If all goes on the expected lines, textile mills in the southern States are expected to import more cotton this year (October 2016 to September 2017). They are looking at promoting Colombo as a hub where international sellers and shippers can stock cotton and supply to the mills in south India and also to buyers in other Asian countries. Such a project is expected to bring down the transport cost substantially for the mills in the South compared to the cost incurred now for moving home-grown cotton from Gujarat or Maharashtra to south India. It will bring stability to cotton prices in India, say industry sources here. Textile mills in Tamil Nadu now buy international cotton based on specifications quoted to them. If cotton is stocked in Colombo, they can have a look at the cotton too. A seven-member delegation from Southern India Mills’ Association visited Sri Lanka recently and had discussions with Sri Lanka Ports Authority officials.
P. Chinnasamy and A. Ilavarasu, who were part of the delegation, told The Hindu on Saturday that the members saw the facilities at Colombo port, the Free Trade Zone warehouse, and logistics facilities. “We have sought 30 days storage of containers with free demurrage,” Mr. Chinnasamy said. Cotton not only from Africa but from other countries can be stored at the Colombo port to be shipped to textile mills in south India and other south Asian countries too, based on demand. “We have invited a delegation to visit Coimbatore to have a meeting with the textile mills and cotton traders and sellers. We hope the facility will be operational by December,” he said. According to Mr. Ilavarasu, about 50 per cent of the country’s spinning capacity is in south India. “But, logistics cost is against us.” Now, shippers bring the cotton to Malaysia and supply to the buyers in south Asian countries. The transit time is three to four months. This will be decreased if cotton is stocked in Colombo. Traders also point out that cotton merchants need the flexibility of selling to Indian and other markets throughout the year. Countries such as Bangladesh and Vietnam buy imported cotton throughout the year. The advantage of Colombo is the connectivity to Karachi, Chittagong, Singapore and Vietnam.
SOURCE: The Hindu
Union Textiles Minister Smriti Irani today emphasised on the urgent need for branding Indian silk both at home and abroad so that its products find more overseas buyers and yield better value realisation. The minister was speaking at the inauguration of the 5th India International Silk Fair being held here on October 15-17. The Indian Silk Export Promotion Council expects a business of over $50 million from the three-day exhibition, an official statement said. The minister saw the future of Indian silk industry as “very bright”. Minister of State for Textiles Ajay Tamta, Central Silk Board Chairman K M Hanumantharayappa and Indian Silk Export Promotion Council Chairman T V Maruthi were also present on the occasion. Nearly 110 exhibitors from different parts of the country have displayed a wide range of products of silk, silk-blended items such as garments, accessories, made-ups, carpets, sarees and interior decoratives of silk and silk-blend fibres.
SOURCE: The Financial Express
With pick up in demand in the new and traditional markets, handicrafts exports will grow by about 10 per cent to Rs 23,560 crore in 2016-17, EPCH today said. Exports Promotion Council for Handicrafts (EPCH) Executive Director Rakesh Kumar said that demand in regions like the US, Europe, Latin America and Middle East is growing and it will help in recording a healthy growth figures in exports. For the April-September 2016 period, the exports reported a growth of 18.25 per cent year-on-year to Rs 13,005.35 crore. "The promotional efforts being undertaken towards enhancing our exports in these markets would certainly result in increase in exports not only in the traditional markets but also in the emerging markets. This year, we are targeting the export figure of Rs Rs 23,560 crore," Kumar told PTI. To boost the exports, the council has sough enhanced duty benefits for the sector, he said.
Talking about compliance issues in the sector, he said the council is taking lead in this direction by creating awareness through various seminars and other means. Further the council is participating in 30-35 exhibitions and fairs abroad every year to promote the items in global markets. "These participations remain both in traditional and not- traditional markets for Indian handicrafts. The participation in exhibition abroad is very much necessary to create awareness, brand image of the sector and to secure business for the sector," he added.
SOURCE: The Economic Times
GST will usher in a new regulatory regime for India’s exports. For the manufactured product exporters, the most significant impact would be the increased requirement and blockage of working capital. For manufacturing a product, a firm buys locally or imports raw material and machinery. The current export schemes allow firms to buy these without payment of applicable duties through ab-initio exemption or subsequent refund of duties. The proposed GST system mandates that all duties must be paid at the time of a transaction while refund for these can be obtained after exports. This means the exporter will have to arrange money for the inputs, manufacturing and payment of duties and taxes.
