MARKET WATCH 30 JANUARY, 2016

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INTERNATIONAL

 

Amended TUFS gives special focus on Technical Textiles: Minister

A special focus has been given to technical textiles, under Amended TUFS, Minister of State for Textiles (Independent Charge), Santosh Kumar Gangwar said in New Delhi on Friday. "A capital subsidy of 15 percent has been provided for technical textile machinery under the amended TUFS scheme," said the Minister. "The government has set up six focus incubation centres at a cost of Rs 17.4 crore. These centres would help budding entrepreneurs build innovative technical textile products in a 'plug and play' model, and would help promote 'Make in India' in textiles," added minister.

Speaking at the curtain raiser event of Technotex 2016, held in New Delhi on Friday, Gangwar said that technical textiles can play an important role in the nation's social and economic fronts. As examples, he pointed out the applications of geotextiles in infrastructure and agrotextiles in improving agricultural productivity and quality of output.  The Minister recalled the launch of a 427 crore rupees Government of India scheme to promote usage of Geotechnical Textiles inthe North Eastern Region of India, in March 2015.  He said that this scheme would provide support for use of geotextiles in road construction, slope stabilization and water reservoirs. He expressed satisfaction at the completion of the construction of the airport access road at Imphal, using geotextiles. He said that approval has been given for 13 water reservoir projects in Manipur and Tripura, and for two projects in road construction and slope stabilization in the two states, all employing geotextiles.

Gangwar said that 44 demonstration centers at a total cost of Rs 8.17 crore have been approved, in order to promote agrotextiles in North East region; out of this, 23 demonstration centers have started functioning. In addition, 263 agrotextile kits have been distributed to farmers in Manipur and Mizoram. He said that a pilot scheme has been approved in order to promote agrotextiles in other parts of India. He said that two demonstration centres are being set up under the scheme in drought- affected areas in Amravati district of Maharashtra.

Besides this, 60 farmers in Amravati have been identified for distribution of agrotextile kits, said the Minister. On the occasion, the Textiles Minister released the Baseline survey on Technical Textiles and BIS Standards for the industry.  The release of the survey and standards is an important step forward in the Government's efforts for standardization of technical textile products in India. The Minister also released the event brochure for Technotex 2016.  TECHNOTEX, organized by Ministry of Textiles, Government of India in association with Federation of Indian Chambers of Commerce & Industry (FICCI), is a flagship event comprising an international exhibition, conference, and seminars.  The event showcases products from various sub-sectors of technical textiles, such as Indutech, Meditech, Mobiltech, Ecotech, Geotech, Packtech, Protech, Sportech, Agrotech, Clothtech, technical textiles equipment and machinery, raw materials and textile manufacturing services.

SOURCE: The SME Times

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Global apparel brands pledge to improve conditions for Bengaluru workers

Clothing companies H&M, Inditex, C&A and PVH have committed to improving the lives of workers in Bengaluru, after a report said employees lived in appalling conditions and were denied decent wages and freedom of movement. Gap Inc., which also sources apparel from Bengaluru, did not respond to the report by the India Committee of the Netherlands (ICN), according to a statement by the Dutch non-governmental group late on Thursday. A draft of the report, Unfree and Unfair, was presented to the companies last November. The conditions of garment workers in South Asia have come under sharp scrutiny following the 2013 Rana Plaza disaster in Bangladesh, in which 1,135 workers were killed, many of them employed by suppliers to Western retailers. The ICN report said hostels run by the Bengaluru factories lacked basic amenities such as beds and clean water, and that workers earned between 95 euros($104) and 115 euros per month, just above the official minimum wage of 93 euros to 103 euros.

Bengaluru, a hub for apparel exporters, is also known as India's Silicon Valley for its numerous information technology companies, and draws migrants seeking better economic prospects from its home Karnataka state, as well as from neighbouring Andhra Pradesh and Tamil Nadu and the country's north and east. There are an estimated 1,200 garment factories in and around Bengaluru, making apparel for large global brands. Many of the workers are women from poor backgrounds who do not know the local language and are unaware of their rights, making them more vulnerable to exploitation, according to the report based on interviews with 110 migrant workers at four garment factories in the city. "Global companies have a responsibility to ensure better conditions for the workers, as they are directly benefiting from their labour," Raphel Jose, vice president of supply-chain sustainability at the Centre for Responsible Business in Bengaluru, told the Thomson Reuters Foundation. "This is an area where the brands can come together and collaborate with a local agency and pressurise the industry to improve conditions."

