The Synthetic & Rayon Textiles Export Promotion Council

MARKET WATCH 14 SEPT, 2018

NATIONAL

INTERNATIONAL

8.2% GDP growth, but how is the economy really doing?

While the larger picture is not one of immediate crisis, there are factors that should be cause for concern. India’s GDP grew 8.2%, the highest in two years, during April-June 2018 (Q1 2018-19). The headline growth numbers, however, do not capture the macroeconomic dynamics currently at play in the Indian economy. (Illustration: Abhimanyu Sinha) India’s GDP grew 8.2%, the highest in two years, during April-June 2018 (Q1 2018-19). The headline growth numbers, however, do not capture the macroeconomic dynamics currently at play in the Indian economy. While the larger economic picture is not one of immediate crisis, there are factors, especially on the external front, which should be cause for concern. Economic growth: The 8% plus GDP growth is more a result of the base effect due to demonetisation’s disruption than any drastic increase in the level of economic activity. This can be seen from the trend in the two-year compound annual growth rate (CAGR) of GDP, which shows economic growth to be stagnant, and slightly lower, compared to the performance before note ban. (Chart 1) To be sure, even a 6.8% GDP growth rate is not bad and India remains the fastest growing major economy in the world. Terms of trade: Terms of trade between agricultural and non-agricultural sectors is an important political economy contradiction in India. Roughly speaking, terms of trade can be thought of as the ratio of prices paid and received by various sectors in an economy. The difference between growth of Gross Value Added at current and constant prices for agriculture, industry and services can give an idea about these trends in the economy (Chart 2). As can be seen in the Chart 2, the sectoral deflator for agriculture had started declining from the last phase of the previous United Progressive Alliance (UPA) government. In September 2017, agriculture’s deflator went below the values for industry and services, which suggests that prices of agricultural commodities were rising at a slower pace than the other two sectors. Things changed in the last quarter when the agriculture deflator shows a slight increase. This trend will probably continue after the government’s decision to significantly (compared to previous years) hike Minimum Support Prices for Kharif crops in July. If the government can maintain a close to 7% overall growth rate with improvement in terms of trade for agriculture, it can expect strong political tailwinds in the 2019 elections. The question is whether this can continue. Inflation and the external sector: Inflation and growing problems on the external front are emerging as major headwinds. The Reserve Bank of India’s (RBI) monetary policy committee noted the hike in MSPs and rising oil prices as potentially important drivers of inflation in its last meeting. Under the new inflation-targeting framework, RBI is bound to raise interest rates in case it expects inflation to rise. The government is expected to maintain the formula of MSP giving a 50% guaranteed return over cost of the cultivation (the so-called A2+FL measure) in the next Rabi season as well. Oil prices are expected to remain tight in the near future. India could face a bigger oil shock if it agrees to adhere to US sanctions on stopping oil imports from Iran. A depreciating rupee will further add to the inflationary impact of the rise in oil prices. Even on a standalone basis, these developments are likely to drive down growth. RBI’s rate hikes will increase the cost of investment and conducting business. A higher import bill due to rising oil prices will reduce GDP figures by fall in net exports. This will further trigger inflation and probably a rate hike cycle. The real impact of these developments could be even bigger. Last week, the RBI reported a significant reversal in foreign portfolio investment (FPI) in the country. There was a net outflow of $8.1 billion during Q1 2018-19 compared to a net inflow of $12.5 billion during Q1 2017-18. This is only the third quarter in which the country has recorded a net outflow of FPI under this government. In absolute terms, the value of net FPI outflows in the last quarter was the second highest since September 2003. The outflows were the highest in December 2016, the quarter in which Donald Trump became the US President. At a time when the trade deficit has been widening, portfolio outflows will add to the strain on our foreign exchange reserves (Chart 3).The ratio of total foreign exchange reserves and India’s imports in Q1 2018-19 was the lowest since Q4 2014-15. At a time when trade wars threaten the rule-based global trade regime, an exogenous shock could create a big disruption on the external front. Avoiding any such mishap will require clarity and close coordination between the government and RBI. This does not seem to be the case right now. Reactions on the falling value of rupee are a case in point. While government officials, including the finance minister, have given statements downplaying the fall in the rupee’s value, reports suggest that the government has asked the RBI to soften the rupee fall and is also contemplating selling deposits denominated in foreign currency. In an interview to Bloomberg Quint, former RBI governor Y V Reddy rightly pointed out that government should resist from commenting too much about the exchange rate as it confuses the markets. If at all the government expresses an opinion, it should be with intent, Reddy added. In this case, this could imply that the government wants the rupee to deteriorate even further. To be sure, the former RBI governor’s advice is not easy for the Bharatiya Janata Party-led government to follow. The Opposition’s attacks on the government over the rupee and oil prices today are not very different from those the party used to launch against the previous government.