Export schemes
The current system of export schemes has evolved over the decades. For example, the Advance Authorisation Scheme that allows duty-free sourcing of raw material is in existence since the 1970s. The Export Promotion Capital Goods (EPCG) scheme that allows duty-free sourcing of machinery was introduced in early 1990s. Both schemes have been used extensively by engineering, electronics, automobile, chemical, petrochemical and pharmaceutical sectors to build an export base. The Special Economic Zones (SEZ) scheme, though introduced in 2005, was already in existence in some form since the mid-1960s.
Jaya’s story
Most of India’s 130,000 exporters who currently use these schemes must comprehend the post-GST impact of the changes. We do it through the example of Jaya, a medium-sized garment exporter from Coimbatore. Jaya just got an export order from a buyer in Germany for supply of 10,000 linen shirts at $100 each. We will have a look at the current export options available to Jaya and how these will change post GST. Jaya will need to buy linen fabric and manufacture shirts from it. She can either import or buy it locally. Her manager tells that the total customs duty would be 24 per cent of the import value of the linen.
Jaya can use the Advance Authorisation Scheme for import of the required quantity of linen from Italy. Currently, she need not pay any duty on imports. However, post-GST, while she will get an exemption from payment of only basic customs duty (7 per cent), she has to pay Integrated GST which (let’s assume) will be around 18 per cent of the import value. She can get the refund of this duty only after exports and realisation of money. Considering a value addition of 15 per cent and cost of capital at 12 per cent, Jaya’s working capital equal to 15.65 per cent of export value will be blocked for six to 12 months. Post GST, Jaya cannot use the two regularly used variants of Advance Authorisation. One, currently she can buy linen from a domestic manufacturer who will supply without payment of duty. Post GST, the domestic manufacturer cannot supply without charging duties. Two, currently, Jaya can buy linen from domestic market paying full duty, manufacture the shirts and export. She can subsequently use the authorisation to import linen without payment of duty. Post GST, this option will not be available.
Jaya needs to buy textile machinery for making quality garments. She currently imports duty-free using the EPCG scheme. In return, she has to undertake to export garments six times the value of the duty saved amount in six years. Alternatively, if she buys machine from an indigenous manufacturer, she will have to export 25 per cent less compared to what she would have had to had she imported the machine. This way EPCG scheme nudges exporters to use indigenous machines. Post GST, imports under EPCG will become expensive. She will have to pay IGST which may be around 18 per cent of the import value. This money may be blocked up to six years, the time allowed under EPCG scheme to complete exports. For an import value of Rs. 100, if Jaya takes a loan at 12 per cent for paying IGST of Rs. 18, she may have to return about Rs. 35.5 after six years. This high additional cost will affect the viability of many enterprises. Worse, since capital goods do not get consumed in the process, it may be difficult to link specific capital goods imports with the specific exports and in that case no GST refund may be a likely scenario. Another option currently available to Jaya is buying duty paid linen from the domestic market and using the drawback scheme for obtaining refunds of duties paid. Currently, the drawback scheme largely refunds the basic custom duty and other central duties paid on buying inputs. However, post GST, the schemes will refund basic custom duty only. The other central duties will be refunded through the GST mechanism on a case-to-case basis.
SEZs, EOUs, deemed exports
Currently, the SEZ developer and units can import their requirements duty-free. Also, the supplies made by the domestic units to SEZs are considered exports and hence are free from payment of taxes and duties. Not anymore. The model GST law defines exports as taking goods and services out of India to a place outside India. And India is defined to include the Exclusive Economic Zones lying at 200 nautical miles beyond territorial waters. Since SEZs are within Indian territory, these would be reduced to the status of a normal domestic firm. This means, no duty or tax exemptions on imports or exports would be admissible. Imports into SEZ will attract IGST while supplies to SEZs will attract CSGT and SGST or IGST. With average value addition at SEZ already less than 10 per cent, the new law may make many SEZs unviable. The GST will also affect the supplies defined as deemed exports. Currently, the supplies to projects under International Competitive biddings (ICB), mega power plants and World Bank funded projects are exempted from central taxes. This has been done to enhance competitiveness of Indian firms participating in global tenders or large scale bids. Post GST, these supplies, currently termed as deemed exports will become taxable where no refund would be available.
