The Synthetic & Rayon Textiles Export Promotion Council

MARKET WATCH 29 JUNE, 2022

NATIONAL

 

INTERNATIONAL

GST Council: Stormy discussion around states' compensation likely today

The all-powerful GST Council might see a stormy discussion around compensation payout to states, with Opposition-ruled states aggressively pushing for its continuation beyond the five-year period which ends on June 30. Some states ministers wrote to Finance Minister Nirmala Sitharaman on Tuesday seeking a change in the GST revenue distribution formula in case compensation to States is not extended beyond the deadline. The primary demand, however, remains to extend the compensation period. In a letter to FM Sitharaman, T S Singh Deo, commercial tax minister of Chattisgarh and member of GST Council said provision for 14 per cent protected revenue must continue for at least another five years. This is because mining and manufacturing States in particular suffer great loss of revenue as they are not consumers. West Bengal’ Amit Mitra said that Supreme Court’s observation in the Mohit Mineral case was the guiding principle for all the decisions by the Council in future. Kerala and other opposition-ruled States too have called for extension of compensation. The Centre had agreed in principle to extend the compensation cess till March 2026, to repay the debt it borrowed during the pandemic to meet the demands of the States. “Requested an extension of five years on this to protect States from severe revenue loss and let them function as effective federal units of India,” Deo said in a series of tweets, while highlighting that his state suffered loss of Rs 2,786 crore, Rs 3,176 crore, Rs 3,620 crore and Rs 4,127 crore during Fiscal years 2018-19, 2019-20, 2020-21 and 2021-22, respectively. In a separate letter, principal chief advisor to the chief minister and finance department of West Bengal, Amit Mitra, also reminded Sitharaman about apex court's observation. “Post the decision by the apex court, it has become imperative for the GST Council to take every decision by consensus and to leave aside any shade of majoritarianism, not only for the future credibility of GST Council, but also to uphold the rich tradition of this august body,” he said. Further, he urged Sitharaman to take note of important observations of the Court and “have serious deliberations on the far-reaching implications of the observation in today’s meeting of the Council, to guide all future decision of the Council in letter and spirit”. In order to meet the resource gap of the states due to the short release of compensation, the Centre borrowed and released Rs 1.1 trillion in 2020-21 and Rs 1.59 trillion in 2021-22 as back-to-back loans.

Source: Business Standard

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Shipping Ministry looks to make govt ports competitive against pvt peers

The government will strengthen capacity and technology at state-owned ports to make them competitive against their private peers. “A presentation on steps to be taken to compete with private/non-major ports talked about increasing competitiveness in the port sector and the positioning of major ports versus the non-major ports in India,” said a statement by the ministry of ports, shipping and waterways on Tuesday. Union minister Sarbananda Sonowal asked the authorities to plan for mega ports by 2047. Along with capacity building, he also suggested major ports draft land policy guidelines and explore the potential of building presence out of their limits. The plans were discussed at a three-day annual 'Chintan Baithak', where the ministry sets the agenda for the fiscal year. The government will also focus on the development of new technologies at major ports, "Application of various cutting-edge technologies such as drone surveillance, internet of things, artificial intelligence, etc, can significantly improve operations at Indian ports," said the statement. Private ports such as Mundra are growing fast, with a cargo volume of 150 million metric tonne (mmt) in 2021-22. Adani Ports and Special Economic Zones (APSEZ) ports had a combined volume 300 mmt in the fiscal year. India’s 13 major ports had a combined cargo traffic of over 700 mmt in the year. Sector experts have said that delayed evacuation of cargo and ports and their capacity to handle containers is a challenge. The three-day session also saw various discussions on public-private-partnership (PPP), a route the ministry is pursuing to attract investments at its ports. Business Standard previously reported that the delayed nature of security clearances from stakeholder ministries such as Home Affairs, Defence, and External Affairs has been a major sore point. The ministry undertook the monetisation of 13 port assets worth Rs 7000 crore, out of which it had achieved Rs 1000 crore at the end of 2021-22. The ministry hopes to speed up that target as it encourages public-private partnership efforts, said officials.

Source: Business Standard

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Lower export demand, rise in costs to hit home textile makers

The ratings agency said the balance sheets, strengthened by healthy cash accrual and debt reduction over the past two fiscals, will lend support. Exports account for 60-70% of the Indian home textile industry's revenue Operating profitability of home textile makers is seen moderating 150-200 basis points to 13% this fiscal, hemmed in by lower export demand and a sharp increase in raw material and transportation costs, but the credit outlook for the sector will remain stable, according to the credit rating agency Crisil Ratings analysis of 60 companies that account for over 60% of the sector revenue. The ratings agency said the balance sheets, strengthened by healthy cash accrual and debt reduction over the past two fiscals, will lend support. Exports account for 60-70% of the Indian home textile industry's revenue. The US, the world's largest market, accounts for a sizeable 58% of these exports. Global demand for home textiles is expected to be impacted in the near-term by inflationary headwinds, with big-box retailers pruning inventory and consumers cutting discretionary spends. A slowdown in the sales of key US retailers in the past 3-6 months triggered an on-year decline of 5-6% in overall home textile exports from India between January and April 2022. Adding to the demand challenge is the price of raw cotton, a key input in home textiles.

