Sitharaman will also discuss with PSBs the prospects of launching RuPay credit cards, a move that was recently announced by SBI Card. Finance Minister Nirmala Sitharaman is set to hold a review meeting with chief executive officers (CEOs) of public sector banks (PSBs) on Saturday. The FM is set to follow up on the Union Budget announcement made in July, in which she had said customers or merchants won’t be charged merchant discount rates (MDRs) as the Reserve Bank of India and banks will absorb the costs. Sitharaman will also discuss with PSBs the prospects of launching RuPay credit cards, a move that was recently announced by SBI Card. Further, overdraft facility to beneficiaries of the Pradhan Mantri Jan Dhan Yojana through RuPay card will be taken up in the meeting which is scheduled to be held over a duration of two hours.
Source: Business Standard
Undoubtedly, Indian markets will still be lucrative (owing to rising middle class), but the gap will be truncated significantly. India was fiercely negotiating in the Regional Comprehensive Economic Partnership (RCEP) on the issues of its interest, which included trade deficit with China and greater mobility for Indian workers, among others. India has been accused of stalling the deal with last-minute demands, and being overtly protectionist in its stance before opting out of the mega trade deal. There are some facts that cannot be ignored, given the concerns and risks that would be faced by farmers, traders and small business enterprises from the likely reduction in tariffs and import surge. The question is, whether opting out of the RCEP brings down exports and does it go against the interest of exporters? There is are obvious expectations from policymakers and government bodies that exporters should take exports to the next level by catering to more global markets and diversifying their export basket. A continuous and significant surge in exports makes the economy relatively robust on the global platform in terms of its bargaining and negotiating power. For instance, going by the capability to export, Germany and the US will have more say at any international forum like the WTO compared to Peru, Ghana or Uruguay. Thus, emphasising and strategising on an export-related policy is justifiable. In the Indian case, policymakers expect exporters to take the leap to transform the export structure, and often extend various incentives such as duty drawback, zero import duty on intermediate goods for exporting finished or through the Merchandise Export from India Scheme. But how far is it pragmatic to expect them to aggressively explore global markets? With a consumer base of 1.32 billion, constituting almost 17.1% of the world population, India offers huge opportunity to the business community. At the same time, it is ubiquitous that exports have a cost component attached to them, and also exporting is a risky business. Operating in an unfamiliar or less familiar foreign market will always throw up novel challenges that might be tough to navigate, while establishing a business within the domestic market is relatively smooth. Doing business overseas is about having symmetric information about the overseas market and the ability to assess the risk. Identifying such risks ahead of time and putting measures in place to manage these can help minimise their impact on the success of the business overseas. India has experienced a perpetual improvement in the ease of doing business, owing to an array of reforms implemented by the government in recent years. The overall growth during the last five years has been driven mainly by domestic demand, which resulted in double-digit growth of imports and hardly 5% rate of growth in exports. If this is the case, then it would be unfair to expect exporters to bear risk, cost and uncertainty, and aggressively focus on exporting. For an exporter, the international market is always a better place to explore and expand business. Nevertheless, since exports tend to be slow, the policies are not lucrative or supportive enough, looking at the circumstances for competition that exporters have to deal with the western and European countries. Going by a high rate of growth of market size of key domestic sectors in India, it will be cogent to see the predilection of exporters to comfortably cater to this, as global imports increased by only 1% per annum in the last seven years. This signals the paucity of opportunity for exporters, maybe due to protectionist policies getting implemented globally. The WTO has already forecast that the world trade in 2020 will grow less than 2% per annum. Therefore, exporters seem inclined towards domestic markets for realising the promising opportunities, mainly through retail, FMCG and electronics sectors, given the high growth of their respective market size (see graphic). This seems to be purely an outcome of the forces of market mechanism, i.e. the demand and supply factors. A surge in exports has to be an outcome of market forces, and not through an artificial policy. Since India has opted out of the RCEP, it calls for preparation while negotiating trade deals. Any foreign economy will be delighted to cater to the Indian consumer base, but India’s list of products to offer is more or less static, be it in ASEAN, SAFTA or MERCOSUR. One of the reasons is that exporters never prioritised focusing on global markets, because they too wish to have a promising market for reasonable gains. While exporters may not be dormant in exploring foreign markets, there is definitely a need for a long-term policy where the gap between the opportunity offered by the domestic and foreign markets is abridged. Here, the focus has to be on quality and competitiveness. If domestic markets also accept quality products that match global standards, an environment of competitiveness will engender. This will make exporters self-reliant and move out of their comfort zone. Undoubtedly, Indian markets will still be lucrative (owing to rising middle class), but the gap will be truncated significantly. Procrastinating with the infant industry argument seems no more a pragmatic defence to continue protectionism. India has not signed a trade agreement with any economy in the last few years. Our industry, as well as agriculture sectors, have not become mature in facing foreign competition and hence negotiations remain non-lucrative. India’s enervated position will always force her to pull back from agreements unless we work on stringent trade policy measures.
