The MSME Ministry will soon announce a new scheme on entrepreneurship and skill training for disabled persons as it looks to expose their talents and provide market for their products, said Union Minister Nitin Gadkari on Monday. Inaugurating "EKAM Fest", a week-long exhibition and sale of handicrafts, textiles and hand-looms products of artisans, traders/ entrepreneurs, belonging to ''people with disability'', Gadkari said the scheme will be worked out in consultation with the ministries of Social Justice and Empowerment (SJE) and Textiles. "I assure you that the MSME (Micro, Small and Medium Enterprises) ministry will work (out) a special scheme for the entrepreneurial and skill development of persons with disabilities very soon as the government wants to encourage, expose and provide opportunities for the products of such persons. The scheme will be worked out in consultation with the ministries of SJE and Textiles," the MSME minister said. Gadkari also assured that the ministry would arrange business loans through the financial institutions to the disabled entrepreneurs without any collateral security. He also said that 29 per cent of the country''s GDP and 48 per cent of exports are contributed by MSMEs. Textiles Minister Smriti Irani has assured international marketing assistance to the textile/handloom products produced and marketed by the disabled entrepreneurs. She has also promised free distribution of handloom tool kits for the disabled weavers through the textile ministry. Social justice minister Thaawarchand Gehlot said the exhibition, organised by the National Handicapped Finance and Development Corporation (NHDFC) under his ministry, was aimed at providing an avenue for the display and marketing of the products made by people with disabilities. The ministry is providing assistance by way of supplying raw materials, production and marketing of products generated by the disabled entrepreneurs, he added.
Source: Outlook India
While data shows India is on track to grow to $5 trillion in 5-6 years, each state must create a unique plan based on its GVA composition and human capital development. PM Modi’s target of a $5-trillion economy by 2025 has sparked much debate in the media and elsewhere. A senior economist from the government is on record saying the calculation is based on 8% real growth, 4% inflation and currency exchange at $1=Rs 75 by 2025. We are currently at a nominal GDP of Rs 209.8 lakh crore or $2.96 trillion (at $1=Rs 71) in 2019-20, as per Union Budget documents. The accompanying table shows economic data of India and the top five states in GSDP. Taking a three-year CAGR from 2016-17 to 2019-20 estimates and projecting to 2024-25 shows India can grow to $5.07 trillion GDP at a constant conversion of $1 to Rs 71. At a conversion of $1 to Rs 75, the GDP projects to $4.8 trillion with a gap of $200 billion. The current three-year CAGR of 11.4% must be incentivised to grow at 12.4% to yield $5 trillion in 2025 at the Rs 75 conversion. State GDP estimates for this year are based on the RBI State Finances report released in September 2019. They seem high in the light of India’s economic slowdown and growth rate revisions. Nevertheless, they serve as useful analytical points and can be revisited when revised estimates are released. India’s top five states in GSDP are Maharashtra, Tamil Nadu, Karnataka, Gujarat and Uttar Pradesh. All five are growing stably, but can be driven faster with the right policies. Uttar Pradesh, in particular, has to mobilise its large youth base to improve economic productivity. It also stands out as most dependent on agriculture with 18.5% of GVA, as shown in the table. Gujarat is at 10.9%, whereas the other three are all under 10%. Gujarat is the only top-5 state with high industrial dependence at 51.8% GVA. If business-as-usual continues, Gujarat might find it problematic to keep growing when automation and other factors kick in. Instead, it must develop its services sector to augment its high industry output. Karnataka has a substantial services contribution, at 68.5% of GVA, with industry at merely 23.7%. Maharashtra and Tamil Nadu’s GVA composition is more balanced, but still reliant on services at 50%-plus. While Gujarat must learn from these three states on developing the services sector with high value-add, the other states must learn from Gujarat how to industrialise sustainably as a vital source of employment and economic growth. Each state must study its unique composition and plan accordingly. As analysed in our previous article (‘The state of job creation’; FE, February 22, 2020; https://bit.ly/2x2zbFH), state expenditures far exceed the Centre’s. State governments must utilise those corpora to boost economic growth in their states. Bold measures around urbanisation, industrialisation, human capital development and leveraging technologies where possible can transform states into economic powerhouses. Clearly, data shows it is within the ambit of reality to grow to $5 trillion by 2025; or at the very least, come close. A growing economy must have lofty economic goals so everyone can get aligned towards achieving these. It is equally important to break the goal down backwards to understand how to accomplish it and where the pain points are. The Indian economy is undergoing a generational transformation, and several issues must be addressed to reach the $5 trillion mark in the next five years.