Source: Economic Times

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Exporters see 10-20% order dip as recession fear grows

The likelihood of a recession in the US and EU has stoked fears among Indian exporters who have begun witnessing a decline in orders. Indian exporters, especially of leather and textiles, anticipate a 10% to 20% decline in export volume during the current financial year compared with FY22. India’s export growth is crucial at a time when imports have surged even as the cost of imported fuel and fertilizers has been rising after the Russia-Ukraine war broke out earlier this year. Record imports have pushed the trade deficit in May to its highest-ever mark of $24.29 billion. “Orders have started slowing down. There is a fear of higher inflation in the US and also in the European countries and they are cutting back on their purchases. The demand was comparatively robust last year. This year the volumes are down 15-20% across the board as far as the leather and footwear industry is concerned," said Rafeeque Ahmed, chairman of Farida Group, one of India’s largest shoe manufacturers. The impact of sharply slower growth in developed markets would be transmitted to Asia via the key channels of trade, financial conditions and commodity prices, Morgan Stanley said in a note. The risk of recession has risen as central banks in developed countries hike interest rates to combat rising inflation. A full cutoff of Russian natural gas could take as much as 2 percentage points off the EU’s gross domestic product growth this year with the impact on economic activity more pronounced during the winter, said Morgan Stanley’s chief European economist Jens Eisenschmidt. “Textile export growth until last year was 20% but the demand from the US and the EU has started slowing. Though we are not planning to reduce capacity, export growth could slip by about 10% this year. Textiles exports could benefit from India-Australia FTA but that would be visible only by the end of the year," said Apparel Export Promotion Council chairman Narendra Goenka. However, the decline in exports could be temporary as demand from western countries has been strong historically, Goenka said. Economists also said healthier balance sheets in developed nations could mean that a recession could be shallow. Trade experts said exporters could benefit from the weakening of the rupee. However, as India is a net importer losses outweigh the benefits, they said. India depends on imports of key items such as fuel, cooking oil and fertilizers, whose supplies were disrupted because of the war. On Tuesday, the rupee fell to a record low of 78.68 against the dollar amid weakness in domestic shares and on the back of persistent selling by foreign institutional investors. Tea exporters, however, said the demand slowdown is not very pronounced “As far as the US and EU are concerned, this is the time when they will come into the market with bulk orders. At this moment we are more worried about the demand in Europe than the US, partly because of the weakness in the euro. Indian orthodox tea prices have gone up on the back of strong demand in the Iranian market. There is an issue. It is more demand-driven," a prominent exporter said on condition of anonymity. Preliminary data released by the commerce ministry last month showed that Indian merchandise exports slipped to $38.19 billion in April, from $42.22 billion in March.

Source: Live Mint

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As rising CAD starts pinching, the Centre starts scrutinising imports

As the trade deficit in May hit a record high of $24.3 billion, revenue authorities have now become vigilant, according to a report The Centre has started to closely monitor imports amid concerns over the rise in current account deficit (CAD), which could undermine the nation's macroeconomic balance, a news report said. As the trade deficit in May hit a record high of $24.3 billion, revenue authorities have now become vigilant, a senior government official told The Economic Times. The official ruled out any knee-jerk reaction from the authorities that could impact the nation's economic recovery. "We are keeping a close watch... Officials have been asked to look at the import data," the official told ET and added that the CAD is an area of concern. The authorities are closely watching the import of precious metals, especially gold. The imports of gold in May rose by almost nine times to $7.7 billion compared to a year ago. Silver imports in May rose to $556 million. India has witnessed an increase in non-fuel imports, including electronic goods, leather goods, and textiles. In the past, India has imposed restrictions or raised custom tariffs to curtail such imports. However, such moves have led to slow economic growth. In FY22, India's CAD showed a deficit of 1.2 per cent of GDP against a surplus of 0.9 per cent in FY21, while the trade imbalance widened to $189.5 billion from $102.2 a year ago. Fitch Ratings earlier in June estimated that the CAD could rise to 3.1 per cent of GDP in the current fiscal year as the finance ministry had also flagged the issue in its monthly report. The ministry said, "India faces near-term challenges in managing its fiscal deficit, sustaining economic growth, reining in inflation, and containing the current account deficit while maintaining a fair value of the Indian currency."

