As exporters grapple with a global container shortage and exorbitant freight costs, the government is exploring a proposal to extend tax and other incentives to draw large players to set up shipping lines in India, official sources told FE. The incentives may be announced as early as in the upcoming Budget for 2022-23, subject to the finance ministry’s concurrence. The ministries of commerce and shipping are learnt to be deliberating on various options; some officials are studying the attractive Ireland model of taxation for shipping firms. Once a proposal is ready, the approval of the finance ministry will be sought. Shipping costs of Indian exporters to most destinations have more than doubled in the past one-and-a-half years in the wake of the Covid outbreak, mirroring a global trend. Given that state-run Shipping Corporation of India (SCI) caters for less than 5% of the roughly $100-billion domestic market, it’s not in a position to ensure orderly evolution of the shipping cost curve. As such, the government has now put the SCI on the block for sale. Another source said the government could extend the validity of the Transport and Marketing Assistance (TMA) scheme, meant primarily for farm exporters, beyond March 2022. Under this scheme, which was reintroduced this fiscal with larger coverage and greater support, the Centre reimburses exporters a certain portion of freight charges. Rates of the assistance have been raised by 50% for exports by sea and 100% for those by air. Apart from emerging risks from the new Covid strain, elevated shipping costs and nonavailability of adequate containers remain the biggest challenge facing Indian exporters, as they seek to take advantage of a resurgence of industrial demand in advanced economies in recent months. Many global shipping firms are registered in Ireland, as it adopts a liberal tax regime for them. For instance, shipping firms based out of Ireland pay tax based on the tonnage of the fleet as opposed to tax on profits recorded by the business. This, combined with the low, general corporation tax rate of about 12.5%, typically keeps their tax liability lower than in many other countries. Similarly, no capital gains tax is slapped there on the disposal of a ship. “Incentivising the setting up of shipping lines in India and even the manufacturing of containers would be a key step towards self-reliance in this area. China has invested hugely in container manufacturing and is now reaping the benefits, although it, too, faces elevated costs,” a senior government official told FE. Ensuring reasonable shipping costs remains crucial to realising India’s lofty merchandise export target of $1 trillion by FY28. Exorbitant shipping costs hurt mainly small and medium exporters. The country shipped out goods worth $291 billion in FY21 after the pandemic hit supply chains. In the current fiscal, it is on course to meet the ambitious target of $400 billion, as demand for merchandise from key markets remains strong. To be sure, shipping costs have gone through the roof across the globe and India isn’t an outlier. In fact, the costs in China have surged at a much faster pace than in India, analysts have said. Chinese suppliers are luring large ships with higher freight charges, according to sources. However, given Beijing’s massive covert subsidies, the competitiveness of its exporters remains intact. So, the Indian government, too, must find ways to cushion the blow to them, domestic exporters say. In its submission before finance minister Nirmala Sitharaman in December, the Federation of Indian Export Organisations (FIEO) said exporters remitted around $65 billion for transportation in 2020, which will likely cross $100 billion in 2021, given the surge. Since the SCI is being disinvested, the government needs to encourage large entities to build an Indian shipping line of global repute, the FIEO submitted. Given the government’s target to raise merchandise exports to $1 trillion by FY28, this shipping bill of exporters is only going to surge. So, even if such a shipping line captures 20-25% of the domestic market, the country will save a lot of foreign exchange, the exporters’ body has argued.
