A federal budget rejected downright by the business community, very tight money supply, downswing in yarn and textile prices, war conditions in north and north western Pakistan, improved prospects of the incoming (2009-2010) cotton crop and mass disruption of power supply have all agglomerated to pull down cotton prices in Pakistan which have suffered a relapse by about Rs 200 per maund (37.32 kgs) since the beginning of this month.
Similarly, the ex-gin price of grade three cotton has been decreased by the Karachi Cotton Association (KCA) from Rs 3,600 per maund (37.32 kgs) on the first of June, 2009 to Rs 3,400 per maund on Thursday (18 June, 2009) with propensity to concede more. The notable downslide in New York cotton futures prices in recent sessions also influenced to decrease domestic cotton prices.
Regarding the power supply issue, the federal government has announced that they will be increasing the power tariff by another seventeen percent in phases due to a conditionality of the International Monetary Fund (IMF). This news will further upset the business and industrial sector materially.
Most businessmen and the various Chambers of Commerce and Industry have criticised the recently announced Federal Budget (13 June, 2009) vehemently. The value added textile sector comprising ten components has threatened on last Wednesday to close down their units under the aggregation of Council of All Pakistan Textile Associations (CAPTA) and even relocate them in other regional countries if the inequities and anomalies in the budget are not rectified immediately.
In this connection, the Faisalabad Chamber of Commerce and Industry (FCCI) has also criticised several new rules incorporated in the recent Budget. The Karachi Chamber of Commerce and Industry. (KCCI) has pointed out at least twenty anomalies in the budget. Above all, the All Pakistan Textile Mills Association (APTMA) has termed the budget as unfriendly and inadequate which makes no efforts to revive the faltering textile industry.
APTMA particularly criticised the discrimination against the spinning and grey cloth weaving sector. Another grievance concerns leaving out the agriculture income from taxation. As a reaction to this widespread dissatisfaction of the members of trade and industry, Adviser to Prime Minister on finance, Shaukat Tareen, has convened a meeting with the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) for consultation to revise the budget where necessary.
The gloomy financial economic condition of the global village is getting grimmer, despite all attempts to salvage it. Despite all the political and economic bigwigs who have pooled their wit and wisdom together to save the capitalism currently in vogue with their collective efforts, they appear to be losing the battle to save the impeding misfortune facing mankind.
There are several reasons why the socio-economic failure, which has engulfed the world, refuses to go away. Thus there seems no exit at present from our prevailing predicaments. Additional adverse news and reports emanating from the four corners of the world over the past week make it difficult to become optimistic about any early rehabilitation of the global financial and economic condition.
First and foremost, the United States of America, a unipolar megapower appears to be suffering from imperial fatigue. America has opened up too many fronts to tackle them properly which has disturbed both friends and foes alike.
The United States does not wish to implement the Comprehensive Test Ban Treaty (CTBT) which it authored; it does not want to be a member of the International Criminal Court whose precepts it promoted; it does not want to sign the Kyoto Protocol; it is procrastinating in finalisation of the Doha Round of the global trade talks because America and Europe do not want to withdraw the subsidies they give to their farmers; it has never presented coherent and credible nuclear containment programme over the previous several decades which would be fair to guarantee peaceful uses of atomic energy to others; it has cold shouldered the United Nations turning it almost irrelevant, besides letting Kashimir, Palestine, Afghanistan and other issues to fester over the pervious several decades.
The allies of United States in Europe and other friends around the globe like China, Japan and Canada appear unhappy with what should be the principled stand of America in several and sundry global issues. Moreover, lack of co-ordination between the global leaders if pushing the global socio-economic condition to a point of no return. Billions of people, mostly from the poor countries, are becoming impoverished and jobless which situation is now leading the globe to an irrevocable socio-economic disaster.
The new fear which has now gripped the world concerns a recurring possibility of a new or second financial disaster in the global financial system, despite pumping of trillions of dollars over the past one year or more to salvage the earlier financial collapse. This fearful development which has sprung de novo upon mankind poses an unprecedented threat to civilisation itself. President Barrak Obama is said to be grappling with this problem in earnest, and so are the European leaders who are also said to be seized with this issue.
They propose to introduce stricter regulations on the bankers. Besides the Atlantic Treaty partners and the G-8 assemblage currently said to be in a consultative mode of engagement, the BRIC countries, namely the top emerging economies such as Brazil, Russia, India and China are said to be huddling together to see if a new reserve currency is desirable in order to stabilise the global settlement issues of receipts and payments against trade.
Therefore, we have yet to see if a second Bretton Woods Conference is in the offing which can look after the European, Asian, Latin American, and African interests with a view to a more viable and stable currency system around the globe. These recent developments are further undermining the functioning of the global economic system. For instance, in the ongoing Centennial Paris Air Show, a little over one hundred aeroplanes were sold as against last year's sale of about five hundred aircraft.
Only military planes saw an increasing demand at the Paris Air Show. After braving the gloomy economic results from most countries around the world, the equity markets had shown a fair amount of improvement over the past so many months. However, they were sagging again this week under the deteriorating economic condition almost everywhere.
People are wondering how the mountain of debts accumulated by bailouts or public expenditure will be paid off without burdening the future generations. In net terms, the global equity markets have lost a third of their value since last one year. With these disturbing news, cotton and textile circles are again losing heart. In regional markets like India, Bangladesh and Pakistan, again there are portents of further downturn in the cotton economy as a whole.
For instance, reeling under a serious recession in textile, Pakistan is facing massive power cuts and socio-political disorder which is wrecking the textile industry. Many observers are now finding a correlation between the Taliban insurgency in northern Pakistan and the deprived social sector of country.
It is said that similarly in many parts of the world like Iran, Thailand, Turkey, Brazil, Mexico and elsewhere, the basic struggle is between the haves and the have - nots which is unmistakably manifesting itself in different forms, both political and social. In domestic cotton news, good sowing has been made for the incoming crop (2009-2010) so that the output outlook has been revised upward to range between twelve million to 12.5 million (12,500,000) domestic size bales on an ex-gin basis.
This development translates into weaker lint prices. Ready transaction of cotton reported till Thursday afternoon comprised of 400 bales of Sindh style sold by an exporter to mill at Rs 3300 per maund (37.32 kgs) on Karachi delivery basis, while another sale of 418 bales also of Sindh style was said to have materialised at Rs 3,425 per maund also on ex-Karachi basis.
Brokers in Karachi said that yarn prices had fallen by Rs 70 to Rs 80 per ten pounds recently. Though there is some demand for 7/1, 16/1, or 20/1 counts of yarns, the demand for high counts of yarns is lagging. Thus it is concluded that lint prices are quite weak at present.