New set of measures include Rs 20,000 crore fund to support last mile funding of unfinished affordable and middle income housing units
As part of her third stimulus package for the economy, Finance Minister Nirmala Sitharaman on Saturday unveiled a set of stimulus measures to boost exports and the housing sector. The new package of measures for exports sector came in six different silos and covered steps that would address comprehensively tax and duties refunds for exporters; improve credit flow to the export sector and launch of a special free trade agreement (FTA) utilisation mission. India will also now host annual mega shopping festivals in 4 places.
Exports
Sitharaman announced the introduction of a new attractive scheme for remission of duties or taxes on export product (RoDTEP) to replace the existing Merchandise Exports from India Scheme (MEIS) from January 1 next year and revised priority sector lending norms for export credit that will release an additional Rs 36,000 crore to Rs 68,000 crore as export credit under priority sector. Sitharaman made it clear that RoDTEP would span all the sectors and the revenue foregone could be about Rs 50,000 crore. It is very difficult to put an exact number on this as the duty remission will vary from sector-to-sector, she explained. “With the introduction of RoDTEP, all the uncertainty over continuation of MEIS is over”, Sitharaman said.
Housing sector
As part of the measures rolled out today to boost the housing sector, Sitharaman announced that a Rs 20,000 crore fund (Rs 10,000 crore from Government and roughly same amount from outside investors) would be set up to provide last mile funding for affordable and middle income housing. This fund will be used to support projects that are non-NPA and non-NCLT projects and the objective is to focus on construction of unfinished units.
Source: The Hindu Businessline
The measures would give confidence to the struggling Tirupur knitwear export sector, he said and hoped that the pending amount would be reimbursed expediently. Tirupur Exporters Association on Saturday thanked Finance Minister Nirmala Seetharaman for announcing new measures to boost exports and for considering the continuance of MEIS (Merchandise Export from India Scheme) at four per cent till December end. TEA President Raja M Shanmugham in a release also thanked her for annoucing revised priority sector lending norms for exporters, which will release an additional funding of Rs 36,000 crore to Rs 68,000 crore to them. He welcomed the announcement that leverage of technology would be used to reduce Time to Export or Turnaround Time, which would give a cushion to export units and help meet delivery schedules and also reduce logistics costs. The measures would give confidence to the struggling Tirupur knitwear export sector, he said and hoped that the pending amount would be reimbursed expediently.
Source: The Hindu Business Line
KOLKATA: Confederation of Indian Textile Industry (CITI) chairman Sanjay Jain on Saturday stated that the continuous rise of man made fibre (MMF) imports, especially after GST implementation, is deeply hurting the domestic textile industry. He said that MMF is an important segment of the Indian textile and clothing industry and it has made substantial investment to enhance its capacity building to meet the desired target of US$ 350 billion market by 2025. Based on CITI analysis, Jain observed that there is an increase in imports of all the MMF products post GST, however, there is a substantial increase in imports of MMF yarn and apparel at 83% and 84%, respectively. The main reason for the same being the removal of CVD post GST, which overnight made imports 12% + cheaper. Import duty on fabrics and garments was subsequently increased by the government to control imports, hence the imports of fabrics has been relatively under control, but garments due to FTAs could not be controlled by this measure. Jain further pointed out that the polyester based products have the highest share in Indian MMF textiles. Imports of polyester yarn in India have increased by a CAGR of about 13% since 2014-15 to reach $ 95 million. in 2018-19. Indonesia is the biggest supplier of polyester yarn to India and imports from there have increased exponentially at a CAGR of 59% during the same period.
Source: Economic Times
Imports of polyester yarn increased 193 per cent from 29,08,000 kg in July 2018 to 85,35,000 kg in July 2019. While imports of all products in the man-made fibre (MMF) value chain has steeply increased since the introduction of GST, destructing the domestic manufacturing industry, imports of polyester and viscose spun yarn have particulalry shot up multi-fold lately. Imports of polyester yarn increased 193 per cent from 29,08,000 kg in July 2018 to 85,35,000 kg in July 2019. Similarly, viscose yarn imports shot up 342 per cent from 6,47,000 kg in July last year to 28,58,000 kg in July this year. In the one-year period between July 2018 and June 2019, there has been substantial rise in the imports of all MMF products. MMF yarn and apparel imports have gone up 83 per cent and 84 per cent, respectively. “The main reason is the removal of countervailng duty post-GST, which overnight made imports more than 12 per cent cheaper. Import duty on fabrics and garments was subsequently increased by the government to control imports, hence the import of fabrics has been relatively under control, but garments due to FTAs could not be controlled by this measure,” said Sanjay K. Jain, Chairman, Confederation of Indian Textile Industry. According to him, the woes have further aggravated this fiscal as the imports of polyester and viscose spun yarn in quantity terms increased by about 71 per cent and 78 per cent respectively during April- July 2019 as compared to a year ago period. “Rising imports are impacting the domestic MMF yarn and garments manufacturers in a big way. It is also not in favour of government’s “Make in India” initiative and is acting as a big disincentive for the upstream industry from investing,” he said. There are certain structural issues like relatively higher fibre, power and interest rates, which have made the upstream industry costlier and hence attracting cheaper imports from other countries. Further under the GST regime, MMF textile products suffer from an inverted duty structure as MMF fibre, yarn and fabric attracts GST at the rate of 18 per cent, 12 per cent and 5 per cent respectively. This has resulted in heavy blockage of working capital plus GST paid on capital goods, services and certain inputs being added to cost in the hands of the MMF textile buyer. These taxes are not considered for calculation of refund of input tax credits and made MMF textiles costlier. The textile industry has sought rationalization of GST rate for MMF products at 5 per cent. “India, despite having world class fibre manufacturing capacities, is losing out to competitors like Bangladesh and Vietnam who import their fibre requirements. The textile industry cannot meet its $350 billion target unless the MMF segment of industry grows at double digit rate in the years to come," added Jain.