Dutch clothing retailer C&A, Swedish retailer H&M and Spain's Inditex, which owns the Zara and Massimo Dutti brands, will work together and liaise with local trade unions to provide training and address workers' grievances, ICN said. Inditex will evaluate the state of workers at its suppliers and factories across India, while PVH Corp., which owns brands including Tommy Hilfiger and Calvin Klein, is developing new guidelines for its suppliers, ICN said. "If the brands commit to these issues and their plan of action, we expect that considerable progress can be made in addressing the working and living conditions of young migrant garment workers in Bangalore," ICN said in the statement.

SOURCE: The First Post

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In India, students size up global apparel industry

Sloane Applebaum ’18 will never look at a “Made in India” clothing label the same way again. After a two-week class trip to see textile and apparel production centers in the country, the world’s second-largest producer of cotton, Applebaum now pictures the people who labored to make the fibers, weave them into fabric, cut the material and sew the shirt hanging in her closet. “I never thought much about the international market and the people who are making our clothes,” said Applebaum, a fashion design management major from Wayne, New Jersey. “Now I can’t stop thinking about it. Every time I put on a shirt and look at the label, I think about those people and what are their conditions like.” From Jan. 2-16, Applebaum and 12 other students and two faculty members from the Department of Fiber Science & Apparel Design (FSAD) in the College of Human Ecology traveled to Hyderabad, Bengaluru, Coimbatore and Tiruppur, visiting fiber, apparel and textile mills, laundering facilities, design studios, textile research centers and a handloom park where traditional ikat fabrics are dyed and woven. The winter break trip – the fourth FSAD students have taken to India since 2011 – is part of the course, Textiles and Apparel in Developing Nations, taught by FSAD assistant professor Denise Green ’07, who led the tour with Juan Hinestroza, FSAD associate professor. While students learn about apparel production in many of their courses, Green said they rarely see the manufacturing process because there are relatively few textile and apparel facilities operating in the United States. “This trip allowed students to witness all aspects of the apparel supply chain. They saw the amount of human labor and material resources used in the design and manufacture of apparel, and observed how the industry impacted local economies, the environment and human health,” Green said.

Joanne Kim ’17, a fashion design management major from Harrington Park, New Jersey, said she was most impressed by the many steps it takes to produce a piece of clothing. “It takes so much more work to create one shirt and one pair of shorts,” Kim said. “A lot of consumers here in America have no idea what it takes to get to that final product and no knowledge of what stands behind that label.” Hinestroza said the trip is a “life-changing experience” for the students. “We expect the students who traveled with us to become leaders and future owners and managers of textile and fashion brands, and that they will see the business in a different way,” he said. “We hope this experience will help them be the change we want to have in the industry.” The trip, offered jointly with the course, Agriculture in Developing Nations II, in the College of Agriculture and Life Sciences, received financial support from Ajit Khaitani, whose daughter, Karishma Khaitani ’10, studied fashion at Cornell. Khaitani, owner and CEO of United Dry Goods, which produces the popular Justice clothing brand, covered students’ in-country expenses during their visit.

SOURCE: The Cornell Chronicle

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GDP growth revised down to 7.2% for FY15

India's economy grew 7.2 per cent in 2014-15, a shade lower than an earlier estimate of 7.3 per cent, official data showed on Friday. Among various segments, agriculture and manufacturing growth was revised down for FY15. The official data also showed that in 2013-14, GDP grew at 6.6 per cent, significantly lower than the earlier calculation of 6.9 per cent. This means that growth in the first year of the Narendra Modi government was much higher than what was seen during the United Progressive Alliance government in 2013-14. One can argue that lower growth rate in 2014-15 may give a slight push to economic growth for 2015-16 as the base effect was now lower than previous calculations. Lower GDP growth in the previous year would make year-on-year growth look higher for the current year. This is also known as base effect. However, slower growth in 2013-14 did not push up economic expansion in 2014-15 but rather lowered it.

