The Synthetic & Rayon Textiles Export Promotion Council

MARKET WATCH 23 JULY, 2019

NATIONAL

INTERNATIONAL

No GST invoice required if goods taken abroad for exhibition are brought back in 6 Months

"Since taking such goods out of India is not a supply, it necessarily follows that it is also not a zero-rated supply. The Finance NSE 1.38 % Ministry on Monday said entities taking goods abroad for exhibitions or other export promotion events will not have to generate tax invoice for those goods which are brought back to India within six month Issuing a clarification in respect of goods taken out of India for exhibition or on consignment basis for export promotion, the ministry said exporters were facing problems due to the lack of clarity on the procedure to be followed under GST at the time of taking these goods out of India and at the time of their subsequent sale or return to India. It said that the activity of taking goods out of India on consignment basis for exhibition would not in itself constitute a supply under GST since there is no consideration received at that time, but such goods would need to be accompanied by a 'delivery challan'"Since taking such goods out of India is not a supply, it necessarily follows that it is also not a zero-rated supply. Therefore, execution of a bond or LUT (Letter of Undertaking), as required under section 16 of the IGST Act, is not required," the ministry said. It also said goods taken out of India in this manner are required to be either sold or brought back within a period of six months from the date of removal. It further said the supply would be deemed to have taken place if the goods are neither sold abroad nor brought back within the period of six months. "In this case, the sender shall issue a tax invoice on the date of expiry of six months from the date of removal, in respect of the quantity of goods which have neither been sold nor brought back. The benefit of zero-rating, including refund, shall not be available in respect of such supplies," the ministry added. If the specified goods are sold abroad, fully or partially, within the period of six months, the supply will be held to have been effected, in respect of the quantity so sold, on the date of such sale. In this case, the sender will issue a tax invoice in respect of such quantity of goods which has been sold. These supplies will become zero-rated supplies at the time of issuance of invoice. The ministry further said refund in relation to such supplies shall be available only as refund of unutilised Input Tax Credit (ITC) and not as refund of Integrated GST. "No tax invoice is required to be issued in respect of goods which are brought back to India within the period of six months," it added.

Source: Economic Times

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India mulls ways to give least duty cuts to China in long time period in RCEP

As per the official, the government wanted to know the number of years various industries need to give zero duties to imports from the RCEP countries especially China. India is looking at different arrangements to give minimum tariff cuts to Chinese goods and delay the concessions by a long number of years amid industry’s fears of cheap imports from Beijing flooding the country as it prepares to conclude a mega regional trade pact next month. In marathon meetings with industry on Monday in Mumbai, which will continue on Tuesday in Delhi, commerce and industry minister Piyush Goyal heard their objections and the products they want to be protected in the Regional Comprehensive Economic Partnership (RCEP). “The government has discussed different categories of phasing out the duty cuts but that is a matter of negotiation,” said a person aware of the meetings. New Delhi has considered duty cuts on Chinese goods over a maximum 25 year period. The stakeholder consultations could be the last set of talks ahead of trade minister-level deliberations in China on the proposed agreement in August 2-3 when it is expected to get concluded after having been negotiated for seven years. “Convened a consultation meet on Regional Comprehensive Economic Partnership (RCEP) with industry representatives from various sectors,” Goyal said in a tweet on Monday. He met representatives from the industries of steel, copper, textiles, aluminium, engineering, pharmaceuticals, leather and food, among others wherein most sectors expressed fears about Chinese dumping. “The deliberations during today's meeting will help put forth our agenda at RCEP Trade Ministers meeting in Beijing next month,” he tweeted. RCEP is a regional trade agreement spanning the 10 Asean countries and the group’s six free-trade agreement partners — Australia, New Zealand, Japan, China, South Korea and India. Though talks on seven of the sixteen chapters of the agreement are complete, the key areas of goods, services and investment are still being negotiated.

Sectoral concerns

While the textile industry has sought protection of man made fibre cheap imports from other RCEP members, auto industry wants 28 sensitive automotive tariff lines to stay on the negative list for all member countries. “Our exports have suffered in earlier trade agreements because we didn’t pay much attention to exports. But we must look at our exports in RCEP because of the global trade environment and our slowing shipments,” said an industry representative who attended Monday’s meeting. As per the official, the government wanted to know the number of years various industries need to give zero duties to imports from the RCEP countries especially China. The aluminium industry wants aluminum and its articles in the negative list or the exceptions to products they want to open up for imports under RCEP and the copper association has sought zero duty on copper ore and concentrate to prevent inverted duty structure. “The minister understood our concerns and said he would take care of those. Another meeting with industry could be likely before the ministerial,” said another industry representative present at one of the meetings. Official level meetings are slated to take place later this week in China before the ministerial.

Source: Economic Times

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Industry inputs sought as India readies strategy for RCEP talks in China this week

The Commerce Ministry is holding a series of meetings with various industry associations on tariff elimination under the proposed 16-member Regional Comprehensive Economic Partnership pact as it prepares for the crucial round of negotiations this week in China followed by a meeting of Trade Ministers. Commerce & Industry Minister Piyush Goyal interacted with representatives from various export promotion councils such as engineering, auto, chemical, pharmaceutical, leather, agriculture, marine & food processing, dairy, copper, zinc, aluminium, textiles and gems in separate meetings in Mumbai on Monday to discuss their specific concerns on the RCEP. This will be followed by more meetings in New Delhi on Tuesday between industry representatives and senior government officials. “The Indian industry, especially sectors such as steel, auto, textiles, and engineering goods, has been apprehensive about taking on commitments to eliminate tariffs for RCEP members, especially China. The meetings have been arranged to take on board their concerns before India decides on its strategy for the negotiations to begin in China,” a government official told BusinessLine.

Mega trade deal

The RCEP is a mega trade pact being negotiated between the 10-member ASEAN, India, China, South Korea, Japan, Australia and New Zealand. With the countries missing the December 2018 deadline for concluding the pact due to change in regimes in some ASEAN countries and India’s unresolved concerns on tariff elimination in goods and low offers in services, most members are determined to sign the agreement by the end of 2019. The 27th round of RCEP negotiations will be held this week in Zhengzhou, capital of central China’s Henan Province. This will be followed by RCEP Trade Ministers meeting in Beijing on August 2-3. “There is no doubt that members are serious about concluding the RCEP talks this year. This message was given clearly to India when the ‘ASEAN troika’, including trade ministers from Indonesia and Thailand and the ASEAN Secretary General, called upon Goyal earlier this month. That is why the forthcoming negotiations are going to be crucial and India has to make its point forcefully,” the official said. The Indian industry, across sectors, is not willing to face unbridled competition from RCEP member countries, particularly China. “The list of items that various Ministries and Departments have handed over for protection against tariff cuts in case India signs the RCEP is so large that if all are included there would hardly be any items left for tariff elimination,” the official said.

Largest free trade zone

Despite the challenges to be faced by industry, the government is keen to be part of the pact as 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.

