A commerce ministry's strategy paper has outlined steps like pushing exports, cutting import dependence and attracting foreign firms which are looking at shifting manufacturing bases from China with a view to reduce trade imbalance with the neighbouring country. The strategy paper, prepared by the ministry, was submitted to Commerce and Industry Minister Suresh Prabhu. Steps taken by Prabhu has already resulted in narrowing trade deficit (difference between imports and exports) with China to USD 53.56 billion in 2018-19 from USD 63 billion in the previous financial year. To push export to China, the paper suggested suitable export incentives. "Efforts would be made to support exporters by pursuing tariff reduction through RCEP (proposed mega trade agreement) and by providing suitable export incentives to adequately substitute the existing MEIS (Merchandise Exports from India Scheme) scheme," it said. It said the ministry needs to vigorously pursue for greater market access for agriculture and dairy products, and pharmaceuticals. The paper said Indian pharmaceutical firms face regulatory hurdles such as prolonged and unpredictable timelines for drug registration, demand for submission of detailed clinical trial data and requirement for revealing the drug formulation process at the time of filing for registration. On this, the ministry would look at establishing an interface between Food and Drug Administrations (FDAs) of India and China for conduct of regular training programmer on regulatory standards and processes of filling dossiers in China; and relaxing product registration time from 3-5 years to one year. It would also looking at pursuing export orders where market access has been obtained from China for commodities like rice, sugar and sesame seed. Regarding import substitution, the paper noted that India's imports from China are mainly dominated by electronics, telecom, electrical equipment and pharmaceuticals. Citing views of telecom industry, it said China is adopting a host of discriminatory and restrictive practices against Indian companies to bar them from participation in their procurement process. The industry has suggested steps like focusing on local manufacturing of products like printed circuit board and camera modules; and creation of the research and development fund for the sector. Further, it said interventions are required for attracting foreign technology intensive firms which are relocating their manufacturing facilities away from China in light of the ongoing trade war between the US and China. "India, with its vast working population, and large consumer market is an attractive destination for companies moving their manufacturing base out of China, and also for Chinese manufacturer for collaborating for setting up production base in India," it said. The sectors more likely to relocate to India are electronics, consumer appliances, consumer electronics, textiles, health care equipment and heavy industry.
Source: Business Standard
The new government must take quick decisions on a number of pending trade and foreign policy issues, including forging of sustainable export and industrial policies, framing of a trade agreement with the US to avoid further bilateral skirmishes, taking a final position on the mega trade pact being negotiated with China, and future of oil imports from sanctions-hit Iran. “The previous government had put off decisions in a number of crucial areas promising that that they would be taken up after elections. Now that the BJP is in power again, quick resolutions of the issues would be expected,” a government official told BusinessLine. Irrespective of whether outgoing Commerce and Industry Minister Suresh Prabhu will be given the responsibility of heading the ministry once again, India’s trade partners would be expecting continuity in policies.
US concerned
The US, for instance, will be expecting an early decision on sticky issues such as import duties on telecom and IT equipment, and price caps on medical equipment. “The US delivered on its informal assurance that the Generalised System of Preferences (GSP) scheme for Indian exporters will not be withdrawn before the election results. “Now it will want the BJP, which has been re-elected, to deliver fast on its key demands such as lowering import duties on smartphones and price caps on medical devices. There will also be pressure to re-work e-commerce rules,” the official said. In fact, US Secretary for Commerce, Wilbur Ross, who was in New Delhi in May, had said that he applauded India’s commitment to address some of the trade barriers (faced by US companies) once the government is re-formed.
Iran oil
The government will also now have to clearly state its policy vis-à-vis oil imports from sanctions-hit Iran. After the US refused to extend the sanctions waiver for India and a few other countries, India stopped oil import from Iran in May. But former Minister of External Affairs Sushma Swaraj has assured the Iranian foreign minister that a decision on oil imports would be taken after the elections. Framing a suitable export policy is also long overdue, especially with continued unstable export performance and negligible growth in April 2019. There is also a need to replace WTO non-compliant export sops with other incentives. The ratification of the new industrial policy to increase foreign direct investment to $100 billion annually, and doing away with regulatory hurdles, are the other issues to be tackled as it had been put off for the new government. Pressure will be high on the new government to take a final decision on whether it wants to participate in the RCEP by removing duties on most items imported from all members, including ASEAN and China. “The re-formed government cannot buy more time by saying it is new because it is actually not and is well-versed with all intricate issues involved with the pact,” the official said.
