Come out of default list by mediation

The International Cotton Association has recommended Bangladeshi companies take up mediation to come out of the default list.

At present, Bangladesh is on top of the default list with 94 companies, ICA Chief Executive Officer Kai Hughes told The Daily Star in an interview in Dhaka on Thursday.

The companies on the default list were affected during the cotton price fluctuation of 2010-11.

The cotton price had leapt to almost $2.5 a pound during the two years from its historic range of 55-60 cents.

The local importers had inked cotton purchase deals, worth a total of $79 million, at the increased rate, but did not honour the contracts or are delaying in making the payments.

As a result, the ICA put those companies on the default list, as the agreements were signed under the laws and bylaws of the association.

Had they read the terms and conditions of the ICA during the purchase agreement, they would have showed sanctity to the deals, he said.

“The default list is a concern for us as an association,” Hughes said, adding that only one Bangladeshi company has so far been able to negotiate its way out of the default list.

Mediation is a tripartite measure for removal of companies from the default list. The process entails the Liverpool-based arbitration body calling the importers, suppliers and other stakeholders for discussions to settle the disputes.

Hughes said ICA high-ups have been calling in to Bangladesh every year to speak with the leaders of the Bangladesh Textile Mills Association and the Bangladesh Cotton Association to resolve the issue.

“We want the removal of the companies from the default list as it is no good for future business. No other reputed suppliers will do business with the defaulting companies in future.” 

The defaulting companies are now doing business with suppliers who are not members of the ICA.

Regarding the cotton price, he said the price stability of the fibre largely depends on China's consumption, the largest cotton consumer worldwide.

Cotton traded between 65 cents and 67 cents two weeks ago, according to industry insiders. ICA Vice-president P Jurg Reinhart said the cotton consumption growth rates of Bangladesh and Vietnam will be “amazing” in the next few years, as the two countries are performing strongly in international apparel trade.

He said the consumption trend shows that Bangladesh might surpass China in import of the natural fibre this year, which is in line with the US Department of Agriculture's forecast.

In the year ending July 31, 2016, Bangladesh may import a record 5.75 million bales (one bale weighs 480 pounds or 218 kilograms) of the fibre, up 6.5 percent from a year earlier, according to the USDA. China is projected to import 5.5 million bales, the lowest since 2003.

Bangladesh imports more than four 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. At the same time, cotton consumption is increasing in Vietnam, owing to relocation of many Chinese textile and garment companies there, Reinhart added.

Global cotton production in 2015-16 is forecasted to be 103.7 million bales, which is 13 percent lower than last season's and the lowest since 2009-10.