Source: Financial Express

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India’s GDP growth to slow down; Credit Suisse points out 2 key headwinds for economy

India’s GDP growth is likely to have peaked in the first quarter of this fiscal and going ahead some moderation is expected as weaker rupee and rising oil prices remain two major headwinds for the economy, says a report. According to global financial services major, Credit Suisse, the 8.2 per cent GDP growth for the India’s GDP growth is likely to have peaked in the first quarter of this fiscal and going ahead some moderation is expected as weaker rupee and rising oil prices remain two major headwinds for the economy, says a report. India’s GDP growth is likely to have peaked in the first quarter of this fiscal and going ahead some moderation is expected as weaker rupee and rising oil prices remain two major headwinds for the economy, says a report. According to global financial services major, Credit Suisse, the 8.2 per cent GDP growth for the April-June quarter of this year, though “encouraging”, was largely owing to base effects. According to official data, the Indian economy grew at a two-year high of 8.2 per cent in the April-June quarter of current fiscal on good show by manufacturing and farm sectors. “A moderation in the PMI seems to be confirming our view that growth likely has peaked in Q1 (April-June) and we could see some moderation in the GDP prints going ahead,” Credit Suisse said in a research note. It further added that “monsoon deficit is now at 6 per cent, and the acreage under kharif sowing is flat year-on-year”. According to Credit Suisse, weaker rupee and rising oil prices remain two major drag factors for the economy. “These two headwinds could turn out to be a double whammy for India, exerting an upward pressure on inflation and downward pressure on growth,” the report said. Regarding price rise, the report said though the headline inflation has eased in recent months owing to benign food inflation, the core inflation is inching up and all these factors could prompt the RBI raise interest rates. “Confluence of these factors could prompt the RBI to raise interest rates once again by 25 bps – with a risk of a 50 bps hike – in the October policy meeting. Higher interest rates will have a negative impact on growth expectations as well,” the report said. In its August policy review, RBI raised benchmark short-term lending rate (repo) by 25 basis points to 6.5 per cent citing inflationary concerns. It was the second such hike in a row. On the positive side, Credit Suisse expects economic growth to gradually get support from strengthening bank balance sheets as more companies exit bankruptcy, and as GST implementation progresses further (full implementation of E-Way bill). “This should provide a much more conducive environment for the investment growth to pick up,” it noted.

Source: Financial Express

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Here's what experts say about current state of the Indian economy