Source: Financial Express
The racket was busted by the anti-evasion wing of CGST Delhi South Commissionerate GST officials have unearthed a racket involving fake invoicing worth Rs 1,600 crore that resulted in tax evasion of Rs 241 crore, an official release said in a statement on Thursday. The racket was busted by the anti-evasion wing of CGST Delhi South Commissionerate. The main culprit was arrested and remanded to 10 days of judicial custody by a local court, the release by finance ministry said. The alleged racketeer had created several firms on the basis of unauthorised access to identity documents of various persons. The ministry said the Commissionerate discovered the case of fake invoicing and GST fraud alongside a "new modus operandi" of defrauding the exchequer by exploiting the facility of refunds given for inverted duty structure. "Over 120 entities who are involved in the transactions have come to light so far, involving fake invoicing of Rs 1,600 crore and tax evasion of Rs 241 crore," it added. It further said investigations in the case have unearthed a well organised racket of creating bogus firms, issuing fake invoices and bogus e-way bills to generate and encash tax credits. The new modus operandi was uncovered by a team of investigators, who worked over many weeks to unearth the maze of companies created across India, the ministry said. Incriminating electronic evidence have been recovered from the premises of the accused, it added.
Source: Business Standard
The first of a two-part series focuses on how the factories, spurred by buyers, have adopted the latest international social and safety standards Esstee Exports Factory, a mid-sized company which supplies to international apparent brands such as Guess, BLDWN, Devred 1902, Jules, among others, lies slightly outside Tirupur main, about 490 km from Chennai. Enter the clean, spacious, well-ventilated interior of the single-storey factory unit and you find push-doors mandated by international safety regulations to facilitate easy evacuation in case of an emergency. Esstee is one among the 1,200 units in and around Tirupur that have equipped themselves with dozens of national and international certifications to show that they adhere ...
Source: Business Standard
Amidst a slowdown in the economy, bank credit is expected to grow at 6.5-7.0% during the current fiscal ending March’20, according to ratings firm Icra. This will be the lowest growth in 58 years. The year-on-year (y-o-y) growth in bank credit is expected to decelerate sharply to 6.5- 7.0% during FY’2020 from 13.3% during FY2019 on account of limited incremental credit growth during the financial year so far, Icra said in a report. Incremental bank credit has increased by only Rs 80,000 crore during FY’20 till December 6, 2019 to Rs 98.1 lakh crore, compared to an increase of Rs 5.4 lakh crore and Rs 1.7 lakh crore during previous corresponding periods of FY’19 and FY’18 respectively, Icra said. Assuming a scenario of higher credit demand in the second half of FY’20 fresh loans extended by commercial banks could be Rs 6.7- Rs 7 lakh crore, Icra projects a 40-45% y-o-y decline in incremental net bank credit to Rs. 6.3-6.8 lakh crore during FY’20 from Rs. 11.9 lakh crore in FY’19. This will translate to a growth of 6.5-7.0% during FY’20, Icra said. A shift of large borrowers such as non-banking financial companies (NBFCs) and housing finance companies (HFCs) to the banking system for their funding requirements, had boosted bank credit growth in FY’19. However, factors such as muted economic growth, lower working capital requirements, as well as risk aversion among lenders, have compressed the incremental credit growth in FY’20, Icra said. On the positive side, the incremental deposit accretion of the Indian banking system at Rs 5.3 lakh crore remained higher than credit growth till December 6, 2019. The overall deposit base increased to Rs. 131.1 lakh crore as on December 6, 2019, a y-o-y growth of 10.3% and credit to deposit ratio of 75.8 per cent. Apart from the muted increase in currency in circulation, the build-up in the deposit base of the banks could be attributed to factors such as lower increase in asset under management (AUM) of debt mutual funds as well as higher liquidity maintained by various corporate entities. Overall Icra expects y-o-y deposit growth to remain higher than credit growth at 8.4-9.0% for FY’20.