Source: Asian Age
FM Nirmala Sitharaman’s promise of higher export credit, electronic refund of ITC, lower turnaround time at ports welcomed. Ending uncertainty for exporters, the government has announced a new scheme for reimbursing input duties and taxes to replace the popular Merchandise Export Incentive Scheme (MEIS) which is not compliant with world trade rules. Some exporters, however, are awaiting more details on the new scheme, called the Remission of Duties or Taxes on Export Promotion (RoDTEP) scheme, as they are unsure if it would offer them higher incentives than what they are getting at present. Most export sectors, such as garments and textiles, leather and engineering goods have been demanding higher sops to combat a fall in exports in the on-going fiscal.
New schemes
Finance Minister Nirmala Sitharaman announced a number of other measures to boost dipping exports including early extension of priority sector lending (PSL) norms for export credit, a fully automated electronic refund route for Input Tax Credits (ITC) in GST and reducing the turn around time for exports at ports and airports. The new export incentive scheme will “more than adequately” incentivise exporters as compared with all existing schemes put together, and it will be implemented from January 1 2020, Sitharaman said at a press conference today. The revenue foregone for the new scheme is estimated at up to Rs 50,000 crore per annum. While some exporters are optimistic about the new scheme, others are sceptical. “The new scheme looks attractive as it will neutralise all duties and levies suffered by export products,” Sharad Saraf, President, Fieo, expressed hopes. Giving three months lead time till December 31 to the existing MEIS will remove the uncertainty creeping in the minds of the exporters and will greatly help to finalise their export orders, he added. “On the face of it, this just seems to be a replacement of MEIS and other existing export benefits. The most critical issue issue will be how the RoDTEP will be calculated,” Sanjay Jain from the Confederation of Indian Textiles Industries (CITI), pointed out. Most exporters, however, are positive about the announcement that PSL norms for export credit have been examined and enabling guidelines are under consideration of the RBI, which will release an additional Rs. 36,000 cr to Rs 68,000 cr as export credit under priority sector.
Exporters enthused
The promise of bringing down the turnaround time for shipments at Indian ports and airports and make them comparable to the very best existing in places such as Shanghai and Boston, has also enthused exporters. “Committing more credit to exporters, bringing down the turnaround time at the ports at par with global standards and making the tax rebate schemes WTO-compliant with particular focus on labour-intensive sectors like textile and handicraft would lift the sentiment in the export sector,” said ASSOCHAM president BK Goenka. Saraf expressed hopes that expanding the scope of Export Credit Insurance Scheme (ESIC) by ECGC will enable reduction in overall cost of export credit including interest rates especially for MSMEs. India’s exports contracted by 6 per cent in August 2019 to $26.13 billion with major sectors including gems and jewellery, petroleum, ready-made garments and engineering goods posting a fall. The overall exports in the April-August 2019-20 period is also lower by 1.54 per cent to $133 billion.
Source: The Hindu Business Line
Giving three months lead time till 31st December to the existing incentive scheme MEIS (Exports from India Scheme) will remove the uncertainty incentives announced by the government will help in boosting the country's exports at a time when there are signs of worsening global economic conditions and it will help in boosting outbound shipments, according to exporters. Federation of Indian Export Organisations (FIEO) said the new measures announced for the sector in form of incentives and refund of taxes will not only go a long way in enhancing the growth prospects in the short-term but will also give it a much needed boost in the medium-term and long-term. FIEO President Sharad Kumar Saraf said the new scheme of Remission of Duties or Taxes on Export Products (RoDTEP) with revenue burden of up to Rs 50,000 crore for the government, looks attractive as it will neutralise all duties and levies suffered by the export products. Giving three months lead time till 31st December to the existing incentive scheme MEIS (Exports from India Scheme) will remove the uncertainty creeping in the minds of the exporters and will greatly help to finalise their export orders, Saraf said. Sharing similar views, world trade information provider Connect2India founder and CEO Pawan Gupta said there are two big roadblocks to expansion of global trade today, one is lack of easy availability of working capital and the other is inefficiencies and delay. "Its good to see that government is focusing to provide solution for both these issues. The usage of technology to reduce the time to export and make export more seamless is a good initiative that would help make our exports more competitive," he said. Expanding the scope of Export Credit Insurance Scheme (ECIS) by Export Credit Guarantee commission (ECGC) to offer higher insurance cover to banks lending working capital for exports, is a step that should help MSMEs facing liquidity issues for exports, he added. "The announcement regarding introduction of RoDTEP from January 1, 2020, with allocation of Rs 50,000 crore, will help alleviate these concerns and would help MSMEs to remain in a competitive market. The new scheme will benefit the exporters, especially MSME exporters as well as encourage first time exporters to explore global opportunities," he added. Council for Leather Exports (CLE) Chairman Panaruna Aqeel said the measures would help in boosting exports and achieve significant level of growth in leather shipments. "easy and timely availability of credit with affordable interest rates is extremely important for the labour intensive sector," he said. It is crucial to provide duty free facility to exports to reduce financial burden in importing raw material and inputs, he added.