Source: The Hindu Business Line

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India will achieve 8% plus growth from FY 2020-2021 onwards: Rajiv Kumar, NITI Aayog Vice Chairman

On the issue of job creation, Kumar emphasised that a very large number of jobs have been generated in the country in the last five years. NITI Aayog Vice Chairman Rajiv Kumar has voiced confidence that India will achieve economic growth of 8 per cent plus from fiscal year 2020-2021 onwards as structural reforms like the GST are set to produce the benefits. The eminent economist was in the city for the High Level Political Forum Ministerial Meeting on Sustainable Development Goals at the United Nations Headquarters. During his visit, he delivered the keynote address at the 'India Investment Seminar' held at the Consulate General of India, New York. Kumar stressed that in the next five, the Modi government is focussed on accelerating growth from the current about seven per cent to more than eight per cent that will propel the country to easily achieving the target of becoming a five trillion dollar economy. "I personally think that in the fiscal year 2020-2021 onwards, we will achieve higher than 8 per cent growth, (continuing) then for the next many years. It is just a fact of (growth) taking off," Kumar said. "The foundation has been laid and the transformation has begun with the passing of structural reforms like the Goods and Services Tax, Insolvency and Bankruptcy Code. These have taken their time to settle down and now they'll produce the benefits," Kumar told PTI in an exclusive interview. "We have the potential to grow at double digit growth rates," he said. On the issue of job creation, Kumar emphasised that a very large number of jobs have been generated in the country in the last five years. "If it was always a jobless growth, then that would have shown up in social strife and social tensions and surely would have meant that this government would not have been reelected," he said, adding that the re-election of Prime Minister Narendra Modi-led government shows that there is a level of satisfaction with the government's performance. He however acknowledged that the nature and quality of jobs is not meeting the aspirations of the country's young people and they want better quality jobs that will engage them fully. "That has to be ensured by us improving the investment climate for domestic investors as well as foreign direct investors." Kumar highlighted that the Union Budget, presented earlier this month, has taken big steps forward for facilitating and further improving ease of doing business by liberalising the inflows of FDI. "This budget is a paradigm shift in saying that we will achieve accelerated growth and job generation but with the primacy of private investment. That is what our focus is - that will then generate the jobs." Underscoring the potential in the agriculture sector, which has 43 per cent of the workforce, Kumar said investment in the agro-processing sectors and improvement in agricultural yields will help exponentially in job creation. "Our agriculture, when it is transformed and it begins to have much higher volume of agroprocessing, growth rates can easily rise from the current two per cent to four per cent," he said adding that similarly there is a lot of potential in other sectors such as manufacturing and services. "There is a lot of potential, there were constrains which are now being removed," he said, citing the example of Labour Codes introduced in Parliament that will simplify the whole labour compliance situation. He said at the NITI Aayog, the most important focus is on improving private investment by improving the investment climate, accelerating growth, generating jobs, creating policies for that and at the same time ensuring through social programmes that benefits reach the bottom of the pyramid and to the last person standing in the queue. "The reforms have been done, the network for taking the benefits of growth to the bottom of the pyramid, to the last of the queue has also been laid. The delivery mechanism has been hugely improved," he said. Kumar said that inclusionary aspects of social programmes such as Ayushman Bharat, JAM trinity of Jan Dhan bank account, Aadhaar unique identity number and mobile phone, have been put in place. "When growth accelerates, you will see the benefits at the bottom of the pyramid." Kumar pointed out that efforts are also being made to promote private investment in the mine, mineral and coal sectors because otherwise the country's import dependence is increasing both for oil and gas as well as for coal even though there are huge reserves in the Country. He noted that the SDG principle of “Leaving No One Behind” finds resonance with the Government of India's motto of “Sabka Saath Sabka Vikas [Collective Efforts Inclusive Growth]”, which guides all development initiatives. "It is a proud moment to say that India has not only mainstreamed the SDGs (Sustainable Development Goals) and Agenda 2030 but is on the way to achieving some of the targets ahead of time," he said. Kumar acknowledged that while a lot has been achieved through programmes such as Swachh Bharat Mission and Ayushman Bharat, challenges remain in a country of 1.3 billion people - from a water crisis, shortage of energy in parts of the country, pollution and need to increase female participant rates. "In the last five years, we have laid the foundation for the benefits of growth to reach the bottom of the pyramid. In the next five years we are focussed on accelerating growth."

Source: Economic Times

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More penal power for Customs dept

Proposed amendments in Section 104 of the said Act would allow arrest of any person fraudulently obtaining duty credit scrips for more than Rs 5 million. In her Budget speech, the finance minister talked of enhanced penalty and prosecution under the Customs laws to deal with bogus entities resorting to unfair practices for availing of undue concessions and export incentives. She said misuse of duty credit scrips and the drawback facility involving more than Rs 5 million would be a cognizable and non-bailable offence. The problem of fake entities or unscrupulous elements obtaining duty credit scrips through wilful mis-statement, suppression of facts or collusion, selling these to unwary importers, who then utilise the scrips, was recognised ...

Source: Business Standard

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India sews coalition of 9 nations to push development at WTO

China, Canada, the US and Norway, too, have submitted reform proposals but experts said a coalition on S&DT is a key milestone for the developing nations. India has formed a coalition of nine countries to place special provisions for developing countries and high farm subsidies in advanced nations that harm African states at the forefront of global trade talks. Stating that special and differential treatment (S&DT) is a “non-negotiable right for all developing countries”, the grouping said “all members, no matter their trade share, must have an equal say in decision making” of the World Trade Organization (WTO). India, South Africa, Bolivia, Cuba, Uganda, Zimbabwe, Ecuador, Tunisia and Malawi have suggested preservation of consensus decision making and reaffirming special provisions for developing countries to address asymmetries in global trade. This comes as the US and Canada, among other countries, have questioned the eligibility of developing countries for special provisions even as they propose rule making for issues such as e-commerce and investment, which don’t have the multilateral mandate. “Our paper has development at its core, which was neglected in developed countries’ proposals. It highlights the asymmetries in WTO agreements, which no country can shy away from now,” said an official aware of the proposal made by the coalition, adding that more members are expected to join. China, Canada, the US and Norway, too, have submitted reform proposals but experts said a coalition on S&DT is a key milestone for the developing nations. S&DT are special provisions for developing countries which allow them more time to implement agreements and commitments, include measures to increase trading opportunities, safeguard their trade interests, and support to build capacity to handle disputes and implement technical standards. The US has proposed withdrawal of these for emerging economies, which are members of the Organisation for Economic Cooperation and Development, G20, classified as “high income” by the World Bank or account for more than 0.5% of global merchandise trade. “No country can fight alone and the joint proposal is a win for developing members because it will draw other countries to join the coalition. This carries substantial political weight,” said a Delhi-based expert on WTO matters.

PENDING ISSUES

Highlighting the inequities in various global trade treaties, the nine countries said the Agreement on Agriculture has allowed developed countries to continue their high subsidies on agriculture products, including those exported to developing countries, impacting their small farmers' livelihood and food security.