1. Significant workforce dependence on a low-performing sector like agriculture is problematic. Latest data available for 2016-17 shows 43% of India’s workforce is dependent on the agriculture sector growing at 3.4%, whereas 57% of the workforce depends on industry and services growing at 5.5% and 7.6%, respectively. This unsustainable dynamic has resulted in high income-inequity. There is an urgent need for the government to update this data and analyse it to understand how to shift workers from agriculture to industry and services. India must set a goal to shift 1.5% of the workforce every year, which amounts to 8% of the workforce shifted by 2025.
2. Level of industrialisation and urbanisation is deficient. Need extensive investment in infrastructure and labour-intensive industries. India is only at 34% urbanisation, compared to the world average of 55% and China at 59.2%. India must plan to urbanise all over the country, and deploy special programmes to develop 5,000 semi-urban centres, as analysed in our previous article (‘Urbanise or perish’; FE, August 2, 2019; https://bit.ly/2TtjaQF). This will drive economic expansion all over India and provide a solution to overcrowding in the big cities. The recently announced Rs 102.5 lakh crore National Infrastructure Pipeline is welcome. There is an urgent need to find the resources to implement this quickly. Quality infrastructure will lend a massive productivity boost to our economy, much like in China. The new move to attract tax-free investments in our infrastructure by foreign sovereign wealth funds is beneficial for capital inflow. The same incentives must extend to domestic investors; tax-free regimes will have Indian investors flock to invest, providing a much-needed boost to infrastructure spending. Similarly, labour-intensive industries must be promoted all over India, particularly in states with large populations like Uttar Pradesh and Bihar. For this too, tax holidays and other incentives to entrepreneurs willing to set up industries that generate large-scale employment are required.
3. Quality, diversity and exportability of our products and services must improve to become globally competitive. By consciously reverting to an export-oriented economy much like China, and now Vietnam and Bangladesh, India can leverage global markets to drive economic output. There is a need to invest in both labour-intensive industries like garments, automobile assembly, and hardware assembly, as well as specialised industries like chip design, 3D printing, automated manufacturing and medical devices. Services sectors like IT, financial and others must also be accelerated to leverage the higher value-add to the economy.
4. Lack of job creation in high-population regions is leading to economic inequity in the country. Fertility and population growth rates are much higher in the north-central-east zones of India compared to the south and west, but job creation is inverse. A combined south-western population estimated at 42.74 crore in 2019 have created 60.8 lakh new formal jobs per EPFO between September 2017 and November 2019. Meanwhile, the north-central-east zones with a combined population of roughly 68.97 crore in 2019 created only 23.5 lakh new formal EPFO-listed jobs in the same period. A directed effort to raise the level of industrialisation and urbanisation in the north, east and central states will provide the large young populations there with ample job opportunities.
5. Education infrastructure must improve. Our recent report on Human Capital Development in India (November 2019) demonstrates India has adequate higher education infrastructure overall and must now focus on rapid brownfield expansion to improve enrolment, quality and affordability. In particular, government spending can improve infrastructure in states with low access like Bihar and Jharkhand. There are also unusual cases of advanced states like Gujarat and Karnataka whose economic productivities are high but have de-focused on higher education. Gujarat’s GER of 20.4 trails the national average of 26.4, while Karnataka at 28.8 is the only southern state with a GER under 30. All Indian states must take stock of their education infrastructure to improve human capital in the age of knowledge economy-led growth. While data shows India is on track to grow to $5 trillion in the next 5-6 years, we cannot afford to continue with a business-as-usual mindset. Each state must create a unique plan based on its GVA composition and human capital development. We must face the challenges head-on and invest accordingly. Fixing these five issues will fast-track India’s progress to a top-3 economy.
Source: Financial Express
The incidence of GST evasion could be much higher if cases detected by state GST authorities are also taken into account, experts said. The finance ministry on Monday said that the central GST authorities have detected evasion of Rs 70,206 crore between July 1, 2017 launch of GST and January, 2020. The tax department managed to recover nearly half of this amount (Rs 34,591 crore), minister of state for finance Anurag Singh Thakur said in Lok Sabha. The incidence of GST evasion could be much higher if cases detected by state GST authorities are also taken into account, experts said. A total of 16,393 cases of evasion were detected by central authorities leading to 336 arrests, the ministry said. It added that in 31 of these cases, prosecution cases have been filed. Data showed that Delhi topped the list of states and union territories with 2991 cases of GST evasion involving Rs 9,364 crore. However, the quantum of tax evasion was highest in Maharashtra at Rs 17,003 crore from 2043 cases. While authorities have managed to recover 50% or more of the evaded amount in most states, Goa fared the worst with only Rs 87.5 crore recovered whereas GST evasion detected was at Rs 7,557 crore.
