Cotton importers’ failure to pay suppliers is blamed on fluctuating prices on the international markets. Photo:amran hossain
The International Cotton Association (ICA) has listed 91 companies from Bangladesh for failing to make payments to suppliers. The country ended up on top of the default list.
The ICA updated its latest list of default companies on Tuesday. Among the South Asian textiles and garment producing nations, India is in the second position with 88 companies while Pakistan has 48 companies on the list.
The Liverpool-based ICA prepares the list on receiving complaints from the cotton supplying companies worldwide.
The companies became defaulters, as the importing companies did not receive shipments for an abnormal price hike of the item in 2010-2011.
Companies from Austria, Belgium, Brazil, China, Greece, Egypt, Hong Kong, Indonesia, Italy, Mexico, Portugal, Switzerland, Tanzania, Turkey, USA and Vietnam are also on the list.
Initially, cotton was sold at 80 cents a pound in 2010, but during a peak in 2011, the price crossed $2.6. Later, the price of cotton dropped and hovered around $1 in the international market.
The importing companies that placed orders at high rates did not execute the orders after the prices fell, said Jahangir Alamin, president of Bangladesh Textile Mills Association.
The importers had rushed into heavy purchases to stock up on cotton amid fears that production would decline worldwide and China would buy more.
The companies listed will have to end the dispute with the ICA arbitration board; otherwise it might have a bad impact on the garment business.The cotton importing companies were affected globally due to the abnormal price hike. As a result, the number of defaulters is so high globally, Alamin said.
“But many companies have already ended the disputes through negotiations between the exporters and importers,” Alamin told The Daily Star by phone.
Dissolving such disputes is not a one-sided affair; it needs cooperation from both parties, he said. “The BTMA has urged the ICA to resolve the disputes as soon as possible though amicable negotiation.”
The finance ministry also came forward with a helping hand to support the importers when cotton prices peaked. “Bangladesh Bank is scheduled to announce the incentive package for the affected cotton importers next week,” the BTMA chief said.
Bangladesh imports more than 4 million bales of cotton a year and the primary textile sector is now capable of supplying 90 percent raw materials to the knitwear sub-sector and 40 percent to the woven sub-sector.
New disputes over cotton contracts fell 53 percent in the first quarter, signalling a slowdown from the record number of defaults last year after prices plunged from an all-time high in 2011, according to a Bloomberg report.
Applications for technical arbitrations slid to 35 during the period, down from 75 in the same quarter of 2012.
Source: The Daily Star