Source: Economic Times

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Modi 2.0 sets fast pace of decision making in 1st 50 days: Report card

The Narendra Modi 2.0 government has set a fast pace of decision making, with important measures on national security such as clean-up of Jammu & Kashmir Bank, domestic agendas to deliver on new welfare schemes and significant foreign policy engagements. An official backgrounder said action against J&K Bank was much needed as it was closely linked to terror funding and was misused by separatists in the Valley. A decision has been taken to improve the financial benefits of central armed police forces. Official sources said there was stepped up action against economic fugitives like the promoters of Sandesara group and jeweller Mehul Choksi who are facing pressure to return to India and face trial. Amendments to the Insolvency and Bankruptcy Code were intended to ensure timely and efficient disposal of cases regarding firms that had defaulted on loans and had left

Registration process for biz simplified

An important set of labour reforms has been announced that will benefit 49 crore workers and also make business smoother and less encumbered with red tape, according to an official backgrounder. The registration process for businesses has been considerably. Unregulated financial schemes have been banned to protect honest people with the poor often falling victim to such frauds. The government has offered more incentives for the middle class on affordable housing by way of tax breaks. Around three crore retail traders and small shopkeepers will be offered pension. An important focus is on investment and related efforts to increase economic growth that would result in higher job creation. There are big plans for infrastructure, a key requisite for a modern nation and growing economy with PM Narendra Modi having set a $5 trillion target for the economy in five years. A sum of Rs 100 lakh crore is proposed to be invested in the next five years to augment infrastructure. There is good news for domestic business with the corporate tax slab set at 25% for companies with turnover of less than Rs 400 crore. An amount of Rs 350 crore has been marked for GST subvention for MSMEs. Among manifesto promises taken up urgently are water conservation with the creation of the Jal Shakti ministry. The department will urgently frame policy for improving water security and considering measures to mitigate climate change. There were several initiatives for farmers with hiked MSP for Kharif crops and the proposed implementation of PM Kisan to all farmers. The government will also spend over Rs 10,000 crore over three years on social security cover for farmers. Among other key initiatives, the government has promised to provide 1.95 crore houses under the PM Awas Yojana by 2022.

Source: Economic Times

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Delhi mulls giving Bangladesh access to ports on west coast

At a time when Nepal is bracing for a multi-billion dollar bill for rail connectivity to Chinese ports located over 4,000 km away, India is discussing the possibility of giving Bangladesh access to the west coast ports ofl JNPT or Mundra, which can receive large mother vessels and are located a little over 2,000 km away from Dhaka. The connectivity will come at no extra cost, as a series of India-sponsored rail-link projects are under implementation between India and Bangladesh. And, Dhaka is building a bridge over the Padma river. The proposal, which is in initial stages, is a win-win for both the countries. Bangladesh now ships its exports, mostly garments, by daughter vessels through the congested Chittagong port to Colombo, Singapore or Port of Klang for transshipment to mother vessels. The entire process is time-consuming with cost implications. Bangladesh aspires to have deep-sea ports. However, considering its limited cargo potential, there is a question mark over the viability of such facilities, which involve substantial investments. Also, there is no guarantee that shipping lines will send mother vessels to Bangladesh. India has already offered Bangladesh the right to use Kolkata port (in exchange for Bangladesh granting the North-East region access to Chittagong port). However, it may not solve the long-term problems of Dhaka, as Kolkata, being a river port, cannot draw large vessels. The other Indian ports on the east coast are either yet to have container traffic or suffer from low draft. India is building three ports — including the proposed $4-billion Vizhinjam port by Adani group — to attract transshipment traffic from Colombo or Klang. However, this will take time. Meanwhile, the Narendra Modi government is keen to improve India’s attractiveness as a transshipment hub by inviting neighbours to use its deep-draft port facilities on the west coast. With Customs having implemented the electronic cargo tracking system, third country containers can easily pass through without physical checks and the resultant delay. The huge investments underway in rail infra will make movement of goods easier. It might also add to the viability of the upcoming freight corridor. With connectivity issues getting resolved fast, both India and Bangladesh are looking forward to making better use of the infrastructure.

Source: The Hindu Business Line

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AP spinning mills in dire straits; to go on ‘production holiday’ once in a week

Spinning mills in Andhra Pradesh, facing grave financial crises, have decided to go on 'production holiday one day in a week’ from Monday. The decision was taken last week-end at Guntur by the AP Spinning Mills Association. There are 120 spinning mills in the State. According to L Raghurama Reddy, Chairman of the association, a number of factors have led to the crisis. “Yarn exports to China have almost stopped due to China-US trade face-off and among domestic mills there is increasing competition. The rising input costs, especially cotton, and the market slump have forced us to stop the mills one day a week from Monday, till the conditions improve, he said. He said the MSP of cotton had gone up by 25 per cent in recent times. “Further, the Cotton Corporation of India is keeping huge stocks and creating an artificial demand in the market. To make matters worse, the previous TDP government in the State had not released industrial incentives to the extent of ₹1,200 crore to the mills. Therefore, we have no choice but to effect production cut.” He added the spinning mills at Tirupur in Tamil Nadu and elsewhere in the country are also facing the same crisis and were also forced to do the same.

Source: The Hindu Business Line

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Punjab govt delegation on Taiwan visit to discuss economic, trade partnerships

A delegation of Invest Punjab, the investment promotion and facilitation agency of Punjab, is visiting Taiwan from July 22-27 to discuss potential economic and trade partnerships, talent exchanges, and resource sharing, an official statement said on Monday. Economic relations between India and Taiwan have deepened in the past decade with signing of several agreements to facilitate trade, investment and technological collaborations, a senior official said here. Punjab has selected Taiwan as a focus country due to the plethora of investment opportunities and potential business synergies possible in bicycle and bicycle components, electric vehicles, electronics, light engineering, auto components, skill development and textile sectors. Punjab Bureau of Investment Promotion Additional Chief Secretary Vini Mahajan and Invest Punjab CEO Rajat Agarwal will address the gathering at Taiwan-ASEAN-India Strategic Partnership Forum in Taipei and Hsinchu to showcase the state''s readiness to cater to industrial requirements of Taiwanese companies. "They will apprise the Taiwanese investors of the significant reforms undertaken by the state, including a blend of policy level changes, simplification of processes and implementation of technology-based solutions to create a business-friendly ecosystem," the official said. "Punjab will also leverage this forum to solidify its presence as a preferred investment destination among other ASEAN countries," she said. To promote industries, Punjab is also adopting measures like cluster approach with the creation of industrial sites like Hi-Tech Valley in Ludhiana (380 acres dedicated to EV, battery manufacturing, bicycle manufacturers), MediCity in Mohali (250 acres dedicated to setting up a multi/super specialty hospitals, medical colleges), IT City in Mohali (1,688 acres) and a new Electronic City under development, the statement said. Punjab-based corporates, including Hero Electric Managing Director Naveen Munjal, Trident Ltd Vice Chairman Abhishek Gupta, Hero Cycles Director Abhishek Munjal, are accompanying the government delegation, the statement said.