GST will block working capital
The provision of no exemption and only refund will lead to blockage of about Rs. 1,85,500 crore annually for the manufactured goods exporters. This figure considers export value of $200 billion, an average 30 per cent value addition over the inputs and cost of capital at 12 per cent. Capital at 12 per cent in India is way too high compared to 0-1 per cent in most developed countries. And secondly, most SMEs can’t get capital even at 12 per cent. The more sophisticated a product, higher is the need for external sourcing of inputs, leading to higher requirement and blockage of working capital.
Resolving working capital issue
The working capital blockage issue can be resolved without compromising the integrity of the GST model. Allow firms to pay tax on transactions leading to exports through e-currency. This would be of the nature of an IOU where a firm would agree to set off its IOUs with the actual payment within an year or at the time of the completion of exports, whichever is earlier. A firm can be allowed to use IOUs equal to the value past year’s export performance. This solution keeps the current GST framework of making payment first, refund later, intact.
SOURCE: The Hindu Business Line
Finally, after a debate that went on for over half a decade, the Goods and Services Tax (GST) Bill has been passed. This indirect tax Bill, which is expected to result in a uniform tax across goods and services, except petroleum, alcohol, tobacco and selected products, will change the way industries, logistics and supply chains operate. While teething troubles are expected in various areas, including the definition and valuation of goods and services under various circumstances, the Bill, set to come into force on April 1, 2017, will optimise production, inventory and distribution nationally. GST’s input tax credit system, where a business can avail tax benefits on tax paid to its suppliers and other service providers, should give organised players a greater advantage. The Centre’s ‘Make in India’ campaign along with investments in transportation networks (road, rail, coastal and inland waterways) is expected to give further impetus to GST. In the long run, the creation of a multi-modal transport regulatory authority by the Centre should complement GST.
Besides optimising the production and distribution of goods and services, the GST Bill will also help speed up cargo movement. A 2015 joint report by the Transport Corporation of India and the Indian Institute of Management – Calcutta (TCI-IIM-C) shows that the stoppage expense (average expense incurred due to the stops along the way such as check-posts and customs) per tonne-km has increased from Rs. 0.16 per tonne-km to Rs. 0.28, a 75 per cent increase between 2011-12 and 2014-15. The levy of duties by State authorities at check points is one of the main reasons for this rise in cost. This will come down once the Bill comes into force and should further increase the speed of cargo movement.
Over the past one year, the movement in stock prices of logistics players has been mixed. Transport Corporation of India and Allcargo Logistics have gone up by 9 and 13 per cent, respectively, while the prices of GATI and VRL Logistics were beaten down by 19 and 16 per cent, respectively. Similarly, the price to earnings ratio (trailing 12-month earnings) of major stocks such as Allcargo Logistics (16 times), GATI (31 times), VRL Logistics (28 times) and Transport Corporation of India (16 times) is lower than their three-year average. This indicates that the positive impact of GST may not have been completely priced in yet.
Warehousing gains, valuation hurdles
Currently, goods incur 2 per cent central sales tax (CST) when they are manufactured in one State and sold in another. To avoid this, industries transfer the manufactured goods to warehouses in the State from where the sale of goods takes place. This helps them avoid CST while simultaneously availing the input credit that can be obtained through value-added tax. But this makes them incur extra storage costs. With a fixed GST rate that is expected to vary anywhere between 18 and 22 per cent, coupled with virtual melting of State boundaries, the numerous smaller warehouses in many locations are expected to be consolidated into bigger ones. Manufacturing companies that own many small warehouses and third-party logistics providers such as Transport Corporation of India, VRL Logistics, and GATI, among others, are likely to move towards this hub-and-spoke service delivery model wherein distribution takes place from a large centralised warehouse to surrounding States. The economies of scale achieved through this consolidation will reduce variable costs, enable automation and improve operational efficiency. Connectivity of these warehouses to consumption centres will improve with the development of multi-modal transportation systems.
