VZCZCXRO0991
OO RUEHLH RUEHPW
DE RUEHLH #0291/01 2960611
ZNY CCCCC ZZH
O R 220611Z OCT 08
FM AMCONSUL LAHORE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3803
INFO RUEHIL/AMEMBASSY ISLAMABAD 4539
RUEHKP/AMCONSUL KARACHI 1910
RUEHPW/AMCONSUL PESHAWAR 1593
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHBUL/AMEMBASSY KABUL 0284
RUEHNE/AMEMBASSY NEW DELHI 0662
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHLH/AMCONSUL LAHORE 4941

C O N F I D E N T I A L SECTION 01 OF 02 LAHORE 000291 
 
SIPDIS 
 
E.O. 12958: DECL:  10/21/2018 
TAGS: ECON PGOV ENRG PK ETRD
SUBJECT: BT COTTON WILL NOT BE QUICK FIX FOR PUNJAB'S TEXTILES, WHICH 
CONTINUE TO SUFFER 
 
REF: ISLAMABAD 2633 
 
CLASSIFIED BY: Bryan Hunt, Principal Officer, Consulate Lahore, 
U.S. Department of State. 
REASON: 1.4 (e) 
¶1. (C) Summary: Leadership of the All Pakistan Textile Mills 
Association (Punjab Zone) told Poleconoff October 17 that the 
global crisis has resulted in a 15-20 percent drop in exports 
during the last three months.  Moreover, the lack of bank 
liquidity has constricted capital, making it difficult for mills 
to purchase cotton.  They estimated that the mills have shut 30 
percent of their spindles, and 80 percent of the mills in Punjab 
operate at a loss.  While the mill owners hoped that the 
introduction of BT cotton, which contains bacillus thuringiensis 
bacteria to make the crops more resistant to insects, would 
stimulate the cotton and textile industries, Monsanto Country 
Manager Amir Mirza cautioned PO in an October 20 meeting that 
even if it could introduce BT cotton by January 2009, the seeds 
would not be widely available until the 2011 growing season. 
End summary. 
 
- - - 
Global Crisis Impacts Already Troubled Textile Industry 
- - - 
 
¶2. (SBU) Akhbar Sheikh, Chairman of the All Pakistan Textile 
Mills Association (APTMA) Punjab Zone, told Poleconoff October 
17 that the downturn in the U.S. and Europe have hit Punjab's 
textile industry.  He estimated that in the last three months 
exports have dropped 15-20 percent because consumers have 
started to defer purchases on bedding, knitwear and other 
non-priority goods.  The global crisis has also constricted the 
availability of cash, Sheikh continued.  He related that banks 
have refused to loan to mill owners, who need to buy more 
cotton.  APTMA Secretary Anis ul Haq pointed out that because 
much of Pakistan's cotton imports come from the U.S. (which 
provided 627,953 bales to Pakistan in 2006-07, second only to 
cotton imports from India), American cotton growers will see 
likely see far fewer orders from Pakistani mills.  Likewise, 
orders for machinery, which tend to come from Georgia, will also 
drop because of a lack of credit, ul Haq predicted. 
 
- - - 
Electricty and Gas Too Expensive and Unreliable 
- - - 
 
¶3. (SBU) Compounding the problems generated by the global 
crisis, the energy shortage in Punjab has also raised costs, 
Sheikh noted.  Although the power providers have attempted to 
exempt textile mills from loadshedding, Sheikh reported that 
outages have reached levels of five-to-six hours per day, 
resulting in mills missing clients' targets. Those mills that 
converted to gas (about 70 percent of the capacity) also face 
cutoffs approximately 90 days of the year, most recently 13-19 
October 2008, Sheikh complained.  The government has also not 
decreased gas prices to reflect the lower costs of oil and gas 
worldwide, he continued, while commodity prices have shot up. 
 
- - - 
Several Barriers Exist for Exporters 
- - - 
 
¶4. (SBU) Senior Vice President of APTMA Raja Nazir said that the 
poor law-and-order situation has prevented buyers from making 
the journey to Pakistan, which he believed offers highly 
competitive prices.  Ul Haq added that difficulties in obtaining 
visas have also made travel to the U.S. infeasible.  He thought 
that the GOP has done a poor job of marketing Pakistani textiles 
and negotiating market access, and he singled out India, from 
which Pakistan imports 25 percent of its cotton, as a 
particularly closed market. 
 
¶5. (SBU) As a result of the crisis, Chairman Sheikh estimated 
that the mills have shut 30 percent of the spindles available 
(spinning capacity normally occurs around 85 percent).  The 
mills have subsequently laid off workers, prompting several 
protests in southern Punjab in mid-October. He predicted that 
big mills will survive the current quagmire, but many small 
mills will go out of business in the near future.  However, he 
hoped that public-private partnerships, USAID-led projects, and 
the imminent introduction of BT cotton would help the textile 
industry recover. 
 
- - - 
Monsanto Pursues BT Cotton Entry With or Without Government 
Buy-In 
- - - 
 
¶6. (C) In an October 20 meeting with PO, Monsanto Country 
Manager Amir Mirza described his firm's strategy to introduce BT 
 
LAHORE 00000291  002.5 OF 002 
 
 
Cotton in Pakistan while protecting the seed's intellectual 
property.  Mirza has started separate negotiations with the 
Punjab province government and the federal government to 
determine a mechanism in which the government would pay Monsanto 
for the use of the technology according to the acreage planted. 
Although he worried about the provincial and federal 
government's ability to reimburse Monsanto, he surmised that 
they could leverage a tax on land owners, growers or millers to 
pay for B T cotton.  If the government refused to cooperate, 
Mirza proposed that Monsanto could sell BT cotton directly to 
private growers, but this option raises concerns about leakage 
of the technology.  He also thought that a hybrid system 
combining government-controlled distribution with private sector 
pricing was possible. 
 
- - - 
Best Case Scenario Has Several Years Until B T Cotton Introduction 
- - - 
 
¶7. (C) Mirza stressed that even if Monsanto signed an agreement 
today, the global shortage of seed stocks would mean that B T 
cotton widely available in Pakistan in 2011 after small trials 
in 2009 and 2010.  He also recognized that Monsanto must find a 
way to price the seeds in Pakistan on par with those in India. 
Finally, he related, Monsanto must find a way for the 
government, whether provincial or federal, to have an interest 
in preventing government research institutes from stealing the 
B T cotton technology, although once B T cotton enters the 
Pakistan market, Mirza estimated, it would increase yields by 
30-40 percent. 
 
- - - 
Comment: No Quick Fix in Textiles 
- - - 
 
¶8. (C) The same multiple factors that have contributed to the 
dismal state of Pakistan's textile industry are those that have 
hurt every Pakistani industry: high commodity prices, unreliable 
and expensive energy, lack of security and a cash crunch.  But 
with a nine percent share in the GDP, mill layoffs and shutdowns 
would compound the problems already experienced in southern 
Punjab, fueling a greater breakdown in law-and-order.  A 
significant rise in unemployment coupled with a rise in 
commodity prices could provide a pool of potential recruits for 
extremist groups that have the funding to provide basic 
necessities.  Ensuring that these desperate workers, whose 
numbers will surely increase, have access to food, shelter, and 
a livelihood will help avoid a breakdown in the stability of 
Pakistan's last stable province.HUNT