Amidst rising fuel prices, and a falling rupee, Prime Minister Narendra Modi is likely to hold a crucial meeting this weekend to take stock of the economy. Soon after this news broke, the rupee recovered sharply in trade. At one point it was close to the 73-mark against the dollar. But by the end of the day, it got back close to the 72-mark marking the biggest single-day gain in over 3 months. The union cabinet also announced a slew of measures to lift the rural economy, a new procurement policy to ensure Minimum Support Price (MSP) to farmers has been cleared and the prices of ethanol has been hiked. Three macroeconomic indicators are offering some hope to the government--- trade deficit in August has eased marginally but it still remains elevated at over $17 billion. Retail inflation for August is below 4 percent for the first time in over 10 months but many expect the rise in fuel prices to have a major impact in the month of September. Industrial production is steady in July with a growth of 6.6 percent but it's largely due to a low base. In July last year, the IIP was at a mere 0.9 percent. CNBC-TV18 caught up with Chengal Reddy, chief adviser at CIFA; Surjit Bhalla member of PMEAC; Pronab Sen, former principal adviser of Planning Commission and DK Joshi, chief economist at Crisil, to discuss the state of the Indian economy and what we can expect from Prime Minister Modi's review meeting. Bhalla said, "Let me first point out that whatever I say it's my own personal view and not that of the PMEAC. The first point on the rupee is that it's part of a global sell-off of currencies. Neither developed country currencies nor developing countries currencies have been spared in this global dollar strength. So, I think that needs to be and should put some perspective on what is happening." "The second part is that if you look at the annual report of the RBI, they state that they don’t think or let me quote it more accurately ‘that amongst the peer group the Indian rupee appeared to be less overvalued than many of its peers’. So, if there is a fundamental reason for the rupee to be where it is, that is an overvaluation, it doesn’t appear from anything that the RBI has said through its research notes or through its annual report or anything that the ministry of finance has said that they believe that the rupee is at 71-72-73 levels somewhat over what they believe to be fair value," Bhalla added. Sen said, "By and large, I agree with what Surjit Bhalla said, there is no reason to panic. But the fact is that media has created panic. The fact is that the political system is making a massive issue out of it. So, the government has to be seen to be doing something and I think what the department of economic affairs secretary was doing was essentially what the governor RBI should have been doing, which is talking the market up and you don’t do anything, but you make the right kind of noises now that is how it should be. But I think the government will have to go beyond that, because it has to address the political issue and hopefully what they will be doing are taking steps to which will give a certain degree of confidence and bring some rationality back to the market." Joshi said, "As far as the NSE is concerned, if you look at the prices today, almost the bulk of the crops are below the new MSP that has been announced. So in a way, we have a situation of glut and you are trying to push the prices up and a little difficult. But that is the commitment that government has made, they have raised the MSP taking the first step. The second step is ensuring that effective procurement takes place on that side. Now that does push food inflation a little bit. Right now, the inflation is down today largely because of the food. I mean the high fuel prices, the currency weakness and they are yet to translate into generalise inflation and core inflation also has started coming down. So, if you raise MSP effectively then it will definitely have an impact on food inflation. It may not take overall inflation beyond the central banks projection but it definitely from these levels it will go up." "The past four years during Modi government there was no problem in regard to production. By and large, production has been satisfactory and food inflation was also at a very low level. But what Modi government has to understand is that as one of our colleague was telling most of the prices are less than MSP, almost every price, every commodity specially in regard to groundnut, cotton, pulses. You see most of these products, there is no procurement system. Even though recently they did announce this increase in rice and wheat, except for Punjab, Andhra Pradesh, Chhattisgarh and Jharkhand. For rest of the states, there is no procurement in place," Reddy said.

Source: CNBCTV18

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Now TDS/TCS for GST also, provisions to come into effect from October 1

The government has notified October 1 as the date for implementing the tax deducted at source (TDS) and tax collected at source (TCS) provisions under GST law. As per the Central GST (CGST) Act, the notified entities are required to collect TDS at 1 per cent on payments to goods or services suppliers in excess of Rs 2.5 lakh. Also, states will levy 1 per cent TDS under state laws. E-commerce companies will now be required to collect up to 1 per cent TCS while making any payment to suppliers under the Goods and Services Tax (GST). States too can levy up to 1 per cent TCS under State GST (SGST) law. EY Tax Partner Abhishek Jain said, “The e-commerce companies for TCS and various PSUs/ Government Companies for TDS would need to quickly gear up their ERP systems to comply with these provisions from 1st October. With audit report as well being notified, the industry would now really need to buckle up, especially given the short time frame.” AMRG & Associates Partner Rajat Mohan said the government has notified operation of TDS provisions on payments made by government agencies and TCS provisions for specified e-commerce operators effective October 1, 2018. “These twin provisions are expected to further deepen the penetration of tax authorities in the economy, and it is likely to carve out widespread tax evasion of not only indirect taxes but also direct taxes,” Mohan said. The GST, which subsumed over a dozen local taxes, was rolled out from July 1, 2017. However, to make it simpler for businesses in the initial months of rollout, TDS/TCS provisions of GST laws were kept in abeyance till June 30. Later on, it was deferred till September 30, 2018.

