10.10
Yield (kgs/ha) 160.00 572.00
Ginneries 31.00 1200.00
Textile Mills 2.00 458.00
Mill Consumption (ml. bales) 0.04 11.50
Yarn Production (ml. kgs) 6.20 1925.00
Cloth Production (ml. sq. mtr) 29.50 600.00
An all time record cotton production <strong>of</strong> 14.6 million bales achieved in 2004-
05 is yet an o<strong>the</strong>r landmark. There is, however, still much scope for

enhancing <strong>the</strong> cotton production to meet <strong>the</strong> future needs <strong>of</strong> <strong>the</strong> domestic
textile sector as well as <strong>the</strong> international market. The government is,
<strong>the</strong>refore, determined to accelerate <strong>the</strong> cotton research and development
process necessarily required for a quantum jump in cotton production as well
as <strong>the</strong> qualitative improvement matching <strong>the</strong> spinners’ requirements. At <strong>the</strong>
same time, it also intends to facilitate all <strong>the</strong> stakeholders, particularly <strong>the</strong>
growing community through a package <strong>of</strong> fiscal, technological,
administrative and legislative measures. Pakistan is one <strong>of</strong> <strong>the</strong> largest cotton
producing and consuming countries in <strong>the</strong> world. Its placement in <strong>the</strong> global
cotton scene can well be visualized from Table 2.
Table 2. Pakistan’s Place in World Cotton and Textiles
Percent Rank
Production 9.5 4 th
Consumption 10.0 3 rd
Yarn Production 9.0 3 rd
Yarn Export 26.0 2 nd
Cloth Production 7.0 3 rd
Cloth Export 14.0 3 rd
In <strong>the</strong> context <strong>of</strong> IDB member countries, 29 countries produce cotton.
Among <strong>the</strong>se, Pakistan is <strong>the</strong> single largest country accounting for 32 percent
<strong>of</strong> <strong>the</strong> collective cotton acreage, 30 percent <strong>of</strong> <strong>the</strong> production and 41 percent
<strong>of</strong> <strong>the</strong> member countries’ consumption.
I. COTTON PRODUCTION PATTERN
In line with <strong>the</strong> growing demand for cotton by <strong>the</strong> domestic textile industry,
concerted efforts were made to enhance <strong>the</strong> volume <strong>of</strong> cotton production in
<strong>the</strong> country through research, development and policy decisions. These
efforts led to a record production <strong>of</strong> 12.8 million bales in 1991-92. The
situation <strong>the</strong>reafter, however, changed as cotton crop was affected by cotton
leaf curl virus. This placed <strong>the</strong> forward moving cotton production in reverse
gear. The disease remained a mystery for a number <strong>of</strong> years. Eventually,
scientists came up with a variety and cultural management solution, which
saved <strong>the</strong> country from any drastic decline in production. The production in
<strong>the</strong> subsequent years remained 10 million bales on average till it bounced to
14.6 million bales in 2004-05.
Despite an improvement in <strong>the</strong> size <strong>of</strong> cotton crop, <strong>the</strong> hectare yield <strong>of</strong> cotton
in Pakistan is, however, below <strong>the</strong> levels being obtained in a number <strong>of</strong>
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countries in <strong>the</strong> world including some <strong>of</strong> <strong>the</strong> IDB member countries, such as
Egypt, Central Asian member countries, Iran, Syria and Turkey. According
to ICAC, <strong>the</strong> hectare yield in 2004-05 is estimated at 773 kgs in Pakistan as
against 1,982 in Australia, 1,571 in Syria, 1,289 in Turkey, 1,119 in China,
etc. The lower hectare yield in <strong>the</strong> country may be attributed to <strong>the</strong> serious
threat <strong>of</strong> cotton leaf curl virus in <strong>the</strong> absence <strong>of</strong> resistant varieties as well as
<strong>the</strong> improper crop and pest management practices still being followed by a
large number <strong>of</strong> farmers cultivating on small and uneconomic holdings, as
elaborated in Table 3.
Table 3. Farm Size Structure in Pakistan
Farm Size Percent <strong>of</strong> Percent <strong>of</strong> Total number <strong>of</strong> Farms= 5.071 million.
(Hectares) Farms Area
Total Farm Area = 19.252 Ml. ha.
Under 2.0
2.0 to under 5.0
47
34
12
27 Average Farm size = 3.8 ha.
5.0 to under 10.0 12 22
10.0 and above 7 39
The research endeavors are however on <strong>the</strong> way to evolving high yield
potential varieties and concerted efforts are also being made to propagate <strong>the</strong>
appropriate cotton production and protection technologies particularly among
<strong>the</strong> small farmers through all possible means particularly <strong>the</strong> electronic
media. The cotton research program being pursued in <strong>the</strong> country focuses
upon <strong>the</strong> following objectives:
• Control <strong>of</strong> Cotton Leaf Curl Virus through breeding <strong>of</strong> resistant
varieties and crop management.
• Development <strong>of</strong> commercial cotton hybrids.
• Development <strong>of</strong> Bt cotton.
• Development <strong>of</strong> Heat, Insect, Salinity and Drought resistant/tolerant
and early maturing varieties with higher Ginning out turn.
• Evolution <strong>of</strong> long and extra long staple cotton varieties.
• Focus on Integrated Pest Management.
Agricultural credit is considered as an important instrument for achieving
production target and promotion <strong>of</strong> agriculture sector by enabling <strong>the</strong> farmers
to arrange an appropriate mix <strong>of</strong> essential inputs for obtaining higher yield.
The government policy with regard to agricultural credit is thus to safeguard
<strong>the</strong> interest <strong>of</strong> small farmers by extending credit to <strong>the</strong>m on easy terms and to
recover <strong>the</strong> same in time as well as to protect <strong>the</strong>m in case <strong>of</strong> any natural
hazards and calamity. Credit requirements <strong>of</strong> <strong>the</strong> farming community have
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shown an increasing trend over <strong>the</strong> years. Therefore, <strong>the</strong> government had
increased agricultural credit allocation for <strong>the</strong> year 2004-05 to Rs.85 billion
from Rs.65.5 billion set for 2003-04. This showed an increase <strong>of</strong> 29.7%.
Thus, <strong>the</strong> existing credit policy promises adequate availability <strong>of</strong> farm credit
to <strong>the</strong> growing community.
II. COTTON CONSUMPTION PATTERN
There has been a phenomenal growth in <strong>the</strong> mill consumption <strong>of</strong> cotton over
<strong>the</strong> years, which is attributable to both <strong>the</strong> setting up <strong>of</strong> new mills and <strong>the</strong>ir
improved capacity, as shown in Table 4.
Table 4. Installed and Working Textile Capacity (as in January 2005)
Installed Working
Number <strong>of</strong> Textile Mills 458
427
Spindles 9,815,574 8,531,021
Rotors 151,560 75,151
Looms 9,032 4,498
Source: Textile Commissioner’s Organization.
The number <strong>of</strong> textile mills in <strong>the</strong> country increased from 131 in 1971-72 to
210 in 1981-82, to 307 in 1991-92 and to 445 in 2001-02, which has fur<strong>the</strong>r
increased to 458 in 2004-05. Accordingly, <strong>the</strong> raw cotton requirements <strong>of</strong>
<strong>the</strong> textile industry have increased manifold over <strong>the</strong> years. According to an
estimation, <strong>the</strong> present level <strong>of</strong> cotton consumption in <strong>the</strong> country is in <strong>the</strong>
range <strong>of</strong> 13-14 million bales annually.
III. COTTON QUALITY IMPROVEMENT
Pakistan cotton is inherently <strong>of</strong> good quality. However, improper handling,
poor ginning practices, absence <strong>of</strong> quality control measures and high degree
<strong>of</strong> contamination as well as non-existence <strong>of</strong> a marketing mechanism based
on premia and discounts lead to depreciation <strong>of</strong> <strong>the</strong> value <strong>of</strong> raw cotton and
<strong>the</strong> textile products. Being cognizant <strong>of</strong> <strong>the</strong>se problems, <strong>the</strong> government had
launched a project in mid-eighties for improvement in cotton quality through
standardization <strong>of</strong> cotton to bring it at par with <strong>the</strong> international standards.
The purpose <strong>of</strong> <strong>the</strong> project was to improve <strong>the</strong> competitiveness <strong>of</strong> Pakistan’s
raw cotton and to ensure better returns to cotton growers, ginners, spinners,
exporters and to increase foreign exchange earnings for <strong>the</strong> country. After
completion <strong>of</strong> <strong>the</strong> project in December 1994, an institution, Pakistan Cotton
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Standards Institute was established. In order to ensure qualitative
improvement in cotton production and marketing, <strong>the</strong> government has thus
undertaken <strong>the</strong> following measures :
• Cotton Standardization Ordinance, 2002 has been promulgated.
• Cotton Standards Institute has been established.
• National Cotton Grades have been developed and approved.
• Intervention price <strong>of</strong> seed cotton being fixed on grade basis.
• Karachi Cotton Association has now been issuing spot rates on grade
and staple basis.
• Contamination free cotton production programs were launched with
visible success.
• HVI equipped fibre testing labs in major cotton growing districts are
being set up.
• Provincial Governments have amended <strong>the</strong> Cotton Control Act to
eliminate contamination problem.
With <strong>the</strong> above measures taken by <strong>the</strong> government, <strong>the</strong> benefits <strong>of</strong> <strong>the</strong> cotton
standardization and grading system in <strong>the</strong> form <strong>of</strong> better grades and
contamination free cotton at <strong>the</strong> grass root level are expected soon in view <strong>of</strong>
<strong>the</strong> general realization among all <strong>the</strong> stakeholders that under <strong>the</strong> post quota
regime <strong>the</strong> quality would rule <strong>the</strong> market. The possible economic gains
through quality control may be expected in Table 5.
Table 5. Estimated Economic Gains
Volume-wise
One bale <strong>of</strong> raw cotton (Kgs) 170
Yarn recovery at <strong>the</strong> present rte <strong>of</strong> 84% (Kgs) 143
Yarn recovery at improved rate <strong>of</strong> 92% (Kgs) 156
Improvement (Kgs) 13
Value-wise
143 kgs <strong>of</strong> yarn @ $1.82* / kg quoted for Pakistan 20’s ($) 260.30
156 kgs <strong>of</strong> yarn @ $ 2.15* / kg quoted for Turkey 20’s ($) 335.40
Improvement ($)75.10
Additional income through one million bales <strong>of</strong> raw cotton equivalent
yarn = $ 75 million or Rs. 4.50 billion.
* Yarn export prices as quoted in Cotton Outlook, Volume 83, February 25, 2005.
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IV. COTTON POLICY AT A GLANCE
The cotton policy being pursued in <strong>the</strong> country envisages all <strong>the</strong> possible
measures to sustain <strong>the</strong> recent significant growth realized in production and
to fur<strong>the</strong>r increase cotton production to meet <strong>the</strong> growing needs <strong>of</strong> <strong>the</strong>
domestic textile industry and to make it competitive under <strong>the</strong> post quota
regime. The government is, <strong>the</strong>refore, also determined to bring about
qualitative improvement in cotton production matching <strong>the</strong> spinners’
requirements. At <strong>the</strong> same time, <strong>the</strong> government also intends to facilitate all
<strong>the</strong> stakeholders and safeguard <strong>the</strong>ir interests. The cotton policy thus encircles
<strong>the</strong> following main features :
• Vertical expansion in cotton production.
• Cotton research focusing high yield potential and long staple cotton
varieties with virus resistance.
• Encourage cotton cultivation in new potential areas.
• Fixing intervention price for seed cotton to safeguard growers’ interest.
• Government intervention for price stabilization through procurement
<strong>of</strong> lint cotton if <strong>the</strong> market price <strong>of</strong> seed cotton falls below <strong>the</strong>
intervention price.
• Qualitative improvement in cotton through standardization and grading
at grass root level, also by involving <strong>the</strong> private sector.
• Promoting cotton pricing and marketing system based on grade and
staple.
• Campaign for producing contamination free cotton.
• Free trade in cotton in order to provide a level playing field to all <strong>the</strong>
stakeholders.
V. TAIL PIECE
In <strong>the</strong> global perspective, Pakistan is a very important country for cotton and
textile production and has <strong>the</strong> potential <strong>of</strong> becoming a key-force in <strong>the</strong>
worldwide cotton and textile market place. There is also growing realization
in <strong>the</strong> country that future gains in cotton production would be possible more
through qualitative improvement in raw cotton.
The country has made noticeable progress in cotton production over <strong>the</strong> years
and reached a record level <strong>of</strong> 14.6 million bales in 2004-05. A still higher
production in years to come seems much more possible in view <strong>of</strong> <strong>the</strong> latent
yield potential <strong>of</strong> <strong>the</strong> existing cotton varieties, growing awareness among
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farmers regarding scientific crop production and protection measures, a well
thought research program and <strong>the</strong> suitable government policies.
The country has also made significant growth in <strong>the</strong> textile sector and
emerged as <strong>the</strong> third largest cotton consuming country in <strong>the</strong> world. There is
also growing emphasis on <strong>the</strong> export <strong>of</strong> more value added textile products
instead <strong>of</strong> confining to <strong>the</strong> export <strong>of</strong> <strong>the</strong> yarn and cloth.
Pakistan’s experiences in cotton research, quality control and <strong>the</strong> textile
development may be shared with <strong>the</strong> o<strong>the</strong>r IDB member countries and
similarly Pakistan can learn from <strong>the</strong>ir experiences particularly in identifying
<strong>the</strong> germ plasm having virus resistance and biological control <strong>of</strong> insect pests,
etc.
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178

COUNTRY REPORT: SYRIA
Mohamed Nayef Alsalti
Director, Cotton Research Administration, Aleppo, Syria
I. INTRODUCTION
179
(Original in Arabic)
Cotton is a major agro-industry in Syria. Syrian cotton is <strong>of</strong> medium staple
belonging to <strong>the</strong> Gossypium hirsutum or Upland cotton species. It occupies
about 16.5 % <strong>of</strong> <strong>the</strong> irrigated area. Almost 20% <strong>of</strong> <strong>the</strong> economically active
population in Syria are dependent for all or part <strong>of</strong> <strong>the</strong>ir income on cotton
production or processing. 40- 50 <strong>of</strong> raw cotton is exported and constitutes 10
% <strong>of</strong> total Syrian exports. Cotton is an important cash crop in Syria after oil
and grains. Cotton cultivation in Syria is planted and managed by <strong>the</strong>
Ministry <strong>of</strong> Agriculture and Agrarian Reform, through a unit specialised in
cotton agriculture issues, i.e <strong>the</strong> Cotton Research Administration (Cotton
Bureau) under <strong>the</strong> General Commission for Scientific and Agricultural
Research (GCSAR). Cotton production in Syria is in three regions: <strong>the</strong>
Central north <strong>of</strong> Syria which covers Aleppo, Idleb and Hama province, <strong>the</strong>
eastern part <strong>of</strong> Syria, Rakka and Deir Ezzore, <strong>the</strong> north eastern part covers El-
Hassaka province.
II. COTTON PRODUCTION POLICY
• Cotton growers must attain a license from <strong>the</strong> ministry <strong>of</strong> agriculture
and agrarian reform to grow cotton.
• A staple price for seed cotton is guaranteed throughout <strong>the</strong> whole
season. The price is announced for <strong>the</strong> basic quality grade before
preparing <strong>the</strong> land for cotton growing, and all cotton seed must be sold
to <strong>the</strong> cotton marketing organization. The cotton seed buying price per
one kilogram <strong>of</strong> basic quality for 2003 / 2004 season was 30.75 Syrian
pounds.
• The last date for planting cotton in <strong>the</strong> region is about mid May.
• Limits on <strong>the</strong> area for every extension unit which is responsible for pest
control, advice concerning good growing methods, and estimating yield
for every field.
• Granting better loan facilities to cotton growers by <strong>the</strong> agricultural co-
operative bank <strong>of</strong> Syria, <strong>the</strong> loans are both cash and material for <strong>the</strong>
purchase <strong>of</strong> seeds, fertilizers, pesticides and sacks.

Overall coordination <strong>of</strong> <strong>the</strong> sector is secured by means <strong>of</strong> an annual “Cotton
Congress” which is attended by 100 to 120 senior <strong>of</strong>ficials, as well as <strong>the</strong>
minister <strong>of</strong> agriculture and agraian reform. The congress reviews <strong>the</strong> results
<strong>of</strong> <strong>the</strong> past cotton season, including research findings. It is also responsible
for formulating <strong>the</strong> policy direction <strong>of</strong> <strong>the</strong> industry. The Cotton Research
Administration produces a bulletin containing recommendations for <strong>the</strong> next
season. The bureau also produces leaflets distributed to farmers and uses
national television and video- tapes in its campaign.
III. COTTON PRODUCTION, AREA AND YIELD
The area for cotton growing and lint cotton production in 1988/1989 was 17
000 hectare and 114 000 tons with yield <strong>of</strong> lint cotton 667 Kg. per hectare
compared to 1415 Kg. per hectare in 2004-2005. Table 1. Show cotton area,
yield and production in <strong>the</strong> last fifteen years 1988/ 1989-2004/2005.
Table 1. Yield and Production <strong>of</strong> Cotton in Syria, 1988/ 1989 - 2004/2005
Season
Area
( hectare)
Yield <strong>of</strong> lint cotton Production <strong>of</strong> lint cotton
( Kg/ ha)
( tons)
1988/89 171026 667 114072
1989/90 158050 811 128237
1990/91 156350 927 145000
1991/92 174000 1086 189000
1992/93 200000 1085 230000
1993/94 195000 1080 212000
1994/95 190000 1080 205000
1995/96 204000 1027 209000
1996/97 219000 1214 266000
1997/98 249000 1335 331000
1998/99 275000 1215 334000
1999/00 250000 1225 306000
2000/01 237000 1260 247000
2001/02 257063 1246 320329
2002/03 199773 1174 234577
2003/04 216000 1364 277000
2004/05 234183 1415 331397
180

IV. CULTURAL PRACTICES
1. Land Preparation
Soils in Central- Nor<strong>the</strong>rn, and North – Eastern regions (Aleppo, Hama and
El-Hassaka provinces) are <strong>of</strong> <strong>the</strong> gromosol type; a dark red, brown dark
brown to black montmorillonite clay, while in <strong>the</strong> Eastern regions ( Rakka
and Deir Ezzore province) are <strong>of</strong> <strong>the</strong> alluvial grey sandy loam to clay soils. In
Aleppo and Hama areas, cotton is grown by <strong>the</strong> majority in fields <strong>of</strong> 2-5 ha.
In two years rotation with wheat, sugar beets, potatoes, legumes and
vegetables, creating a very diverse ecosystem. While in <strong>the</strong> o<strong>the</strong>r province,
cotton is grown in fields <strong>of</strong> 10 to 25 ha. in two years rotation with wheat.
Typically wheat is harvested in June; land is plowed two times in opposite
directions and left exposed to <strong>the</strong> air and sun. <strong>the</strong> third plowing takes place in
February or March <strong>the</strong> following, <strong>the</strong> surface is <strong>the</strong>n smoo<strong>the</strong>d and leveled.
Planting is carried out mainly by hand. Single and multiple row planters are
also used. Planting takes place from <strong>the</strong> first <strong>of</strong>- April till mid May. The
recommended planting method is to space rows 65-75 cm apart, with 18- 25
Cm. between plant holes, which should contain 4 to10 seeds at a rate <strong>of</strong> 70 to
80 kg. per ha.seeds per ha. Weed control takes place through pre- emergence
herbicides, and manual labour.
2. Details <strong>of</strong> Research Institution
Cotton Research Administration which previously was named Cotton Bureau
is under <strong>the</strong> General commission for Scientific Agricultural Research
(GCSAR). Cotton Research Administration includes <strong>the</strong> following research
departments:
• Agriculture department
• The breeding department
• Cotton protection department
• Observation department
• Mechanization department
3. Cotton Research Administration Includes <strong>the</strong> Following Laboratories
• The Staple laboratory
• Biological Control Laboratory in Aleppo and Deir Ezzore.
181

Cotton Research Administration includes seven field Research Stations in:
Aleppo(2), Rakka, Deir Ezzore,Homs and El-Hassaka(2). The Research
Efforts are directed to:
• Resisting <strong>the</strong> species to Wilt disease
• Resisting <strong>the</strong> species <strong>the</strong> high temperature (tolerant to heat)
• Increasing <strong>the</strong> production
• Good technological specifics
• Integrated Cotton Pest Management (Biological control).
V. CROPPING SYSTEM AND AGRONOMIC MANAGEMENT
1. Irrigation
Water for irrigation is obtained from wells, rivers and lakes. Water is led
mainly through ear<strong>the</strong>n ditches to <strong>the</strong> fields. Three irrigation methods are
used in cotton agriculture: Flood, furrows and drip. They represent different
irrigation techniques with different water consumption rates. All three
methods are used in Syria. The most common is <strong>the</strong> flood method. During <strong>the</strong>
growing season (April- September) cotton fields take about 8 to 10 irritations,
with an average water consumption <strong>of</strong> about 14 000 cubic meters per hectare.
2. Fertilization
Fertilizer recommendations for cotton are formulated by <strong>the</strong> latest normal rate
<strong>of</strong> recommendation, which is <strong>the</strong> actual amount from <strong>the</strong> Directorate <strong>of</strong> Soil
in cooperation with <strong>the</strong> Cotton Bureau. Quantities applied by farmers range
between 150- 190 Kg and 75-95 kg <strong>of</strong> P2O5 per ha. The recommended time
<strong>of</strong> application <strong>of</strong> nitrogen is 1/3 at sowing date and 2/3 at first flower
appearance. The recommendation is meant to discourage early excessive
growth and to give <strong>the</strong> bulk <strong>of</strong> <strong>the</strong> nutrient at <strong>the</strong> beginning <strong>of</strong> <strong>the</strong>
reproductive phase when <strong>the</strong> nutritional demand <strong>of</strong> <strong>the</strong> crops is high.
Phosphor is added at sowing date. Application <strong>of</strong> Fertilizers is carried out by
hand or by tractor mounted equipment. Fertilizers are obtained from <strong>the</strong>
Agricultural Cooperative Bank and that is why <strong>the</strong> actual amount applied by
farmers coincides with that <strong>of</strong> <strong>the</strong> recommended rate.
3. Crop Management
The annual cotton acreage according to regions is declared by <strong>the</strong> High
Council <strong>of</strong> Agriculture at least four months before <strong>the</strong> commencement <strong>of</strong>
182

cotton planting in April. The Departments <strong>of</strong> Agriculture in <strong>the</strong> various
regions are responsible through <strong>the</strong> extension units to distribute <strong>the</strong> acreage
on <strong>the</strong> farm levels. Cotton growers obtain <strong>the</strong>ir licenses to grow cotton from
<strong>the</strong> Department <strong>of</strong> Agriculture or its branches in <strong>the</strong> regions. By <strong>the</strong>se
licenses, cotton growers are granted loans by <strong>the</strong> Agricultural Cooperative
Bank. The loans comprise cash and material loans for <strong>the</strong> purchase <strong>of</strong> seeds,
fertilizer, pesticides, and sacks.
During <strong>the</strong> growing season <strong>the</strong> extension units are responsible for advising
farmers about <strong>the</strong> best agricultural practices. Scounting for pest infestations,
and reporting weekly <strong>the</strong> cotton situation to <strong>the</strong>ir Department <strong>of</strong> Agriculture.
The Cotton Research Administration (C.R.A.) is under <strong>the</strong> General
Commission for Scientific Agricultural Research (G C S A R) which is
responsible for <strong>the</strong> supervision <strong>of</strong> cotton growing, controlling cotton exports,
and conducting research. The C.R.A. is not directly represented in <strong>the</strong> rural
areas, but is responsible for <strong>the</strong> technical supervision <strong>of</strong> fully staffed "Cotton
Branches” in each provincial Directorate <strong>of</strong> Agriculture. The former works in
close association with <strong>the</strong> extension units. In addition to regular contact with
<strong>the</strong> cotton branches, <strong>the</strong> (C.R.A.) has a system <strong>of</strong> “ Central committees” <strong>of</strong>
senior staff who spend tow weeks per month during <strong>the</strong> season in <strong>the</strong> main
cotton areas.
Harvesting is carried out from <strong>the</strong> end <strong>of</strong> September till mid November,
mainly by hand. The Cotton Marketing Organization is <strong>the</strong> sole body
authorized to purchase cotton seed directly from producers. It deals with local
prices structure and supply method, warehousing cotton seed and paying its
value to growers.
Pest problems: Common Pests in <strong>the</strong> Country:
i. Insects: The main insects arranged according to <strong>the</strong>ir importance are:
Earias insulana: <strong>the</strong> spiny bollworm appeared to be <strong>the</strong> most common pest
species in Syria cotton, and was found to be most numerous in <strong>the</strong> Deir
Ezzore region .
Helicoverpa armigera: <strong>the</strong> European bollworm can be considered <strong>the</strong> 2 nd
most common pest. It was found to be present in all cotton growing areas in
Syria. The species can reach economic level in Hama, Deir Ezzore, Rakka,
and Aleppo regions.
Aphids, Trips,. Jassids, and Mites: These insects were observed in all
regions but occasionally reached pest status. Aphids sp. and trips were
mainly encountered on seedling after which populations dwindled.
183