Source: The Hindu Business Line
The exporting community that comprises of MSME players (responsible for 40% of the country's total outward shipments) seems to be buoyed by the victory of the NDA Government. Lauding the economic reform agenda initiated by the Prime Minister Narendra Modi-led NDA Government during its first term, stakeholders from the MSME sector have come up with their wishlist for the new Government. Figuring on top of their list are the concerns related to the segment’s traditional pain points — a high cost of credit, unavailability of adequate and timely funding avenues and regulatory and compliance related bottlenecks, particularly about GST. Summing up the perspective of the MSMEs, Anil Bhardwaj, Secretary General of the Federation of Indian Micro Small & Medium Enterprises (FISME), says, “If the government moves to implement the recommendations of RBI’s Expert Committee on MSMEs, which is likely to submit its report June end covering all aspects of MSMEs including finance, marketing, technology etc, that would take care of almost all the key demands of MSME sector.” Talking about on-the-ground performance of the 25% procurement criteria under the Public Procurement Policy (PPP) as announced by Modi on November 2 last year, Bhardwaj stresses that the government should ensure that, keeping in view the spirit of the policy decision, procurement in central government purchase, provisions against delayed payments, priority sector lending, defence offsets etc, are implemented on the ground smoothly and remain hassle free. Aimed at giving a fillip to the MSME sector, regarded to be the ‘growth engine’ of the Indian economy, Modi had announced the 25% procurement criteria as part of his 12 mega sops announced last year. Under this, Public Sector Undertakings (PSUs), which were earlier mandated to source 20 % of their annual procurement from MSMEs, were thereafter mandated to source at least a quarter of their requirement (25 %) from the MSME sector. Further, out of the 25% procurement mandated from MSMEs, 3% was reserved for women entrepreneurs. Representative of industry-wide MSMEs association also pitched for a nationwide internetbased effective grievance redressal mechanism, calling it “an absolute must” where MSMEs could turn to for remedies to their problems. Speaking on similar lines, Sameer Vakil - cofounder and chief executive officer, GlobalLinker, an MSME enabling platform, underlined that while NDA-I had worked to address many fundamentals of the economy and business environment - introducing GST and rationalising rate structures, demonetisation, ease of doing business, loan in 59- minute amongst other matters, NDA-II is expected to frame policies and drive programs to help Indian MSMEs and startups, take their rightful position in the global economy. Urging new age businesses to be set up and removal of business irritants with regard to the ill-famed Angel Tax, new company registration process, sector incentives and incubation services etc, the industry leader wishes NDA-II to Improve access to financing and credit cycles for SMEs.
IBC Code aftershocks
While none can question government’s intent and rationale behind the introduction of Insolvency and Bankruptcy Code (IBC), industry leaders believe that there is still room to make it more pro-MSMEs. “The I&B Code 2016 was one of the boldest moves of the government and initially was criticised by all or been considered as another law or mechanism to deal with huge NPA accounts however with the passage of time it is now one of the most powerful action in the hand of creditors (both Operational and Financial),” says Daizy Chawla, Senior Partner, Singh & Associates. In recent times, due to insolvency process of a number of corporates, coupled with upheaval in the banking and finance sector, a large number of MSME players are said to be bearing its aftershocks in the form of unpaid bills, bad debts and NPAs. The industry has been voicing that many of the provisions of the initial I&B Code 2016 should thus be eased out further.
Exports need a helping hand
The exporting community that significantly comprises of MSME players (responsible for 40% of the country's total outward shipments) also seems to be buoyed by the victory of the NDA Government. Pinning hopes on the NDA-II to accelerate its reform agenda initiated during its first term and introduce key structural reforms needed to jumpstart the economic activity in the MSME segment, Mahavir Pratap Sharma, Chairman, Carpet Export Promotion Council (CEPC), says, “There should be smooth GST inflow and better labour law reforms. Change has to be initiated for labour reforms. Funding for the MSME sector should also be easier and more accessible. These are the three most important issues that should be addressed on a regular basis for a change to come by. If the government really wants to make an impact then the MSME sector will need due attention.” Hailing PM Modi’s various digital initiatives for MSMEs, Ankit Gupta, vice president, ExportersIndia.com, opines, "We have been on the path of digitalization and global exposure since the past few years now. We hope that in the future too, there is a focus on easing the path for MSMEs.” According to Gupta, private investment and consumption would be two key facets that would need some fast paced working to set the economy ticking. “MSMEs look forward to the liberalisation of policies so that they are able to innovate, invest in new technologies and equip themselves to adapt to the changing business environments," he adds.
NBFC Sector: Optimistic of the times ahead
Representatives from NBFC and fintech segment, that along with traditional banking sector, has in recent times, emerged as an important player for addressing Indian MSMEs huge unmet credit demand estimated at approximately $200 billion, have also raised their yet-to-be-addressed concerns with UPA-II. Alok Mittal, CEO and Founder of Indifi Technologies, a fintech platform, said, “We expect the new government to define concrete steps to mobilize access to financial services and empower the fintech companies that facilitate them. Extending credit guarantee schemes such as MUDRA and facilitating better data access to alternate lending companies can help in bolstering the impact and reach of these initiatives. Doing so can ensure high growth potential for MSMEs in India - being one of the most dynamic and critical sectors of the nation’s economy.” Pushkar Mukewar, cofounder, DRIP Capital, hopes that in coming times, a slew of measures announced to improve credit access for MSMEs will be put into action. “What is now needed is a big push to promote fintech in areas such as MSME lending and export finance, to help solve the credit gap problem for the MSME sector,” he said, adding that if PSUs are indeed mandated to ensure that 25% of their purchases are from MSMEs, this will give the sector some much-needed impetus. Pitching for increased uniformity in GST and easing out of its compliance-related bottlenecks, he hopes that existing wrinkles in GST will be ironed out in the next few years.