The Transport Corporation of India is already in the process of building GST-ready warehouses across four locations (Nagpur – 1.65 lakh sq ft, Hyderabad – one lakh sq ft, Chennai – 45,000 sq ft and NCR – 2.5 lakh sq ft) in India. GST should also favour VRL Logistics, a major player in parcel service and warehousing solutions, which intends to scale up operations in its existing trans-shipment hubs and increase focus on north, central and eastern regions. Similarly, GATI, a major logistics player, with more than five million sq ft warehouse capacity is also likely to improve its efficiency. The company is gaining strong traction with its parcel and e-commerce business. The recent quarter ending June 2017 saw GATI’s parcel and e-commerce revenue grow 49 per cent and 28 per cent, respectively. However, valuing goods and services for the calculation of GST can be a challenge. A case in point is the difficulty in arriving at the gasoline cost, which forms a major fraction of total cost incurred by freight operators but is exempt from GST.
Containerisation – in full throttle
Major domestic freight players like AllCargo Logistics, Navkar Corporation and Container Corporation of India are expected to have a positive impact from GST implementation. Over the last three years, twenty-foot equivalent container volumes for Allcargo Logistics and Navkar Corporation grew by 17 and 12 per cent respectively. But, in the case of CONCOR, port congestion and haulage charges were a dampener for container volume growth. These companies, operating their own container freight stations (CFS) and inland container depots (ICD), offer a wide range of services, including customs clearance and handling and storage of containers (both export and import). CFS is located near ports while ICDs are located in the hinterlands. ICDs help in decongesting traffic away from the ports.
Total container volume throughput in India during 2015-16 stands at 11.6 million twenty-foot equivalent units (TEU), an 8 per cent increase compared to the year earlier. With containerised transportation expected to double over the next five years and the share of trade through containerised transportation also set to increase, GST will add more impetus. With larger storage hubs, truck operators will transport higher volumes (full truck loads) thus optimising operations. Organised big players should be able to take advantage of these changes. Allcargo Logistics, a diversified player offering storage, and custom clearance services for cargo at major Indian ports, is one amongst the top five CFS operators at JNPT, Chennai and Mundra ports. Its presence in coastal shipping and a land bank of more than 200 acres should also aid its expansion plans.
Navkar Corporation, a leader in containerised logistics, has warehouses spread over an area of five lakh sq ft. Its strong rail connectivity to ICDs, logistics parks and proximity to industrial clusters places it in an advantageous position. Container Corporation of India (CONCOR), a Navratna company, which has more than 60 CFS/ICDs accounting for more than 70 per cent of Indian Railways’ container traffic, should strengthen its industry leadership position over the next three years. Over the next couple of years, CONCOR plans to set up around 20 multi-modal logistics parks across India and operate private freight terminals.
Transit time reduction
Trucks in India currently travel an average of about 280 km per day in comparison to those in the US which travel 800 km per day. The report on revenue neutral rate headed by India’s Chief Economic Advisor Arvind Subramanian indicates that implementation of GST can add an additional 164 km truck distance per day, which is close to 60 per cent increase from the present day scenario. The argument is reinforced by the TCI-IIM-C report which shows that though the average fuel mileage has improved over the last few years, the nation incurs a cost of close to $6.6 billion annually due to transportation delays.
After GST implementation, reduced border checks and paper work is expected to cut transportation cost by 20-30 per cent. The increased savings should aid in improvement in operating margins for logistics players. VRL Logistics, a dominant service provider operating close to 70 per cent of its parcel services at less-than-truck load, uses 3,872 owned and third-party hired vehicles for last mile connectivity. We can expect transportation to take place at full truck load with GST roll-out. This favourable factor, along with the low net debt to equity ratio of around 0.5, should assist its plans for heavy investment in fixed assets creation across 28 States and four Union Territories. The reduction in transport time will also help Indian container companies. Further, the Centre’s heavy investments in dedicated freight corridors will also help in faster movement of goods transporters. The increased speed of transportation will be a boon to the cold supply chain industry. Snowman Logistics, the largest company in this segment with a current market cap of more than Rs. 1,000 crore, stands to gain. The company had a year-on-year revenue growth of around 18 per cent in 2015-16. Besides, CONCOR and Gati Kausar, a division of GATI operating in the cold chain industry segment, have plans to increase investment in this space.