Source: Economic Times
Revival of demand is key not just for consumption, but also private investment. Tweaking the tax rates can help in this India’s GDP growth has decelerated to 4.5 per cent in the second quarter of the current fiscal, and the government remains clueless on how to deal with it. Neither consumption nor export nor private investment are supportive. As of now, India’s economic growth is being driven by government expenditure. However, slowing economic growth will lower tax collections and cap the government’s ability to finance any serious stimulus package. From the expenditure side, the magnitude of India’s deepening slowdown can be observed in three of the four major components of the GDP: consumption, investment and export. Excluding government expenditure, which comprises not more than 13 per cent, the Indian economy grew 3.05 per cent in the July-September quarter. Thus, the current situation is much worse than what the headline growth number shows.
Export prospects
Let’s start with exports. The government has been hinting that global headwinds are behind sluggish exports, and not without reason. The US is increasingly turning protectionist. President Donald Trump has removed India from the US GSP beneficiary list, which had adverse implications on major export items such as chemicals, pharmaceuticals and engineering goods. American tightening of immigration rules has dampened IT export prospects. The EU is struggling to deal with Brexit and slowing growth in its major economies such as Germany. The Middle East, another major export market for Indian merchandise, is troubled by its over-reliance on oil and increasing political tensions between Iran and Saudi Arabia. Supply chains are now sourcing more locally than before. All these developments are bound to affect India’s exports. However, what the government is not saying is that India’s merchandise exports have been hovering around $300 billion for almost eight years now. It was $305 billion in FY12 and $303 billion in FY18. In FY19, it rose to $330 billion, but export prospects remain bleak in the current financial year. Obviously the problem lies somewhere else. Most of India’s merchandise exports are commodities — undifferentiated products with not much pricing power. Thus, a weaker rupee doesn’t make much difference to such exports. Countries like Bangladesh and Vietnam are fast replacing India in areas it traditionally dominated, for example ready-made garments. In fact, India’s textile majors such as Arvind and Raymond are silently shifting their production base to Ethiopia to take advantage of cheaper labour and electricity. Vietnam is doing far better in attracting top electronics manufacturers.
Lowered demand
A number of factors are responsible for slowdown in consumption (comprising over 57 per cent of the country’s GDP) that fell to 5.1 per cent in Q2 FY20 compared to 9.8 per cent in Q2 FY19. Continuing rural distress, accentuated first by the note ban and then through domestic and global supply gluts, caps rural demand. The wholesale prices of most pulses crops such as tur (red gram), urad (black gram), channa (Bengal gram) and oilseeds are 15-30 per cent lower now. In contrast, the cost of major farm inputs and equipment such as high-speed diesel, DAP, insecticides and pesticides, tractors, cattle feeds and electricity have gone up by 10 per cent or so, squeezing margins. Lower margins reduce farmers’ income and affect their demand for goods and services. High taxation and regulatory rent-seeking in sectors such as automobile and real estate are aiding the demand slowdown. For instance, effective taxation is up to 50 per cent for automobiles. Similarly, high GST on key inputs eg cement, protectionism-induced high-priced steel along with the prohibitive stamp duty and registration charges are keeping home prices artificially high and capping demand. Given their strong backward and forward linkages with many other industries and services, the demand slowdown in these two is bringing down dependent industries. Rising household debts and credit crunch in the shadow banking space (important for automobiles, consumer durables and homes) are further contributing to the demand slowdown and forcing companies to operate below capacities. No wonder investment, as measured by the gross fixed capital formation (GFCF), grew by a meagre 1.0 per cent in Q2 2019-20, even as its share in the GDP continued to decline. The decline in capacity is reflected by the 5.8 per cent contraction in eight core sector industries, which make up 40 per cent of the total industrial production. Government investments, which generally bridge the gap during the slowdown started losing steam as State governments’ capex — which makes up the major share of public investments — has shrunk in the last two quarters.
