NEW DELHI: The trade war between the US and China could provide opportunities for Indian oilseed meal, cotton and maize producers in the Asian country’s market, say companies and traders. “If the export price remains competitive, a small window for agri-exports could open for Indian exporters of oilseed meals – soyameal – and mustard, cotton and maize,” said Prerana Desai, head of research for Edelweiss Agri Value Chain. “We have some stock and with China the largest consumer and importer, we have a market to tap.” India, the second-largest exporter of cotton after the US, can benefit. Of the 5 million bales of cotton imported by China, 40% was from the US, said experts. “With China imposing 25% duty on US cotton, we can leverage our position. There is no duty on import of Indian cotton,” said Atul Ganatra, president of the Cotton Association of India.
Source: The Economic Times
New Delhi : The Export Inspection Council, the export certification body of the government, has launched three portals for faster certification of food and farm products and efficient monitoring of alerts raised by importing countries on non-compliances of standards. “Building a strong ‘Brand India’ is important to increase exports from the country and all efforts should be made to promote and protect it. This type of assessment promoted by the digital initiatives is what is needed,” said Commerce & Industry Minister Suresh Prabhu. The complete export food chain has been integrated in this digital platform, according to an official release. “Primary production, chain catch, aquaculture pond, dairy farms and apiaries are all linked. Processing units, testing laboratories, official controls and exports have complete traceability,” the release said. The ‘one lab one assessment’ portal provides unified approach to all stakeholders like accreditation bodies, regulators and laboratories by bringing them together on a common platform. Simplified procedures for granting joint certification and taking joint decisions help in reducing cost, time and multiplicity of assessment, the release added. The ‘export alert monitoring portal’ monitors non compliances raised by importing countries. The portal will enable monitoring of alerts and action taken by multiple organisations involved in initial certification in the food safety & biosecurity and analysing the trend, understanding the trade barriers to reduce the alerts and enhance the export trade. The portals not only provide an opportunity for ease of export but also play an important role in the ‘Go Green’ initiative by reducing paper usage and saving millions of trees, Prabhu said.
Source: Business Line
New Delhi :To help small businesses borrow from banks, the Ministry of Micro, Small and Medium Enterprises (MSME) is working on a portal that will certify the credit worthiness of small players based on certain identified parameters which can be submitted to banks when loans are applied for.“The MSME sector often complains that banks do not give them loans easily and they are made to run from pillar to post. Our endeavour would be to rate the credit worthiness of a proprietor or firm based on certain criteria and after doing due diligence and then generate a certification for them. If banks do not give loans to MSMEs with a good credit certificate, they could be hauled up and asked to explain,” a senior government official told BusinessLine. The official further explained that retail banks often approached individuals for loans after examining certain pre-determined criteria which ascertained the credit worthiness of the individual. “These criteria could be anything ranging from the previous loan repayment record of the individual to the assets possessed. However, in the case of MSME, banks often ignore positive factors going in favour of the loan seeker and dilly dally in sanctioning credit,” the official said. The Ministry of MSME, therefore, believes that it could help in the initial screening of the loan seekers after getting them to submit information on some pre-determined parameters. “We are working on the criteria on the basis of which credit worthiness would be determined,” the official said. The facility would be provided in the National Enterprise portal being designed by the Ministry of MSME which would serve as an interface for the small industry to interact with other Ministries and the outside world. “The portal will be convergence driven. The Ministry of MSME is an aggregating ministry. So many other ministries do MSME related work. The idea is to get everyone together,” the official said. Out of a total outstanding credit of ₹26,04,100 crore as on November 2017, just 17.4 per cent went to MSMEs, according to the Economic Survey 2017-18. The share is disproportionately small given the fact that the share of MSME sector in the country’s Gross Value Added (GVA) is approximately 32 per cent.
Source : Financial Express
In what could come as a relief to some taxpayers, the indirect tax department on Wednesday said it would allow those who couldn’t file the TRAN-1 form on the GST Network portal for claiming transitional credit due to IT glitches to complete the process by the end of the month. However, this facility will be restricted to those who can demonstrate clear IT-related issues for not being able to comply. “GSTN shall identify such taxpayers who could not file TRAN-1 on the basis of electronic audit trail,” the circular issued by the department said. It added that taxpayers won’t be allowed to amend the amount of credit in TRAN-1 during this process from what was recorded in their failed attempts to file the form. The process of redressal of IT glitches will be carried out by a GST implementation committee (GIC), which will act as the IT grievance redressal committee. The circular said: “Where an IT-related glitch has been identified as the reason for failure of a class of taxpayer in filing of a return or a form within the time limit prescribed in the law and there are collateral evidences available to establish that the taxpayer has made bonafide attempt to comply with the process of filing of form or return, GST Council has delegated powers to the IT Grievance Redressal Committee to approve and recommend to the GSTN the steps to be taken to redress the grievance and the procedure to be followed for implementation of the decision.”