Source: Financial Express
Goods and services tax (GST) collection crossed the Rs 1 trillion mark for the fourth month in a row. The government collected Rs 1.05 trillion in February, which was 8.3 per cent higher than in the same period last year, but was lower than the Rs 1.1 trillion collected in the previous month. While it is encouraging to see the GST mop-up stabilising above the Rs 1 trillion mark, experts note that higher collections could be a result of blocking input credit. Therefore, it will be important to see if the trend sustains in the coming months, especially after the end of the current fiscal ...
Source: Business Standard
With most other indicators still weak, earnings outlook is challenging; cause for caution. India’s GDP growth slowed 40bps q-o-q to 4.7% in Q3FY20 but hopes of sundry green shoots abound and there may well be a few if the surge in power demand since late Jan is any guide. Yet, with most other indicators still weak, even before COVID-19, it may still be a hard slog keeping the earnings outlook challenging. With valuations also rich, we stay defensive, therefore, with a bias for large-caps and Financials. Power: There is much hope that this marks the bottom, though, with frequent assertions of green shoots even if some proved premature. But, there may be some. Power demand has risen by 7% in the last five weeks, e.g., after falling for 5M with growth in Feb at a 8M-high of 6.5%, hurt a tad by a taper in the last week. Inventory rebuild may well explain it rather than a durable rebound but it is still encouraging and should reflect in a better IIP print than in December when it surprisingly contracted by 0.3%.Credit: Non-Food bank credit growth has slowed to a 32-M low of 6.3% and may even soften a tad more with system growth even more sluggish despite a pick-up in ECBs. Confidence: Indeed, consumer confidence also slipped further in the RBI’s surveys in Jan to decade lows with the more frequent CMIE readings suggesting that it has dipped even more since in rural India. Exports: With exports anaemic as they have been for over a year and even before COVID-19, global markets are unlikely to help offset domestic weakness either. RBI: The pricey INR, buffeted by strong capital inflows and perhaps even a current account surplus, hasn’t helped here but overall monetary policy, unconventional and conventional as inflation cools, can still be a growth tailwind. Outlook: And yet, a rebound may only be gradual leaving the corporate outlook challenging. Revenues fell 4.6% y-o-y in Q3FY20, e.g., amid weak pricing power as the core WPI will attest to, with consensus Nifty FY20/21 EPS 8%/2% lower since Sep19. Stance: And yet, valuations remain extended at 18.5x 12M P/E boosted by buoyant flows, with MSCI India now at a higher 45% premium to EMs. We remain defensive overall, therefore, with a bias for Large-Caps over Mid-Caps, which are no longer at a premium but not cheap, either, with Financials, Industrials & Tech our favoured Ows.
Source: Financial Express
The textile industry is under scrutiny for many sustainability-related issues. The First South Asian Conference on Sustainability in Textile and Apparel Industry is set to take place in New Delhi on March 3, 2020 at the C.D. Deshmukh Auditorium, India International Centre, New Delhi. The conference is being inaugurated by the Hon’ble Minister for Textiles and Women and Child Development Smriti Z Irani. It is a well-known fact that the textile industry has many sustainability-related issues. In recent years, the industry has come under scrutiny due to the human and environmental impact of its practices. If things do not change, continued growth will cause untold harm to the planet and people. The garment export industry in South Asia is a prominent industry and a major source of revenue for these countries, especially in India, Sri Lanka and Bangladesh. India is the third largest exporter of textiles in the world and Indian textile and apparel exports are expected to cross US$ 82 billion by 2021. The industry is also one of the biggest polluters. It employs a work force of over 45 million, 60% of whom are estimated to be women. This contributes roughly 15 per cent of India’s current export earnings. We strongly believe that sustainability, and the working condition inside factories and workers’ well-being are critical issues for the growth of this sector. The First South Asian Conference on Sustainability in Apparel and Textile Industry 2020 is an effort to address the following important concerns of the industry :
1. Sustainable facilities
2. Workers’ well-being
3. Sustainable products and resources
The conference aims to create awareness amongst students and young professionals about the sustainable built environment, safer work places for workers and minimum damage to the environment. The conference is being organized by the Prem Jain Memorial Trust and Michigan State University, USA in association with School of Planning & Architecture, New Delhi, Lady Irwin College, University of Delhi, IDH-the Sustainable Trade Initiative, Indian Green Building Council and Ella Pad Foundation, Bangladesh. The Mission of Prem Jain Memorial Trust is to create, establish and maintain the sustainability paradigm through education, recognition and nurturing of the present and future generations. Its vision is to identify future leaders and be a catalyst for global development of sustainability, to create awareness and advocacy on sustainability and environment and to nurture India's young talent by disseminating education on sustainable development ecosystems, built environment, traditions, arts, crafts and related studies across India’s youth and working professionals. Dr Prem Jain, architect of the modern green building movement in India, is revered as the ‘Father of Green Buildings’. He ushered in a paradigm shift in the way buildings are conceived, designed worldwide and facilitated. India stands tall in second place after USA in the global green building movement, as he aspired for "Bharat to emerge as Jagat Guru in Sustainable Built Environment”. The ‘Green Bharat’ story is unparalleled amongst members of the World Green Building Council (WGBC). He led India to the world’s highest 60 platinum and 40 gold awards from IGBC and USGBC, for the design of services for Green Buildings. Under his leadership, India reached 1 billion sq ft of registered green footprint with IGBC in 2012, three years ahead of schedule, without any incentives. By 2018, over 4,900 projects, amounting to over 6.4 billion sq ft of green building footprint adopted IGBC standards. IGBC, under his guidance, launched 25 green building rating systems including affordable housing, net zero, green homes, green cities, green villages and green townships. He was instrumental in launching over 150 IGBC student chapters in colleges.