Source: Outlook India

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Jharkhand to get its own World Trade Centre

The Department of Industries has got the Centre’s nod for construction of a World Trade Centre (WTC) at the upcoming Smart City in suburban Ranchi, officials from the Department said on Sunday. State officials recently met senior officials from the Union Commerce and Industry Department in New Delhi and finalized the project, which was pending since a long time, said Mukesh Kumar, Director of State’s Department of Industries. The Jharkhand Industries Development Corporation (JIDCO) will be the executing agency for the project, he added. “Although the World Trade Centre will come up in Ranchi’s Smart City, it will be governed by the Department of Industries,” said Kumar. The building is likely to be constructed on a 10 acre plot and will facilitate export to foreign countries directly from Jharkhand. The project is likely to cost around Rs.45 crore, sources from the Department said. The WTC, they said, will boost the State’s industrial aspirations and attract investments. The infrastructure will act as a one-stop-centre for all the businessmen interested in globalizing their business, said officials. Officials from the Department of Industries said that Jharkhand already exports steel, auto parts, tussar, tamarind and lac to foreign shores. After the construction of the WTC, industrialists and businessmen here will not have to go to Kolkata or New Delhi for exporting their goods, they added. The WTC will also provide space to multinational companies to exhibit and promote their products. The Bharatiya Janata Party (BJP) led Jharkhand Government in the past four and a half years has taken several initiatives to add a fillip to the industries here by luring foreign and domestic investors. The State organized its maiden Global Investors’ Summit in 2017, which led to the signing of at least 210 Memorandum of Understandings for investments to the tune of Rs.3 lakh crore. The WTC is being developed under the Trade Infrastructure for Export Promotion Scheme of Ministry of Commerce and Industry, Government of India. Currently, less than one per cent of trade is being exported from the state, despite vast potential in the field of food processing, textiles, minerals and more. The export is dismal from the state in absence of enabler. This building will have office spaces, permanent exhibition centre, lab for quality and certification, International Trade Desk and more. The Department of Industries has got the Centre’s nod for construction of a World Trade Centre (WTC) at the upcoming Smart City in suburban Ranchi, officials from the Department said on Sunday. State officials recently met senior officials from the Union Commerce and Industry Department in New Delhi and finalized the project, which was pending since a long time, said Mukesh Kumar, Director of State’s Department of Industries. The Jharkhand Industries Development Corporation (JIDCO) will be the executing agency for the project, he added. “Although the World Trade Centre will come up in Ranchi’s Smart City, it will be governed by the Department of Industries,” said Kumar. The building is likely to be constructed on a 10 acre plot and will facilitate export to foreign countries directly from Jharkhand. The project is likely to cost around Rs.45 crore, sources from the Department said. The WTC, they said, will boost the State’s industrial aspirations and attract investments. The infrastructure will act as a one-stop-centre for all the businessmen interested in globalizing their business, said officials. Officials from the Department of Industries said that Jharkhand already exports steel, auto parts, tussar, tamarind and lac to foreign shores. After the construction of the WTC, industrialists and businessmen here will not have to go to Kolkata or New Delhi for exporting their goods, they added. The WTC will also provide space to multinational companies to exhibit and promote their products. The Bharatiya Janata Party (BJP) led Jharkhand Government in the past four and a half years has taken several initiatives to add a fillip to the industries here by luring foreign and domestic investors. The State organized its maiden Global Investors’ Summit in 2017, which led to the signing of at least 210 Memorandum of Understandings for investments to the tune of Rs.3 lakh crore. The WTC is being developed under the Trade Infrastructure for Export Promotion Scheme of Ministry of Commerce and Industry, Government of India. Currently, less than one per cent of trade is being exported from the state, despite vast potential in the field of food processing, textiles, minerals and more. The export is dismal from the state in absence of enabler. This building will have office spaces, permanent exhibition centre, lab for quality and certification, International Trade Desk and more.

Source: The Pioneer

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Global Textile Raw Material Price 22-07-2019

Item

Price

Unit

Fluctuation

Date

PSF

1157.9613

USD/Ton

-0.38%

7/22/2019

VSF

1726.0452

USD/Ton

-0.34%

7/22/2019

ASF

2261.43885

USD/Ton

0%

7/22/2019

Polyester    POY

1179.7548

USD/Ton

-0.61%

7/22/2019

Nylon    FDY

2448.1365

USD/Ton

0%

7/22/2019

40D    Spandex

4271.526

USD/Ton

-0.68%

7/22/2019

Nylon POY

1314.8745

USD/Ton

-1.09%

7/22/2019

Acrylic    Top 3D

2687.865

USD/Ton

0%

7/22/2019

Polyester    FDY

5491.962

USD/Ton

0%

7/22/2019

Nylon    DTY

1372.9905

USD/Ton

-1.05%

7/22/2019

Viscose    Long Filament

2310.111

USD/Ton

0%

7/22/2019

Polyester    DTY

2411.814

USD/Ton

0%

7/22/2019

10S OE    Cotton Yarn

1971.5853

USD/Ton

-0.07%

7/22/2019

32S    Cotton Carded Yarn

3048.1842

USD/Ton

-0.05%

7/22/2019

40S    Cotton Combed Yarn

3553.7934

USD/Ton

-0.06%

7/22/2019

30S    Spun Rayon Yarn

2382.756

USD/Ton

-0.61%

7/22/2019

32S    Polyester Yarn

1859.712

USD/Ton

-0.78%

7/22/2019

45S    T/C Yarn

2600.691

USD/Ton

0%

7/22/2019

40S    Rayon Yarn

2034.06

USD/Ton

-1.41%

7/22/2019

T/R    Yarn 65/35 32S

2397.285

USD/Ton

0%

7/22/2019

45S    Polyester Yarn

2673.336

USD/Ton

-1.08%

7/22/2019

T/C    Yarn 65/35 32S

2251.995

USD/Ton

0%

7/22/2019

10S    Denim Fabric

1.3279506

USD/Meter

0%

7/22/2019

32S    Twill Fabric

0.755508

USD/Meter

0%

7/22/2019

40S    Combed Poplin

1.031559

USD/Meter

0%

7/22/2019

30S    Rayon Fabric

0.6160296

USD/Meter

0%

7/22/2019

45S    T/C Fabric

0.6843159

USD/Meter

0%

7/22/2019

Source: Global Textiles

Note: The above prices are Chinese Price (1 CNY = 0.14529 USD dtd. 22/07/2019). The prices given above are as quoted from Global Textiles.com.  SRTEPC is not responsible for the correctness of the same.

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Rise of Asia is happening faster than expected: MGI report

India is poised to overtake the United Kingdom to become the world’s fifth largest economy, with a gross domestic product (GDP) about double the size of either Canada or Russia in the coming years, according to the Mckinsey Global Institute (MGI). The rise of Asia is happening faster than expected and Asian cities are already international financial centres, it said. McKinsey & Company, in partnership with MGI, recently launched ‘Future of Asia’, research that examines how Asia will lead. The MGI research examined 71 developing economies and singled out 18 of them for consistently posting robust economic GDP growth. All seven long term outperformers and five out of 11 recent outperformers are located in Asia. The 21st-century will be characterised by a pivot towards Asia, and business and market leaders will need an accurate picture of what a future Asia will look like as they set long-term strategies, according to the study. The region is on track to top 50 per cent of global GDP by 2040 and drive 40 per cent of the world’s consumption. Further, as consumption rises, more of what gets made in Asia is being sold locally instead of being exported to the West. Today, 52 per cent of Asian trade is intra-regional. “While the previous era of globalization was marked by Western companies building supply chains that stretched halfway around the world as they sought out the lowest possible labour costs, today only 18% of goods trade involves exports from low-wage countries to high-wage countries," said Jonathan Woetzel, a senior partner at McKinsey and director of MGI. As wages have risen in China, countries like Vietnam, India and Bangladesh have managed to grow their exports of labour-intensive manufactured goods by annual rates of 15 per cent, 8 per cent and 7 per cent respectively.  “While the trade intensity of goods has declined, service flows have become the real connective tissue of the global economy – and Asia’s services trade is growing 1.7 times faster than the rest of the world’s," the research states. Additionally, over 40 per cent of the world’s 5,000 largest companies are Asian. McKinsey projects that over the next decade, the region may fuel half of the consumption growth worldwide.