Tax collection
Nevertheless, a 15.6 per cent increase in government expenditure in the second quarter, compared to 10.9 per cent same quarter last fiscal, has contributed one-third of the 4.5 per cent GDP growth rate. However, government demand is primarily dependent upon tax revenue, as it can’t really borrow much without forcing interest rates to rise, crowding out private investment. Direct tax, including corporate and personal income tax, grew 5 per cent in the April-September period, compared to the same period last year. Thus, to achieve the budgeted target of 17.3 per cent in FY20, it must grow by a whopping 27 per cent — highly unlikely. GST collection remains muted due to slowing growth and a low base — only 1.2 million out of 62 million companies are GST-registered. Given this backdrop, the ill-advised corporate tax cut — estimated to cost ₹1.45 trillion — will further limit the government’s ability to spend and support growth. In the absence of adequate consumer demand, corporates are using low interest rates to improve margins and indulging in share buybacks to further their stock market prospects. Similarly, halving of corporate tax has not led to any big-bang private investment. Lower return on bank deposits, in a country wherein these remain the primary channel of savings for most Indians, especially the retired and senior citizens, cutting interest rates may dampen consumption demand through their negative wealth effect. That being said, the government can do two things to revive demand and induce the private sector to invest even in short run. The GST Council should increase the rates on low-GST items with inelastic demand and reduce rates for high-GST items with elastic demand. This will reduce rate differentials and discourage GST evasion and corruption, boosting consumer demand and, in turn, prompting businesses to ramp up their capex plans. As the revival of demand remains the key to reviving private investment, it would help to consider reducing income tax rates for lower income people, if not for all. Rather than increased import duties, a weaker rupee can provide protection to domestic manufacturers and yet improve export competitiveness. Singh is the CEO of Indonomics Consulting. Padakandla is a Assistant Professor at IMT, Hyderabad
Source: The Hindu Business Line
Repayment issues, bad loans amid economic slowdown, have caused Non Performing Assests (NPAs) in Micro Small and Medium Enterprises (MSME) sector to rise up by 20.7%, said report. According to the latest State Level Bankers’ Committee (SLBC) report released on Tuesday, non-performing assets (NPAs) in the second quarter went up by 20.7%, growing from Rs 8,526 crore in 2018-19 to Rs 10,290 crore this year. As per the bankers, the growth is already muted in the economy, and with demand remaining low-key, slowing growth have caused bad loans to rise. The advances in the MSME sector grew merely 11.4%, from Rs 1.15 lakh crore in 2018-19 to Rs 1.28 lakh crore in 2019-20 as the bad loans rose by 20.7% in the second quarter. MSMEs in sectors including automobiles, auto ancillaries, steel and textiles, are among the worst affected. Liquidity crisis too remain one the reason due to which bad loan rose, blamed Industry players. Slowdown, forced to stop operations or cut production, which effected working capital. With the liquidity crunch created by the collapse of major Non-Banking Finance Companies (NBFCs), there is a huge vacuum when it comes to working capital financing of MSMEs. The SLBC report for Gujarat further showed that the percentage of NPAs among loans given for housing and education rose to 1.17 per cent and three per cent respectively.
Source: KNN India
Welspun India will leverage its new hospitality and e-commerce channels to keep shrinking volumes afloat, according to its Chief Financial Officer Altaf Jiwani. “[We are] focusing on our new channels—hospitality and e-commerce,” Jiwani told BloombergQuint, adding that he expects to see substantial traction coming into hospitality. The textile maker’s volume growth contracted in the second quarter, but the com About 70 percent of Welspun’s revenue comes from the mainstay textile business in the U.S., he said. “The complete back-end has been put in place for drop shipment and for servicing orders from e-commerce.”