Source: Financial Express
MUMBAI — The US-based DuPont Safety & Construction has announced a $50 million investment commitment in the global operations for DuPont™ Kevlar. As a world leader in safety and protection this investment will help meet increased customer demand boost productivity and improve quality through increased automation. “Kevlar is recognized for creating the protection solutions category 50 years ago and customers have turned to our technology for quality reliability and performance ever since ” explained John Richard vice president and general manager for DuPont™ Kevlar and Nomex. “The market leadership of Kevlar comes from our ability to solve some of today’s toughest challenges. This investment in our operations will position the business to push the boundaries of fiber science and what is possible for our customers for the next 50 years.” In addition to the millions in capital investment the Kevlar business has dedicated nearly 50 people around the world to the continuous improvement of Kevlar fibers and the development of next generation game changing performance innovations. “These investments are only just the beginning ” Richard added. “At over 50 years strong Kevlar is constantly seeking out and identifying new uses and applications to enable people to Dare Bigger – we never stop thinking about what’s next.”
Source : Tecoya Trend
Bengaluru : After conducting a seven-month-long pilot in India, Amazon Business on Tuesday announced the expansion of its Global Selling programme by launching B2B selling for Indian exporters. With this, B2B sellers, manufacturers and exporters in India will be able to reach business customers — ranging from sole proprietors to Fortune 500 enterprises — across Amazon’s international marketplaces in the US, the UK, Germany, France and Japan. The company said the pilot received a positive response with over 2,000 registered exporters for B2B global selling at present. Peeyush Nahar, Vice-Predident, Marketplace Business, Amazon, said: “We are happy to expand the scope of our Global Selling programme in India for B2B customers, which takes another step by hiding the complexities of procurement processes of Fortune 500 companies from Indian sellers. Indian sellers can simply focus on doing what they do best: design and manufacture high-quality products. The programme will get the sellers in front of decisions-makers of Fortune 500 companies as well as medium and small corporations across the world.” Through the programme, Indian sellers can get discounted referral fees for bulk orders, offer business pricing and receive bulk quantity discounts, maintain a single selling account to manage inventory and product listings for both B2C and B2B selling, take complete control of pricing/brand/messaging, take advantage of Amazon’s customer service through telephone and email to address and resolve issues, and receive working capital loans through Amazon’s partner institutions. Business customers can register for their B2B Global Selling account via Amazon Seller Central. The B2C Global Selling programme, which was launched in India in 2015, has over 32,000 exporters offering more than 90 million made-in-India products to customers across 10 global marketplaces. The 2,000 registered exporters for B2B global selling are not new sellers, but a part of the 32,000 exporter pool.
Source : Business Line
MUMBAI— The Cotton Textiles Export Promotion Council (TEXPROCIL) has called upon the CBEC Chairman for refund of unutilised Input Tax Credit (Transitional Credits) when goods are exported under LUT. Texprocil in a letter to CBEC has informed that large number of representations received from the exporters are pointing out difficulty faced by them due to a clarification issued by CBEC Circular No. 37/11/ 2018-GST dated March 15 2018 with regard to the refund of transitional credit. According to the said circular “Transitional Credits pertaining to duties and taxes paid under the Central Excise Act 1944 and Chapter V of the Finance Act 1994 cannot be included in the “Net Input Tax” for the purpose of refund of unutilized “Input Tax Credit” in terms of Section 54 of the CGST Act. Effectively it means those exporters who had exported under LUT and intend to claim refund of unutilized Input Tax Credit related to the export goods will not eligible for the refund if the Input Tax Credit is on account of “Transitional Credit”. In this regard Texprocil pointed out to the CBEC that the Transitional Rules have been framed to facilitate transit from the old Central Excise / VAT/ Service Tax regime to GST. Under the Transitional Rules the amount of Cenvat credit claimed on inputs capital goods and input services carried forward in the last return filed for Excise and Service Tax immediately before the appointed day shall be transferred to the Electronic Credit Ledger of the business concerned provided the amount of credit is admissible under the existing laws as well as GST. The reason for the denial of refund as per the Circular is that the Transitional credit pertains to duties and taxes paid under the Central Excise Act 1944 and therefore the same cannot be said to have been availed during the relevant period and thus cannot be treated as part of “Net ITC”. However Texprocil pointed out that the “Transitional Credits are allowed to offset GST liabilities on onward supplies which includes clearance for exports. In other words IGST paid on exports out of Input Tax Credits which includes “Transitional Credits” are allowed as refund when the exporter have exercised the option of “Exports under IGST Refund”. While IGST refund is allowed when the GST is paid out of Input Tax Credit including “Transitional Credits’ there is no reason why the refund should be disallowed in the case of Exports under LUT when the exporter claims refund of unutilized “Input Tax Credit” which is related to Transitional Credit. Further Texprocil noted that the GST law allows business units to carry forward their Input Tax Credit and ensures that no ITC is lost while migrating into the new GST regime. By denying refund of Transitional credits the very propose of “Transitional Rules” is defeated. In view of the above scenario Texprocil has requested the CBEC to look into the matter and do the needful so that Refund of unutilised Input Tax Credit (Transitional Credits) are allowed when goods are exported under LUT.