GDP growth revised down to 7.2% for FY15 Sunil Kumar Sinha, Principal Economist, India Ratings & Research, said, "Lower GDP growth in FY14 means lower base. Yet, the revised GDP for FY15 has come down marginally instead of going up. In a nutshell, the data released by the CSO (Central Statistics Office) suggest that economy in the past two financial years grew slower than it was believed earlier and even though GDP growth may have bottomed out, the path to recovery is going to be slow and painful." The growth rate for 2012-13 was also revised to 5.6 per cent, compared with 5.1 per cent earlier. The GDP calculations are based on market prices, which include indirect taxes unlike the earlier practice of calculating it at factor cost, excluding indirect taxes. Now, the practice of estimating GDP at factor cost has been done away with. Instead, aggregate of agriculture, industry and services comes at gross value added at basic prices, including some product taxes such as property tax. Gross value added (GVA) has also been revised on almost similar lines. According to new data, GVA for 2014-15 now grew by 7.1 per cent against previous estimates of 7.2 per cent. Similarly, GVA for 2013-14 rose by 6.3 per cent, lower than earlier calculation of 6.9 per cent. The 2014-15 GVA estimate was revised downwards as agriculture contracted 0.2 per cent against the previous estimates of 0.2 per cent growth. Similarly, manufacturing was shown growing at 5.5 per cent against the earlier calculation of 7.1 per cent. The size of the economy has now been projected at Rs 124.9 lakh crore against earlier estimate of Rs 1.25 lakh crore for 2014-15. Similarly, the economy size stood at Rs 112.7 lakh crore for 2013-14 against earlier calculation of Rs 113.4 lakh crore. Per capita income stood at Rs 86,879 in 2014-15, lower than the earlier calculation of Rs 87,748.

SOURCE: The Business Standard

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Call to bring down charges at ports, improve infrastructure

There is an urgent need to bring down the handling charges at Indian ports and improve infrastructure to make it easier for the industry and the exim trade. The opinion was voiced by many experts at a two-day conference, East Coast Maritime Business Summit, which concluded here on Friday. It was organised by Maritime Gateway, a shipping magazine, in association with Visakha Container Terminal Ltd. Sabyasachi Hazara, former chairman of the Shipping Corporation of India, said the shipping costs had come down drastically over the years and, “as the oil prices are likely to be subdued for a long time, it augurs well for India. Every effort should be made to bring down the handling charges at the ports and make our ports more efficient.” He said the shipping industry was making a great contribution to the growth of the nation, but it went largely unrecognised.

Rear Admiral Sarath Babu, Chairman and MD of the Hindustan Shipyard, said the government should support shipbuilding in a big way and “we should also follow the Chinese and the Koreans to give a boost to the industry.” He said it was a green industry, leaving the minimum of carbon footprints, and the future looked bright for the industry in spite of the vicissitudes in the short run. V Kalyanarama, Director (Projects and Services) of Concor, said exports from the east coast should increase and containerisation should also pick up pace. Concor was taking up eight major facilities on the east coast, including one at Visakhapatnam, a logistics park, and seven more on the west coast. Rajesh Alla, CMD of IIC Technologies, spoke about a product of his company -www.nautiluscharts.com - which was released by Rear-Admiral Sarath Babu. He said the website contains information of great value to the shipping industry.

SOURCE: The Hindu Business Line

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'Bad' subsidies should go, says PM

Prime Minister Narendra Modi on Friday batted for rationalising subsidies, by weeding out the bad ones and making those that really help the poor more efficient. Speaking at the Global Business Summit here on Friday, he, however, did not spell out what the 'bad' subsidies were. The PM noted that subsidies are also given to industries and businesses, but named differently. "When a benefit is given to farmers or the poor, experts and government officers normally call it a 'subsidy'. However, if a benefit is given to industry or commerce, it is usually called an 'incentive' or a 'subvention'." While the PM referred to the government's policy in curbing cooking gas, fertilizer and kerosene subsidies, he also highlighted the issue of revenue loss from incentives to corporate tax payers. The figure, around Rs 62,000 crore, did not take into account dividends and long-term capital gains on shares traded on the stock exchanges which are exempt from tax, he said. Modi also said double-taxation avoidance treaties have in some cases resulted in double non-taxation.

The PM's observations came at a time when the Budget is widely expected to prune wasteful subsidies in line with the recommendations of the Bimal Jalan panel, while targeting the necessary ones. The PM said pragmatism was required while classifying such forms of government assistance and bad subsidies should be eliminated irrespective of what it is called. However, he said his aim is not to eliminate subsidies altogether but to rationalise and target them. He added Chandigarh, which had 68,000 beneficiaries of subsidised kerosene in 2014, would be declared free of kerosene subsidy by March 2016.

Listing out his government's achievements in the past 19 months, Modi said its policies might be popular but not populist. He responded to detractors of the Jan Dhan Yojana who derided the large numbers of zero balance accounts in the initial days, saying it has become the world's largest financial inclusion programme having accumulated a total of $4 billion in these accounts. He also referred to the Congress' tactic of stalling reforms in the Rajya Sabha. He noted the Rajya Sabha was sitting on 827 Central laws, which had been marked by the government as 'obsolete'. Noting that quality of life rested not only on economic growth but on good governance as well, Modi said corruption and poor governance affect the poor the most. He said his government has managed to bring down corruption drastically, a feat he said "was not easy". On the international stage, Modi hinted at India's growing aspiration in taking a more visible global presence by saying the country's policies must positively impact the rest of the world. Modi also highlighted a large number of achievements made by the country in 2015 such as software exports, record production of urea-based fertilizer, coal, power generation, and transferring a record number of cooking gas units to rural households, among others.

