image rotation

MARKET WATCH 03 DEC, 2018

NATIONAL

INTERNATIONAL

Textile mills tie up with GEDA to reduce energy consumption

SURAT: City-based textile processors have tied up with state government-owned Gujarat Energy Development Agency (GEDA) and Man-Made Textiles Research Association (MANTRA) for reducing energy consumption in textile mills in south Gujarat, including Surat. At present, energy cost-water, coal and electricity- is about 40 per cent in the overall cost of production of finished polyester fabrics in the textile mills. A licensed agency approved by GEDA and research scientists of MANTRA will be providing inputs on reducing energy costs by cutting down on usage of water, coal and electricity as per international standards of polyester fabric production. South Gujarat Textile Processors’ Association (SGTPA) president Jitendra Vakhariya told TOI, “The textile mills have been using water, coal and electricity abundantly. At present, the prices of coal and electricity are very high and we are unable to compete with our counterparts in Maharashtra where they get cheap electricity at Rs3.50 per unit. Energy saving is the only option left with us.”  Vakhariya added, “Researchers at MANTRA and GEDA will be guiding the textile mill owners on reducing consumption of water, electricity and coal as per international standards. For example, fresh water is required for drum washing of fabrics and that the water flows down the drain. The researchers will provide us with input on recycling of the waste water for reuse, thereby helping us save on the cost of water and consumption of power and fuel.” Escon Tech director Raju Shah, who is the licensed energy auditor of GEDA, said, “Textile mills use electricity in huge quantity and this increases outflow of carbon monoxide from the mills into the air. If the mill owners save 10% electricity then they will be able to save Rs56 crore per annum and reduce the release of carbon monoxide also by 57,400 tonnes.” Textile sector leader Ashish Gujarati said, “Electricity tariff for industrial purpose is very high compared to Maharashtra. Textile industrialists are unable to compete with those in Maharashtra due to cheap electricity there. The energy saving mission in the textile mills will go a long way in changing the future of the textile sector in the city.”

Source: Times of India

Back to top

Fostering Vietnam-India comprehensive strategic partnership

 NDO - Indian President Ram Nath Kovind and his spouse have arrived in Hanoi to begin his State visit to Vietnam at the invitation of the Party General Secretary and President Nguyen Phu Trong. His visit to Vietnam affirms that the two countries will continue to maintain regular high-level visits to strengthen political trust and promote the comprehensive strategic partnership in a more substantial and effective manner. This is the first visit to Vietnam, as well as the first visit to the Asian region, by the Indian President since taking office in July 2017. India is located in South Asia with a total area of nearly 3.3 million km2 and is rich in natural resources. India's population is over 1.3 billion. After the victory of the 2014 general election, the ruling Indian People's Party (BJP) has implemented policies that were committed to voters to ensure a situation of stable politics and security. In 2017, GDP of India reached US$2.45 trillion, up 6.7% over 2016, and per capita income posted at US$1,989. India has become the sixth largest economy in the world. The country has also accomplished great achievements in science and technology and is considered as a key player in shaping the industrial revolution 4.0. Vietnam and India have a long-lasting traditional friendship. Since the establishment of the diplomatic relations in 1972, the Vietnam - India traditional friendship and multifaceted cooperation, whose foundation was laid by President Ho Chi Minh and Prime Minister Jawaharlal Neru, has been continuously nurtured and promoted by generations of leaders and people of the two countries. India actively supported Vietnam in the struggles for national independence and unification in the past, as well as in the current cause of renewal and economic development. The two countries established the strategic partnership in 2007. In September 2016, the bilateral relationship was upgraded to the comprehensive strategic partnership, reflecting the deep and effective development of the relations between India and Vietnam. In 2017, the two countries held significant activities to celebrate the 45th anniversary of the diplomatic relations and the 10th anniversary of the strategic partnership. We are pleased to see that the bilateral cooperation between Vietnam and India has developed strongly in all aspects, including politics, economics, culture, education, science and technology, energy, national defense and security. The two sides also hold regular exchanges of delegations at all levels and the relations between the Communist Party of Vietnam and other political parties of India are increasingly expanding. Bilateral cooperation mechanisms such as the Joint committee, Political consultation, Defence policy dialogue and Security dialogue were also successfully held in 2018. The bilateral cooperation in the field of economy and trade has also flourished. India is one of the 10 largest trading partners of Vietnam and the two-way trade revenue rose by five times over the 10 years between 2007 and 2017. As of September 2018, the bilateral trade volume was estimated at about US$8.3 billion (up 47.1% over the same period in 2017). The two sides strive to raise the two-way trade turnover to US$15 billion by 2020. India has invested in 182 projects in Vietnam, with a total registered capital of US$816 million, ranking 28th among 126 countries and territories investing in Vietnam. Vietnam currently has seven investment projects in India with a total registered capital of nearly US$6.15 million. Vietnam and India are now members of the ASEAN-India Investment Agreement under the ASEAN-India Free Trade Agreement. The two countries have also witnessed positive development in security and defense cooperation in addition to finance - credit, oil and gas, and science - technology cooperation. Cultural and educational cooperation has made remarkable progress with the establishment of the Indian Cultural Centre and the Indian Research Centre in Hanoi in 2016 and the Vietnam Research Centre in New Delhi in March 2018. The cooperation on tourism and people-to-people exchanges is also growing with the increasing number of Indian tourists to Vietnam, posting an annual increase of 17% in the 2010 - 2016 period and 30% in 2017. Vietnam and India have coordinated closely, shared mutual trust and supported each other on various regional and international issues. As a coordinator of India-ASEAN relations in the 2015 - 2018 period, Vietnam supports India's implementation of the "Act East" policy and other regional connectivity initiatives. Meanwhile, India supports ASEAN's central role in the region. The State visit of Indian President Ram Nath Kovind and his spouse intend to consolidate the political trust between the two countries, creating momentum for further development of the traditional friendship and comprehensive strategic partnership for the interests of the two peoples as well as for peace, stability, cooperation and development in the region and the world.