Source: Tecoya Trend
MSME minister Giriraj Singh has a stereotyped image in the media. Not many, however, know that Singh has grand plans for the sector, even when he’s readying a blueprint for jobs in rural India which he plans to share with the PM shortly. In an interview with Suman K. Jha, Singh lists his priorities and concerns.
Edited excerpts:
Demonetisation was a phase and it was a transition phase. Prime Minister There was an adverse impact of demonetisation and GST on the MSME sector. Do you think that phase is over now? Narendra Modi took such a big decision in national interest, where Indira Gandhi had refused to endorse the same. The phase (of ill-effects on MSMEs) has ended now. That phase of demonetisation is over. Now it’s all about GST. There have been some teething issues. But it’s my 200 per cent faith that May onwards things will be on track. So there’s nomore impact? For demonetisation, it’s done. For GST, it will be soon. After 31 March, all will be resolved. It’s the first time in Indian history that 59 per cent budgetary increase for MSMEs was given in the Union Budget. It clearly reflects the importance given to MSMEs by the PM and the finance minister of India. Talking of budgets, I say it was the biggest decision by any government. When it’s (provisions for MSMEs) in budget, it reflects a national concern. There were special provisions for the MSME sector in the last Budget. Do you think they were sufficient? And what about the corporate tax relaxation? Earlier, the government of India gave 5 per cent rebate to those who had turnover of up to Rs 50 crore or less. According to the new norms for MSMEs, Rs 5 crore for micro, Rs 75 crore for small and Rs 250 crore is the limit for medium enterprises. Now the rebate is applicable to all. This is a long-standing demand getting fulfilled. I have heard that wherever You recently got a job creation survey done. What was the need and what were the highlights of the survey? Rahul Gandhi is going, including to foreign shores, he’s attacking the government on the supposed unemployment figures. So, I got a survey done. In fact, two. It was my way of getting done a reality check on the issue. In the survey, I asked MSMEs if they do advance planning for their jobs. The responses were varied, ranging from on job training, interest subsidies, etc. When I asked them how many people they employed on average, while some said none, but if one were to take an average of the numbers, they said seven persons on average were employed by each MSME firm. According to the National Service Scheme figures, there are over six crore MSMEs. And as per Goods and Services Tax Network (GSTN) registrations, they are more than 1 crore. So if we put together the average number of employed persons with the total number of MSMEs, eight to 10 crore people are being provided jobs by this sector alone. I got the survey findings rechecked by a private surveyor, which more or less corroborated the earlier findings.Why is this fact not being highlighted? I would say the population explosion is the real challenge. Let me give you an example. The Metro service in So what are the challenges? Delhi was started in 1998-99. But if you look at the traffic today during peak hours, there is not an inch of space available (in the metro trains). When I raise the issue of population explosion, some point out the demographic dividend. They fail to realise that resources are limited. And if not planned properly, this could become a big problem for the government. By 2020, the textile sector will be a major source of employment. In textiles, apparels will be the biggest sub sector, wherein, it’s estimated that over 6 crore jobs would be created by the said year. You have an ambitious employment generation roadmap for the future that you want to present to the PrimeMinister. Can you please share the details? But there’s a challenge. The average pay in the sector is Rs 7,000 to 12,000 per month. Earlier, composite mills were established in centres such as Mumbai, Kanpur, etc. Today such units can be found in places such asDelhi, Noida, Gurgaon, which bring with them their own set of challenges. You cannot expect people to make a living with Rs 10,000 in Delhi! Therefore, the need of the hour is to take the entire ecosystem to rural India as that will also help industrialise the hinterlands. I have already started an experiment in Navada in Bihar, and the initial results are very encouraging. Then there is the issue of solar charkha (spinning wheel). It is highly cost effective, and can revolutionise garment manufacturing in India. Many complain that we are losing out to countries such as Cambodia and Bangladesh in textiles. I have studied Bangladesh. The manufacturing units there are in the rural areas. There’s a need to recreate that model here. This will revolutionise the rural areas, and will create a major avenue for job generation for the rural populace. With minor policy tweaking, this can be a major source of employment. I am going to propose this to the PM. We must acknowledge globalisation as a reality. We may be facing competition from China, but it is also true that we are beating it in many areas. We need to invest more in technology and R&D.