Source: Economic Times
A high level government-appointed committee on trade and industry has suggested it to issue ‘Elephant Bonds' to people for declaring undisclosed income to mandatorily invest 50%, reduce corporate tax rate, drop tit for tat approach on tariff wars with other countries, and set a target to double the exports (goods and services) to $1,000 billion by 2025. The fund, made from these bonds, will be utilised only for infrastructure projects, the panel said. The group, headed by former member of the Prime Minister's Economic Advisory Council, also suggested allowing joint ventures and wholly owned subsidiaries of Indian parties to invest money in India as foreign direct investment (FDI) through funds earned overseas, under automatic route. “Simplify regulatory and tax framework for foreign investment funds and individual investors to enable the on-shoring of fund management activity of India-dedicated offshore funds and attract foreign individual investment into capital markets,” the panel said in its suggestions made to commerce and industry minister Suresh Prabhu. Besides, it also suggested a reform of financial services sector policies to enable onshoring of India-related financial services currently rendered from global financial services. The government had constituted the High Level Advisory Group (HLAG) in September last year to look into the challenges arising from the current global trade scenario and suggest ways to boost the country's goods and services exports. The recommendations to lower effective corporate tax rate, reducing cost of capital and simplifying regulatory and tax framework for foreign investment funds, are aimed at doubling India's exports of goods and services from $500 billion in 2018 to over $1,000 billion in 2025.
Industry-specific proposal
The group has suggested a separate regulation for medical devices and a single ministry for the sector, abolishing Essential Commodities Act and the APMC (Agricultural Produce Market Committee) to boost farm exports, and simplified medical visa regime along with a pan-India tourism board to promote tourism and medical value tourism. For textiles and garments sector, it suggested modification in labour laws (like the Industrial Disputes Act, 1947) to remove limitation on firm size and allow manufacturing firms to grow.
Source: Economic Times
Cabinet recommends dissolution of 16th Lok Sabha; rumblings grow loud in Congress. Prime Minister Narendra Modi on Friday met President Ram Nath Kovind to tender his resignation along with those of his Council of Ministers and pave the way for the formation of a new government over the next week. A meeting of the BJP’s parliamentary party has been convened for Saturday along with an NDA meeting — for which all ruling party allies are expected to arrive in Delhi. A Rashtrapati Bhavan communiqué said the President had asked the Prime Minister and the Council of Ministers to continue until the new government assumes office. The process to form a new House will be initiated when the three Election Commissioners meet the President over the next few days to hand over the list of newly elected members. The EC released the final tally of the Lok Sabha results, which showed that the BJP won 303 seats out of the 542 where elections were held, while the Congress won 52. The Union Cabinet, which met earlier in the day, recommended dissolution of the 16th Lok Sabha, whose term ends on June 3. The President, acting on the advice of the Council of Ministers, will accordingly dissolve the House. No date has yet been set for the swearing-in of the new Cabinet. The first Modi government had taken the oath of office on May 26, 2014. The BJP’s stupendous success in the elections clears the decks for a fresh alignment in the ruling party and government structures. The million-dollar question is: who becomes the BJP president if Amit Shah moves to the Union Cabinet. The two Union Ministers whose health did not permit them to either campaign or contest elections — Sushma Swaraj and Arun Jaitley — are expected to be offered the option of continuing in the Cabinet. Simultaneously, the three former Chief Ministers who were inducted into the central party unit as vice-presidents after the elections in Madhya Pradesh, Rajasthan and Chhattisgarh last year — Raman Singh, Shivraj Singh Chouhan and Vasundhara Raje — represent fresh talent for the Prime Minister to tap. The biggest star among the younger lot of ministers is Union Textiles Minister Smriti Irani, the ‘giant-killer’ who defeated Congress president Rahul Gandhi in Amethi. The PM has consistently promoted women leaders – Nirmala Sitharaman and Sushma Swaraj – for top slots in the Cabinet, and this is likely to continue in his second tenure. Another favourite for one of the top jobs is Piyush Goyal. The new Cabinet is also likely to see bigger representation from West Bengal, where the BJP is looking to expand its horizons. Even as the ruling party and alliance are gearing up a fresh beginning, there were rumblings against the leadership in the principal Opposition party, the Congress, with Rahul Gandhi facing public pressure to resign in the wake of the party’s colossal defeat. However, the Congress Working Committee (CWC), which is scheduled to meet on Saturday, will likely reject Rahul Gandhi’s offer to resign. Meanwhile, a host of State Congress leaders, including Uttar Pradesh Congress president Raj Babbar, Odisha Congress president Niranjan Patnaik and senior leader from Odisha Bhakta Charan Das, tendered their resignation, owning moral responsibility for the party’s defeat. The CWC meeting will also discuss the resignations of the State leaders.
Source: The Hindu Business Line
The Reform Agenda 2.0 should focus on turning India into an export and private sector driven high growth economy says India’s Principal Economic Advisor Sanjeev Sanyal to ET Now, a day after the Modi government won a massive mandate in the 2019 general elections, becoming the third prime minister after Nehru and Indira Gandhi to return to power the second time with full majority. “Our infrastructure is not the binding constraint anymore. We have done major framework reforms like GST and IBC, so the last five years were for creating framework for delivery, infrastructure, governance. The next five years should be for growth driven by exports and private investments. Space has opened up going for growth and I am not in favour artificially inflating consumption”, said Sanyal, one of North Block’s top policymakers. The three key engines of the economy are witnessing a slowdown- private investment, consumption and exports and Finance Ministry is tasked with drawing a blueprint to pump prime the economy at a time when trade war has become a reality. Sanyal said that there is demand slowdown but fiscal and monetary tools will be used to boost growth, while adding that tight real interest rates and liquidity issues had to be addressed soon. Sanyal also pointed that trade war should be used as an opportunity to boost India’s competitiveness. “There is disruption in global trade, but there’s a lot of opportunity. Our share is very small so we can easily expand our share. Liquification of global trade networks is a good thing. It allows us to insert ourselves in global supply chains both in services and goods. We shouldn’t think that our internal market is end all and be all and we can use this space to leverage on building scale and size”, he added. Sanyal also added that Enforcement of contract is the single biggest in India’s Ease of doing business. Indian ranked 77th in World Bank Ease of Doing Business list in 2018.
