INTERNATIONAL
In its latest report, credit rating investment agency ICRA is projecting that weak export demand and higher cotton prices will hurt profitability of Indian cotton spinners. ICRA has forecast this trend, as Indian cotton prices are 17 per cent higher from a season ago period, although this is just the beginning of the Indian cotton season. “Normally cotton prices soften at the beginning of the season, but prices have firmed following slower cotton arrivals, due to demonetisation and also due to ambiguity in data of expansion in raw cotton output, despite lower acreage,” the report observed.
According to the report, additionally, lower export demand for cotton yarn, driven by decline in yarn exports, particularly to China, also poses a challenge. Media reports quoted the ICRA report as adding that during the first seven months of fiscal 2017, cotton yarn export volumes were down 23 per cent over the same period of earlier fiscal. On the other hand, Chinese yarn import volumes too dropped 20 per cent year over year in the first seven months of fiscal 2017, with China’s yarn imports from India plunging 54 per cent from a fiscal ago period.
SOURCE: Fibre2fashion
A major exporter of jute to Europe, the country has now shrunk to producing only 17,000 tonnes of jute. The jute industry has been dropped from the government’s priority list even though demand for more ecological packaging globally has strengthened its export potential. The government has also removed subsidies on fertilizers, seeds and pond construction. Import of jute to India have also come to a complete halt for the last two weeks after Indian customs authorities abruptly imposed a 12.5 percent excise duty on goods made of natural fibre, traders said. Jute products from Bangladesh are exempt from the tax. Earlier, the Indian Finance Ministry had recommended to its anti-dumping department to charge 2.5 percent duty on jute rope, 1.5 percent on hessian jute fabric and 5 percent on jute sacks.
Ramesh Rathi, vice-president of Jute Industry Association said that exports of jute products have come to a complete halt since December 15 after India imposed a 12.5 percent duty on hessian jute fabric and jute sacks. He added that the duty had not been imposed on jute rope. Most of the jute products made in Nepal are exported to India. It has been confusing that excise duty has been imposed on only two products made of jute fibre.
Jute producers have been importing 70 percent of their raw materials from India and exporting the finished products to the southern neighbour. Nearly 95 percent of Nepali jute is exported to India. Traders said that Nepali factories produce jute products valued at more than Rs2.5 billion annually. Extended load shedding hours, labour issues and lack of incentives had forced most of local jute factories to shut down. Among the 12 factories in the country, only four -- Arihant, Raghupati, Baba and Swastik -- are still in operation. These mills employ 12,000 workers. Rathi said that traders had been unable to export jute goods to India due to the hefty excise duty. Most of the operating mills have already stopped production.
SOURCE: Yarns&Fibers
The first global Uniform and Garment Manufacturer’s fair 2017 in Solapur is expected to be attended by over 6,000 retailers from India. It will take place from January 5 – 7 to help promote and facilitate the expansion of the garment manufacturing industry of Solapur. The event will also be promoted oversees to attract international buyers. The fair is being organised by the Shri Solapur Readymade Kapad Utpadak Sangh in association with the textile ministry of Maharashtra and Mafatlal Fabrics. The organisers have planned door-to-door visits to invite retailers from Karnataka, Andhra Pradesh, Kerala, Tamil Nadu, Goa and Maharashtra, and will be carrying out fashion shows at the event. The main purpose of the fair is to attract national and international investments in the garment sector of Solapur, said the organisers.
Solapur has more than 1,200 garment manufacturing factories. There are a number of medium and small scale industries in the district and the textile sector is an important aspect of the economy. During the last decade, Solapur has witnessed major revamp with the growth of garments manufacturing sector. The industry in Solapur already caters to the requirements of many institutions located in India and has direct garment export houses as well. It manufactures uniform wear, mens wear and kids wear, and offers good quality products at competitive prices.
SOURCE: Fibre2fashion
The Commerce & Industries opened a separate Directorate of Handlooms & Textiles on 30th December 2016 under Textiles, Commerce and Industries department at the Directorate Complex, Lamphel. Along with the inauguration of the Directorate, Handicraft museum and Handicrafts Cluster Projects under AHVY was also launched. Directorate of Handlooms and Textiles was inaugurated by Govindas Konthoujam, Minister of Textiles, Commerce & Industry. Speaking at the occasion, Govindas stated that handloom and handicrafts is one sector which is closely associated with the culture, traditions and civilisation of Manipur apart from being a key economic sector. Opening of a separate directorate would definitely bring some positive changes in the particular sector, Govindas exuded confidence. It is essential to highlight the handloom and handicraft products of the State at the international level. It was in view of this necessity that a separate directorate was opened at the advice of Chief Minister O Ibobi, Govindas said.
The Handlooms and Handicrafts Policy 2016 has been already framed. The policy aimed at selling 50 percent of the State's handloom and handicraft products to Government departments and 20 percent to private buyers, he informed the gathering. He then appealed to all weavers of the State to focus on producing quality products. Govindas also appealed to artisans to concentrate on producing handicraft products which can be marketed profitably in addition to showcasing them in different exhibitions. The State Government would provide all possible assistance in their endeavours towards this end. Winners of State Awards were also felicitated and the Handloom & Handicrafts Policy was also released during the function. Merit awards were also given 10 other handloom and handicraft persons and inspiration award to 10 others.
Incentives were also distributed to one State level handicraft cluster project and nine district level handicraft cluster projects. Govindas Konthoujam, Minister of Textiles, Commerce & Industry, O Nabakishore Singh, IAS- Chief Secretary, L Lakher, IAS- Principal Secretary( Textile, Commerce & Industry) and B John Tlangtinkhuma, IAS- Director of Trade, Commerce & Industries were present on the occasion as Chief Guest, Special Guest, President and Guest of Honour respectively.
SOURCE: Yarns&Fibers
The demonetisation brought in by Prime Minister Narendra Modi has had a devastating impact on India's largest man-made fabric hub at Surat, in his home state Gujarat. The city is known for its diamond polishing and textile units across India. Before demonetisation, one could not escape the continuous chatter from the weaving units spread across the city along with the hectic business activity that was visible in all the textile markets. All that has fallen silent, and nobody knows when things will return to normalcy. According to sources Surat is home to around seven lakh power looms and 35,000 weaving units apart from 350 textile processing units. There are some 65,000 traders who work from 140 textile markets spread across the city.
Till demonetisation was announced, around a 10 lakh-strong workforce was employed in this sector with almost 75% of them working on the power looms. This is apart from lakhs of those who were indirectly dependent on the industry for their livelihood. Sources told Catch News that the workforce in the sector primarily comprises of labourers coming from Bihar, Uttar Pradesh and Odisha with the locals being engaged only for supervisory and managerial tasks. Things have now come to a pass that more than 50% of these people have migrated back to their homes. A large number of them had gone for Diwali and Chhath celebrations and have not returned.
NO MONEY, NO WORKERS
The impact that demonetisation has had on the industry can be gauged from the fact that the Surat railway station generated revenue to the tune of Rs 18.36 crore in scrapped currency notes by selling tickets to passengers between 8 November and 30 November. This was an unprecedented figure. And it was generated as workers were fleeing the city to return to villages. Many were perplexed over how to get the money that they had saved over months in old notes exchanged in the face of not having a bank account. The Rs 40,000 crore man-made fibre sector in the city is now passing through its worst phase. "With 50% of the workforce gone, we are operating at 35% of our capacity. The production being done is just to stock the fabric as the sales have come to a complete halt and there are no orders coming," says Ashish Gujarati who is the president of Pandesara Weavers' Association. He disclosed that the biggest blow came in the form of there being no sales in the marriage season. "Our estimates were that there were 50 lakh marriages across India during these days. With no cash in hand, who would order sarees or other fabrics? It must be kept in mind that the prime consumers of these products are in the villages where the impact of demonetisation is the worst."