Source: Financial Express
While the rate increases were meant to correct the long-unresolved issue of inverted duty structure in the synthetic textiles value chain, it met with opposition from the industry. A structure where inputs are subjected to higher taxes than finished products results in accumulation of tax credits with the downstream players. India’s competitiveness in the global textiles market, where synthetic textile products have a much larger share than cotton-based products, is seen to be blunted, owing to the inverted tax system. A GoM had earlier proposed the rate increases, keeping this in view, but several states and the fabrics-to-garments industry, which include thousands of MSMEs and tiny units, opposed this move as they saw it leading to a demand compression. Heeding to demands from states, including the polls-bound ones, the Goods and Services Tax (GST) Council held an emergency meeting on Friday and virtually rolled back a decision taken in its September meeting to increase the GST rate on textile products from 5% to 12%. But a similar rate hike for certain footwear will take effect from Saturday as planned. A group of ministers (GoM), which is currently reviewing the entire GST rates structure, would revisit the issues with regard to the textiles value chain and submit its report in February, Union finance minister Nirmala Sitharaman, the chairperson of the council, said after its 46thmeeting here. While the rate increases were meant to correct the long-unresolved issue of inverted duty structure in the synthetic textiles value chain, it met with opposition from the industry. A structure where inputs are subjected to higher taxes than finished products results in accumulation of tax credits with the downstream players. India’s competitiveness in the global textiles market, where synthetic textile products have a much larger share than cotton-based products, is seen to be blunted, owing to the inverted tax system. A GoM had earlier proposed the rate increases, keeping this in view, but several states and the fabrics-to-garments industry, which include thousands of MSMEs and tiny units, opposed this move as they saw it leading to a demand compression. Sitharaman said: “A committee is already looking at rates rationalisation. The (issue of) textiles will again be put to the committee for review, which will submit a report by February. In the (subsequent) Council meeting, the recommendations of the group will be discussed.” At present, tax rate on man-made fibre, yarn and fabrics is 18%, 12% and 5%, respectively. To illustrate, GST rate is 18% on mono-ethylene glycol (MEG) and purified terephthalic acid (PTA), the building blocks; 12% on polyester partially oriented yarn (POY) and 5% on grey fabrics, finished fabrics and garments. Natural yarns like cotton, silk and wool are in the 5% slab. At present, footwear up to `1,000 a pair attracts 5% GST and costlier ones attract 18%. The price differential has now been done away with; all footwear will now attract 12% GST. The proposed rate hikes on textiles, which would have brought uniformity in the taxation of products in the textiles value chain, was opposed by several states including Tamil Nadu, Rajasthan, West Bengal and even the BJP-ruled Gujarat. “The rise in tax rates would have increased the financial burden on already-stressed MSME textiles and handloom sectors,” Tamil Nadu finance minister Palanivel Thiaga Rajan said. The Council had earlier asked the seven-member GoM on GST rate structure led by Karnataka chief minister Basavaraj S Bommai to suggest measures to rationalise GST rates. As the GoM’s tenure ended on November 27, it was given a one-month extension and now it has been asked to submit the report in February. The Council will likely meet in early March to consider the group’s recommendations. As reported by FE earlier, many state governments on Thursday asked for extension of the revenue compensation mechanism for states under the GST for another five years from June 2022. On most state governments likely facing a revenue shock due to the scheduled expiry of the GST compensation period on June 30 next year, Union revenue secretary Tarun Bajaj had earlier cited an absolute absence of resources for extension of the mechanism, but said augmentation of GST revenues through rationalisation of the rates structure and improved compliance would likely ameliorate the situation. Meanwhile, a process of formalisation of the economy – thanks to the spurt in digital transaction and steps taken by the government to improve compliance — has boosted GST receipts in recent months. Gross GST collections came in at `1,31,526 crore in November (October sales) 2021, the second-highest mop-up in the history of the comprehensive indirect tax that was launched in July 2017.
Source: Financial Express
On September 9, the government announced to release Rs 56,027 crore against pending tax refunds of exporters under different export incentive schemes. On September 17 this year, the ministry had fixed December 31 as the last date. The government on Friday extended the last date for submitting applications to January 31, 2022 from December 31, 2021 for various export promotion schemes under the Foreign Trade Policy. The Directorate General of Foreign Trade (DGFT), in a notification, said that after January 31, 2022 no further applications would be allowed to be submitted and would become time-barred. For claiming pending refunds under merchandise exports from India Scheme (MEIS), the DGFT said that exporters can submit applications for exports made between July 1, 2018 to March 31, 2019 and from April 1, 2019 to March 31, 2020 and from April 2020 to December 31, 2020. For Services Export from India Scheme (SEIS), exporters can file applications for exports made during 2018-20. As per the notification, textile exporters can file applications for exports made during March 7, 2019 to December 31, 2020 under Rebate of State and Central Taxes and Levies (RoSCTL). “The last date for submitting online applications under MEIS, SEIS, RoSCTL, ROSL and 2% additional adhoc incentive has been notified to be December 31, 2021," DGFT said.