Source: Economic Times
Chamber also suggests measures to spur investment and growth including corporate tax rate cut to 25% and a simpler Alternate Minimum Tax. A FICCI delegation led by Rajan Bharti Mittal, Past President, FICCI met Dr. Ajay Bhushan Pandey, Secretary (Revenue), Ministry of Finance in the pre-budget discussion meeting held at North Block on 24 May 2019. The key recommendation was that the focus of the Government should be to spur domestic investment and in order to retain India's competitiveness globally, corporate tax rate cut should be considered. It was stressed that with phasing out of exemptions and deductions available under the Income Tax Act, 1961 ('the Act') and to avoid complexities arising under Ind-AS, there is a need to review the concept of Minimum Alternate Tax (MAT). A recommendation has been made to abolish MAT and extend a simpler Alternate Minimum Tax as is currently applicable to non-corporates to corporates, but at a reduced rate of 10% considering the reduction in corporate tax rate to 25% in line with global trend. The need to restore weighted deduction under section 35(2AB) of the Act for expenditure incurred on scientific research being critical for Indian businesses was clearly stressed upon. Recommendations for amendments required in the Act to facilitate smooth re-organisation across the economy were also made.
Some of the recommendations made in this regard are as below:
- Allow successors in case of amalgamation, demerger or any other form of reorganization to be eligible to claim benefit of MAT Credit;
- Section 72A of the Act should be amended to allow benefit of carry forward of losses, pursuant to amalgamation, to all companies irrespective of their line of business especially services business;
- Suitable provisions be introduced in the Act to allow tax neutral merger of two LLPs;
- Amend definition of demerger under the Act to be in alignment with Ind AS;
- Provide clarification under section 55(2)(ac) of the Act to allow grandfathering benefit in case of shares received under tax neutral transfer in lieu of shares held as on 31 Jan 2018.
On the indirect tax side, some of the key recommendations are:
- Currently, Merchandise Export from India Scheme (MEIS) and Service Export from India Scheme (SEIS) scrips cannot be utilized for payment of IGST & GST compensation cess on imports. The non-availability of utilizing the scrips towards the payment of IGST, has led to financial burden on the importers. It was recommended that the Foreign Trade Policy 2015-20 and Customs Law needs to be amended for allowing the utilization of MEIS & SEIS scrips towards the payment of GST on imports.
- The existing Authority of Advance Rulings constituted under Section 245-O of the Act is common for both Customs and Income Tax applications and as result the average time period for obtaining advance ruling is 6 to 12 months. As a trade facilitation measure, a separate 'Customs Authority of Advance Rulings' needs to be constituted and made operational without any further delay;
- Section 28(7A) of the Customs Act, 1962 as inserted by Finance Act, 2018 empowers the proper officer to issue a supplementary notice which would be deemed as the show cause notice (SCN) issued under the main provisions of Section 28 of the Customs Act. However, neither the meaning of supplementary notice has been defined under the Customs Act nor the circumstances and manner under which supplementary notice may be issued is prescribed. There is a possibility of ambiguities arising around the scope of supplementary notice. Recommendation was made that the "supplementary notice" should be defined in the Customs Act, 1962 and the circumstances and manner in which it may be issued may be prescribed expeditiously to prevent misuse of the provision by the authorities on ground;
- A point was made that tariff duty rate changes are undertaken by the Government with strategic view of the future, resulting in avoidable disputes for the past period where customs department and the trade has been following a particular practice. To protect possibility of disputes for the past period, any upward revision of duty rates should be accompanied with protection for reopening of assessment practice of the past period;
- During the Pre-GST regime, the custom benefits allowed exemption on goods imported for mega power project from Basic Custom Duty, Additional Duty (CVD) and Additional Duty (SAD). However, due to introduction of the GST Regime, exemption stand curtailed under GST Law. Post GST Implementation, only Basic Custom Duty is notified to be exempted resulting in increase in cost of developing the mega power projects in India.Recommendation was made to grant exemption from IGST payment on all the goods imported for mega power projects.
Source: Business Standard
Taking the high moral ground, India has kept out of the NPT, CTBT and now the BRI. But this hasn’t done us much good India has a history of choosing principle over pragmatism. From turning its back on the nuclear Non- Proliferation Treaty and its sibling, the Comprehensive Test Ban Treaty, to siding with Palestine against Israel and keeping away from the Refugee Treaty, India has taken a moral ground at the risk of coming across in the eyes of the world as a recalcitrant heel-digger. Now one wonders whether India’s decision to keep out of China’s Belt and Road Initiative is yet another instance of India refusing to join the global mainstream. However, the triumph of principle over pragmatism doesn’t seem to have done India much good.