Source: The Financial Express

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Declining rupee Sept 12 Weak rupee increases revenue of IT, textile units

Indore: The weakening rupee is not all bad as it is seen giving a cushion to software companies and textile industry aiding them earn extra penny. Cutting down on the increased raw material costs, exporters of apparel, pharmaceuticals, steel, packaging films and software among other export oriented units have witnessed a rise in their revenues. Narendra Sen, founder of a data centre in Indore said, “It’s like a free money for export oriented software units as almost every contract is in dollar terms and conversion rate has gone up significantly. The fluctuation in rupee does not affect the offshore clients and hence the contracts remain intact at the previously decided terms” Sen said his revenues have jumped by about 5 per cent due to the plunge in rupee. The rupee had crashed to an all-time low of 72.91 on Wednesday. Experts said, exporters are benefiting from a weak rupee as they get more rupees while converting their dollar export earnings into Indian currency. They said, among all software exporters will be the highest beneficiaries of the declining rupee. According to an industry estimate, export oriented units of the region are seeing an average increase of 2 per cent to 7 per cent in their revenues because of the declining rupee. Dinesh Mishra, an exporter of packaging films located at the Special Economic Zone said, “We have seen an increase of about 2 per cent in our revenues. The rise could have been more but it was negated by imports of raw materials.” Industry players from the textile segment said, the weak rupee will give a cushion to the apparel exporters who were heavily burdened by the sharp rise in the cost of the imported raw materials. A leading textile exporter from the region who did not wish to be named said, “Certainly apparel exports will do better now. The growth was almost stagnant since past few years but a weak rupee has brought cheers to many exporters of the region. The revenues are likely to edge up by over 3 per cent.

Source: The Times of India

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Indian textile sector on upswing: Ind-Ra

The domestic demand for textiles is likely to remain robust from end-user segments, supported by a strong rise in private consumption expenditure during the rest of FY19. The rating agency has maintained a stable outlook for the cotton and synthetic textiles for the remaining FY19. The domestic demand for textiles is likely to remain robust from end-user segments, supported by a strong rise in private consumption expenditure during the rest of FY19. Also, textile exports are likely to rise, with apparel exporters benefitting from the depreciation of the Indian rupee against the US dollar. The Indian rupee depreciated at a higher rate against the US dollar over April-August 2018 than the currencies of key apparel-exporting nations, said India Ratings and Research (Ind-Ra). The rating agency has maintained a stable outlook for the cotton and synthetic textiles for the remaining FY19. It is expected that the overall credit profile of the sector will gradually improve, as expected by the agency in February 2018. The sector profitability is likely to improve gradually, with players passing on increased raw material prices to end-users, given the healthy demand, a depreciating rupee and waning impact of the structural issues. However, the positive impact of improved demand and profitability will be partly countered by sticky working capital requirements, Ind-Ra said.

Source: Financial Express

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 ‘Vested interests fomenting unrest in embroidery sector’

Surat: The sudden spurt of unrest among embroidery unit workers that too over an otherwise trivial issue of Sunday holiday has set off murmurs of the agitation being politically motivated. The embroidery unit owners and textile traders claim that some politically influential elements are trying to foment trouble by provoking the workers in wake of the upcoming assembly election in Odisha and Lok Sabha polls next year. They feel that political parties are trying to gain confidence of the migrants, who are registered voters in their respective states. President of South Gujarat Embroidery Association (SGEA), Dinesh Angadh said, “The workers’ unrest was politically motivated. There are vested interests in the trade unions who have become the puppets of certain political parties to galvanise support of migrant voters for elections.” This the first time in the last 15 years that embroidery industry has witnessed such an agitation, that too over an issue of holiday. Recently, the Odisha samaj in the city had organized ‘Odisha Parba’ in the presence of union petroleum minister Dharmendra Pradhan. The entire event had become a political stage due to the presence of senior BJP leaders including chief minister Vijay Rupani. Moreover, two senior ministers from Odisha government had visited the city after the power loom weavers sought their help to save the jobs of the Odisha workers. Even chief minister Naveen Patnaik had written letter to the Centre seeking relief for Surat’s power loom sector under GST. Patnaik also wrote to Union Railway minister Piyush Goyal and Civil aviation minister Suresh Prabhu demanding more train services between Surat and Behrampur and direct flights from Surat to Bhubaneshwar. During the December 2017 Gujarat assembly election, the textile sector had witnessed massive unrest with strikes and bandh calls to protest the Goods and Service Tax (GST) and demonetisation. For the last three decades, BJP’s social and business engineering for the textile trinity— embroidery, power loom and textile traders— has helped the party reap electoral riches in the city. However, Congress leaders connected with the textile sector had gone all out to encash on the problems.