Source: Nhan Dan Online

Back to top

India to demand better deal with PRC in RCEP negotiations

India will reportedly demand a better trade deal with China as part of the ongoing negotiations for the proposed Regional Comprehensive Economic Partnership (RCEP), expected to conclude in 2019. India wants to offer zero duty market access to less number of Chinese items compared to other RCEP member nations due to the widening trade deficit with China. India also wants more time to eliminate duties on Chinese goods as part of the deal, according to a news agency report. RCEP is a proposed free trade agreement being negotiated since November 2012 by 16 countries, including 10 members of the Association of South East Asian Nations (ASEAN)—Brunei, Cambodia, Indonesia, Malaysia, Myanmar, Singapore, Thailand, the Philippines, Laos and Vietnam—and their six free trade agreement partners—India, China, Japan, South Korea, Australia and New Zealand. The pact aims to relax norms and significantly cut import duties to boost trade in goods, services, promote investments, technical cooperation and intellectual property rights. The members want India to remove customs duties on about 90-92 per cent items that it trades with the countries with which it has a free trade agreement. India has asked for 20 years period to remove these duties. But with China, it wants more time for elimination of tariffs. With the non-free trade agreement partners—China, Australia and New Zealand—discussions are under way for eliminating duties on 80-86 per cent of the products. Several Indian industries, including steel, food processing and metals, and government departments are concerned over the presence of China in the RCEP group. Lowering or eliminating duties for China will flood Indian markets with Chinese goods, they fear. India has a trade deficit with 10 countries in this grouping. The Indian commerce ministry will reportedly commission a study on the agreement. In services sector, India is pushing for business visitor commitment for smooth movement of professionals. (DS)