What challenges are you facing in theMSME sector?
The biggest gap here is in financial inclusion. The government has addressed this challenge, and now we are also aggressively promoting cluster scheme. In many countries MSMEs’ contribution to gross domestic product (GDP) is around 50 to 80 per cent. MSMEs’ share in India’s GDP is may be 30 per cent presently, and their share in exports is at 35 per cent. By 2022, the sector must be 50 per cent of GDP. We are working towards that national objective. I am undertaking newer experiments in rural empowerment. Recently, I took the NITIAayog CEO to visit one such hotspot in Bihar. The solar charkha there, and the ecosystem it will spawn has the potential to give employment to over five crore people.
What other initiatives are you taking?
I am also stressing on a cow-based agrarian economy. World over, there’s a thrust on organic farming.In one such experiment, human hair and cow urine is being mixed to produce amino acid, which with cow dung will help achieve the objective of organic farming.
This also fits well into the PM’s vision of reducing chemical fertilisers by half by 2022.
The entire country is shifting towards organic farming. The farmers in Punjab prefer wheat produced in Madhya Pradesh because there’s less chemical fertiliser. As a consequence of chemical fertilisers, many are getting deadly diseases such as cancer. I am also trying to see how agro industries in the MSME space can be combined and promoted.
Source: Businessworld
Surat: While the textile traders’ community is yet to come out of the impact of the goods and service tax (GST), the textile market labourers’ union has decided to implement hike in charges for various works including cutting, folding and packaging works. The Surat district textile marketing transport labour union has sent a detailed list of revised rates to all textile markets located at Ring Road, Salabatpura, Bombay market and Sahara Darwaja regarding the hike in the charges starting from 12 paise to Rs 15 in various categories of labour jobs including cutting, folding and packaging. The union office-bearers have also decided to implement 20% hike in labour charges every year and have asked for cooperation from the market associations. Talking to TOI, president of the labour union, Shaan Khan said, “The labour charges are prevalent from last many years and there was need for revision. Hence, we have decided to implement new rates applicable from April 1, 2018. Every year, we have decided to implement 20% hike in the prevalent rates.” Khan added, “The labourers working in the textile markets are not getting enough work due to decrease in business post-GST. As a result, they are unable to survive in such environment and need better rates.”
Source: The Times of India
Gadwal: The state government is planning to provide 40 per cent subsidy to all the handloom workers, master weavers and handloom weavers Associations for buying fabric, dye and colours required by the weaver community through a scheme called ‘Cheneta Mistra’ in the district. For this the government is providing 40 per cent subsidy to the waver community who buy the fabric, dye and colours through TSCO.Earlier under the Cheneta Mistra which was launched in 2017, the government was providing a subsidy of 20 per cent to the weavers, however this year the government has enhanced this subsidy for enabling the weavers’ better profits. According to district officials of Gadwal this is in addition to the 10 per cent subsidy provided by the Central government. For this purpose, the State government has allocated Rs 120 crore funds for the year 2018-19 and the same should be utilised by the weavers’ community, said MD Zaheeruddin, Assistant director Handlooms and Textiles Gadwal. The District Collector has called for more awareness on the various schemes provided by the government for the weavers and urged them to avail the subsidy and get benefited.