Source: Fibre2Fashion

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Energy tariffs for export sectors to be issued soon

Finance Secretary Naveed Kamran Baloch has assured the All Pakistan Textile Mills Association (Aptma) that a notification about gas and electricity tariffs for five major export sectors will be finalised and issued on Monday, said an Aptma official. Speaking to The Express Tribune, he said a meeting had been scheduled for Monday, July 22, where representatives of the Ministry of Petroleum and Power would be invited to address the challenges being faced by the industry, especially those that emerged after the presentation of federal budget 2019-20. According to minutes of a meeting held among Aptma, finance secretary, petroleum secretary and power secretary on July 18, a summary was being prepared for Sui Northern Gas Pipelines Limited regarding halting the subsidy from March 2019 onwards. It would be forwarded to the Economic Coordination Committee (ECC) for consideration and approval.

ECC bans wheat export, calls for price control meeting

It was highlighted that clarification was being sought from the Ministry of Finance for continuing electricity supply at 7.5 cents per kilowatt hour (kWh) to the five major export sectors, which were previously zero-rated, from July 2019 onwards. Aptma also held a meeting with Adviser to Prime Minister on Commerce Abdul Razak Dawood and Federal Board of Revenue (FBR) Chairman Shabbar Zaidi where it was decided that withholding tax on the import of machinery would be fixed at 1% as was previously applicable under SRO 1,125. Earlier, withholding tax was being charged at a rate of 5% and clarification in that regard would be issued on July 22. The new tax refund mechanism for exporters has been drafted and the FBR will post a notification on its website to seek comments and input of the stakeholders. “As per the new mechanism, tax refunds to exporters will be released immediately after filing tax returns,” stated minutes of the meeting. During the meeting, Aptma expressed concern that most of the cotton production was being purchased by the industry within three months during which hefty tax refunds would get stuck and registered persons would not be able to claim or adjust them. Aptma proposed that either the sales tax on cotton should be reduced to 5% from the present 10% or payment of sales tax should be deferred till cotton consumption. “Furthermore, buyers of cotton (spinners) should be allowed to pay sales tax under special ginning rules,” it stressed. The FBR chairman assured businessmen that the proposal would be considered. Aptma was of the view that the inadmissibility of input tax if CNIC was not provided was harsh and emphasised that it should be withdrawn. Secondly, it demanded that 3% sales tax on unregistered persons should also be withdrawn and maintained that the sales tax on registered and unregistered persons should be the same. “The word ‘good faith’ in case of sales to unregistered persons needs to be defined that the seller will never be prosecuted in case the CNIC is found to be fake,” Aptma said. The demand for withdrawal of 10% sales tax and 3% additional tax on the import of machinery for both Greenfield and Brownfield projects also surfaced during the discussion.

Current account deficit contracts 32% to $13.59b

According to the minutes, the FBR chairman assured textile millers that clarification over 1% withholding tax being applicable under SRO 1,125 would be issued on July 22. Zaidi pointed out that initially 10% sales tax and 3% additional tax on the import of machinery would be applicable to Greenfield projects only and sales tax on machinery for Brownfield projects may not be considered at this stage. He urged Aptma to provide cases of deferred payment which were not being processed. On the issue of providing a level playing field to the local industry and imports under exemption rules, substantial data and proper arguments were given by the Aptma delegation to ensure that domestic industry was protected, the minutes concluded.

Source: The Express Tribune

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Cambodia, Vietnam will meet 2020 trade target: Ministry

Cambodia and Vietnam are optimistic that they will reach $5 billion in bilateral trade by 2020 as pledged by their governments. That optimism was evident during a meeting last week between Prak Sokhonn, Cambodia’s Minister of Foreign Affairs, and Nguyen Quoc Dung, Vietnam’s Vice Minister of Foreign Affairs. The meeting, held on Thursday in Phnom Penh, was part of the sixth round of political consultations between the two countries. “Given current trends, including the fact that two-way trade reached $4.7 billion last year, bilateral trade will reach and may even surpass the target of $5 billion by 2020 set by the governments. “This will be possible thanks to the Bilateral Trade Enhancement for 2019-2020, signed in February 2019,” the Ministry of Foreign Affairs said in a press release on Sunday. During the meeting, both parties briefed each other on recent political and economic developments in each country and agreed that peace, security, and stability are essential for socio-economic progress in both countries and in the region. The discussion covered political and security cooperation, trade and investment, human resources development, tourism and cultural promotion, infrastructure connectivity, and border policy, among others. Both sides agreed to find ways to further enhance cooperation in these fields to serve their mutual interests, according to the statement. The officials also agreed to speed up work on the conclusion of the Border Trade Agreement and implement relevant measures to further expand trade and investment, and facilitate the movement of goods and people across their shared border. “The fruitful outcomes of the political consultation contribute to strengthening the relationship between the two countries, and lay the groundwork for the 17th Joint Commission Meeting between Cambodia and Vietnam in August,” the Ministry said. As of 2018, Vietnam had about 210 investment projects in Cambodia, mostly in agriculture and forestry, with a total registered investment capital of about $3 billion. Cambodian investment in Vietnam has also expanded in recent years. There are now 19 projects by Cambodian firms in Vietnam, amounting to $63.4 million in investment, according to data from the Vietnamese Embassy.

Source: Khmer Times

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Exporters get a boost

Exporters will now be able to issue the certificate of origin to enjoy the generalised system of preferences (GSP) facility in the European Union, instead of relying on the Export Promotion Bureau (EPB) for the document. Md Mofizul Islam, senior secretary of the commerce ministry, Md Shafiqul Islam, vice-chairman of the EPB, Sheikh Fazle Fahim, president of the Federation of Bangladesh Chambers of Commerce and Industry, and Md Siddiqur Rahman, vice-president of the federation, were also present at the event. This will save time and cut cost for exporters, said Commerce Minister Tipu Munshi, according to a statement. This will allow exporters to enjoy the GSP benefit quickly after sending a shipment. A certificate of origin is an important international trade document that certifies that goods in a particular export shipment are wholly obtained, produced, manufactured or processed in a particular country. It also serves as a declaration by the exporter. The minister said exporters would be able to issue the certificate because of the introduction of the registered exporter system (the Rex system). The commerce minister made the comment while speaking at a programme at the conference room of the EPB in Dhaka on Sunday. He handed over the Rex number to 10 exporters at the programme. The exporters are Zaber & Zubair Fabrics, Rifat Garments Ltd, Square Fashions Ltd, Noman Terry Towel Mills, Sea Park (BD) Ltd of Chattogram, Akij Jute Mills, Pran Agro Ltd, Karupannya Rangpur Ltd, Uniglory Cycle Industries, and Universal Jeans Ltd. About 6,000 exporters will receive the Rex number gradually, the statement said. “With this, Bangladesh’s export simplification takes another step forward,” Munshi said. Bangladesh has been enjoying the GSP facility since 1971 under the EU’s “Everything but Arms” scheme. The transition period from the current system of origin certification to the Rex system started for Bangladesh on January 1 this year and will last until December 31 this year, according to the European Commission website. Exporters will have to apply to become registered exporters by filling in an application form and by returning it to the EPB. According to the commerce ministry statement, the new system was introduced in line with the rules of the World Trade Organisation. Local exporters have long been demanding the introduction of the Rex system. Under the new system, exporters will bear all the responsibilities for the exports, while the EPB will supervise it. The Rex system will progressively and completely replace the current system of origin certification based on certificates of origin issued by government authorities and on invoice declarations made out under certain conditions by economic operators.