Source: Fibre2fashon

Back to top

RCEP: Experts to evaluate pact to strengthen India’s position

New Delhi: To sharpen India’s bargaining position in the Regional Comprehensive Economic Partnership (RCEP), which is being negotiated among 16 countries, the Commerce Ministry has roped in experts from academic institutions and think-tanks to carry out a detailed study of the pact and give their recommendations. The expert group, from the Centre for Regional Trade, IIM-Bangalore and the Indian Council for Research on International Economic Relations (ICRIER), will also carry out stakeholder consultations, and has been asked to submit its report by January-end, a government official told BusinessLine. “The idea is to get an independent view on the negotiations from experts who have not been part of the discussions so far. They will carry out a scientific and objective assessment, and their recommendations will be studied by our negotiating team and implemented in the on-going negotiations,” the official said. The RCEP now has a new deadline of 2019-end for completion. Several stakeholders are still unsure about the usefulness of the talks, including the Ministries of Steel, Heavy Industry and Textiles. “With the deadline postponed by a year, India now has enough time to recalibrate the situation and carry out more nuanced negotiations. We have to cover our sensitivities while being aggressive in our areas of strength. The suggestions by the group of experts will hopefully help the negotiators to strike the right balance,” the official said. Once implemented, the RCEP could be the largest free trade zone in the world as member countries account for 25 per cent of global GDP, 30 per cent of global trade, 26 per cent of global foreign direct investment (FDI) flows and 45 per cent of the total population. As part of the review, the experts are likely to examine lines of tariffs of all member countries and identify where Indian industry and agriculture need to be protected the most, and where negotiators could be adventurous and aggressive. India has not yet managed to get substantial offers from other members in the area of services, which is its area of strength. Other RCEP members, however, are pushing India to take up very ambitious commitments in goods such as committing to dismantle import tariffs on 90-92 per cent of items for the 10-member ASEAN, Japan and South Korea and on 80-86 per cent of items for China, Australia and New Zealand.

Source: Business Line

Back to top

China rejects India’s proposal to trade in rupee-renminbi

New Delhi: China has not accepted India’s proposal to carry out bilateral trade in local currencies which was aimed at bridging the ballooning trade deficit with the neighbouring country, an official said. India’s exports to China stood at only $13.4 billion, imports aggregated to $76.4 billion in 2017-18, leaving a trade deficit of $63 billion. It was $51.11 billion in 2016-17.India had suggested to China trade in local currency in order to boost its exports and tackle the widening trade deficit concern“They have not accepted the proposal,” the official said. The issue was discussed in an inter-ministerial meeting in October. In the meeting, it was suggested to the Reserve Bank of India and the Department of Economic Affairs would look at the possibility of exploring renminbi-rupee trade with China. India has also proposed trade in national currencies with some other countries, including Russia, Iran and Venezuela. New Delhi has trade deficit with these three countries, too. The Federation of Indian Export Organisations (FIEO) President Ganesh Kumar Gupta said that the government should promote exports from India in the domestic currency. “This will help in bridging trade deficit with countries like China,” Gupta said. Trade experts have stated that bilateral trade in domestic currencies will help India only in the case of those countries with which it has a trade balance. “Trade imbalance should not be there with the country with which we want to do trade in rupee. It will not help in bridging the deficit. The partner country should have an opportunity to invest in India to use the rupee,” said Biswajit Dhar, professor at Jawaharlal Nehru University. The Indian industry and exporters have time and again raised the issue of increasing trade deficit with China and have asked the government to seek greater market access for domestic goods in the Chinese market. Recently, China has permitted exports of rice and sugar. But India wants to increase exports of several other items, including pharmaceuticals, engineering and services.

Source: Live Mint       

Back to top

India-UAE trades meet this week

External Affairs Minister Sushma Swaraj will co-chair the 12th session of the India-UAE Joint Commission Meeting for Economic and Technical Cooperation with her counterpart Sheikh Abdullah bin Zayed Al Nahyan in Abu Dhabi during her official visit to the Gulf country from December 3-4. With nearly $50 billion bilateral trade, the two countries are one of the largest trade partners for each other and have made robust investments bilaterally. The UAE is the sixth-largest source of Indian oil imports and hosts a 3.3 million-strong Indian community. “We look forward to the visit of the External Affairs Minister to Abu Dhabi to co-chair the India-UAE Joint Commission,” India’s Ambassador to the UAE, Navdeep Singh Suri, said. Suri said the minister’s visit is an important opportunity to continue the bilateral dialogue at the highest levels of government, to share views on major regional and global issues and to give a further boost to our comprehensive strategic partnership. “Such high-level visit helps in adding a new building block in areas like energy and food security, economy, defence and much else,” he said. Meanwhile, the External Affairs Ministry has said that with the exchange of visits at the highest-level in the recent past, the bilateral relationship has been elevated to a Comprehensive Strategic Partnership. Along with the UAE Foreign Minister, Swaraj would inaugurate a Gandhi-Zayed Digital Museum in Abu Dhabi to mark the celebrations of 150 years of Mahatma Gandhi’s birth and centenary celebrations of the birth of Shaikh Zayed, founder of the modern UAE. She would also interact with the Indian community in Abu Dhabi.