Gujarati further said, "Although the unit owners have started taking steps to open bank accounts for their employees, the problem is that the banks are reluctant to open these accounts. They believe that such accounts are mere liabilities for them and are therefore going very slow on them. The problem remains that the labourers are not digitally equipped. Even if they are, the situation will not improve till there is a proper e-payment infrastructure in place. There is also a huge shortage of swipe machines."
CASH-LESS
It is a known fact that the migrant labour from outside Surat prefers to be paid in hard cash. With no bank accounts, they save the cash and carry it home when they go there. Sources said the remittances from Surat to the villages of other states are no less than Rs 700 crores. Dinesh Zaveri, who owns a textile unit and manufactures curtains and tapestry pointed out, "The working of power looms has come down by 80%. They are operating for just two days in a week at present. Ours is an industry that thrives on new designs and colour combinations introduced on a daily basis. This too will add to the problems when sales pick up in the future as the designs will get old. At present, the business is 70 % down across Surat in the textile sector." Sources point out that the parallel economy in the sector running on cash has been hit and the cost of shifting to everything in cheques and e-payments would be somewhere around 33%. With the retailers not asking the whole sellers for more stock, everything is at a standstill for now.
STRAPPED AND THROTTLED
On Monday, delegates of the Synthetic and Rayon Textiles and Export Promotion Council at New Delhi, along with 17 other export promotion councils across the country, reportedly told the central government officials seeking feedback on the impact of demonetisation on trade and commerce that the industry stands on a verge of collapse. They pointed out that barring spinning units, yarn, texturising, sizing, twisting, warping, weaving, processing and embroidery units have been paying wages in cash to the workers. They maintain accounts for the same and it reflects in their balance sheets. Demonetisation has stalled payment to workers who are now being encouraged to open bank accounts.
With no cash liquidity, while weavers are operating at one-third of their capacity, almost 90% of embroidery and knitting units stand closed. Meanwhile, reports suggest that the prime minister's office is keeping a watch on the situation and the textile commissioner's office has been seeking details on a daily basis from the weaver organisations on the ground. The prime minister's office has been apprised of the emigration of workers in large numbers. The Employees Provident Fund Organisation has also been pressurising the unit owners to create bank accounts for their workers. But the semi-literate and often illiterate workers have a lot of problems operating their accounts. "Many times their signatures do not match. They have a major problem filling forms as they know only their native language. This leaves us helpless and they return frustrated," said a bank manager. The functionaries in the textile sector do not see things picking up at least before March. Till then the workers will have to bear the brunt of the Centre's decision.
SOURCE: The Catch News
Cargo traffic in India has grown slowly over the last 4-5 years. The government’s focus on developing shipping as a mode of transport is key to reducing the over-dependence on roads as a mode of transport. In light of this, the government recently announced the Major Ports Authorities Bill, 2016 as a long pending reform of the Major Port Trusts Act, 1963—the Bill has been introduced in the Lok Sabha. It aims to empower major ports by giving them full autonomy and ensure transparency in operations by decentralising decision-making. It will also aid in the expansion of port infrastructure.
The Bill has been made precise in comparison to the 1963 Act, by removal of overlapping or obsolete sections. In terms of provisions, the new law shall assign full authority to the Board of Port Authority to enter into contracts, on planning and development, fixing of tariffs, etc. Decisions on reference tariff for bidding on PPP projects, on lease rates etc. would also be taken by the Board of Port Authority. The Bill also aims to reorganise the existing hybrid governance model at major ports, to put it in line with the global practice of using the landlord model, wherein the public port authority acts as a regulatory body/landlord while the private companies carry out the operations.
The Bill has proposed a simplified structure for the board by bringing its membership down to 11 members (including 3-4 independent members) to help streamline decision-making and strategic planning. The board shall include members from the Defence ministry, Ministry of Railways, department of Customs, department of Revenue, Major Port Authority and from the state government in which the Major Port is situated. A swift and transparent decision-making process shall help in project execution and further ease of doing business, while a reduced gestation period shall help keep costs under check.
In terms of tariffs, the rates fixed by the board-appointed panel would have to be ratified by the board prior to implementation. However, the government will continue to exercise control with the right to frame rules or issue directions to the port authorities for fixation and implementation of rates. Additionally, the port authorities have been assigned the task of setting rates for private facilities, which may lead to unfair competition as these ports also run cargo terminals that compete with private facilities therein. The Bill is also mute on the inclusion of labour provisions, which is key to handling of port operations.
Overall, the Bill is aimed at greater efficiency in the functioning of major ports and ensuring rapid and transparent decision-making. In keeping with the international best practices in port management, the Bill shall ensure timely project implementation and cost reductions. It shall thus provide an impetus to the government’s Sagarmala Project and port-led development of India, leading to inclusive growth in the sector.
SOURCE: The Financial Express
With the Shipping Ministry pushing for dry ports across the country, experts feel that such facilities will not only aid ‘Just in Time’ manufacturing but also provide a cushion for business operations. The Ministry under Nitin Gadkari is keen to set up three dry ports in Maharashtra and two for the landlocked Telangana. Dry ports in other States are also being explored. The groundwork for a dry port in Jalna, Central Maharashtra, has already commenced.
Director (Transport), CRISIL Infrastructure Advisory, Jagannarayan Padmanabhan, said that companies rather than shipping out their goods immediately from the dry port, could hold the goods in the port warehouse and Custom-clear the goods only when they require it for the manufacturing operations. It will help them in the ‘Just in Time’ manufacturing processes. If a power company is setting up a power plant and has ordered for expensive equipment from an overseas destination, then the equipment could remain at the warehouse and get Customs cleared and transported to the plant site only when it is required. It will provide a cushion to the cash flows of the company as Customs duty will only have to be paid when the equipment leaves the port, he said. The dry port could also be used by manufacturing companies for assembling goods in a semi-knocked down format in the warehouse and Customs-clear the goods only when it is required. Companies could get more elbow room while operating through such ports, Padmanabhan said.
Other developments
A senior Jawaharlal Nehru Port Trust (JNPT) official said that along with the dry port, developing Free Trade and Warehousing Zones in the vicinity of the ports and industrial areas is also on the Ministry’s radar. Such a facilities cluster will help speed up faster processing of cargo and the customer will have more control over the cargo. If a customer is closer to the dry port, then, in the event of a problem, the customer, rather than depending on a Customs agent at JNPT or any other coastal port, could solve the problem himself, the official said. The CEO of Krishnapatnam Port, Anil Yendluri, said that dry ports alone will not be sufficient for the development of the port sector. All other parts of the logistics chain need to be integrated. Hinterland industrial activity along with road and rail connectivity is a must for operating dry ports. Faster Customs Department clearance is a must, he said.
Manpower training
Stressing on the need for well-trained officers for Customs clearances, Yendluri said that many times, lesser number of Customs officers are stationed at ports, who may not be well-versed with all the Department's formalities. Due to shortage of staff, sometimes, personnel from the Central Excise Department are stationed at the port. However, the approach of both the departments is very different. The Central Excise Officers orientation is of carrying out policing while that of the Customs is of facilitation plus policing, he said.
SOURCE: The Hindu Business Line
Though GST has been postponed for now, state governments would do well to sit down with firms they have promised tax sops to, in order to invest in their states, and figure out how to honour these promises—indeed, since tax sops are one way of attracting investors, a solution for existing investors will allow extending this to new ones as well. If, say, a Maruti has been given tax incentives to locate in Gujarat, this means the company can sell cars within the state and retain the VAT collected on them; the CST it pays on sales to, say, Karnataka will be refunded to it by Gujarat. Once GST comes in, Gujarat can still allow Maruti to keep the GST levied in the state, but Karnataka gets to keep the GST on the sales within its boundaries—GST is a destination-based tax. In such a situation, an obvious solution is to extend the period for which the Gujarat GST can be retained by Maruti. Since Maruti also produces cars in Haryana and may want to sell these models in Gujarat, another option is to allow Maruti to retain the GST for these sales as well. This is a good solution for any company that has production facilities in multiple states across the country.