Source: The Asian Age
Reliance Industries Ltd (RIL) on Saturday said it has acquired 37.7 per cent stake in textile manufacturer Alok Industries Ltd for Rs250 crore, following approval from the Ahmedabad bench of the National Company Law Tribunal and the Competition Commission of India Reliance Industries Ltd (RIL) jointly with JM Financial Asset Reconstruction Co Ltd had bid for acquiring Alok Industries that was auctioned under the insolvency and bankruptcy law by lenders to recover their unpaid loans. "Please note that in accordance with the approved Resolution Plan, ALOK has today allotted 83.33 crore equity shares of Re1 each at a premium of Rs2 per equity share for cash at a total consideration of Rs250 crore to RIL," Reliance Industries Ltd (RIL) said in a regulatory filing. Pursuant to this acquisition, RIL will hold 37.7 per cent equity share capital of Alok Industries, it added. Also, in accordance with the approved resolution plan, Alok Industries has allotted 250 crore 9 per cent Optionally Convertible Preference Shares (OCPS) of Re1 each for cash at par, for a total consideration of Rs250 crore to RIL. The NCLT had, in March 2019, approved the sole RIL-JM Financial ARC bid for Alok for Rs5,050 crore. RIL had planned to raise about Rs4,550 crore through bank loans while infusing Rs500 crore equity in the company. Incorporated on 12 March 1986, Alok Industries is a Mumbai-based is an integrated textile manufacturer with interests in the polyester and cotton segments. It manufactures a range of textle products, including cotton yarn, apparel fabrics, bed linen, terry towels, embroidery, garments and polyester yarn. The company has representative offices for sales promotion in Sri Lanka and Bangladesh. It posted a profit of Rs2,283.82 crore on a turnover of Rs3,128.76 crore in 2018-19. "Approval of National Company Law Tribunal, Ahmedabad Bench and Competition Commission of India have been received," the filing said. SBI, the lead bank, had initiated insolvency proceedings against Alok Industries in June 2017. It was among the 12 accounts with outstanding loans greater than Rs5,000 crore that the Reserve Bank of India (RBI) asked banks to refer to the NCLT process. Alok Industries owed lenders a total of Rs30,000 crore.
Source: Domain – B
Rising inflation and declining growth is back in the news, with Q3 FY2020 growth at a low 4.7% and consumer price index (CPI) inflation over the upper limit of the inflation target regime of 6%. After reducing the repo rate by 135 basis points (bps) in 2019, the Monetary Policy Committee (MPC) has paused in lowering the interest rates, while keeping the stance accommodative. Reserve Bank of India (RBI) has introduced other measures to enhance credit growth, such as longer-term repos and reprieve for loans to real estate and autos. Whether these will be enough to boost recovery remains to be seen, as credit growth remains at a low 6- 7%. Many analysts mistakenly believe that the inflation-targeting regime had been instrumental in lowering India’s inflation rate between 2014 and 2018. But India’s inflation trajectory is really driven largely by global commodity price movements, as one would expect in a mostly open economy. When India was a more autarchic country, domestic factors — especially food-related supply shocks — drove inflation. But since India liberalised, inflation is largely driven by global commodity prices. But even before India opened up its economy, global commodity prices had sizeable effects on domestic inflation. Organisation of the Petroleum-Exporting Countries (Opec)-driven oil price increases in 1974 had a huge effect on inflation in India in 1974-75. The wholesale price index (WPI) inflation for India mirrors the global commodity index, and the CPI inflation also matches it with a one-year lag (see charts). The decline in inflation came about because global commodity prices fell in 2014-15, and had very little to do with the introduction of inflation targeting. Inflation remained low between 2000 and 2006 without any inflation-targeting regime, because global commodity prices were subdued. But after global commodity prices rose, inflation also rose in India, remaining high — until 2014, as part of the global commodity cycle. If global commodity prices drive inflation, then mechanically targeting inflation through monetary policy can be downright harmful. In India’s case, in 2014-18, the real repo rate was kept at 250-300 bps, much higher than was necessary. This hurt growth, drove up the real exchange rate by attracting portfolio inflows, hurt export growth and damaged the goals of ‘Make in India’.