Source: Business Line

Back to top

Global Textile Raw Material Price 02-12-2018

Item

Price

Unit

Fluctuation

Date

PSF

1247.40

USD/Ton

-0.86%

12/2/2018

VSF

1990.38

USD/Ton

0%

12/2/2018

ASF

2501.27

USD/Ton

0%

12/2/2018

Polyester POY

1185.61

USD/Ton

0%

12/2/2018

Nylon FDY

3003.54

USD/Ton

-1.42%

12/2/2018

40D Spandex

4771.17

USD/Ton

0%

12/2/2018

Nylon POY

1372.43

USD/Ton

0%

12/2/2018

Acrylic Top 3D

3262.22

USD/Ton

-1.73%

12/2/2018

Polyester FDY

5417.87

USD/Ton

0%

12/2/2018

Nylon DTY

1465.84

USD/Ton

0%

12/2/2018

Viscose Long Filament

2802.35

USD/Ton

-2.99%

12/2/2018

Polyester DTY

2471.81

USD/Ton

0%

12/2/2018

30S Spun Rayon Yarn

2687.38

USD/Ton

0%

12/2/2018

32S Polyester Yarn

1932.90

USD/Ton

0%

12/2/2018

45S T/C Yarn

2917.31

USD/Ton

0%

12/2/2018

40S Rayon Yarn

2083.80

USD/Ton

0%

12/2/2018

T/R Yarn 65/35 32S

2486.18

USD/Ton

0%

12/2/2018

45S Polyester Yarn

2989.17

USD/Ton

0%

12/2/2018

T/C Yarn 65/35 32S

2543.67

USD/Ton

-0.56%

12/2/2018

10S Denim Fabric

1.33

USD/Meter

0%

12/2/2018

32S Twill Fabric

0.81

USD/Meter

0%

12/2/2018

40S Combed Poplin

1.13

USD/Meter

0%

12/2/2018

30S Rayon Fabric

0.64

USD/Meter

0%

12/2/2018

45S T/C Fabric

0.68

USD/Meter

0%

12/2/2018

Source: Global Textiles

Note: The above prices are Chinese Price (1 CNY = 0.14371 USD dtd. 2/12/2018). The prices given above are as quoted from Global Textiles.com.  SRTEPC is not responsible for the correctness of the same.

Back to top

Pakistan must explore untapped export territories

KARACHI: Leaving the comfort zone is perhaps the most difficult decision anyone has to make. However, when it becomes the matter of survival, it is not merely a choice. Our reliance on a few sectors to earn foreign exchange has brought us to a point where staying complacent can be detrimental to our economy. We are in a desperate need to diversify not only what to export, but also where to export. Despite the fact that we have the GSP Plus status, our textile export to eurozone has not increased significantly, as anticipated by the market participants. We, in fact, lose a lot of ground against our competitors from Bangladesh and Vietnam. One of the key reasons includes our dependence on the manmade fibre as opposed to the synthetic fibre, which is being used by our competitors, in addition to a host of other factors as claimed by the textile industry, such as the cost of doing business – energy, raw material cost, etc – and withheld tax refunds. Our less reliance on the more value-added segment did not only keep us from earning big bucks but we also lose opportunities when it comes to job creation, which is more tied to further downstream of the value-added chain. As a major agrarian country of the world with a diverse produce, it is surprising to see how that strength is not reflected in Pakistan’s export portfolio. As per the State of Global Islamic Economy Report 2017-18, prepared by Thomson Reuters, the halal food market can grow at a compound annual growth rate (CAGR) of 7.6% to reach $1.93 trillion by 2022. As per the report, Malaysia takes the top position in a complete halal ecosystem (sustainability, governance, certification, etc) where Pakistan is ranked fifth. There are many instances where the lack of efforts, on the part of previous governments, becomes a bottleneck that prevented Pakistan from realising its full export potential. To cite an example, in 2006, the United Arab Emirates (UAE) placed a ban on the import of poultry products from Pakistan due to the overblown bird flu epidemic. Even after Pakistan was cleared by the World Health Organisation (WHO) in 2008, the ban remained in place until 2017, when the UAE finally agreed to allow import after lots of lobbying by the Pakistan Poultry Association (PPA). Despite all the opportunities and potential, the export numbers paint a rather gloomy picture as meat export declined to $221 million in 2017 compared to $269 million in 2016. According to PPA estimates, potential exports to the UAE alone can reach $200 million, if proper support and infrastructure is available. The export potential can be further increased due to two recent developments – UAE’s ban on meat import from Brazil and India’s ban on beef export have created a huge gap, which can be filled by Pakistani companies, especially the ones already having certification and approval from the UAE. It can be hoped that the recent episodes of rupee depreciation and the government’s incentives for the meat export industry through an export package can slowly turn the situation around. A slight improvement is evident from a 2.3% growth in meat export, which came in at $226 million in 2017-18. However, Pakistan is far behind establishing a sustainable halal ecosystem to become a major global supplier of halal food. The new Pakistan Tehreek-e-Insaf (PTI) government should focus more on the value-added export industry to boost foreign exchange reserves and create jobs as promised.