Source: Business Standard
The impending conclusion of negotiations for the contentious Regional Comprehensive Economic Partnership (RCEP) trade deal may have forced the Indian government to announce a comprehensive package for exporters—akin to a mini foreign trade policy—to boost their competitiveness. “Announcing a package for exporters had become inevitable given the disadvantage that the RCEP deal may put some exporters," said a government official speaking under condition of anonymity. While steel, MSME, agriculture, and dairy industries have been vocal against the trade deal, pharmaceutical and cotton industries may benefit from the trade agreement. In clearest sign so far that India is inclined to sign the free trade agreement with the 16 member grouping which also includes China, trade minister Piyush Goyal last week said the government will protect its national interest while signing the RCEP deal. “Prime minister Narendra Modi has directed me to enter RCEP negotiations while taking all steps to protect the domestic industry. At the same time, we have to keep in mind the opportunity to increase business activities of new technology, new foreign investment and opening up of the services sector, new market access to Indian exporters. Otherwise, Indian exporters will be at a disadvantage," Goyal had told reporters after hearing concerns of exporters on trade remedial measures. Finance minister Nirmala Sitharaman on Saturday announced a package to boost exports that included a new WTO compatible scheme named Remission of Duties or Taxes on Export Product (RodTEP) to reimburse all central and state taxes paid by exporters; fully electronic refund of input tax credit; cheaper dollar and rupee credit for exporters including priority sector lending norms. The package also included export facilitation measures including leveraging technology to reduce turnaround time at ports and airports to international standard and online system for getting Certificates of Origin of goods. To address lower utilization of free trade agreements, a senior commerce ministry official will now head a “FTA Utilisation Mission" to spread awareness about preferential benefits available under FTAs that India has signed and put in place an effective FTA monitoring system. Exporters now will also have to adopt all necessary technical standards to make Indian exports more competitive. This will also help government put in place stringent norms to check low quality imports. In the RCEP Ministerial concluded last week in Bangkok, member countries resolved to conclude negotiations by November. Commerce ministry officials also feel that if India has to sign the deal, there is no point further dragging it as it may lead to higher ambition from member countries. On Saturday and Sunday, officials from other RCEP member countries met in Delhi to discuss India’s proposal to put in place an “auto trigger" mechanism which would mean a member country would have the option to raise duties if it sees sudden surge in imports on particular items from a partner country. The RCEP is a proposed trade pact between the 10 countries of the Association of Southeast Asian Nations and their six FTA partners, including Australia, China, India, Japan, Korea, and New Zealand. It accounts for 25% of global gross domestic product, 30% of global trade, 26% of foreign direct investment flows, and 45% of the world’s population. India has been seeking a more balanced outcome of the RCEP deal with a strong agreement on services trade, including a deal on easier movement of skilled manpower. However, most members are reluctant to accept India’s proposal. With India’s trade deficit with China and RCEP in 2018-19 standing at $53.6 billion and $105 billion, respectively, it is apprehensive that further liberalisation in tariffs to China could be detrimental to its domestic industries.
Source: Live Mint
Regional Comprehensive Economic Partnership is a trade pact being negotiated by 16 nations. There is a general feeling that India’s trade agreements have not worked out well. The country is also not in any mega trade pact that includes China, which is a part of RCEP. There is concern that Chinese imports will become a bigger problem if a deal is signed. ET explains. RCEP (Regional Comprehensive Economic Partnership) is a trade pact being negotiated by 16 countries. Negotiations were formally launched in November 2012 at the Asean summit in Combodia. The trade pact is close to being concluded.
ASEAN (10 COUNTRIES)
Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam China Japan India Australia South Korea New Zealand.
Sectoral Issues
*Dairy, iron and steel industries want protection from imports
*Textile industry already facing competition, fears job losses
* India’s fisherfolk threatened by automated fishing trawlers Chemicals and plastics industry fears smaller players will be hurt by import
Opportunities
* India will for first time join a big regional trade pact
* It can make big gains if domestic manufacturing becomes competitive
* Pharma industry confident of market access
* Cotton yarn sees big market India can extract some gains for its services industry
Threats
* FTA with China may boost imports
* Disproportionate loss of customs revenue
* Trade gap may worsen
Source: Economic Times
Proposal to extend RoSCTL scheme to all export sectors to be finalised by Commerce Ministry for Cabinet nod. The Department of Expenditure is examining the financial implications of the proposed extension of the new input tax reimbursement scheme, the Rebate on State & Central Taxes & Levies (RoSCTL), for all export sectors. The implementation of the RoSCTL scheme, so far extended only for garments and made-ups, will be done in a phased manner for all sectors in tandem with the phasing out of the Merchandise Export Incentive Scheme (MEIS). The popular MEIS scheme is not compliant with World Trade Organisation rules. “The DoE had asked for an Expenditure Finance Committee memorandum on the proposal which had been sent by the Directorate General of Foreign Trade. The DoE will now have some meetings with the EFC for appraising the new scheme following which it can be sent to the Union Cabinet for clearance after incorporation of views from other Ministries and Departments,” a government official told BusinessLine. The Ministry of Commerce and Industry had floated a draft Cabinet note on the RoSCTL scheme in July. The proposal was to extend and implement the RoSCTL for all sectors in a phased manner, on the lines of the garments and made-ups sectors, along with phased MEIS removal. A similar scheme was approved by the Union Cabinet for the garments and made-ups sectors in March.