Look Under the Hood
Inflation-targeting is a fad that can do damage if the underlying factors driving inflation are not properly analysed and understood. There is also excessive focus on temporary price surges — for onions, vegetable, pulses, cereals, etc. These are best handled by supply-side and trade policy measures, not by inflation-targeting. To that extent, core inflation is a better measure of aggregate demand pressures in the system. Globally as well, central bankers take too much credit for the decline in inflation. Commodity price cycles explain much of the movements in world inflation. Inflation targets have worked because they have coincided with falling commodity prices. And inflation has, to the surprise of most analysts, remained low in the US, despite the lowest rates of unemployment for the last 50 years because global commodity prices remain subdued. In Japan and Europe, despite vigorous attempts by central banks to increase money supply, the major worry remains deflation, not inflation. RBI governor Shaktikanta Das has rightly initiated a review of the Monetary Policy Framework (MPF). This will reportedly focus on issues such as how to improve the transmission mechanism, what to target (headline or core inflation?), and how to ensure that RBI’s rate changes are passed on by banks. These are all useful issues. But such areview should ask a more fundamental question: what are the factors that drive India’s inflation? If we don’t understand that, a mechanical review of MPF may not be so useful. If (as the charts show) much of India’s inflation is driven by global commodity prices, then it is more useful to ask: how does imported inflation transmit to the domestic economy? How does it affect wages through food prices? How does it affect cost of production and transportation? How does it feed into investment costs? How does monetary policy accommodate the pass-through of imported inflation and affect price expectations? What can be done to smoothen out spikes in inflation through reserves and exchange-rate mechanisms? How does one diversify the sourcing of key imported commodities, especially oil and gas? Inflation has risen again in 2019 because global commodity prices rose in 2017/2018, and we are seeing them pass through into domestic prices. No need to panic and start taking policy decisions that may do more damage than good. With global commodity prices falling again in 2019 — and likely to fall further with the coronavirus — inflation in India will once again subside.
Dial ‘L’ for Recovery
The real problem facing India and the world economy will be growth, not inflation. India’s slump may have bottomed out. But we may at best get an L-shaped growth trajectory from now on. A misguided inflation-targeting regime now constrains India’s policy toolkit, which maybe badly needed in the coming year, especially with the coronavirus adding to the economic decline. Improving inflation-targeting is not the answer. That would be like shooting from the hip and running the risk of shooting one’s own feet. The writer is chief economic adviser, Federation of Indian Chambers of Commerce and Industry (FICCI).
Source: Economic Times
|
Item |
Price |
Unit |
Fluctuation |
Date |
|
PSF |
921.51 |
USD/Ton |
-1.53% |
3/3/2020 |
|
VSF |
1374.41 |
USD/Ton |
0.21% |
3/3/2020 |
|
ASF |
2007.32 |
USD/Ton |
0% |
3/3/2020 |
|
Polyester POY |
928.66 |
USD/Ton |
-2.26% |
3/3/2020 |
|
Nylon FDY |
2157.34 |
USD/Ton |
0% |
3/3/2020 |
|
40D Spandex |
4100.37 |
USD/Ton |
0% |
3/3/2020 |
|
Nylon POY |
1207.25 |
USD/Ton |
-1.17% |
3/3/2020 |
|
Acrylic Top 3D |
1993.04 |
USD/Ton |
-0.71% |
3/3/2020 |
|
Polyester FDY |
2185.91 |
USD/Ton |
0% |
3/3/2020 |
|
Nylon DTY |
1092.96 |
USD/Ton |
-2.55% |
3/3/2020 |
|
Viscose Long Filament |
2407.36 |
USD/Ton |
-0.30% |
3/3/2020 |
|
Polyester DTY |
5357.63 |
USD/Ton |
0% |
3/3/2020 |
|
30S Spun Rayon Yarn |
2035.90 |
USD/Ton |
0.35% |
3/3/2020 |
|
32S Polyester Yarn |
1614.43 |
USD/Ton |
0% |
3/3/2020 |
|
45S T/C Yarn |
2407.36 |
USD/Ton |
0% |
3/3/2020 |
|
40S Rayon Yarn |
2185.91 |
USD/Ton |
0% |
3/3/2020 |
|
T/R Yarn 65/35 32S |
1950.18 |
USD/Ton |
0% |
3/3/2020 |
|
45S Polyester Yarn |
1757.30 |
USD/Ton |
0% |
3/3/2020 |
|
T/C Yarn 65/35 32S |
2271.63 |
USD/Ton |
0% |
3/3/2020 |
|
10S Denim Fabric |
1.26 |
USD/Meter |
0% |
3/3/2020 |
|
32S Twill Fabric |
0.69 |
USD/Meter |
0% |
3/3/2020 |
|
40S Combed Poplin |
0.97 |
USD/Meter |
0% |
3/3/2020 |
|
30S Rayon Fabric |
0.54 |
USD/Meter |
0.54% |
3/3/2020 |
|
45S T/C Fabric |
0.67 |
USD/Meter |
0% |
3/3/2020 |
Source: Global Textiles
Note: The above prices are Chinese Price (1 CNY = 0.14287 USD dtd. 03/03/2020). The prices given above are as quoted from Global Textiles.com. SRTEPC is not responsible for the correctness of the same.