Source: The Hans India
Fynd, the Indian lifestyle omni-channel platform that sources its inventory directly from brand stores, has closed its series C round of funding, with the lead investor being Google, followed by Kae Capital, IIFL, Singularity Ventures, GrowX, California-based Tracxn Labs, Venture Catalyst, Patni family office and Hong Kong-based Axis Capital. With more than 8,000 outlets on board, Fynd’s proprietary inventory integrations enable customers to discover fashion in real-time and know the exact specifications of the products available. Fynd’s latest round of funding will enable it to enhance the way it engages with consumers and retailers. The online-to-offline platform directly sources products across various categories including clothing, footwear, jewellery and accessories, from the most prominent brands in the country and brings them online. Fynd had earlier raised a round in April 2017 led by IIFL with participation from New York based FJ Labs and Silicon Valley-based Rocketship among other participating existing investors, according to a company press release. “Our vision is to revolutionize the online and offline shopping experience across all channels and customer touch-points. We expect that the capital raised will help us further bolster our growth trajectory,” said Fynd co-founder Harsh Shah.
Source: Fibre2Fashion
India has been announced as the new partner country for Ambiente, Europe's mega exposition of living, dining and gifting items, next year. India has taken over the baton from the Netherlands which was the partner country at the Frankfurt Messe this year. Incidentally, India is the second Asian country after Japan to partner with the Ambiente. "With its population of over 1.3 billion, India has an incomparable diversity, a rich culture and also a tradition of art and craft. It’s also among our absolute top countries in terms of exhibitors. I’m confident that its presentation will be a real highlight at Ambiente 2019," Detlef Braun, member of the executive board of Messe Frankfurt, organiser, said while making the announcement. The partner country globe was handed over at a ceremony held at the Frankfurt Messe. Pratibha Parkar, consul-general of India in Frankfurt, accepted the partner country globe from the ambassador of the kingdom of the Netherlands, Wepke Kingma. "India’s participation at Ambiente 2019 will add to the vibrancy and diversity of the fair and familiarise global manufacturers, retailers and brands with the robust entrepreneurship in Indian textiles, apparel and consumer products industry and will open up opportunities for sourcing and investment in India. India is looking forward to this collaboration that will help to develop long-term sustainable partnerships of Indian industry with the value chain in Germany and other countries," Ajay Tamta, minister of state for textiles, said. This was the eighth time that the partner country globe was handed to another country at Ambiente. After Denmark, France, Japan, the United States, Italy, the UK and the Netherlands, India will thus be at the focus of visitors to the forthcoming Ambiente. The next Ambiente will be held from February, 8 to 12, 2019 while the Indian edition will take place from 22 – 22 June in New Delhi this June and will host over 150 companies from countries like India, Indonesia, Switzerland and Thailand showcasing trendsetting designs in the interior décor as well as the famed Interior Lifestyle Awards for aspiring Indian designers. )
Source: Fibre2Fashion
On Wednesday the rupee fell 14 paise to end at 65.15 against the US dollar. The rupee strengthened by 15 paise to 65 against the dollar at the interbank forex market on fresh selling of the greenback by exporters and banks ahead of the RBI’s monetary policy outcome later in the day. Dealers said dollar’s weakness against some other currencies overseas and early gains in domestic equity markets supported the rupee.
Source: The Hindu
KARACHI: Aimed at doubling value addition from $1 billion per million bales to $2 billion per million bales during five years and double textile exports from $13.1 billion to $26 billion, besides facilitating investment of additional $5 billion in machinery and technology, the textile policy 2014-19 has remained fail to achieve desired targets. This was stated by representatives of the Pakistan Textile Exporters Association, All Pakistan Textile Mills Association, Pakistan Hosiery Manufacturers Association, Pakistan Readymade Garments Manufacturers and Exporters Association, Towel Manufacturers Association, Pakistan Apparel Forum and other textile organisations. They said that the policy failed to yield any fruitful outcome during this mentioned period in the policy due to lack of will and poor approach. “Even the Economic Coordination Committee during the period could not succeed in qualifying for taking appropriate decisions for providing rewarding result to textile sector stakeholders. Except some proposals, any furtherance could not be achieved.” Textile policy 2014-19 adopted a five-pronged strategy to make textile sector competitive and sustainable. Budgetary support, drawback of local taxes and levies, easy finance, sales tax regime, duty free import of machinery, policy interventions, tariff rationalisation, fibre diversification, product diversification, small and medium enterprises development, enactment of domestic labour laws, revival of sick units, marketing strategies, technology up gradation, establishment of world textile centre and model cotton trading houses, revitalisation of projects like Pakistan Textile City, garment cities and capacity building of the Ministry and related organisations were the salient features of textile policy. Ghulam Rabbani of the Pakistan Yarn Merchants Association, Rana Abdul Sattar of the Pakistan Cotton Ginners Association and other stakeholders were of the view that lack of determination of government’s textile, commerce and finance custodians and failing in coordinating real stakeholders for a positive result had resulted in failure of desired goals given in five years policy. “Textile policy 2014-19 could not be implemented in its true spirit, and resultantly it could not meet even near to target objectives like last textile policy.” Textile sector provides employment to about 45 percent of industrial labour force, consumes more than 42 percent banking credit and accounts for more than 9 percent of Gross Domestic Products. The roadmap for sector was approved by the ECC with a proposed total outlay of Rs 64 billion, comparing to Rs 188 billion in the previous policy. Among other segments, policy also proposed increasing focus on small and medium enterprises sector. It was also proposed in policy to increase exports and fully utilise potential of textile sector.