Source: The Daily Star

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83% of fashion companies plan to reduce China sourcing

Dive Brief:

  • Rising production and sourcing costs and protectionist trade policies are fashion companies' top business challenges in 2019, according to a report from the U.S. Fashion Industry Association. The number of companies holding a positive five-year outlook dropped from 84% in 2018 to 64% in 2019, according to the report's survey.
  • Due to tariffs and the ongoing trade war with China, 83% of fashion industry respondents said they plan to reduce their sourcing from the country, up from 67% in 2018. Only 6.7% of respondents said they plan to "reduce sourcing significantly" however, demonstrating the continued business value of maintaining a presence in China. Half of the respondents said their Chinese vendors lowered prices in an attempt to keep from losing customers to Vietnam, currently the alternative manufacturing country of choice.
  • According to the report, "during 2018, American fashion brands and retailers paid more than $12 billion dollars in tariffs on apparel and home textiles. And another $3 billion on imported footwear." In spite of these costs, the effect on U.S. reshoring has been negligible. Firms said the trade war has only "increased the production costs of textiles and apparel 'Made in the USA,' and, while they are reluctant to do so, they will have to raise prices if the China tariffs escalate any further.
  • Dive Insight:
  • The fashion industry was largely insulated from the trade war with China until May 2019, when the third tranche of tariffs included $3.7 billion in textile products, according to the report data. The administration's fourth proposed tranche (which would have affected up to $55 billion in key industry imports) was put on hold in favor of new rounds of negotiations after the G20 summit in late June.
  • While the administration's list three tariffs have made it more expensive for retailers to source from China, 100% of the survey respondents said they continue to import from the country. For some of them, however, the share of their Chinese sourcing has decreased, with 25% of respondents saying they now source more from Vietnam than they do from China.
  • Import share from Vietnam and Bangladesh, in particular, has skyrocketed in the past two years as these are apparel companies' main alternatives to China. According to the U.S. Reshoring Index, Vietnam captured $36 billion of the $72 billion in imports China lost due to tariffs in 2018. While this has helped some companies circumvent tariffs, USFIA survey respondents said it has had the additional effect of driving up production costs by as much as 20% in Vietnam and other second-choice manufacturing countries like Bangladesh and Indonesia.
  • Overall, the vast majority of retailers don't see themselves leaving China anytime soon as neighboring countries in the area don't yet have the infrastructure and workforce capability to produce the same variety of SKUs as quickly, the report said.

Source: Supply Chain Dive

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China retailers plan to buy more imported goods to meet consumer demand, survey shows

Chinese retailers and wholesalers plan to increase their purchases of imported products because demand for them among Chinese shoppers remains strong, according to survey results published by China’s Ministry of Commerce. Some 9.7 per cent of the 945 retail and wholesale firms that responded to the Ministry of Commerce survey said they would increase their consumer product imports in the next year, 2.5 percentage points higher than those planning to decrease their purchases. Of 1,059 consumers surveyed, 24.1 per cent planned more purchases of imported products, with strong demand for food, maternal and infant products, cosmetics, watches and glasses, jewellery and passenger vehicles. Nearly 80 per cent of the consumers who responded to the survey said they had bought imported consumer products at least once. According to 41.7 per cent of the surveyed consumers, such purchases accounted for more than 10 per cent of their buying in a particular product category. A product’s brand name and reputation was the top consideration when retailers and wholesalers imported consumer products, while safety also mattered in food and maternal and infant products, while design was important in apparel and jewellery choices, the survey showed. The survey is part of the ministry’s efforts to help prepare for the second China International Import Expo, which will be held in Shanghai from November 5 to 10 this year. China’s imports totalled 6.72 trillion yuan (US$977 billion) in the first half of this year, up 1.4 per cent from the same period a year earlier.

Source: SCMP

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China coastal province sees robust growth in trade with B&R countries

Fujian Province on China's eastern coast, which boasts traditional trade ties on the ancient Marine Silk Road, witnessed a strong growth in trade with Belt and Road (B&R) countries in the first half of the year (H1). The trade volume grew by 13.6 percent year on year in H1, hitting 220.21 billion yuan (about 32 billion U.S. dollars). The amount accounted for 34.6 percent of the province's total foreign trade, according to Xiamen Customs Sunday. The main export goods from Fujian are labor-intensive products and mechanical and electrical products. The exports of textiles and garments, furniture, bags, shoes, plastic products and toys hit 51.99 billion yuan in H1, a year-on-year increase of 23.7 percent. The exports of mechanical and electrical products soared by 26.8 percent year on year to reach 46 billion yuan. The largest component of Fujian's imports was crude oil, reaching 18.07 billion yuan in H1, up 10.4 percent year on year. Fujian's trade with countries of the Association of Southeast Asian Nations reached 117.6 billion yuan in H1, up 15.1 percent, accounting for 53.5 percent of the total trade with B&R countries, according to the customs statistics.

Source: Xinua

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Dejected textile sector needs cheering up