WTO conditions
“The MEIS scheme for the textiles sector has to definitely go first, as its phase-out period ended in 2018 as per the WTO rules. However, it is also not possible for the scheme to continue for all other sectors for long. This is because India as a country may no longer be eligible for export subsidies under the multilateral regime because its per capita Gross National Income exceeded the $1,000 mark long ago,” the official said. The US has already challenged India’s export subsidy schemes, including the MEIS, at the WTO. The RoSCTL, which replaces the Rebate of State Levies (RoSL) scheme that reimbursed only certain State taxes, includes all embedded and other taxes that are not covered under existing schemes. These include value added tax on fuel used in transportation, captive power, farm sector, mandi tax, duty of electricity, stamp duty, embedded SGST and CGST paid on inputs and central excise duty on fuel. The maximum rate of rebate for apparel was fixed at 6.05 per cent and for made-ups at 8.2 per cent. The reimbursement of duties under the RoSCTL is through freely transferable scrips that can be used to pay duties.
Source: The Hindu Business Line
The Indian rupee today fell sharply against the US dollar as oil prices skyrocketed after drone attacks on Saudi Arabia's oil infrastructure. Other Asian currencies were also weaker against the US dollar. The rupee fell to as much as 71.42 a dollar as compared to its previous close of 70.92. Oil prices today surged to four-month highs after weekend attacks on crude facilities at key producer Saudi Arabia sparked supply fears. Opening at 71.57, the rupee traded in the range of 71.42 to 71.67 against the US dollar so far in the day. At 10:03 am, the rupee traded at 71.45 a dollar.
Here are 5 things to know about rupee dollar trade today:
1) "Given that India relies heavily on crude imports to meet its energy needs, rupee is likely to underperform. We could see a knee-jerk sell-off in domestic assets. Saudi Arabia is the second largest supplier of crude to India after UAE," forex advisory firm IFA Global said in a note.
2) Oil prices today surged as much as 20%, its biggest intra-day percentage gain since the start of the Gulf War in 1991, after an attack on Saudi Arabian oil facilities on Saturday shut in the equivalent of 5% of global supply. A $10 per barrel spike in crude prices worsens India's trade deficit by approximately $1.5 billion a month and pushes up consumer price inflation by 0.3%," IFA Global added. Higher trade deficit puts downward pressure on the rupee. Indian stock market index Sensex was down about 200 points in early trade. Indian bonds also sold off, with yields the 10-year Indian government security surging 9 basis points to 6.73%. Bond yields and prices move in opposite directions. Indian equities are particularly sensitive to changes in crude prices and USD-INR rates, Yes Securities said.
3) While oil prices have surged, the key is the duration of the outage, say analysts. "Though Saudi officials have expressed optimism that normalcy would be restored soon, a sudden flare-up in Middle East geopolitical tensions will get built into the risk premium across assets," IFA Global added. "Further action on crude prices will be a function of how quickly the full capacity is restored and how coordinated the global efforts to release strategic reserves is," HDFC Securities said in a note. "Saudi Arabia has millions of barrels stored in locations around the world, which they can draw down to replace the lost production. A rally could also be tempered if the U.S. and other countries release oil from their strategic reserves to ease the shortfall. The Trump administration has said it is ready to deploy the nation’s emergency oil reserves and help stabilise markets if needed," HDFC Securities added.
4) Also on focus this week will be US Federal Reserve's policy announcement. The US central bank is expected to cut its interest rate but markets have scaled back their expectations of aggressive cuts by the Fed, IFA Global added. Most analysts expect a quarter-point rate reduction, which would be the central bank's second such cut after lowering rates in July for the first time since 2008. Lower US interest rates helps emerging market currencies like rupee.
5) The India government on Saturday announced more measures to stimulate the housing sector and boost exports. The increased geopolitical risk concerns overshadows the measures Finance Minister Nirmala Sitharaman announced over the weekend to revive economic growth from a six-year low. The rupee is likely to remain volatile against the US dollar this week amid monetary policy decision from Fed, BoE and BoJ, say analysts. "With US accusing the Iranian government of orchestrating the attack and Iran in turn threatening war, there by further destabilising the region at large and further impacting future supplies, the oil prices are expected to remain firm," said Pritam Kumar Patnaik, head of commodities at Reliance Commodities. So far this year the rupee is down over 2% against the US dollar.