While various automobile firms that have invested thousands of crore rupees in states like Tamil Nadu, Maharastra and Gujarat are already in discussions with them, the Centre also needs to work on similar solutions. In the case of mobile phones, those importing phones have to pay a countervailing duty while those who assemble them here get an excise benefit. Since this is no longer possible under a GST regime, a solution could revolve around denying input credits to those who import phones while giving them to those who assemble them locally. Given those who have planned, or are planning mobile phone assembly facilties are naturally jittery, the earlier a solution is arrived at, the better—else, Make-in-India will die a premature death.
SOURCE: The Financial Express
The Reserve Bank of India (RBI) governor Urjit Patel has said that the nationwide Goods and Services Tax (GST) and legislation of bankruptcy code should impart resilience to the economy. The governor in his Financial Stability Report published by the RBI said that the withdrawal of specified bank notes will impart far reaching changes going forward. “With respect to demonetisation, it is expected to significantly transform the domestic economy in due course in terms of greater intermediation, efficiency gains, accountability and transparency through increasing adoption of digital modes of payments, notwithstanding the short-term disruptions in certain segments of the economy and public hardship,” added Patel.
Raising concerns about stress in the banking sector, he said “While the domestic banking sector continues to face significant levels of stress partly reflecting legacy issues, on balance, enhanced transparency has helped to reinforce the stability of India’s financial system.” Adding to this he said that the global financial crisis has prompted regulators to require banks to undertake stress tests to see if their risk appetite matches their risk taking capacity.
SOURCE: The Financial Express
Year 2016 will stand out as a year of reckoning insofar as the Indian and global tax policy landscape is concerned. Never before has the tax policy and ease of administration been so high on the political agenda as economies witnessed during the past 24 months. The G-20- and OECD-led multilateral policy works to combat global harmful tax practices culminated in abroader consensus on an inclusive framework of policy measures that shall find their way into country specific tax rules, as well as more than 3,000 bilateral tax treaties; all of this will come in the next 12 months or so. The July 2016 Ministerial-level Symposium held in China laid the foundation for work on enhancing, pro-growth tax policy.
It is no surprise that India has been at the forefront of this, participating in a majority of global debates for ushering in transparency in tax matters. The transparency there circles around exchanging banking information, avoiding stateless income and strengthening anti-avoidance rules, besides taxing income based on economic substance. The Narendra Modi government’s alacrity in promoting ease of tax administration, a critical component in the ease of doing business index, has set in motion several incremental policy and administrative reforms. It is in this backdrop that the upcoming budget is being looked at as an opportunity for the government to lay down a roadmap for transformative changes. For the record, the budget shall mark many firsts also. To state a few, advancing the budget date by a month is a possible precursor to an overlapping of the financial year with the calendar year; doing away with a separate rail budget shall free up resources for railways reforms; switching from archaic plan/non-plan expenditure to a more contemporary capital-revenue nomenclature will distance the reform agenda from annual political leverage; and finally, burying the five-year plan and ushering in a 15-year vision statement is expected to pave the way for transformational policy changes.
Foremost, a majority of the policy announcements are likely to be woven around reformative changes to the economic architecture to address the post-demonetisation policy framework. This could mean a downward trend in tax rates, focusing on tax administrative reforms and promoting the digitisation of land records. Unveiling a new Fiscal Responsibility and Budget Management Act (FRBMA) is likely, creating a sustainable long-term roadmap on fiscal discipline without compromising infrastructure spending. The government would be wary of announcing populist dole-out schemes and instead focus upon the larger objective of containing non-plan, nonproductive capex. In this drive, financial sector reforms hold an important key; a wellcoordinated monetary and fiscal policy regime would yield dividends. Pushing its unceasing commitment to GST implementation, the government would do well to flesh out the details of the draft GST legislation, allowing the businesses at least four to six months to calibrate their preparation for a smooth transition. The political logjam on the GST framework has caused implementation uncertainty to resurface yet again. The government must avoid the temptation of carrying out sundry changes to the existing indirect tax rate structure.
Turning to direct tax policies, given the demonetization move, rationalising income-tax rates, coupled with administrative reforms to ease compliance costs, will feature prominently. The extent of rate cuts could be a matter of speculation, but overarching principles of ‘ease doing of business in India’ and ushering in a competitive tax regime should guide the change with preferential rates for middle-income individuals. On a wider policy front, India is likely to witness a convergence with the emerging global tax policy landscape. A successful negotiation on the OECD’s multilateral instrument by an ad hoc group, where India participated on an equal footing with OECD countries, is intended to implement outcomes from the comprehensive package of Base Erosion & Profit Shifting (BEPS) works endorsed by G20. While the Indian tax administration has in principle indicated its commitment to Multilateral Instrument (MLI) implementation, it will necessitate amendments to the Income-Tax Act to ink Multilateral Convention and set in motion a renegotiation of over 90 tax treaties, with priority to nations that are India’s significant trade and investment partners. The government may also consider it opportune to clarify its stance on mandatory arbitration under the framework of bilateral tax and investment treaties. Ease of tax compliance for honest tax payers, given that the administration is likely to up surveillance for errant tax payers in light of demonetisation impact, shall mean embracing best practices on tax-payer services, empowered ombudsman and discouraging avoidable litigation.
SOURCE: The Business Standard
As far as banks and financial institutions are concerned, 2016 was an eventful year, to say the least. Game-changing developments on both the global and domestic fronts came thick and fast. The role of institutions in fostering economic growth has successfully entered the modern policy discourse. After all, institutions help lay down the rules of the game, create transparency, weed out populist discretion, improve efficiency and, most important, make the process of economic growth sustainable. The year 2016 saw the foundation for three structural institutional pillars being laid by the government.
GST: The GST is expected to be a potent tool to address the current inefficacies of indirect taxation in India while allowing the states and the Centre to adhere to the path of fiscal consolidation. After getting cleared by both houses of the Parliament, the GST Council has managed to take a unanimous decision on many issues, including the finalisation of rates, threshold for exemption, compensation to states among others. GST is expected to maximise the size of economic pie by minimising the deadweight loss caused by double taxation and lead to efficiency gains of at least 15% and, most important, enhancing potential output by over 1%.
MPC: After the adoption of flexible inflation-targeting framework in 2014, the next reform in monetary policy-making is the creation of the Monetary Policy Committee (MPC). The combination of rules-based policymaking, with committee-based action and accountability, has boosted the central bank’s credibility.
The Bankruptcy Code: In May last year, Parliament cleared the Insolvency and Bankruptcy Code, in operation since December. It is expected to ensure time-bound settlement of insolvency, enable faster turnaround of businesses and create a database of serial defaulters. The last few weeks of the year were dominated by the ongoing de-legalisation of high denomination currency notes, which will eventually pave way for demonetisation. This is a master-stroke by PM Modi.
Undertaking a step like this requires immense political courage to impose the transitional adjustment costs on the economy, while having the perspective to lay the foundation for sustained future benefits. With incentives being put in place, the desired behavioural impact has already started to manifest. Use of cash alternatives like debit/credit cards, cheques, mobile/internet banking, e-wallets, have zoomed since the second week of November. Additionally, the process of demonetisation will help boost household financial savings, enhance monetary policy transmission mechanism, and in conjunction with the GST, help establish a transparent financial trail for transactions, thereby benefiting government’s fiscal position in the medium-term. Overall, the demonetisation exercise will help to usher in a new transactional era with multiplier effects via the financial sector. Even as the overall domestic macro-situation improved in 2016, the banking sector continues to face challenges due to lack of recovery in asset quality, capital constraints and sluggish profitability. Nevertheless, 2017 could be the inflexion year for the banking and finance sector with support from the policy and regulatory environment.