Source: Business Standard

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CBDT: Buyer to Deduct Tax in P2P Virtual Asset Exchange

Synopsis "In a peer-to-peer (ie buyer to the seller without going through an Exchange) transaction, the buyer (ie person paying the consideration) is required to deduct tax under section 194S of the Act," the CBDT said. Both buyer and seller will have to withhold taxes for transactions involving an exchange of one virtual asset for another, the Central Board of Direct Taxes said Tuesday. In a fresh set of clarifications, the CBDT said according to section 194S of the I-T Act, the buyer will have to deduct tax in a peer-to-peer transaction of virtual digital assets (VDA). "Thus, in a peer-to-peer (i.e. buyer to the seller without going through an Exchange) transaction, the buyer (i.e. the person paying the consideration) is required to deduct tax under section 194S of the Act," the CBDT said.

With regard to liability to deduct tax at source under section 194S of the Act when the consideration is in kind or in exchange of VDA, the CBDT said in this situation, the person responsible for paying such consideration is required to ensure that the tax required to be deducted has been paid in respect of such consideration, before releasing the consideration. "Thus both need to pay tax with respect to a transfer of VDA and show the evidence to others so that VDAs can then be exchanged. This would then be required to be reported in TDS statement along with challan number by both of them," the CBDT said.

Source: Economic Times

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Odisha eyes investments in petro-chem, other sectors

The state government is eyeing investments in sectors like petrochemicals, chemicals and plastics, food processing, including sea food, textiles and apparels and metal downstream during chief minister Naveen Patnaik’s investors meet, in Dubai on Wednesday. The investments are mainly targeted from the Gulf and north African countries as business delegation from the region are expected to attend the event apart from top executives from some of the leading business houses in the state. Though the industries department is yet to publish the list of those who would be attending the event, official sources said Karan Adani, chief executive officer of Adani Ports and special economic zone, Paarth Jindal, managing director, JSW Cement, Satish Pai, managing director of Hindalco Industries and IMFA managing director Subhrakant Panda are some who are likely to be there. Top executives from Tata Steel, JSPL, ArcelorMittal, Indian Oil Corporation Limited and leading business people from the state would be attending the meet and share their experiences of doing business in Odisha. The chief minister would also address the meet, showcasing the state’s investment prowess and hold one-on-one discussions with some of the leading industrialists. Odisha’s priority sectors are in alignment with the industries in the Gulf and north Africa region. “We hope to get good investment intents at the investors’ meet,” said a senior industries department official. To draw investments in chemicals, petrochemicals and plastic sector, the state government has been developing the Petroleum Chemicals and Petrochemicals Investment Region (PCPIR) including a plastic park, where necessary facilities are being developed to provide ready to use industrial infrastructure. The PCPIR is the most strategically located region as it provides easy access to NH (just 2.5 km away), railway station (3 km), Paradip port (10 km) and is about 125 km away from the state capital. Dedicated industrial sector for food processing has already been developed near Khurda while similar facilities are being planned in the textiles sector near the city and Bhadrak.

Source: Times of India

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Slowing exports, rising cost to crimp profitability of home textile cos: Crisil

Operating profitability of home textile makers is seen moderating 150-200 basis points (bps) to 13% this fiscal, hemmed in by lower export demand and a sharp increase in raw material and transportation costs, ratings agency Crisil said on Tuesday. According to a sectoral report, Crisil said that despite moderating profitability credit outlook for the sector will remain stable. Balance sheets, strengthened by healthy cash accrual and debt reduction over the past two fiscals, will lend support, a CRISIL Ratings analysis of 60 companies that account for over 60% of the sector revenue, shows. Exports account for 60-70% of the Indian home textile industry’s revenue. The US, the world’s largest market for it, accounts for a sizeable 58% of these exports. Global demand for home textiles is expected to be impacted in the near-term by inflationary headwinds, with big-box retailers pruning inventory and consumers cutting down on discretionary spends. A slowdown in the sales of key US retailers in the past 3-6 months has led to an on-year decline of 5-6% in overall home textile exports from India between January and April 2022. Adding to the demand challenge is the price of raw cotton, a key input in home textiles. Its price has more than doubled on-year in May to ₹100,000 per candy. This will remain a challenge for exporters till the new cotton crop arrives starting October, the report said. Supply-chain disruptions leading to volatility in ocean freight rates will also impact profitability, it added. With domestic cotton prices soaring past international levels, exports have become less competitive. Consequently, India’s share in the US import basket moderated 700 bps in the four months ended April 2022, on-year. Says Mohit Makhija, Senior Director, CRISIL Ratings, “Slowing exports growth and high cotton prices will hit the operating margins of home textile exporters by 150-200 bps this fiscal. The rupee’s depreciation against the dollar and sustenance of the China+1 policy by global buyers will cushion the hit on profitability to some extent. The second half of this fiscal should gradually restore demand momentum and market share for Indian home textile exporters as freight and raw cotton costs moderate, and ease pressure on profitability." Overall, Indian home textile industry’s revenue is expected to grow 11-12% this fiscal, primarily because of higher in price realisations. Domestic demand (comprising 30-40% of Indian home textile industry’s revenue) is expected to grow at a healthy 13%, driven by sharp demand recovery in the domestic hospitality industry and continued focus on health and hygiene. Growth in export demand will moderate to 10% from 25% last fiscal due to slower recovery in the international travel and hospitality segments globally. Capex spends would be pruned this fiscal as current capacity utilisation levels of 75% affords sufficient headroom to accommodate any increase in demand. Says Gautam Shahi, Director, CRISIL Ratings, “Strengthening of balance sheets over past two fiscals and steady cash generation will keep debt metrics stable this fiscal. The interest coverage3 ratio of CRISIL-rated home textile companies will remain at 6-6.5 times and gearing3 at 0.7-0.8 time this fiscal, compared with 6.2 times and 0.8 time, respectively, last fiscal." That said, input prices in the new cotton season, resolution of supply-chain issues and global inflationary pressure will bear watching over the medium term.