Non-Proliferation Treaty
Take the example of the Non-Proliferation Treaty, which entered into force in March 1970. Few can disagree that the treaty is discriminatory. The voice of the nuclear weapons states comes out clear in it, saying ‘we shall have nuclear weapons, but you shall not get yourselves one’. The fact that in the following years and right up to the peak of the Cold War, the nuclear weapon states, principally the US and the erstwhile Soviet Union, went on unrelentingly producing more and more nuclear weapons (“vertical proliferation”) lent strength to India’s stand. And having just fought a war with a nuclear weapons possessor, China, in 1962, and having faced intimidatory moves by the US in the Indian Ocean in the height of the war with Pakistan in 1971, there was no way India would deny itself the opportunity to get itself a nuclear umbrella. But look at the consequences of the decision to keep out. It set off an armament race, impelling Pakistan to also acquire nuclear weapons, with the help of an obliging China. In the end, Pakistan possessing nuclear weapons — in larger numbers than India — has caused the country to level with India, thereby blunting India’s undeniable edge in conventional weapons superiority. Alongside, keeping out of NPT lost India access to technology and fuels for nuclear energy, leaving the country to fend for itself. Where did we end up after 50 years? A measly 6,870 MW of nuclear power capacity, when it could have easily been ten times as much. It is logical that with access to cheap, clean nuclear power, Indian economy would have fared much better.
CTBT
Take the case of CTBT, which again India was correct in describing the treaty as discriminatory. As many as 185 countries have signed the treaty since it opened for signature in 1996, of whom 168 have also ratified it. Yet the treaty is not yet on because under a clause in it, the 44 countries that possess nuclear capabilities and research reactors have to sign and ratify, otherwise the treaty won’t come into force. Eight of the 44 have not ratified and India is one of them. The eight is an elite club that includes China and the US; but though China and the US have not ratified (India has not even signed), they are ‘in’, funding and participating as observers. The US has been a big funder for the CTBT Organisation (CTBTO) that is meant to bring the treaty to fruition; China actively participates by allowing test detecting and monitoring stations on its soil. The CTBTO is pleading with India to join at least as an observer and there is no indication of India saying yes. By staying well away, India only loses in being close to emerging technologies such as radionuclide, hydro-acoustic and infra-sound that the CTBTO uses for detecting and monitoring tests.
GM crops
Take another instance — genetically modified foods. Well, saying no to GM crops is not quite due to any ‘principles’, but nevertheless one that shows India as an out-of-liner. This one that hurts more than the other stay-outs. But for this meaningless, Luddite-ist self-denial, India would be well-positioned to take US’ place as a major supplier of soya beans to China as the US vacates the space due to the trade war with China. Delhi University has developed a GM mustard that is drought-resistant and can raise yields by 25 per cent; the seed was approved by the Genetic Engineering Appraisal Committee, of the Ministry of Environment, Forest and Climate Change in 2016, but the government is yet to allow its use — and the farmers are losing an opportunity. GM crops are rising the world over, the area under which has grown from 1.7 million hectares in 1997 to 230 million hectares now. The US, Brazil, Argentina, and Canada have all immensely benefited by GM. Nevertheless, India says no. There are projections that Bangladesh would overtake India in terms of per capita income by 2030, growing rich by adopting GM.
Belt and Road Initiative
And now, the Belt and Road Initiative. As many as 122 countries have signed co-operation documents with China. Initially, only some resource-rich, low GDP countries signed up with China; now even Europe is joining in. India sits out. India’s two main objections are: part of the BRI runs through Pakistan Occupied Kashmir and many projects are opaquely financed. The first, obviously, is a valid point. But by staying out of the BRI, India is not likely to make the mildest difference to China’s activities in PoK, which, by the way, are not confined to just the BRI projects. For long, China has been plundering PoK by, for instance, carting away copper from Gilgit-Baltistan, and India has been a silent spectator. Now, to keep out of BRI because a Chinese road passes through PoK is disingenuous. On the other hand, being ‘in’ could give India some leverage over China. Again, what does India lose by allowing China to carry out its proposal to build a high-speed rail between Kolkata and Kumning, which would run through one of the least developed parts of India? As for the opacity argument, true, as many as 29 countries — including Pakistan and Malaysia — have had problems with BRI projects. These are the countries that were lured into acquiescence. But who prevents India from making sure that the BRI projects in India are transparent? You can always negotiate for better terms — as Malaysia did recently, when it cancelled a railroad project and readmitted it after China agreed to slash costs. China is a huge trading partner for India, with trade volumes reaching $90 billion in 2017-18. The BRI has seen overwhelming international response; India would only be worse off not joining the game. True, China is not exactly a friend. But India should not forget the basic principle of engagement: keep friends close, enemies closer.