Tax structure implications
Currently, majority of business-to-business (B2B) suppliers make use of third-party logistics providers. Post-GST, the expected increase in service tax to 18 per cent from the current 14.5 per cent, is likely to reshape the procurement practices between suppliers, third-party logistics players and downstream manufacturers. In the B2B segment, the downstream manufacturer could expect the supplier to bear some of this cost escalation. Some of the larger manufacturers could consider investing in a captive transportation fleet. This will decrease the cost incurred in paying the intermediate third-party logistics player. The revenue and margins for companies such as TCI, which operates in the B2B space, may hence come under pressure. But businesses may still depend on third-party logistics providers for the supply of essential spare parts that are needed at short notice. In the case of the business-to-consumer (B2C) segment, demand fluctuations and dispersed customer base will dissuade manufacturers from incurring high fixed investments. Here, we can expect third-party players to continue offering their services.
IMPACT
SOURCE: The Hindu Business Line
The 8th BRICS Summit concluded here on Sunday with Prime Minister Narendra Modi calling upon leaders of the group of emerging economies to double the size of intra-grouping trade to $500 billion by next five years. "In 2015, intra-BRICS trade stood at about $250 billion. We should set ourselves a target to double this number to $500 billion by 2020," Modi said addressing the BRICS (Brazil, Russia, India, China, South Africa) leaders plenary here. "This requires businesses and industry in all five countries to scale up their engagement. And, for governments to facilitate this process to the fullest," he said. "Our agreement on a tax and custom cooperation framework is a good start," he added, referring to an outcome of the summit here.
Declaring that in a world of new security challenges and continuing economic uncertainties, BRICS stands "as a beacon of peace potential and promise", the Indian Prime Minister said that the five-nation group's work holds much meaning for the developing world. "In the past year, BRICS have played an active role in shaping the global agenda for change and development. Our association with Agenda 2030, the Paris Climate Agreement, and the Addis Ababa Action Agenda on Financing for Development has been purposeful and productive. "And, we remain at the forefront of pushing change in the global governance architectures. BRICS should push for empowering the global governance institutions to reflect today's reality," he added. At a meeting earlier in the day, Modi exhorted the BRICS Business Council to work with member countries for strengthening mutual trade and said events like the first BRICS Trade Fair help to generate greater business awareness and commercial exchanges. "We count on the BRICS Business Council to work with us to achieve our common aim of strengthening mutual trade, enhancing business opportunities, building investments linkages, promoting innovation and removing bottlenecks to intra-BRICS commerce," Modi said at a meeting of the leaders with the BRICS Business Council. "India hosted the first BRICS Trade Fair in New Delhi two days ago with active participation from all your countries. Such activities must be promoted to generate greater business awareness and commercial exchanges," he added. The BRICS Business Council Report was also presented on the occasion.
In the report, the council has recommended the member countries to continue dialogue for a new rating agency for emerging economies. Besides, with a huge scope for intra-BRICS cooperation in infrastructure development and financing, the formation of a group of angel investors was also one of its key recommendations. With the expansion of the BRICS agenda, the council also emphasised on the need to enhance business cooperation in agriculture by way of sharing of best practices among members. Addressing the gathering, BRICS New Development Bank President K.V. Kamath said the lender is targeting an incremental revenue of $2.5 billion in the next year and that member countries would be approached to mobilise funds through bond markets. "Looking forward, we are targeting incremental revenue of $2.5 billion for the next year and we believe that this will be largely in the area of sustainable infrastructure, green infrastructure... we plan to raise $1.5 billion through bonds," he said. He also said that the NDB had begun the process of establishing its credentials as an institution which supports green and sustainable infrastructure. Kamath also said that the bank would seek to mobilise funds in the markets of the member countries, adding that there were plans to approach the bond market in India as part of the exercise. Talking to media later on the sidelines, Kamath said that the Shanghai-headquartered NDB, which has completed one year of operations, had approved loans to the tune of $911 million for development of the renewable energy sector in member countries.