Populations <strong>of</strong> thrips may in some years reach high levels, and serious
damage may be inflicted. Red spider mites, Tetranychus sp., were found to
be present in all cotton growing areas. The species can reach economic
level in Hama; Rakka and El-Hassaka regions.
Agrotis ipsilon: Larvae was observed to cause damage to seedling in
Hama, Rakka, and Deir Ezzore .However, in general <strong>the</strong> species was not
found to be a pest <strong>of</strong> significance, while moreover, high seed rates amply
compensated for seedling losses.
Creontiades pallidus: The shedder bug is ano<strong>the</strong>r common pest in Syrian
cotton . It can be observed in Hama, Aleppo, and Rakka regions , while in
Deir Ezzore region it can be considered <strong>the</strong> 2 nd most common pest after
Earias insulana.
Spodotera exygua: The green worm is not a common pest in Syrian cotton.
Occasionally <strong>the</strong> species can reach economic level in Hassaka, and Hama,
regions.
Bemisia tabaci: The whitefly is not a serious pest in Syrian cotton.
However, it has <strong>the</strong> potential to reach major pest status. The species was
found to be present in all cotton growing regions; however, populations
were heavily parasitized by Aphilinids.
Recently, no pest introductions has taken place into <strong>the</strong> country.
Table 2. Areas Controlled by Chemicals Against Different Pests in
Cotton Fields(ha)
Season Pest 1987 1995-96 1997-98 1999-00 2001-02 2003 2004
Green worm 1573 858 1344 0 2 0 193
Bollworms 11224 2985 799.5 995.5 62.5 200 306
Sucking
insects
4970 3265 500.5 258.5 15 0 0
Mites 2743 42.5 0 339 23.5 8.5 0
Cutworm 3776 243 1314 1436.5 976 541 528.8
O<strong>the</strong>r
insects
6 55.5 100 35 97 39 69.1
Total 24292 7339 4058 3064.5 1176 788.5 1096.9
Planted 128687 211919.5 26259.5 254429 228418 205107 234183
areas
Controlled
areas (%)
18.88 3.47 1.53 1.23 0.47 0.38 0.47
184

Table 3. Areas Controlled by Parasitoids (ha)
Trichogramma Bracon
1936.6 975
ii. Diseases: The main diseases that cause some damage and decrease cotton
production are:
Verticillium Wilt disease caused by Verticillium albo- atrum., and
Damping- <strong>of</strong>f caused by Rhizoctonia solani, Fusarium sp., Altennaria sp.
Planting tolerant varieties such as Aleppo 40, Aleppo 33-1 and Rakka 5,
and following crop rotation with cereals had reduced <strong>the</strong> incidence and
severity <strong>of</strong> Verticillium Wilt. Double seed treatment with BCNP plus
mercurial fungicides or thirarm or <strong>the</strong> use <strong>of</strong> vitavax are recommended to
control damping- <strong>of</strong>f under Syrian conditions.
iii. Weeds: The main weeds in cotton fields in Syria are:
Berrnuda grass Cynodon dutylon
Rabbit grass Panicum colonum
Red pigweed Amaranthus retreflexus
Cooklebur Xanthium brasillium
Field hind weed Convolvulus arvensis
Foxtail mille Setavia italica
Johnson grass Sorgh um helapense
Goose foo Ghenopodium album
Purslane Portulaca oleracea
Hight shade Solanum alatum
Weeds in cotton fields are kept to a minimum, mostly because Syrian farmers
are very active and tends to keep <strong>the</strong>ir fields clean by cultivation. Preplanting
incorporated herbicides are used widely, almost 90 % <strong>of</strong> <strong>the</strong> cotton
area is treated annually with Treflan (Trifluralin) at 2.5 L/ ha.
During <strong>the</strong> growing season Fusilade (Fluassifop- butil) is used as spot
treatment at <strong>the</strong> rate <strong>of</strong> 2.5 L/ ha to control perennial weeds such as Bermuda
grass and Jonson grass while broad- leaf weeds are controlled through manual
labour.
4. Varieties Released, Their Characteristics and Origin
Different varieties planted in Syria, each variety pertains to a cotton
producing region in order to remedy some adverse environmental conditions
185

such as high temperature and Verticillium Wilt disease. Currently <strong>the</strong>
cultivated cotton varieties are:
Aleppo 40: A cross produced an excellent strain since its fourth generation.
This strain gave an increase in yield in 1974, so it was given <strong>the</strong> name Aleppo
40 in 1977 and has covered most areas planted to cotton since 1980- 81. This
new variety has a high tolerance to Verticillium Wilt, staple length <strong>of</strong> 1 and
3/32 inch and fibre strength up to 92.000 p.s.i.
Aleppo 33-1: This variety is a strain selected from <strong>the</strong> American variety,
Acala S.j.4. It is more tolerant to Verticillium Wilt than Aleppo 40.
Therefore; it is distributed in areas which are highly infested by wilt diseases
in Hama province. Its staple length and fiber strength are better than Aleppo
40.
Rakka 5: This variety is a strain selected from <strong>the</strong> Russian variety, Tashkent
3. This variety is earlier and more tolerant to Verticillium Wilt than any o<strong>the</strong>r
variety, but it is less in lint percentage than Aleppo 40. Rakka 5 is grown in
Rakka province which is intensively infested by Verticillium Wilt.
Deir Ezzore 22: This variety is a strain selected from <strong>the</strong> American variety,
Delta&Pine 41. It is earlier, more tolerant to heat, higher in yield and lint
quantities than Aleppo 40. In Deir Ezzore province. Thus it is pertained for
cultivation in this area. Table 2 shows three years prefonnace <strong>of</strong> Syrian
cultivated cotton varieties.
Aleppo 90 (Taskent 3 x Delta & Pine 70): This variety is earlier and more
tolerant to Verticillium Wilt than any o<strong>the</strong>r variety. Aleppo 90 is increased
with <strong>the</strong> average 7% in Al- Hassaka and 5% in Aleppo. This strain excels in
<strong>the</strong> staple length and fiber strength but <strong>the</strong> average <strong>of</strong> ginning is less with <strong>the</strong>
estimated 1.6%.
Aleppo 118 (BW 76-31 x Aleppo 40): This variety is superior to Aleppo 90
with <strong>the</strong> estimated 13 % <strong>of</strong> cotton and 12 % <strong>of</strong> seed- cotton. It is better than
Aleppo 40 in its technological species.
Table 4. Three-Year Performance <strong>of</strong> Syrian Cultivated Cotton Varieties
varieties
Yield(seed
cotton
Kg/ ha)*
Degree <strong>of</strong>
wilt
Resistance
Gining
turn-out %
Earliness
st.
Picking % Fiboro-Gragh
2.5 % (inch)
186
Fibre properties
Pressley
Index
Stelo-mter
gm/tex
Micronaire
Reading
Aleppo 40 4070 1.61 39.31 72 1.133 8.82 21.44 4.67
Rakka 5 4330 0.93 38.35 76 1.118 8.68 22.57 4.68
Aleppo 33-1 3620 1.38 38.94 68 1.206 9.38 25.14 4.36
Deir Ezzore 22 3710 1.90 41.20 76 1.172 8.84 21.42 4.37
Aleppo– 90 4741 0.55 38.20 77 1.165 9.14 23.42 4.36
Aleppo – 118 4775 0.96 39.98 79 1.192 10.25 25.60 4.40
* Average 6 stations

5. Seed Production
The General Organization for Seed Multiplication (G.O.S.M) has <strong>the</strong>
responsibility to multiple all <strong>the</strong> seeds in Syria, using <strong>the</strong> farmers land(20000
tons seeds). The C.R.A. provides <strong>the</strong> G.O.S.M. with <strong>the</strong> improved varieties
(111.5 tons <strong>of</strong> seeds produced in 2004).
6. Cotton Marketing
The cotton Marketing Organization (C.M.O) is <strong>the</strong> sole body authorized to
purchase seed cotton directly from producers. In <strong>the</strong> season 2003-2004
(C.M.O.) operated 17 gin – mills distributed in <strong>the</strong> most cotton producing
regions, Aleppo, Deir Ezzore, Hassaka, Hama,Homs, Idleb and Rakka. Local
Cotton consumed in Syrian cotton ginning mills in 2003-2004 amounted to
about 145000 tons which constitutes 55 % <strong>of</strong> <strong>the</strong> total local production. The
cost <strong>of</strong> cotton agriculture operation is relatively high due mostly to expensive
water consumption and <strong>the</strong> agricultural methods practiced in Syria. The
cotton ginning and marketing organization buys all cotton agriculture
production from farmers with prices higher than <strong>the</strong> production cost within a
national support scheme for <strong>the</strong> cotton producers. Ginned cotton exports are
sold at international prices.
7. Future Needs for Cooperation
- Continue <strong>the</strong> cooperation in cotton breeding and varieties exchange.
- Training and workshops.
- Solve <strong>the</strong> cotton problem in Syria, related to sprinkler irrigation systems
which affect and increase <strong>the</strong> Angular leaf spots, caused by <strong>the</strong> Bacteria
Xanthomonas campestris pv. malvacearum.
- PROJECT: DELUTE ACID DELINTING PLANT FOR COTTON
PLANTING SEED (CAPACITY 1-1.5 TON PER HOUR) FUZZY
COTTON SEED.
187

188

COTTON IN TURKEY: THE ROLE OF COTTON RESEARCH
INSTITUTE IN DEVELOPING OF COTTON
Abstract
İsa Özkan
Cotton Research Institute, Nazilli, Turkey
Cotton (G. hirsutum L.) is a strategically important plant for Turkish
agriculture and plays a vital role in <strong>the</strong> life <strong>of</strong> lots <strong>of</strong> farmers in Turkey and
also around <strong>the</strong> world. Turkey is <strong>the</strong> sixth largest cotton producing country <strong>of</strong>
<strong>the</strong> world with approximately 700 000 ha planting area and cotton production
provides employment to lots <strong>of</strong> people in this sector. Turkey has had major
development in cotton productivity and quality. In this development,
Research institutes has played a very important role, especially Cotton
Research Institute in Nazilli. The increase in production resulted from high
average yield per unit area only 309 kg/ha in 1960 and increase 1428 kg /ha
in 2003. The duties <strong>of</strong> Institute are to improve genetic potential <strong>of</strong> cotton
making basic and strategic researches, to improve agronomic practices,
mechanization, harvesting, laboratory and technological substructure
opportunities and help o<strong>the</strong>r institutions with <strong>the</strong>se opportunities, to organize
seminars, courses and conferences in order to disseminate new techniques
and finally to prepare cotton seed and provide for <strong>the</strong> farmers’ demand.
In Aegean region, <strong>the</strong> most popular variety is Nazilli 84-S developed by
Cotton Research Institute. O<strong>the</strong>r varieties developed by <strong>the</strong> Institute are
widespread as local in Aegean region. Before 5 or 6 years, Nazilli 84 and
Nazilli 84-S varieties had 95% planting area <strong>of</strong> Aegean region. Aegean
region was a great cotton field including Nazilli 84-S cotton variety. This was
very important and good for textile industry, because almost all <strong>the</strong> fibers in
<strong>the</strong> region had same characteristics. As such Cotton Research Institute has an
important position in <strong>the</strong> Region. IDB cotton producing member countries
must cooperate with each o<strong>the</strong>r and private sector to increase communication,
exchange germplasm, improve higher yield and good quality varieties, reduce
production cost, share technological improvement, improve product diversity
and establish an International Cotton Research Center including IDB member
countries. International Cotton Research Center will help to enhance
productivity and competitiveness by organizing studies between IDB member
countries and exchanging research programs and by supply sharing <strong>of</strong>
experiences.
189

I. INTRODUCTION
Cotton (G. hirsutum L.) is a strategically important plant for Turkish
agriculture and plays a vital role in <strong>the</strong> life <strong>of</strong> lots <strong>of</strong> farmers in Turkey and
also around <strong>the</strong> world. Turkey is <strong>the</strong> sixth largest cotton producing country <strong>of</strong>
<strong>the</strong> world with approximately 700,000 ha planting area and cotton production
provides employment to lots <strong>of</strong> people in this sector. Fur<strong>the</strong>rmore, 40% <strong>of</strong>
Turkey’s exports come from cotton and cotton-made product. Cotton also
plays a significant role by providing employment to <strong>the</strong> people. Cotton has
driven force for economical and sociological development in Turkey.
Turkey has had major development in cotton productivity and quality from
1960 till now (Table 1). In this development, Research institutes have played
very important role, especially Cotton Research Institute in Nazilli. In 1960
total production was 192,000 metric tons <strong>of</strong> lint produced from 621,000
hectares and in 2003 <strong>the</strong> annual production was 899,000 tons <strong>of</strong> lint obtained
from 630,000 hectares. The increase in production resulted from high average
yield per unit area only 309 kg/ha in 1960 and increase 1428 kg /ha in 2003
(Table 1). In Turkey, Cotton yield has been higher than twice <strong>of</strong> world
average cotton yield since 1970. This situation has got significant advantages
for Turkey against o<strong>the</strong>r country.
The increase in yield is a result <strong>of</strong> new high yielding cultivars, better
irrigation techniques and increase in <strong>the</strong> use <strong>of</strong> fertilizers, insecticides,
fungicides and better farming technology. Today, Turkey is among <strong>the</strong> top
three countries in <strong>the</strong> world in average yield per hectare and Turkey is <strong>the</strong>
seventh world cotton producing country in planting area and also in
production <strong>of</strong> <strong>the</strong> world (ICAC, 2003). Due to <strong>the</strong> low market prices in <strong>the</strong>
last four year, cotton growing area has decreased but in spite <strong>of</strong> everything,
cotton is a not given up crop for Turkish farmers and also Turkish economy.
So cotton will continue to be produced. Cotton Research Institute (in Nazilli),
has managed to solve problems and improve new varieties and it has
achieved lots <strong>of</strong> thing.
190