Source: Live Mint
|
Item |
Price |
Unit |
Fluctuation |
Date |
|
PSF |
1033.80 |
USD/Ton |
0.62% |
9/15/2019 |
|
VSF |
1482.92 |
USD/Ton |
0% |
9/15/2019 |
|
ASF |
2167.17 |
USD/Ton |
0% |
9/15/2019 |
|
Polyester POY |
1092.41 |
USD/Ton |
-0.32% |
9/15/2019 |
|
Nylon FDY |
2316.17 |
USD/Ton |
0% |
9/15/2019 |
|
40D Spandex |
4095.67 |
USD/Ton |
0% |
9/15/2019 |
|
Nylon POY |
1299.32 |
USD/Ton |
0% |
9/15/2019 |
|
Acrylic Top 3D |
2203.19 |
USD/Ton |
0.65% |
9/15/2019 |
|
Polyester FDY |
2302.05 |
USD/Ton |
-1.81% |
9/15/2019 |
|
Nylon DTY |
1228.70 |
USD/Ton |
0% |
9/15/2019 |
|
Viscose Long Filament |
2570.39 |
USD/Ton |
0.55% |
9/15/2019 |
|
Polyester DTY |
5338.49 |
USD/Ton |
0% |
9/15/2019 |
|
30S Spun Rayon Yarn |
2153.76 |
USD/Ton |
0% |
9/15/2019 |
|
32S Polyester Yarn |
1645.33 |
USD/Ton |
0% |
9/15/2019 |
|
45S T/C Yarn |
2415.03 |
USD/Ton |
-0.29% |
9/15/2019 |
|
40S Rayon Yarn |
2443.28 |
USD/Ton |
0% |
9/15/2019 |
|
T/R Yarn 65/35 32S |
2019.59 |
USD/Ton |
0% |
9/15/2019 |
|
45S Polyester Yarn |
1807.74 |
USD/Ton |
0% |
9/15/2019 |
|
T/C Yarn 65/35 32S |
2273.80 |
USD/Ton |
0% |
9/15/2019 |
|
10S Denim Fabric |
1.26 |
USD/Meter |
0% |
9/15/2019 |
|
32S Twill Fabric |
0.70 |
USD/Meter |
0% |
9/15/2019 |
|
40S Combed Poplin |
0.98 |
USD/Meter |
0% |
9/15/2019 |
|
30S Rayon Fabric |
0.57 |
USD/Meter |
0% |
9/15/2019 |
|
45S T/C Fabric |
0.66 |
USD/Meter |
0% |
9/15/2019 |
Source: Global Textiles
Note: The above prices are Chinese Price (1 CNY = 0.14123 USD dtd. 15/09/2019). The prices given above are as quoted from Global Textiles.com. SRTEPC is not responsible for the correctness of the same.
Egypt’s Minister of Manpower and Public Business Sector Hisham Tawfiq announced on Saturday that the ministry is set to establish the world’s largest textile factory, at the al-Shouna area of al-Mahalla al-Kobra in Gharbiya governorate. This comes about as part of a plan to establish four new factories in addition to preparing for the establishment of 10 new gins. In a meeting with representatives of the Mahalla Spinning and Weaving Company’s workers, Tawfiq said that the development of textile companies begins with the development of cotton cultivation. He pointed out that the Agriculture Ministry brought a global initiative to oversee the cultivation of 20,000 acres of cotton, adding that LE21 billion will be pumped to develop the industry. Tawfiq said that a new cotton gin was installed in Fayoum, expected to be more efficient than the old one. He also promised that the textile companies will regain their strength from the 1930s, in two and a half years, and shift from loss to profit. Tawfiq announced back in October 2018 that a comprehensive development plan for the spinning and weaving industry within the ministry’s companies will be implemented over three years. The plan includes the development of cotton spinning companies through weaving, dyeing and processing, Tawfiq said.
Source: Egypt Independent
At times, a kick in the back is a lot more effective than years of rational arguments. And the China-US trade war might be just that. Imagine a scenario in which instead of a tariff battle the United States and China have increased bilateral trade to new heights. China increases imports from Pakistan and newspaper headlines blare the country’s improving export numbers. But that is not to be. The trade war between economic giants has suppressed the import demand from Pakistan in China. The trend was reflected in trade data.
Trade war impact on yarn
“Pakistan’s cotton yarn exports declined 15.4 per cent to $835.7 million in July-March 2018-19,” states the third quarterly report of the State Bank of Pakistan (SBP). Citing Chinese customs data, the report explains that cotton and yarn imports by China dropped by a sizeable 17.2pc last year as part of the trade war with the United States. ‘US importers have lost confidence in China, which benefited Vietnam, Cambodia and Bangladesh in a big way,’ says a textile industry leader
Since cotton yarn consists of about 44pc of Pakistan’s exports to China, the dip exacerbated the current account deficit and contributed in a small measure to the need to approach the International Monetary Fund (IMF) with a begging bowl. However, the trade war’s effect of losing out on exports of raw material and intermediate goods may also have created new and more lucrative opportunities.
Silver lining
In the backdrop of the IMF programme and the trade balance pressure, the drop in textile raw material exports to China came at a time when the country could ill-afford it. However, it has turned into a blessing in disguise. “In the last three weeks, we have received a lot of inquiries by US retailers,” said Pakistan Textile Exporters Association Chairman Khurrum Mukhtar. “They have lost confidence in China because of which Vietnam, Cambodia and Bangladesh are the biggest beneficiaries. We have not been able to benefit as much as the other countries have but home and garment sectors within the industry are receiving a boost.” Mr Mukhtar went on to explain that while the impact was not significant in dollar terms because of depreciation, the textile sector’s quantum of exports had increased by 32-36pc. Given the noise created by big businesses because of the hardships attributed to the budget, a question arises whether the sector has the capacity to benefit from available opportunities. In Mr Mukhtar’s view, there is still 30pc idle capacity that can be utilised to boost exports by $2.5-3 billion. However, a cash-flow crunch remains an issue, he added. His sentiments were echoed by the adviser on commerce and textiles, Abdul Razak Dawood, in a recent interview with Dawn. Mr Dawood said that the slowdown in textile raw material and intermediate exports to China has benefitted Pakistan in a roundabout manner as they are available at a more competitive price for local manufacturers.