Source: Daily Times
The National Cotton Council is concerned that China’s announcement of significantly higher proposed tariffs on U.S. raw cotton shipped to that country would significantly harm the economic health of the U.S. cotton industry. For the current 2017 crop year, China stands as the second largest export market with purchases of approximately 2.5 million bales of U.S. cotton. "I cannot overstate the importance of China’s market to U.S. cotton farmers and the importance of U.S. cotton in meeting the needs of China’s textile industry," NCC Chairman Ron Craft said. "The cotton industries of the United States and China enjoy a healthy, mutually beneficial relationship." According to the USDA Foreign Agriculture Service GAIN Report, cotton has been listed among multiple U.S. agricultural products that could potentially be hit with higher tariffs from China—specifically an in-quota tariff that would increase from one percent to 26 percent. Following the announcement, the cotton market reacted accordingly—almost limit down on nearby contracts. The GAIN Report noted that China's proposal of retaliatory tariffs on selected U.S. agricultural products is in response to the recent U.S. proposed tariffs on Chinese imports resulting from the Section 301 investigation into the forced transfer of U.S. technology and intellectual property. Craft said the NCC strongly encourages the two governments to engage in immediate discussions "that can resolve trade tensions and preserve this long-term collaborative relationship. The U.S. cotton industry stands ready to assist the U.S. government and our trading partners in China to find a resolution to this damaging trade dispute.”
Source: High Plains Journal
Dhaka Tribune 'If there is a long term tax policy, it helps business people to make informed investment decisions'The National Board of Revenue (NBR) wishes to set the tax at source based on export value, instead of on export return earnings. Currently, the tax at source is based on export earnings, at a rate of 0.7%.NBR Chairman Md Mosharraf Hossain Bhuiyan made the proposal at a pre-budget meeting with business leaders from the export sector. In the meeting, the Exporters’ Association of Bangladesh (EAB) urged the government to set a fixed percentage tax at source for the next five years to make it easier for entrepreneurs to take policy decisions. In response to the exporters’ call, the NBR chair said they were considering not changing the rate of tax at source, but may instead set a tax at source on export proceeds instead of on realized earning from exports. However, the EAB opposed the proposal, saying it would hurt businesses. “It will not be a wise decision as it will compel the exporters to pay taxes based on the unrealized amount, which will cause losses to the business,” EAB First Vice-President Mohammed Hatem told the Dhaka Tribune. The business leader added that at source taxation for the export oriented sectors should be fixed for the long term, for a minimum period of five years. “If there is a long term tax policy, it helps business people to make informed investment decisions,” he said. Replying to the business leaders’ comments on tax at source, the NBR chair said it would be set for the next few years, regardless of whether it is cut or increased in the next budget. Meanwhile, the Bangladesh Garment Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA) urged the government to set the tax at source at 0.5% instead of 0.7% for the next fiscal year. Prices of raw materials have increased, while the prices of finished goods are declining. As a result, RMG manufacturers are cutting the prices of accessories, BGAPMEA President Abdul Kader Khan said in his budget proposal. “To remain competitive, the government should cut tax at source to 0.5% for the sector,” he added. The BGAPMEA has also requested a 12% corporate tax rate for FY2018-2019. Currently, the sector pays 35% corporate tax. “Despite being a fully export oriented industry, the garment accessories and packaging manufacturers are paying 35% corporate tax,” said the BGAPMEA president. He added that the 35% rate was discriminatory, as exporters of knitwear and woven products presently pay 12% corporate tax, while garments manufacturers who operate certified green factories have to pay 10%.