SOURCE: The Business Standard

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Anti-dumping duty imposed on melamine, Mulberry Raw Silk

Government today extended the anti-dumping duty on import of melamine from China for five years and also imposed the levy on Mulberry Raw Silk from the neighbouring country to protect domestic industry from cheap inbound shipments. The Department of Revenue in the Finance Ministry issued a Gazette Notification extending the levy at a rate of USD 331.10 per tonne anti-dumping duty on import of melamine, which is used in beauty and utility products from China. In a separate notification, it imposed an anti-dumping duty of USD 1.85 per kg on Mulberry Raw Silk from China. India had first imposed the restrictive duty on melamine imported from China in November 2004. Imposition of such duty was extended up to February 18, 2016. It has now been extended for five year. In imposing the safeguard duty on melamine, the department went with the findings of the Directorate General of Anti-dumping and Allied Duties (DGAD) which stated that there is "continued dumping" of the chemical product from China which is causing "injury to the domestic industry." In the "event of revocation or cessation of anti-dumping duties, dumping of subject goods from subject country (China) and injury to domestic market is likely to continue or intensify," it had observed.

In case of Mulberry Raw Silk, DGAD had stated "the material injury has been caused by the dumped imports of the subject goods" from China and "recommended imposition of definitive anti-dumping duty on imports" in order to "remove injury to the domestic industry." Imports of the silk from China had increased considerably from 12.63 lakh kg in 2010-11 to 22.17 lakh kg during the period of the investigation (April 2013 to June 2014). India had imposed the restrictive duty on melamine for the first time in November 2004. In 2008, DGAD initiated the sunset review in the matter of continuation of anti-dumping duty on imports and in 2010 the duty was imposed.

Further, after the complaint of the domestic industry, the authority initiated the second sunset review investigation in December 2014 to review the need for continued imposition of the duties. Melamine imports from China have increased from 17,580 tons in 2010-11 to 30,780 tons during April 2013 to June 2014. Anti-dumping measures are taken to ensure fair trade and provide a level playing field to domestic industry. It is not a measure to restrict imports or cause an unjustified increase in the cost of products.

SOURCE: The Business Standard

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India, EU need to trash out remaining issues of FTA: Sweden

Terming the proposed free trade agreement between India and EU as a "classical win win" for the two sides, Sweden today said negotiators need to sit down and "trash out" remaining issues of the trade pact. Ambassador of Sweden to India Harald Sandberg said although there are few outstanding issues which needs to be addressed, both India and the European Union (EU) have covered lot of areas of the agreement. "I know both the sides are willing to talk to each other and this is a very important issue between the EU and India. We as a EU member are very supportive of this process finally creating a positive result which will be mutually beneficial. This is a classical win win," he told reporters here. "Negotiators have to sit down and trash out the remaining issues," he added.

India and the EU started talks on free trade agreement in 2007 and till 2013, 16 rounds of negotiations were held. But talks were stalled after that as the two regions failed to bridge substantial gaps on crucial issues, including data security status for the IT sector. On his expectation about the conclusion of the negotiations, he said: "It is a billion dollar question" but Sweden wants to see the conclusion "as soon as possible". He said both the sides should work on the outstanding issues and "crunch" those out and reach a result on those.

On the demand of India for a liberalised visa regime in the EU, Sandberg said as far as Sweden is concerned, it has the most liberal migration policy for professionals. "I know this is an issue," he added. Chief negotiators of India and EU met on January 18 here and took stock of contentious issues, including duty cut on automobiles and movement of professionals, that have held up talks on the proposed free trade agreement. The purpose of the meeting was to assess where both sides stand and how India and the EU should go forward with the proposed pact, officially dubbed as Bilateral Trade and Investment Agreement.

Negotiators were expected to meet in August last year, but talks were deferred by India, expressing disappointment and concern over the EU banning sale of around 700 pharma products, clinically tested by GVK Biosciences. In May 2013, India and the 28-nation bloc failed to bridge substantial gaps on crucial issues, including data security status for the IT sector. The other issues include easy movement of professionals and data security status demand from India. Besides demanding significant duty cuts in automobiles, EU wants tax reduction in wines and spirits and dairy products and a strong intellectual property regime. The free trade pact is aimed at reducing or significantly eliminating tariffs on goods, facilitating trade in services and boosting investments between the two sides.  The two-way commerce in goods between India and the EU was USD 98.5 billion in 2014-15.