Indonesia still deserves special treatment in global trade despite the United States recently taking the archipelago off its list of developing countries, local economists have said. Economists of the Institute for Development of Economics and Finance (INDEF) said that, based on its gross national income (GNI) per capita and parameters of social development, among other factors, Indonesia should still be considered a developing country. They suggested that the government defend its developing nation status, so that Indonesia would continue to benefit from the World Trade Organization’s (WTO) special differential treatment (SDT), which exempts developing countries like Indonesia from strict trade rules. “Why do we need to make a declaration? Because our GNI per capita is far lower than that of [developed] countries. Indonesia’s is only around US$3,800 per capita. Compared with the United States, the gap is very big,” INDEF economist Tauhid Ahmad said in a press conference in Jakarta on Thursday. According to the World Bank’s parameter, high-income economies are those with a GNI per capita of $12,376. Indonesia with a GNI per capita of $3,840 in 2018 is considered a lower-middle-income economy, the category for countries with a GNI per capita between $1,026 and $3,995. INDEF senior economist Aviliani said during the press conference that, based on several social development parameters, Indonesia had more characteristics of a developing country than a developed one. “Our human development index [HDI] is still low. Even though there are funds worth Rp 500 trillion for education, but if we look at Indonesia’s population, those with higher education make up only [a small] percentage. The biggest [demographic] is junior high school [graduates],” Aviliani said, contrasting such conditions with developed countries that had tech-savvy human resources. In the United Nations Development Programme’s Human Development Report 2018 Indonesia ranked 111th with an HDI score of 0.707, or 96 countries ranks below the US ranked in 15th place with an HDI of 0.920. Aside from the aforementioned parameter, Aviliani explained, numerous other characteristics justified Indonesia defending its developing country status. The majority of Indonesia’s population still works in agriculture with traditional farming equipment, and high levels of unemployment were indicators of a developing country, Aviliani said. The United States Trade Representative (USTR) rolled out a new policy in February and removed several countries from the list of developing and least-developed countries, including Indonesia. The new policy outlines that a developed country is one with more than 0.5 percent of trade significance to the world and a member of international organizations such as the Organization for Economic Cooperation and Development (OECD) or the Group of 20 (G20). Indonesia, accounting for 0.9 percent of global exports in 2018 and being a member of the G20, is therefore no longer eligible for subsidies. INDEF researcher Ahmad Heri Firdaus said at the same event that, with the US' new policy, Indonesia’s exported goods would be subject to higher import taxes, which could increase the price of the goods in the international market. According to a simulation he ran with the Global Trade Analysis Project (GTAP), assuming that import tax would rise to 5 percent from the current position, Indonesia’s main export products to the US would suffer a loss of up to 2.5 percent. Several commodities would be affected, for example, textile product exports would decrease by 1.56 percent and components for electric machines were projected to decrease by 1.2 percent. “We can still claim to be a developing country, [but] of course, supported by strong research,” Heri said.
Source: The Jakarta Post
The US Federal Trade Commission (FTC) is proposing to add seven generic fibre names to the rules and regulations under the Textile Fibre Products Identification Act (Textile Rules), which require marketers to, among other things, place a label on each covered textile product disclosing the generic names and percentages by weight of the constituent fibres in the product. The deadline for receiving comments is March 19, according to international trade consultant Sandler, Travis & Rosenberg. Section 303.7 of the rules lists the generic fibre names and definitions the FTC has established through its textile petition process and incorporates by reference the generic names and definitions set forth in the ISO 2076 standard. FTC is now proposing to incorporate the most recent version of that standard (from 2013), which added seven generic fibre names not defined in the 2010 standard: chitin, ceramic, polybenzimidazole, polycarbamide, polypropylene/polyamide bicomponents, protein, and trivinyl.