The ongoing demonetisation exercise will incentivise financial inclusion; moderation in currency circulation will help lower cost of handling cash and the the bankruptcy framework will help ensure in a quicker resolution of stressed assets. The GST framework will further formalisation of the economy while stimulating consumption and investment.
The year 2017 will also be important as the introduction of new IFRS accounting norms will kick in. While this may lead to some tightening in capital provisioning, the overall system is expected to gain in terms of better disclosures and increase in transparency and robustness. 2017, thus, will offer opportunities for the nimble-footed in the banking and finance sector. At the same time, it will pose requirements for re-platforming of PSU banks and exploring out-of-box ideas for monetisation of idle PSU assets.
India is fast becoming an active incubation centre for e-commerce with such ventures expected to reach 10,500 by 2020 as per NASSCOM. With thrust on programmes like Digital India and Startup India, entrepreneurial economy characterised by DICE—Design, Innovation & Creativity—is flourishing. The technological penetration of the banking and finance sector will improve further in 2017 in order to support this new-age commercial requirement. The JAM trinity is a silent revolution that will transform India in the coming years. As gateways like the recently launched UPI platform gather momentum in 2017, they will generate basic digital intelligence, with the market for e-finance providing one of the biggest opportunity for the banking and financial system.
With 2016 laying the foundation for critical reforms in the country, we are at the cusp of transformational shifts in the future with the banking and finance sector being an important change agent in this exciting journey.
SOURCE: The Financial Express
Trying to dispel fears that the MSME (Micro, Small and Medium Enterprises) sector had taken a big hit from demonetisation, Union Minister Kalraj Mishra on Saturday said things are falling in place slowly despite “initial difficulties”. Addressing reporters here on the ministry’s achievements in 2016, Mishra admitted that “there were difficulties initially”, but things are moving towards normalisation. “There were difficulties initially, but wage payment to labourers has started normalising and migrant labourers who had left are returning,” Mishra said when asked about reports of job losses in the informal sector after the cash recall exercise.
About banks' reluctance to disburse loans under the MUDRA Yojana in the wake of demonetisation, Mishra acknowledged some issues, saying these are “only for the time being”. Banks are expected to disburse Rs 1.80 lakh crore loans under the Pradhan Mantri Mudra Yojana (PMMY) in the current financial year. Last year, 3.5 crore beneficiaries availed of Rs 1.22 lakh crore loans under PMMY. Under the scheme, loans ranging from Rs 50,000 to Rs 10 lakh are provided to small entrepreneurs.
To increase sales of khadi products, the government is also trying to penetrate global markets and adopt a franchisee model to open more outlets in India, with an emphasis on attracting youth towards the indigenous fabric, the minister said. Sales of khadi goods went up by about 29 per cent to Rs 1,510 crore in 2015-16. Mishra said the much-awaited Goods and Services Tax (GST) will benefit micro, small and medium enterprises (MSMEs) across the country
SOURCE: The Business Standard
It is no mean achievement when Indian economy flexed its muscles in 2016 and briefly nosed ahead of Britain — its once colonial master. But the honour was fleeting as India quickly fell back to the sixth-largest position, with considerable headwinds from demonetisation and delay in GST rollout queering the pitch. At the start of 2016, everything looked hunky-dory as the country took pride in being the world’s fastest-growing major economy, but the momentum seemed to have petered out by the end of the year as spending took a hit and industrial activity faltered with the junking of 86 per cent of currency in circulation, leading to an across-the-board downgrade in growth projections.
The first half saw India being called the bright spot – and rightly so — in a world searching for growth engine. The government moved in to reconfigure its economic architecture through new institutional mechanisms – like the one to tackle monetary policy. But Brexit, protectionist signal from Donald Trump fresh from the surprise US presidential election win, the Syrian turmoil and an uptick in oil prices partly reversed some of the gains and capped 2016 as a tumultuous year.
The economic agenda for 2017 remain clear. Finance Minister Arun Jaitley needs to impart a big push to the economic activity in the budget – coming up in a month — through not just raising spending on socio-economic infrastructure but dealing with the fallout of the cash recall exercise. The need of the hour is a ‘feel-good’ budget that will give people something to look forward to while taking the reforms agenda to the logical conclusion, including a schedule for the landmark GST launch that can be honoured.
Once expected to overtake the UK GDP in 2020, the moment arrived early enough in mid-December on the back of a near 20 per cent drop in the value of the pound after the shock Brexit vote. This squeezed UK’s 2016 GDP to 1.87 trillion pound (USD 2.29 trillion) as against India’s USD 2.3 trillion (Rs 153 lakh crore). But the change of fortunes came when forex rates realigned and the UK economy stood at USD 2.3 trillion compared with USD 2.25 trillion of Indian economy as the year drew to a close. The jury is still out as India is expected to bridge the gap in the new year even if it were to grow at a lower pace of 7 per cent and UK’s growth is projected at no more than 2 per cent through 2020.
Although economists are wary of comparing the relative size of economies using the volatile market exchange rates and prefer purchasing power parity instead, which adjusts the differences in local purchasing power, India’s fifth spot behind the US, China, Japan and Germany speaks volumes. The single-biggest spoiler was the cash ban, which has triggered fears of a blow to consumption, particularly in rural areas, with the dominant services sector being the worst hit. Also, industrial output and investment may feel the pinch which coupled with job losses and a drop in demand could add to the disruption.
Demonetisation also acted as a speed breaker in the planned take-off of the Goods and Services Tax, the biggest piece of reform since Independence, from April 1. States that saw their revenues being affected by demonetisation have stalled a consensus on supplementary legislations, and the April 1 schedule looks a tall order now. But to give credit where it is due — Prime Minister Narendra Modi and Finance Minister Jaitley — there was never a moment that saw commitment to reforms slipping. After cleaning up the economic mess left by the previous UPA government, the Modi government has bitten the bullet and started carrying out tough structural and deeper reforms. Despite this, private investments are still hard to come by in a big way and loans to corporate remained subdued throughout the year. Gross domestic product, by some estimates, has slowed to 6.5 per cent in the third quarter, from 7.3 per cent in July-September. The government is confident that these are only short-term blips, and in the long run, India is well poised to hop on to the higher growth trajectory.
While the economy grew by 7.2 per cent in the first half of the current fiscal, the Reserve Bank of India (RBI) downgraded projections for 2016-17 to 7.1 per cent, from the previous 7.6 per cent. Fitch too lowered it to 6.9 per cent from 7.4 per cent while S&P had slashed its projections of 7.9 per cent to 6.9 per cent even before the November 8 demonetisation announcement.
While inflation was in check and trade and capital flows remained largely unaffected, exports – often seen as the engine for growth – have been tepid. Public investment has been robust, but private investment is yet to pick up. Industrial activity has been weakened by demonetisation, which has taken a toll on consumption demand, the mainstay of the economy.
From the biggest change in RBI’s eight-decade history by adopting an inflation-targeting framework and moving to a collective interest-rate decision making to overhauling of the century-old bankruptcy law to concerted efforts to make India a ‘one nation and one market’ through GST, the transformation has been complete that laid the pitch for long-term structural benefits.
The new bankruptcy code will allow quick closure of businesses gone bad and prevent build-up of NPAs, which are already are at a 16-year high of 12 per cent. As the reforms momentum picked up, India overtook the UK economy in absolute terms in mid-December though it is still less than one-fifth of the UK in per capita terms. Though the glory was short-lived, it did highlight India’s arrival on the global stage as an economic powerhouse that one can afford to ignore at its own peril. More importantly, it has been able to shed any residual notion of colonial inferiority. This is reflected in getting tax havens like Mauritius, Cyprus and now Singapore to redraw tax avoidance treaties with India, which is also negotiating a trade deal with the UK, post Brexit. The way government handles the after-effect of demonetisation and the all-crucial Budget will now shape the narrative for the economy in 2017.