SOURCE: The Economic Times

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Invest in Ontario, says its Premier to Indian companies

Canada's major province Ontario has invited Indian companies to invest there, saying it has competitive corporate tax rate, strong financial sector and a talented workforce besides being a gateway to USD 20 trillion North American market. Ontario's Premier Kathleen Wynne, who is here on a visit to encourage Indian companies to invest in her province, identified Information and Communications Technology, life sciences, agri-food, auto and film sectors as possible areas for business. Wynne, who is here mainly to attend Global Business Summit later this week, also evinced interest in cooperation in sustainable development and urban renewal projects. She will also meet Prime Minister Narendra Modi to discuss "shared priorities and areas for future collaboration". "Ontario and India have a lot in common. We not only share a commitment to invest in sustainable infrastructure and urban renewal projects, we also share an interest in developing our key business sectors," Wynne told PTI. She observed that India is growing due to strengths such as a young and increasingly-educated population, established knowledge-economy sectors and ambitious plans to develop its social and physical infrastructure. "There is much we can learn from each other, especially in sustainable development, clean technology and infrastructure," she said.

Presenting her province, which has a huge and vibrant capital in Toronto, as a perfect place for Indian investment, Wynne said, "Ontario's competitive and stable business environment makes it an ideal place for Indian companies to start a new business or expand an existing one. "We are one of the world's best places to do business because we have a competitive corporate tax rate, a strong financial sector and a talented workforce." She said investing in Ontario will also give Indian companies access to the USD 20 trillion NAFTA (North American Free Trade Agreement) market.

SOURCE: The Economic Times

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India, US map way out of tax disputes

Scores of US-based tech biggies have reduced their tax liabilities in India as New Delhi and the US resolved as many as 100 pending tax disputes involving India-incorporated associates of these firms in the last one year without resort to litigation. Although a comprehensive list of companies that benefited from the development could not be immediately drawn up, IT majors like Microsoft, IBM, Google, Cisco, Honeywell, AT&T, Dell, Intel and Alcatel had in the past been subjected to transfer-pricing (TP) audits in India for their cross-border transactions. The tax disputes arose after India’s tax authorities made allegedly aggressive TP adjustments; these have now been amicably settled thanks to a bilateral framework agreement signed a year ago. What paved the way for the agreement was the provision of mutual agreement procedure (MAP) in the India-US Double Taxation Avoidance Convention.

Coupled with the growing trend of the Indian tax department signing (APAs) with MNCs’ Indian units to avoid cross-border tax disputes — in all, 39 such treaties have already been signed — and the interest shown by the US and some other countries to sign bilateral (government-to-government) APAs with India, the success of the MAP mechanism would help allay MNCs’ fears of high-pitched TP adjustments in India, analysts said. The current MAP agreement targets to settle a total 200 cases — all relating to the disputes over the values ascribed by the Indian tax department to the past cross-border transactions of these MNCs’ associates in India. TP adjustments typically revise the income of these companies in India upwards; the result is higher tax claims. “The MAP programmes with other countries like Japan and UK are also progressing well with regular meetings and resolution of past disputes. The CBDT is confident that a combination of a robust APA programme and a streamlined MAP program- me would be helpful in creating an environment of tax certainty and encourage MNCs to do business in India,” the revenue department said in a statement issued on Thursday. “Resolution of almost 50% of the MAP disputes in a span of one year from the framework agreement with the US revenue authorities and opening of bilateral APA shows the commitment of the authorities not only to speedily resolve the past issues but also pave the way for a non-adversarial tax regime leading to ease of doing business in India. We understand that competent UK authority will be India during the first week of February wherein resolution of certain MAP cases with UK is expected,” said Nitin Jain, tax partner, transfer pricing group, EY.

The APA scheme, introduced in the Income Tax Act in 2012, is aimed at providing certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and setting the prices of international transactions in advance. These agreements allow MNC units to declare a value for their transactions with their overseas parents as per the rules prescribed by India and avoid audit or questioning by Indian authorities for five years. As for bilateral APAs, the tax authorities in the home country of the MNCs could accept the taxes paid in India by the Indian unit as a valid business expenditure, negating the chances of double taxation. The profitability of contract research and development centres set up in India by global IT and IT-enabled services firms has been a major area of dispute between them and the Indian tax department. On the basis of its internal benchmarks of industry averages and median industry price, the department demanded higher taxes by ascribing higher profitability to such units. It had, for instance, attributed about 30-40% profitability to contract research units, while the firms claimed to have eked out much less. The higher estimates of profit margin allowed the taxman to revise upwards the value of the service rendered by the captive Indian units to its overseas parent, in what could inflate the tax liabilities of these units.