Source: The Hindu Business Line
Bangladesh's overall export to India reached US$1.07 billion during July-April period of the current fiscal (FY), 2018-19, marking a robust 53 per cent growth, reports Financial Express. Bangladesh earned $701.56 million during the corresponding period of last FY, according to the state-owned Export Promotion Bureau (EPB) data. The other non-traditional destinations where local export during the period under review witnessed double-digit growth included Japan $1.17 billion with 22.57 per cent growth, and China $709.06 million with 26.14 per cent growth. Besides, export to Australia rose 13.63 per cent and reached $688.89 million, Russia 12.83 per cent to $446.94 million, and Korea 48.05 per cent to $317.72 million, the EPB data showed. Ready-made garment (RMG) items are the major local goods shipped to India along with other products like raw jute and jute goods, fish and crustaceans, plastic and leather items, sources said. The exporters and experts attributed the rise in export to growth in demand of these items among the Indian rising middle class. They opined that India is a potential market, not only for RMG but also for non-RMG products. Western retailers, having outlets in India, and Indian local brands also found sourcing their goods from Bangladesh competitive, they added. When asked, Fazlee Shamim Ehsan, acting president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said the growing middle class in India is pushing up the demand for the locally-produced garment items there. Besides, the western retailers, including H&M, are also opening their chain shops in India, and increasing direct sourcing from Bangladesh, he told the FE on Thursday. The duty-free access to India has also encouraged them (western buyers) to source from Bangladesh for Indian market. "Indian local clothing brands are also gaining confidence in our quality products." "India is undoubtedly a big market for Bangladesh, and locally made apparel items have huge demand there," he added. Local jute exporters, however, said their export to India is facing difficulties due to imposition of anti-dumping duty on jute goods by that country. India has amended the registration rules for importing raw jute and jute products, making it mandatory for all importers to obtain no objection certificate (NOC) from the Jute Commissioner of India for each consignment, according to a recent report of the World Bank. "The entire procedure of obtaining NOC is fraught with complexities and uncertainty, thus restricting the import of raw jute and jute products from Bangladesh," it added. Abdul Barik Khan, Secretary of the Bangladesh Jute Mills Association, opined that one-fourth of the total exportable jute goods of the country are shipped to India, and the exporters are facing high duty ranging between $19 and $356 per tonne. The anti-dumping duty has severely affected export of local jute goods to India, although there is no such barrier in exporting raw jute, he noted.
Source: BD Apparel News
Some voices in the U.S. have claimed that the higher tariffs on goods imported from China will drive some enterprises to move from China to elsewhere in Asia. These voices also claim that some American firms would return to the United States. These remarks fail to recognize fundamental concepts of how a market economy works. As China moves up the global value chain, it is natural for its lower-end manufacturing sector, such as textiles, apparels, and footwear, to move out of the country. This movement is in line with the law of industrial transfers in economic development. It's a normal state of affairs for a market economy, and by no means the result of the U.S. imposing extra tariffs. Efforts by Washington to link these two unrelated phenomena are part of an attempt to scare foreign enterprises away from China by bad-mouthing about its economy. But here's the smack in the face: A recent report by the Japan External Trade Organization says China's market takes pride of place when it comes to the export, investment, and cross-border e-commerce strategies of Japanese companies.
According to official statistics, the actual use of foreign capital in China was up 6.4 percent in the first four months of this year compared to the same time last year, and investment from the U.S. was up 24.3 percent. And the "2019 American Business in China White Paper" recently released by the American Chamber of Commerce in China has revealed that 98 percent of the American firms surveyed would continue to do business in China. So why can't rising tariffs in the U.S. force American firms back home? The reason is that American investments in China are mainly in high-end manufacturing, including telecommunications equipment, computers and other electronics, and chemicals and materials manufacturing. These industries demand skilled workers, and China is the only country in the world that is home to the full range of industrial sectors. It can provide a great number of skilled workers, along with complete supply and industrial chains, which greatly reduces costs for American firms. Take Apple as an example. It has around 800 suppliers around the world and about half of them are in China. A 2018 report by Goldman Sachs showed that if Apple moved all of its production and assembly plants back to the U.S., its production costs would increase by 37 percent. In addition to the advantages China has when it comes to production, it also has a huge domestic market. Its 1.4 billion consumers have become the most important force driving China's economic growth. The sales revenues of American firms in China stand at around 700 billion U.S. dollars, and their profits exceed 50 billion U.S. dollars. According to the white paper released by the American Chamber of Commerce in China, 69 percent of the firms surveyed indicated that their businesses in China will turn a profit even after Washington imposes punitive tariffs on goods produced in China. And if they were to leave, it remains a question whether they could find another market that can deliver them the lucrative profits they get in China. Most important of all, over the past year or so, China's actions to further open its economy have offered a lot of reassurance to American companies. Following ExxonMobil's announcement that it would invest in a large-scale wholly-owned petrochemical project in China, and since Tesla started work on its first overseas factory in Shanghai, Ford Motor Company announced its own plan that it would start production of new Lincoln luxury vehicles in China to help it to lower costs and avoid the risk of tariffs. Back in the U.S., Washington's decision to unilaterally raise tariffs without taking into consideration the interests of the American public or companies has greatly increased uncertainty and instability in the market. Since last year, people have seen an exodus of American firms, as they move their production chains abroad so as to better meet demand from other markets, including China. And Chicago, the third-largest city in the U.S., has signed a five-year plan to boost business ties with China, aiming to enhance cooperation in fields such as health care, advanced manufacturing, innovative technology, financial services, agriculture, and food, as well as infrastructure construction. American tariffs won't scare away foreign firms operating in China, on the contrary they will aggravate the hollowing out of the American domestic manufacturing sector. This outcome is the result of poor decisions made by the policymakers in Washington, who are keen to avoid their accountability by laying the blame on China.