SOURCE: The Financial Express
Over the last 40 years, Zade has been growing cotton, a practice he got from his father, in the remote mid-western district of Buliisa. For him, the crop paid tuition fees for his five children and funded the construction of a permanent house. Cotton is Uganda’s third largest export crop after coffee and tea, as well as the main source of income for some 250,000 households like Zade’s. For many of them, hopes are high that the industry would embrace a boom after the Ugandan government launched a campaign to support cotton and other local industries.
Before the onset of stiff competition from Asia, Uganda’s textile industry had been a flourishing industry way back to the 1960s. Zade refers to the time as the "good old days" when a good cotton harvest meant merry making for the whole village. There were structures and systems right from growing to marketing cotton, and extension workers could traverse villages teaching farmers how to plant and harvest cotton. The price of cotton at the farm-gate was paid by the ginneries or co-operatives in most cases, and the government would provide a subsidy. This system always encouraged farmers as a good price was guaranteed. At the national level there was the Lint Marketing Board (LMB), which had the monopoly to trade in all the lint and cotton seed. As a result, production reached the highest level, of 470,000 bales of lint, in 1969/70, according to government figures. During the early 1970s to mid-1980s, however, war and economic turmoil that befell Uganda disrupted the cotton production.
In order to revamp the industry, the government in 1994 liberalized the cotton sector, replacing the LMB with the Cotton Development Organization (CDO), a state agency charged with monitoring the production, processing, and marketing of cotton. In the process of liberalization, the government had been anticipating that opening up the sector would make it more efficient and boost production. This however exposed the farmers to the price fluctuation in the global market as over 90 percent of Uganda’s cotton is exported. Figures from the Bank of Uganda, the country’s central bank, show in recent years, whereas the quantities of cotton have gone up, the value is not stable. While exported cotton rose to 63,512 tonnes in 2015 from 40,671 tonnes in 2014, the value for exported cotton fell to 20 million U.S. dollars in 2015 from 22 million dollars in 2014. The government is striving to revamp the sector, arguing the crop can still be one of the country’s top foreign exchange earners and generate much of the revenue internally.
Earlier this year, President Yoweri Museveni called for supporting Uganda’s local industries and directed all uniforms for the army, the police and prisons service be bought locally. He said the country spends 888 million dollars on annual textile imports, money that would have been used to revamp the industry locally. Banking on a recent decision by East African Community member states to ban importation of used clothes, Uganda believes it can still reap big from the crop. The country is already reaping from the available international markets where it can export its textile materials tariff and quota free. According to CDO, Uganda now has 40 ginneries and a total installed seasonal ginning capacity of around 1 million bales of lint production (200,000 tonnes). This is above the maximum production achieved in the last two decades.
Despite many opportunities awaiting local farmers, Zade urges the government to help them cope with the harsh climate change effects besides declining soil fertility. He said the last two seasons have not been good due to prolonged dry spells and infertile soils. He said farmers need to be provided with good-quality seeds and fertilizers to ensure good yields.
SOURCE: The Coast Week
As of middle of December 2016, exports from Myanmar garments firms employing the cutting, making and packaging (CMP) system soared to $1.157 billion, up 83.7 per cent as against $629.709 million in the same period of the prior fiscal. Exports to Japan, the largest apparel importer from Myanmar accounted for 33 per cent of all clothing exports. Quoting statistics from the Myanmar ministry of commerce, Myanmar media reported that Japan was followed by South Korea and Germany with 25 per cent share each in exports, in addition to shipments to China and the American markets. A majority of the investments permitted by the Myanmar Investment Commission (MIC) in the current fiscal has streamed into the clothing production industry. There are over 400 apparel manufacturing units in Myanmar, employing over 300,000 people.
SOURCE: Fibre2fashion
The second edition of Dhaka Apparel Summit will plan out a roadmap to accomplish the target of exporting readymade garments (RMG) worth $50 billion by 2021. Bangladesh Garment Manufacturers and Exporters Association will organise the summit on February 25, 2017. The event will also focus on improving safety measures of the workers in the RMG sector.
The one-day summit will provide a platform for the stakeholders to enhance their business. The event will witness participation of representatives from buyers, brands, universities and workers. These representatives will discuss about various possibilities to achieve the target of exporting apparels worth $50 billion when Bangladesh celebrates 50th anniversary of its Independence in 2021. The summit is likely to be inaugurated by Bangladesh prime minister Sheikh Hasina.
The first summit held in December 2014 highlighted various points including dynamics of global sourcing in Bangladesh, product and market diversification, strategic plans to overcome the existing challenges, supportive government policies, importance of physical infrastructure, power, gas and energy to attain the milestone set for 2021.
SOURCE: Fibre2fashion
Hyosung a global leader in spandex and an integrated textile producer with nylon, polyester and fabric in addition to spandex/elastane has released its creora brand’s activewear fabric trends for 2017, celebrating fashion combined with functionality and high performance. Nourish it! trend combines wellbeing and harmony with performance and functionality. Natural touch fabrics aim to deliver a welcoming embrace, enhanced by discreet function from the inclusion of creora spandex. Quick dry, moisture management fabrics help enhance the performance, while featherweight power stretch compression knits deliver a smooth silhouette. The fabrics feature a soft, velvety, brushed touch.
Work it! Trend is related to fashion, function and fit interact with the body, complimented with an explosion of colour and textures in pushing performance to new heights, creating an exhilarating experience all round for the wearer. Multi-functional fabric structure ranges from compact and precise through to textured on the technical side for a micro massaging effect. Mix and match solid fabrics and prints, as well as the use of vibrant colours, are said to enhance the look, combined with a stronger feminine style through cut out and inserts.
Own it! trend is focused on the intense workout arena, pushing forward the premium elements of activewear. It is tough, robust and protective with comfort and lighter weight qualities featuring for the first time. creora Power Fit leads the way, as compression fabrics embrace the muscular structure of the body in generating hardcore fabrics that will withstand the physical elements and aid the wearer in beating the most severe obstacles and enduring the most extreme of sports.
Through the interaction of the body and the multi-functional fabrics, this direction aims to meet the demands of active people. It is tough and resistant, not just in structure but also in colour palette. Colours are deep, contrasting with sharp tones. Warp knits feature in clean cut finishes, eliminating uncomfortable seams, with heat bonding replacing traditional cut and sew. Fabrics feature laminated prints, innovative structures and punch out effects.
Fashion and functionality come into the foray on the activewear front as the desire for comfort continues to grow. Live it! Trend takes the core performance ingredients and works them into an urban sports direction, as well as delivering to the growing athleisure market. For summer, the desired features include quick dry and cool touch, whilst for winter it is thermal aspects, both seasons teaming with creora spandex/elastane.
Denim, both knitted and woven, creates a ubiquitous street style that goes functional with thermal fibres teaming with spandex/elastane for a svelte, flexible and durable finish. This direction also takes on a serious active approach as bi-stretch denim knits and shaping jog jeans deliver an alternative option to the dedicated sports aficionados who want a different look.
Hyosung will present its latest fabric innovations at ISPO Munich, which takes place from 5-8 February 2017, where it will also launch a new range of fabrics with MIPAN Aqua X and creora Fresh, developed in collaboration with Best Pacific.
SOURCE: Yarns&Fibers
The third Morocco Hometex "Morocco International Home Textile Fair" will be opening doors in the coming New Year during the month of February where sector leader companies to take their places rapidly in this unique international platform. This platform allows national and international companies of different industry sectors to show and promote their skills, meet partners and find international brands from several countries. Thousands of professional buyers will come together along with their Buyer Delegation Programme from their target countries such as Italy, Spain, Quatar, Gambia, Ghana, UAE, Egypt, Nigeria, Liberia, Senegal, Kuwait, Guinea, Jordan, Algeria, France and Tunisia to exhibit in Morocco Home.