Source: Economic Times
If the Modi govt clears the agreement, it would be the first free trade agreement to be signed by India after a decade. The India-UAE free trade agreement is expected to cover more than 1,000 products across sectors. Senior commerce ministry officials said the Union cabinet is likely to vet the deal as soon as the negotiations between the sides come to a fruitful end. If the Modi government clears the trade deal, it would be the first free trade agreement to be signed by India after a decade. Exports from India that could benefit from the pact include textiles, gem & jewellery, petroleum products, engineering & machinery products and chemicals. The gains will, however, be limited as the import duties on most goods are at 5 per cent in the UAE. Besides, the duties on most agriculture products, such as meat, fruits & vegetables and tea,are already at zero per cent, so India is unlikely to make substantial gains in the area, the officials said. The UAE has also drawn up a long list of products, including food items such as dates and confectionery for duty concession. The officials said the list of trade items are being monitored closely as India needs to protect domestic industry. While FTA would provide access to the Indian markets, it should not result in the routing of products from other countries, especially China, they said. The ministry officials said to prevent any misuse of FTA benefits and curb potential illegal inflows of Chinese goods through a key transit hub such as Dubai, India will insist on strict rules of origin. It may either stipulate a 35 per cent value addition at the UAE for all products to be eligible for duty concession under the FTA or impose similar conditions on select products where it sees the maximum scope for abuse, they added. They pointed out that the UAE has zero duty or very low duties on a majority of items, making it easier for it to be part of free trade agreements. About 87 per cent of the products that the UAE imports are currently taxed at 5 per cent, while 11 per cent attract zero duty. The rest see higher duty incidence or are in the prohibited or special lists of goods, the officials said. Services pact Market access in services, including mutual recognition agreements, would also be crucial, the officials said. In services, both sides might negotiate a deal on labour-intensive sectors, which would ensure free movement of skilled professionals. This is expected to boost job creation in both the countries.
Source: Telegraph India
Disruption in the global supply chain has opened up opportunities for large-scale manufacturing in India, aided by significant policy initiatives such as production-linkedincentive (PLI) schemes and low corporate tax rates for new manufacturing, among others. Structural issues like cost of land and electricity, lack of adequate infrastructure and shortage of skilled manpower could play the spoilsport if not addressed on time, says industry. "MNCs that manage supply networks have acknowledged the necessity to hedge against future events and have decided to geographically disperse their supply chains. As a result, India has reaped significant benefits," NITI Aayog CEO Amitabh Kant said. The government has unveiled a $27 billion worth of PLI scheme for 13 sectors to help integrate Indian companies into the global value chains and tap into the opportunity. The PM Gati Shakti - National Master Plan (NMP) which brings together 16 ministries to enable integrated planning and coordinated implementation of infrastructural connectivity, is expected to lower logistics costs significantly. The corporate tax rate for new manufacturing has been reduced to 15%. the Society of Indian Automobile Manufacturers said. "Auto industry in India is also poised to become a major player in the global supply chain and these schemes would provide the necessary impetus in this regard," Menon added. The MSME sector has also gained in strength and seems in a position to support big investment. "MSMEs have seen a remarkable improvement in access to finance and power and significant improvement in ease of doing business with introduction of GST," Anil Bhardwaj, secretary-general of the Federation of Indian Micro and Small & Medium Enterprises said. Vikram Kirloskar, chairman (manufacturing council), the Confederation of Indian Industry, feels it is time for the industry to step up. "Government measures can give you added incentive but it is upon manufacturers to improve upon scale and quality." The government and businesses see the opportunity but acknowledge the need for improvement in the enabling framework. "In the medium term to long term, India will have to address its structural issues," Kant said. In the short term, he believes it is extremely important to enhance ease of doing business in manufacturing.
Source: Economic Times
After a disastrous 2020, India’s trade picked up in 2021 as global demand from its biggest markets rose. Exports reached a new high but they were closely followed by burgeoning imports which signal both healthy domestic demand and foreign exchange losses. On the other hand, import dependence on China was reduced for key items as more domestic value addition meant lower shipments of electronics from China. But despite a series of restrictions aimed at Chinese goods, imports from the country shot up in 2021. Moneycontrol takes a deep dive into the data.
Headline figures rise Merchandise exports rose to records in 2021. A glut of global demand raised levels of export orders since the beginning of the year. As factories and markets around the globe opened following months of lockdown, demand for India's exports rose across the board. This pushed overall export earnings to above $300 billion in the first 10 months of the year. Officials now hope to crack the $400 billion target in the full 2021-22 financial year. On the other hand, imports also rose to their highest level over a similar period. High import figures denote healthy industrial and consumer demand and the latest spate of imports in 2021 has been directly proportional to the sudden drop in the year before. As the global supply chain failed, imports had crashed during the peak of the pandemic. Interestingly, the trade deficit has been lower despite the surge in inbound trade. The $4.7 billion trade deficit recorded in January-October is the lowest in a decade, and the first time since 2015 that deficit has fallen to below $ 10 billion.