Source: Bloomberg Quint
Country’s apparel exporters have demanded 5 per cent tolerance in yarn count during the release of the item imported for the export-oriented readymade garment sector and easing the system of temporary bond transfer between factories in export processing zones and those of outside EPZs. Leaders of the country’s textile sector on Monday hold a meeting with National Board of Revenue chairman Mosharraf Hossain Bhuiyan on the issues and also demanded tax waiver or reduced rate for the import of racking system for establishing modern bonded warehouse. Bangladesh Garment Manufacturers and Exporters Association president Rubana Huq, Bangladesh Knitwear Manufacturers and Exporters Association’s acting president Mohammad Hatem and Bangladesh Textile Mills Association president Mohammad Ali Khokon attended, among others, the meeting held at the NBR office in the capital. Exporters said that they had faced penalty and harassment during the release of imported yarn and fabric if minor deviation was found in count and composition of the items. Exporters demanded 5 per cent tolerance for cotton yarn count and 10 per cent for viscos during the examination by customs saying that minor deviation in yarn count and composition might be occurred due to weather and suppliers’ faults. Apparel exporters demanded easing of temporary bond transfer system between the factories in EPZs and those of outside EPZs, saying that approval for inter-bond transfer was required for the exporters to do subcontract business with the EPZ factories. Getting approval for inter-bond transfer from customs bond commissionerate is a lengthy process but exporters get limited time to export the products to the buyers, they said. Exporters demanded empowering the BGMEA to issue approval for inter-bond transfer between the factories in EPZs and outside EPZs to protect the interest of readymade garment sector. RMG exporters said that establishing a modern bonded warehouse system was very much important to fulfil the compliance requirements provided by the buyers and racking system was a must to do so. The present duty structure is high for the import of racking system and it would not be viable for the exporters to import the system with paying 58.60 per cent duty, they said. Apparel makers demanded tax waiver or reduced tax rate on import of racking system, saying that the sector could gain more export orders by introducing the system as rack-supported warehouses help preserve maximum products within the shortest spaces separately and locate them easily. ‘We also discussed the delay and harassment by custom officials in ports during the release of raw materials for the sector,’ Hatem told New Age on Thursday. He said that the NBR chairman agreed in principle to their demands and assured them of taking necessary steps to facilitate exports.
Source: New Age Business
Rapid expansion of private company debt linked to shadow banking fuels distress. Corporate defaults in China surged to a record high in 2019, raising new questions over how policymakers in Beijing will manage mounting financial distress among large private and state-owned companies. Onshore corporate defaults hit Rmb130bn ($18.6bn) in the final weeks of the year, breaking the record of Rmb122bn last year, according to data compiled by Bloomberg, as economic growth fell to a three-decade low. Private companies that expanded rapidly in recent years, accruing large piles of debt, have been at the heart of the explosion in corporate distress. Some of the country’s leaders in sectors such as chemicals and textiles have faced financial pressures in recent weeks. Defaults on US dollar-denominated bonds, which until recently were closely guarded with implicit state guarantees, have hit $2.9bn this year, according to data from S&P Global Ratings. “The recent pick-up in defaults adds to broader evidence that corporate balance sheets remain under strain,” Julian Evans-Pritchard, senior China economist at Capital Economics, said in a recent note to investors. Private sector defaults have been concentrated in industries heavily reliant on shadow bank funding — an area of the Chinese financial system where access to credit has tightened significantly over the past two years — and are now suffering from oversupply. Yuhuang Chemical, which expanded rapidly over the past five years and opened a large methanol plant in the US in 2017, is among a growing list of large, private groups that have reneged on domestic bond payments this year. Shandong Ruyi, the owner of UK clothing maker Aquascutum and Savile Row tailor Gieves & Hawkes, narrowly averted a default on a $345m US-dollar bond due on December 19. But the group is still struggling to manage a vast pile of debt that doubled in size between 2015 and 2018. “Reduced funding access for weaker shadow banks could result in increased credit events and defaults, particularly against the backdrop of a slower environment, which can be particularly acute for private-sector enterprises,” Rowena Chang, an associate director at Fitch, said in a report this month. State-owned companies and groups controlled by local governments around China have also faced unprecedented financial pressures this year. Commodities trader Tewoo Group, which is backed by the city government of Tianjin, forced creditors to take deep discounts on a $300m dollar-denominated bond earlier this month, delivering a shock to investors who had thought such a high-profile state group would receive full support from Beijing. Experts are now debating how much support state-backed companies will receive from the government in the new year following a warning from a central bank adviser over a chain reaction in missed payments. “The 2020 wish lists for China’s local government officials are likely to include new bailouts of local debt,” Logan Wright and Allen Feng of independent researcher Rhodium Group wrote in a report this month. “But the debt levels are just too large at this point.”