Cambodia’s garment sector is the backbone of the country’s export-driven economy and employs 86 percent of all factory workers. But the sector faces threats from increasingly competitive regional neighbours, the inevitable shift to automation and the potential loss of preferential trade agreements. The stakes couldn’t be higher for the country’s economy. About 40 percent of Cambodia’s GDP comes from garment exports, while more than 800,000 people are employed in garment factories around the country. But as Cambodia’s political situation has deteriorated with the dissolution of the main opposition party in November, and as the push to lower electricity and logistics costs for businesses have taken a backseat to populist policy initiatives, the garment sector is facing several risks that threaten the industry’s short- and long-term future in the Kingdom. Competitiveness Cambodia remains competitive in the global garments marketplace primarily because of its low wages, according to analysts. But recent years have seen steep wage hikes for garment factory workers, and that trend has accelerated ahead of July’s national elections. The minimum wage has risen from $61 in 2012 to $170 this year. And as Prime Minister Hun Sen has attempted to woo garment workers ahead of the election, more populist policies have been enacted, including an increased burden for businesses to pay into their workers’ funds at the National Social Security Fund. In a recent speech, the prime minister said that experts had floated $250 per month as a reasonable minimum wage by 2023, and said he thought it could go even higher. That could be disastrous, according to some factory owners that operate in Cambodia. “We cannot survive a 12 percent wage increase every year,” said Eric Tavernier, CEO of France-based textile firm We Group Ltd. While Tavernier said he has no immediate plans to leave the country, the increased financial burden of doing business in the Kingdom worried him. “I believe a significant number of factories feel the pressure to consider moving out, and not many are willing to come in,” he said. Tavernier said that when he compared his Cambodia operations to those in Vietnam and China, the Kingdom has only maintained its profitable edge due to lower wages, as Cambodia’s transportation, freight and export costs were all higher than in neighbouring countries. “We can’t increase prices for our customers, because competition is intense,” he said. “Vietnam has high wages, but . . . there’s better oversight there, better shipping and more flexibility in the market.” Anthony Galliano, CEO of Cambodian Investment Management, said the Kingdom needed to improve on a wide range of factors if it hoped to keep investment flowing. “Cambodia’s attractiveness and competitiveness has elevated over the last 10 years, primarily due to low labour costs,” Galliano said. “But infrastructure, productivity, energy costs and logistics are lagging, and must improve demonstrably if Cambodia is to remain a major player.” Labour Ministry spokesman Heng Sour has said in the past that increased costs and wage hikes should not deter future investment in the sector, pointing to the government’s recent reduction of corporate taxes. The January elimination of the export management fee, along with exemptions allowed to the prepayment tax – a 1 percent minimum tax obligation paid on monthly revenue flows – are expected to amount to a $40 million tax break for factories this year. But lowered taxes may not be enough to cover employers’ rising financial burdens. “If costs are going up faster than productivity, then Cambodia is absolutely at risk of losing factories to other countries in the region,” said Stephen Higgins, managing partner at Mekong Strategic Partners. “Embracing automation is the only way that Cambodia can improve productivity quickly enough to justify the level of wage rises that we are seeing,” he said. Automation can increase productivity while lowering the wage burden for employers.
Automation
But questions remain about whether Cambodia’s labour force would be able to adapt to move up the value chain, and whether the country’s infrastructure could support an automated garment sector. David Tan, the managing director at the technology company MyTeb Cambodia, noted that Cambodia lacks both the trained workforce and infrastructure backbone to support an automated factory sector. “Electricity availability and uptime remain a critical challenge,” he said. “Without a steady and uninterrupted supply of energy, many of these automated processes will be disrupted, causing multiple points of delay and unproductivity.” The local labour force could benefit from education programs regarding automation, and Tan said Cambodian labourers appeared willing to adapt. “Cambodian people are eager to learn more and embrace modern methods of productivity – this is unlike other territories, where there is a perception that automation and enhanced efficiency will cause redundancy and a reduction of jobs,” he said. But retraining the more than 800,000 garment workers would be a massive investment for both private companies and the government, and it’s unclear if either side would be willing or able to put in the time and money. Marco Kalinna, the founder of factory assessment company Cosmos Services who has 17 years of experience working in Cambodia’s garment sector, was pessimistic about the country’s chances of adapting to automation. “Cambodia can only be competitive in those areas where labour costs are still an advantage,” he said. “Mass-automation will find its place where electricity costs are affordable and where there is proximity to the markets, and Cambodia has none of these.” Last week, apparel groups representing some of Cambodia’s largest garment buyers expressed “growing concern” over several of Cambodia’s controversial labour laws and requested a meeting with Hun Sen.
