Key to Surviving Volatility: Closer Contact with Partners
Cotton International 2012 Global Summit Preview
April 12, 2012
As the president of the International Textile Manufacturers Federation (ITMF) and keynote speaker at the Cotton International 2012 Global Summit, Bashir Ali Mohammad is in better position than most to assess the state of the cotton and textile value chain and identify the steps needed to strengthen it for all stakeholders.
During an exclusive interview with Cotton International, Mohammad – who is also chairman of the Karachi, Pakistan-based Gul Ahmed Textile Mills – discussed the major issues and trends that will be the foundation of his presentation at the Global Summit in Bangkok:
In recent years, Asia seems to have become the center of the cotton textile world. What developments have led to its growing importance, and what makes it so important to the textile industry?
The primary factor is demographics. The textile industry depends on the demography of the region – the need for a specific set of vocational skills and training. History shows us that it started in England more than100 years ago. It really was remarkable how it then shifted. From England it went to Continental Europe, Japan and Korea. Then as things changed, low-cost labor took it to China, which had a major population base that provided mills low-cost labor with the necessary skills. China needed export-led growth to make that significant jump in importance.
I think China has now peaked, very literally, because their labor costs are getting more expensive, the land is getting expensive, and the demographic is changing.
Over the next five years, you will see new entrants stepping forward: Vietnam, Indonesia, and the Southeast Asia region in general. Countries such as Bangladesh, India, Pakistan and Sri Lanka are growing in importance, as is Turkey. This is the new generation of big players.
There are, of course, smaller yet still significant players all over the world, but the Southeast Asia region features a number of countries that have the raw materials – both cotton and polyester – as well as a large, low-cost labor pool with the necessary skill set. All of those things are very important.
Given that population demographics are always changing, will the center of the textile production industry always be shifting from one region to another?
No, not necessarily. It’s a three-fold influence. For one, countries need to have a reasonable raw materials base, or at least some duty privileges. For example, Bangladesh received some duty preferences when they didn’t have the raw materials base. Europe gave them a zero duty to give them that edge in raw materials. Then you have to have a workforce with the correct set of skills and training. That process doesn’t occur overnight. How many years has it taken Pakistan, India, and Bangladesh, for example, to get to that point? Africa might well be the next big player, but it’s probably going to take them 20 years to get there. Then again, it might not because the world moves so much faster today than it has in the past. A major shift that used to occur over a period of 50 years might now occur in 15 years.
Are companies and sectors in the supply chain more dependent on one another than in the past? And if that’s the case, then what should business owners and managers be doing to ensure the success of their partners, and thus their own businesses?
That’s a topic I will focus heavily on during my presentation at the Global Summit in Bangkok. What has happened is that many of the large and influential companies – the ones we thought would be major players forever – may not be there in the future. The risks have become so enormous. Businesses are more dependent upon their customers, and retailers are more dependent on their banks due to the worldwide recession. In many cases, those businesses are no longer their own masters. What is needed more than anything else is exceptional management skills to help us navigate through these storms, which are coming one after another. This is a double-dip recession, literally, combined with rising prices, raw materials problems and a supply shortage. Mills have to run their factories in an oversupply situation or in a shortage situation. It’s a very complicated situation with regard to how to take positions, how to hedge those positions, and how to keep risk to a minimum without being greedy. Retailers, mills and cotton professionals are all suffering because their code of ethics has broken down. It has been a very difficult year and I don’t think the struggles are over yet. There is no certainty anymore. These are uncertain times, and you have to be lean to succeed.
Risk management isn’t an area in which mill owners traditionally have a lot of experience. What, specifically, can mill owners do to learn the skills they need to effectively manage the risks they face?
I think the most important thing they can do is be as close to their customers and suppliers as they possibly can. They need to have very good partners and communicate very well with their customers. Today and in the near future at least, the customer is going to be the dominant force and will rule the entire supply chain, all the way through to the department store. It’s a matter of how to position yourself, find partners you can trust, be transparent in your operations, and above all, don’t be greedy. In today’s circumstances, if you let your business partners down, you might literally bankrupt them.
SESSION SCHEDULE FOR THE COTTON INTERNATIONAL 2012 GLOBAL SUMMIT
Plenary Session I:
Risk Management – Strategies for Volatile Markets
The mitigation of market and trade risk is a strategic imperative for the cotton value chain in today’s volatile environment. Innovative new risk management strategies – created to identify and manage risk for all stakeholders – are the imperative. The experts in this panel will discuss the new techniques and approaches needed to manage uncertainty and ambiguity in a turbulent and unpredictable market.
Plenary Session II:
Emerging Markets Roundtable: Key Regions for Cotton’s Growth
Emerging markets offer exciting new growth opportunities key to the future of the global cotton industry. This panel discussion will highlight several of the market leaders in cotton consumption, with special emphasis on Southeast Asia and Africa. Speakers will focus on their organizations’ growth strategies, the recent events that have led to their region’s growing importance, and the short- and medium-term outlook for their respective cotton and textile industries.
Plenary Session III:
Global Trade – Keys to Cotton Future
Abrupt and dramatic shifts in market dynamics are challenging the traditional global cotton trade patterns and market development. Industry collaboration is essential to identify and remove impediments to effective global trade to ensure cotton’s sustained viability. This panel of global leaders will provide their perspective and insights into cotton’s future market outlook and opportunities.
Plenary Session IV:
Major Markets Roundtable: Trends for 2012/13
Production and consumption trends in the world’s largest markets are significant drivers for the global cotton industry. Even minor changes in the cotton strategies of these key markets have a ripple effect that can be felt across the globe. Leaders representing the major markets will focus on the domestic, regional and global trends that will impact the future direction of the world cotton and textile industries.