Source: Tribune

Back to top

Smooth African trade to tackle rising challenges: UNCTAD

Smoothing the way for African trade is critical if the continent has to tackle the challenges posed by fast-shifting patterns of global commerce, United Nations Conference on Trade and Development (UNCTAD) secretary general Mukhisa Kituyi said recently in Addis Ababa. He was in Ethiopia for the first African Forum for National Trade Facilitation Committees. The forum at the UN Economic Commission for Africa (UNECA) discussed how to reduce trade hurdles in the continent. It is part of efforts to implement the World Trade Organisation’s (WTO) Trade Facilitation Agreement, which entered into force in February 2017 and could help drive down the cost of commerce, according to an UNCTAD press release. It also comes amid new momentum provided by the African Continental Free Trade Agreement (AfCFTA), a landmark for regional integration that was signed in March 2018. “Africa faces a moment when the market access gains that have been negotiated over the past two decades can be severely eroded unless we address the challenges of trade facilitation,” said Kituyi. He emphasized that Africa’s competitive labour advantage must be accompanied by quality transport hubs, efficiencies in the cross-border movement of goods and services, better procedures at ports, and a predictable regime of logistics management. Overall, the WTO calculates current trade costs for developing countries are equivalent to applying a staggering 219 per cent tariff on their international trade, and that full implementation of the Trade Facilitation Agreement could cut trade costs for Africa. “It could add 2.7 percentage points per year to world trade growth and more than half a percentage point to world GDP. The biggest benefits would accrue to developing countries,” WTO director general Roberto Azevêdo said. “In Africa estimates show that full implementation of the agreement could reduce trade costs by an average of 16.5 per cent - by doing that, it has the potential to deliver a huge economic boost for the continent,” he said. The forum is the first of events globally to support implementation of the WTO’s agreement, which besides measures to boost trade also addresses improved revenue collection, safety and security compliance controls, including for food, and streamlining government agencies. The reforms aim to help small cross-border traders, often women, enter the formal sector, make economic activities more transparent and accountable, promote good governance, generate better quality employment, strengthen information technology capabilities and generally modernise societies by bringing about benefits related to administrative efficiency. The three-day forum, which ended on November 29, was supported by the Commonwealth, the European Union, Danish development agency Danida, the Government of Finland, and the Islamic Development Bank. (DS)

Source:Fibre2Fashion

Back to top

Tehran hosting intl. textile, clothing related expos

TEHRAN - Attended by senior officials, the 24th edition of Iran’s international exhibition of Textile Machinery, Raw Materials, Home Textiles, Embroidery Machines and Textile Products known as IRANTEXT and the 6th International Apparel Exhibition (Iran Mode 2018) started operating at Tehran Permanent International Fairgrounds on Sunday. More than 220 domestic and foreign companies from over nine countries are exhibiting their latest products, services and achievements in the textile industry at IRANTEXT 2018, IRNA reported. As reported, 141 domestic companies along with 80 foreign exhibitors from Italy, Switzerland, Romania, Belgium, Taiwan, France, Turkey, Germany, China and Austria are participating in this exhibition. As for Iran Mode exhibition, 60 Iranian participants are presenting their latest collections and productions of clothing to introduce the most up-to-date designs based on Iranian and Islamic culture. Creating competition and exchanging information between manufacturers and exporters, improving domestic production, developing domestic designs, helping development of employment, marketing and increasing exports, and increasing efficiency have been mentioned as some of this exhibition’s main goals.