Source: Live Mint

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Shri Piyush Goyal, Union Minister Commerce & Industry, Consumer Affairs, Food & Public Distribution and Textiles felicitates 126 Exporters at 23rd Handicrafts Export Awards

The handicrafts sectors needs a fresh, ambitious vision that takes it new heights with ambitious targets, and the country should not be satisfied with the 29% increase in exports achieved in 2021-22, said Shri Piyush Goyal, Union Minister of Textiles, Commerce & Industry and Consumer Affairs, Food and Public Distribution while delivering the address at the 23rd Handicrafts Export Awards Function here today. Shri Goyal said the increase in exports of handicrafts from 25,680 crore in 2020-21 to Rs. 33,253 crore in 2021-22 shouldn’t be the benchmark as the sector has tremendous capacity to strengthen its export targets further. He called upon the award winners to stress on quality, consistency, design and branding to create an ecosystem where multifold increase in the sector could be made possible. Citing a number of examples including that of solar charkha, the textile minister urged the exporters to focus on innovation to drive the growth in the sector. He cited the rapid rise of Tiruppur, which had grown dramatically in recent decades and said exports of handicrafts could take a quantum leap. He emphasized that Prime Minister, Shri Narendra Modi is the brand ambassador of India’s handloom sector as he is seen wearing some of the artistically woven clothes. He said that during PM’s visit to other nations, mostly Indian handicraft products are gifted. Similar practice is being followed by nearly 200 Indian Missions abroad. Shri Goyal said that the Ministry of Textiles has a database of 30 lakh artisans and if we could focus on increasing the income of the artisan by even Rs. 1000 per month, it could lead to transformation in their lives. He suggested that artisans can be linked with GeM. Also, the mandatory clause of GST registration could be worked upon so as to bring the artisans on board on e-commerce platforms. Emphasizing the big opportunity created by Free Trade Agreements with UAE and Australia, the textile minister suggested that the artisans could be provided a platform in the Dubai Expo Centre for showcasing their products and organizing buyer-seller meets. He also complimented EPCH work for past three and a half decades to promote & boost exports. The award function recognise exporters for their outstanding performance during the years 2017-18 and 2018-19. The evening saw a huge gathering of India’s handicraft exporters from all parts of India along with Mr. Raj K Malhotra, Chairman, EPCH; Vice Chairman, EPCH – Shri Kamal Soni; Mr. Rakesh Kumar, Director General, EPCH and Chairman, India Exposition Mart Ltd.; members of EPCH’s Committee of Administration. Shri Goyal along with Smt. DarshanaVikramJardosh, Union Minister of State for Textiles and Railways gave away the awards. The occasion was also graced by Shri Upendra Prasad Singh, Secretary, Ministry of Textiles and was presided by Shri Shantmanu, IAS, Development Commissioner (Handicrafts), Ministry of Textiles, Govt. of India. Smt. DarshanaVikramJardosh, Hon’ble Union Minister of State for Textiles and Railways said that it’s significant to promote and support the artisans. She applauded that EPCH through its exhibitions ensures promotion of small artisans. Shri Upendra Prasad Singh, IAS, Secretary, Ministry of Textiles, Govt. of India, congratulated the winners. He said even during COVID pandemic, Handicrafts export continued to grow. He also emphasisied that nearly 70 lakh people in the country are directly or indirectly connected with Handicrafts. Shri Raj Kumar Malhotra, Chairman, EPCH informed that a total of 126 awards were given to 61 winners of the year 2017-18 and to 65 winners of the year 2018-19. A special commendation award was also given. The Awards, instituted in 1989, are organised in four broad categories – Top Export Award, Product Group-wise Awards, Regional Awards and Woman Entrepreneur Award together totalling to 39 Trophies, 3 Platinum Performer Certificates, 72 Merit Certificates, 11 Women Entrepreneur Awards and 1 Special Commendation Award. The objective of awards is to create a sense of healthy and wholesome competition amongst exporters. Over the years, these have become a coveted recognition amongst the handicrafts exporters as more and more strive to achieve a place in these awards. Shri Rakesh Kumar, Director General, EPCH thanked the dignitaries for their presence, encouragement & support and added that due to the pandemic, the export awards function is being held after a gap of three years, hence, honoured awardees are for two consecutive years. EPCH is a nodal agency for promoting exports of handicrafts from the country to various destinations of the world and projecting India’s image abroad as a reliable supplier of high-quality handicrafts goods & services. The Handicrafts exports during the year 2021- 22 was Rs. 33253.00 Crores (US $ 4459.76 Million) registering a growth of 29.49% in rupee term & 28.90% in dollar terms over previous year informed by Shri Rakesh Kumar, Director General, EPCH. The Export Promotion Council for Handicrafts (EPCH) has been organizing Export Awards since 1989 to felicitate exporters who have contributed significantly to the development as well as to the exports of handicrafts from the country. The institution of these awards is said to be one of the vital steps taken by EPCH. The objective of the Handicrafts Export Awards is to create a sense of healthy competition amongst exporters and to encourage wholesome competition through the institution of such prestigious awards. The Awards have become a coveted recognition amongst the handicrafts exporters and more and more exporters strive to receive this award. The same has also led to the quantum jump in the exports of handicrafts from the country. The export awards are given based on the export performance of the exporters duly certified by the Chartered Accountant and are selected by Export Awards Selection Committee chaired by the Development Commissioner (Handicrafts) or his nominee (Addl. Development Commissioner-Handicrafts) and members of the Committee of Administration of the Council. Five types of awards are given to the exporters of handicrafts based on their export performance viz. Top Export Award (All Handicrafts); Top Export Award (Product Categories), Women Entrepreneur Award, Merit Certificates for Excellent Export Growth and Regional Export Award