In the 2nd edition, exhibitor countries from Turkey, Morocco, Egypt, USA, Portugal, Greece, Italy, China, Pakistan and India along with 12,308 local and international visitors from West Africa, North Africa, Middle East and Gulf Countries, European countries such as Italy, Germany, Spain, Portugal, France, Belgium, Greece, Netherlands, England and America made Morocco Style Fair the biggest remarkable event of the Morocco. Morocco Hometex Fair organized by Pyramids Group Fair and Expotim between 24 and 27 February 2017 is going to take place in Trade center of North Africa, Casablanca
SOURCE: Yarns&Fibers
The overall textile exports continued to present a dismal look during the year 2016. The industry has been rendered nonviable by the high cost of doing business as a consequence of which textile exports fell further by $600 million, said All Pakistan Textile Mills Association (APTMA) Chairman Aamir Fayyaz. He expressed fear that the exports could fall further by $1.2 billion in the current year if the present trend continues. He said that foreign exchange receipts on trade account were important to be revived to control the country's trade deficit that had swelled to an alarming and unmanageable level of $28.3 billion. "This gap cannot be bridged until export-led growth policy initiatives are undertaken at the earliest." He said the textile industry continued to face the handicap of being 10 percent expensive against international competitors owing to unrealistically high-energy cost. "Since 2013, the price of energy has been higher than that of competing countries by 4 cents per kWh," he added. "Due to unrealistically high energy price in the province - where 70% of the country's textile industry is located - the Punjab-based textile industry was exposed to a severe disparity in energy prices. Resultantly, a bulk of the textile manufacturing capacity lies under-utilised, and over 70 textile mills have shut down in the last six months." He said that the two basic raw materials of textile industry - cotton and manmade fibres - to which the textile industry adds value for export, had to be imported, as their domestic availability fell far short of the industry's requirement. "The acute domestic shortfall of cotton being procured at higher than import parity is having a crippling effect on the entire textile value chain." He added that the government's apathy to increased import duty, besides other levies such as sales tax and withholding tax was indeed regrettable.
Besides, he added, the presumptive and innovative tax regime in the country was an additional burden on the organised segment of the textile industry. "As it is not possible to pass this burden on to international buyers, the presumptive tax regime weighs heavily on Pakistan's competitiveness in the global textile market." Furthermore, he said domestic commerce in textile and clothing had been swamped by dumped subsidised imports and smuggled goods, "a vital factor in the closure of as many as 70 mills in Punjab". He pointed out that the already signed and about-to-be-signed free trade agreements were posing a serious challenge to the domestic industry. "Manufacturing has been replaced with trading because of the shattered confidence of investors," he maintained.
In this backdrop, Pakistan's currency - that in dollar terms is 10% overvalued - has an inhibiting effect on exports and adds to the already bleak picture. "An urgent monetary review for correction of the aberration in currency valuation or industry-specific intervention to zero-rate increased cost-incidentals on exports is overdue." He said the government should revisit its policies towards the textile industry and expressed the hope that policymakers would take concrete steps in reviving the ailing textile industry in 2017.
SOURCE: The Daily Times
Total exports from Pakistan have declined by more than 12% between 2013 and 2015. This decline is disconcerting, particularly as lower oil prices since 2014 were expected to improve the trade deficit. The expected outlook, as reported by the State Bank of Pakistan, for 2016 does not look promising. Total exports were reported at $18 billion between January 2016 and October 2016. This figure is lower than the total exports of $19 billion reported for the corresponding period in 2015. Although, the decline in exports is attributed to a global slowdown in demand, the trend must be investigated as the export base for Pakistan is not only limited to a few products but is mostly confined to low-valued products that are susceptible to price shocks.
Borrowing data from UN COMTRADE and product classifications from World Integration Trade Solution (WITS), the declining trend in exports is examined below. The exports from Pakistan are mainly destined for the United States, the European Union and the Middle East, at approximately 24%, 15% and 11% respectively in 2013. Recently, after the negotiation of the free-trade agreement with China in 2007, the exports to China have surged. The European Union awarded the GSP Plus status to Pakistan in 2014, which was aimed at boosting the exports from Pakistan.
The European Union and the United States of America imported approximately 30% and 15% of the global trade in 2013. Their shares have increased slightly between 2013 and 2015. On the other hand, China has maintained its share at approximately 10% of global trade between 2013 and 2015. The three destinations accumulatively account for more than 50% of the total imports.
Similar to the global trend, the share of exports from Pakistan to the United States and the European Union has increased between 2013 and 2015. Pakistan exported more than 30% of its total exports to the European Union in 2015 and 17% to the United States. However, in absolute numbers, exports from Pakistan to the United States have fallen. On the other hand, the value of exports from Pakistan to the European Union has increased between 2013 and 2015, which is likely to be driven by the preferential treatment to Pakistani exports imported under the GSP Plus scheme.
Pakistan exports mainly textile products, vegetable products and leather products, which cumulatively constituted approximately 78% of the total exports in 2015. Their share in total exports from Pakistan increased between 2013 and 2015. The share of textile products in global trade is slightly less than 5%.
Although, China and India are the largest exporters of textile products, the total contribution of textile products is less than 15%. Their share of vegetable products is approximately 2.7% and 1.2% respectively. The combined exports of leather products and vegetable products are less than 10% in both countries. On further examination of the trend in exports, the total exports of consumer goods, as classified in WITS, to the European Union from Pakistan had increased between 2013 and 2015 by approximately $770 million but the total exports of intermediate goods and raw materials to the European Union had decreased by approximately $400 million.
Consumer goods are primarily finished products such as made-up textile articles, whereas intermediate goods and raw materials, such as cotton yarn and raw cotton respectively, require further processing before being sold as consumer goods. The share of consumer goods to total exports to the European Union from Pakistan increased from 70% in 2013 to 77% in 2015.
A similar trend was observed for total exports from Pakistan in the textile industry. The total exports of consumer products in the textile industry increased by approximately $565 million but the exports of intermediate goods and raw materials decreased by approximately $160 million. Furthermore, the exports of consumer products in the textile industry to the European Union increased by $747 million. This suggests that the exports of value added consumer products, particularly in the textile industry, to the European Union performed relatively well compared to raw materials and intermediate goods during the last few years as the exporters of consumer goods were more effective in absorbing the demand shock. The exports to the United States from Pakistan decreased across all aforementioned product classifications.
Approximately 67% of all consumer goods exported by Pakistan were destined for the European Union and the United States. This number increases to more than 86% of the consumer goods exported in the textile industry. Importing countries may adopt stringent requirements to control the quality of their imports. Non-tariff measures (NTMs), such as sanitary and phytosanitary measures on plants and animals as well as technical barriers to trade mainly on non-agricultural goods, imposed by importing countries to restrict sub-standard imports into the country.
Under NTMs, exporters may be required to meet certain guidelines on size, shape and function of a certain product. Several consignments tend to get rejected by the importing countries if the products do not conform to their requirements. This increases the fixed costs to trade for exporters, limiting trade to larger exporters, who can afford the costs associated with the NTMs. The developed and advanced countries, such as the European Union and the United States, tend to impose higher levels of NTMs on imports from developing countries, particularly where sub-standard products are prevalent. Therefore, trade policies should ensure that trade obstacles due to NTMs are reduced so that new exporters can participate in international trading activities. It is imperative to pursue industrial and trade policies that promote value addition within Pakistan. Such a strategy should involve a focus on the exports of consumer goods to their more important destination markets. This will ensure a reduction in the volatility of exports.
SOURCE: The Tribune
The bilateral relationship between Peru and the United States will remain positive and solid under the Donald Trump administration once he takes office in January, said former Peruvian Ambassador to Washington Harold Forsyth. Historically, the relations with the world’s leading power have been quite good, and have been strengthened under the Obama administration, a situation that would not change —he said— since governments change but ties remain. “They [the bilateral relations] have been significantly enhanced, regardless of the government in power. Governments change, ties remain, and they are actually very strong,” the diplomat was quoted as saying by Andina news agency.