Source: Times of India

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Ironing out the GST wrinkles

The GST Amendment Bill of 2018 is the first ever revision to the supreme law regulating the GST. The Monsoon Session of the Parliament will stand out in India’s history, as the first GST Amendment Bill was passed in this session. This Bill introduced changes that were proposed to the GST legislations. While no proposals were made in the budget presented on February 1, 2018, the Centre made several amendments to the delegated legislations. The GST Amendment Bill of 2018 is the first ever revision to the supreme law regulating the GST. The GST Amendment Bill received Presidential assent on August 29, 2018. The Centre seems to be keen on ironing out the ambiguities in the newly introduced GST and have therefore made these amendments. Procurements made from an unregistered supplier of goods and/or services provided for the discharge of GST by the registered purchaser. This provision was time and again suspended by way of an exemption, thereby reducing substantial effort and tax risks via the registered buyer. Moreover, the unregistered sector experienced some setbacks due to tax obligations vested on their respective GST-registered customers. The amendment of 2018 revises the enabling provision for the levy of GST on such transactions and empowers the Centre to specify the class of registered persons who will have to pay tax upon procurement of specified goods and/or services from the unregistered sector. This amendment is similar to the law that prevailed during the service tax regime. The definition of supply, which also happens to be a trigger point for the levy of GST, was elastic enough to cover a host of transactions. However, the definition is somewhat open-ended to capture all possible business transactions that were made for a consideration and in the furtherance of the course of business. Activities that were to be treated as a supply of goods and services were also included in the definition of supply itself and listed under Schedule II of the CGST Act, 2017. With the amended law, the sole purpose of listing activities in Schedule II seems to determine whether GST will be levied on such activities as a supply of goods or as a supply of services. In other words, Schedule II will no longer decide whether the transaction will be a supply or not. The role of Schedule II will be limited to determining whether the transaction should be taxed as a supply of goods or a supply of services. This amendment brings the same position that was proposed in the GST Model Law of November 2016. Accordingly, a transaction will first be evaluated based on the amended definition of supply and the recourse to Schedule II will be for the limited purposes of determining the taxability as a supply of goods or as a supply of services. This amendment should operate retrospectively i.e., effective July 1, 2017. The ambivalence around taxability of transactions in the nature of high sea sales, bonded warehouse sales and merchant exports will cease to exist. There is confusion around taxability of these transactions, since there are contradictory views floating in the industry. With the amendment, such transactions have been put outside the sphere of ‘supply’. In conjunction, the law has also been amended to provide that no input tax credit reversal will be required upon effecting such transactions. This answers the second worry of the industry for credit reversals upon effecting transactions that are not supply-based according to the GST law. The provisions around restrictions on the seamless availability of credits have also been rationalised. The credit pool has now been extended to permit increased flow of credits. Credit, in respect of GST paid on motor vehicles with approved seating capacity of more than 13 persons, will be available when the same has been used for transportation of people. This is a huge relief for the industry, since major players take buses and tempo travellers for transportation of employees. In addition, services of general insurance, servicing, repair and maintenance of such vehicles will also be available. Where such vehicles are taken on rent or lease or hire by business houses, for the purposes of transportation of employees, credit restrictions will not apply. While amendments have been effected to Central level legislations, parallel changes in the State level legislations (the SGST Acts) should be made in conjunction and in consonance to the Central law.

Source: Financial Express

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2018 WTMC to explore internationalization and transformation of textile industry

SHAOXING, China - The First World Textile Merchandising Conference (2018 WTMC) will be held at the Keqiao District, Shaoxing City of east China'sZhejiang Province in September 20-21, to explore new patterns of internationalization and transformation of the textile industry. It is expected that well-known enterprises, top fashion institutions, industry associations, design institutes from more than 20 countries will participate in the 2018 WTMC to discuss the status quo and future of the world's textile industry and promote the cooperation in the textile industry chain under the Belt and Road Initiative. China's textile industry has to strengthen international cooperation, actively promote cross-border flows of resources such as products, production capacity, technology, capital, and talents, strengthen product innovation, and advance the industrial intelligence and service transformation in the process of the industrial transformation and upgrading, according to Sun Ruizhe, president of the China National Textile And Apparel Council (CNTAC), earlier at the press conference of 2018 WTMC. In recent years, markets along the Belt and Road routes have gradually become a new engine for the foreign trade development of Keqiao District of Shaoxing City. As an important textile industry base in China, Keqiao District has a full textile industry chain including raw materials, textile machinery, fabrics, home textiles and garments, as well as a large textile distribution center, China Textile City. According to statistics, there are nearly 500 enterprises in Keqiao which have made investment in 65 countries and regions.