Source: Tehran Times

Back to top

Iqra University holds textile expo

Islamabad : Iqra University Islamabad Campus orgnised Textile Graduate Show 2018 to exhibit the creative talent of its graduating class, says a press release. The display featured the culmination of four-year hard work by the graduating class of 2018. The projects of the future textile designers covered a vast array of products including prints, furniture, interior decor layouts and installations. The graduating students drew their inspiration from diverse sources such as Pakistani culture, architecture, the environment as well as everyday objects. The style is both contemporary and classic to suit a variety of palettes. Iqra University vice president Dr Muhammad Islam inaugurated the textile exhibition. Featured work included ‘Ajrak with Pakistani Architecture’, ‘Doorways and Lanterns’, ‘Earth View from Space at Night’, ‘Makli tombs Village Life and Bridges’, ‘Pakistan’s Skylines’, ‘Pakistan Beautification Through The Entangled And Ragged’, ‘Golra Railway Station’, ‘Interstellar’, ‘Octopuses and Steampunk’, ‘Pakistani Malang’ and ‘Botanical Vintage’.

Source : PK News

Back to top

S Africa working on apparel-textile value chain master plan

South Africa wants to develop a master plan for the growth of the apparel, textile, footwear and leather retail value chain, targeting creation of 60,000 jobs, according to trade and industry minister Rob Davies, who said his department is working with Justin Barnes, facilitator for the new automotive master plan till 2035, to come out with a similar plan. The plan may be announced early next year, a report in a South African newspaper quoted the minister as saying on the sidelines of a function to launch the Toyota Wessels Institute for Manufacturing Studies in Durban. Barnes has been appointed executive director of the institute. The extent of illicit trading happening in the textile and apparel sectors and new entrants and competitors make the challenges more complicated, Davies said. He said the government had seen the impact of incentives for the clothing and textile retail value chain a few years ago when the incentive was changed to be based on competitiveness from being earned on the basis of exports, with the duty credits sold to importers of new clothes. (DS)

Source: Fibre2fashion

Back to top

‘Duties on raw material imports to be abolished soon’

SIALKOT: Advisor to Prime Minister for Commerce, Textile, Industries, Production and Investment Abdul Razzaq Dawood says the government will soon abolish all the duties and taxes on the import of the raw materials. He was addressing a meeting of the Sialkot exporters at Sialkot Chamber of Commerce and Industry (SCCI) on Sunday. SCCI President Khawaja Masud Akhtar presided over the meeting. SCCI SVP Waqas Akram Awan, Riazuddin Sheikh and the government officials were present. Mr Dawood said the business community of the country should learn from the export culture of Sialkot to boom their exports. He said the government was planning and making policies to boost industry, besides taking business community into confidence for complete implementation of the policies. Mr Dawood said the issue of five percent regulatory duty on the import of polyester yarn and seven percent anti-dumping duty would be resolved this month. He announced full support for establishment of a special economic zone at Sialkot. The advisor to the PM said the role of the Federal Board of Revenue (FBR) was being redefined to only taxes collection from levying taxes. “I have sent a summery to the government under which the FBR would not levy any taxes directly as the FBR’s role would be tax collection only,” he revealed.