According to Samir Gandhi, partner, Deloitte Haskins & Sells, “With satisfactory resolution of IT and ITeS cases, one can now focus on more complex cases for payment of royalty and management charges and cases involving application of profit split method. The settlement will cover outsourcing units of the US-based companies which are mainly present in IT and ITeS sectors in India.” The outcome of MAP settlement on how much tax should be levied in each country on a specific transaction is, however, not binding on the taxpayer. If the taxpayer accepts the outcome, the solution becomes binding on both it and the tax authorities.

Resolving transfer pricing disputes was one of the primary agendas put on the table by US President Barack Obama when he met Prime Minister Narendra Modi last year here. A slew of US-based companies had petitioned to the White House to help them seek resolution of the long-pending disputes in India. “MAP resolution can be made more efficient by inserting Article 9(2) in tax treaties with Germany, France, Singapore and South Korea as presently the position is that MAP settlements can’t be made with these counties which are also one of India’s largest trading partner and investors. MAP/APA is the most efficient option of resolution of transfer proving disputes as normal litigation process is time consuming and uncertain. This will certainly increase the confidence of doing business in India and will send much needed assurance to foreign investors,” explained Gandhi of Deloitte.

SOURCE: The Financial Express

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Com Min reduces number of documents for import-export code

To facilitate ease of doing business and lessen paperwork, the Commerce Ministry has decided to reduce the number of mandatory documents for taking import-export code to two. Import-Export Code (IEC) is required for shipments. "Only two documents are required to be uploaded /submitted along with the digital photograph while applying for IEC," the Directorate General of Foreign Trade (DGFT) said in a notification. Earlier, several documents including complete details of the entity seeking the IEC; details of the proprietor/ partners/ directors/managing trustee of the entity, and details of the signatory applicant were required to get this code number. It also said "only" online application for IEC or modification in IEC can be made by applicants through digital signature with effect from April 1 this year.

The Commerce Ministry has been engaged with different departments to reduce paperwork in a bid to cut transaction cost for exporters and improve the ease of doing business. According to the World banks's report on doing business, India ranked 133 in terms of trade across borders out of 189 economies. To improve India's ranking, the ministry has already reduced the number of mandatory documents required for import and export of goods to three in each case. Overall, India's rank was improved to 130 in 2016 out of 189 countries from 134 in 2015.

SOURCE: The Business Standard

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Reduce dependence on textile sector, EU to Pakistan

European Union (EU) Ambassador to Pakistan Jean Francois Cautain has emphasised on breaking away from past trade stereotypes and explores opportunities in other sectors besides textile and leather, in a bid to take advantage of the GSP Plus scheme. With effect from January 2014, Pakistan gained duty-free access to the EU on certain products. Many saw it as an opportunity for the country to increase exports to the EU, but two years later, revenue receipts have barely crawled up. Analysts have blamed various factors behind the sub-par performance, including the economic slowdown in Europe, low quality of exports and overdependence on textile. Cautain on Friday echoed a similar view and said the country needed to look beyond textile and leather products. “Pakistani government and the business community should look beyond the textile and leather sectors, invest in other areas to improve the export scenario to EU,” Cautain said while talking to The Express Tribune.

With eight more years to go under the GSP Plus status, it is high time Pakistan develops its value added sectors, said the EU envoy. “This can be done in shape of joint-ventures between the government and the local business community; where they can look for potential sectors and make investments in infrastructure development,” he added. During 2014-15, textile exports registered a decline of $1.21 billion in value. Furthermore, in the first five months of 2015-16, exports slid by another $1.37 billion. This drop has raised questions over Pakistan’s ability to take advantage of the status. “There is no doubt that consumer spending in Europe is not at an all-time high, mainly due to the on-going crisis in the eurozone; and this has also affected Pakistani exports,” Cautain said.

In 2014, global exports to the EU increased by 20%, but Pakistan’s share remained stagnant. A similar pattern has occurred in 2015. “Currency fluctuations play some part and we were unable to achieve what we had hoped,” he said. “But it is not the instrument to blame; there are other factors too, which we have to work on together for increased trade. But some issues are out of our control and these have to be tackled by the Pakistani government.” Cautain added that Pakistan’s energy crisis was a huge impediment in the way of the country’s textile growth. “Government should ensure this is resolved swiftly.” The ambassador further said that the EU was in the process of releasing its first post-GSP plus review report. The report will look at Pakistan’s performance in terms of implementing the 27 EU conventions, he said. “Some positive steps like establishing the National Commission for Human Rights has been taken by the government but the continued benefit of GSP Plus status depends on the country’s compliance to international conventions,” said Cautain, adding that he was not at liberty to discuss the topic further.