Export basket diversifying While a global super-cycle kept commodity prices high across the board throughout 2021, exports saw significant support from finished products as well. Policymakers have marked 2021 as the year when exports of high-value, finished goods took hold significantly. Since coming to power, the government has pushed labor-intensive manufacturing to simultaneously boost productivity, job creation and export. After six years of trying to substitute industrial raw materials and agri items with products that are higher up the value chain, India saw an increasingly diversified export basket. Engineering items constituted the second largest category in exports till October. According to the Engineering Exports Promotion Council, this was sustained by tapping into a broader network of market beyond Europe and North America. Finding cheaper sources of copper ore beyond Indonesia and Chile also helped keep primary prices low for both domestic items and export products. Electronics exports also continued to maintain pace, registering nearly $15 billion. Pushed up by the performance-linked incentive scheme of the government, electronics exports rose by more than $ 2 billion from 2019. Exports of mobile phones and components rose to $4.7 billion, up from $3.3 billion in 2019. Meanwhile, after a year of national lockdowns and sluggish shipping movement, demand for industrial and consumer commodities skyrocketed in 2021.
New trade partners The United States, followed closely by China and the United Arab Emirates were India's largest trade partners in calendar year 2021. This traditional troika has been the top three nations in New Delhi's trade list for the past decade. China had become India's top partner just before the Covid 19-pandemic hit, but in 2021, the US wrested back the top spot. New Delhi's strenuous ties with China have affected trade volumes as policymakers tried to cut Chinese imports. However, imports from China again gained pace in 2021. Imports jumped by 21 percent even compared to 2019 figures. This was despite India managing to reduce import dependence on China across several key categories such as electronics and machineries. Interestingly, Switzerland became the fourth largest source of imports for India, by value of the consignment. More than $23 billion worth of unwrought gold came in from the country in the January-October period of 2021, up from just $ 5 billion in the same period of 2020. Meanwhile, Bangladesh became India's fourth-largest source of exports. This was due to a rise in flows of limestone, cotton, sugar and most interestingly rice. The country is one of the largest producers of rice globally with cereal being a staple diet of almost the entire population. Yet, more than $895 million worth of parboiled rice made its way across the border to Bangladesh in 2021, up from just $12 million in he previous year. Exports to neighbouring Nepal also went up by 66 percent. Outside the neighbourhood, India's exports to a more diverse set of countries gained a foothold. Nations like Netherlands, Belgium, Indonesia, Australia and Turkey received more Indian shipments this year. Officials say all these nations have remained for long, prominent middle order trading partners. But concerted efforts at targeted exports based on specific demand, more B2B connections and increasing awareness of Indian products, are finally bearing fruit.
Source: Money Control
Pratibha Syntex, a vertically integrated manufacturer of knitted textile products, in association with Fairtrade, distributed sewing machines and fixed deposits to its 3,024 employees recently. The initiative supported by elite brands like Patagonia, Prana and Pact, aims to bring visible change in overall livelihood of grassroots employees, creating a more enriching work environment. One of the employees, Baliram Savle, who received fixed deposit for his child’s education, expressed gratitude towards the management and Fairtrade for letting his children dream big. “The sewing machine will open up new avenues of income. In evening hours I will earn extra money by carrying out tailoring work,” said another associate Kali Dodve, who had opted for sewing machine. “We are extremely grateful towards the initiative by Fairtrade and our brand partners. Since 2014 our associates have been benefiting under the programme, and it is satisfying to see their progress over the years,” H S Jha, VP HR, Pratibha Syntex Ltd, said in a statement. Fairtrade is one of the most trusted sustainable trading standards in the world that transfers wealth back to farmers and workers in developing countries ensuring a decent income and decent work. Notably, Pratibha Syntex has been organising Fairtrade Premium Programme since 2014. Over the years, raincoats, water purifier, mixer grinder, cookware, refrigerator, washing machine and other home appliances were presented to associates.