Source : Dawn.com

Back to top

Pakistan : Import restrictions breed inefficiency in domestic industries

KARACHI:  In October 2018, the government imposed regulatory duties on the import of 570 goods in order to discourage their import and generate a minimum of Rs20 billion to tackle the fiscal deficit. In order to generate fiscal revenue, there is a preference to raise customs duties by imposing an additional duty on imported goods. It is believed that this will tackle the widening trade deficit. However, such measures are rarely effective. Higher import tariffs are usually imposed on several items considered luxury goods such as expensive mobile phones, cheese and automobiles. Furthermore, goods that were previously imported duty-free now face import tariffs under the new tariff regime. For example, live animals, fish, eggs, motorcycles and bicycles are also included in the list of products facing positive tariff rates. Additionally, the import tariffs on goods are raised under the guise of countervailing duties and anti-dumping duties in order to protect domestic industries even when such measures have historically been ineffective. Unfortunately, such measures fail to differentiate between necessary and luxury goods. According to a summary released by the Pakistan Bureau of Statistics (PBS) in November 2018, the month-on-month increase in imports in October 2018 was 9.28% while the year-on-year decrease in imports was 1%.On the other hand, the month-on-month increase in exports was 10.15% and the year-on-year rise was 1.17%. Although the trade deficit decreased year-on-year by 2.36%, it increased month-on-month by 8.72%.Moreover, the exports in the first four months of FY19 (July to October) increased 3.48% over the same period in FY18 while imports decreased 0.10%. The overall decrease in the trade deficit was 2.20% in FY19 over the same period in FY18. In essence, the imports have decreased negligibly. Although the trade deficit at the end of FY19 may decline if exports continue to rise, the imposition of new customs duties as well as additional customs duties may create distortions in the market, which will eventually lead to a wedge between domestic and international prices. This wedge breeds inefficiencies. It is important to mention that the above data has been reported in dollar terms. Due to the recent depreciation of the rupee, there is a greater increase in rupee valuation of imports, exports and trade deficit over the previous fiscal year.

Commodity-wise data

Imports of the food group, machinery group, transport group, textile group and miscellaneous group decreased in October 2018 over October 2017. On the other hand, the imports of petroleum group, agricultural group (including inputs such as fertilisers) and metal group increased in October 2018. The most notable decline was in the power generating machinery as its import decreased more than 60%, equivalent to $130 million. On the other hand, the imports of crude oil and LNG increased more than 37% and 85% respectively, a combined increase of more than $250 million in monetary terms. In addition to this, in the first four months of FY19, the imports of power generating machinery decreased by almost $500 million over the same period in FY18. On the other hand, the imports of LNG increased by more than $650 million. Therefore, the petroleum group is regaining its share in the import composition of Pakistan as the scope of CPEC-related power projects shift from investment to day-to-day operations requiring imported fuel such as LNG. However, it is unlikely that the increase in tariffs has created this realignment as both the commodity groups are unlikely to be affected by the tariff measures. On the other hand, if the government successfully prioritises industrial development, we may expect an increase in the import of industrial machinery. Although there has been a decline of more than 50% in the import of dry fruits and completely built units of transportation vehicles, their total decline is slightly more than $150 million. The repercussions of tariff measures and other import restrictions are evident in higher prices of domestically produced varieties. The fall in trade value may also indicate an increase in informal trade. Even though the primary reason for higher prices has been the depreciation of the rupee, higher tariffs provide greater leverage to domestic producers to increase their prices and pass the burden of higher input costs on to customers. Local manufacturers of automobiles have increased their prices by approximately 20% since December 2017. In order to reduce the trade deficit, policymakers must direct their focus to an export-led growth. Although the total increase in textile products has been negligible at 0.41% for the first four months in FY19, exports of knitwear increased 10.41%. Exports of readymade garments in October 2018 increased 7.62% over October 2017. However, on the other hand, there had been a significant decline in the export of raw cotton and cotton yarn in the first four months of FY19 over the same period in FY18. With an increase in energy availability, greater liquidity for exporters through incentive payments and depreciation of the rupee, the downstream textile industry has regained its export competitiveness. However, to maintain the level of growth, it may be necessary for the policymakers to relax import constraints on raw material and intermediate goods that hamper competitiveness of the downstream producers. In summary, the fall in imports is attributed to the change in import composition. Furthermore, import restrictions, such as tariffs, are likely to breed inefficiencies in domestic industries. Lastly, the focus must be on export-led growth and ensuring availability of raw material and intermediate goods to domestic producers. Investments, both foreign and domestic, need to be efficiency-seeking rather than market-seeking, leading to higher exports.

Source: Tribune

Back to top

 

Subscribe to SRTEPC mailing list

Exchange Rates