Source: Financial Times
The Pakistan Textile Exporters Association (PTEA) has appreciated 33% significant drop in trade deficit; however urged for measures to steam up industrialization and boost exports as growth in exports has remained tepid during July-November period. In a statement here on Thursday, PTEA Chairman Sohail Pasha hailed the sharp fall in trade deficit during July-November to US$ 9.496 billion from US$14.47billion in the same period last fiscal year. However, he pointed out that this decline in trade deficit is mainly contributed by import side not from exports, as growth in exports remained tepid. Quoting the official figures he said that exports have fallen by 0.67% in November over the preceding month while average rise in exports in first five months is less than 5 percent, indicating that achieving the export target will again be toughest this year. For the first time in last 15 years, imports are decreasing but low export volumes are still the issue for the country’s economic growth. Lack of diversification of export destinations and products and high cost of doing business are among the key factors behind low exports, he added. PTEA Chairman expressed that despite extreme crisis, textile industry remained the most export-oriented sector of the economy in last decade with its 60% share in country’s export revenues; however stagnating textiles exports have been a consistent source of concern for the economy. Challenges like stuck up liquidity, high priced energy inputs and imposition of duties & taxes on inputs / raw materials are adversely impacting production, employment and exports. Although Government has taken exemplary drives to address the issue of outstanding refunds by liquidation of sales tax refund claims; however still huge amounts are stuck in income tax, custom duty drawback and textile policy incentive regime. Appreciating the launch of FASTER module for expeditious payment of sales tax refunds to exporters, he stressed for immediate simplification of Annexure H. He said that in order to promote investment in export oriented sectors and turn Pakistan into an export-led economy, the State Bank of Pakistan had announced to enhance financing limits for exporters under subsidized loan schemes including Export Finance Scheme (EFS) and Long Term Finance Facility (LTFF); however, the same has not yet been implemented.
Source: Pakistan Observer
The bluff of free trade, first called in the 19th century by an industrialising America against Britain, lies exposed yet again as China aspires to be the 21st century’s new hegemon. As the year ends, a partial and brief ceasefire seems imminent in Donald Trump’s trade war on the world. The US and China may sign a deal as early as next month. But make no mistake: The protectionist impulse behind the trade war remains as ineradicable as ever. Nor should it be forgotten that economic nationalism has guided the destiny of all major nations since the 19th century. According to the ideological prejudices of the present, built up over four decades of globalisation, free trade and deregulation represent the natural order of things. History, however, tells us that the US was a protectionist power for much of its existence, and the tariff was a crucial factor in its dethronement of Britain as global economic leader by the early 20th century. As William McKinley put it in 1890: “We lead all nations in agriculture; we lead all nations in mining; we lead all nations in manufacturing. These are the trophies which we bring after 29 years of a protective tariff.” The argument for economic nationalism against a manufacturing giant such as Britain was simple. British free-traders claimed that their ideology was best placed to bring prosperity and peace to the world. Their critics in countries less economically advanced than Britain, such as Germany’s Friedrich List, the 19th century’s most influential economic theorist, argued that free trade could only be a goal rather than the starting point of modern development. Economic self-strengthening for nations required they protect their nascent industry until it becomes globally competitive. Notwithstanding Britain’s rhetoric, which periodicals like the Economist amplified, it had arrived at free trade after a successful policy of tariffs. It also used military power to acquire foreign markets for its surplus goods and capital. In the late 19th century, one aspiring power after another set out to match the British; the Americans were not alone. Italy, while seeking to modernise its economy, imposed massive tariffs on France. Germany and Japan nurtured domestic manufactures while trying to shield them from foreign competition. Even Britain, following its settler colonies Australia, Canada and South Africa, came to abandon free trade by 1932. The US’s protectionism peaked with the infamous Smoot-Hawley Tariff Act of 1930. The US moved swiftly to embrace free trade after the Second World War only because its manufacturing industries, dominant over the world’s war-ravaged economies, needed access to international markets. Even then the Cold War’s military and diplomatic urgencies turned the US into an unlikely protector of Japan’s manufacturing industries as they were rebuilt into world-beaters. Trade practices of the kind deemed unfair by Trump today—from loans and subsidies to national conglomerates and restriction of imports—were key to the rise of not only Japan but also such East Asian “tigers” as South Korea and Taiwan. Trying, albeit much less successfully, to build a manufacturing economy, India imposed some of the world’s highest tariffs. After a short-lived experiment with trade liberalisation, which resulted in a $53 billion trade deficit with China, India today has retreated into its old protectionist crouch. The rise of China as a manufacturing powerhouse has made even the US renounce the posture of international cooperation it assumed after the Second World War. Multilateral institutions such as the WTO that the US helped set up no longer seem to serve its purposes. Moreover, the argument, first widely heard in the US during the debate over NAFTA in the 1990s, that free trade enriches the wealthy at the expense of the poor and the middle class, not to mention the environment, has become politically much more potent. It is clear the advocates of free trade ignored for too long the volatile political problems rising from wage stagnation and income inequality. Upholding the economic law of “comparative advantage,” they also managed to downplay the higher law that governs international economic relations: might is right. Following the British “imperialism of free trade,” powerful countries have practised what they denounce in others. For instance, the US, while insisting that other countries reduce state intervention, has nurtured high-tech industries in ways that violate WTO agreements. The bluff of free trade, first called in the 19th century by an industrialising America against Britain, lies exposed yet again as China aspires to be the 21st century’s new hegemon. Free trade turns out to be something that helps a rising great power, until it doesn’t, and which most countries claim to practice while trying to subvert its principles as much as possible. Trump’s trade wars are, of course, dangerously reckless in a world more interconnected than ever. But they have served to clarify the challenge ahead: to devise multilateral institutions that acknowledge protectionism rather than free trade as the deeper and more enduring reality of global economic history.