Investments in the industry to grow exports and substitute imports are a precondition for sustainable future economic growth. The economic stability the government expects to achieve on the back of fiscal, monetary and structural reforms it is executing under the 39-month, $6 billion bailout package from the International Monetary Fund is unlikely to last long unless it puts in place policies conducive for improving the business climate to attract new investments. “Unfortunately the business and investment sentiments are at their lowest at present. The situation will worsen going forward if measures are not taken to correct the policies that have led us to this point where businessmen are forced to drop their investment plans,” asserts Khurram Mukhtar, a major exporter of home textiles and garments from Faisalabad, during an interview with this writer. The chief executive of Sadaqat Limited, who also owns a large retail home textiles and clothing business in Pakistan and England, cites several factors that have depressed business and investment sentiments: massive exchange rate adjustments over the last one year, increased cost of credit, severe cash flow crunch facing most manufacturers owing to withdrawal of zero-rated regime for exporters, gas price subsidy issues and so on. ‘The withdrawal of zero-rating will tie up Rs424bn of working capital in the refund regime for a six-month cycle’ “The monetary policy adjustments, new tax measures announced in the budget and certain other policy changes have steeply raised the cost of investments in the industry and affected export competitiveness. The income tax credit of 10 per cent on new investments has been halved for the present fiscal year and the concession will be completely withdrawn from the next financial year. “Many textile exporters, who planned to increase their production capacities to take advantage of foreign buyers’ renewed interest in Pakistan in the last one and a half years, have been forced to either put their plans on hold or scale down the size of their investments amid the new business environment prevailing in the country. The new business environment will work against the government’s two top economic policy objectives of creating jobs and increasing exports (to close the current account gap),” he argues. Khurram, who himself had planned to substantially increase his denim and knitted garments production capacity to increase his company’s exports has significantly scaled down his planned investments from Rs3.5bn to Rs1.5bn. “We had worked out our investment feasibility in 2018 at an exchange rate of Rs124 a dollar to create 10,000 new jobs and raised our exports by $150 million a year. The 29pc depreciation in the value of the rupee since has hiked our capital expenditure to Rs4.5bn. Similarly, the spike of 750bps in the central bank’s policy rate to 13.25pc since early 2018 has made bank loans too expensive for us. The reduced size of investment will mean we will create only 4,000 new jobs with a potential of additional export revenues of just $50m”. According to him, the share of subsidised loan under the EFS (export finance scheme to cover exporters’ needs for working capital) and LTF (long-term financing facility for purchase of machinery and equipment) as a ratio of the textile industry’s total exposure (to bank credit) has decreased from 41pc in 2017 to 27pc in 2018, which means the industry was compelled to borrow commercial loans at a very heavy price to meet their financing needs for working capital (for purchase of inputs, etc) that have increased by a fifth because of the massive exchange rate depreciation. “The cost of capital is much more than the profitability of the textile industry, which is a high volume and low margin sector. Majority of the textile and clothing exporters operate at a very thin margin of 3-5pc.” Khurram, who is also chairman of the Faisalabad-based Pakistan Textile Exporters Association (PTEA), points out that the cash flow crunch is squeezing the exporters’ financial streams as a major part of their working capital is stuck in the refund regime and creating extreme financial stress for them. “Before the withdrawal of the zero-rated regime, the average input sales tax paid (on packing/stitching material/certain chemicals and store items) was 1.75pc of the industry’s foreign sales. After the withdrawal of zero-rating, it is feared to rise to 12.8pc of our total exports. “If we add other refundable taxes to it, we will have 18-20pc of our total overseas shipments stuck in the refund regime for a minimum of 175 days (provided the government delivers on its promise of releasing the refund claims within the stipulated time framework). We estimate that the withdrawal of zero-rating of exporters will result in Rs424bn of their working capital stuck in the refund regime for a six-month cycle. “I do not ask for a return to the zero-rated regime, but I want the government to release the sales tax and other refunds based on the consumption of inputs to exporters immediately after the monthly filing of their returns as is the practice in the rest of the world.” Moreover, the PTEA chairman said the government has not provided price subsidy on gas supply to the exporters (from Punjab) since March and the funds of Rs4.5bn allocated for this lapsed due to the end of the last financial year. The government had in October last year announced to provide LNG to Punjab’s exporters at a subsidised rate of $6.5 per million British thermal units, and electricity at $0.75 a unit to bring the energy prices in the province at par with those in Sindh and improve the industry’s international competitiveness. “New notification has not been issued and exporters are being charged normal tariffs, forcing them to get legal remedy from the courts in this respect. That is not all. The facility of purchasing raw materials from the domestic market for exports under the bond schemes has also been withdrawn. Furthermore, anti-dumping duties have been implemented on inputs like 51-count yarn and above and hydrogen peroxide imported under the duty and tax remission for the export scheme for re-export. These kinds of policies are unnecessarily increasing cost of exporters, affecting our international competitiveness and stalling export growth.” His message to the government: “facilitate exporters by removing the obstacles slowing down their business; stop punishing them for the Federal Board of Revenue’s inability to enforce the laws and recover taxes from those who aren’t paying their share. If immediate corrective actions aren’t taken to remove obstacles to growth and investments, exports will go down and jobs will be lost.”

Source: The Dawn

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“Sri Lanka’s future lies in producing exportable manufactured goods”: Dr. Howard Nicholas

Agriculture, specifically the plantation agriculture, has contributed enough to Sri Lanka’s economy in the past. But it has now come to its peak and any more development will not generate increased employment opportunities to Sri Lankans, a crucial issue which Sri Lanka has to tackle through accelerated economic growth – Pic by Shehan Gunasekara

Drawing lessons from Vietnam’s experiences

The Sri Lanka-born economist attached to The Hague based Institute of Social Studies – Dr. Howard Nicholas – addressing a packed audience consisting of the alumni of the Postgraduate Institute of Management in Colombo last week gave a fine advice on how Sri Lanka should fast-track its economic growth. Drawing on the experiences of the recent economic development and predicted economic prospects of Vietnam, he conclusively declared that Sri Lanka’s future depends on its concentrating on producing exportable manufactured goods and not over-relying on agriculture or services.

Sri Lanka should go for exportable manufacturing goods

In summary, Nicholas’ thesis was as follows: Agriculture, specifically the plantation agriculture, has contributed enough to Sri Lanka’s economy in the past. But it has now come to its peak and any more development will not generate increased employment opportunities to Sri Lankans, a crucial issue which Sri Lanka has to tackle through accelerated economic growth. Similarly, services cannot take Sri Lanka further afar since, without a backing strong real sector, it cannot remain viable in isolation. Hence, the natural choice for Sri Lanka is to move into manufacturing because a society accumulates not agricultural products but manufactured products. He gave a fine example to illustrate his point. In 1960s when he joined the college, he took all his belongings in a briefcase. But, now if he has to do the same, he has to carry with him truck load of goods which are all manufactured products. Hence, when income increases, the demand from the citizens is for manufactured products. Thus, a country should be able to produce and supply the same if it is to survive and prosper. But Sri Lanka’s market is small – it is only 21 million people – and therefore, it cannot absorb every manufactured product it may get to produce. Hence, it has to sell its products to the rest of the world which process is known as exports. Therefore, Sri Lanka has no choice, Nicholas opined, but to get into exportable manufactured product business. This is heretic in a country where agriculture is worshipped like a religion. As such, Nicholas may run into challenge of and criticism by those Sri Lankans who still think that Sri Lanka should design its future by promoting its agriculture as the base of the economy. For them, Sri Lanka is an agriculture-based economy. To say otherwise is unpatriotic and a cardinal sin.

It is the Industry 4.0 that challenges Sri Lanka

In my article in this series last week, I also argued the same. The article titled ‘Sri Lanka’s future depends not on an outdated feudalistic system but on becoming a partner of a digital economy (available at: http://www.ft.lk/columns/SL-s-future-depends-not-on-outdated-feudalistic-system-but-on-becoming-partner-of-a-digital-economy/4-681935) argued that it is a myth to say Sri Lanka was an agriculture based economy in the past, it is so today and it should be the same in the future. In the past, Sri Lanka was, I argued, more a trading economy than an exclusively agriculture  based economy. During the British period, its plantation sector consisting of three tree crops – tea, rubber and coconuts – brought higher income to Sri Lankans. This trend continued till about late 1970s but beginning from early 1980, the economic structure got changed in favour of basically a single manufactured product, namely, textiles and garments. Accordingly, while agricultural output continued to increase in absolute terms, its dominance in the economy gradually shrank. In exports, tea, rubber and coconut had accounted for 90% of its earnings prior to 1977, but this ratio continued fall in the subsequent period. In 2018, their combined share in export earnings was just 15%. To take its place, the export earnings from industrial products continued to grow and in 2019, it brought in 79% of export earnings. Of those earnings, textiles and garments were responsible for 45%. Sri Lanka as a nation has been anti-foreign, seeing ‘unseen conspiracies’ being hatched by them against this small island nation. Media is abuzz with such conspiracy stories, and even the more educated Sri Lankans fall victims to such sensational stories every day. Hence, before doing anything, the Sri Lanka Government should erase these paranoid beliefs from the minds of people if the country is to welcome foreign investors as friendly collaborators in the country’s march toward development. In the national economy, of the total output, agriculture accounted for, on average, about 30% in 1970s. Though the agricultural output increased in absolute terms in the subsequent period, the output of industry and services increased faster than that of agriculture, pushing down its share to 8% of the total output by 2019. Hence, I argued that there was a dramatic structural change in Sri Lanka’s economy in the past few decades, but that change has to take a different direction today, especially because of the new challenges faced by its main growth driver, textiles and garments, globally. Those challenges took the form of a call for the return of the industry to developed countries by locating factories on their soil – known as on-shoring or re-shoring – and in countries close to major markets – known as near-shoring. Thus, Sri Lanka has to find a new growth driver now and that growth driver comes in the form of ‘digital economies’ along with the new wave of industrialisation named the Fourth Industrial Revolution or Industry 4.0, a term coined by the convenor of the World Economic Forum, Klaus Schwab. Hence, it was argued that Sri Lanka should redesign its strategy to make Sri Lanka an active partner of the emerging global digital economy. Nicholas stopped short of making this recommendation.