SOURCE: The Tribune

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Ethiopia: Textile Sector Export Performance Lagging Behind Plan

The Ethiopian Textile Industry Development Institute (ETIDI) said the first six month export performance of the textile sector is lagging behind plan. During the 2015/16 fiscal year first half year cotton development and textile industry performance evaluation, the Institute announced that while the nation planned to obtain some 60.07 million USD from the export of textile, 41.1 million USD has been obtained meeting 70 percent of the plan. It was also noted that the major challenge in the export performance focus on local market, managerial and technical capacity of companies, power outage and fluctuation, shortage of manpower and high turnover, weak company linkage, investment project implementation delay and the like. Institute Plan and Information Management Director Abebe Kasse told the media that the government believes that the sector has to be export oriented by giving due emphasis to quality. The last six month export performance is 70 percent of the plan because of the above mentioned challenges, he said. However, it is the conviction of the Institute that there is still potential to achieve the target for the year within the coming six months. Most of the industries established at Bole Lemi industrial park are garment producers and they are expected to commence production next month and they would become additional input to achieve the target, he added.

Despite the country's comparative advantage in cotton production, it has not managed to meet its local demand. According to the evaluation, during the production year, the planned land for cotton is 262,000 hectare but actual covered land was only 65,000 hectares. In addition, the performance evaluation shows that due to the El Nino, over 14,000 hectares of cotton plantation has been damaged and replanted with other crops. However, a total of 65,000 hectares (50,000 from Omo and 15,000 from Beles) was reversed from sugar to cotton production. It was also noted as per the government's aspiration to support producers to get bank loan for cotton production, 4.2 billion Birr was approved and around 3 billion was disbursed yet the loan has not been fully invested in cotton production.

Concerning this, Kassa told The Ethiopian Herald that it is the responsibility of the banks to lend the money after conducting feasibility study. However, [because of the practice of crop rotation], it is impossible for the producers to plant cotton every year. If the land is covered with cotton this year, it has to be covered with other crop say for instance sesame the next year. The point is, the loan was approved in the name of cotton production and there are some investors who received land but not yet commenced production. Industry State Minister Tadesse Haile on his part said besides formulating appropriate policy framework, the government has been working to produce the manpower needed to develop the textile industry and its exports. In addition, various institutions including ETIDI have also been established to provide support to the sector. The Bahir Dar Institute of Technology has also been made to focus entirely on textile and textile related courses, the State Minister said. In addition, five universities have also launched textile programs and produce engineers for the sector. Industrial parks suitable for textile production have also been established, he added. The textile sector has been growing significantly from time to time in terms of capacity, scale, production, employment and export, Tadesse said. However, according to the plan, much remains to be done, he added.

SOURCE: The All Africa

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FTAs to boost SME sector growth in Vietnam

The two major Free Trade Agreements (FTAs) – Trans Pacific Partnership (TPP) pact and EU-Vietnam Free Trade Agreement (EVFTA) – will give a boost to the small and medium enterprises (SME) sector in Vietnam owing to the advantages associated with it, according to economist Pham Chi Lan, according to Vietnamese media reports. The two FTAs will lead to a diversified supply and lower import costs for the SME sector by eliminating international trade barriers, Lan said at a conference on TPP and EVFTA, organised in Ha Noi. The FTAs will boost investments in the country, increase the market share of Vietnamese companies globally and enhance the overall quality of Vietnamese textile products. Vietnamese small and medium companies saw a decrease in market demand in 2015, and some SMEs had to shut down as a result, according to a leading Vietnamese portal. Some SMEs had to reduce their prices in the international market owing to competition from other textile producing countries. EVFTA is likely to increase Vietnam's export turnover by 3-6 per cent, as it will eliminate export duties on several items in the next 8-10 years. On the other hand, the implementation of the TPP is likely to increase the country's export by around 30 per cent and improve the country's GDP by around 10 per cent.