Source: PIB

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Euratex’s ReHubs initiative to tackle Europe’s massive textile waste problem

ReHubs, an initiative by the European Apparel and Textile Federation (Euratex) launched in 2020, aims to tackle Europe’s huge textile waste problem - currently, 7 to 7.5 million tons of it are generated (mainly by private households) but only about 30 to 35 percent are collected. The European waste law wants to change that and accordingly, all EU member states must separately collect textile waste in the next 2.5 years. While some countries are designing schemes to face the waste collection challenge, currently no large-scale plan exists to process it - and this is where Euratex’s ReHubs initiative comes in as it plans to pursue fibre-to-fibre recycling for 2.5 millions tons of textile waste by 2030.

Textile recycling is lucrative According to the ReHubs Techno Economic Master Study (TES), the textile recycling industry could generate around 15,000 direct new jobs by 2030 in Europe, and increase the need for nearshoring and reshoring of textile manufacturing. This would result in economic, social and environmental benefits amounting to 3.5 billion to 4.5 billion euros by 2030. “Transform Waste into Feedstock”, ReHubs first project, aims at building up a 50,000 tons capacity facility by 2024, led by Texaid AG. It will focus on further developing and scaling such sorting technologies. “We assess that to reach a fibre-to-fibre recycling rate of around 18 to 26 percent by 2030, a capital expenditure investment in the range of 6 billion to 7 billion euros will be needed, particularly to scale up sufficient sorting and processing infrastructure,” estimates Euratex. In addition to “Transform Waste into Feedstock”, three further projects have been announced: to increase the adoption of mechanically recycled fibres in the value chain, to expand capacity by solving technical challenges for thermo-mechanical textiles recycling, and to create a capsule collection with post-consumer recycled products.

What is the ReHubs initiative? The ReHubs initiative consists of three stakeholder groups: a business council pooling together pioneering companies to perform the TES study; a stakeholder forum with a wider pool of business, research and academia players, which has been gathered twice to share high-level information and to support future collaboration, and a Euratex task force with 14 national associations to review progress of the ReHubs initiatives and to align with policy and industry developments and on a national level. Euratex launched the ReHubs initiative in 2020 to promote collaboration across the extended textile value chain and to consider all perspectives on chemicals, fibre and textile making, garments production, retail and distribution, textile waste collection, sorting and recycling.