Sri Lanka’s FDI drive has yielded a pittance in the past

Nicholas presented in his comparative analytics that Vietnam is already on to the Fourth Industrial Revolution by becoming a new tiger in East Asia. The secret of its doing so was to attract foreign direct investments or FDIs from other developed East Asian nations, namely, South Korea, Japan, Taiwan, and China. It did so by creating a social, political, economic and technological environment conducive to receive and harness FDIs. This is where Sri Lanka had faltered though it was the first country to do so in early 1980s among the emerging South Asian nations. But Sri Lanka’s attraction of FDIs was a pittance compared to more successful other Asian nations. From 1950 to 1978, Sri Lanka’s attraction of FDIs was on average either negative or near zero. After the country went into the FDI strategy consciously, it was hovering around $ 50 million per annum till 1989. It took a sharp turn upward since 1990 maintaining it at an average level of about $ 600 million till 2016. In 2017, it broke the hitherto impossible threshold of $ 1 billion by mobilising about $ 1.3 billion and reached further high to $ 1.5 billion in 2018. Since most of these new FDIs were into the growing hospitality and the real estate sector, it is unlikely that this growing trend could be maintained unabated by Sri Lanka in the next few years. Hence, like Vietnam, Sri Lanka has to find new avenues to attract more advanced FDIs to the country. Nicholas’ mission was to tell Sri Lankans the key learning points from the recent experiences of Vietnam.

Sad story of National Economic Council

FDIs will not come to a country on their own and they have to be managed carefully by policy authorities. In Sri Lanka’s case, the authority de jure is the Board of Investment which is empowered by law to attract, regulate and monitor FDIs into the country. However, the de facto policy authority until recently was the Cabinet Committee on Economic Management or CCEM, a loose organisational mechanism lacking transparency in its operations or direction with respect to where Sri Lanka’s economy should move forward. This was made defunct by a Presidential order in late 2017 and, in its place, a National Economic Council or NEC was set up with a wider membership in addition to those who had earlier served CCEM. NEC was expected to come up with a comprehensive national economic plan taking into account the current state of the economy, emerging global developments and future strategies for Sri Lanka to generate prosperity to Sri Lankans, on the one hand, and driving Sri Lanka to a rich country within a shortest time possible, on the other. There was an announcement in the media that NEC was on to this job in mid-2018, but so far no such plan has emerged. About 30 years ago, it was Singapore which was Sri Lanka’s benchmark country. Now Singapore has faded into oblivion since Sri Lanka cannot reach that country’s level even within a century. Ironically, a new country which was nowhere in the scene two decades ago has taken Singapore’s place. That country is Vietnam and Sri Lanka’s policy makers will have to follow its footsteps carefully if the country is to first recover from the economic depth to which it has fallen today and allow it to fast track as recommended by Nicholas. If one goes through the website of NEC (available at: http://www.necsl.gov.lk/ ), one could find reports about various meetings it had conducted to resolve fire-fighting micro issues relating to Sri Lanka’s economy. It had discussed the status of Sri Lanka’s economy some 10 months ago, solutions to the economic challenges nine months ago and the appointment of a committee to recover the badly hit tourism sector following the 4/21 bomb attacks some three months ago. In the download section, according to the website, one could download the Central Bank annual reports. It also appears that the website has come under cyber attack since, when one tries to log into a specific section, one is often redirected to an outside website announcing to the user that his IP address has been selected for a cash award and what action he should take to retrieve that cash award. Thus, FDI management in Sri Lanka is like a ship without rudder or skipper floating in the rough seas with no direction. This is no good news for FDIs in Sri Lanka.

Vietnam’s proactive FDI policy

In contrast, Vietnam has always taken a forward look at FDIs. It goes by a well-laid strategy to attract FDIs in terms of the country’s economic priorities and the emerging global developments. In July 2018, its Ministry of Planning and Investment in collaboration with World Bank’s sister organisation, International Finance Corporation, came out with a document recommending strategies for attracting FDIs during 2020-30 which is a major component of the country’s socio-economic development strategy during the same period (available at: https://www.vietnam-briefing.com/news/vietnam-recommendations-fdi-strategy-2020-2030.html/).According to this report, as at mid-2018, the total registered FDIs in Vietnam had totalled US $ 331 billion and of that, $ 181 billion or 55% had been disbursed. About 57% of that amount had gone into manufacturing and processing, while 17% to real estates. As at mid-2018, FDI sector had accounted for 22% of Vietnam’s GDP and 70% of its exports. The total job creation had been close to 10 million. Since, like Sri Lanka, Vietnam is also facing the problem of the shortage of skilled labour and connection to supply chains, the new plan envisages to tackle the problem by investing heavily in developing a skilled labour force, modernising on investment promotion activities and focussing on priority sectors, ensuring the attraction of quality FDIs, opening the services sectors such as education, logistics and financial services to make them more competitive, promoting Vietnamese FDIs abroad, tackling the negative impact of the Fourth Industrial Revolution and developing backward and forward linkages with FDIs and local suppliers. The priority sectors that should attract FDIs in the next decade, according to the Government of Vietnam, will be high tech manufacturing, high tech farming, healthcare, travel and education that will elevate its economy to the status of a high tech producer in the globe.

Make foreign investors feel at home

About 30 years ago, it was Singapore which was Sri Lanka’s benchmark country. Now Singapore has faded into oblivion since Sri Lanka cannot reach that country’s level even within a century. Ironically, a new country which was nowhere in the scene two decades ago has taken Singapore’s place. That country is Vietnam and Sri Lanka’s policy makers will have to follow its footsteps carefully if the country is to first recover from the economic depth to which it has fallen today and allow it to fast track as recommended by Nicholas. Singapore in its initial stage of attracting FDIs in 1960s and 1970s, took deliberate measures to convert the city state into a ‘Western Oasis’ so that foreigners would feel as if they are in their home countries. Two centuries ago, the Scottish planters in old Ceylon did the same by establishing a small Scotland in Bandarawela, Hatton and Nuwara Eliya. Vietnam has also done it now by developing different towns in Ho Chi Minh City catering to foreign investors. Accordingly, there are several Japan Towns, South Korea Towns, Taiwan Towns and China Towns in the city with schools, restaurants, hospitals, apartments and so on catering to the needs of the respective investors. Its motto has been ‘Keep investors happy and it will make Vietnamese too happy’. Sri Lanka as a nation has been anti-foreign, seeing ‘unseen conspiracies’ being hatched by them against this small island nation. Media is abuzz with such conspiracy stories, and even the more educated Sri Lankans fall victims to such sensational stories every day. Hence, before doing anything, the Sri Lanka Government should erase these paranoid beliefs from the minds of people if the country is to welcome foreign investors as friendly collaborators in the country’s march toward development. The writing on the wall is now clear: If Sri Lanka misses this opportunity, it will never be able to catch up with the rest of the world.

Source: Financial Times

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