SOURCE: The Economic Times
Sounding exuberant, veteran banker and New Development Bank (NDB) President K V Kamath has said everything is going right for India at present and the third largest Asian economy will witness a “sudden uptick” in fortunes soon. “Everything is going right… the government should keep the accelerator fixed firmly to the ground,” Kamath, who is credited for the growth of ICICI Bank into biggest private sector lender, told PTI here. “I would think the economy is set for a sudden uptick in 12-18 months,” he added.
Listing out reasons for his bullishness, Kamath gave a slew of positives including the control over inflation which is leading a “dramatic fall” in interest rates and passage of the crucial indirect taxation reform, GST. “I look at India very positively from several angles,” he said, adding that factors like foodgrain management reforms and deploying hidden wealth for productive purposes through the Income Disclosure Scheme (IDS) are also very positive. He said the rapid adoption of technology will only help through several applications, including when used for tax collections. The banker also said he does not see the high asset quality stress as a concern which will impede development.
Kamath, who took over as the first president of the Shanghai-headquartered NDB, said the bank promoted by the BRICS grouping is targeting to more than double its loan book in 2017. As against USD 1 billion which it expects to close 2016 with, NDB will have a book of USD 2.5 billion by end of 2017, he said. As it deepens its spread, the bank will focus on local currency borrowings, he said. It has already done a successful Yuan issue in China and is also looking to do a ‘masala bond’ issue early 2017 to raise rupee-denominated debt, he said. NDB is also in the process of ramping up its staff strength and shall see the overall employee base touch 300 people in the three years from present 50, he said. It is also setting up a regional office in South Africa very soon, he said. The bank is also in the process of getting an international rating soon, after which it will be able to raise money by issuing masala bonds, he said.
SOURCE: The Financial Express
The rupee turned weak by 12 paise to 66.83 against the dollar at the foreign exchange market today after the American currency gained ground following a spurt in demand from importers. Dealers said the dollar’s strength against some other currencies overseas on the prospects of higher US rates also weighed on the rupee, but a firm domestic equity market meant the losses were limited. On Friday, the rupee had staged a smart recovery from its three-week low against the US currency to close up by 23 paise at 66.71 on heavy corporate dollar sales as well as easing inflationary pressure. The benchmark BSE Sensex rose further by 129.61 points or 0.26 per cent to 27,803.21 in early trade.
SOURCE: The Hindu Business Line
Michael Scherpe, President of Messe Frankfurt France, has signed a partnership agreement with Karim Tazi, president of AMITH (the Moroccan Association for the Textile and Clothing Industries), to promote the Moroccan textile industry on an international scale, following a presentation on the clothing and textile sector in Morocco at Apparel Sourcing last month. The presentation entitled The clothing and textile sector in Morocco: performance, strategies, outlook provided an overview of the domestic industry and its potential for future growth, aimed at production managers attending the leading trade fair for sourcing finished products in clothing and fashion accessories. The eighth largest supplier of clothing and textiles to the European Union in 2015 with exports worth EUR 2.54 thousand million, 2.3 billion of which was clothing, the clothing and textile industry is said to be a key sector for socio-economic equilibrium in Morocco.
Back on track
Despite a rather sluggish European economic climate, Moroccan clothing and textiles are not merely holding their ground but have been back on track for growth for the last three years. In the first half of 2016, exports to Europe boomed by 8%. Morocco owes these excellent results, which contrast sharply with the dismal performance of other European producers (Turkey, Tunisia), to rallying the sector, setting clear and ambitious strategic objectives with the support of government bodies to improve the competitiveness of businesses, encourage integration of clothing and textiles, attract foreign investment, upgrade the ranges of products and services, develop the domestic market and diversify export markets. The outcome of greater cooperation between the profession and public authorities, the current textile plan is promising and bodes well for the future, with the involvement of the government agencies Maroc Export (CMPE) and Invest in Morocco (AMDI), as well as promoting the textile ecosystems, at AMITH, in order to realise national and international projects.