Source: Business Insider

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Pakistan : Rs25.7bn paid to textile sector under PM trade package

ISLAMABAD: The government has paid Rs25.7 billion to the textile sector under the first phase of Prime Minister’s Trade Enhancement Package by June 30, 2018, senior officials at the Ministry of Commerce and Textile told here Thursday. Rs. 2.6 billion was disbursed to the textile sector in first two months during Phase II from July 1 to August 31 2018, he said. Replying to a question, he said the government had planned to expand coverage areas under the Trade Enhancement Package to remaining industrial sectors including pharmaceuticals. “We are committed to providing an enabling environment for the industrial sector,” he said. The official said that through this package, the cost of doing business would come down in the country. The Ministry of Commerce and Textile had assured payments through Prime Minister’s Trade Enhancement Package to the textile sector by February 2019 to enhance the country’s exports. The government, he said, had also given relaxation on the import of textile machinery for the modernization of industry and to enhance the capacity of the sector. He said the government gave priority to facilitating the textile sector and helping it gain competitiveness in order to enhance the country’s exports. “We want to revive confidence of the textile sector through the Trade Enhancement Package.” he remarked. Replying to another question, he said the Ministry is offering multiple training courses to focusing on different areas of textile sector to enhance the capacity of its workers. Garments, fashion, apparel design, cutting for lingerie making, line supervisory skills and knitting machine operators training are the areas of these capacity building courses, he said. He further said that the training program’s main objective is provision of skilled workforce to make textile industry more competitive. The Ministry will cover the costs incurred in the areas of trainee stipend, trainer’s salary, raw material cost, social mobilization, evaluation cost, certificate printing and distribution, he added.

Source: Business Recorder

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Pakistan : Linkages with China in textile discussed

LAHORE: The significance of textile sector in Pakistan’s economy can hardly be debated and in terms of strategy Punjab needs to place special emphasis on growing the value-added garment industry. This was discussed at a roundtable meeting convened by the Punjab Board of Investment and Trade (PBIT), which was attended by textile sector stakeholders.

Textile exports drop 16% after rebate reduction

Participants were of the view that it was a relatively low energy consuming industry and had immense job creation potential. In that regard, exploring linkages with China, especially with the industry on China’s west coast, which is closer to Pakistan, in the form of contract manufacturing of garments could be an interesting avenue to explore. This strategy could be very important given the rising domestic consumption in China. It was highlighted that the government of Punjab could also work with large textile players in the country for implementing the strategy through its special economic zones such as the Quaid-e-Azam Apparel Park. The meeting participants called for addressing the energy price differential between provinces and releasing the tax rebate the government owed to the industry. The textile sector is the largest employer of industrial labour and accounts for over 60% of total exports from Pakistan.

Textile exports drop 2% as production cost rises

In the face of a competitive regional landscape with countries like Bangladesh and Vietnam emerging as sizable players, Pakistan must defend and invest in the entire value chain of the textile sector including innovative solutions for enhancing cotton yield, the meeting noted.

Source: The Express Tribune

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Bangladesh : Parliament passes Textile Bill 2018

Parliament has passed the Textile Bill 2018 which aims to maintain the quality of textile products as Bangladesh earns huge foreign currency from apparel exports. State Minister for Textiles and Jute Mirza Azam tabled the bill and it was passed by voice vote on Wednesday. As per the draft law, a directorate will be formed with a director general (DG), who will be appointed by the government. The DG will also work as its registrar. The directorate’s officers will be responsible to inspect quality and standard of various elements used in textile products including paint and other chemicals. The government will also establish a laboratory of international standard to carry out the inspections and standard tests. About the provision of punishment, the proposed law stated that the registration of any company can be suspended or even cancelled for giving wrong or false information while getting registered.