Table 1. Progress in Planting Area, Production and Yield in Turkey
Years Planting Area Production (Lint) Lint Yield World
(1000 ha) (1000 ton)
(kg/ha) (kg/ha)
1932 158 20 128 -
1940 324 77 238 -
1951 642 150 234 237
1960 621 192 309 298
1970 528 400 758 367
1980 672 500 744 411
1990 641 655 1021 550
1995 757 851 1125 567
1996 750 802 1069 576
1997 719 838 1165 590
1998 757 882 1166 563
1999 719 791 1100 581
2000 654 880 1345 576
2001 693 922 1330 624
2002 695 964 1388 638
2003 630 899 1428 635
Source: Sabit A.Ö. et al., 2004.
II. IMPROVEMENT IN COTTON
Before <strong>the</strong> Turkish Republic was established, <strong>the</strong> cultivated cottons in
Anatolia were old world’s cultivars especially G. herbaceum. At that time,
Turkish cotton production was approximately 15,000 tons <strong>of</strong> lint. The major
improvement and increase in yield was achieved after <strong>the</strong> Turkish Republic
established in 1923. In 1940 <strong>the</strong> total production was about 77,000 metric
tons. Meanwhile, in 1934 Cotton Research Institute was established and by
effect <strong>of</strong> Cotton Research Institute and o<strong>the</strong>r research institutes, after World
War II, production progressed very fast because <strong>of</strong> <strong>the</strong> increase <strong>of</strong> <strong>the</strong> planted
area and <strong>the</strong> introduction <strong>of</strong> new productive cultivars from o<strong>the</strong>r countries.
In 1951, after <strong>the</strong> introduction <strong>of</strong> new varieties, total production rose up to
150,000 metric tons <strong>of</strong> lint produced from 642,000 hectares and nowadays,
<strong>the</strong> annual production is 899,000 tons obtained from 630,000 hectares. The
increase in production resulted from increasing high average yield per unit
area from only 234 kg/ha in 1951 to 1428 kg /ha in 2003 (Table 1). This
improvement has occurred not only breeding studies but also improving new
cultural techniques. After starting breeding studies, a lot <strong>of</strong> institute
developed and registered new cultivars in different properties obtained
different ways. These cultivars are shown in Table 2. As shown in Table 2, so
far 35 cotton cultivars have been developed and released by different research
institutions and have been given for <strong>the</strong> farmers’ use in Turkey. It is shown
that, Cotton Research Institute has got <strong>the</strong> biggest share <strong>of</strong> cultivars (Table 2).
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Table 2. Cultivars Developed and Registered by Research Institutions
in Turkey
Cultivars Breeding Method Institution Year
Acala-1086 Selection Nazilli C.R.I. 1959
Maydos Yerlisi Selection Nazilli C.R.I. 1964
Coker 100 A/2 Selection Nazilli C.R.I. 1964
Deltapine 15/21 Selection Adana C.R.I. 1964
Sealand-542 Introduction Nazilli C.R.I. 1965
Caroline Queen –201 Introduction Adana C.R.I. 1968
Nazilli 66-100 Selection Nazilli C.R.I. 1975
Adana 967/10 Selection Adana C.R.I. 1977
Delcerro Introduction Nazilli C.R.I. 1977
Ege-69 Hybridization Nazilli C.R.I. 1977
Sayar-314 Hybridization Adana C.R.I. 1980
Çukurova 1518 Selection Adana C.R.I. 1982
Nazilli-84 Hybridization Nazilli C.R.I. 1984
Glandless-86 Hybridization Ege University 1986
Nazilli-87 Hybridization Nazilli C.R.I. 1987
Nazilli M 503 Hybridization Nazilli C.R.I. 1992
Nazilli M-39 Hybridization Nazilli C.R.I. 1992
Maras-92 Hybridization Maras A.R.I. 1992
Ersan-92 Hybridization Maras A.R.I. 1992
Adana 98 Introduction Adana C.R.I. 1998
Nazilli 84-S Selection Nazilli C.R.I. 1998
Nazilli-143 Hybridization Nazilli C.R.I. 1998
Nazilli M 342 Hybridization Nazilli C.R.I. 1998
Çun S-2 Hybridization Nazilli C.R.I. 1999
Şahin 2000 Selection Nazilli C.R.I. 2001
Aydın 110 Hybridization Nazilli C.R.I. 2001
Dicle-2002 Hybridization Diyarbakır C.R.I. 2002
Gürelbey Hybridization Nazilli C.R.I. 2002
Ekşi 911 Hybridization Nazilli C.R.I. 2002
Özbek 142 Hybridization Nazilli C.R.I. 2002
Gossypolsüz Nazilli Hybridization Nazilli C.R.I. 2002
Nazilli 954 Selection Nazilli C.R.I. 2003
Nazilli 342 Hybridization Nazilli C.R.I. 2003
Nazilli 303 Hybridization Nazilli C.R.I. 2003
Source: Harem, E., 2003.
As known, lots <strong>of</strong> <strong>the</strong>m are not planted now. Some agronomical and
technological properties <strong>of</strong> currently cultivated varieties are given regionally
in Table 3. Most <strong>of</strong> <strong>the</strong> cotton production in Turkey (98 %) is grown with
irrigation and is harvested by hand. The major challenge <strong>of</strong> cotton in Turkey
is picking cost. Also o<strong>the</strong>r cost <strong>of</strong> inputs such as fertilizer, pesticides and
liquid fuel are forcing <strong>the</strong> cotton production.
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Table 3. Lint Yield and Some Fiber Properties
<strong>of</strong> Currently Cultivated Varieties in Turkey
Lint Yield Fiber Length Fineness Strength (1000 Lint
(Kg/ha) (mm) (Micronaire) lb/inch²) (%)
Cultivars Aegean Region
Nazilli 84 1,968 28.7 4.4 81.2 43.0
Nazilli 84-S 2,276 29.6 4.4 82.7 44.5
Nazilli M-503 1,636 30.5 4.3 78.6 40.9
Nazilli 143 1,901 28.8 4.2 84.3 40.7
Aydın 110 1,390 34.1 4.0 110.2 34.3
Şahin 2000 1,989 30.5 4.5 80.2 41.0
Özbek 142 2,034 29.3 5.0 92.5 46.0
Carmen 2,120 30.1 4.7 91.5 40.8
SG-125 2,140 29.4 4.6 79.2 42.0
Çukurova Region
SG-125 2,140 29.4 4.6 79.2 42.0
Çukurova 1518 1.538 29.3 4.1 85.9 41.0
Lachata 1.609 29.5 4.5 87.3 40.5
South Eastern Anatolia Region
Stonoville 453 1.989 30.9 4.9 85.8 41.7
Deltaopal 1,673 28.0 3.2 81.0 39.0
Tex 1,590 29.8 4.5
Antalya Region
90.5 40.9
SG-125 2,140 29.4 4.6 79.2 42.0
Source: Harem, E., 2003.
Until 1999, <strong>the</strong> increases in cost <strong>of</strong> production were compensated by
increasing yield or market prices but now any small increases in cost <strong>of</strong>
production are influencing <strong>the</strong> farmers’ income. Before 1999, almost all
Turkey cotton was picked by hand. In <strong>the</strong> last five years, due to <strong>the</strong> scarcity
<strong>of</strong> labor in Turkey, picking cost has risen up to 20-30% <strong>of</strong> cotton market
price, so this is forcing <strong>the</strong> Turkish cotton producers to use machines for
harvest <strong>of</strong> cotton. Estimately almost 90-100 machines already exist in
Turkey. Sustainable cotton production must have been higher yield but lower
costs. It is clear that harvest machine must enter cotton producers’ life in
Turkey and it started to enter our life through <strong>the</strong> last five or six year.
III. COTTON RESEARCH INSTITUTE
Cotton Research Institute was established in 1934, in Nazilli, west coast <strong>of</strong>
Turkey, named as “Cotton Breeding Station and Production Farm”, and in
1987, its name was changed to “Cotton Research Institute”. The duties <strong>of</strong> <strong>the</strong>
Institute are to improve genetic potential <strong>of</strong> cotton making basic and strategic
researches, to improve agronomic practices, mechanization, harvesting,
laboratory and technological substructure opportunities and help o<strong>the</strong>r
institutions with <strong>the</strong>se opportunities, to organize seminars, courses and
conferences in order to disseminate <strong>of</strong> new techniques and finally to prepare
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cotton seed and to meet <strong>the</strong> farmers’ demand. Cotton Research Institute is a
coordinator establishment in Turkey on cotton researches. Cotton Research
Institute has carried out lots <strong>of</strong> studies to improve resistance to Verticillium
Wilt, earliness, high lint percentage, long staple and high yielding varieties by
using different breeding methods. As a result <strong>of</strong> <strong>the</strong>se studies today, <strong>the</strong> most
quality cotton crops <strong>of</strong> Turkey is produced in Aegean region. Aegean cotton
can be sold at higher market prices than those <strong>of</strong> o<strong>the</strong>r regions in Turkey and
native textile industry prefers it because it enables good quality production.
By means <strong>of</strong> varieties developed by Cotton Research Institute, better quality
cotton can be produced in Aegean region. And also, cotton producers play a
role too because <strong>the</strong>y are well-informed and experienced in cotton producing.
They can solve many <strong>of</strong> <strong>the</strong>ir problems on cotton production by <strong>the</strong>mselves.
In Aegean region, <strong>the</strong> most popular variety is Nazilli 84-S developed by <strong>the</strong>
Cotton Research Institute. O<strong>the</strong>r varieties developed by <strong>the</strong> Institute are
widespread locally in Aegean region. Before 5 or 6 years Nazilli 84 and
Nazilli 84-S varieties had 95% planting area <strong>of</strong> Aegean region. Aegean
region was a great cotton field including Nazilli 84-S cotton variety. This was
very important and good for textile industry, because almost <strong>the</strong> whole fibers
in <strong>the</strong> region had same characteristics. As such Cotton Research Institute has
an important position in <strong>the</strong> Region. Today, varieties developed by Cotton
Research Institute have 60-65% planting area in <strong>the</strong> Region. As known, GAP
(South East Anatolian Projects) Region is <strong>the</strong> new area for cotton production
compared to o<strong>the</strong>r regions. Cotton Research Institute has carried out a project,
except for Aegean region, known as <strong>the</strong> “Integrated Cotton Crop
Management in GAP Region” as a partner with o<strong>the</strong>r institutes to solve GAP
region’s problem and improve new productive and high quality cotton
varieties for <strong>the</strong> region. As a result <strong>of</strong> successful studies till today, <strong>the</strong> Cotton
Research Institute has achieved <strong>the</strong> most important targets for <strong>the</strong> region and
country’s cotton production and textile industry. I think it is also possible
that <strong>the</strong> Cotton Research Institute will help solve problems <strong>of</strong> IDB cotton
producing member countries for productivity and o<strong>the</strong>r related matters.
1. Breeding Studies
In <strong>the</strong> beginning, adapting to <strong>the</strong> introduced materials from o<strong>the</strong>r countries
was common. Then, production <strong>of</strong> new cultivars was started by emphasizing
on selection and hybridization. Principal objectives <strong>of</strong> <strong>the</strong> cotton breeding
program in Turkey focus on improving yielding ability and fiber quality,
earliness, adaptation for specific regional conditions and resistance to
Verticillium Wilt (V.dahliae) and insects. Lint yield and fiber quality have
always been <strong>the</strong> primary importance to <strong>the</strong> breeders because <strong>the</strong> greatest
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pr<strong>of</strong>it is usually realized from maximizing yield. Because <strong>the</strong> rain usually
begins in beginning <strong>of</strong> October and so limited vegetation period, earliness is
considered one <strong>of</strong> <strong>the</strong> most important features <strong>of</strong> a cotton cultivars, especially
Aegean region. Earliness enables <strong>the</strong> cotton crop to develop during periods <strong>of</strong>
more favorable moisture and to be harvested before damage from unfavorable
wea<strong>the</strong>r conditions. In <strong>the</strong> 1970’s Verticillium wilt was <strong>the</strong> most common
cotton disease in Turkey causing between 16 % to 38 % yield loss in <strong>the</strong>
Aegean Region. The objective <strong>of</strong> breeding programs <strong>of</strong> cotton research was
focused on developing cotton cultivars tolerant to Verticillium wilt (V.
dahliae Kleb.). Nazilli 66-100 was <strong>the</strong> first Turkish cotton cultivar developed
with resistance to Verticillium wilt in 1975. Then, Nazilli 84 and Nazilli 87
both with higher levels <strong>of</strong> resistance to Verticillium wilt were developed and
released by Cotton Research Institute. Today as a result <strong>of</strong> breeding studies,
25 cotton varieties were developed and released by Cotton Research Institute
to <strong>the</strong> farmers’.(Table 2).
At that time, a lot <strong>of</strong> projects were carried out to develop new cotton varieties
not only to maintain or improve yield and fiber quality to levels acceptable to
<strong>the</strong> spinners, but also to improve colored cotton, resistance to major insect
pests and pathogens, particularly Verticillium wilt, one <strong>of</strong> <strong>the</strong> most important
project to solve disease problem is Improvement <strong>of</strong> Turkish Cotton Varieties
Using Molecular Techniques. In this project, improving a new variety
resistance to Verticillium Wilt was <strong>the</strong> aim; by using marker gene
technology. Besides <strong>the</strong>se varieties, <strong>the</strong>re are a lot <strong>of</strong> lines that can be
investigated in suitable conditions. There is a genetic stock barn to maintain
varieties and advanced lines and this includes over 500 varieties.
2. Agronomic Studies
Agronomical studies have been conducted about suitable cultural properties
to improve yield and fiber quality in cotton farming. The objectives <strong>of</strong>
agronomic studies are planting date, planting pattern, planting density,
rotation, hoeing, irrigation and fertilization time, method and doses, and so
on. Environmental Stresses especially salt and drought tolerances are being
investigated in recent years.
3. Studies on Technological Properties
Technological studies are on cotton lint and boll properties. Because <strong>of</strong> <strong>the</strong>
main goal <strong>of</strong> <strong>the</strong> cotton production is to obtain lint, technological studies have
been conducted to help ei<strong>the</strong>r breeding or agronomic investigations by
determining fiber characteristics <strong>of</strong> cotton plant which is studied. For this
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purpose, last year one new HVI Spectrum machine and trash counter was set
up. Now, with two HVI machine, much more sample can be tested faster than
before.
4. Cotton Pests and Diseases Studies
One <strong>of</strong> <strong>the</strong> most important subjects studied in Cotton Research Institute is
cotton diseases and pests. Although insect pest population is low at Aegean
region, studies on pest control are being carried out to find easier and cheaper
methods and sensitive to <strong>the</strong> environment and human health. Verticillium
Wilt is <strong>the</strong> most important disease <strong>of</strong> Aegean region. A lot <strong>of</strong> studies have
been carried out to find out chemical and cultural methods and also breeding
program have been conducted to improve resistance or tolerant varieties
aiming at control this disease. Introduced materials or new varieties
improving inside are tested with respect to disease. For <strong>the</strong> purpose <strong>of</strong>
assistance and ability to investigate much more effective studies, in Cotton
Research Institute, phytopathology laboratory was founded in 2004.
5. Cotton Seed Production Activity
One o<strong>the</strong>r function <strong>of</strong> Cotton Research Institute is to produce new varieties <strong>of</strong>
cotton seeds, developed and registered by <strong>the</strong> Institute and to make available
for farmers required quantity and time. For this purpose, elite and original
cotton seeds are produced on enough quantity, satisfying to demand.
Depending on years, 100-150 thousand tons original cotton seed is produced
annually from 80 hectares planting area in Cotton Research Institute. In
addition, Cotton Research Institute has a sowgin establishment which has
3500-4000 kg per hour capacity and a delintation establishment which has
1000-1200 kg per hour capacity.
IV. THE WAYS OF ENHANCING PRODUCTIVITY AND
COMPETITIVENESS IN IDB COTTON PRODUCING
MEMBER COUNTRIES
IDB cotton producing countries shared 30% <strong>of</strong> <strong>the</strong> world total area and 29%
<strong>of</strong> <strong>the</strong> world total production in 2003-2004 season (ICAC, 2003). The world
average yield in 2003-2004 was 635 kg/ha but what a pity only seven
countries from twenty-nine IDB cotton producing member countries have
yield above world average (ICAC, 2003). Turkey and Syria has yield higher
than twice <strong>of</strong> <strong>the</strong> world average yield. Turkey has <strong>the</strong> highest cotton lint yield
with 1428 kg/ha according to Cotton Information Committee data in Turkey
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compared to IDB member countries in 2003 (Sabit, 2004). In this phase,
answers <strong>of</strong> two questions, what and how, must be exposed to enhance
productivity and competitiveness in cotton sector.
1. Increasing <strong>of</strong> Communication
IDB cotton producing member countries must communicate for learning from
each o<strong>the</strong>r’s experiences but <strong>the</strong>re is no communication system that countries
can aware what is happening in member countries. So, <strong>the</strong>re is a need to form
a communication system between IDB cotton producing member countries
and also o<strong>the</strong>r countries. In addition, a cotton journal must be published
including studies in IDB member countries to keep <strong>the</strong>m connected to each
o<strong>the</strong>r ei<strong>the</strong>r on-line or hard copy.
One <strong>of</strong> <strong>the</strong> most important and effective communication systems is “Cotton
Conferences”. Many countries, like <strong>the</strong> USA, Australia, etc., organize
National Cotton Conferences to bring toge<strong>the</strong>r all participants, from farmers
to industry, in <strong>the</strong> cotton sector and get feedback for improving <strong>the</strong> sector.
That’s why, like <strong>the</strong>se countries, IDB cotton producing member countries
have to urgently organize annual Cotton Conferences on a regular basis to at
least exchange <strong>the</strong>ir experiences. In Turkey, cotton meetings are held
regularly every year to discuss recent studies, and to determine new strategies
in cotton studies.
2. Exchange <strong>of</strong> Varieties and Germplasm
First <strong>of</strong> all, varieties which have high yield and quality must be exchanged
between each IDB cotton producing member. Variety exchange is very
important and necessary to discover appropriate varieties for o<strong>the</strong>r countries
as an introduction material. Growing varieties in Turkey has high yield as
shown in Table 3. Of course cotton production conditions are different in IDB
member countries but it is worth it to try our varieties in countries where
yield is low. Exchange <strong>of</strong> germplasm is ano<strong>the</strong>r important concern because
good germplasm is <strong>the</strong> basis for a successful breeding program.
Unfortunately, <strong>the</strong>re is no germplasm bank or information in any country that
can give assistance germplasm breeders about availability in different
countries. That’s why, <strong>the</strong>re is a need to establish a germplasm bank directed
towards IDB cotton producing member countries. For <strong>the</strong> sake <strong>of</strong> establishing
a germplasm bank, Cotton Research Institute has been readied for duty. Last
year a genetic stock unit was established in <strong>the</strong> Cotton Research Institute.
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3. Improving High Yielding and Good Quality Varieties
Associate breeding studies must be conducted to develop high productive and
good quality varieties in IDB countries. Since cotton is a sensitive plant that
shows a high reaction to climatic conditions, breeders must improve varieties
suitable for local conditions. Exchange <strong>of</strong> germplasm is a necessity for
improving new varieties. Cotton growers in IDB member countries must
plant high quality certified seed. At <strong>the</strong> same time, sustainability <strong>of</strong> cotton
production must be improved by decreasing <strong>the</strong> cost <strong>of</strong> production, because
high yield does not mean higher efficiency if <strong>the</strong> cost <strong>of</strong> production is high.
4. Reducing Cost <strong>of</strong> Production
To decrease production cost;
• Lower soil treatment methods must be used,
• Pesticide usage must be reduced by using new methods i.e., IPM,
• Machine harvesting must be used for decreasing harvest cost which is
25-30% <strong>of</strong> total production cost in some countries.
5. Share <strong>of</strong> Technological Improvement
IDB member countries can learn from each o<strong>the</strong>r about new technology such
as harvest machinery, spray machinery, ginning technology, and pest control
methods. In addition, <strong>the</strong>y can establish a training center to study methods
for improving new technology on harvest machinery and o<strong>the</strong>r cotton issues.
Besides machinery technology, breeding technology must be shared too.
Molecular techniques can be used in a breeding study except classical
methods. Molecular techniques are expensive compared to classical methods
but more effective results can be obtained in this way. Biotechnology <strong>of</strong>fers
opportunities to enhance breeders’ success in developing new varieties. I
believe that, if a good project found, IDB will support it financially.
6. Private Sector
There are a lot <strong>of</strong> private foundations in <strong>the</strong> cotton sector, but almost all <strong>of</strong>
<strong>the</strong>m are studying marketing. Of course, marketing is very important for a
firm, but research and development programs are never undervalued.
Therefore, <strong>the</strong> private sector must be stimulated to investigate cotton
research. The private sector must supply funds and be a partner in cotton
research.
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7. Improving Product Diversity
In recent years, organic cotton use has ascended in merit in developed
countries because <strong>of</strong> human health concerns. For example, Germany and
o<strong>the</strong>r European countries decelerated to increase organic crop usage. Organic
cotton farming can be supplied to <strong>the</strong> farmers’ new expansions. IDB member
countries must study organic cotton production possibilities. The o<strong>the</strong>r
objective is colored cotton production. New colored varieties can be
developed with higher yield and good quality. At <strong>the</strong> same time, colored
cotton will be an important objective in organic cotton production. In Turkey,
projects are conducted in <strong>the</strong>se two subjects and we are expecting to register a
new colored cotton variety in 2005.
8. Cotton Research Institute
To achieve <strong>the</strong> above mentioned, <strong>the</strong>re is a need to establish a cotton research
center or to convert an existing institute to an international cotton research
center that will organize and oriented cotton studies in IDB member
countries. This is very important for enhancing cotton productivity and
international competitiveness in IDB cotton producing member countries.
The objectives <strong>of</strong> this center are;
• To realize communication between cotton researchers in different
IDB member countries.
• To organize IDB Cotton Conferences annually to discus studies and
to share experiences.
• To constitute a breeding program for different regions in IDB
member countries to solve problems or improve new varieties with
local institutes.
• To form a technology research laboratory that can be controlled
easily.
• To establish a germplasm bank to collect elite germplasm from all
countries to maintain and supply it on demand to researchers. These
processes (collection and supply) can be discussed separately.
• To organize an exchange program for researchers for a determined
period to increase <strong>the</strong>ir experiences. This will be useful for sharing
experiences among IDB member countries.
• To help collective studies between IDB member countries to study
<strong>the</strong> performance <strong>of</strong> cotton varieties in different member countries and
also o<strong>the</strong>r working objectives.
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V. CONCLUSION
Turkey has proceeded in cotton productivity, with 1428 kg/ha and quality
since 1970. There is no significant problem concerning yield. Turkish studies,
recently, have been directed to lint quality properties much more than yield.
Never<strong>the</strong>less, due to low market prices during <strong>the</strong> last four years, studies to
improve higher yield varieties have been continued. So far, 35 cotton
varieties have been developed and registered. We can share <strong>the</strong>se varieties
with IDB cotton producing member countries. A Cotton Research Institute is
one <strong>of</strong> <strong>the</strong> most important and active establishments <strong>of</strong> Turkey. The Cotton
Research Institute has already completed its substructure in many ways. It has
a phytopathology laboratory, a fiber analysis laboratory, a ginning and
delintation establishment, a genetic stock unit and 20 researchers. Varieties,
developed by <strong>the</strong> Cotton Research Institute have supplied more significant
advantages to <strong>the</strong> region and <strong>the</strong> country’s cotton sector.
The Cotton Research Institute has achieved a rise in IDB cotton producing
member countries with its research studies and improved varieties. If IDB
member countries want to enhance production efficiency and
competitiveness, first <strong>of</strong> all <strong>the</strong>y have to enhance cooperation in all areas. As
a result, IDB cotton producing member countries must cooperate among each
o<strong>the</strong>r to increase communication, exchange germplasm, improve desirable
varieties, and share technological improvements. In addition to this, <strong>the</strong>
private sector must be included in this cooperation, too. This is necessary, at
least, to make improved varieties easily available to suitable regions.
I hope this meeting will be a great opportunity and beginning for IDB
member countries to cooperate among IDB cotton producing countries.
LITERATURE
Harem, E., 2003. Türkiye’de Tescil Edilen Yerli ve Yabancı Pamuk Çeşitleri ve
Özellikleri. İkinci Baskı, Yayın No : 63, Nazilli, 2003.
International Cotton Advisory Committee (ICAC), 2003. World Cotton Statistics,
Bulletin <strong>of</strong> <strong>the</strong> International Cotton Advisory Committee. 1629 K Street, Suit 702,
Washington DC 20006, USA, September 2003.
Sabit, A.Ö., F. Işın, İ. Akyıldız, P. Nacak, Y. Sokat, E. Sayın. 2004. Pamuk Çalışma
Grubu Raporu. AB Müktesebatına Uyum Kapsamında Türk Pamuk Sektörünün
Durumu ve Yapılması Gerekenler.
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PART THREE
ROLE OF PRODUCTIVITY INSTITUTIONS AND
PRIVATE SECTION IN THE COTTON SECTOR
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202

ENHANCING THE ROLE OF NATIONAL
INSTITUTIONS
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204

Executive Summary
PRODUCTIVITY IN COTTON SPINNING:
PAKISTAN’S EXPERIENCE
Saquib Mohyuddn
Chief, National Productivity Organization &
Amina Mahmood
Research Officer, National Productivity Organization
Formal international trade <strong>the</strong>ory tends to assume that once trade distortions
are removed, a country’s potential comparative advantage emerges
automatically through <strong>the</strong> workings <strong>of</strong> a well coordinated market system and
a fully developed institutional framework. The challenge that faces Pakistan’s
textile industry in <strong>the</strong> current context <strong>of</strong> trade liberalization, is how our
domestic polices, can best facilitate <strong>the</strong> realisation <strong>of</strong> <strong>the</strong> gains from trade
expansion both in terms <strong>of</strong> competitive threats and growth opportunities.
Cotton being <strong>the</strong> leading crop <strong>of</strong> Pakistan makes <strong>the</strong> textile industry <strong>the</strong> most
significant one in <strong>the</strong> country which is best captured by a phalanx <strong>of</strong> figures.
The textile industry accounted for a value addition <strong>of</strong> 9 percent <strong>of</strong> GDP in
FY03, has a direct share <strong>of</strong> one-fifth in <strong>the</strong> index <strong>of</strong> large-scale manufacturing
and a 46 percent share in overall manufacturing activity. The industry also
has a 38 percent share in generating employment and contributes to a share <strong>of</strong>
30 percent in world yarn trade and 8 percent in cotton cloth, and about 68
percent <strong>of</strong> export earnings with a value <strong>of</strong> around $ 7 billion derived from <strong>the</strong>
textile sector alone. Cotton in <strong>the</strong> west has undergone massive restructuring
and is becoming more and more capital intensive. As trade in cotton and its
allied industry including textiles is liberalised, a highly competitive
environment awaits us. The removal <strong>of</strong> quotas will pitch Pakistan into open
competition with o<strong>the</strong>r exporting countries, <strong>the</strong> impending gain and loss in
market share primarily depends on productivity indices and relative
efficiency <strong>of</strong> <strong>the</strong> domestic institutional framework <strong>of</strong> each country.
A major drawback <strong>of</strong> efficiency in Pakistan is <strong>the</strong> emphasis placed on <strong>the</strong>
spinning activity in <strong>the</strong> textile sector. An imperative structural weakness <strong>of</strong>
our textile industry is <strong>the</strong> export <strong>of</strong> most <strong>of</strong> our good quality yarn to o<strong>the</strong>r
countries, ra<strong>the</strong>r than being utilised for producing high value-added products
like fabrics or garments locally. This yarn is imported by countries like Japan,
a major export market for yarn, China, and South Korea. These countries
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have a well-flourished textile industry to convert this yarn into high value
added products that fetch much higher prices in <strong>the</strong> international market. The
stilling discontent is fur<strong>the</strong>r provided by <strong>the</strong> fact, that <strong>the</strong>se countries do not
grow cotton, <strong>the</strong>y have a well-established textile industry because <strong>the</strong>y have
invested in modern manufacturing technology as well as in a qualified and
well-trained work force which greatly enhances <strong>the</strong> productivity <strong>of</strong> <strong>the</strong>ir
textile sector, enabling <strong>the</strong>m to overcome <strong>the</strong> handicap <strong>of</strong> imported yarn. The
new economic world order, with deeply integrated global markets will be
increasingly marked with intense competition and specifically <strong>the</strong> textile
industry will face challenges in <strong>the</strong> development <strong>of</strong> pervasive technology and
communication networks, massive improvements in international logistics
and transportations, and most <strong>of</strong> all a surmountable impediment in today’s
rapidly growing investment towards human capital and an innovation driven
industry. The task that lies ahead requires stimulation <strong>of</strong> policies towards
fostering a highly competitive and productivity enhanced industry focusing
on some <strong>of</strong> <strong>the</strong> following issues:
Demand for Market Oriented Strategy: Producers should try to increase
<strong>the</strong>ir market power by producing high price fashion clothing according to
current demands, and since apparels and garments provide <strong>the</strong> highest value
added product among <strong>the</strong> textile items, maximum focus should be towards
<strong>the</strong>se units. Proportion <strong>of</strong> syn<strong>the</strong>tic fibres in our textile products should be
increased especially from <strong>the</strong> export point <strong>of</strong> view, and realising that this
segment is more capital-intensive an increase in technological resources
would be required.
Supply for Market Oriented Strategy: Non-price factors on <strong>the</strong> supply side
play a crucial role in <strong>the</strong> export performance <strong>of</strong> <strong>the</strong> country and
diversification is needed in <strong>the</strong> direction <strong>of</strong> trade. More than 50 percent <strong>of</strong>
Pakistan’s exports are directed towards European and North American
markets and given <strong>the</strong>ir technological superiority Pakistan’s textiles would
certainly be at a disadvantage. This is one <strong>of</strong> <strong>the</strong> major drawbacks for <strong>the</strong> low
level <strong>of</strong> Pakistani exports especially <strong>of</strong> apparels making it worthwhile to
workout new markets in o<strong>the</strong>r parts <strong>of</strong> <strong>the</strong> world.
Product Differentiation: Producers should go for product differentiation
through <strong>the</strong> promotion <strong>of</strong> brand names and advertising and also try to
increase <strong>the</strong> efficiency <strong>of</strong> distribution. With an increase in market power <strong>the</strong>y
can easily transfer rising costs to <strong>the</strong> consumer in <strong>the</strong> form <strong>of</strong> rising prices.
Quality Standards: To survive in a competitive environment, we need to
develop modern technology that emphasises on <strong>the</strong> quality <strong>of</strong> finished
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products. There should be should be an introduction and monitoring <strong>of</strong> <strong>the</strong>
global quality standards, ISO 9000 and ISO 14000 in <strong>the</strong> production <strong>of</strong> all
textile products.
Value Addition: Instead <strong>of</strong> emphasizing, too much, on <strong>the</strong> spinning activity
our industry should focus more on <strong>the</strong> production <strong>of</strong> fine quality cloth. A
major portion <strong>of</strong> good quality yarn should be utilised domestically in <strong>the</strong>
organised mill sector for <strong>the</strong> production <strong>of</strong> high value added fabrics <strong>of</strong> better
quality and later this fabric should be used in <strong>the</strong> production <strong>of</strong> garments.
Technological Up-gradation: Investment in more efficient machinery has
become a cliché for this industry, but none<strong>the</strong>less we still need to put stress
on its acute significance towards productivity. Specifically, <strong>the</strong> industry’s
reliance on low technology power looms for <strong>the</strong> production <strong>of</strong> fabrics should
be reduced and <strong>the</strong> number <strong>of</strong> shuttle less looms should be increased, which
have <strong>the</strong> capacity to produce wider width and superior fabric quality for <strong>the</strong>
international market.
Enhancement <strong>of</strong> Human Capital: The current enhancement in productivity
is mainly due to an increase in capital-output ratios but labour productivity
must also increase to fur<strong>the</strong>r improve <strong>the</strong> overall productivity <strong>of</strong> this sector.
Increasing investment towards improving <strong>the</strong> skill level <strong>of</strong> workers, leads not
only to a more qualified and efficient work force, but also generates a
“learning by doing” positive externality, which provides <strong>the</strong> much needed
competitively driven comparative advantage.
Infrastructure: A competitive textile industry will require sufficiency in a
well developed infrastructure in terms <strong>of</strong> communication, services, export
procedures and efficient ports. A natural corollary to infrastructure
development would be <strong>the</strong> establishment <strong>of</strong> clusters leading to centralisation
<strong>of</strong> expertise in areas <strong>of</strong> high industrial activity.
Resource Development: Pragmatic competitiveness in global trade for
textile would require highly innovative production techniques which require
investment in research and development <strong>of</strong> <strong>the</strong> textile sector. More efficient
means <strong>of</strong> producing cotton in <strong>the</strong> past has mainly focused on <strong>the</strong> introduction
<strong>of</strong> new seed varieties. What is needed are policies towards <strong>the</strong> development
<strong>of</strong> bio-technology and more efficient production techniques through <strong>the</strong>
establishment <strong>of</strong> vocational and technical learning centres, that conduct
training and research in <strong>the</strong> industry so as to produce cutting edge innovative
solutions.
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I. BACKGROUND
With <strong>the</strong> continuing globalization <strong>of</strong> <strong>the</strong> marketplace, productivity remains
inevitably <strong>the</strong> key to competitiveness. The goal <strong>of</strong> economic development is a
rising standard <strong>of</strong> living. A nation’s standard <strong>of</strong> living is determined by <strong>the</strong>
productivity <strong>of</strong> its economy, which is a measure <strong>of</strong> <strong>the</strong> value <strong>of</strong> goods and
services produced per unit <strong>of</strong> <strong>the</strong> nation’s human, capital and natural
resources. For a nation to be prosperous it is its productivity – <strong>the</strong> ability to
produce high quality products and services in support <strong>of</strong> rising wages and
price disparities in <strong>the</strong> long run. The central challenge <strong>of</strong> <strong>the</strong> National
Productivity Organization towards <strong>the</strong> economic development <strong>of</strong> Pakistan is
to create conducive environments for rapid and sustained productivity
growth. Stable political, legal and institutional frameworks and sound macroeconomic
policies provide <strong>the</strong> bases for improving national prosperity.
However, at <strong>the</strong> enterprise level, it is <strong>the</strong> ability <strong>of</strong> firms to create valuable
goods and services in a productive manner so as to ensure maximum returns
on capital in line with <strong>the</strong> immense competition due to market liberalization
in this sector. Ultimately, in this age <strong>of</strong> rapid globalisation <strong>of</strong> both markets for
goods and services, it is international competitiveness that will finally
determine how far current opportunities are converted into lasting national
benefits and how far potential threats from <strong>the</strong> daunting international
competition will result in economic costs for developing countries.
The economy <strong>of</strong> Pakistan is at an important crossroads today, with prospects
<strong>of</strong> chalking up real GDP growth close to an impressive 7 percent this year
and with <strong>the</strong> end <strong>of</strong> <strong>the</strong> international textile and clothing regime <strong>the</strong>
agricultural sector must work in tandem with <strong>the</strong> fast performing
manufacturing sector to ensure maximum utilization <strong>of</strong> <strong>the</strong> dwindling
comparative advantage. The specific case examined here is cotton and cotton
products, which toge<strong>the</strong>r constitutes <strong>the</strong> largest and most important economic
sector in Pakistan, with considerable trade exposure at every stage <strong>of</strong>
production. It is a global activity involving economic and political interests
around <strong>the</strong> globe and has long been <strong>the</strong> subject <strong>of</strong> North-South trade
negotiations.
Cotton being <strong>the</strong> leading crop <strong>of</strong> Pakistan makes <strong>the</strong> textile industry <strong>the</strong> most
significant one in <strong>the</strong> country which is best captured by a phalanx <strong>of</strong> figures.
The textile industry accounted for a value addition <strong>of</strong> 9 percent <strong>of</strong> GDP in
FY03, has a direct share <strong>of</strong> one-fifth in <strong>the</strong> index <strong>of</strong> large-scale manufacturing
and a 46 percent share in overall manufacturing activity. The industry also
has a 38 percent share in generating employment and contributes to a share <strong>of</strong>
30 percent in world yarn trade and 8 percent in cotton cloth, and about 68
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percent <strong>of</strong> export earnings with a value <strong>of</strong> around $ 7 billion derived from <strong>the</strong>
textile sector alone.
The growth targets <strong>of</strong> <strong>the</strong> government focus on value added products and is
expected to increase its consumption <strong>of</strong> cotton to 17 million bales and <strong>the</strong>
spinning sector is expected to grow at a rate <strong>of</strong> 6 percent. This calls for
continual productivity enhancement at a greater pace for <strong>the</strong> enterprise level
and better functioning <strong>of</strong> downstream activities to ensure sufficient value
addition. The economy has an overwhelming reliance on cotton in general
and <strong>the</strong> textile sector specifically which itself contributes significantly for
value addition to <strong>the</strong> GDP. Since <strong>the</strong> textile sector largely remains cotton
based, despite an increasing trend towards syn<strong>the</strong>tic and blended fabrics,
interventions must be focused on building a competitive strength through
greater productivity enhancement efforts if <strong>the</strong> textile and apparel industries
are to continue to sustain <strong>the</strong>ir contribution to <strong>the</strong> national economy.
II. OBJECTIVES
In order to tap <strong>the</strong> immense opportunities available from world trade, an
increase in overall productivity in labour, technology and innovation is
intrinsic to create <strong>the</strong> ripple effect, to give a competitive edge to <strong>the</strong> industry.
To quote <strong>the</strong> Total Factor Productivity Growth (growth in real GDP per unit
<strong>of</strong> labour and capital combined) for Pakistan stands at -0.19 percent, Korea
2.02 percent and India 3.06 percent is just <strong>the</strong> tip <strong>of</strong> <strong>the</strong> iceberg in <strong>the</strong> algebra
<strong>of</strong> growth indices. The extraordinary growth achieved by Hong Kong, South
Korea and now mainland China depends on more than anything else <strong>the</strong>
ability <strong>of</strong> <strong>the</strong>se countries to exploit <strong>the</strong> shifting comparative advantage in <strong>the</strong>
world textile and clothing industry. Low wages alone cannot guarantee a cost
advantage in textile production. Pakistan retrospectively has had <strong>the</strong>
advantage <strong>of</strong> cotton and labour, but <strong>the</strong> textile industry still continues to
suffer due to lack <strong>of</strong> competitiveness in <strong>the</strong> international market.
Competitiveness means <strong>the</strong> ability to compete with firms at <strong>the</strong> international
frontier <strong>of</strong> best practise. Rapid technical change, shrinking economic
distance, new forms <strong>of</strong> industrial organization, tighter links between national
value chains and widespread policy liberalization are all altering radically <strong>the</strong>
environment facing developing country enterprises. Competition now arises
with great intensity from practically anywhere in <strong>the</strong> world. To compete,
enterprises must use new technologies and organizational methods at best
practice, and link up to global value chains. Hence competitiveness is about
productivity which in turn is a function <strong>of</strong> factors related to <strong>the</strong> cost <strong>of</strong>
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products as well as those related to non-price factors such as delivery
schedules, reliability <strong>of</strong> producers and o<strong>the</strong>r intangible factors like image <strong>of</strong>
<strong>the</strong> country/company and brand equity. Thus a product is export competitive
if:
• Growth rate in unit value <strong>of</strong> <strong>the</strong> product exported from Pakistan
exceeds <strong>the</strong> average growth rate in unit value <strong>of</strong> <strong>the</strong> product from
all suppliers in world market
• The market share <strong>of</strong> Pakistani export grows.
The project sets as an objective <strong>the</strong> examination <strong>of</strong> <strong>the</strong> strategic problems
facing <strong>the</strong> target countries and outlining <strong>the</strong> opportunities for promising
prospects. The study will focus on government policies influencing patterns
<strong>of</strong> development and <strong>the</strong> adoption <strong>of</strong> technology, farm-level productivity and
<strong>the</strong> efficiency and effectiveness <strong>of</strong> processing and marketing operations. In
this regard, case studies <strong>of</strong> technical and institutional National Productivity
Organization has focused on productivity gains in <strong>the</strong> cotton and textiles
sector. Initiating gains in Productivity imply a more efficient and effective
process <strong>of</strong> production leading to lower prices <strong>of</strong> goods and services.
Productivity improvement decreases production cost per unit which may
contribute to <strong>the</strong> consumers in terms <strong>of</strong> lower prices and more goods and
services at better quality. As <strong>the</strong> level <strong>of</strong> productivity rises, outputs become
more competitive, both in terms <strong>of</strong> quantity and quality. Thus, better quality
goods and services are made available to <strong>the</strong> consumers. Realizing <strong>the</strong>se
objectives <strong>the</strong> National Productivity Organization has pioneered <strong>the</strong>
following programs:
• Benchmarking in Cotton Spinning - Identification <strong>of</strong> 80 Best
Practices
• Cluster Development <strong>of</strong> Cotton Weaving Sector
• Productivity and Quality Enhancement <strong>of</strong> Cotton Weaving
Sector- Technical Up gradation
• Khaddi Association <strong>of</strong> Pakistan (KAP)- developing <strong>of</strong> handloom
weaving industry
• Developing Role Model Companies – Leisure Textiles to enhance
maximum value addition <strong>of</strong> cotton.
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To support <strong>the</strong>se exercises <strong>of</strong> <strong>the</strong> National Productivity Organization (NPO),
<strong>the</strong> organization has various departments that conduct research, support
services and training for <strong>the</strong> capacity building <strong>of</strong> its sectoral initiatives
enabling maximum value creation and a significant multiplier effect for <strong>the</strong>
industry consolidated with <strong>the</strong> objectives <strong>of</strong> <strong>the</strong> Government <strong>of</strong> Pakistan.
Thus <strong>the</strong> objectives <strong>of</strong> NPO are as follows:
• To promote a holistic and dynamic process through which local
people will continuously improve <strong>the</strong>ir productivity,
• The quality <strong>of</strong> <strong>the</strong>ir lives through efficient and sustainable
utilization <strong>of</strong> internal and external resources,
• Knowledge sharing,
• Leveraging each o<strong>the</strong>rs capabilities.
� Training and
Skill
Development
� Consultancy
Service
� Innovation and
Quality Center
Training and Consultancy
<strong>Group</strong>
211
Research <strong>Group</strong>
� Research and Knowledge Sharing
� Integrated Community Development
� Development <strong>of</strong> Best Practice Network
� Benchmarking (Cotton Spinning and Weaving
Higher
Productivity and
Value Creation
� Productivity Promotion
� Implementation <strong>of</strong> APO
Programs in Pakistan
� President Productivity
Awards
Business
Development and
Support Services