Forsyth, who served as Deputy Minister of Foreign Affairs under the Toledo administration (2001-2006), noted that Peru and the United States work together in many fields, such as trade and cooperation, which —he said— raises hopes of an excellent future. Bilateral trade has remained intense, to such an extent that the United States is second largest trading partner of Peru, after China. In addition, the Andean nation has a free-trade agreement (FTA) with the North American country, in effect for nearly eight years. “We have signed an FTA and commercial interests are quite strong on either side. This is a good opportunity to encourage Peruvian entrepreneurs to use the FTA and boost their non-traditional products where there is plenty of space,” he emphasized. The ambassador is confident the bilateral cooperation in the fight against drugs will remain active and effective within the next four years. Donald Trump, 70, will take office on January 20 after a nearly two-year campaign that concluded on November 8 with his victory against Democrat Hillary Clinton.
SOURCE: The Andina
China-Pakistan Economic Corridor (CPEC) has emerged as the most important geopolitical and infrastructure project of this region and beyond. The regional countries like Iran have shown their willingness to join it and we have now been told that the European countries too have shown their desire to link up to the project which has the potential of turning this region into hub of the world economy. The gigantic plan to build a network of energy and infrastructure projects including roads, railways, pipelines etc across Pakistan was initially estimated to cost $46 billion. But now the size of the plan is being jacked up by 24 percent to $57 billion by including more projects. The all weather ties between Pakistan and China have always been a cause of unease in New Delhi but the vigorous implementation of the CPEC project has caused more consternation and confusion in India. A section of Indian media has dubbed the project as the “Great Game of this century” whereby China is extending its clout across Asia and beyond through Pakistan.
But there also voices in the India media warning their government against missing a golden opportunity to develop its creaky infrastructure as they maintain that CPEC is not a Pakistan-specific project but it is a transcontinental project which once completed would link up more than 64 countries. “While there can be little expectation of any room for India in CPEC at present, there is (a) space for India to step back and see where China and Pakistan want to go with it. The offer to India (to join the project) was made along with offers to other neighboring countries,” the Indian daily The Hindu wrote editorially. The newspaper also tried to play down euphoria in New Delhi about help it is extending to Iran to built a deep sea port in Chahbahar as a counterweight to China-built Gwadar port in Pakistan and said Tehran wants Chahbahar to be a “sister” rather than a “rival” port to Gwadar. Moreover, it said Turkmenistan and other Central Asian states have also shown interest in the warm-water port in Gwadar that would be a nodal point for goods through Pakistan to the Chinese city of Kashgar. “Further north, despite its problems on terror from Pakistan, Afghanistan is becoming a nodal point for China’s connectivity projects to Iran,” the daily noted.
Another respected India daily, The Hindustan Times, in an opinionated article, compared the CPEC to the Marshall Plan under which the United States rebuilt Europe after the World War II. “The $46 billion CPEC is the flagship point within the even more ambitious Belt-Road programme of Chinese leader Xi Jinping, a transcontinental project that would effectively convert the Middle Kingdom into the logistics hub of Eurasia and, potentially, the centre of the global economy,” the article said. With such a magnificent project in hand which both friends and foes are eager to join, it is unfortunate that unnecessary controversies are being created in Pakistan and the rulers are taking least interest to address these concerns. The most important challenge for the Pakistani rulers is to give a sense of ownership to the people of Baluchistan of the project. Because of the flawed state policies and foreign interference, particularly by India , in Baluchistan, there has been a sense of deprivation among the people of Pakistan’s most resourceful but least developed province.
The tough questions posed by a girl student from Gwadar to chief minister of Punjab Shahbaz Sharif underscore the need for more solid steps to be taken by the state and the government to address the sense of alienation among the people of Baluchistan. “We have grown sick of listening to the unabated talk about the CPEC…..it is strange that CPEC is being built in Baluchistan but the development is taking place here in Lahore,” she moaned. She implied that Gwadar is the pivot for the CPEC but it unfortunate that its people are deprived of the basic life amenities like safe drinking water and electricity. “We get electricity two to three hours a day while there has been no loadshedding whenever some VIP visits the town.” Such concerns of the people of Pakistan were also highlighted in a recent report by the Federation of Pakistan Chambers of Commerce and Industry (FPCCI). According to report, the local people of the province fear that they would be marginalized with the influx of Chinese nationals to the province. The report says there are apprehensions that the Chinese people would outnumber ethnic Baluchistan by 2048 when the CPEC would be fully completed and operationalised. It maintained that the province is full of natural resources, raising concerns among the locals that they might loose ownership of these resources with the huge influx of skilled people from a other parts of Pakistan as well as from China.
The FPPCI exhorted the government to provide a sense of security to the people of Baluchistan by involving them in decision-making and legislative process and by imparting technical and vocational training to them to fully reap the fruits of progress being carried out under CPEC. The 139-page report titled “FPCCI stance on CPEC” also dealt with the impact of CPEC on local businesses. “Inflow of Chinese investment and business enterprises will adversely impact the interests of Pakistani business communities – it covers the signing of FTA (Free Trade Agreement) with China and flooding of Chinese products, inflow of Chinese investments and migration of Chinese labor force to Pakistan.” The report also raised questions of transparency over the funding of CPEC projects and urged the government to take solid measures to check corruption and ensure that the projects are executed in a transparent manner. The report also cautioned the government to handle foreign investments in a prudent manner. “The domination of foreign investment in political and economic decision making is not limited only to ‘Banana Republics,” it warned.
Another key concern expressed in the report is the dominant role of the Chinese investors and entrepreneurs in the public sector services. For instance, the report cites that some major operations in railways are being transferred to a Chinese firm after buying locomotives from it. Moreover, the Sindh government is also mulling to handover management of the Tharcoal project to the Chinese firms as well as waste management project in Karachi. These concerns came against the backdrop of a series of complaints by the politicians and ministers of the smaller provinces about the perceived preference being given to Punjab in the allocation of projects under CPEC.
Preferably, the prime minister should have played a lead role in addressing their controversies but it is unfortunate that no serious steps has been taken by the federal government in this regard rather bombastic statements are being issued from all sides which add fuel to the fire. It is heartening to see chief ministers of the three provinces as well as of Gilgit-Baltistan alongwith relevant federal ministers as well as senior provincial ministers from Punjab attending the sixth Joint Cooperation Meeting of the CPEC in Beijing last week where they pitched their proposals for approval. In recent months, there have been a series of statements from Chinese officials and Chinese embassy to allay concerns of Pakistan’s political parties over the CPEC projects. However, it would have been much better if Pakistani leaders had figured out their differences for themselves. The All Parties Conference held in 2015 had decided that prime minister would regularly meet senior politicians as well as relevant officials and ministers to review the progress of the projects as well as address the issues that crop up from time to time. This forum needs to be activated urgently to avoid misgivings in future.
SOURCE: The News
Total exports grew 11.97% in November last year from the same month a year ago, underpinned by higher traditional shipments (19.38%), the National Institute of Statistics and Informatics (INEI) informed. The most demanded traditional products were those derived from mining, such as copper, gold, zinc, lead, iron and tin, as well as oil and natural gas derivatives and coffee. Nevertheless, INEI reported that non-traditional exports posted a 2.40 contraction in November 2016. Products that experienced such drop include those in textile and metal mechanic industries; whereas, the demand for farming, fishing and iron and steel products expanded.
Imports in decline
According to data updated as at December 18, 2016, imports on CIF (cost, insurance and freight) basis dropped 1.56% in November last year, explained by a reduced procurement of capital goods (-5.32%) and consumer goods (-7.06%). Likewise, the procurement of raw materials and intermediate products saw a 5.16% rise.