Value addition
Though the buzzword ‘value-addition’ has been in vogue for decades, Pakistan’s textile exports lean more towards cotton yarn and woven fabric than apparel. While teaching a course at the Institute of Business Administration, ex-SBP Governor Salim Raza once shared an illustrative table of price appreciation when seed cotton is processed into a garment. Though the data in the table is somewhat dated, his argument was that converting cotton into apparel yields the highest factor of value addition. Manufacturing of yarn and grey cloth is highly mechanised and the processes depend on imported machinery. Therefore, it under-contributes to employment and does not allow Pakistan to leverage its low-cost labour. Thus, the total factor productivity payback of the industry — i.e. net value added — remains low whereas the reliance on imported machinery remains high. Keeping micro-economic jargon aside, it means that Pakistan is using its inputs in the least efficient manner to get the maximum monetary benefit.
Competing with big boys
The European Union and the United States are Pakistan two’s main destinations for textile exports. While the GSP Plus covers exports to the European Union, the US preferential tariff regime GSP does not. Any increase in exports to the US market means Pakistan is competing with the big boys on an equal footing. In the past, industrialists opted the easy way out of supplying raw materials to competing countries rather than investing in value-addition. One garment exporter and member of the Federation of Pakistan Chambers of Commerce and Industry that Dawn talked to said he had wrapped up his business five years ago because he saw the writing on the wall — that the economy was not headed in a direction for his enterprise to remain commercially viable. However, the trade war may have created the space for the domestic textile sector to revive hope. The mollycoddled local industries have been protected by import substitution policies for decades. Open competition in the global market while facing a tough macro-economic environment at home may let the industry emerge stronger. Overly optimistic? Possibly. However, the latest export numbers shared by the adviser on commerce indicate a 17pc increase in readymade garments and 16pc increase in home textiles in July over June. Though a month’s numbers do not represent a trend, being forced towards finished goods rather than raw materials may nudge the sector towards stronger and more sustainable growth.
Source: The Dawn
As many as 120 million workers from the world's 12 largest economies, including Indonesia, may need to participate in reskilling programs in the next three years as a result of automation enabled by artificial intelligence (AI), according to a recent study. The study released by technology giant IBM's Institute for Business Value found that it would take 10 times longer compared to in the last four years to close a skills gap through employee training because of the new skills requirements. The study, which involved 5,670 businesspeople in 48 countries, said that in 2018, the top two skills sought were behavioral, namely a willingness to be flexible, agile and adaptable to change and time management skills. Meanwhile, in 2016, businesspeople ranked technical core capabilities for science, technology, engineering and mathematics (STEM), as well as basic computer and software knowledge, as the top two skills, signifying the rapid change in skills requirement. "Skillset gaps have worried many companies because they would have an impact on the businesses' future and the world economy," said IBM Indonesia president director Tan Wijaya. As more Indonesian companies automated their business processes to reduce costs and boost productivity, IBM sees the country as a potential market for its services and products. In 2015, 28 percent of Indonesian manufacturing companies reported that they were automating manual processes, less than Vietnam, Cambodia and Malaysia, which had about 35 percent of their companies investing in automation within the same year, according to a World Bank study. Tan said on Wednesday that the country had huge potential for IBM's business as many local companies sought to automate their business processes to face the so-called fourth industrial revolution, commonly known as Industry 4.0. "We aim to solve industries' problems by helping those who have the potential and the problems because that is our market," said Tan during a press briefing in Jakarta, adding that the company targets several industries from financial institutions to manufacturing. According to a road map entitled "Making Indonesia 4.0", created by the government to maximize industrial development, the government sets its focus on five industries, namely food and beverages, chemicals, textiles, automotives and electronics. The technology giant would also focus on the five industries set out by the government, said the president director. Tan said that the company would provide business consulting, as well as software and hardware products, to help companies automate their business processes. Speaking during the same briefing, IBM's associate partner for global business services, Andrian Purnama, said that the company has been working with automotive companies, such as German carmaker BMW, to automate their manufacturing processes. "We use sensors to detect manufacturing processes so that the machine [learning system] would make their own decisions," said Andrian, adding that the company has combined the sensors' data from the manufacturing processes with IBM's database knowledge for the machine to make its decisions. Andrian said IBM had booked double-digit revenue growth globally in its lines of business, namely software, hardware, consulting and cloud computing services, adding that the company aimed at double-digit revenue growth in Indonesia. He, however, declined to unveil the value of the company's revenues in Indonesia. Indonesia’s automation pace has the potential to contribute Rp 5 quadrillion (US$352.25 billion) to the nation’s gross domestic product over 11 years, Australia-based advisory firm Alpha Beta and the Australia-Indonesia Partnership for Economic Development (Prospera) projected in a July report. Currently the pace is predicted to be Rp 3.2 quadrillion between 2019 and 2030. “Indonesia’s labor force growth rate is slowing, which means that it will need to rely more heavily on productivity gains like those that automation provides,” the Alpha Beta-Prospera researchers wrote. Statistics Indonesia data show that Indonesia’s workforce growth has stagnated at less than 1 percent annually since 2016.