Social and economic development means bringing a better future to <strong>the</strong>
people. The ultimate goal <strong>of</strong> productivity improvement as a driving force <strong>of</strong>
economic development is to improve <strong>the</strong> quality <strong>of</strong> life <strong>of</strong> <strong>the</strong> people. This is
a key factor that enables society to generate value added through an optimal
mix <strong>of</strong> available resources-human knowledge and skills, technology,
equipment, raw materials, energy, capital and intermediary services. Its
growth contributes towards <strong>the</strong> prosperity <strong>of</strong> nations, makes companies
competitive in <strong>the</strong> global market, and thus contributes to <strong>the</strong> quality <strong>of</strong> life.
III. OUTLOOK OF COTTON SECTOR IN PAKISTAN
Pakistan stands at number four in <strong>the</strong> world’s cotton yarn production with an
8% share. Its production has grown at an average rate <strong>of</strong> 4.9% from 1990 to
1999. This growth figure when compared to <strong>the</strong> global yarn production
growth rate <strong>of</strong> 0.53% is very substantive. Pakistan’s spinning industry
manufactures all counts <strong>of</strong> yarn but traditionally, <strong>the</strong> product mix is highly
tilted towards low value added yarns. Yarn production for <strong>the</strong> year 1999
shows about 70% <strong>of</strong> Pakistan’s yarn production in coarse (47%) and medium
(27%) counts. Fine and super fine accounted only 3% <strong>of</strong> <strong>the</strong> total production.
In Pakistan, <strong>the</strong> cotton sector exhibits considerable diversity in terms <strong>of</strong>
virtually every characteristic: unit size, formality <strong>of</strong> industrial structure,
nature <strong>of</strong> competition, and underlying cultural and governance systems. At
one extreme are 1.3 million cotton farms (<strong>of</strong> which roughly half are smaller
than 2 hectares) competing in almost classic perfect competition, a
vast majority operated as family farms by owners/ cultivators with limited
literacy or access to technology.
With a record cotton crop <strong>of</strong> over 13 million bales in <strong>the</strong> current season and
<strong>the</strong> “excess” production over and above <strong>the</strong> <strong>of</strong>ficial target by 2 to 3 million
bales, real GDP is expected to grow by at least 70 to 80 points. The economy
was likely to experience an acceleration in growth, with an unexpected
bounce in agriculture providing greater-than-anticipated uplift since cotton
constitutes a large share in Pakistan’s still dominant agricultural sector fur<strong>the</strong>r
elucidated by <strong>the</strong> figures below. In both <strong>the</strong> graphs we can observe that <strong>the</strong>
relationship <strong>of</strong> <strong>the</strong> agricultural growth rate and GDP growth rate shows a
strong positive relationship as seen in Figure1. Though, on <strong>the</strong> contrary
agricultural cotton production (cotton production from <strong>the</strong> farming sector
without value addition) shows a lesser degree <strong>of</strong> correlation, hence <strong>the</strong>
smaller correlation coefficient <strong>of</strong> 0.133 and 0.655 <strong>of</strong> cotton and <strong>the</strong>
agricultural sector respectively.
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Figure 1
Agricultural Growth Rate and GDP
Agricultural Growth Rate and GDP
Growth Rate
Growth Rate
15
15
10
10
5
5
0
0
0
-5 0
-5
-10
-10
2
2
4
4
6
6
8
8
10
10
GDP Growth Rate Linear (GDP Growth Rate)
GDP Growth Rate Linear (GDP Growth Rate)
Figure 2
Agricultural Cotton Production and
Agricultural Cotton Production and
GDP growth rate
GDP growth rate
14
12
14
10
12
8
10
6
8
4
6
2
4
0
2
0
0 2 4 6 8 10
0 2 4 6 8 10
GDP Growth Rate Linear (GDP Growth Rate)
GDP Growth Rate Linear (GDP Growth Rate)
The value <strong>of</strong> cotton depends, to a great extent, on <strong>the</strong> condition and quality <strong>of</strong>
<strong>the</strong> fiber. Better quality enhances price and makes <strong>the</strong> crop more marketable.
Quality cotton has strong advantages to textile manufacturers. High speed
spinning equipment requires quality fiber for higher quality end products.
Effective harvest aid chemicals help in getting a head start on harvest. Mature
cotton, harvested as early as possible, ensures better quality over cotton that
remains open and subject to wea<strong>the</strong>r-related deterioration. Domestic textile
mill use <strong>of</strong> cotton would likely increase substantially with favorable producer
price incentives for <strong>the</strong> qualities that improve mill performance. The more
desirable spinning properties pave <strong>the</strong> way for a more productive, competitive
and pr<strong>of</strong>itable textile industry. Considering <strong>the</strong> figures below from Table 1,
one can easily infer that <strong>the</strong> quality <strong>of</strong> cotton should be <strong>of</strong> paramount
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importance to all developing countries. Since <strong>the</strong> fragile economies <strong>of</strong>
developing countries must rely on value addition for sustainable
development it has become absolutely essential for countries like Pakistan
that possess a comparative advantage in cotton production to cash in on <strong>the</strong>
pr<strong>of</strong>its from <strong>the</strong> value addition <strong>of</strong> this agricultural produce.
Table 1. Value <strong>of</strong> One Bale <strong>of</strong> 170 Kg <strong>of</strong> Cotton
Conclusively after examining <strong>the</strong> value added figures from <strong>the</strong> price <strong>of</strong> cotton
and its associated products one can easily make <strong>the</strong> logical inference that <strong>the</strong>
textile industry is <strong>the</strong> most important industrial sub-sector in Pakistan. Being
based on locally available raw cotton, providing <strong>the</strong> largest employment to
<strong>the</strong> industrial labour force and also <strong>the</strong> largest foreign exchange earner it
should be most sensitive to cotton production. Global textile and clothing
trade has undergone significant changes in <strong>the</strong> last decade. Clothing trade has
grown at a faster rate as compared to textile trade. The textile trade increased
from $150 billion to $155 billion in an eight year period from 1990-98, while
<strong>the</strong> clothing trade has grown from $97 billion to $177 billion over <strong>the</strong> same
period <strong>of</strong> time. Textile trade indicates an obvious shift from basic textiles
towards high value added products including apparel and clothing articles.
Today, textiles have a demand <strong>of</strong> around $ 18 trillion in <strong>the</strong> world. Textile
fibres are divided into three basic types according to <strong>the</strong>ir source:
• Cotton Fibre
• Manmade Fibre
• Wool
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Nowadays, man made fibres have dominance in world fibre consumption.
Manmade fibres include polyester, acrylic, nylon, rayon and viscose.
Polyester has by far <strong>the</strong> largest share <strong>of</strong> manmade fibres. Textile production is
comprised <strong>of</strong> <strong>the</strong> following categories:
Cotton ginning Cotton yarn Cotton fabric
Fabric processing Home textiles Towels
Hosiery & knitwear Readymade garments
The main determinant <strong>of</strong> technological change in this sector is <strong>the</strong>
governmental system <strong>of</strong> research and extension--which has become quite
ineffective over time. At <strong>the</strong> o<strong>the</strong>r extreme are large scale textile processors
and small scale garment manufacturers, both subject to <strong>the</strong> influence <strong>of</strong> large
international corporations, and indeed a part <strong>of</strong> an internationally governed
commodity chain. In <strong>the</strong> middle are large scale spinning units and smallscale,
informal sector weaving units, <strong>the</strong> latter numbering in <strong>the</strong> tens <strong>of</strong>
thousands, mostly operating as family enterprises, with virtually
no recognized system <strong>of</strong> industrial governance. It would usher well for <strong>the</strong>
textile industry which now has a bigger appetite for cotton consumption than
in past years to meet higher world demand under quota free era.
If we look at <strong>the</strong> growth rates <strong>of</strong> Cotton Yarn and Cotton Cloth with respect
to an increase in GDP according to Figures 6 and 7 below we observe an
indirect relationship while on <strong>the</strong> contrary agricultural cotton production and
agricultural growth rate shows a positive trend showing <strong>the</strong> importance <strong>of</strong>
cotton for agriculture as well as GDP as in Figure 2. An interesting fact that
arises from <strong>the</strong> conjecture is that according to Figure 4 and 5 agricultural
cotton production in relation to both cotton yarn and cotton cloth shows a
positive trend. These deductions hence conclude that <strong>the</strong> comparative
advantage Pakistan possesses in cotton production and abundance <strong>of</strong> raw
material for textiles including cheap labour is not translated into cost
competitiveness in <strong>the</strong> textile industry as a whole. This lack <strong>of</strong>
competitiveness results in low value addition to GDP <strong>of</strong> cotton related
products. This relationship is fur<strong>the</strong>r streng<strong>the</strong>ned from <strong>the</strong> figures available
from <strong>the</strong> Asian Development Bank study as show below in Figure 8.
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Figure 3
Agricultural Cotton Production and
Agricultural Growth Rate
15 15
10 10
5
0
-10 -10 -5 -5 0 5 10 10 15 15
Agricultural Growth Rate Rate
Linear (Agricultural Growth Rate)
Figure 4
Agricultural Cotton Production and
Cotton Yarn Production
2000
1500
1000
500 500
0
0 5 10 10 15 15
Agricultural Cotton Growth Rate
Linear (Agricultural Cotton Growth Rate)
Figure 5
Agricultural Cotton Production and
Cotton Cloth Production
700 700
600 600
500 500
400 400
300 300
200 200
100 100
0
0 5 10 10 15 15
Series1 Linear (Series1)
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2000 2000
1500 1500
1000 1000
500 500
Figure 6
Cotton Yarn and GDP growth
0
0 2 4 6 8 10 10
GDP GDP growth growth rate rate Linear Linear (GDP (GDP growth growth rate rate ) )
Figure 7
Cotton Cloth and GDP growth
700 700
600 600
500 500
400 400
300 300
200 200
100 100
0
0 2 4 6 8 10 10
Series1 Series1 Linear Linear (Series1) (Series1)
Figure 8: Values <strong>of</strong> Textile and Clothing Exports ($ Million)
217