Source: Dhaka Tribune

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Pakistan : Textile package talks help stocks close in green

KARACHI: The index managed to snap four-day losing streak on Tuesday as investors tracked the previous day’s Economic Coordination Committee’s (ECC) decision to postpone the gas price increase coupled with expectations of textile package which was rumoured to reduce energy tariff for manufacturers.  Although the KSE-100 index closed with marginal gains of 75.48 points (0.19 per cent) at 40,759.53, investors were comforted over the floor under the market fall that had seen it sink by 1,070 points. The market kicked off to a positive start but soon succumbed to selling pressure from nervous investors ahead of the presentation of the Finance Bill on Friday, which was thought to consider revision of major macroeconomic budgetary targets to control the widening deficits. Mid- and small-cap stocks helped market recover towards the end as day traders and bargain hunters took advantage of low prices. After hitting the intraday low by 164 points, renewed buying interest largely reinvigorated the steel, exploration and production, textile, food and oil marketing sectors that saw the index advance by 259 points. Meanwhile, Finance Minister Asad Umar’s assurance of reducing the energy tariffs for export-oriented sectors and expectations of further depreciation of the rupee put the textile sector in the spotlight where Nishat Mills, Gul Ahmed Textile Mills, Nishat Chunian and Gadoon Textile Mills, all closed at their respective upper circuits. Hub Power and Pakistan Petroleum also provided some respite. The volume saw healthy improvement of 24pc over the previous day to 140m shares, while the average traded value also jumped 37pc to Rs5.76 billion. However, most top-tier banks continued to tumble. Habib Bank, United Bank and MCB saw decline in prices which kept the index under severe pressure and the sector lost 63 points overall. Automobile also closed in the red, eroding 22 points whereas exploration and production added 44 points, followed by power 42 points, textile 33 points and oil and gas marketing companies 21 points.

Source: Dawn.com

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Cost of logistics in VN hurting textile players

Vietnam News/ANN: Vietnamese garment and textile enterprises are losing their competitiveness due to high costs of logistics services for exports, experts have said. According to statistics from the Viet Nam Textile and Apparel Association (Vitas), textile and garment export value last year reached US$31 billion, an increase of 19.2 per cent compared to 2016. Of the $31 billion in export value, the industry spent nearly $18 billion to import raw materials, including cloth, fibre and cotton, among others. However, the cost of logistics activities for textile and garment enterprises accounted for 9.1 per cent of total export turnover, around $2.79 billion. According to Vitas, the cost of logistics services in Vietnam is much higher than that of neighbouring countries and the region. In particular, logistics costs in the country are 6 per cent higher than in Thailand, 7 per cent more than in China, 12 per cent higher than in Malaysia and three times more than in Singapore. Despite reasonable labour costs, competitiveness has been affected by transport costs, surcharges at seaports, and limited seaport infrastructure. Pham Thi Thuy Van, deputy director of marketing at the Sai Gon Newport Corporation, Viet Nam’s leading container port operator, attributed high logistics costs to a number of reasons. “The current regulations on fees and charges for logistics services are high, making transport costs also relatively high, accounting for between 30 and 40 per cent of the cost of the products, compared to some 15 per cent in other countries,” she said. For example, BOT charges on the Ha Noi-Hai Phong expressway for businesses from Ha Noi and Bac Ninh are about $75 per trip, accounting for 40 to 42 per cent of the total trucking fee, while in Malaysia, the BOT fees account for only 6 per cent of trucking costs. In addition, the surcharges of shipping lines also contribute to the cost of logistics operations in the country. Experts said the expanded costs for logistics have significantly affected the garment and textile industry, which employs a large number of labourers and is hugely dependent on input importation, which results in low added value. Nguyen Xuan Duong, chairman of the board of directors for the Hung Yen Garment and Textile JSC, said it was difficult for enterprises to be highly competitive because of the high cost of logistics. “The company has to spend around $5 million on logistics services for exports every year,” he said. In the first eight months of the year, exports of the garment and textile sector reached nearly $20 billion. This year, the garment and textile industry has set a target of $34-35 billion worth of exports. If achieved, the costs for logistics services would reach up to $3 billion, reducing competitiveness of businesses. To address the challenges, many firms have applied technology to better manage warehousing as well as optimise supply chains. One of the most commonly used technologies includes backing up bills and contracts, and automatically transferring documents between firms. Experts said that logistics enterprises should work to improve their competitiveness, and consider cooperating in transport services to reduce costs for other enterprises. They also suggested that the Government outline a roadmap to improve the quality of logistics services to meet the demand of many sectors, especially the garment and textile industry. According to the Viet Nam Logistics Business Association, Viet Nam’s logistics costs in 2016 totalled $41.26 billion, equivalent to 20.8 per cent of the country’s GDP. Despite high logistics costs, the logistics sector has contributed a mere 3 per cent to GDP, according to the association. According to the World Bank, in 2016, the country’s logistics sector ranked 64 out of 160 countries, and fourth in the Asean region after Singapore, Thailand and Malaysia.