Source: Fibre2 Fashion
Goyal said monetary-fiscal coordination has worked well and stimulus has been adequate but not excessive Eminent economist Ashima Goyal on Sunday said India is likely to have one of the highest rates of growth in the world as there are gradual moves towards normalisation, even as stimulus and support for vulnerable sectors continue. Goyal further said sticking to the announced consolidation path by the government in the upcoming budget will give a good signal of control and predictability. "India has come out of a very difficult time with good macroeconomic parameters. It is likely to have one of the highest rates of growth in the world, while inflation remains within the tolerance band," she said. Goyal, who is also a member of the Monetary Policy Committee (MPC) of the RBI, in an interview to PTI said monetary-fiscal coordination has worked well and stimulus has been adequate but not excessive. "There are gradual moves towards normalisation, even as some stimulus and support for vulnerable sectors continues," she said, adding that the financial sector is healthy. The RBI has lowered the growth projection for the current financial year to 9.5 per cent, while the IMF has projected a growth of 9.5 per cent in 2021 and 8.5 per cent in the next year. On threat from the new COVID-19 variant to the economy, Goyal said the recovery should be durable, with productivity enhancing reforms and the appropriate policy support. "The country is now much better prepared to face another wave, if it happens. In the second wave, disruption to the economy was lower because there is less supply chain disruption with localised lockdowns," she noted. The new potentially more contagious B.1.1.529 variant (Omicron) was first reported to the World Health Organisation (WHO) from South Africa on November 24. Asked about going with fiscal consolidation or continuing with stimulus in the coming budget, the eminent economist said "sticking to the announced consolidation path will give a good signal of control and predictability". "Reforms such as more transparency should continue," she said, adding that this improves the credibility and accuracy of the budget figures. According to Goyal, revenue buoyancy gives the space to finance essential expenditure consistent with medium-term consolidation on the announced path, which already builds in some stimulus. She noted the improvement in the quality of expenditure adds to the stimulus as does using the financial sector through warranties that do not add to current borrowing requirements. Goyal pointed out that improving the quality of expenditure implies a shift towards high multiplier and high job creation items such as investment, human capacity creation, supporting vulnerable sections and the greening of the economy. On high inflation, Goyal said high WPI reflects high import prices, especially commodity prices, which may not persist beyond the winter. "The Covid situation is making them exceptionally volatile and multiple shocks have occurred. CPI inflation, however, remains within the tolerance band and is expected to soften next year," she opined. While the cut in fuel taxes has already led to some reduction, Goyal said in India, because food price inflation has a larger impact, the causality tends to be from CPI inflation to WPI.
Asked about the impact of 'taper tantrum' or withdrawal of monetary stimulus by the US Federal Reserve on India, Goyal said the announcement of a faster taper has not led to untoward disruption in global markets, since they tend to accept announcements clearly linked to macroeconomic developments. "India has more stable macroeconomics and a larger stock of reserves than it did in 2013. Moreover, the real interest differential is lower since US inflation is high," she said. According to Goyal, so India is in a better position to survive US monetary policy exit without a large depreciation while keeping its policy rates aligned to its own domestic cycle. Replying to a question on cryptocurrencies, she said they are better called crypto-tokens as they are not acceptable or adequate as currencies and should be banned as legal tender, but regulated as tokens. "Only large transactions, from investors who are aware of the risks, may be permitted. A total ban is difficult to implement and would only increase illegal activities and participation in the dark net," she said. India is contemplating bringing a bill in Parliament to deal with the challenges posed by the unregulated cryptocurrencies. Currently, there are no particular regulations or any ban on use of cryptocurrencies in the country.
Source: Business Standard
The China Council for the Promotion of International Trade (CCPIT), China's foreign trade and investment promotion agency, issued RCEP certificates of origin for 69 Chinese enterprises nationwide on Jan 1. With the certificates, enterprises can enjoy preferential tariffs when they export goods to RCEP member countries. Those companies' exports include mechanical and electrical products, textiles and chemical products. The value of these exports came in at $12 million, and the RCEP certificates of origin are expected to help reduce tariffs for the related Chinese enterprises by $180,000, CCPIT said. After RCEP took effect on Jan 1, more than 90 percent of goods trade between member countries will eventually enjoy zero tariffs. Those include immediate cutting of tariffs to zero and cutting of tariffs to zero gradually in 10 years. The measures indicate member countries will fulfill their promises to liberalize trade in goods in a relatively short time, and it will vigorously help enhance regional economic integration in East Asia as well as help with economic recovery and growth in the postpandemic era, CCPIT said. Currently, Singapore, Thailand, Japan, New Zealand and Australia have adopted electric issuance of RCEP certificates of origin. For Chinese enterprises that would like to export products to these countries, the certificates of origin will be fully electronically issued and CCPIT will provide online approval and printing services to enterprises. For Chinese enterprises that would like to export products to Brunei, Laos, Vietnam or Cambodia, those countries temporarily are not accepting electronic signatures, and they require manual signatures and stamps on the certificates, CCPIT said. CCPIT has issued certificates of origin for various trade agreements and preferential trade arrangements. As of Dec 15, 2021, the CCPIT had issued 1.08 million certificates of origin for Chinese enterprises, and the number increased 25.7 percent year-on-year. As of that date, the value of exports involved reached $63.42 billion, surging 98.8 percent year-on-year, and the certificates have helped reduced tariffs by at least $3.17 billion for Chinese enterprises that export goods abroad, CCPIT said.