Internal tax collection
According to information provided by the National Customs and Tax Administration (Sunat), the general sales tax (IGV) of domestic origin grew to S/2.59 billion (about US$770.8 million), up by 0.12% compared to November 2015. Likewise, the collection of customs duties increased 6.50% to S/2.28 billion (about US$680.3 million) from the same month a year ago. On the other hand, the selective consumption tax collection reached S/303.1 million (around US$90.2 million), that is, 17.08% less than in November 2015.
SOURCE: The Andina
Crude oil prices moved up by the end of second week of December, edging closer to new 17-month highs, after Goldman Sachs boosted its forecast for 2017 and OPEC producers showed signs of adhering deal to reduce output. European Brent futures settled at US$55.21 a barrel, US West Texas Intermediate crude settled at US$51.90 per barrel. Both contracts were on track to rise for a fourth week in the last five, with Brent up around 23% during that time and US crude up about 20%.
The OPEC had agreed to reduce output by 1.2 million bpd from January 1, its first such deal since 2008. Russia and other non-OPEC producers plan to cut about half as much. Russia stated that all the oil companies, including top producer Rosneft, had agreed to reduce output. However, there are doubts about the willingness of other OPEC members to reduce output. Paraxylene prices in Asia hit a 2016 peak as bullish energy values and strong futures prices in the downstream PTA markets exerted significant upward pressure on trading values. European paraxylene prices edged up as Brent climbed on the week while mixed xylene prices were firm.
SOURCE: Yarns&Fibers
China’s manufacturing sector expanded for a fifth month in December, but growth slowed a touch more than expected in a sign that government measures to rein in soaring asset prices are starting to have a knock-on effect on the broader economy. The official Purchasing Managers’ Index (PMI) stood at 51.4 in December compared with 51.7 in November. A reading above 50 indicates an expansion on a monthly basis while one below 50 suggests a contraction. December’s reading was slightly below the forecast in a Reuters poll for 51.5. A housing boom in the second half of 2016 and a government spending spree on infrastructure have helped boost prices for commodities from cement to steel, giving the manufacturing sector a much-needed lift.
SOURCE: The Business Standard
US President-elect Donald Trump’s tax reform plan (TRP) has been seen as one of his clear objectives during the campaign and Congress perceives this as a likely opportunity to update a tax code which has not seen any major overhaul for over three decades. While the uncertainty about what policies Trump will pursue as president will remain till he assumes office, analysts are anticipating a comprehensive tax reform to have a knock-on effect on the global tax regime.
The major reforms in Trump’s TRP aim to broaden the individual income tax base and targets modifying the corporate income tax base (eliminating expenditures other than research and development credit, corporate deduction for interest, moving from multi-layer depreciation deductions to first-year expensing, etc.) and lower the corporate income tax rate to 15 per cent from the existing 35 per cent. It also includes amendment in the individual income tax code by lowering marginal tax rates on wages, investment, and business income. The TRP also intends to eliminate federal estate and gift tax while eliminating the step-up basis.
While the tax reforms propose major cuts in both the personal and corporate taxes, they also aim at eliminating the alternative minimum tax. The current US tax code, with a headline rate of 35 per cent for corporates, is one of the highest in the world and resultantly the State’s corporate tax haul has been falling as businesses increasingly shift production overseas and stack profits offshore.
In view of the massive tax rate cut, the TRP intends to promote business activity 'at home' rather than 'abroad'. Nonetheless, reduction in corporate and personal taxes foresees its own challenges within the State. The reforms are likely to intensify the global tax competition and the pressure on medium and small economies to reduce corporate income tax rates would be even higher.
The TRP imposes tax on deemed repatriation at one-time 10 per cent rate on all deferred foreign earnings held in cash and 4 per cent for other earnings. This one-off tax liability can be spread over 10 years. Analysts predict that the repatriation would potentially augment stock buybacks and dividends. While this may seem to be a stimulus for the US MNEs at the inception, it needs to be matched with a shift from the existing taxability on a global basis to a territorial tax system. Consequential global double taxation still remains a threat for such companies in the transitional phase. Further, the mechanics of global tax law that currently make it possible for companies to keep this cash overseas will also make it challenging for them to simply bring it all back to the USA.
With the change in the global tax landscape Base Erosion and Profit Shifting (BEPS) is putting tax firmly on the strategic business agenda with issues varying from transparency to financing to transfer pricing. BEPS is perceived to impact any business that operates in multiple territories. While the TRP does not mention about BEPS, it will be interesting to see as to how the Trump administration will embrace the BEPS agenda. All in all, one does expect several changes, but only time will witness as to how far-reaching they would be. One may agree that tax reforms are inherently complex and to succeed politically, ‘they would ideally require the support of all stakeholders. While the specifics of TRP are still speculative, any tax reforms in US may trigger a host of consequential measures for the multinationals as well as global economies. One may just hope that the ambitious tax reforms and the overhaul of the current US tax code is more US-centric and may have positive implications for the rest of the world.
SOURCE: The Business Standard
Pekalongan, known for its coastal batik, is also famous as a centre for textile production. the city, located in Central Java, played an important role in the introduction of Islam in indonesia. Currently, it is the home to many pesantren, or Islamic boarding schools. The Muslim influence is so strong that some local firms take off on Fridays instead of Sundays. Muslim wear is also in fashion, as the sarong, typically worn for daily prayers, is considered proper for everyday wear.
Local people on the haj pilgrimage to Mecca also sport the garment, showing that a sarong is a piece of cultural, as well as religious, heritage. The Gajah Duduk brand of sarong was launched in 1972 by Pismatex, whose founder, Ghozi Salim, followed a then-common practice of naming firms after fruits to ensure success.
Pismatex is a portmanteau of pisang, or banana, and manggis, or mangosteen–both of which are harvested in Indonesia throughout the year. Perhaps reflecting the fecundity of the fruits, Pismatex, which started as a home industry, has since become the nation’s leading maker of sarongs. Under Ghozi Salim’s son Jamal, Pismatex’s current president director, sarongs are made using high-tech machines that meet the highest international standards of production. Pismatex also has its own factory, Pisma Putra Textile, to make thread. Enough is manufactured to fulfill the firm’s own needs three times over, so Pismatex also books brisk business selling the surplus in the overseas market. Sarung Gajah Duduk offers products that have been entirely made in Indonesia. Thread from its factory is 65 percent polyester and 35 percent rayon. It is also made from locally sourced material. Threads come in about 60 different colours that can be combined into a single sarong. Besides the 525 machines in its 10,000- qm factory in Pekalongan, Pismatex has been collaborating with local home factories, which offer an additional 613 machines, to make more than 1.4 million sarongs every month.
Despite mechanisation, there is still room for a human touch, as the sarongs still boast some hand sowing by tailors, who are mostly women. Quality control and labelling also are done by the workers. Aside from the high technology air jet loom machines, Pismatex’s factories are equipped with high-speed rapier looms with electronic Jacquard machines as well as rapier looms with Dobbys. This is something that allows the firm to explore more variations in patterns, including 3D effects. “The best-known sarong is the plaid [kotak-kotak] pattern,” says Gajah Duduk vice president Lukas Prawoto. “However, since we have to evolve with today’s fashions, we also design sarong with various patterns.”
Among the brand’s offerings are a series of ethnically inspired designs intended for daily use, all of which feature unique packaging. While people in Indonesia follow contemporary trends in fashion and lifestyles, use of the sarong as everyday wear remains common throughout Indonesia, from the highlands of Sumatra, where the textiles are favoured by farmers, to the nation’s east, where sailors don sarongs as scarves by day and blankets by night. The timeless designs of Gajah Duduk’s sarongs form an intangible part of the nation’s heritage, while also reflecting the piety of the wearers. The sarongs combine not only thread, but part of Indonesia’s rich culture, into their weave. Gajah Duduk makes sarongs that are a reflection of the nation’s heritage at its finest.
SOURCE: The Indonesia Design