Source: the Phnom Penh Post

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China : Tariff Threat Pushes Importers to Bring in Cargo Early

There is nothing like the prospect of tariffs on Chinese goods to nudge importers to bring in their merchandise a little early to avoid a hefty increase in prices. Cargo-container imports this summer at the nation’s ports are setting all-time highs with retailers and importers concerned that the Trump administration could impose tariffs ranging from 10 percent to 25 percent on $267 billion in goods at any time. In early July, the Trump administration imposed 25 percent tariffs on $34 billion of Chinese products, and the review period for more tariffs on $16 billion of Chinese products ended July 1. “The current boom in shipping can primarily be explained by importers’ response to the U.S. trade war with China,” said Ben Hackett of Hackett Associates, who prepares themonthly Global Port Tracker report for the National Retail Federation about cargo traffic at the nation’s top retail ports. The most recent report, released on Sept. 10, showed that cargo imports in July were up 5.6 percent to 1.9 million 20-foot containers from the same month last year. While August figures are not completely tallied, they are expected to be up 4.8 percent year-over-year to 1.92 million containers. August will be the third month in a row for container imports setting a new monthly record. Part of the reason for increased imports is that consumers are back shopping again now that the U.S. unemployment rate is at a low 3.9 percent, wages are going up slightly, the economy is predicted to expand 2 percent to 3 percent this year and a recently passed income tax cut is putting more money in shoppers’ pockets. But tariffs could dampen that consumer spending. “More tariffs could come any day, and retailers have been bringing in record amounts of merchandise ahead of that in order to mitigate the impact on their customers,” said NRF Vice President for Supply Chain and Customs Policy Jonathan Gold. “Retail sales are growing stronger than expected this year thanks to tax cuts and job creation, but tariffs are the wild card, which threaten to throw away a significant portion of those benefits.” The apparel industry has taken a stand against tariffs. Most recently, the U.S. Fashion Industry Association in Washington, D.C., joined forces with more than 80 organizations to voice its concern about the damaging effects of tariffs. “The fashion industry is pleased to join with a wide range of industries and organizations across the country to fight the proposed tariffs, which will amount to an additional tax on consumers and limit consumer choices,” said USFIA President Julie Hughes. “The proposed 25 percent duties on consumer products will not achieve the stated goal of eliminating China’s troublesome intellectual property and technology transfer practices. Furthermore, the tariffs will harm American consumers at all income levels—from the single parent struggling to make ends meet as they purchase back-to-school necessities for their kids to the consumer of high-end fashion manufactured in the United States and every American family in between—by imposing a substantial regressive tax on basic household purchases of clothing, footwear, back-to-school items and home goods.” While importers are pushing to bring in goods, this flurry of increased cargo traffic has not hit the Port of Los Angeles, one of the largest in the United States. For the first eight months, cargo imports were nearly flat with last year, totaling 3.15 million containers versus 3.17 million containers last year. When calculating imports, exports and empty containers, cargo-container traffic for the eight months is down 2.6 percent. Still, cargo volumes have been extremely robust this year. “We are off a couple of percentage points this year compared to 2017, but that is after record-breaking years in 2016 and 2017,” said Phillip Sanfield, director of media relations at the Port of Los Angeles. “We were seeing cargo owners pushing their orders in June and July.” At the neighboring Port of Long Beach, cargo-container import volumes for the first eight months this year were up 7.6 percent over last year, totaling 2.68 million containers. When calculating inbound, outbound and empty cargo containers, port volume was up 9.4 percent. With the threat of a tariff-trade war, importers are getting nervous. “I am seeing very high demand for space from Asia to the United States, on the ocean and in the air,” said Robert Krieger, president of Krieger Worldwide, a customs brokerage and freight forwarder in Los Angeles. He said an apparel company bringing in basic fashions should import as much as it can afford at this time. To defer duty payments, he recommends putting merchandise in a bonded warehouse or a foreign-trade zone in the Los Angeles area. “That’s what people use to do many years ago when there were quotas,” he said. “When you think tariffs are going to go up soon, bring your goods in right away and lock out your competition.”

Source: Apparel News

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