Source: Fashion United

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Cambodia and Myanmar race to become the next apparel manufacturing hub

Cambodia has become the next popular destination for China’s processing trade business after Vietnam. As China battled a wave of Covid-19 flare-ups over the past few months with strict control measures, the widespread disruption of business operations fueled concerns over an accelerating exodus of manufacturing. From October 2021 to March 2022, China lost around 5% of its textile export orders, 7% of its furniture and 2% of its mechanical and electrical export orders from the United States to the 10-member Association of Southeast Asian Nations (ASEAN), especially Vietnam, according to U.S. customs data. A shift of factories away from China has been underway for years as China’s labor costs rise. Countries in Southeast Asia and South Asia such as Vietnam and India have become the top alternatives for their abundant and cheap labor forces. “Vietnam has been a very popular destination to take over export orders (from China), but Myanmar and Cambodia are catching up in recent years,” said Wang Huanan, an industry insider with 20 years of experience in shipping and world trade. The relocation has been driven by lower costs and the trade war between China and the United States. However, it’s barely dented China’s manufacturing base as the moves mainly involved low-end processing, experts said. Meanwhile, Chinese companies and investors have been deeply involved in manufacturing relocation, which will in turn support the country’s industrial upgrade at home. According to research by Everbright Securities, the factory relocation to Southeast Asian countries — Vietnam in particular — is largely concentrated in textiles, furniture and lowend consumer electronics assembly. Vietnam has become an obvious alternative to China for the production of clothing and furniture. Authorities in the Cambodian and Myanmar governments have spared no effort in the race to attract foreign investment, introducing tax reductions and exemptions while offering policy incentives. In Cambodia, foreign companies are exempt from import and export taxes for one year and corporate income taxes for three to five years if they meet requirements set by the Cambodian Investment Board. The tax exemption period can be extended to nine years if the company is set up in the country’s special economic zone. The Myanmar government since 2012 has adopted a series of tax exemptions and preferential rights to foreign investment projects. Despite its low base, Cambodia’s export growth has accelerated and outperformed that of Vietnam so far this year. According to the country’s customs authority, Cambodia’s total trade volume reached $22.47 billion in the first five months of 2022, an increase of 19.7% from the same period last year. Total exports topped $9.41 billion, up 34.5% year-on-year. The top export goods were garments, leather goods and footwear. The U.S. is Cambodia’s largest export destination. From January to May, Cambodia shipped $3.73 billion of goods to the U.S., 57.7% more than a year ago. China is the country’s top source of imports. Shipments from China reached $4.47 billion, up 31.5% from the same period last year. After Vietnam, Cambodia has become the next popular destination for China’s processing trade business. It is following a development trail that Vietnam blazed almost a decade ago — taking over more low value-added manufacturing business from China to power rapid economic growth with strong exports. “Before 2018, there were only 190 Chinese apparel factories in Cambodia,” said He Enjia, president of the China Textile & Garment Association in Cambodia. “In 2019, about 40 new ones were set up, followed by roughly 75 more in 2021.” Although the growth of new Chinese-funded apparel factories is declining this year, the expansion of Cambodia’s garment industry continues, He said. Cambodia’s apparel industry has benefited from the trade war between China and the U.S., in which special tariffs were imposed on Chinese textiles in 2018. Chinese textile enterprises have since accelerated the relocation of production to Cambodia to avoid the extra duties. Since 2021, Cambodia has experienced the arrival of another wave of Chinese-funded garment and textile factories due to political turmoil in neighboring Myanmar and the severe pandemic situation in Vietnam. In 2007, Cambodia’s exports to the U.S. were $1.88 billion, according to UN Comtrade. By 2021, the total nearly quadrupled to $7.49 billion, according to Cambodian Customs. Exports including leather goods, footwear, furniture and electronics have grown from almost zero in 2007, according to Zhang Huafeng, Los Angles chief representative at Transfar Shipping Pte. Ltd. “Many industries in Cambodia started from scratch and have developed rapidly in recent years,” Zhang said. Myanmar is another popular destination for Chinese garment factories shifting production. Shi Kun, president of the Chinese Textile & Garment Association in Myanmar, told Caixin that 70% of garment factories in Myanmar are Chinese-funded. Myanmar’s access to preferential tariff treatment from the U.S., the EU and Japan has attracted Chinese enterprises. The number of garment factories in Myanmar increased from fewer than 100 in 2012 to more than 500 in 2019, according to Shi. Between 2012 and 2019, average annual growth of Myanmar’s garment exports exceeded 18% and topped 50% in some years. The country’s garment exports totaled more than $5 billion between 2018 and 2019, according to Shi. The rapid growth was interrupted by the pandemic in 2020 and political turmoil the following year. According to Myanmar’s Ministry of Commerce, Myanmar’s total foreign trade value dropped 19.5% year-on-year during the 12 months since October 2020. The processing trade sector, including garments, luggage and travel bags, shoes and hats, fell by 21.4%. But signs of recovery appeared after October 2021, and the growth of Myanmar’s garment trade is resuming, Shi said. “With the political situation stabilizing, Myanmar will see more investment in the garment industry,” Shi said. Despite the rapid growth of garment manufacturing in Cambodia and Myanmar, the two countries still mainly focus on the final portion of a long industry chain by making clothing from imported materials. “Garment factories in Cambodia and Myanmar import 95% of their raw materials from abroad, of which more than 60% are from China,” He said. By comparison, Vietnam has established a more complete chain of business including weaving, dyeing, printing and garment making. More than 40% of the fabrics and accessories are already available locally in Vietnam, He said. Compared with garment production facilities, investment in the upstream portions of the clothing industrial chain such as textile and dyeing is much more expensive in terms of equipment and workforce. Some Chinese textile and garment accessory manufacturers visited Myanmar in 2019 to consider investment, but the plans were dropped due to concerns over the pandemic and political risks, according to Shi. “From a short-term perspective, apart from the garment manufacturing industry, Myanmar is not an ideal destination for most other industries, since the entire economic base and environment are not yet ready,” Shi said. The high cost of water and electricity in Cambodia is another concern blocking upstream manufacturers from moving productions there, according to He. Electricity costs about O.14 U.S. cents per kilowatt-hour (kWh) in Cambodia, compared with 7 to 9 cents per kWh in Vietnam. As labor costs in Vietnam rise, Cambodia and Myanmar have become increasingly popular candidates to take over manufacturing capacity. But costs in the two countries are also rising. “Before 2012, Cambodia’s labor costs were much lower than Vietnam’s, with a basic salary of $61 a month,” He said. “It has now risen to $194 a month, tripling in three years.” He said wage increases in Cambodia, largely driven by political factors, are irrational and may have affected Cambodia’s competitiveness.