Source: China Daily
China will introduce a guideline to help businesses tap opportunities from the Regional Comprehensive Economic Partnership (RCEP), which is likely to expand trade and inject growth impetus into the regional and global economies. The country is expected to play an increasingly important role in both regional and global value chains, say analysts. "The ministry will roll out a guideline for high-quality implementation of the agreement together with other departments, aiming to help enterprises and local governments to make better use of RCEP rules and seize opportunities from markets opening up wider," Chinese commerce ministry spokesman Gao Feng told an online media briefing recently. Such efforts will propel regional trade and investment growth and strengthen deep integration of industrial and supply chains among the agreement members. This will accelerate high-quality and in-depth regional economic integration, he was quoted as saying by state-controlled media reports. A recent State Council executive meeting chaired by Premier Li Keqiang called for efforts to support enterprises to increase competitiveness in international markets, improve the quality of trade and investment, and push for industrial upgrades in light of the RCEP coming into force in 2022. The State Council executive meeting urged enterprises to expand exports and imports and leverage RCEP provisions on tariff reductions and the rules of origin. The meeting also called for better utilisation of the RCEP on opening-up commitments and rules, and strengthening regional cooperation on high-end and green industrial chains and manufacturing projects. The agreement should also shore up the opening-up of the services sector and take investment to a higher level. RCEP takes effect on January 1 in 10 member states: Japan, Brunei, Cambodia, Laos, Singapore, Thailand, Vietnam, Australia, China and New Zealand. It will enter into force for the other five members 60 days after official deposition of ratification, acceptance, or approval. South Korea will see it take effect on February 1.
Source: Fibre 2 Fashion
Officials and experts said Cambodia has pinned high hope on the Regional Comprehensive Economic Partnership (RCEP) and the Cambodia-China Free Trade Agreement (CCFTA) to boost its economic growth in the post-COVID-19 pandemic era. The two free trade deals are due to enter into force on Jan. 1, 2022. RCEP is a mega trade pact between 10 ASEAN member states and its FTA partners, namely China, Japan, South Korea, Australia and New Zealand. The Association of Southeast Asian Nations (ASEAN) groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. RCEP will eliminate as much as 90 percent of the tariffs on goods traded between its signatories over the next 20 years, while the CCFTA will bring the proportion of zero-tariff products in the goods traded between Cambodia and China to more than 90 percent for both countries. Cambodian Ministry of Commerce's undersecretary of state and spokesman Penn Sovicheat said the two free trade deals will boost Cambodia's exports and attract more foreign investment to the kingdom. "For Cambodia, both RCEP and CCFTA will give Cambodia a great market access to China and will also push Cambodia to participate more in the markets of other RCEP member countries," he told Xinhua. Covering a region with a combined gross domestic product (GDP) of 26.2 trillion U.S. dollars, or about 30 percent of global GDP, the RCEP agreement is an unprecedented, modern, comprehensive, high-quality and reciprocal mega-regional trading arrangement that accommodates the broadest possible interests, conditions and priorities of different countries. Asian Development Bank (ADB) acting-country director for Cambodia Anthony Gill said Cambodia will benefit from both agreements, saying that they will help expand market access and attract more investment to Cambodia. "The RCEP region is at the center of global economy, so it will help boost economic growth of ASEAN member states, including Cambodia," he told Xinhua. Gill said the recent rapid growth in exports of agricultural and other higher-value manufacturing products besides garments, travel goods and footwear (GTF) has shown that Cambodia can diversify away from its traditional focus on production and export of the GTF. "Being part of the trade agreements would provide more market opportunities for Cambodia to expand agriculture production, agro-processing for exports, and non-GTF manufacturing," he said. "It also offers opportunities to further promote the tourism sector to the FTA partners, i.e. China, Japan, South Korea, Australia and New Zealand." Enjoy Ho, deputy chairman of the Garment Manufacturers Association in Cambodia, said the two deals would bring about better development for Cambodia's textile and garment industry and added that with tariffs reduced or eliminated, cost for production would be cheaper. "I think there will