Figure 9: Growth Rate <strong>of</strong> Textiles and Clothing Exports (% per annum )
Figure 10: Share <strong>of</strong> Textiles and Clothing in Total Exports (% per annum)
We can easily see from <strong>the</strong> above graphs that Pakistan is faring low on value
addition to GDP with respect to cotton products. It is <strong>the</strong>refore imperative
that steps are taken to improve <strong>the</strong> production process by investing in
technology, human resource development, training, research, and testing
laboratories. Production inefficiencies arising out <strong>of</strong> poorly trained labour,
weak management and supervision systems, high wastage levels and low per
capita productivity also accounts for <strong>the</strong> high costs <strong>of</strong> production in Pakistan.
According to <strong>the</strong> World Bank, Pakistan’s textile sector will have to improve
its productivity by 63% to reach <strong>the</strong> productivity levels <strong>of</strong> China, <strong>the</strong> latter
being treated as a benchmark. Due to low investment by <strong>the</strong> government in
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human resource development, <strong>the</strong> absorption capacity for technology is poor
at all strata <strong>of</strong> production personnel. There is a dearth in <strong>the</strong> number and
quality <strong>of</strong> training Institutes for <strong>the</strong> textile and garments sector. Additionally,
<strong>the</strong>re is a shortage <strong>of</strong> trained textile technologist in <strong>the</strong> country. The textile
industry requires about 12,750 textile graduates per annum as against <strong>the</strong>
current supply <strong>of</strong> about 7,950. The shortage works out to be 4,800 per annum
similarly; <strong>the</strong> wastage percentage in production <strong>of</strong> garments in Pakistan
varies from 20-35% -levels that are unacceptable in competitor countries.
For developing countries in general and Pakistan in particular <strong>the</strong> main
drivers for competitiveness are human resources, technological effort,
technology inflows and supporting institutions. Pakistan has a weak base for
building competitive capabilities, and it is not improving over time in
response to growing international challenges. Its long experience in textiles
and clothing seems to have given it an adequate competitive base in <strong>the</strong>se
activities, but even here new niche markets need to be sought out to keep
pace with international competition.
The base <strong>of</strong> skills and capabilities in essentially low and stable technologies
may not, in o<strong>the</strong>r words, allow Pakistan to diversify into <strong>the</strong> more dynamic
and complex activities that are <strong>the</strong> new engines <strong>of</strong> export growth in <strong>the</strong> global
economy. And <strong>the</strong> base may not be sufficient to attract foreign capital and
technology into export-oriented activities in competition with many o<strong>the</strong>r low
wage economies that are vying for similar investments.Essential background
to <strong>the</strong> development <strong>of</strong> such a long-term perspective is benchmarking <strong>of</strong> an
economy's current competitive strengths and weaknesses. Benchmarks have
to be qualitative: comparison with best practice in <strong>the</strong> comparators. This is
<strong>the</strong> procedure commonly used in competitiveness strategy analysis
throughout <strong>the</strong> developed and newly industrialized countries (Lall, 2001.).
NPO has launched <strong>the</strong> Benchmarking in <strong>the</strong> Cotton Spinning Sector to enable
more value addition and competitiveness for Pakistan’s cotton industry. We
hope this would lead to pr<strong>of</strong>it maximization and a larger contribution <strong>of</strong>
textiles and cotton products for <strong>the</strong> GDP.
During <strong>the</strong> last four years Pakistan strived hard to accelerate its growth rate <strong>of</strong>
clothing and textiles far in excess <strong>of</strong> <strong>the</strong> world growth rate. In <strong>the</strong>1990s
textile trade grew at an average rate <strong>of</strong> 4 percent and clothing 6 percent.
Clothing trade’s share in total textile and clothing is 56 percent. Within this
group <strong>the</strong> relative share <strong>of</strong> clothing exports should rise even more rapidly.
This is exactly what has been done. There has been a reversal <strong>of</strong> shares
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etween cotton innovations which had an impact on <strong>the</strong> competitiveness and
pr<strong>of</strong>itability <strong>of</strong> cotton production and processing as explained above.
One <strong>of</strong> <strong>the</strong> solutions as mentioned before was to have a more productive
spinning sector. During <strong>the</strong> last decade <strong>the</strong> spinning industry went through
serious operational problems due to <strong>the</strong> increased cost <strong>of</strong> production. This
had a negative impact on <strong>the</strong> replacement and modernization <strong>of</strong> technology
installed. Hence, <strong>the</strong> overall productivity <strong>of</strong> <strong>the</strong> mills and quality <strong>of</strong> <strong>the</strong> yarn
deteriorated. Today, most <strong>of</strong> <strong>the</strong> mills are not equipped with modern
machines and are <strong>the</strong>refore handicapped and unable to produce yarn <strong>of</strong> <strong>the</strong>
required quality at competitive prices.
Keeping in view <strong>the</strong> forthcoming challenges <strong>of</strong> <strong>the</strong> free global trade regime, a
number <strong>of</strong> large textile groups have embarked upon modernization programs.
The spinning sector comprises 445 spinning mills in <strong>the</strong> country (50
composite and 395 spinning units) with 8.6 million spindles and 145
thousand rotors installed. Out <strong>of</strong> this, presently 7.2 million spindles and 64
thousand rotors are in operation. The capacity utilization has stagnated at
87% in spindles and 45% in rotors. Formerly, spinning units were based on
Chinese/Japanese machinery, being cost-effective. Now a number <strong>of</strong> mills are
shifting to German technologies. Pakistan has so far invested US$ 400
million in <strong>the</strong> replacement <strong>of</strong> machinery and ano<strong>the</strong>r U$$ 500 million is in
<strong>the</strong> pipeline.
The government has also allowed duty-free imports <strong>of</strong> machinery and plants
by export-oriented industries subject to an increase <strong>of</strong> 40% value-addition in
<strong>the</strong>ir products and 50% <strong>of</strong> <strong>the</strong>ir total sales income in <strong>the</strong> form <strong>of</strong> export
earnings. The textile industry, which contributes 65% to <strong>the</strong> total foreign
exchange earnings <strong>of</strong> Pakistan, is taking full benefits from this decision <strong>of</strong> <strong>the</strong>
government. As cotton is no longer available at subsidized prices and <strong>the</strong>
country faces a threat from India and China, where spinning sector is
expanding rapidly. In addition, <strong>the</strong> opening up <strong>of</strong> textile markets under <strong>the</strong>
WTO arrangement demands revamping <strong>of</strong> <strong>the</strong> textile industry to face <strong>the</strong> new
challenges. Never<strong>the</strong>less, it has been felt that <strong>the</strong> implementation <strong>of</strong> <strong>the</strong>
replacement/modernization plans will not automatically lead to <strong>the</strong>
manufacture <strong>of</strong> quality yarn at competitive prices unless standard levels <strong>of</strong>
process conditions and machinery/labour performance are achieved at each
stage.
The responsiveness <strong>of</strong> individual actors in a production chain to changing
incentive structures is linked closely to <strong>the</strong> nature <strong>of</strong> governance in <strong>the</strong> chain.
In <strong>the</strong> absence <strong>of</strong> an effective system <strong>of</strong> governance (as in cotton production,
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ginning, and spinning), transition costs are likely to be high as well as
inequitably distributed. Fur<strong>the</strong>r communication between mill operators and
producers is needed to reinforce <strong>the</strong> economic viability <strong>of</strong> <strong>the</strong> industry. Direct
mill contracts speed <strong>the</strong> communication process regarding <strong>the</strong> desirable
quality attributes and improve both producer and mill income. The table
below fur<strong>the</strong>r highlights <strong>the</strong> fact that fabrics and yarns dominate Pakistan’s
export product portfolio <strong>of</strong> textiles, whereas <strong>the</strong> high value added segment
such as clothing shows a very low growth.
Table 2. Exports <strong>of</strong> Cotton Yarn, Cotton Thread and Cotton Cloth
Year Cotton Yarn Cotton Thread Cotton Cloth
Value Quantity Value Quantity Value Quantity
Rs million Million Kg Rs million Million Kg Rs million Million Sq meter
1997-98 49988 461.9 79 0.3 53991 1271.3
1998-99 47421 421.5 76 0.3 55980 1355.2
1999-00 55485 513.0 66 0.3 56757 1574.9
2000-01 62914 545.1 61 0.2 60486 1735.8
2001-02 57135 540.0 31 0.1 69297 1909.3
2001-02 42260 391.2 27 0.1 49759 1365.6
2002-03 40808 398.3 22 0.8 55742 1469.2
IV. ACHIEVING HIGHER COTTON PRODUCTION AND
EFFICIENCY
1. Technological Improvements
Pakistan suffers from a number <strong>of</strong> problems related to non-application <strong>of</strong>
standard ginning practices and poor management. Although technological up
gradation has been done by many industrialists but still <strong>the</strong>re is a lot to be
done in this respect. Hence <strong>the</strong> efficiency and productivity <strong>of</strong> <strong>the</strong> process is
one-fifth <strong>of</strong> that <strong>of</strong> machines currently being used in <strong>the</strong> US or in o<strong>the</strong>r
competing countries.
In Pakistan, <strong>the</strong> cotton processing industry has catered to low quality products
- lint, yarn and fabric, over <strong>the</strong> past few decades. Changing global demands
and textile market pr<strong>of</strong>iles are demanding a shift to quality products. In this
<strong>the</strong> ginning factory plays a pivotal role for determining quality <strong>of</strong> cotton fibre
as raw material for downstream industry. Yet this component <strong>of</strong> local textile
industry is <strong>the</strong> most neglected and antiquated. Unless up gradation <strong>of</strong> this
industry is undertaken, it would not be possible to remain competitive in
export markets.
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2. Effective Capacity Utilization
Looking at <strong>the</strong> spindles capacity utilization for major textile exporters,
Pakistan is found to be operating at a very low usage <strong>of</strong> spindles for spinning.
Of <strong>the</strong> total 163 million spindles in <strong>the</strong> world, 113 million spindles are
installed in Asia. Major Asian yarn producers along with <strong>the</strong>ir number <strong>of</strong>
installed spindles and share in world and Asia are shown in Table 2 below:
Table 3. Installed Spindles and Their Share in <strong>the</strong> World
Country Spindles Share in Share in Asia Growth rate
(‘000’) World (%)
(%)
(%)
China 41710 25.5 38.6 0.1
India 41710 25.5 38.6 3.7
Indonesia 7050 4.3 6.5 4.6
Turkey 4544 2.8 4.0 2.8
Japan 4630 2.7 4.0 -11.0
Thailand 4100 2.5 3.8 2.0
Taiwan 3334 2.0 3.1 -2.3
Korea 2135 1.3 2.0 -10.1
Iran 1975 1.2 1.8 7.3
Pakistan 8159 5.0 7.6 6.2
Pakistan is operating at 18% utilization for manmade fibre (MMF) that is
lowest amongst all its competitors. Although local availability <strong>of</strong> cotton is <strong>the</strong>
competitive edge <strong>of</strong> Pakistan and its utilization should naturally be higher for
cotton, it is actually below even India and China who use 40% and 35% <strong>of</strong>
<strong>the</strong>ir spindles for spinning MMF, respectively. A comparison with India and
China is more realistic because <strong>the</strong>y are larger cotton producers than Pakistan
and <strong>the</strong>ir competitive edge in textiles also stems from local cotton production
but <strong>the</strong>y are trying to follow <strong>the</strong> world trend in which Pakistan is lagging far
behind.
Table 4. Spindle Capacity Utilization for MMF (Percent)
Country Cotton MMF
Taiwan 34 66
Thailand 51 49
Korea 57 43
India 60 40
China 65 35
Indonesia 66 34
Pakistan 82 18
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3. Market Emphasis
Major markets that Pakistani manufactures have so far not been able to
explore are <strong>the</strong> Japanese, Far East and Middle East markets. These markets
demand high product standards and in return <strong>of</strong>fer higher unit price
realizations. The shift towards newer product and non-traditional markets can
only be brought about by more emphasis on syn<strong>the</strong>tic garments and <strong>the</strong>
development <strong>of</strong> a marketing and research infrastructure for <strong>the</strong> industry.
V. INITIATIVES FOR ENHANCING PRODUCTIVITY
1. Benchmarking in Cotton Spinning
Benchmarking is <strong>the</strong> process <strong>of</strong> determining who is <strong>the</strong> very best, who sets
<strong>the</strong> standard, and what that standard is.
2. Leading Individual and <strong>Group</strong>s <strong>of</strong> Organizations in Benchmarking
Efforts;
• Defining high pay<strong>of</strong>f areas for research topics
• Conducting short (survey) and long (site visit) benchmarking
efforts
• Facilitating project teams in benchmarking efforts
• Attracting top companies to join efforts
• Measuring performance
• Performing Gap analysis
• Leading site visits to best practice companies
• Compiling results and making recommendations for action
• Providing implementation services
3. Creating Benchmarking Databases to Support Benchmarking Efforts;
• Organizing taxonomies <strong>of</strong> business processes used for analytic
purposes
• Creating over study maps and guides to structure benchmarking
efforts
• Developing industry standard databases <strong>of</strong> performance measures
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• Ga<strong>the</strong>ring company responses to specific measures into databases
• Administering databases <strong>of</strong> process owners categorized by industry
and process interest
4. Forming Associations to Share Benchmarking Information;
• Conducting member meetings
• Identifying critical topics <strong>of</strong> interest
• Forming study groups
• Collecting Performance data
• Identifying leading companies
• Leading site visits to best practice companies
• Compiling results into summary and detailed management reports
5. Benchmarking Creates Value by
• Focusing on key performance gaps;
• Identifying ideas from o<strong>the</strong>r companies;
• Creating a consensus to move an organization forward;
• Making better decisions from a larger base <strong>of</strong> facts.
The benchmarking study in <strong>the</strong> cotton spinning sector in Pakistan was
undertaken by <strong>the</strong> National Productivity Organization (NPO), Ministry <strong>of</strong>
Industries & Production, in close collaboration with a number <strong>of</strong>
organizations.
Considering <strong>the</strong> importance <strong>of</strong> enhancing productivity and quality in this
specific sector <strong>of</strong> <strong>the</strong> textile industry, and also its significant contribution to
<strong>the</strong> exports and foreign exchange earnings <strong>of</strong> <strong>the</strong> county, NPO-Pakistan
decided to undertake a process and result benchmarking. The proposed
survey on benchmarking was <strong>the</strong> first <strong>of</strong> its kind in Pakistan.
i. Objectives <strong>of</strong> <strong>the</strong> Study
The exercise was designed around <strong>the</strong> following objectives:
• To develop in-depth understanding, and application <strong>of</strong> benchmarking
in companies;
• To identify and encourage <strong>the</strong> implementation <strong>of</strong> best practices so as
to minimize costs, improve efficiencies and productivity;
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• To collect information on best practices in different production
process/sections <strong>of</strong> <strong>the</strong> mills under <strong>the</strong> survey and to develop
comparative data amongst <strong>the</strong> local mills as well as similar projects
in o<strong>the</strong>r Asian countries. (The idea was to identify functions and
processes in each department <strong>of</strong> a spinning unit, and <strong>the</strong> related
results being obtained. Subsequently, overall results <strong>of</strong> <strong>the</strong>
departments would be linked and evaluated, and reasons for
differences in various mills would be assessed. Simultaneously, <strong>the</strong>
practices in use would be determined).
The benchmarking methodology adopted was intended to assist in
ascertaining best practices, which need to be adopted in Pakistani mills. It
was decided that necessary guidelines, concrete action plans and
recommendations based on <strong>the</strong> observations and empirical findings from <strong>the</strong>
exercise would be made. The Government <strong>of</strong> Pakistan, with <strong>the</strong> assistance <strong>of</strong>
NPO-Pakistan, and <strong>the</strong> APO can <strong>the</strong>n toge<strong>the</strong>r take necessary measures and
plans for its implementation and fur<strong>the</strong>r development in order to enhance <strong>the</strong>
overall productivity in <strong>the</strong> sector.
ii. Scope <strong>of</strong> <strong>the</strong> Study
The study was carried out for enhancing <strong>the</strong> productivity <strong>of</strong> <strong>the</strong> textile
spinning sector. In Pakistan, <strong>the</strong>re are mainly two types <strong>of</strong> mills – average
size <strong>of</strong> up to 25,000 spindles, and large mills having more than 25,000
spindles. Within <strong>the</strong>se mills, despite <strong>the</strong> fact that same machinery is installed
(Chinese/Japanese/German origin), <strong>the</strong>re is a combination <strong>of</strong> yarn counts
being manufactured. It was learnt, <strong>the</strong> available raw cotton is best for making
lower count yarn i.e. 20s. Most <strong>of</strong> <strong>the</strong> mills have now upgraded <strong>the</strong>ir facilities
to produce 40s count yarn. Based on its discussions with APTMA and
Spinning Machinery Company (Pvt.) Ltd., NPO decided to focus on that
particular segment, <strong>the</strong> product <strong>of</strong> which is mainly exported. Pakistan is
presently exporting a coarse quality <strong>of</strong> yarn. As a short-term goal, NPO
decided to benchmark <strong>the</strong>se mills so that increased productivity in this
segment will directly and immediately affect our exports earnings and GDP.
Subsequently, since benchmarking is a continuous learning process,
benchmarking will study improving o<strong>the</strong>r areas <strong>of</strong> concern e.g. energy
consumption in <strong>the</strong> textile sector.
iii. Steps <strong>of</strong> <strong>the</strong> Benchmarking Study
The NPO-Pakistan followed <strong>the</strong> NPC Model for conducting <strong>the</strong>
benchmarking exercise. The procedure adopted is indicated below:
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Benchmarking steps are:
● What to benchmark
● Plan benchmarking project
Understand & analyze <strong>the</strong> current business practices that have been targeted
●
for reform
● Collect data and information <strong>of</strong> processes to be benchmarked
● Analyze data/information to determine best practices
● Determine best practices to be adopted
● Implementation <strong>of</strong> Results
A total number <strong>of</strong> 14 mills in Punjab consented to become benchmarking
partners, out <strong>of</strong> which 12 mills shared <strong>the</strong>ir data. However, as has been
mentioned before, since <strong>the</strong> prerogative to chose a balanced sample for study
did not rest with NPO, most <strong>of</strong> <strong>the</strong> mills which chose to participate in <strong>the</strong>
exercise turned out to be above average mills. As such, <strong>the</strong> differences
amongst <strong>the</strong> mills were minor.
Although NPO had specified its criteria, it was also learnt during <strong>the</strong> visits
that most <strong>of</strong> <strong>the</strong> benchmark mills are producing different counts <strong>of</strong> yarns and
different varieties e.g. combed, carded, slub, core-spun,lycra, polyestercotton,
etc. The count varied from 20 ne to 40 ne during one shift. Both
labour and machine productivity is influenced by different yarn parameters
i.e. blend (cotton type, syn<strong>the</strong>tic, waste,etc), count, twist, slub, nep, core yarn.
Hence, although best practices were noted during <strong>the</strong> visits, but <strong>the</strong> aim to set
Productivity Assessment Technique and Productivity Standard for <strong>the</strong>
Spinning Sector could not be finalized in <strong>the</strong> first phase.
It was hence determined, that in <strong>the</strong> second phase <strong>of</strong> <strong>the</strong> benchmarking study,
NPO would undertake <strong>the</strong> formulation <strong>of</strong> <strong>the</strong> Spinners’ data as done in
Europe and India. This information is based on assessing labour productivity,
machine productivity, and cost structures, as well as comparing quality data
with <strong>the</strong> Uster Statistics. The procedure entailed three steps:
• Process analysed (classical break down <strong>of</strong> spinning process)
• Process measured
• Data made comparable
Detailed data was collected by NPO. However, in order to compare <strong>the</strong> data,
<strong>the</strong> production / labor values etc. have to be adjusted for comparison. In order
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to formulate a basis for comparison, <strong>the</strong> concept <strong>of</strong> A STANDARD MILL
was developed. With <strong>the</strong> help <strong>of</strong> conversion tables, mills’ data can <strong>the</strong>n be
converted on a comparable basis to measure <strong>the</strong>ir performance and
productivity. At <strong>the</strong> conclusion <strong>of</strong> this study, NPO has established <strong>the</strong>
following:
• Identification <strong>of</strong> 80 best practices; it is expected that with <strong>the</strong>
adoption <strong>of</strong> <strong>the</strong> best practices identified, overall productivity <strong>of</strong> <strong>the</strong>
spinning sector will improve between 2-5% which would result in
reduction in material handling and conversion costs by rs.7.500
million per annum in an average mill. This will thus ensure a
substantial increase in pr<strong>of</strong>itability <strong>of</strong> <strong>the</strong> mills;
• A technique to assess productivity <strong>of</strong> a mill; this entails
calculation <strong>of</strong> labor and machine productivity <strong>of</strong> each mill;
• A standard mill for comparing <strong>the</strong> performance <strong>of</strong> each mill;
• Comparable data to measure <strong>the</strong> performance <strong>of</strong> each mill with
o<strong>the</strong>r mills in <strong>the</strong> same sector.
Benefits <strong>of</strong> benchmarking: Benchmarking allows <strong>the</strong> formation <strong>of</strong> a Best
Practice Network, which generates knowledge on global best practices that
are useful to achieve best practice performance standards, supporting <strong>the</strong>
transfer <strong>of</strong> best practice knowledge. To perform its role effectively, <strong>the</strong> best
practice network allows <strong>the</strong> development <strong>of</strong> a best practice benchmarking
toolkit, comprising a consistent and comprehensive framework and
methodology, for benchmarking across mills, firms and even countries.
Comprehensive Benchmarking will:
• Identify where global best practices reside;
• Allow <strong>the</strong> gain <strong>of</strong> useful knowledge on global best practices that
will help to achieve superior performance;
• Augment current best practice networks or learning circles to
enhance competitiveness.
VI. CLUSTER DEVELOPMENT OF WEAVING SECTOR
Since <strong>the</strong> 1990’s industrial clusters have generated much excitement amongst
academics and policy makers. The view that competitiveness can be
enhanced in geographically concentrated and sector specialized clusters has
found resonance amongst economists and business management specialists.
The allure <strong>of</strong> <strong>the</strong> approach lies in its promise for small scale industry and <strong>the</strong>
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importance it attaches to Local Linkages. It shows that with economies <strong>of</strong>
agglomeration and local joint action small and medium sized enterprises can
compete alongside large firms in global markets. Cluster specific external
economies include <strong>the</strong> presence <strong>of</strong> specialized labor, specialized suppliers
and knowledge spillovers. Economies <strong>of</strong> scale and scope both arise where
firms concentrate on particular processes and produce complex goods by
interacting with each o<strong>the</strong>r. High levels <strong>of</strong> organizational flexibility within
small clustered firms, fur<strong>the</strong>r result in cost advantages. Finally, local joint
action between firms and through local institutions has <strong>the</strong> potential <strong>of</strong>
enhancing <strong>the</strong> capacity <strong>of</strong> small firms and raising <strong>the</strong> overall competitiveness
<strong>of</strong> <strong>the</strong> cluster.
The essence <strong>of</strong> a competitiveness strategy is to promote in-firm learning, skill
development and technological effort; improve <strong>the</strong> supply <strong>of</strong> information,
skills and technology from surrounding markets and institutions; and
coordinate collective learning processes that involve different firms across
related industries or 'clusters', geographical or activity-wise. Realizing <strong>the</strong>
benefits <strong>of</strong> cluster development NPO has embarked on an initiative in
collaboration with <strong>the</strong> United Nations Industrial Development Organisation
(UNIDO) to establish a Weaving Cluster in Hyderabad, Pakistan.
Identification <strong>of</strong> clusters or inter-linked industrial activities share strong
technological externalities, use <strong>the</strong> existing base <strong>of</strong> skills and capabilities,
<strong>the</strong>se can fur<strong>the</strong>r develop good backward linkages and face rising competition
both locally and abroad. The best way to proceed is to examine closely <strong>the</strong>
experience <strong>of</strong> countries that have similar endowments but have been
successful in developing competitive bases. This is an art ra<strong>the</strong>r than a
science and involves considerable benchmarking and policy analysis.
Pakistan's fabrics range from coarse to super fine varieties; while coarse and
medium varieties are mostly exported, fine and super fine is consumed
locally. Although <strong>the</strong>re has been a declining trend in <strong>the</strong> production <strong>of</strong> cloth
in <strong>the</strong> mill sector over <strong>the</strong> past few years, <strong>the</strong> non-mill sector or power loom
sector, maintained a rising tempo <strong>of</strong> expansion in capacity and production.
The production <strong>of</strong> cotton cloth in <strong>the</strong> mill sector has increased marginally by
1.5% during July-March 2002-03, while non-mill sector registered a
phenomenal growth <strong>of</strong> 14.6% in <strong>the</strong> same period. The export <strong>of</strong> cotton cloth
witnessed a tremendous increase <strong>of</strong> 18% during July-March 2002-03 in value,
however in quantitative terms; <strong>the</strong> increase was 7.4%, which is almost a 10%
increase in unit value <strong>of</strong> cotton fabrics in <strong>the</strong> international markets. The major
contribution <strong>of</strong> <strong>the</strong> power loom sector to exports has been in <strong>the</strong> form <strong>of</strong>
different types <strong>of</strong> fabrics, including grey cloth, bed spreads, specialized cloth
etc.
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Presently Pakistan has been producing and exporting relatively low value
added grey fabrics. The quantity exported is woven from coarse to medium
yarn counts and about 70 to 80% is in <strong>the</strong> form <strong>of</strong> sheeting. The importing
countries generally utilize it for curtain linings, coverings, dusters etc.
Considerable quantities <strong>of</strong> imported Pakistan grey cloth are also processed by
<strong>the</strong> importing countries for end-uses according to <strong>the</strong>ir respective market
requirements. The power loom sector, which accounts for 90% <strong>of</strong> <strong>the</strong> total
grey cloth production <strong>of</strong> Pakistan comprises <strong>of</strong> mostly small family owned
units <strong>of</strong> approximately four looms each. The owners in general lack technical
know how and continue to operate old, obsolete shuttle looms without
adequate quality control. The cloth marketed is generally <strong>of</strong> poor quality and
is <strong>the</strong>refore sold at low price. Consequently, Pakistani cotton cloth suppliers
have developed and retain a poor quality image. Most <strong>of</strong> <strong>the</strong> looms in
Pakistan are old, obsolete shuttle looms and pose a big problem for <strong>the</strong>
government as to how this sector could be modernized quickly. It was this
sector which was responsible for giving to Pakistan poorly perceived image
in <strong>the</strong> international market.
The declining value <strong>of</strong> export per <strong>the</strong> sq.meter emphasizes <strong>the</strong> urgency <strong>of</strong>
modernization and up-gradation <strong>of</strong> <strong>the</strong> power loom sector. Under <strong>the</strong> Textile
Vision 2005, it was envisaged that Rs.333 billion would be invested in <strong>the</strong>
textile industry by <strong>the</strong> year 2005, out <strong>of</strong> which Rs.40 billion was expected to
be invested in air jet and weaving water jet looms. Over <strong>the</strong> last three years,
<strong>the</strong> textile sector received USD 1.5 billion worth <strong>of</strong> investment. However, a
matter <strong>of</strong> serious concern is that 89% <strong>of</strong> <strong>the</strong> total production is still being
produced by <strong>the</strong> power loom sector, mainly comprising <strong>of</strong> <strong>the</strong> old shuttle
looms. There has been no conspicuous replacement in this small and medium
enterprise sector.
In support <strong>of</strong> <strong>the</strong> government’s objectives in line with <strong>the</strong> Textile Vision 2005
NPO has conducted a study to identify <strong>the</strong> specific up-gradation required in
<strong>the</strong> power loom sector to enhance productivity <strong>of</strong> <strong>the</strong> mills. This study has
designed viable and affordable financial product to support <strong>the</strong> weaving
sector. Up-gradation <strong>of</strong> <strong>the</strong> power loom projects is expected to:
• Improve <strong>the</strong> productivity <strong>of</strong> <strong>the</strong> individual projects i.e. <strong>the</strong>
quantity and quality <strong>of</strong> fabric produced with <strong>the</strong> effective
utilization <strong>of</strong> <strong>the</strong> available resources;
• Support <strong>the</strong> local manufacturing and allied industry;
• Support <strong>the</strong> government’s objective <strong>of</strong> producing value added
products;
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• Improve <strong>the</strong> image <strong>of</strong> Pakistan as a cloth exporter in <strong>the</strong>
international market and facilitate a break through in textile
exports.
VII. NATIONAL INITIATIVES
1. BMR Requirements <strong>of</strong> Pakistani Spinning Industry
Balancing, Modernization and Rehabilitation (BMR) is a regular requirement
<strong>of</strong> any industry. Need for BMR arises as a result <strong>of</strong> any <strong>of</strong> <strong>the</strong> following
reasons:
• There is a change in <strong>the</strong> product features that warrants a newer
technology.
• Levels <strong>of</strong> production need to be enhanced.
• Plant/Machinery needs a thorough refurbishment as a result <strong>of</strong>
wear and tear.
BMR plays a pivotal role in keeping <strong>the</strong> local industry up to mark and
helping it to remain competitive in international markets. The spinning
industry in Pakistan has, in <strong>the</strong> past 53 years, undergone a number <strong>of</strong> BMRs
on a unit to unit basis. The requirements for <strong>the</strong>se have varied from additions
and/or up-gradation <strong>of</strong> <strong>the</strong> following processes:
• Back Process
• Spinning
• Winding
• Testing Facilities
The BMR programs result in diversification <strong>of</strong> <strong>the</strong> product and production
efficiencies, coupled with reduced costs. The general level <strong>of</strong> technology in
<strong>the</strong> Pakistani spinning industry is satisfactory. Most <strong>of</strong> <strong>the</strong> industry is using
state-<strong>of</strong>-<strong>the</strong>-art machinery. Though <strong>the</strong> spinning industry is old and many <strong>of</strong>
<strong>the</strong> units are as old as <strong>the</strong> time <strong>of</strong> partition, most <strong>of</strong> <strong>the</strong>m have undergone
BMR at successive times in order for <strong>the</strong>m to remain operational in a
competitive manner. However, since <strong>the</strong> industry has suffered due to bad
cotton crops in nineties, so <strong>the</strong> investment going towards BMR has decreased.
The result is that currently, BMR requirements in <strong>the</strong> industry are higher than
at previous times and <strong>the</strong> lack <strong>of</strong> BMR emerges as one <strong>of</strong> <strong>the</strong> major problems
<strong>of</strong> <strong>the</strong> spinning industry.
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The BMR requirements <strong>of</strong> <strong>the</strong> spinning industry for <strong>the</strong> next five years has
been assessed as part <strong>of</strong> <strong>the</strong> long-term policy on textiles. The exact
requirement <strong>of</strong> BMR varies from one company to ano<strong>the</strong>r. There is no fixed
rule by which an estimate can be made on an industry wide basis. However,
BMR requirements have been estimated on <strong>the</strong> basis <strong>of</strong> available information
and certain assumptions.
Table 5. Estimate <strong>of</strong> Investment Required for Urgent BMR <strong>of</strong> <strong>the</strong> Textile
Industry Over <strong>the</strong> Next Five Years
Sector Particulars <strong>of</strong> urgent BMR Unit Rate C and F cost Landed cost
(in million) (In Million)
Spinning i) Replacement <strong>of</strong> 4.033 million spindles
including back process machines
@US$ 250 per spindle US$ 1008.25 = Rs. 60,495 Rs. 66,544.
ii) Modernization <strong>of</strong> 1.535 million spindles
including back process machines
iii) Replacement <strong>of</strong> 100,000 rotors
including back process machines
iv) For installation <strong>of</strong> compact spinning
mills (approx. 200,000 spindles)
Weaving i) Modernisation <strong>of</strong> 5000 old looms
operating in <strong>the</strong> mill sector
Independent
weaving sector
i) Replacement <strong>of</strong> 5000 old projectile and
flexible rapier looms
Power loom sector i) Up gradation <strong>of</strong> 50,000 old and obsolete
looms
@ US$ 50 per spindle US$ 76.75 = Rs. 4,605 Rs. 5,065
@ DM 3500/- per rotor DM 350 = Rs. 9,800 Rs. 10,780
231
---- US$ 100 = Rs. 6000 Rs. 6,600
@ Sw. Fr. 4,0000 per
loom
@ JY 10 million per
loom
Sub-Total Rs. 88,990
Sw. Fr 200 Rs. 7400 Rs. 8,140
JY 50,000 = Rs. 23,085 Rs. 25,393
@ US$ 25000- per loom US$ 1,250 = Rs. 75,000 Rs. 82,500
Sub-Total Rs. 116,033
Total Rs. 170,585 Rs. 205,023
Ex. Rates: US$ Rs. 60, SW. Fr. = Rs. 37, JY = 0.4167, £ = Rs. 87 – D.M. = Rs. 28
2. Textile Vision 2005
Say Rs. 205,042
Realizing that various sectors <strong>of</strong> <strong>the</strong> textile industry <strong>of</strong> Pakistan were in
urgent need <strong>of</strong> balancing, modernization and replacement, <strong>the</strong> martial law
government <strong>of</strong> Pakistan has formulated a new policy called <strong>the</strong> "Textile
Vision 2005". This policy envisages an open, market driven, innovative and
dynamic textile sector which would be internationally integrated, globally
competitive and fully equipped to exploit <strong>the</strong> opportunities created by MFA
phase out which will enable Pakistan to be among <strong>the</strong> top 5 textile exporting
countries in Asia. For <strong>the</strong> implementation <strong>of</strong> this textile policy <strong>the</strong> GOP has
allocated investment <strong>of</strong> a total <strong>of</strong> Rs. 333 billion over <strong>the</strong> next five years, <strong>the</strong>
break up <strong>of</strong> which is given in Table 6. The Textile Vision 2005 besides
providing a road map to enhance <strong>the</strong> exports <strong>of</strong> textile products also
estimated <strong>the</strong> investment requirements for <strong>the</strong> creation <strong>of</strong> new capacity and
up-gradation <strong>of</strong> <strong>the</strong> existing production base.