Source: Jakarta Post
If you want to understand the present, look to the past. All the talk right now in apparel supply chains is of new technology, automation and robots potentially replacing humans. We read constantly about how customisation is the future—that consumers want to go online and bespoke their clothing to their own specific requirements. “Personalisation” is the name of the game. Surely it is far better to have personalised products than mass customisation, right? Perhaps so, provided that you are prepared to pay for it, but who is? How many people do we see wearing personalised apparel products? We also hear talk of 3D sampling. Some claim that textile manufacturers which can’t provide 3D samples face an uncertain future. Really? I’d be more inclined to believe such rhetoric if I hadn’t been hearing people say the same thing for several years. Surely it can be no coincidence that the people making such claims also happen to be those who have the most to gain from such technology gaining traction—including the manufacturers themselves or the consultants trying to sell this technology. What about the micro-factory? This concept has been in evidence at several textile exhibitions in the past two years, and there is no doubt it is an interesting idea. A glimpse into the future, perhaps, but there are no guarantees at all that such a future will ever arrive. In theory, the micro-factory turns the traditional textile model on its head, switching from the existing paradigm of “produce-deliver-sell” to “sell-produce-deliver”. The system is driven by developments in digital technology, online workflow, laser cutting and digital textile printing. With production and delivery after the sale, this means that production is essentially demand-led: you only sell what you produce, which is surely better for cash flow, right? If only it were all this simple, however. Where does such a model fit with the cash flow of a factory in Bangladesh producing millions of units per month? Are such factories going to disappear overnight? Who will take up the slack of this lost production? We need to remember that global apparel supply chains have, fundamentally, changed very little over the past few years. This is a conservative industry and, let’s not forget, an industry of tight margins. Recently, I was at a textile conference in Switzerland. “How many people in the audience are wearing customised clothing?”—a speaker asked the 120-strong audience. Seven people in the room stood up. I am pretty confident that the answer to this question will be similar next year, and the year after. Change will not happen overnight in apparel production, it will be incremental, and many of the fundamentals will remain the same. Take 3D sampling, for instance. How widespread is this in the apparel industry? I know of very few who use it, and I also recognise why it has not really captured the imagination of buyers. People still like to feel and touch fabrics, which is why trade fairs around the world are actually busier than ever, and the number of textile exhibitions is increasing all the time. Perhaps this is not a good thing as far as the environment is concerned—all those people flying around the world—but it is a fact that textiles and apparel remain a tactile industry, where people like to touch and feel before placing large orders. And yet, talk of technology, automation, artificial intelligence, the internet of things and other such phrases creates fear among suppliers. They worry they will be left behind, and that automaton will lead to job losses at factories. Workers themselves worry about “sewbots” replacing people. They worry one machine might be able to do the job of five people. We have to remember that apparel manufacture is not a high-tech industry. This is not car manufacture or silicone chip production, where the economics of automation stack up. This is the production of low-value items which are sold on for tiny margins. Also consider the fact that automation technology of varying guises has been around for years in the garment industry. Why is it taking so long for the manufacturers to use it? Perhaps it is because labour is so cheap in this industry, certainly in Southeast Asia. Labour costs are not the burden for manufacturers in garment supply chains that they are in other industries. It’s interesting that such worries have been around for hundreds of years in the textile industry. In English-speaking countries, the word “Luddite” is used as an insult, to describe somebody who has failed to keep up with progress. Yet the term has its origins in the textile industry. In the 19th-century England, the Luddites were a radical, secret oath-based organisation of English textile workers who destroyed textile machinery as a form of protest! The group was protesting against the use of machinery and they feared that the time spent learning the skills of their craft would go to waste, as machines would replace their role in the industry. It’s amazing that all these years later, we are having the same discussions now. Were the fears of the Luddites realised? Their fears were greatly exaggerated and often misplaced, as they are now. We have to remember that apparel supply chains have to run before they can walk. Yes, we need to increase productivity and always be thinking about modernisation. But we also need to get the basics right. Many factories still struggle to even pay basic salaries or have poor factory set-up which leads to huge inefficiencies and a lack of optimisation. They can forget about automation on any kind of serious scale until they sort out such issues. Consider, also, the cost of automation and other technology solutions such as ERP (Enterprises Resources Planning) which we hear so much about. How much do these systems cost to design and implement (remembering that such technology needs to be tailor-made for individual factories)? The costs here can run into several millions of dollars. The number of suppliers who can afford to invest this kind of money is limited, especially when the benefits for doing so are not entirely proven or clear. When I think about the use of technology in apparel supply chains, what I do see is a lot of prototypes or pilots. Many are trialling different types of technology for one-off or short batches. But this has always been the case. Factories will always experiment with new ways of doing things, especially when there is little or no risk involved. Translating these efforts into a commercial basis is entirely different. Many of the technologies being trialled may never actually see the light of day on a commercial basis. I realise there is a danger of sounding like the Luddites I mentioned before, but that is not the case. Actually, there is an area where the use of technology and investments in new systems is actually happening. I could use the word “sustainability” here but I prefer the word “efficiency” for I feel these are actually two sides of the same coin. There are small steps which suppliers can take—and are taking—which help them to save money in terms of reducing water use, reducing electricity use, shifting to more modern boilers, and so on. New technologies in these areas are often relatively inexpensive and the pay-off for suppliers in terms of return on investment can often be in just 12 to 18 months. Investment in these areas is a low-hanging fruit for textile suppliers. It makes financial sense and the benefits are there to see. It is also worth remembering that there are often grants and other financial inducements available to support these investments, which provide another incentive. But investments in the garment “factory of the future” that we hear so much about are a different thing entirely. Too many factory owners still need to get the basics right and take the low-hanging fruit on offer; to make better, more efficient use of their existing capital outlays. They also need to keep in mind that the best technology will only ever be as good as the person who operates it. Good technology is one thing; having the people in place who are trained and educated to operate it effectively, to maximise its potential, is something else entirely. If we were to have a technology revolution, this would have to go hand in hand with a training and education revolution. This would require wholesale change in garment supply chains such as Bangladesh. The industry is a long, long way from such a scenario. Mostafiz Uddin is the Managing Director of Denim Expert Limited. He is also the Founder and CEO of Bangladesh Denim Expo and Bangladesh Apparel Exchange (BAE).