Apparel Sourcing
According to organisers, having grown to one hundred exhibitors, this edition of Apparel Sourcing Paris demonstrated a unique European offer for clothing production and accessories and was able to attract the interest of customers from as far away as USA. Praised by visitors for creating great networking opportunities, stimulating decision making and business negotiations, the show offered a diversity of services, products and skills. "Visitors noticed the increased presence of certain countries like Hong Kong, China and Vietnam, which drew a lot of attention and were very busy, but also the return of Morocco and Tunisia, which offer short lead times that are also used by a good number of visitors,” commented Michael Scherpe, President of Messe Frankfurt France. “Product ranges sourced from nearby countries, something that is certain to increase in the future since I have signed a strategic agreement with Karim Tazi, president of AMITH (the Moroccan Association for the Textile and Clothing Industries) to promote the Moroccan textile industry on an international scale. It goes without saying that we will expand our search for new sources of procurement, where each new supplier brings into play their stock of techniques, expertise and original skills as that conforms to buyers’ economic priorities.”
SOURCE: The Knitting Industry
Last Thursday, 13th October in Abuja, the Federal Ministry of Industry, Trade and Investment in collaboration with the Bank of Industry convened an intensively rewarding one-day Cotton, Textile and Garment (CTG) stakeholders’ forum. The Forum was to achieve the following: To stimulate patronage of locally made fabrics and made ups (tarpaulin) especially by the uniformed personnel including school, Institutions, nurses etc through linkage of fabric producers with Garment Manufacturers; to create domestic market by encouraging the patronage of locally made products by government ministries, government agencies, parastatals, the military, paramilitary and the private sector of the Nigerian economy; to ascertain quality and source of raw materials available locally to identify possible linkages of producers and end-users; and development of the garmenting sub-sector for more mass production. Thursday’s forum was the largest gathering of stakeholders since similar forum was convened by the former president Olusegun Obasanjo in 2002.
Since the inception of democratic rule, from Obasanjo era to Jonathan era and the present Buhari administration, federal governments have demonstrated interest in reviving the industry, many thanks to the advocacy of the union. I recall that 2002 could very well be declared the year of textile revival. President Olusegun Obasanjo that year specifically devoted a whole weekend forum to ‘TEXTILES’. The outcome was refreshingly optimistic and revolutionary in its proceedings, its revelations and its possible resolutions of the identified problems of textile industry. Faced with ‘naked’ statistics of factory closures then, by stakeholders, the President agreed as much the industry was on the verge of total collapse.
The President announced a number of policy initiatives that included temporary suspension of importation of all fabrics to the country. A new certification arrangement was put in place to ensure that imported fabrics meet certain Nigerian standard in terms of price, quality and health of the citizenry. Genuine imports could only pass through two ports, namely, Apapa and Tin Can ports for verification by customs. Imports outside these ports were treated as contraband to be auctioned at 20 per cent of market value or be destroyed on account of sub-standard and harmful effects on human lives. The relevant agencies, namely Standard Organization (SON), Customs and FIIRO were to ensure compliance with the new policy. There was a Presidential Task Force headed by the then no-nonsense FCT minister, Mallam El-Rufai charged with apprehending smuggled textile fabrics and burning them. All these measures helped in halting the factory closures and even improving the capacity utilization of the existing survived factories. The reopening of UNT Plc. in 2010 after three years of closure (with close to 1,500 direct jobs currently) was due to these cocktail of measures pushed by BOI, CBN and government. Will this historic forum make a difference in the official effort to revive the industry? The importance of industry cannot be overemphasised. The key to real transformation, economic recovery and sustainable mass job creation lies in manufacturing, beneficiation and value addition. Abuja Forum, once again, stressed the significance of CTG to economic diversification. It was resolved that it was time for the sincerity of purpose on the part of government and all stakeholders. And it must start with the supply and pricing of basic inputs like gas. For instance prior to 2010 gas pricing was capped at 80% of equivalent LPFO price. The policy focused on Gas pricing to stabilize gas utilization for the domestic market (based industries, power, and commercial). The forum briefed by the NNPC Gas marketing unit resolved that Virtual gas pipelines (trucking) will be ready in two months to deliver gas to remaining surfing factories while efforts are being made to put in place physical pipelines in the long run. CBN Development Financing officer in attendance disclosed N50 billion loan earmarked for industry to facilitate the provision of facility including working capital. About N14 billion has been disbursed at interest rate of 4.5%. Loan amount is a maximum of N2 billion for a single obligor in respect of new facilities and N1 billion for refinancing. Clothing in Nigeria annually accounts for about $6.3 billion. There is therefore the urgent need for industrial visits (consumers) to establish quality and capacity of the remaining industries to meet domestic requirements. Refreshingly it is the new initiative to combat smuggling. Nigeria Customs Services, (NCS) has developed e-platform to facilitate monitoring activities of smuggling. On the shortage of cotton, it was a scandal to discover that out of the 52 ginneries established in Nigeria, only 17 are working. Cotton can be grown in 26 states of the country. There is therefore the need for states to support cotton growth. There is need to introduce high quality yielding cotton seed. In all, the forum resolved that there will be stakeholders meeting on high gas pricing and unacceptable dollar pricing for domestic industries. Gas pricing has implications for industry and there is need for appropriate pricing. There is disconnect between the Public Procurement Act and the political will. There is therefore need to patronize the locally made products. Federal and State Produce officers are to meet and synergize on the grading of cotton. There can be no industrilization without electrification. Therefore there is the need to ensure alternative sources of uninterrupted energy supply to industries. It was resolved that 60% of forex to be allocated by the CBN must go to the CTG sector. Finally, CBN is advised to monitor and enforce 60% of forex allocated to manufacturers. Are we about to witness the revival of the textile industries and creation of millions of sustainable jobs?