Source: Khmer Times

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Sri Lankan apparel & textile exports see dramatic rise, thanks to US

Sri Lankan merchandise exports, including apparel and textile exports, have shown dramatic improvement after the disruption of financial crisis and unrest. Apparel and textile export jumped over 30 per cent in May 2022 on year-on-year basis. The US alone accounted for 43.24 per cent of all apparel exports made by the island country in JanuaryApril 2022. Sri Lanka’s exports crossed the $5-billion mark in the first five months of this year. Earnings from the merchandise exports increased by 9.9 per cent year-on-year to $980.2 million in May 2022. The earnings from export of Apparel & Textiles, Coconut based products and Electrical & Electronic Components increased significantly. Textiles and apparel exports increased by 30.1 per cent y-o-y to $482.7 million in May 2022. The export to the US, Sri Lanka’s single largest export destination, increased by 25.02 per cent y-o-y to $266.42 million. The cumulative textile and apparel exports during January-May 2022 increased by 16.3 per cent y-o-y to $2,400.6 million. In 2021, 42.06 per cent of $4.973 billion apparel exported by Sri Lanka were destined to the US, according to Fibre2Fashion’s market insight tool TexPro.

Source: Fibre 2 Fashion

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Regenerated fibre for an annual 100 million t-shirts

Finland leads in the creation of a circular economy-based textile value chain with another €400 million project. During Techtextil 2022 in Frankfurt, Infinited Fibre Company announced plans to build a commercial-scale factory to produce its regenerated textile fibre. It will be sited at Stora Enso’s mothballed Veitsiluoto paper mill in Kemi, a Finnish city on the northern shore of the Baltic Sea. The cost of the investment is estimated at €400 million, and is expected to create around 270 jobs in the area. The annual fibre production capacity of the planned factory will be 30,000 metric tons – equivalent to the fibre needed for about 100 million T-shirts. Infinited’s technology enables cotton-rich textile waste to be transformed into a versatile, high-quality regenerated textile fibre called Infinna, which looks and feels like cotton. Major international fashion and apparel companies – including Bestseller, H&M Group, Zara’s parent company Inditex, Pangaia, Patagonia, and PVH Europe, which is known for the Tommy Hilfiger brand – have already committed to Infinna purchases through multiyear agreements as they look for materials that enable the industry to shift towards circularity. Infinited expects to export most of the output of its planned factory, which makes Kemi an ideal location – the city’s port serves as very efficient link to the rest of the world. Infinited will convert a building housing a discontinued paper production line into an Infinna fibre factory. Both the factory engineering and project implementation, as well as the related financing negotiations, commenced at the beginning of the year and are progressing well. It has also agreed on the provision of energy and water related services with utility infrastructure company Nevel. The factory is expected to be operating at full capacity by 2025. “Circularity is at the heart of our business,” said CEO and co-founder Petri Alava. “We aim to make use of existing resources in all that we do, which makes the historic Veitsiluoto industrial site a great fit for us. At the same time, we will be creating new export products and jobs. Finland has solid bioeconomy know-how and is very supportive of circular economy innovations. We see these as major strengths that will enable Finland to become a leader in the creation of the new, circular economy-based textile industry value chain.” Infinited selected the Veitsiluoto industrial site after reviewing dozens of potential premises across Finland. Decisive factors supporting the decision included the site’s excellent existing infrastructure, the availability of fresh water, renewable electricity and energy, efficient port services and local skilled labour. “We are pleased to get part of the Veitsiluoto site utilised and happy about the investments and jobs that Infinited is set to bring there,” said Stora Enso CFO and Finland country manager Seppo Parvi.