Source: The Daily Star
Australia should take its cue from the circular economy on recycling, reusing its waste rather than sending it to landfill, says a recent report by business advisory firm EY. It added that Australians need to have confidence in their country’s recycling system and should look upon it as a resource rather than waste. The accounting firm affirmed a combined approach to waste which included households, local councils and the private sector is needed to “restore faith” in the country’s recycling system. This would lead to the start of a win-win circular economy. Such an economy can be achieved when “people minimize waste and make the most of resources. Shifting to a more circular economy will grow the economy, increase jobs and reduce impacts on the environment,” according to the Victorian State Government.
China recycling ban
Australia’s strategy of dealing with its waste by sending it to China for processing was thrown into confusion in 2017. It was then when China decided to tighten the restrictions on contamination for accepting foreign waste. The new standards effectively banned all Australian paper, plastics and textiles because of their high contamination rate. Before the Chinese ban, it had been sending 619,000 tonnes of recycling waste to China every year.
A “lost opportunity”
Terence L. Jeyaretnam, an environmental and sustainability expert who is also a partner at EY in Melbourne, described the present methods as an example of a “lost opportunity”. “Through better sorting of recyclables, reducing contamination and developing markets for our recycled waste, Australia could take advantage of this lost opportunity sitting in our kerbside bins,” he said. He added that Australians were missing out on up to $324 million of value in our waste bins and needed to change to adapt to the future. “The old way of sorting our waste is not the right fit for 21st century Australia,” he said in the study, adding that “not only does it lead to poor environmental outcomes, it’s preventing us from grasping an opportunity worth hundreds of millions per year.”
Restoring belief in the system
The report underlined the need for Australia to view waste as a valuable resource saying it “will only be realized if households take a more diligent approach to sorting, councils assist though education and infrastructure and there is a greater focus on waste as a resource.” It points to a lack of confidence currently amongst households with the country’s recycling methods. “Instead of ‘waste’ we need consumers to see a tradable asset, a commodity with a market value. The first step in changing consumers behavior is restoring their belief that what they are putting in the recycling bin is actually being recycled,” said the discussion paper. Restoring the customer’s faith in the broken recycling system would be the first step towards creating a viable circular economy and finding a solution to the recycling crisis in Australia, summarized the report.
Source: The Rising
UNIDO (United Nations Industrial Development Organisation) organises, in collaboration with ACIMIT, the Association of Italian textile machinery manufacturers, and Italian Trade Agency, a symposium on Italian textile technologies in Cairo, Egypt, from 25-26 September. The initiative is part of a broader UNIDO project to support the local cotton textiles industry for the purchase of sustainable and innovative technologies. The seminar dedicated to Italian textile technologies, according to UNIDO, is a fundamental part of the dialogue between local industry and Italian technology excellence. The technological seminar Innovation in the textiles sector: latest trends and perspectives for Egypt, in which Italian manufacturers present their up-to-date technologies, includes b2b meetings with local operators and some visits to local textiles companies. As many as 16 Italian companies will participate in the initiative promoted by UNIDO: Arioli, Brazzoli, Color Service, Danitech, Fadis, Ferraro, Itema, Marzoli, Mesdan, Ms Printing Solutions, Reggiani Macchine, Rite, Savio, Ssm Giudici, Tonello e Ugolini "This is an important occasion for the Italian textile machinery industry,” explained Alessandro Zucchi, President of ACIMIT, presenting the initiative. The Egyptian Government has recently presented the large-scale modernization project of the local textiles industry. The value of the investments to be made between 2019 and 2021 is around EUR 1 billion. In the first phase they will also affect the machines of some well-known Italian suppliers. “This technological symposium is aimed to strengthen our presence in the Country, which is already the first Middle Eastern market for Italian textile machinery manufacturers,” continued Mr Zucchi. In 2018, the Italian exports of the sector in Egypt recorded a surge, reaching a value of EUR 45 million, up 79% compared to the previous year. After years of stagnation the investments of Egyptian textiles have finally regained momentum and Italian manufacturers are ready to take advantage of the new business opportunities that arise.
Source: Innovation in Textiles