Source: CGTN
European electors are voting this week to choose their representatives in the European Parliament, whose voice will be key in the following five years on sector’s evolution. Textile is concerned on European elections’ results. New representatives’ decisions on commerce liberalization decisions will have an impact on companies and industries of the sector in Europe. Within the issues currently on the table for the new European Parliament, and with an impact on textile, are the continuation of free trade agreements (FTA) of the European Union with third countries, the changes within tariffs system for non-european countries, and the stability of digital single market. The dialogue with Morocco for the reduction of origin demands and traceability of products is also in European agenda on textile issues. In 2017, the sector had a volume of business of 181 billion euros if all data from 28 European Union members is combined, as stated by the European Textile and Apparel Confederation (Euratex), in an annual report of the sector. In parallel, Europe is one of the world’s biggest consume markets, with the United Kingdom, Germany, France or Italy as the engine of sector’s global sales. In 2016, Eurostat published that each European home invested almost a 5% of its consumption expenditure in clothes and footwear, which supposed a total investment of 395.4 billion euros. In other terms, Eurostat calculated that each European citizen dedicated 800 annual euros to clothing and footwear. At the same time, clothes production in Europe grew a 0.9% in 2017, having two consecutive years of positive progress. The European Union has bid to negociate bilateral agreements with countries, to encourage the free tradeIn foreign trade, the two biggest agreements signed in the last legislature have been the agreement with Canada (CETA) and the treaty with Japan (JEFTA). Sources from the European Commission pointed that the European companies export 58,000 million euros in goods and 28,000 million euros in services to Japan. Thus, the agreement with Japan meant a drastic reduction of tariffs barriers to products’ exports from Europe to Japan. One of the most important treaties of the legislature is the Canada Comprehensive Economic and Trade Agreement (CETA), the agreement signed by the European Union and Canada. The tariffs reduction emerged from the agreement, valid from 2017, supposed an increase of a 20% in the commerce between both territories, as well as a boost of commercial interexchange until 20,000 annual million euros. The European Union is also under commercial treaties negotiations with Mexico, with implications on tariffs reductions, with the leather as one of the most important raw materials in that exchange. At the same time, the European Commission has also concluded agreements with South Korea, Moldova and Ukraine, and its keeping bilateral dialogues with Colombia and China. Binding agreements as TPP, Ceta or Jefta have been aproved, as well as bilateral dialogues with China and Colombia in parallel, the European Union has also done a first gesture to resume the dialogue with the US on free trade issues. After the US withdrawal of Ttip negotiation with Donald Trump arrival to the presidency, the European Commission has started to maintain contacts again to resume the negotiations. The European Parliament does not aprove this move, because it voted against the European executive to start negotiating again with the US to pass a free trade agreement between both territories. However, the dialogue that has challenged the European textile sector is the one maintained in the paneuromediterranean convention, negotiated between the European Union and the African countries of the Mediterranean watershed. The main destination country of Spanish textile material exports is Morocco, one the main manufacturer countries, and where it is sustained a 25% of the total volume of business. With the existing commercial model between both territories, the products that have done two of its industrial processes in Europe or the North of Africa have tariff rates advantages. Countries like Morocco are seeking to reduce the model to one process only and continuing to have tariff benefits, which will allow them to work with Asian raw material and abandon the European market.
GSP, a European commercial bridge
The European Union also performs actions to promote the imports from third countries. Under the argument of helping underdeveloped countries, the European Union excludes from tariff rates payments to some countries from the African and Asian continents, from approximately 50 years ago. The standard application means the reduction of two thirds of tariffs, partially or totally. Within the countries benefiting from this measure are countries like Vietnam, India, Kenya or Indonesia, among others. Countries like Myanmar or Bangladesh enjoy free trade policies with Europe, despite not respecting human rightsCountries with good government, according to the European Union, are also enjoying this application. In this case, they are free of two third of the total tariffs rates. In this group, countries like Bolivia, Philippines or Sri Lanka are in. However, the biggest group is formed by countries that have free duties access to the European market. All kind of products can aplly to this measurs, except arms and ammunition, in a group known as EBA (everything but arms). The European Commission has started the process to expel Cambodia from tariff advantages system, after the national government had won an election with harassment on the opposition. Besides, the European executive warned that was taking into consideration to implement the same procedure to Myanmar, due to the ethnic crusade to rohinyá’s population.
A single market for the ecommerce
The online commerce is Europe has also been on the spotlight of the European Union recently. Juncker’s executive has promoted a digital single market policy, to encourage the price unification of online products within the whole Europe, in order to help countries’ companies to open to other European markets. In fact, the European Commission highlights that only the 7% of SME’s sell in other countries within the territory. The fight against geographical block has been the main measure to boost the European digital single market and lighten the cross-border package shipment. Companies like Nike, which was fined with 12.5 million euros, or Guess, with a penalty of 40 million, were sanctioned by the European Commission for violating the principle of digital single market, and limit the cross-border sales to certain products. Guess, for instance, commercialized products, with a 10% more expensive price in countries as Hungary or Poland, in comparison with other member states.