Table 6. Expected Investment in Textile Sector in Asian
Textile Exporting Countries Over <strong>the</strong> Next Five Years
Sector Allocation(in Rs billion)
Stitching machines 39
Processing in weaving 62
Processing in knitting 07
Knitting machines 29
Air jet looms 40
Water jet looms 40
Spinning (spindles) 87
Polyester fibre 29
Total 333
All <strong>the</strong> investment estimates were linked with <strong>the</strong> overall export performance
<strong>of</strong> <strong>the</strong> textile sector. The basic objective was to project total investment layout
in order to achieve a specific level <strong>of</strong> exports. For <strong>the</strong> year 2001 a total <strong>of</strong> Rs
24 billion was estimated as <strong>the</strong> investment requirement. Although total
disbursements exceeded <strong>the</strong> requirement by almost 21% <strong>the</strong> direction <strong>of</strong> <strong>the</strong>
investment was not in alignment with <strong>the</strong> one envisaged in <strong>the</strong> Textile Vision
2005. The Textile Vision 2005 clearly mentioned that in <strong>the</strong> initial years
heavy investment will be needed to create additional capacity in <strong>the</strong> apparel
industry however, total disbursement to this sector was only 36% <strong>of</strong> <strong>the</strong>
target. Also processing was suggested to be developed on war a footing in
order to support garment manufacturing but unfortunately total disbursement
in processing was only 49% <strong>of</strong> <strong>the</strong> targeted amount. From within <strong>the</strong>
traditional sectors <strong>the</strong> bulk <strong>of</strong> <strong>the</strong> investment has gone to <strong>the</strong> spinning
industry, in-fact 56% <strong>of</strong> <strong>the</strong> total investment in <strong>the</strong> textile sector during 2001
has been directed towards <strong>the</strong> spinning industry.
The disbursement to spinning was three times higher than <strong>the</strong> amount
estimated in <strong>the</strong> Textile Vision. Although heavy investment were forecast in
<strong>the</strong> spinning sector so as to create a processing capacity <strong>of</strong> 13 million bales
but <strong>the</strong>se were to take place from <strong>the</strong> year 2003 onwards. The bright side <strong>of</strong>
<strong>the</strong> investments in <strong>the</strong> textile industry is <strong>the</strong> high investment in <strong>the</strong> Air Jet
weaving segment, <strong>the</strong> actual disbursement for which has exceeded <strong>the</strong> target.
Such investments are likely to fuel value addition in garments manufacturing
by indigenously providing a diverse range <strong>of</strong> fabrics. However, <strong>the</strong> Textile
Vision also mentioned <strong>the</strong> importance <strong>of</strong> state <strong>of</strong> <strong>the</strong> art syn<strong>the</strong>tic fabric
weaving technology. This can play an instrumental role in providing high
quality syn<strong>the</strong>tic fabrics to <strong>the</strong> apparel sector which can penetrate <strong>the</strong> global
woven women-wear markets. The investments in <strong>the</strong> Water Jet weaving
sector are not at all in line with <strong>the</strong> recommendations <strong>of</strong> <strong>the</strong> Textile Vision
2005.
232

VIII. POLICY RECOMMENDATIONS
Looking beyond 2005, complete quota removals and a recent success in
exports may lead to a false sense <strong>of</strong> being impassive. Assuming constant
demand, it is crucial that Pakistan develops its comparative advantage in
textile production which is mainly due to low labour costs and cheap access
to raw materials. This comparative advantage is vital for maintaining a strong
market share as eventually supply <strong>of</strong> textiles would increase after 2005
leading to falling prices which will first and foremost drive out <strong>the</strong> inefficient
producer. Ano<strong>the</strong>r potential benefit to Pakistan could be <strong>the</strong> increased export
<strong>of</strong> low value added products to countries which have already gained market
share as <strong>the</strong>se would need to increase production in order to meet <strong>the</strong>ir export
obligations.
Textile in <strong>the</strong> west has undergone massive restructuring and is becoming
more and more capital intensive. As trade in this sector is liberalised, a highly
competitive environment awaits us. The removal <strong>of</strong> quotas will pitch Pakistan
into open competition with o<strong>the</strong>r exporting countries, <strong>the</strong> impending gain and
loss in market share primarily depends on productivity indices and relative
efficiency <strong>of</strong> <strong>the</strong> domestic institutional framework <strong>of</strong> each country. A major
drawback <strong>of</strong> efficiency in Pakistan is <strong>the</strong> emphasis placed on <strong>the</strong> spinning
activity in <strong>the</strong> textile sector in comparison to o<strong>the</strong>rs as shown in <strong>the</strong> figure.
An imperative structural weakness <strong>of</strong> our textile industry is <strong>the</strong> export <strong>of</strong>
most <strong>of</strong> our good quality yarn to o<strong>the</strong>r countries, ra<strong>the</strong>r than being utilised for
producing high value-added products like fabrics or garments locally. This
yarn is imported by countries like Japan, a major export market for yarn,
China, and South Korea. These countries have a well-flourished textile
industry to convert this yarn into high value added products that fetch much
higher prices in <strong>the</strong> international market. The stilling discontent is fur<strong>the</strong>r
provided by <strong>the</strong> fact, that <strong>the</strong>se countries do not grow cotton, <strong>the</strong>y have a
well-established textile industry because <strong>the</strong>y have invested in modern
manufacturing technology as well as in a qualified and well-trained work
force which greatly enhances <strong>the</strong> productivity <strong>of</strong> <strong>the</strong>ir textile sector, enabling
<strong>the</strong>m to overcome <strong>the</strong> handicap <strong>of</strong> imported yarn.
The new economic world order, with deeply integrated global markets will be
increasingly marked with intense competition and specifically <strong>the</strong> textile
industry will face challenges in <strong>the</strong> development <strong>of</strong> pervasive technology and
communication networks, massive improvements in international logistics
and transportations, and most <strong>of</strong> all a surmountable impediment in today’s
rapidly growing investment towards human capital and an innovation driven
industry.
233

Figure 11. Sectoral Shares in Total Investment, 1999-2003
50
40
30
20
10
0
Spinning
Weaving
Knitwear
and
Textile
Processing
Made-ups
234
Syn<strong>the</strong>tic
Textile
The task that lies ahead requires stimulation <strong>of</strong> policies towards fostering a
highly competitive and productivity enhanced industry focusing on some <strong>of</strong>
<strong>the</strong> following issues:
1. Market Development
• Demand Oriented Strategy: Producers should try to increase <strong>the</strong>ir
market power by producing high price fashion clothing according to
current demands, and since apparels and garments provide <strong>the</strong> highest
value added product among <strong>the</strong> textile items, maximum focus should be
towards <strong>the</strong>se units. Proportion <strong>of</strong> syn<strong>the</strong>tic fibres in our textile products
should be increased especially from <strong>the</strong> export point <strong>of</strong> view, and
realising that this segment is more capital-intensive increase in
technological resources would be required.
• Supply Oriented Strategy: Non-price factors on <strong>the</strong> supply side play a
crucial role in <strong>the</strong> export performance <strong>of</strong> <strong>the</strong> country and diversification
is needed in <strong>the</strong> direction <strong>of</strong> trade. More than 50 percent <strong>of</strong> Pakistan’s
exports are directed towards European and North American markets and
given <strong>the</strong>ir technological superiority Pakistan’s textiles would certainly
be at disadvantage. This is one <strong>of</strong> <strong>the</strong> major drawbacks for <strong>the</strong> low level
<strong>of</strong> Pakistani exports especially <strong>of</strong> apparels making it worthwhile to
workout new markets in o<strong>the</strong>r parts <strong>of</strong> <strong>the</strong> world.

2. Product Differentiation and Quality Standards
Producers should go for product differentiation through <strong>the</strong> promotion <strong>of</strong>
brand names and advertising and also try to increase <strong>the</strong> efficiency <strong>of</strong>
distribution. With an increase in market power <strong>the</strong>y can easily transfer rising
costs to <strong>the</strong> consumer in <strong>the</strong> form <strong>of</strong> rising prices. We need to develop
modern technology that emphasises on quality <strong>of</strong> <strong>the</strong> finished products. There
should be should be an introduction and monitoring <strong>of</strong> <strong>the</strong> global quality
standards, ISO 9000 and ISO 14000 in <strong>the</strong> production <strong>of</strong> all textile products
in line with environmental standards.
3. Value Addition
Instead <strong>of</strong> emphasising too much on <strong>the</strong> spinning activity our industry should
focus more on <strong>the</strong> production <strong>of</strong> fine quality cloth. Major portion <strong>of</strong> good
quality yarn should be utilised domestically in <strong>the</strong> organised mill sector for
<strong>the</strong> production <strong>of</strong> high value added fabrics <strong>of</strong> better quality and later this
fabric should be used in <strong>the</strong> production <strong>of</strong> garments.
4. Technological Up-Gradation
Investment in more efficient machinery has become a cliché for this industry,
but none<strong>the</strong>less we still need to stress on its acute significance towards
productivity. Specifically, <strong>the</strong> industry’s reliance on low technology power
looms for <strong>the</strong> production <strong>of</strong> fabrics should be reduced and <strong>the</strong> number <strong>of</strong>
shuttle less looms should be increased, which have <strong>the</strong> capacity to produce
wider width and superior quality fabric for <strong>the</strong> international market. The
current government initiative has encouraged up gradation in ginning and
spinning which has significantly improved <strong>the</strong> quality <strong>of</strong> <strong>the</strong> products.
5. Enhancement <strong>of</strong> Human Capital
The current enhancement in productivity is mainly due to increase in capitaloutput
ratios but labour productivity must also increase to fur<strong>the</strong>r improve
overall productivity <strong>of</strong> this sector. Increasing investment towards improving
<strong>the</strong> skill level <strong>of</strong> workers, leads not only to a more qualified and efficient
work force, but also generates a “learning by doing” positive externality,
which provides <strong>the</strong> much needed competitively driven comparative
advantage.
235

6. Resource Development
Pragmatic competitiveness in global trade for textile would require highly
innovative production techniques which require investment in research and
development <strong>of</strong> <strong>the</strong> textile sector. More efficient means <strong>of</strong> producing cotton
in <strong>the</strong> past has mainly focused on introduction <strong>of</strong> new seed varieties. What is
needed are policies towards <strong>the</strong> development <strong>of</strong> bio-technology and more
efficient production techniques through <strong>the</strong> establishment <strong>of</strong> vocational and
technical learning centres, that conduct training and research in <strong>the</strong> industry
so as to produce cutting edge innovative solutions. A natural corollary would
be <strong>the</strong> establishment <strong>of</strong> clusters leading to centralisation <strong>of</strong> expertise in areas
<strong>of</strong> high industrial activity. The extraordinary growth achieved by Hong Kong,
South Korea and now mainland China depends more than anything on <strong>the</strong>
ability <strong>of</strong> <strong>the</strong>se countries to exploit <strong>the</strong> shifting comparative advantage in
world textile and clothing industry. Only low wages cannot guarantee a cost
advantage in textile production. Pakistan retrospectively has had <strong>the</strong>
advantage <strong>of</strong> cotton and labour, but <strong>the</strong> textile industry still continues to
suffer due to lack <strong>of</strong> competitiveness in <strong>the</strong> international market.
In order to tap <strong>the</strong> immense opportunities available from world trade, an
increase in overall productivity in labour, technology and innovation is
intrinsic to create <strong>the</strong> ripple effect, to give a competitive edge to <strong>the</strong> industry.
To quote <strong>the</strong> Total Factor Productivity Growth (growth in real GDP per unit
<strong>of</strong> labour and capital combined) for Pakistan stands at -0.19 percent, Korea
2.02 percent and India 3.06 percent is just <strong>the</strong> tip <strong>of</strong> <strong>the</strong> iceberg in <strong>the</strong> algebra
<strong>of</strong> growth indices.
IX. CONCLUSION
As textile and clothing quotas under <strong>the</strong> Multi-Fibre Arrangement are
removed in conformity with <strong>the</strong> Uruguay Round Agreement on Textiles and
Clothing. Pakistan already has a large potential in cotton, textiles and clothing
trade and <strong>the</strong> sustainability <strong>of</strong> this quota-free trade depends as much on
Pakistan’s own domestic policies as on <strong>the</strong> new export and import
opportunities available. Trade liberalisation brings <strong>the</strong> market and <strong>the</strong> state
toge<strong>the</strong>r in playing two very important roles in <strong>the</strong> phases <strong>of</strong> rapid growth and
export expansion in developing countries. One represents <strong>the</strong> “widening” <strong>of</strong>
<strong>the</strong> domestic framework while <strong>the</strong> o<strong>the</strong>r is <strong>the</strong> “deepening” <strong>of</strong> this
framework.
Widening <strong>of</strong> domestic institutions is <strong>the</strong> opening up <strong>of</strong> traditional economies
and <strong>the</strong> vent for surplus <strong>the</strong>ory <strong>of</strong> trade. The prime example being <strong>the</strong>
spectacular expansion <strong>of</strong> labour-intensive manufacturing exports and <strong>the</strong>
236

corresponding high rates <strong>of</strong> economic growth in <strong>the</strong> East Asian economies
such as Korea and Taiwan in <strong>the</strong> 1960s.The deepening phase <strong>of</strong> <strong>the</strong> domestic
institutional framework is easily explained by <strong>the</strong> factor proportions <strong>the</strong>ory <strong>of</strong>
comparative advantage when countries with initial conditions <strong>of</strong> scarce land
and abundant labour produce labour intensive exports. These countries have
been enjoying continued growth from free trade by starting from highly
labour intensive exports and <strong>the</strong>n climbing <strong>the</strong> ladder <strong>of</strong> comparative
advantage towards less labour intensive and more capital intensive exports, as
<strong>the</strong> tightening <strong>of</strong> <strong>the</strong> labour market and rising wages shifts <strong>the</strong>ir comparative
advantage. The crucial clause in this lucid <strong>the</strong>ory is that a developing country
like Pakistan can only convert its abundant and cheap labour supply into a
comparative advantage in labour intensive exports by first increasing
agricultural productivity while keeping wages down. Then release this labour
towards manufacturing and thus secondly increase productivity <strong>of</strong>
manufacturing, relative to low wages to gain a comparative advantage in <strong>the</strong>
world market for labour-intensive manufactures like textiles. Korea and
Taiwan were fortunate in inheriting a valuable institutional legacy in both
agriculture and manufacturing from <strong>the</strong> Japanese colonial period which was
mainly Japan’s own adaptation to its abundant labour supply as it started its
successful economic development.
Incentive packages alone cannot help <strong>the</strong> industry to compete in <strong>the</strong>
international markets. The manufacturers have to broaden <strong>the</strong>ir vision and try
to remove <strong>the</strong> label 'Pakistan is a source <strong>of</strong> low-quality, low-priced products'.
This requires rapid modernization and up-gradation <strong>of</strong> <strong>the</strong> production
facilities not only in <strong>the</strong> spinning sector, but also in <strong>the</strong> upstream ginning and
downstream power loom sectors.
For <strong>the</strong> consumer, productivity gains mean lower prices <strong>of</strong> goods and
services. Productivity improvement will decrease production cost per unit
which may contribute to <strong>the</strong> consumers in terms <strong>of</strong> lower prices and more
goods and services at better quality. As <strong>the</strong> level <strong>of</strong> productivity rises, outputs
become more competitive, both in terms <strong>of</strong> quantity and quality. Thus, better
quality goods and services are made available to <strong>the</strong> consumers. With <strong>the</strong>
dawn <strong>of</strong> <strong>the</strong> new millennium, Pakistan like all developing countries is facing
a major challenge <strong>of</strong> a free and borderless, global market. Not only does it
need to improve <strong>the</strong> range and quality <strong>of</strong> its products, innovation and
creativity are equally imperative crux to consider becoming competitive in
<strong>the</strong> world arena. Value addition should <strong>the</strong>re be <strong>the</strong> focal point all economic
policies and agendas. To <strong>the</strong> broad public and communities, higher
productivity means reducing <strong>the</strong> effects <strong>of</strong> inflation, a higher standard <strong>of</strong>
living, provision <strong>of</strong> more employment opportunities, reducing social conflicts
237

since more goods and services are made available at affordable prices due to
increase in consumers' purchasing power, a better natural environment and
community services. To <strong>the</strong> government, improved productivity means <strong>the</strong>
capability to provide more and better social services and to carry out
development programs more efficiently.
The government could greatly contribute to productivity movement through
developing a supportive environment by maintaining a productivity
monitoring system, conducting policy evaluations, formulating supportive
policies and providing support services and infrastructure for productivity
movement. It can also contribute to public awareness raising, setting-up
national awards and recognition systems as well as building-up <strong>the</strong> national
capabilities such as national HRD programs, provision <strong>of</strong> <strong>the</strong> supportive
institutional infrastructure.
238

Year
Annex 1
Pakistan Cotton Production Statistics
GDP
Growth Rate
Agriculture
Growth Rate
239
Cotton (Ag)
Mln. Bales
Cotton
Yarn Mln.
Kg.
Cotton Cloth
Output- Mln.
Sq. Mtr.
1990-1991 5.6 5.0 9.6 1041 293
1991-1992 7.7 9.5 12.8 1171 308
1992-1993 2.1 -5.3 9.1 1219 325
1993-1994 4.4 5.2 8.0 1310 315
1994-1995 5.1 6.6 8.7 1403 322
1995-1996 6.6 11.7 10.6 1495 327
1996-1997 1.7 0.1 9.4 1521 334
1997-1998 3.5 4.5 9.2 1533 340
1998-1999 4.2 1.9 8.8 1540 385
1999-2000 3.9 6.1 11.2 1672 435
2000-2001 1.8 -2.2 10.7 1721 490
2001-2002 3.1 0.1 10.6 1809 568
2002-2003 5.1 4.1 10.2 1902 578
2003-2004 6.4 2.6 10.0 1456 485

240

ENHANCING THE ROLE OF
PRIVATE SECTOR
241

242

ENHANCING THE ROLE OF PRIVATE SECTOR
I. INTRODUCTION
Masood A. Majeed
Director, Asia Ghee Mills Company Ltd., Pakistan
Pakistan is one <strong>of</strong> those few lucky IDB cotton producing countries where
most <strong>of</strong> <strong>the</strong> cotton chain is controlled by <strong>the</strong> private sector. Now, we know
that a truly vibrant and strong economy emerges where <strong>the</strong> private sector is
fully involved and in control. However, we don’t see that in Pakistan as <strong>the</strong>re
are numerous short comings in <strong>the</strong> way. These private sectors are operating,
but for example, <strong>the</strong> concept <strong>of</strong> research and development – <strong>the</strong> very
important R&D, does not exist. Thus enhancing <strong>the</strong> role <strong>of</strong> <strong>the</strong> private sector
is <strong>the</strong> pressing need <strong>of</strong> <strong>the</strong> day which can be achieved by increasing <strong>the</strong>
quality <strong>of</strong> work, its efficiency, and fur<strong>the</strong>rmore finding ways <strong>of</strong> privatizing
<strong>the</strong> sectors which are still under government control.
II. THE ROLE OF PRIVATE SECTOR
The following are areas in <strong>the</strong> cotton chain I would like to discuss:
• Cotton Farming.
• Cotton Research & Breeding.
• Agriculture Credit.
• Agriculture Supplies, Pesticide and fertilizer.
• Agriculture Machinery Manufacturing.
• Cotton Handling, Farm to Markets.
• Cotton Ginning.
• Ginning Machinery Manufacturing.
• Formal Ginning Training.
• Cotton Standards and Evaluation Centers.
• Cotton Trade and Export. Role <strong>of</strong> Public & Private Sectors.
• Spinning.
1. Cotton Farming
In <strong>the</strong> year 2004, cotton was planted on about 3.2 million hectares <strong>of</strong> land in
Pakistan. Almost all cotton farming is done by private farmers. A small
243

quantity <strong>of</strong> cotton is planted at cotton research centers in <strong>the</strong> public sector.
Even though Pakistan enjoys an extensive canal irrigation system with
wea<strong>the</strong>r and soil conducive to cotton plantation and growth, Pakistan gets less
yield per hectare than many o<strong>the</strong>r developed countries. This season it may
reach 781 kg/hectare. The Pakistani farmer is not well aware <strong>of</strong> <strong>the</strong> new
concepts in water conservation where he can apply water efficiently and
make <strong>the</strong> maximum use <strong>of</strong> <strong>the</strong> mineral rich canal water. Drip irrigation,
sprinkler irrigation, and tilt bed irrigation to preserve water are hard to find
among farmers. Some farmers have moved towards <strong>the</strong> beds and furrows
method to preserve water. Similarly, a lot <strong>of</strong> fertilizer is wasted when it is
manually spread and rests for hours in <strong>the</strong> sun and open air until it gets
watered. Applying fertilizer in a gaseous state or through o<strong>the</strong>r optimal
methods is also unheard <strong>of</strong> in Pakistan.
The majority <strong>of</strong> Pakistani farms are controlled and owned by small farmers
who don’t have <strong>the</strong> advantages <strong>of</strong> economies <strong>of</strong> scale. Large scale farmers
can afford to spend on R&D to improve <strong>the</strong>ir farming practices. The
government is trying to encourage corporate farming in <strong>the</strong> country which is
<strong>the</strong> need <strong>of</strong> <strong>the</strong> hour, and if effectively promoted it can remedy many <strong>of</strong> <strong>the</strong>
above mentioned problems.
2. Cotton Research & Breeding
The cotton breeding program nourished in government departments is still
dominated by <strong>the</strong>m. Even though private, local and multinational companies
are working towards providing seeds, none <strong>of</strong> <strong>the</strong>m are able to provide good
varieties or come up with good breeding programs. Government programs are
slow to respond to new requirements. Besides cotton, hybrid seeds are being
imported by many companies for oil seed crops and o<strong>the</strong>r crops, but none are
provided for cotton. Some private companies have started breeding programs
on a very small scale and have also provided BT cotton seed for about 5,000
acres during <strong>the</strong> current season which appears to be quite successful. Pakistan
produces a good number <strong>of</strong> agriculture graduates in its agriculture
universities and programs that can provide a good work force for <strong>the</strong> private
sector. There is a large area for improvement in <strong>the</strong> private sector in Cotton
Research & Breeding.
3. Agriculture Credit
Agricultural credit is provided by public and private sector banks and by
private agricultural supply companies and cotton ginners for <strong>the</strong> production
<strong>of</strong> cotton. Pakistan has leapt forward as private sector banks are more
244