Loss of agreements
In the letter, penned by US-based American Apparel & Footwear Association and UK-based advocacy group Ethical Trading Initiative, the groups warned that Cambodia’s 2016 Trade Union Law places restrictions on freedom of association and union rights, and continuing to implement such restrictions “will make Cambodia an unattractive and expensive place to do business”. H&M, one of the buyers represented in the letter, told The Post that while they are monitoring the situation in the country, they had no immediate plans to leave. “We are continuously monitoring the political situation,” wrote Ida Stahlnacke, H&M communications officer, in an email. “However, we remain committed to Cambodia, and to being present [in the Kingdom], to continuously improve the lives of garment workers.” Kalinna, from Cosmos Services, said that brands were unlikely to take concrete steps beyond issuing “concerns”. “Sorry, but that letter was a publicity stunt,” he said. A more significant risk was the potential loss of preferential trade agreements, such as the Everything But Arms (EBA) agreement, which grants Cambodian exports tariff-free access to the EU market. The EU imports more than 40 percent of Cambodia’s garments, making EBA a lynchpin of the Kingdom’s economy. “The removal of . . . duty free [status] for garment exports to the EU would certainly have a devastating effect on the garments industry,” Kalinna said. “My estimate is that, within 18 months, up to 50 percent of manufacturers would move out of Cambodia.” Whether the EU would ever enact such a measure remains an open question. Most analysts think it is unlikely due to the fact that the ramifications of a repeal would impact hundreds of thousands of Cambodian workers. “There are more effective, targeted mechanisms for the EU to make their point than a broad brush approach like pulling the EBA,” Higgins said. However, the bloc has taken several unprecedented steps toward Cambodia recently, raising questions about how predictable its actions may be. The EU Commission, prompted by protectionist concerns from member nations, launched an investigation into Cambodian rice exports last month – the first investigation of its kind of Cambodian exports. The decision was unrelated to labour rights or the political situation, but the move shows that Europe won’t hesitate to re-evaluate Cambodia’s tariff-free status if it determines it would benefit its members’ interests. In mid-March, the EU and Cambodia held the 10th Joint Committee, a meeting that is held roughly once every two years to discuss a range of issues between the two trading partners. In past statements, the portion written by EU foreign affairs ministers often chides Cambodia on politics and rights issues, but the portion from the Trade and Investment Subgroup – which is responsible for evaluating the EBA – has generally refrained from wading into such matters. The subgroup’s portion of the statement from the ninth meeting, held in 2016, for example, makes no mention of politics or rights. But at the meeting in March this year, the Trade and Investment Subgroup specifically called for more attention to be paid to human rights and fundamental freedoms, “including labour rights”, which “underpins the continued eligibility for EU trade preferences under the EBA”. It went on to detail specific concerns related to economic land concessions for sugar plantations, as well as human rights and labour issues that needed “urgent action on the Cambodian side”. But even with a stronger statement, analysts say the EU is likely all bark and no bite. Galliano, from Cambodian Investment Management, said he is not worried at all about the continued existence of preferred trade agreements, with continued access to the EBA all but assured in the coming years. “While strong statements threatening concrete steps have been issued, withdrawal of preferences are rarely implemented,” he said. “I see a very low probability that Cambodia’s EBA status will be terminated.” If trade agreements remain stable, the Kingdom may avoid a sudden shock to its largest industry. But the inexorable changes promised by automation technology, as well as the lofty promises of wage hikes that are unlikely to be offset by decreases in costs for businesses, could leave the garment sector in Cambodia hanging by a thread.
Source: The Phnom Penh Post
Global: Official notification has been received that the import ban on second-hand clothing and footwear mooted by members of the East African Community (EAC) will not now be implemented by four of the five countries that had originally proposed it. Kenya announced last year that it was backing away from the ban and now Tanzania, Uganda and Burundi have followed suit. Writing in 2018/Issue No. 2 of Recycling International, Alan Wheeler - director of the UK's Textile Recycling Association and the BIR textiles division's general delegate - says of the change of mind: 'It seems as though we now have an important opportunity to liaise with the EAC governments, to convince them to support the used clothing sector and to develop proposals that can create manufacturing standard jobs in this sector within their own countries.' Dropping the ban 'is a victory for both the EAC countries and the second-hand textiles industry', according to the US-based Secondary Materials and Recycled Textiles Association (SMART). 'For the people of the EAC, many rely on second-hand clothing and shoes imports as their only affordable access to quality apparel. For the second-hand textiles industry, it means international imports to the EAC will continue, with more than 190 000 jobs within the United States alone being preserved, as the total exports to the EAC represent roughly 22% of the US industry's total exports.'SMART expresses the hope that Rwanda will also reconsider its position on banning second-hand clothing imports.
Source: Recycling International