be more Chinese-funded enterprises investing in Cambodia, which will enrich our product structure," he told Xinhua. "When the cost is reduced, our competitiveness and ability to take orders will be better." Kin Phea, director-general of the International Relations Institute at the Royal Academy of Cambodia, said RCEP and Cambodia-China FTA are very beneficial for Cambodia. "It will be a driving force to accelerate trade volume and competitive advantage for Cambodia's foreign direct investment and will help rebuild Cambodia's economy during the post-COVID-19 era," he told Xinhua. Cambodia's Economy and Finance Minister Aun Pornmoniroth said the country's economic growth is projected at 4.8 percent in 2022, making the GDP value rise to 30.5 billion dollars. The kingdom's per capita GDP is forecast to increase to 1,842 dollars in 2022, up from 1,730 dollars in 2021, he told parliament in late November, adding that the inflation is estimated to drop to 2.8 percent in 2022 from 3.4 percent in 2021. Gill said the ADB projected the country's growth to rise to 5.5 percent in 2022 thanks to the noticeable progress of the COVID-19 vaccination rollout. "The government has also taken steps to mitigate the pandemic's economic and social impacts. Those measures included free COVID-19 vaccines and treatment, cash transfers to poor households, economic stimulus, and loan restructuring programs," he said. "To increase people's wellbeing and sustain growth, the government will need to continue strengthening its social protection systems and improve the quality of healthcare and education," Gill added Garment workers make clothes at a factory in Phnom Penh, Cambodia on Dec. 17, 2021. Officials and experts said Cambodia has pinned high hope on the Regional Comprehensive Economic Partnership (RCEP) and the Cambodia-China Free Trade Agreement (CCFTA) to boost its economic growth in the post-COVID-19 pandemic era. The two free trade deals are due to enter into force on Jan. 1, 2022. Enjoy Ho, deputy chairman of the Garment Manufacturers Association in Cambodia, said the two deals would bring about better development for Cambodia's textile and garment industry and added that with tariffs reduced or eliminated, cost for production would be cheaper. (Xinhua/Wu Changwei).
Source: Xinhua Net
The Regional Comprehensive Economic Partnership (RCEP) free trade agreement takes effect from January 1, bringing together 15 Asian and Oceanian nations that account for 30 per cent of the world’s economy. It will abolish import tariffs on 91 per cent of items. Trade within the Asia-Pacific, already worth $2.3 trillion in 2019, will receive a major boost, just as Asia-Pacific nations try to recover from the pandemic. RCEP signatories are the 10-member Association of Southeast Asian Nations (ASEAN) and China, Japan, South Korea, Australia and New Zealand. It will also set common rules around trade, intellectual property, e-commerce and competition in a move, the United Nations, said would raise the Asia Pacific region's position as a ‘center of gravity’ for global commerce, according to media reports in Asia. According to the UN Conference on Trade and Development (UNCTAD), RCEP would boost inter-regional trade by $42 billion. A big potential benefit arising out of RCEP’s 'common rules of origin' is that members will require only one certificate of origin for trading within the bloc. RCEP is Japan’s first economic partnership agreement with China and South Korea. Japan’s auto industry is expected to benefit a lot from the tariff cuts. The Japanese government estimates increased trade as a result of the tariff cuts may push up its real gross domestic product (GDP) by around ¥15 trillion. Japan will lower tariffs on clothing, matsutake mushrooms and makgeolli, a South Korean alcoholic drink. China will gradually raise the proportion of imports of industrial products exempted from tariffs from 8 per cent to 86 per cent over two decades. South Korea will also increase the proportion of such tariff-exempted items from 19 per cent to 92 per cent. India opted out during late-stage negotiations in 2019, concerned over possible cheap imports from China. RCEP is the first major trade pact for China, which applied for TPP membership in September 2021 to capitalize on the economic growth of the Indo-Pacific region. While many expect China and other big Asian countries to benefit the most, RCEP may leave smaller ASEAN nations at a disadvantage, as the trade deal doesn't cover their major industries. The smaller countries may also lose some of their benefits from trade preference programmes that allow them to export tariff-free products outside of ASEAN, including South Korea and Japan. The lower-income countries should, however, gain from so-called trade diversion, where commerce is redirected from non-RCEP members. UNCTAD said trade diversion would be "magnified" as integration between RCEP goes further in the next decade.