Source: Financial Express
Myanmar is on track to meet its target of drawing US$10 billion worth of textile exports by 2024, an official from the Myanmar Garment Entrepreneurs Association (MGEA) told state media. The target was set as part of Myanmar’s ten-year export strategy in 2014. During fiscal 2018-19, the textile manufacturing sector generated US$4.6 billion in export revenue, making up nearly 10 percent of the country’s export revenues, according to the Ministry of Commerce. This fiscal year, officials are expecting textile export revenues to reach US$5 billion. Myanmar exports its garments and textiles mainly to Europe, Japan and South Korea. Currently, the industry’s earnings average US$300 million per year. If manufacturers make a shift from the Cut, Make, Pack (CMP) production system to a free on board (FOB) system, annual earnings could swell ten-fold should demand remain at the current level, the MOC said. Under a CMP system, all raw materials, such as fabric and buttons are imported by the local factories, which then assemble the garments for export. Under an FOB system, the exporter quotes the a price that includes all costs, including delivery of goods aboard an overseas vessel. The local factory is responsible for the whole production process. Under the export plan, employment in the industry is also expected to hit a million workers by 2024. The MGMA estimates that around 600 factories in the country now offer job opportunities to approximately 500,000 workers. The boom in Myanmar’s clothing and textile industry comes at a time when wages in other regional production hubs such as Vietnam and Cambodia have risen, driving manufacturers to cheaper nations. At K4800 a day, the minimum wage in Myanmar is among the lowest in Southeast Asia.
Source: Myanmar Times
The dissolving wood pulp facility will produce fiber used for textile production. The Lenzing Group and Duratex are undertaking a joint venture to build a dissolving wood pulp plant in Brazil that will strengthen Lenzing’s production of biobased fibers. The plant, which will be based in Minas Gerais, near Sao Paulo, Brazil, is expected to start up in the first half of 2022. Lenzing holds the majority ownership at 51 percent, while Duratex, the largest producer of industrial wood panels in the southern hemisphere, has a 49 percent stake. Dissolving wood pulp is a key raw material in the manufacture of wood-based cellulosic fiber, which is used in the textiles industry. The new plant strengthens Lenzing Group’s backward integration and cost position as well as its specialty fiber growth. The single-line dissolving wood pulp plant is expected to produce 500,000 tons annually, making it the largest and most competitive production facility of its kind. “Wood-based cellulosic fibers offer an important contribution to enhance sustainability in the textile industry,” said Stefan Doboczky, CEO of Lenzing Group. “In line with its corporate strategy sCore TEN, Lenzing is committed to drive organic growth in this market. With this investment, we will become more competitive, act more independently and subsequently strengthen our market position.” The joint venture secured FSC-certified plantations covering 44,000 hectares to provide the necessary biomass. The plant is designed to be energy efficient and will feed 40 percent excess bioelectricity as green energy into the public grid. Lenzing Group was recently rated No. 1 in the world among 32 of the world’s largest producers of wood-based fibers by Canopy, a Canadian nonprofit organization, in the group’s Hot Button Report. The report graded companies on their success in achieving sustainable wood and pulp sourcing. “We are extremely proud of this top ranking,” said Doboczky. “It underlines our leading position as a sustainable trailblazer in the manufacturing sector and in the fiber industry in particular. Environmental protection and the prudent use of resources are an integral part of our responsibility to nature and society.” In the report, Lenzing received 26.5 points (up 3.5 points from the previous report) and was given a “light to mid green shirt” rating, which means that with the use of wood-based cellulosic fibers from the Lenzing Group there is only very minimal danger that the wood is derived from primeval and endangered forests.
Source: HFN