SOURCE: The Daily Trust
One of the finest muslin textile fabrics produced in Bangladesh, Jamdani is going to get the country's first Geographical Indication (GI) registration this month. This was revealed by Mosharraf Hossain Bhuiyan, senior secretary in the industry ministry, while addressing the annual meeting of the World Intellectual Property Organisation (WIPO) in Geneva. The GI registration tag will be given by the Department of Patents, Designs and Trademarks under the industry ministry to the Jamdani fabric. In his address, Bhuiyan said Bangladesh offers high importance to preserving intellectual property rights, for which the country has already formulated laws to provide GI products registration.
SOURCE: Fibre2fashion
The Oeko-Tex Association has launched a new tool 'Detox to Zero', which enables manufacturers along the textile chain to assess the status of their chemical management systems and the quality of their waste water and sludge. The tool allows companies to better identify harmful substances in textile production and handle them in a responsible way. Detox to Zero comprises of three basic modules, one of which is MRSL screening of all chemicals used. The second is an analysis and assessment of the established chemical management system and lastly, a review of all waste water and sludge with regards to the eleven groups of harmful chemicals, as stated by Greenpeace. According to Oeko-Tex, the results are summarised in an annual status report that lists the extent to which the company is already compliant with the Detox targets and includes specific improvement suggestions. “With this status report, companies are also able to transparently communicate the stages achieved on the path toward complete elimination of Detox substances,” it said.
SOURCE: Fibre2fashion
The free trade agreement (FTA) between Vietnam and the Eurasian Economic Union (EAEU) that took effect on October 5 this year is expected to boost Vietnamese garment exports. Under the FTA, 90 per cent of tariff lines have been cut or reduced. The EAEU consists of five member countries, viz Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan. The EAEU region has GSP of $2.2 trillion and population of 183 million. Increasing consumption in this region offers a potential market for Vietnamese goods, including textiles and apparel. Duties were removed on 59 per cent of tariff lines the day the FTA took effect. This offers great advantage for Vietnamese companies while competing with other countries that export to EAEU region. However, to enjoy zero duties, Vietnamese goods must meet two criteria. First, they must meet rules of origin, labelling requirements and hygiene standards. Second, the volume of exports must be no more than 1.5 times of the average volume that Vietnam exported to the region in the last three years. This is called trigger safeguard measure.
As per the FTA, the EAEU would cut import tariffs from 10 per cent to zero per cent for garment and textile products and apply a trigger safeguard measure. So, in a way, there is an upper limit to expansion of Vietnamese exports to this region. If Vietnamese exports exceed the trigger volume of 1.5 the average of last 3 years, then EAEU will conduct an investigation to decided whether to apply most favoured nation (MFN) tariffs. Logistics remains another obstacle in increasing export volume to the EAEU. Currently, it takes one to two months time for Vietnamese goods to reach EAEU member countries, participants at a recent seminar in HCM City were told. Last year, Vietnam-EAEU trade increased by 6 per cent year-on-year to $3.6 billion.
SOURCE: Fibre2fashion