Source: Fibre 2 Fashion
Bilateral trade between Cambodia and Canada was valued at about $822 million in the first 10 months of 2021, marking a 26 per cent year-on-year surge, and many economists are hopeful that an ASEAN-Canada free trade agreement (FTA) would be able to create a more favourable environment and further accelerate that growth rate. Official negotiations for the ASEAN-Canada FTA were announced at the virtual 10th ASEAN Economic Ministers- (AEM) Canada Consultations on November 17. The Cambodian delegation to the event was led by Minister of Commerce and ASEAN Economic Minister for Cambodia Pan Sorasak. In January-October 2021, Cambodian exports to Canada were worth $790 million, up by 31 per cent year-on-year from $604 million, and imports logged $32 million, down by 33 per cent from $48 million in the same period in 2020, according to the Ministry of Commerce. Cambodia Chamber of Commerce (CCC) vice-president Lim Heng told The Post that an ASEAN-Canada FTA, much like other similar bilateral and regional trade deals, would greatly benefit the Kingdom and provide new avenues to export local merchandise. “Cambodia has exported a lot of core merchandise to the Canadian market such as textile products, garments and apparel, travel goods, bicycles, et cetera. “So if Cambodia, as an ASEAN member, gets preferential tariffs on these items, it’d be able to grab the attention of those investors who produce goods for export to Canada,” he said. Heng shared that the CCC is working with the ministry to open its first representative office abroad, in Canada, “as soon as possible” after numerous Covid-related delays. Branches are also planned for the EU, US, China and Japan, he said, adding that these offices aim to facilitate business relations. Hong Vanak, director of International Economics at the Royal Academy of Cambodia, billed Canada as a “developed and prosperous country” that buys a lot of goods from the Kingdom, mostly textile-based wares, bags, travel products and other items. He remarked on the strong historical trade performance between the two countries, and said: “Through continuous production diversification, Cambodia expects to be able to export more to Canada. “By introducing new investment laws and other trade legislation, I foresee that the trade volume between the two countries will be even bigger in the future,” he told The Post.
Source: Phnom penh Post
The committee further recommended that Ministry of Commerce and Ministry of Energy will jointly devise a mechanism in 2-3 months on targeting energy regime to real beneficiaries in a way that export oriented sectors/ units of textile industry would remain internationally competitive. The committee-maintained Duty drawback (DLTL) will be continued for value-added products only (i.e., technical textiles, apparel, made-ups and carpets); however, it will be de-linked with increment in exports. Moreover, diversification within products and markets will be offered an additional incentive. Ministry of Commerce will further pursue the SBP and FBR to automate disbursements process of the duty drawback schemes on the lines of custom duty drawback mechanism where payments are made directly to exporter accounts by SBP on receipts of foreign exchange for notified products export subject to allocation of funds by the Ministry of Finance. On December 16, 2021, the ECC discussed the revised draft of Textile and Apparel Policy 2020-25 and approved it with the following amendments: (i) electricity and RLNG rates, indicated for fiscal year 2021-22, will be substituted, with regionally competitive energy rates;(ii) the regionally competitive RLNG rates will be applicable on processing industry;(iii) for the captive and the cogeneration units, a separate policy by the formulated by the Ministry of Energy, in consultation with the Ministry of Commerce, which will cover the benefits; and (iv) comments of the Finance Division shall be made part of the proposed Textile and Apparel Policy 2020-25. The sources said, the Federal Cabinet, on December 21, 2021 also ratified the decision. However, Advisor to Prime Minister on Commerce and Investment, Abdul Razak Dawood has claimed that he requested the Cabinet that he wanted to withdraw the policy from Cabinet, but his viewpoint has not been recorded accurately. Now, Commerce Ministry has written a letter to Cabinet Division, requesting withdrawal of Textile and Apparel Policy 2020-25.
Source: B Recorder
In a measure taken in response to alleged human rights violations and recent coups, the United States on Saturday cut off Mali, Ethiopia and Guinea from access to a duty-free trade programme. In November, US President Joe Biden had threatened this action by saying that Ethiopia would be removed from the duty-free trading regime provided under the US African Growth and Opportunity Act (AGOA). The president had made the announcement over alleged human rights violations in the Tigray region, while Mali and Guinea were targeted due to the recent coups in these countries. In a statement, the US Trade Representative’s office, said, "The United States today terminated Ethiopia, Mali and Guinea from the AGOA trade preference programme due to actions taken by each of their governments in violation of the AGOA Statute." The USTR statement said, "The Biden-Harris Administration is deeply concerned by the unconstitutional change in governments in both Guinea and Mali, and by the gross violations of internationally recognised human rights being perpetrated by the Government of Ethiopia and other parties amid the widening conflict in northern Ethiopia." Ethiopia's textile industry, which supplies global fashion brands, will be one of the worst sufferers of this suspension.
Source: Wionews