Source: MDS
Head of Ethiopia’s state-run investment body says it is time the government settles on a minimum wage among others to protect the interests of workers. Ethiopian Investment Commission, EIC, Abebe Abebayehu added that his outfit was currently working with the relevant ministry and other agencies in efforts to achieve that goal. His comments come in the wake of a recent report that said garment workers in Ethiopia’s industrial parks are the least paid in the world. Whiles speaking to the general issue of jobs and remuneration, Abebayehu said government had identified loopholes it needed to fix. He was speaking to a private channel, Business Safari TV during the European Union – Ethiopia Business Forum that took place between 14 – 15 May, 2019 in Brussels, Belgium. “Currently the industrial parks alone have created around 80, 000 jobs. Now, how do we make sure that these jobs are decent and provide a decent way of living for the workers? “We do not believe we have addressed certain types of issues that need to be tackled towards improving the living conditions of the workers.” Directly addressing the report he said: “The salary that the report indicated does not take into account a number of other benefits that the investors provide. But still as the basic salary we need to work as a government towards setting a minimum salary that can provide the workers a decent way of living. “But I think how low can this wage be is the question that should be asked. How can we ensure that while providing competitive labour force we are also ensuring the wellbeing of workers… and also ensuring a decent standard of living for our workers?” In mid-May this year, the privately-owned Capital Ethiopia news portal reported that the government had started talks to harmonize a national minimum wage. The draft proclamation was to set a Commission that will work on the wage, the report said citing Kassahun Follo, president of Confederation of Ethiopian Trade union, CETU. A minimum wage is the lowest wage that an employer is allowed to pay; determined by contract or by law. Most African countries have it in place save for the likes of Ethiopia despite being Africa’s second most populous nation. The three biggest economies in Africa – Nigeria, South Africa and Egypt – have in the last few months increased the threshold.
Other issues he touched on were:
What the Capital Ethiopia report said about mistreatment of Ethiopian garment workers Factories in Ethiopia making clothes for top global brands are paying their workers far less than counterparts in other low-paying countries, according to a report by New York University’s Stern Center for Business and Human Rights released in May 2019. The new report is based on a visit to the flagship Hawassa Industrial Park that currently employs 25,000 people. Workers in Industrial parks earn less than 30 USD per month. CETU is therefore advocating with government and employers for any new labor law to include an adequate minimum wage. In comparison, Chinese garment workers earn USD340 a month, those in Kenya earn USD207 and those in Bangladesh earn USD95.
Source: Africa News
On the occasion of a VDMA press conference themed ITMA countdown in Frankfurt, this month, speakers from member companies Lindauer Dornier, Herzog and Mahlo showed how Industry 4.0 solutions are going to impact the textiles process chain and what technologies visitors can expect to see at ITMA 2019, which takes place in Barcelona, next month. The products examples of the respective companies made clear that Industry 4.0 is no end in itself but helps to improve production processes and results and supplements the range of services.
Organic start with an app
Dr Janpeter Horn, CEO of Herzog, a leading company in braiding technology, introduced the company’s latest Industry 4.0. product: An app-box with which the customer can easily access the data of Herzog and other machines, e.g. on a PLC (Programmable Logic Controller). The data can be visualised on dashboards created by the customer on terminals or others, and processed, e.g. by creating key figures, alarms or analyses. “Starting with Industry 4.0 does not necessarily mean to end up in a huge project and to employ software and consultant teams. We are offering an organic start into Industry 4.0 scenarios,” said Dr Horn. To realise this lean approach, the solution makes use of cloud technologies on the shop floor; open source technologies for inexpensive apps; no internet connection is necessary. The main advantage, however, is the “one-click” installation of apps, which have been applicable only for smartphones and tablets.
Better production results with digital help
According to Rainer Mestermann, Managing Director of Mahlo, collecting and processing data for better production results is a basic idea of Industry 4.0. Mahlo develops and produces measurement and control equipment for the textile and nonwoven industry. A new platform from Mahlo realises the ideas of Industry 4.0 with digital technologies. In the digitisation concept for all Mahlo products, the functionalities are grouped, optimized and standardised as services. This results in modular hardware and software function blocks that can also be retrofitted. There are modules e.g. for the acquisition and processing of measured values, for control tasks or for the long-term archiving, data logging and analysis. One example is the control module in Mahlo’s weft straighteners. The distortion control was revised and digitised. Optimised hardware and software resulted in a faster and more efficient controller. “Evaluations confirmed by customers prove that the control module regulates 20% faster and more precisely than before. Better straightening results reduce the production of second-choice goods and the need to pass the same fabric through the stenter several times,” commented Mr Mestermann.
Addition to personalised services
“Even in a 4.0 future, personal installation and maintenance support will remain an indispensable part of services but the portfolio will be supplemented by digital solutions,” stated Peter D. Dornier, CEO of Lindauer Dornier. The company is technology leader in weaving machines. At ITMA 2019, Lindauer Dornier will present a new customer portal. The portal is based on state-of-the-art database technology and will provide an online shop with permanent availability for original parts for all product lines. Remote maintenance and networking of weaving machines – to improve run characteristics, for example – will also be possible in future via the new customer portal. The focus of this solution is on people: Its purpose is to make the job of machine operators and production planners easier.
Focus on Industry 4.0
“The future success of the textiles industry is more and more determined by Industry 4.0. As seen today, Industry 4.0 has many dimensions and possible fields of application,” summarised Thomas Waldmann, Managing Director of the VDMA Textile Machinery Association. “In smart services, operations and factory, key solutions are provided by the machinery industry. Today’s presentations are just a few examples for innovative Industry 4.0 solutions. At ITMA in Barcelona, visitors will have the chance to see the whole range of I4.0 and other innovative solutions offered by VDMA member companies.” Six weeks prior to the show, Nicolai Strauch, press officer of the VDMA Textile Machinery Association, Germany, spoke to experts of VDMA member companies about their products and services with regard to digitisation and Industry 4.0.
Source: Innovation in Textiles