aggressively seen marketing to farmers. Similarly pesticide and fertilizer
companies also extended more than five billion Rupees in <strong>the</strong> shape <strong>of</strong> <strong>the</strong>ir
products as loan to farmers and to cotton ginners which can be fur<strong>the</strong>r
extended to farmers against bank guarantees.
4. Agricultural Supplies, Pesticides and Fertilizers
The private sector in Pakistan is doing a remarkable job <strong>of</strong> providing
fertilizers and pesticides to farmers. Local and multinational companies are
meeting <strong>the</strong> local needs and many types <strong>of</strong> fertilizers are available on <strong>the</strong>
market. Similarly, a huge variety <strong>of</strong> pesticides from various origins are
available. These companies also provide <strong>the</strong>ir products on credit against bank
guarantees. The only disadvantage faced by cotton growers sometimes is that
<strong>the</strong>y are sold some pesticides by <strong>the</strong> sales team <strong>of</strong> <strong>the</strong>se pesticide firms which
are not really needed or not appropriate.
5. Agriculture Machinery Manufacturing
Almost all agricultural machinery manufacturers are in <strong>the</strong> private sector.
Only tractor manufacturers are more organised and operate on a larger scale.
All o<strong>the</strong>r implements are made by small scale manufacturers in un-organised
sector. The farming tools used by Pakistani farmers are old fashioned and
made <strong>of</strong> heavy steel which weigh heavy on tractors and are not efficient at all.
Inaccuracies and <strong>the</strong> malfunctioning <strong>of</strong> agricultural implements result in
lower yields, expensive, and time consuming farming. There is a huge
potential for investment in <strong>the</strong> private sector to manufacture agriculture
machinery.
6. Cotton Handling, Farm to Markets
A large amount <strong>of</strong> cotton in Pakistan comes from small farmers and it passes
through many hands and numerous places before reaching <strong>the</strong> ginneries.
There is a chain <strong>of</strong> middlemen that provide an important role in <strong>the</strong> rural
economy on one hand but are also responsible for <strong>the</strong> contamination in cotton
such as <strong>of</strong> hair, jute, colored cloth, polypropylene etc.
There are markets in almost all small towns in <strong>the</strong> rural area where growers
send <strong>the</strong>ir cotton and all agricultural products for sale through <strong>the</strong>ir
commission agents. Cotton is stored on open platforms and <strong>of</strong>fered for
auction in small lots. In <strong>the</strong>se markets different varieties <strong>of</strong> cotton are mixed
with each o<strong>the</strong>r before reaching <strong>the</strong> ginning factories. All this is done by <strong>the</strong>
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private sector and <strong>the</strong>re is a vast need for improvement, by applying new
techniques for <strong>the</strong> handling and transportation <strong>of</strong> cotton from farm to market.
7. Cotton Ginning
The entire cotton ginning industry, with about 1200 ginning units, is owned
and operated by <strong>the</strong> private sector in Pakistan except for three government
ginneries set up for <strong>the</strong>ir seed programs. Some <strong>of</strong> <strong>the</strong>se ginning units are run
by people whose families have been ginning for generations. In addition,
<strong>the</strong>re are new owners every year.
Pakistan’s ginning sector is not as efficient as it could be. Due to a lack <strong>of</strong>
quality ginning machinery much more power is drawn and consumed in <strong>the</strong>
entire ginning operation including pneumatics, ginning, and bale pressing. No
automation process exist in <strong>the</strong> Pakistani ginning environment and <strong>the</strong>
concept <strong>of</strong> ‘Intelligin’ is altoge<strong>the</strong>r absent. The concept <strong>of</strong> <strong>the</strong> efficient
working <strong>of</strong> machines such as gins, pre and post cleaners and <strong>the</strong> impact <strong>of</strong>
moisture, trash and inputs on it are not as refined and researched as in many
o<strong>the</strong>r countries. BMR in <strong>the</strong> Pakistan Cotton Ginning industry is badly
needed to bringing it to world standards.
8. Ginning Machinery Manufacturing
Since all ginning machinery is locally made, Pakistan lacks <strong>the</strong> expertise to
make quality ginning machinery which could gin world class cotton. In <strong>the</strong>
absence <strong>of</strong> material sciences and <strong>the</strong> availability <strong>of</strong> light and strong alloys, <strong>the</strong>
performance <strong>of</strong> ginning machinery is not good.
At present a government organization, “Small and Medium Enterprises
Development Authority” called SMEDA, is running a project to up-grade
Pakistan’s cotton ginning machinery. All <strong>the</strong> work is in <strong>the</strong> private sector,
SMEDA only provides technical assistance. There is a need for <strong>the</strong>
development and manufacture <strong>of</strong> quality cotton ginning machinery in private
sector.
9. Formal Ginning Training
There has been a lot <strong>of</strong> talk regarding providing formal training in <strong>the</strong> field <strong>of</strong>
ginning. There is a need for <strong>the</strong> establishment <strong>of</strong> a ginning institute which
could train personnel in <strong>the</strong> field <strong>of</strong> selection, grading, machinery operation
and maintenance.
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10. Cotton Standards and Evaluation Centers
Pakistan Cotton Standard Institute –a government sector entity, is mainly
responsible to design and uphold standards for cotton. It developed its
standards with <strong>the</strong> help <strong>of</strong> international organizations such as FAO. Pakistan
Cotton Standards have been approved by many international cotton
organisations.
Pakistan Cotton Standard Institute has only two cotton classing labs with HVI
machines. Almost all <strong>the</strong> spinning mills have <strong>the</strong>ir own cotton testing labs but
ginners do not have easy access to testing labs. In contrast to <strong>the</strong> practice in
<strong>the</strong> USA and Australia where each and every bale is tested, most Pakistani
ginners seldom get <strong>the</strong>ir products tested at all. And even if some ginneries get
<strong>the</strong>ir product tested, it is tested only once for each lot (100 bales). Great
progress can be achieved by establishing such labs and cotton evaluation
centers in <strong>the</strong> private sector.
11. Cotton Trade and Export: Role <strong>of</strong> Public & Private Sectors
Almost all <strong>the</strong> cotton ginned within Pakistan is purchased by <strong>the</strong> Pakistani
spinning industry a 100% private sector entity. Even this year, in <strong>the</strong> wake <strong>of</strong>
a bumper cotton crop crossing 14.312 million bales (167.72 kg), <strong>the</strong> market is
still bullish and Pakistani spinners are ready to bid for every available lot at
comparable international rates. In <strong>the</strong> presence <strong>of</strong> numerous private sector
exporters, not all <strong>of</strong> which were reliable business houses, <strong>the</strong> quality <strong>of</strong>
exports is questionable and no reliable agency has <strong>the</strong> expertise or vision to
determine its quality. This made most <strong>of</strong> international houses shy away from
buying Pakistani raw cotton.
However, in this regard credit must be given to <strong>the</strong> Trading Corporation <strong>of</strong>
Pakistan (T.C.P.) a government entity which intervened during <strong>the</strong> 2004-05
cotton season when prices were about to go down. They bought some <strong>of</strong> <strong>the</strong>
cotton which again stabilized <strong>the</strong> price and restored buying confidence. The
role <strong>of</strong> T.C.P., is appreciated by cotton people and <strong>the</strong>re is a general
consensus that this organization should stay alive to support <strong>the</strong> market and
farmers in <strong>the</strong> wake <strong>of</strong> an abnormal drop in prices- which are, most <strong>of</strong>ten,
temporary.
12. Spinning
Pakistan’s spinning industry is considered quite efficient as almost all <strong>the</strong>
machinery used by spinning mills is imported and works efficiently. Pakistani
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spinners have achieved a high level <strong>of</strong> BMR recently and have updated and
improved <strong>the</strong>ir operations remarkably. It is probably <strong>the</strong> issue <strong>of</strong> cotton
contamination which hampers <strong>the</strong>ir efficiency and makes <strong>the</strong>m uncompetitive
to some extent. Removing contamination at <strong>the</strong> mills is a cost and time
intensive operation and it slows down production.
Looking at <strong>the</strong> 9.6 million spindles in 455 spinning mills <strong>of</strong> Pakistan, <strong>the</strong>re is
a dire need for spinning and textile machinery to be produced locally.Pakistan
produces more yarn than its consumption and ends up exporting most <strong>of</strong> it –
sometimes at very cheap rates. This calls for more weaving units. Vertical
integration is required which would add value to its products.
III. COOPERATION AMONG IDB COTTON PRODUCING
MEMBER COUNTRIES
So far no co-operation exists or seems to exist among cotton producing IDB
member countries. Islam gave us <strong>the</strong> bond <strong>of</strong> bro<strong>the</strong>rhood. We have
wonderful platforms to work toge<strong>the</strong>r on, such as <strong>the</strong> IDB, <strong>the</strong>re is a need for
closer co-operation in <strong>the</strong> fields <strong>of</strong> research, trade, joint ventures and helping
each o<strong>the</strong>r in bringing us out <strong>of</strong> any farming or trade related troubles. Now as
we have awareness <strong>of</strong> <strong>the</strong> problems we can facilitate each o<strong>the</strong>r with close cooperation
in <strong>the</strong> fields <strong>of</strong> cotton farming to finished products. Close cooperation
among <strong>the</strong> private sector <strong>of</strong> IDB member countries is a requirement
<strong>of</strong> <strong>the</strong> time.
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COTTON CULTIVATION IN THE REPUBLIC OF MALI
Mahamdou Cisse
Director, Cotton Global Ltd., Mali
(Original in French)
I. QUALITY OF COTTON PRODUCTION
Cotton production in Mali is considered <strong>the</strong> driving force <strong>of</strong> <strong>the</strong> economy and
rural development in <strong>the</strong> areas where <strong>the</strong> Malian Textile Development
Company (CMDT) and <strong>the</strong> Upper River Niger Bureau (OHVN) are active.
Cotton production is <strong>the</strong> major source <strong>of</strong> income for <strong>the</strong> farmers, so its
extension helps to improve <strong>the</strong> living conditions <strong>of</strong> <strong>the</strong> people. Over <strong>the</strong> past
50 years, <strong>the</strong> CFDT, currently called DAGRIS, and <strong>the</strong> CMDT have tried to
reach <strong>the</strong> largest number <strong>of</strong> villages and farms in <strong>the</strong> area. Owing to this mass
development policy, all farmers have gradually become cotton producers. In
fact, cotton production systems have been generalized in many regions <strong>of</strong>
sou<strong>the</strong>rn Mali. This has helped modernize agricultural farms and improve <strong>the</strong>
living conditions <strong>of</strong> <strong>the</strong> inhabitants.
However, this strategy has reached its limits because it is increasingly
difficult to combine mass development and quality. There are huge
discrepancies between farms, soil, proper handling techniques and harvests
(low yield, uneven soil rotation, obsolete methods <strong>of</strong> cotton collection, labour
capacity, and long periods <strong>of</strong> harvests). As a result, we are witnessing low
cotton standards and average cotton fibre. The CMDT’s promotion <strong>of</strong> cotton
cultivation should, in <strong>the</strong> medium term, seek to identify agricultural and
environmental zones and <strong>the</strong> farms that better satisfy <strong>the</strong> requirements <strong>of</strong>
quality cotton production. Continued cotton cultivation in areas <strong>of</strong> low rain
fall and <strong>the</strong> training <strong>of</strong> farmers that are ill equipped in oxen drawn ploughs
and remote from decision making areas cause financial losses for both <strong>the</strong>
farmers and <strong>the</strong> society. Because <strong>of</strong> low yield, cotton producers cannot repay
<strong>the</strong>ir debts.
The cotton fibre obtained is <strong>of</strong> poor quality (lack <strong>of</strong> fertilizers and
immaturity), and <strong>the</strong> cost <strong>of</strong> collecting and processing cotton is very high.
The extension policy must be streamlined with <strong>the</strong> producers’ technical
standard, with <strong>the</strong> quantity produced and <strong>the</strong> land area where <strong>the</strong> cotton is
collected, and <strong>the</strong> viability <strong>of</strong> <strong>the</strong> activity. The private sector should also be
more involved in <strong>the</strong> privatization <strong>of</strong> <strong>the</strong> cotton industry.
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II. THE PRIVATE SECTOR AND THE PRODUCTION OF COTTON
SEED
Mali's partners have agreed on <strong>the</strong> need to enhance <strong>the</strong> production and
management <strong>of</strong> cotton seeds. The seeds constitute <strong>the</strong> back bone <strong>of</strong> this
agricultural activity and increases <strong>the</strong> quantity and improves <strong>the</strong> technical
characteristics <strong>of</strong> cotton fibre. It has emerged in discussions that serious
disruptions cause loss in seed production in factories <strong>the</strong>reby nullifying
efforts to increase cotton seeds through selection and monitoring. Bags <strong>of</strong>
seeds are not properly stored. Farmer associations manage seeds in a
disorderly manner <strong>the</strong>reby compelling <strong>the</strong>m to always request an increase in
quantity per hectare. The private sector must draw up a strategy designed to
choose cotton varieties and manage cotton seeds. Measures to increase Seed
Production are:
• Set up an internal multi-disciplinary consultative body in <strong>the</strong> CMDT
that will choose cotton varieties
• Ga<strong>the</strong>r information about <strong>the</strong> market, trends and expectations <strong>of</strong>
weavers concerning <strong>the</strong> quality <strong>of</strong> fibre, and progress <strong>of</strong> research on
cotton varieties
• Establish a seed multiplication centre during <strong>the</strong> <strong>of</strong>f season.
• Install a small factory that gins cotton seeds and conducts tests and
research on cotton ginning
• Install a unit for scraping cotton lint
• Encourage <strong>the</strong> introduction <strong>of</strong> genetically modified cotton varieties in
collaboration with researchers
1. The Private Sector and Phytosanitary Production
Phytosanitary protection is essential for <strong>the</strong> production <strong>of</strong> cotton seeds,
especially when it comes to greater productivity. It is <strong>the</strong> private sector that
should supply pesticides to <strong>the</strong> producers so that <strong>the</strong>y can take advantage <strong>of</strong>
<strong>the</strong> market i.e. supply and demand.
i. Cotton Ginning
• <strong>Meeting</strong> <strong>the</strong> requirements <strong>of</strong> introducing cotton seed in <strong>the</strong> ginning
chain is a good way <strong>of</strong> using <strong>the</strong> ginnery.
• Supplying <strong>the</strong> ginnery with bales <strong>of</strong> cotton
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Not only do cotton bales increase <strong>the</strong> ginning rate through regular supply,
<strong>the</strong>y also eliminate dirt because <strong>the</strong>y prevent <strong>the</strong> cotton from falling to <strong>the</strong>
ground.
ii. Cotton Ginning According to Homogeneous Areas
Officials <strong>of</strong> factories that gin cotton according to agro-climatic regions should
do so as soon as possible in order to ensure that cotton fibre is produced in
homogeneous packages. It is advisable that cotton ginneries be installed
according to agro-climatic regions so that cotton fibre can be produced
homogeneously. This would help standardize and better control <strong>the</strong> quality <strong>of</strong>
<strong>the</strong> fibre produced.
iii. Streamlined Ginning
Although <strong>the</strong> ginning rate prescribed by designers (12-15 bales/hour per
ginner) helps to make <strong>the</strong> production machine more pr<strong>of</strong>itable, factories
generally operate at a slower rate <strong>of</strong> 10 bales per hour per ginner so as to
maintain <strong>the</strong> quality <strong>of</strong> <strong>the</strong> cotton fibre: good silk length, good uniformity,
fewer neps and less preparation. Ginnery <strong>of</strong>ficials know exactly how to adapt
<strong>the</strong>ir ginning rate to <strong>the</strong> quality <strong>of</strong> cotton received and <strong>the</strong> equipment
available.
2. The Private Sector and Cotton Transport
To ensure that cotton ginneries operate at full capacity, <strong>the</strong>y must be supplied
with raw materials by a good fleet <strong>of</strong> mechanically slow solid vehicles.
Considering <strong>the</strong> huge volume <strong>of</strong> investments, <strong>the</strong> government must adopt,
through <strong>the</strong> banks, a voluntary policy toward promoters. This will definitely
help to reduce transport costs and ensure <strong>the</strong> raw material is <strong>of</strong> good quality.
III. THE PRIVATE SECTOR AND COTTON FIBER CLASSIFICATION
Over <strong>the</strong> past decade most African cotton companies have done a lot to
classify <strong>the</strong>ir infrastructure, equipment and human resources. Classing can be
improved by:
• Sponsoring and training <strong>of</strong> classing <strong>of</strong>ficers by experts
• Enrolling classing <strong>of</strong>ficers at <strong>the</strong> Memphis Cotton Institute
• Conducting study trips among classing departments in countries <strong>of</strong>
<strong>the</strong> sub-region.
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• Modernized Classing Services
Although conventional classing is still <strong>the</strong> method used to constitute batches,
major cotton firms have been equipped with HVI series and <strong>the</strong> AFIS system.
The use <strong>of</strong> this equipment can help provide information that is more rational
than <strong>the</strong> one provided through conventional classing. For every production
sector, one can monitor <strong>the</strong> progress <strong>of</strong> quality according to technological
specifications measured by HVI: micron, extension, colour, brightness,
quantity <strong>of</strong> dirt. If <strong>the</strong> information is used properly, one can anticipate
problems related to quality, provide <strong>the</strong> cotton research units with good
information about variety selection and assess better <strong>the</strong> genuineness <strong>of</strong>
claims made by customers.
Once installation, training, and <strong>the</strong> mastering <strong>of</strong> measurement instruments are
completed, <strong>the</strong> equipped cotton firms can seek to improve <strong>the</strong> maintenance <strong>of</strong>
<strong>the</strong> equipment and devise standardized procedures and exact measures. The
private sector can also take part in <strong>the</strong> classing process, especially with regard
to expertise.
IV. CONCLUSION
The privatization <strong>of</strong> <strong>the</strong> African cotton industry is necessary to ensure
sustainable production, but it should be done in a streamlined manner
according to a “method approach and quality”. In a market where supply is in
excess and whose mechanisms are deregulated by subsidies, better quality is
not only a requirement for <strong>the</strong> customer but also for pr<strong>of</strong>essionals <strong>of</strong> <strong>the</strong>
cotton industry as one <strong>of</strong> <strong>the</strong> surest ways <strong>of</strong> addressing a difficult situation
while preparing for <strong>the</strong> future. In this quest for quality, all <strong>the</strong> phases <strong>of</strong> <strong>the</strong>
production line are involved: researchers, farmers, extension workers,
forwarding agents must come toge<strong>the</strong>r to preserve and improve <strong>the</strong> quality <strong>of</strong>
<strong>the</strong> produce introduced into <strong>the</strong> marketBetter quality requires constant efforts
and huge investments. This also means that cotton companies must develop a
global vision <strong>of</strong> <strong>the</strong> requirements <strong>of</strong> quality and consider <strong>the</strong> components <strong>of</strong>
an enterprising project. This comprises several parts ranging from major
stages to <strong>the</strong> production <strong>of</strong> cotton and its delivery to <strong>the</strong> final customers.
Quality <strong>of</strong> an enterprise depends on:
• Production <strong>of</strong> cotton
• Transport from <strong>the</strong> field to <strong>the</strong> ginnery
• Delivery <strong>of</strong> bales to <strong>the</strong> weavers
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The measures taken should all seek to improve <strong>the</strong> quality <strong>of</strong> <strong>the</strong> cotton so as
to obtain <strong>the</strong> best fibre. The o<strong>the</strong>r measures should be concerned with
harvesting and ginning.
Such measures have an effect on <strong>the</strong> grading properties and <strong>the</strong> colour <strong>of</strong> <strong>the</strong>
fibre. It is <strong>the</strong> characteristics <strong>of</strong> <strong>the</strong> cotton emerging from <strong>the</strong> ginning process
that <strong>the</strong> weaver or <strong>the</strong> trader will buy and not <strong>the</strong> fibre. However, <strong>the</strong>
customer should receive clean, unadulterated and well packaged bales <strong>of</strong>
cotton and a fibre that is exempt <strong>of</strong> all forms <strong>of</strong> contamination.
Customer confidence and <strong>the</strong> reputation <strong>of</strong> <strong>the</strong> producer will grow once
production, ginning and delivery take <strong>the</strong>se concerns into consideration.
“Quality is not affected by crisis”.
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254