Source: Fibre2Fashion
The US recently slimmed down its list of developing and least developed countries, thus removing Vietnam from receiving preferential trade benefits. The move, however, was not directed specifically at Vietnam but included several countries such as China, Hong Kong, India, Indonesia, Malaysia, Thailand, and Singapore among others. The move will allow the US a reduced threshold for starting an investigation into which countries are harming US industries with subsidized exports as per United States Trade Representative (USTR). Under World Trade Organization (WTO) rules, governments are required to terminate their countervailing duty (CVD) investigations if the amount of foreign subsidy is less than 2 percent ad valorem (duty calculated as percentage of the value of goods). Therefore, countries removed from the list, will not be given special consideration and will have lower levels of protection in a CVD investigation.
But what does this mean for Vietnam?
Le Trieu Dung, from the Trade Remedies Department under the Ministry of Trade (MOIT), stated that the effect will be minimal as Vietnam has applied subsidies of 2 percent to goods in all its countervailing duties (CVD) investigations. The decision, however, could be problematic in the long run if the US applied further investigation on its exports and the subsidies applied is less than 2 percent. Experts also suggest that the US delisting will have minimal effects on existing duties on Vietnam, though the move means that Vietnam will stop receiving some preferential treatment. The MOIT also stated that Vietnam’s developing country status with the WTO remained unchanged and it still enjoyed the Generalized System of Preferences (GSP). Vietnam however, will have to be even more careful to deal with origin fraud and transshipment as this has been the source of US tariffs on Vietnam in the past. The tariffs were imposed to prevent steel products that originated from China attempting to bypass anti-dumping rules. The Vietnamese government, subsequently, issued new regulations related to the origin of exported and imported goods. Most recently, Vietnam issued Resolution 119 in December 2019 to address transshipment and origin fraud. The move was in line to satisfy US rules of origin requirements and address the trade surplus.
US-Vietnam trade expected to continue to grow
Nevertheless, Vietnam’s exports to the US have continued to grow. As per WTO data, Vietnam’s total import and export turnover reached US$235.5 billion in 2019 and US$242.6 billion in 2018. In the first nine months of 2019, exports to the US jumped by 34.8 percent year on year. The US is Vietnam’s largest export market and China is Vietnam’s largest source of imports. This was clear when several garment and textile industries due to the lack of raw materials from China during the ongoing Covid-19 outbreak. Overall, Vietnam-US trade will likely to continue to increase. However, Vietnam will need to be more careful particularly for industries such as steel, footwear and agricultural products exports to the US, which have been growing. If it does not, the US is likely to impose countervailing duties on products that it deems to harm its domestic industries.
Source: Vietnam Briefing
Cambodia's multi-billion-dollar garment industry is at risk of chain disruption from the deadly coronavirus, its strongman premier said Monday, as the outbreak cripples Southeast Asia's key industries, bringing border trade to a trickle. The death toll from the virus, which emerged from Wuhan in central China, has reached over 3,000 worldwide -- the bulk of the fatalities in the mainland. Beijing issued unprecedented lockdowns for cities and provinces most affected, bringing to a shuddering halt the so-called "Factory of the World" -- key to a global supply chain. The coronavirus has "shaken the global economy", said Cambodia's strongman premier Hun Sen Monday. Cambodia is already feeling the sting with its $7-billion-dollar garment sector reliant on China for 60 percent of its raw materials. Last week, the labour ministry announced 10 factories had downsized their production lines, leaving 3,000 workers out of work. But the full impact of the coronavirus is expected to hit in March, when nearly 200 factories are expected to run out of their reserve inventory of materials. This could spell doom for 160,000 workers and employees -- more than 20 percent of the sector's 700,000-strong workforce. Hun Sen said he had asked China to send materials urgently in order to avoid suspending workers. A labour ministry official told AFP Monday the country is expected to receive "some" by the end of March, though it would not meet its full demand. Garment worker Pann Sokchea, who toils in Phnom Penh's manufacturing district, fears cuts to her crucial overtime pay. "Factories no longer have cloth coming in, so workers are concerned about their jobs," she told AFP. Neighbouring Vietnam also stands to lose as much as $2 billion dollars if China-sourced materials are delayed for another fortnight, Le Tien Truong, director general of garment corporation Vinatex, told state-run media. Like Cambodia, the country's industry is reliant on China for 60 per cent of fabrics to fuel its clothing production lines according to the Vietnam Textile and Apparel Association (VITAS). So far, its garment exports dropped 1.7 per cent to $4.5 billion dollars in the first two months of this year. But exporters of finished products to China are also feeling the heat as container trucks slow to a crawl at the border. In northern Lang Son, rows of trucks wait hours -- or even days -- to bring their goods through the main international crossing. A shortage of Chinese labour means unloading operations, previously completed in just over an hour, can now take an entire day. Meanwhile, fruits and vegetables languish in over-heated trucks as drivers dressed in protective suits periodically check their freshness. "I've been here for four days," driver Le Thanh Duy, who was transporting dragonfruit, told AFP.