Source: Innovation in Textiles

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Vietnam: Local enterprises lack materials due to China's 'Zero COVID' policy

Tân Phú Plastic Company produces safe products to serve the local market. The Zero COVID policy in China means many Vietnamese producers lack input materials. — Photo courtesy of the firrm While many exporters and producers had orders for 2022, they are worried about a possible shortage of production materials because of supply disruptions from China. The worst sufferers were the electronics, wood, textiles, and footwear industries. According to the Ministry of Industry and Trade (MoIT), China was an important market for the export and import activities of Việt Nam as it provides the majority of input materials for Việt Nam's production, especially electronic components, machinery parts, fabrics and chemicals. MoIT said from 50 to 55 per cent of raw materials and accessories for the textile, garment, and footwear industries originated from China. The country was currently implementing the "Zero COVID" strategy, which forced many factories there temporarily stop production to fight the pandemic. The import-export activities in the neighbouring country were affected a lot by the shortage of containers at ports. Phan Thị Thanh Xuân, deputy chairwoman and general secretary of the Việt Nam Leather, Footwear and Handbag Association, said businesses in the industry had to slow down export deliveries because their Chinese partners lacked empty containers for transporting raw materials and accessories. She added the supply of raw materials from China also decreased because many factories had to suspend operations. Nguyễn Đức Minh, director of Đức Minh Rubber Company and chairman of the HCM City Rubber Plastics Association, said: "The Việt Nam's rubber industry depends on up to 70 per cent of raw materials, especially chemicals. "However, the supply from this market is being blocked due to the Chinese side's implementation of Zero COVID. If the supply from this market continues to be interrupted, enterprises are forced to import from the Japanese and Korean markets at 15-20 per cent higher prices. With this input material price, enterprises are at risk of not being profitable, making their products difficult to compete in the world market." Phan Anh Tuấn, general director of Tân Phú Plastic Company, said besides the Zero COVID, the escalating fuel prices forced the plastic materials prices to go up, influencing his firm's input source. Tuấn said though operation costs were also put higher due to higher logistic prices, the Tân Phú company still kept prices of all products stable to support consumers. Tuấn said: "We keep modernising the production process to improve products and cut costs the most." The company also aimed to use safe and high-technology materials so that the consumers could reuse them to protect the environment and avoid more consumption of plastic. Tuấn said they organised a campaign called "Live green, live Japanese style" to encourage customers to exchange the old products for the new ones instead of buying new products. While the plastic company seemed to find a way to fix its problem, the textile and garment, an industry with a lot of imported materials, was still struggling. Local media reported that Đáp Cầu Garment Corporation, specialising in garment processing for major markets and imports up to 80 per cent of raw materials from China, got orders until September, but it also had to postpone the delivery of many orders due to the lack of raw materials. The company's leader said: "For orders that do not have enough materials, we have to renegotiate the delivery time. However, the delivery time cannot be too slow because that makes businesses face many payment risks." In this case, the MoIT asked local enterprises to adapt to an appropriate strategy. "The most important task of enterprises at this time is to restructure production soon, find alternative sources of supply to offset the shortage of the current raw materials and outdated equipment. Enterprises also need to promote linkages, support and use madein-Việt Nam products in production and business activities to reduce dependence on external resources," the MoIT said. The ministry asked them to find new sources of supply outside of China besides negotiating with partners to share risks and extend the delivery time, but Nguyễn Đức Thắng, head of Đáp Cầu Garment Company, said: "It's not an overnight issue because China is the world's factory, supplying many raw materials and accessories at reasonable prices. In addition, most of the raw materials Đáp Cầu company imports are pre-assigned by partners." Vũ Đức Giang, chairman of the Vietnam Textile and Apparel Association, said that it was necessary to effectively promote the role of foreign trade counsellors to strengthen the search for markets to supply raw materials along with supporting them to access to a reliable source with good prices. He said: "This not only increases competitiveness for local enterprises but also minimises the risks of dependence on a supply market." A representative of the MoIT's Department of Industry emphasised that in the long term, there must be solutions to develop supporting industries and several important primary material industries in order to minimise dependence on imported raw materials, components and input accessories.

Source: EIN News

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