Background
COTTON IN TURKEY
Tugrul Yemisci & Hamdi Bagci
Izmir Mercantile Exchange & Turkish Derivatives Exchange
In <strong>the</strong> light <strong>of</strong> developments in <strong>the</strong> cotton sector <strong>of</strong> Turkey, below are
proposals devoted to improve <strong>the</strong> cooperation between <strong>the</strong> Islamic
Development Bank and cotton producing member countries.
I. THE IMPORTANCE OF COTTON AS A STRATEGIC CROP IN
TURKEY
Cotton has strategic importance in <strong>the</strong> Turkish Economy. Among agricultural
products, it is one <strong>of</strong> <strong>the</strong> leading crops creating a high added value. With
regard to production, employment and exports, cotton has a character <strong>of</strong>
fundamental & nodal input for <strong>the</strong> textile and confectionary sector which is
<strong>the</strong> engine <strong>of</strong> Turkish economy. The textile and confectionary sectors
comprise 33% <strong>of</strong> total exports and provide employment for 3.5 million
people. There have been considerable investments in <strong>the</strong> textile and
confectionary industry in Turkey. Turkey has 2.8 million tons <strong>of</strong> fibre
production capacity. Almost 70% <strong>of</strong> this production capacity uses cotton and
short fibre like cotton.In Turkey, one hundred thousand growers produce
cotton. Cotton provides employment for several million people. Cotton seed
is also consumed as oil and margarine additive. Cotton production provides
raw material for <strong>the</strong> food industry.
II. DEVELOPMENTS IN THE TURKISH COTTON SECTOR
1. Developments in Cotton Production
Turkey has an important place in <strong>the</strong> world cotton market. Turkey is <strong>the</strong> sixth
largest producer country, <strong>the</strong> fifth largest cotton consumer and <strong>the</strong> second
largest importer country in <strong>the</strong> world. With regard to <strong>the</strong> changes in domestic
and global prices, fluctuations in total, <strong>the</strong> cotton area is observed. Due to a
rise in <strong>the</strong> yield, cotton production was enlarged over <strong>the</strong> years. Due to <strong>the</strong>
impact <strong>of</strong> recent decreases in prices, <strong>the</strong> cotton production in Turkey dropped
by 6.7% in <strong>the</strong> 2003/04 season.In Turkey, it is observed that cotton
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production in <strong>the</strong> Sou<strong>the</strong>astern Region has increased significantly due to <strong>the</strong>
introduction <strong>of</strong> GAP(Sou<strong>the</strong>astern Anatolia Project). When <strong>the</strong> GAP is totally
completed, irrigation <strong>of</strong> 1.7 million hectares <strong>of</strong> land and <strong>the</strong> expansion <strong>of</strong>
cotton production are expected.
Table1. Developments in Cotton Production and Yields in Turkey
Seasons Area (000 Ha) Production (000 Tonnes) Yield (Kg/Ha)
1980/81 672 500 744
1985/86 660 518 785
1990/91 641 655 1021
1995/96 757 851 1125
2000/01 654 880 1340
2001/02 693 922 1330
2002/03 695 964 1388
2003/04 630 899 1428
2. Developments in <strong>the</strong> Cotton Trade <strong>of</strong> Turkey
Turkey was a net cotton exporter country until <strong>the</strong> second half <strong>of</strong> <strong>the</strong> 1980s. From
1985/86, due to <strong>the</strong> developments in <strong>the</strong> textile and confectionary sectors, it
started to import cotton. In <strong>the</strong> 2001/02 season, Turkey was <strong>the</strong> largest importer
country in <strong>the</strong> world. The USA and Greece provided 77 % <strong>of</strong> total cotton imports
to Turkey in <strong>the</strong> last season. The share <strong>of</strong> USA in <strong>the</strong> total imports is 60%.
Countries having important shares in total imports are Syria, Turkmenistan, Iraq,
Uzbekistan, Tajikistan, Azerbaijan (<strong>the</strong> members <strong>of</strong> Islamic Development
Bank).There are no restrictions in exports and imports <strong>of</strong> cotton, and no duty is
charged for <strong>the</strong> foreign trade <strong>of</strong> cotton. In o<strong>the</strong>r words, cotton is freely traded.
Table 2. Development In Cotton Foreign Trade <strong>of</strong> Turkey
Seasons Cotton Exports (000 Tones) Cotton Imports (000 Tones)
1980/81 228 1
1985/86 68 16
1990/91 164 46
2000/01 21 383
2001/02 20 626
2002/03 68 494
2003/04 77 517
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III. SUBSIDY POLICIES BEING APPLIED IN TURKEY
The cotton growers <strong>of</strong> Turkey are supported by <strong>the</strong> government in <strong>the</strong> form <strong>of</strong>
direct income support and premium payments. In addition, in recent years, diesel
oil was sold at a reduced tariff. In 1993/94, <strong>the</strong> premium system was put into
effect for <strong>the</strong> first time. Premium payments amounted to 12 US cent/kg for 99/00,
9 US cent/kg 00/01, 4.3 cent/kg for 2001/02, 5.2 cent/kg for 2002//03 and 6.6 cent
for 2003/04. They are determined by taking budget facilities into consideration.
From <strong>the</strong> 2003/04 season, it has been observed that producers have started to stop
producing cotton. Because <strong>of</strong> this fact, during <strong>the</strong> 2004/05 season, <strong>the</strong> government
decided to increase <strong>the</strong> premium amount in order to maintain <strong>the</strong> sustainability <strong>of</strong>
cotton production. The premium was set at 15 cent/kg.
IV. SPOT MARKETS AND FUTURE MARKETS IN TURKEY
Cotton prices are being determined at spot markets in Turkey under free
market conditions. In Turkey, cotton is being transacted at about thirty
commodity exchanges. But at many <strong>of</strong> <strong>the</strong>se commodity exchanges, only <strong>the</strong>
registration <strong>of</strong> <strong>the</strong> trade <strong>of</strong> cotton is being accomplished. Every working day,
between 12:00-12:30 pm, at <strong>the</strong> İzmir Mercantile Exchange(İME), demand
and supply faces <strong>of</strong>f under market conditions in <strong>the</strong> trading pit and <strong>the</strong>n <strong>the</strong>
current market price is determined. The textile and clothing industry closely
follow <strong>the</strong> cotton trading prices <strong>of</strong> İME. Apart from that, <strong>the</strong> o<strong>the</strong>r exchanges
in Turkey utilise İME prices as <strong>the</strong> base index. In Turkey, <strong>the</strong> İzmir
Mercantile Exchange has had a very important role since 1981 in cotton
trade.
Aside from that, appropriate studies have been initiated for <strong>the</strong> organisation
<strong>of</strong> a cotton futures exchange in Turkey. On 4 February, 2005 TURDEX
(Turkish Derivatives Exchange) launched. At Turkdex, Cotton Future
Contracts traded via an electronic trading platform.
V. PROBLEMS OF COTTON SECTOR IN TURKEY
The fundamental problem <strong>of</strong> Turkey, which has been one <strong>of</strong> <strong>the</strong> leading cotton
importing countries in recent years, is <strong>the</strong> continuous increase <strong>of</strong> deficient supply.
Cotton consumption started to increase rapidly in <strong>the</strong> 1990s, but a proportional
increase in production could not be realized. On <strong>the</strong> o<strong>the</strong>r hand, <strong>the</strong> downward
trend in world cotton prices emerged in recent years making imports attractive.
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Cotton producers could not compete with producers supported by premium
payments <strong>of</strong> 61 cents per kg in Greece, and 23 cents per kg in USA.
Table 3: Subsidies in USA, EU and Turkey(*)
Seasons USA (USD/kg) Greece (USD/Kg) Turkey (USD/KG)
1999/00 0.23 0.45 0.12
2000/01 0.11 0.35 0.09
2001/02 0.26 0.49 0.04
2002/03 0.23 0.61 0.05
(*):For seed cotton
As it is known, almost 40% <strong>of</strong> world cotton exports is realized by <strong>the</strong> USA. The
domination <strong>of</strong> USA will get higher and higher as long as <strong>the</strong>y continue to provide
subsidies to cotton production. On <strong>the</strong> contrary, <strong>the</strong> competitive power <strong>of</strong> <strong>the</strong>
developing countries, which do not have sufficient funds to subsidize <strong>the</strong>ir cotton
productions, will decrease gradually. The conditions <strong>of</strong> <strong>the</strong> world markets enforce
Turkey to import more and more each year.
Ano<strong>the</strong>r factor having an effect on <strong>the</strong> increase <strong>of</strong> cotton imports to Turkey is
<strong>the</strong> fact that no contamination is observed particularly in <strong>the</strong> cotton imported
from <strong>the</strong> USA. The problem <strong>of</strong> contamination in Turkish cotton increased in
<strong>the</strong> last few years. It caused great financial losses for <strong>the</strong> textile and
confectionary sectors.
VI. PROPOSALS FOR IMPROVING COOPERATION BETWEEN
IDB COTTON-PRODUCING MEMBER COUNTRIES
In order for <strong>the</strong> Turkish textile and confectionary sector, <strong>of</strong> which <strong>the</strong> basic
raw material is cotton, to be able to compete in global markets, it must supply
high quality products at suitable prices.In terms <strong>of</strong> cotton production,
competitiveness with developed countries such as <strong>the</strong> USA&EU countries,
can only be realized by accelerating technological developments, particularly
improving seeds. By creating sources (funds) for studies aimed at increasing
productivity and reducing production costs. Important studies on new cotton
species are being carried out by Nazilli Cotton Research Institute which has
significant experience in cotton improvement studies in Turkey.
Collective seed production projects supported by mutual financial, and
technological aid programmes can be executed by members countries under
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<strong>the</strong> coordination <strong>of</strong> Turkey. High quality production and high productivity
will play an important role in increasing <strong>the</strong> power <strong>of</strong> competitiveness. Total
cotton exports <strong>of</strong> producer members <strong>of</strong> <strong>the</strong> bank was 2.8 million tons. This
figure is 38% <strong>of</strong> global exports. Total imports <strong>of</strong> members was 1.9 million
tons. The top three importers were Indonesia, Turkey and Pakistan
respectively.
respect to cotton trade, a coordination model should be developed among <strong>the</strong>
members by taking import and export potentials into consideration. For
instance, GSM (General Sales Manager) credits are important factors having
an impact on cotton exports in <strong>the</strong> USA. The members must be enabled to
export cotton in deferred terms under <strong>the</strong> guaranty and sponsorship <strong>of</strong> <strong>the</strong>
bank.
It is observed, that a majority <strong>of</strong> cotton producing member countries are raw
cotton exporters. Particularly a group <strong>of</strong> African countries and Turkic
Republics export cotton in raw character, and <strong>the</strong>y can not benefit from <strong>the</strong>
added value that <strong>the</strong> cotton <strong>of</strong>fers. Countries which are cotton producers and,
exporters <strong>of</strong> textile and confection products in significant volumes are Egypt,
Pakistan, Iran, Uzbekistan and Turkey. While Iran and Uzbekistan only
export textiles, Egypt, Pakistan and Turkey export both textiles and
confectionary.
Turkey’s share <strong>of</strong> textiles exports is 3.1% and confectionary exports at 4.4%.
As it is obviously observed, regarding <strong>the</strong> exports <strong>of</strong> textiles and
confectionary , among members countries, Turkey has <strong>the</strong> biggest share in <strong>the</strong>
world. Turkey can share information and experience it has in <strong>the</strong> textile and
confectionary sector, which were gained due to improvements realized. For
<strong>the</strong> economies <strong>of</strong> member African countries, cotton production denotes huge
importance. The negative impact <strong>of</strong> subsidies on <strong>the</strong> global trade that <strong>the</strong>
USA implements and <strong>the</strong> fall <strong>of</strong> <strong>the</strong> prices below normal levels has lead to an
economic and social crisis in member countries, mostly in Mali, Benin,
Burkina Faso and Chad where almost 30-40% <strong>of</strong> <strong>the</strong> export incomes <strong>of</strong> <strong>the</strong>se
countries is about 10-12% <strong>of</strong> total revenue. Within <strong>the</strong> WTO, members
countries must act in a corporate manner against cotton subsidies that <strong>the</strong>
USA implements.
As a result, if a secretariat (Institutional Body) is established, it can provide
technical assistance for cotton production, trade and cotton productivity.
Turkey may play a leading role in this process. Turkey may transfer its
experience and know-how in <strong>the</strong> cotton sector (regulation, statistics,
information dissemination, productivity).
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PART FOUR
RECOMMENDATIONS AND ACTION PLAN
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GENERAL FRAMEWORK AND ACTION PLAN FOR ENHANCING
COOPERATION AMONG IDB COTTON-PRODUCING MEMBER
COUNTRIES
I. INTRODUCTION
The <strong>Expert</strong> <strong>Group</strong> <strong>Meeting</strong> (EGM) on "Enhancing Production Efficiency
and International Competitiveness in IDB Cotton-Producing Countries"
took place from 12-13 Safar 1426H (22-23 March 2005) at <strong>the</strong> Headquarters
<strong>of</strong> <strong>the</strong> Islamic Development Bank (IDB) in Jeddah, Saudi Arabia. The
purpose <strong>of</strong> <strong>the</strong> meeting was to discuss <strong>the</strong> main issues and challenges faced
by <strong>the</strong> IDB cotton-producing member countries, propose concrete actions to
tackle <strong>the</strong>se issues and lay down a General Framework and Action Plan for
enhancing cooperation among cotton-producing member countries. The EGM
was inaugurated by Dr. Syed Jaafar Aznan, Vice-President (Trade & Policy),
IDB and chaired by Dr. Abdin Mohamed Ali El-Faki, Director General, The
Sudan Cotton Company Ltd., Sudan. Eighteen eminent experts from public
and private companies and productivity centers <strong>of</strong> member countries heavily
dependent on <strong>the</strong> cotton sector attended <strong>the</strong> meeting including Benin, Burkina
Faso, Egypt, Mali, Pakistan, Sudan, Syria, Turkey and Uganda.
The EGM emphasized <strong>the</strong> significance <strong>of</strong> cotton in <strong>the</strong> national economies <strong>of</strong>
many IDB member countries. These countries shared 29 per cent <strong>of</strong> world
production, 25 per cent <strong>of</strong> consumption and 36 per cent <strong>of</strong> cotton traded in <strong>the</strong>
international markets in 2004/05. Cotton provides employment opportunities
and generates cash flow in <strong>the</strong> rural sector and provides foreign exchange
earnings ei<strong>the</strong>r from raw cotton exports or from value added products. It was
also emphasized that <strong>the</strong> elimination <strong>of</strong> subsidies and quotas will accelerate
<strong>the</strong> shift <strong>of</strong> textile manufacturing to countries with lower textile
manufacturing costs. To this end, <strong>the</strong> EGM has developed <strong>the</strong> following
General Framework and Action Plan for enhancing cooperation among IDB
cotton-producing member countries, particularly in areas related to
productivity and competitiveness.
II. GENERAL FRAMEWORK
Given <strong>the</strong> importance <strong>of</strong> cotton in many IDB member countries, <strong>the</strong> EGM
identified major challenges/constraints faced by <strong>the</strong>se countries in
streng<strong>the</strong>ning <strong>the</strong>ir production efficiency and international competitiveness
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and priority areas to enhance cooperation among cotton-producing member
countries. The EGM highlighted <strong>the</strong> possible role <strong>of</strong> multilateral financing
institutions, like <strong>the</strong> IDB.
1. Major Challenges/Constraints
The EGM identified <strong>the</strong> following major challenges/constraints in cottonproducing
member countries.
• Limited access <strong>of</strong> cotton growers to inputs needed for achieving high
yields in many countries, particularly in <strong>the</strong> African cotton-producing
countries.
• Poor supply <strong>of</strong> inputs due to insufficient production, high costs and poor
rural infrastructure.
• High levels <strong>of</strong> <strong>the</strong> cost <strong>of</strong> production for farmers due to a high
dependence on pesticide based production practices and lower yields.
• Limited access to many emerging technologies like <strong>the</strong> use <strong>of</strong>
biotechnological applications and rapid instrument testing.
• Unavailable means and resources for direct communications among
cotton-producing countries.
• Small size <strong>of</strong> growers and fur<strong>the</strong>r fragmentation <strong>of</strong> land into smaller
units and difficulty to adopt mechanization <strong>of</strong> cotton production and
harvesting.
• Weak role <strong>of</strong> <strong>the</strong> private sector in cotton production, processing and
allied industries.
• Limited resources for cotton research and for credit to meet <strong>the</strong> needs <strong>of</strong>
production operations.
• Weak institutions and bureaucratic procedures affecting production and
research efficiency.
• Inadequate price levels for quality cotton produced due to various reasons
such as contamination.
• Traditional ways <strong>of</strong> marketing cotton and <strong>the</strong> slow privatization process
in <strong>the</strong> cotton sector.
• Weak domestic consumption in cotton-producing countries, particularly
in African countries.
• High subsidies by developed countries and <strong>the</strong> artificially low level <strong>of</strong>
cotton prices.
• Insufficient public and private investment due to production and price
uncertainties.
• Shortage <strong>of</strong> irrigation water and inefficiency in water use in irrigated
cotton cultivation.
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2. Priority Areas for Cooperation
In order to face <strong>the</strong> challenges and overcome <strong>the</strong> constraints, <strong>the</strong> EGM
identified <strong>the</strong> following four major priority areas for cooperation:
i. Production
IDB member countries can enhance productivity and efficiency by learning
from each o<strong>the</strong>r’s experiences in production practices models, up-to-date
irrigation system, cotton standardization and grading system at <strong>the</strong> ginnery
level, high yielding varieties, certified planting seed, least use <strong>of</strong> pesticides,
biological control, agronomic management and transfer <strong>of</strong> technology.
Greater efforts are also needed to enhance <strong>the</strong> technical awareness <strong>of</strong> small
and uneducated farmers in increasing <strong>the</strong> quantity and quality <strong>of</strong> cotton.
ii. Marketing
IDB cotton-producing member countries may cooperate to enhance domestic
consumption and promote exports. They can help each o<strong>the</strong>r to promote an
orderly and efficient marketing <strong>of</strong> cotton by developing, disseminating, and
encouraging <strong>the</strong> use <strong>of</strong> universal cotton classification standards, and by
sharing market news that meets <strong>the</strong> needs and expectations <strong>of</strong> <strong>the</strong> cotton and
textile industries.
iii. Institutional Development
The cotton sector suffers from <strong>the</strong> absence <strong>of</strong> specialized institutions both at
regional and international levels such as an international cotton research
center, an international germplasm center and a regional cotton-classing
laboratory for African countries. While cooperation among cotton-producing
countries is needed to establish <strong>the</strong>se international or regional organizations,
more effort is required to establish and streng<strong>the</strong>n national specialized
institutions, particularly those dealing with training, research and
development in <strong>the</strong> cotton sector. The regulatory environment should also be
improved in order to enhance <strong>the</strong> role <strong>of</strong> <strong>the</strong> private sector by adopting
adequate intellectual property rights legislation.
iv. Financing
Cotton farmers mostly suffer from <strong>the</strong> poor performance <strong>of</strong> <strong>the</strong> financial
sector in rural areas. In this context, IDB cotton-producing member countries
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need assistance to establish or streng<strong>the</strong>n commodity funds contributed for
and managed by farmers <strong>the</strong>mselves to reduce both price and production
uncertainties and to rebuild <strong>the</strong> rural financial facilities for providing
emergency seasonal credit and enhancing <strong>the</strong> role <strong>of</strong> small rural savers.
Greater efforts are also needed to finance projects related to infrastructure
development, farm, ginning machinery manufacturing, and export credit
guarantees/financing.
III. ACTION PLAN
Given <strong>the</strong> General Framework for enhancing cooperation among IDB cottonproducing
countries, <strong>the</strong> EGM recommended <strong>the</strong> following actions at
national, regional and IDB/international levels to promote cotton production
efficiency and competitiveness:
1. Actions at National Level
The IDB cotton-producing member countries may consider <strong>the</strong> following
actions:
• Enhance <strong>the</strong> awareness <strong>of</strong> farmers for improving productivity and
producing quality cotton through effective means <strong>of</strong> technology transfer.
• Adopt precise measurements <strong>of</strong> quality characteristics through
instrument-based systems.
• Improve ginning which constitutes <strong>the</strong> weakest link in <strong>the</strong> cotton chain.
• Enhance <strong>the</strong> private sector participation in <strong>the</strong> cotton chain, including
variety development and seed production.
• Adopt adequate intellectual property rights legislation in order to enhance
<strong>the</strong> role <strong>of</strong> <strong>the</strong> private sector.
• Develop bio-safety regulations and educate <strong>the</strong> public about <strong>the</strong> new
technologies (biotechnology and o<strong>the</strong>rs) in order to remain competitive in
<strong>the</strong> international cotton market.
• Rebuild rural financial facilities with <strong>the</strong> view <strong>of</strong> providing emergency
seasonal credit in <strong>the</strong> medium term and enhance <strong>the</strong> role <strong>of</strong> small
producers in <strong>the</strong> rural financial system.
• Undertake suitable measures for greater market liberalization in order to
enhance cotton productivity and international competitiveness.
• Provide assistance to improve water use efficiency at <strong>the</strong> farm level.
• Support <strong>the</strong> private sector to enhance domestic raw cotton consumption
for value addition.
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2. Actions at Regional Level
IDB cotton-producing member countries may bilaterally or multilaterally
consider <strong>the</strong> following actions:
• Establish a network <strong>of</strong> cotton researchers and start a cotton newsletter,
on-line or hard copy, to keep IDB member countries connected to each
o<strong>the</strong>r.
• Establish a regional cotton-classing laboratory for African countries.
• Streng<strong>the</strong>n transport linkages <strong>of</strong> landlocked cotton-producing countries.
3. Actions at <strong>the</strong> International/IDB <strong>Group</strong> Level
The IDB <strong>Group</strong>, in collaboration with relevant international organizations,
may consider <strong>the</strong> following actions:
• Support facilities for sharing experiences and for specialized training in
areas like integrated crop/pest management among member countries.
• Disseminate information stories about best practices related to zero
pesticide plant production in countries like Syria and productivity
enhancement in <strong>the</strong> spinning sector in countries like Pakistan.
• Provide support for cotton development programs and projects,
particularly related to marketing and vertical expansion.
• Provide assistance for improving training facilities in cotton ginning.
• Support quality farm and ginning machinery manufacturing in IDB
member countries.
• Support commodity funds aimed at reducing cotton prices and production
uncertainties through <strong>the</strong> national development financing institutions.
• Sponsor small and short-term research projects related to production and
fiber quality.
• Facilitate cotton intra-exports by providing export credit guarantees/
financing to promote cotton trade among IDB member countries.
• Contribute in upgrading one <strong>of</strong> <strong>the</strong> existing germplasm facilities to an
international germplasm center on cotton and prepare a germplasm
catalogue.
4. General Action
Many <strong>of</strong> <strong>the</strong> issues and concerns expressed by <strong>the</strong> delegates could be resolved
by establishing a commercially viable International Cotton Research
Center capable <strong>of</strong> providing a variety <strong>of</strong> cotton related services to cottonproducing
countries. Delegates demonstrated strong need for such a center.
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The Honorable Delegates,
Bro<strong>the</strong>rs and Sister,
CLOSING REMARKS
Dato Syed Jaafar Aznan
Vice President Trade & Policy, IDB
Assalamu Alaikum Wa Rahmatullahi Wa Barakatuh
It is my pleasure to once again address you on <strong>the</strong> occasion <strong>of</strong> <strong>the</strong> closing
ceremony <strong>of</strong> <strong>the</strong> <strong>Expert</strong>s <strong>Group</strong> <strong>Meeting</strong> on "Enhancing Production
Efficiency and International Competitiveness in IDB Cotton-Producing
Member Countries". I would like to congratulate all <strong>of</strong> you for <strong>the</strong>
successful outcome, which is only possible due to your active participation in
<strong>the</strong> events <strong>of</strong> this meeting.
It would have been a great honour for me to have been able to attend your
deliberations in last two days. But my o<strong>the</strong>r engagements have prevented me
from doing so. Never<strong>the</strong>less, this does not change my sense <strong>of</strong> support for
your endeavours.
I have learnt about <strong>the</strong> fruitful discussion where a lot <strong>of</strong> interesting ideas have
come up. I assure you that <strong>the</strong> IDB would carefully look at <strong>the</strong>
recommendations <strong>of</strong> <strong>the</strong> EGM and take appropriate follow-up action. I hope
that all <strong>the</strong> cotton-producing member countries would also benefit from your
deliberations in order to enhance cotton productivity and competitiveness. In
fact, this is essential to fur<strong>the</strong>r improve <strong>the</strong>ir share in <strong>the</strong> world cotton market.
I am grateful to all <strong>of</strong> you for traveling so long, to participate in this meeting,
and thank you once again for all your efforts and contributions.
With <strong>the</strong>se remarks I declare <strong>the</strong> meeting closed.
Thank you and Wassalamu Alaikum Wa Rahmatullahi Wa Barakatuh.
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270

ANNEX
<strong>Expert</strong> <strong>Group</strong> <strong>Meeting</strong> on
“Enhancing Production Efficiency and International Competitiveness
in IDB Cotton-Producing Member Countries”
12-13 Safar 1426H (22-23 March 2005),IDB Headquarters, Jeddah
Programme
Tuesday, 12 Safar 1426H (22 March 2005)
8:30-9:00: Registration
Inauguration
9:00-9:05: Recitation from <strong>the</strong> Holy Qura’n
9:05-9:10: Welcome and Opening Remarks by Dr. Faiz Mohammad, Director,
Economic Policy and Strategic Planning Department
9:10-9:20: Opening Address by Dr. Syed Jaafar Aznan, Vice-President (Trade &
Policy)
9:20-9:30: Election <strong>of</strong> <strong>the</strong> Chairman and Drafting Committee
THEME ONE : MAJOR CHALLENGES TO IDB COTTON-PRODUCING MEMBER
COUNTRIES
Session 1:
9:30–10:30 : Big Picture
• Presentation <strong>of</strong> <strong>the</strong> working Paper by <strong>the</strong> consultant: Dr. Rafiq
Chaudhry, Head <strong>of</strong> Technical Information, International Cotton
Advisory Committee (ICAC)
• Discussion
THEME TWO: ISSUES RELATED TO COTTON PRODUCTION EFFICIENCY AND
INTERNATIONAL COMPETITIVENESS:
Session 2:
10:45–13:00: Country Experiences from <strong>the</strong> African Region
• Presentation by:
- Dr. Fede Blaise, Directeur du CRA-CF, Institut National des
Recherches Agricoles, Ministry <strong>of</strong> Agriculture (Benin)
- Dr. Seydou N. Traoré, Chef de Service, Production et Appui
Technique /Direction de l’INERA. (Burkina Faso)
- Mr. Ibrahim Malloum, Executive General Manager <strong>of</strong>
Cottonchad, (Chad)
- Dr. Mohamed Ahmed Raafat, Director <strong>of</strong> Cotton Research
Institute (CRI) (Egypt)
- Dr. Amadou Aly Yattara, Sélectionneur, Chef de programme
coton (IER) (Mali).
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- Dr. El Fadil Abdel Rahman Babiker, National Coordinator
Cotton Research Program, Agricultural Research
Corporation (ARC) (Sudan)
- Ms. Nabakka Lubwama Damalie, Cotton Development
Organization (CDO) Uganda)
• Discussion
Session 3:
14:00–15:30: Country Experiences from <strong>the</strong> Asian Region
• Presentation by:
- Dr. Ibad Siddiqui, Vice President, Pakistan Central Cotton
Committee, (PCCC) (Pakistan)
- Dr. Mohamed Nayef Al Salti, Director <strong>of</strong> Cotton Research
Administration, Cotton Bureau (Syria)
- Dr. Isa Ozkan, Head, Nazili Cotton Research Institute (NCRI)
(Turkey).
• Discussion
Wednesday, 13 Safar 1426H (23 March 2005)
THEME THREE: ROLE OF PRODUCTIVITY INSTITUTIONS AND PRIVATE SECTOR
IN COTTON SECTOR
Session 4:
9:00–10:30: Enhancing <strong>the</strong> Role <strong>of</strong> National Productivity Institutions
• Presentation by:
- Mr. Balafraj Anis, Morocco Productivity Institution (Morocco)
- Dr. Saquib Mohyoddin, National Productivity Organization
(Pakistan)
• Discussion
Session 5:
10:45–13:00: Enhancing <strong>the</strong> Role <strong>of</strong> Private Sector
• Presentation by:
- Mr. Masood Ahmed Majeed, Chief Executive and Director,
Asia Ghee Mills (Pvt) ltd (Pakistan)
- Dr. Abdin Mohamed Ali El Faki, General Director, Sudan
Cotton Company Ltd (Sudan)
- Mr. Cissé Mahamadou, Director <strong>of</strong> Cotton Global Ltd (Mali)
- Mr. Tugurl Yemisci, Chairman <strong>of</strong> <strong>the</strong> Board <strong>of</strong> Directors, Izmir
Mercantile Exchange, (Turkey)
• Discussion
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THEME FOUR: RECOMMENDATIONS AND ACTION PLAN
Closing Session:
14:00-15:30: Action Plan for Enhancing Cooperation among IDB Cotton-
Producing Member Countries
• Adoption <strong>of</strong> <strong>the</strong> Action Plan: Report by <strong>the</strong> Chairman <strong>of</strong> <strong>the</strong> Drafting
Committee
• Closing Remarks by Dr. Syed Jaafar Aznan, Vice-President
(Trade & Policy).
Note: The EGM was chaired by Dr. Abdin Mohamed Ali El Faki, General Director,
Sudan Cotton Company Ltd.
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