SOURCE: Fibre2fashion

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What Economists Got Wrong About Free Trade

As trade has become a more and more integral part of the global economy, accepted economic wisdom has asserted again and again that overall, free trade is a good thing. Because trade brings so much in the way of competitive pricing and opportunities to buy and sell goods on a more massive scale, the drawbacks that come with it—job losses and declining wages for instance—are often thought to be outweighed. Further, there’s a belief that some of these downsides aren’t even the direct consequences of trade. Proponents of free trade argue that the decline of American manufacturing jobs isn’t the result of increased trade, but of a larger shift in the nation’s economy toward higher-skilled jobs. They also point out that the growth of wage inequality hasn’t corresponded perfectly with the expansion of global trade. At any rate, whatever their cause, the drawbacks of trade are regarded as not so severe that they can’t be overcome; it’s assumed that workers who find themselves in a region whose jobs are vulnerable to foreign competition could simply move and find a job somewhere else.

But a new paper from the National Bureau of Economic Research suggests that workers’ ability to relocate may be overstated, and that the negative impacts of large trade deals may be more significant than previously thought. To illustrate just how persistent the ill effects of trade could be, the authors, M.I.T.’s David H. Autor, UCSD’s Gordon H. Hanson, and the University of Zurich’s David Dorn of the University of Zurich, examine what happened to workers in certain parts of the U.S. after China’s massive trade expansion. They found that what’s thought of as workers’ main recourse—the desire and ability to pack up and move to a new city with more jobs—isn’t really all that dependable. Within the manufacturing-heavy regions of the Southeast and the Midwest, the influx of Chinese imports hit the furniture and textile industries hard. Standard economic wisdom would suggest that after an initial decline, many workers who specialized in the areas hurt by growing imports would simply leave, mitigating their losses.

But that didn’t really happen. In Tennessee, few workers within the commuting zone of struggling plants moved away after their work prospects declined. Instead, unemployment rose both among manufacturing and nonmanufacturing workers, suggesting that the ill effects of increased trade had a spillover impact on the larger local economy. On top of that, average weekly wages declined. In general, places like Tennessee were very slow to adapt to the new economic reality—their elevated unemployment rates and diminished wages persisted for a decade, the paper’s authors estimate. The workers there are also saw a lower lifetime income. In the paper, Autor, Hanson, and Dorn note that the trading dynamic between the U.S. and China could change in the not too far-off future: China’s growth is slowing, its wages are rising, and it is developing a middle-class of its own. Still, the failure of the U.S. labor market to conform to economists’ expectations in the case of China means that the consequences of free trade may not be as understood as once thought.

SOURCE: The Atlantic

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US fourth-quarter growth disappointing

In the fourth quarter of 2015, US gross domestic product (GDP) increased by 0.7 percent, the Commerce Department said on Friday in a report that showed a further cutback in investment by energy firms grappling with lower oil prices. It was the second straight quarterly deceleration, and a bit worse than the 0.9 percent rate that analysts had forecast. GDP expansion was 2.0 percent in the third quarter of 2015 and a brisk 3.9 percent in the second. The slowdown came on the back of slumping business investment in buildings and equipment, related in part to the deep contraction in the oil sector. 

Consumer spending, which accounts for more than two-thirds of US economic activity, increased at a rate of 2.2 percent - a fall from the 3-percent pace notched in the third quarter. Support for growth came from home building and buying, as well as government spending. Government expenditure in the fourth quarter showed a surge especially in defense-related spending, making a solid contribution to overall growth. The quarter ended a year that was somewhat disappointing, after early estimates forecast that economic activity might expand by as much as 3.0 percent. In the end, for the full year the economy mustered a 2.4-percent expansion, the same as in 2014.

Disappointment

Analysts took the data as a warning that the economy could be at the start of a soft patch. Chris Low of FTN Financial pointed out that consumption weakened despite cheaper energy costs, a sign that consumers and businesses are not quickly spending their savings from cheaper gasoline. "All components of private-sector growth are flashing warning signs," he told the news agency AFP. And Chris Williamson, economist with Markit research group, told the same news agency that recent financial market uncertainty and expectations of higher interest rates could mean that consumers and businesses would "continue to show reluctance to spend."

 

Stocks rise on rate hopes

Slowing US growth caused American shares to rise on Wall Street Friday as investors' were expecting the US Fed to go slow on future interest rate hikes. The US central bank raised interest rates in December for the first time since June 2006. While the Fed has not ruled out another rate hike in March, the current GDP decline could force it to wait until June. US stocks have failed to sustain several rallies in 2016 and are yet to post gains for three days in a row. "We're likely to settle in at these levels for a short time, at least until more news comes out probably in a month or so," said Terry Sandven, chief equity strategist at Bank Wealth Management in Minneapolis. "Near term, I think it's oil, earnings and technicals that are likely to drive the market," he told the news agency Reuters.

SOURCE: The DW

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