Source: The Daily Star
Costs of raw material for polyester have started moderating due to outbreak of novel coronavirus (COVID-19) in China. This is impacting demand and production of polyester yarn in China, and thereby disrupting its supply chain. The current situation, along with abolition of anti-dumping duty on PTA, is likely to boost polyester yarn exports from India. "Disruption in production of polyester yarn in China is likely to provide greater export opportunities to Indian polyester manufacturers. A quick assessment from credit rating companies indicates that operating profits of polyester yarn manufacturers are set to rise by 15-20 per cent next fiscal because of a 150-200 basis points’ (bps) spurt in operating margins stemming from lower raw material prices, healthy demand for polyester and higher blending in garments and other products," Madhu Sudhan Bhageria, CMD, Filatex India Ltd, told Fibre2Fashion. India imported $46.652 million of polyester yarn from China in 2018, which slightly decreased to $45.728 million in 2019, according to data from TexPro. On the other hand, India's polyester yarn exports to China stood at $2.878 million in 2018, and $3.237 million in 2019. Speaking about the benefit accrued due to the abolition of anti-dumping duty on purified terephthalic acid (PTA), a key raw material for synthetic textiles, in Union Budget 2020-21, Bhageria said, "The abolition of anti-dumping duty has changed the landscape of synthetic textile manufacturers. Indian textile industry has been stagnating despite slowdown in China. Reduction in PTA prices in India has created a level playing field for Indian manufacturers of polyester yarn, fibre and clothing. The benefit of this reduction in import cost is being passed on to end users, which will help the country to enhance its global competitiveness, boost exports and enable domestic manufacturers to compete with cheaper imports." The UK finally leaving the European Union will also benefit Indian exporters, according to Shubhasis Sur, AGM-sales & marketing, Kusters Calico Machinery Pvt Ltd. "India is expected to be a preferred market for sourcing of apparel products for buyers from the US, the UK, Europe and Canada as trade with China had been affected due to the novel coronavirus epidemic. Besides, the UK's exit from the EU would also give an edge to India. However, low cost non-branded garment trade in rural Bengal is a major victim since traders are fully dependent on import of Chinese goods. Chemical and dyestuff intermediate industry is also feeling the heat for shortage of raw materials."
Source: Fibre2Fashion
East African citizens will pay more for imported clothes should governments go ahead with plans raise taxes on imported textiles by between 30 and 35 per cent. The move is in line with a plan to protect textile industries that have been identified as strategic to the region. Part of the regional tax reforms will also see iron and steel, agro-processing, and wood and wood products imported into the region attract similar duty. The EastAfrican has learnt that imported second hand clothes will now be classified as “sensitive”, and attract duty higher than finished products. The regional private sector businesses are demanding a 32.5 per cent duty on finished products to protect local industries.
FOUR-BAND STRUCTURE
The proposal will be presented to the next East African Community Heads of State summit, scheduled for Arusha on February 29, for consideration. Under the EAC’s three-band tariff structure which came into effect on January 1, 2005, finished goods imported into the regional bloc attract a duty of 25 per cent, intermediate goods 10 per cent, and there is no duty on raw materials. Sensitive items such as sugar, wheat, rice and milk attract a higher duty of above 25 per cent to protect local industries from competition. The EastAfrican has learnt that as part of the review of the EAC Common External Tariff (CET), member states have agreed on a new tariff structure of four bands, but failed to agree on the rates to be imposed on goods in the new band. The new four-band tariff structure includes zero per cent import duty for raw materials and capital goods, 10 per cent import duty for intermediate products not available in the EAC, and 25 per cent import duty for intermediate products available in the region. However, partner states have disagreed on the rate for the highest band, which will be either 30 per cent or 35 per cent for finished products. The East African Business Council (EABC), the region’s top organ for private sector business associations, has proposed a fourth band, with a rate of 32.5 per cent for finished products “Under the CET there is a need to have the fourth band. We are considering having either 30 per cent or 35 per cent for the fourth band,” said Peter Mathuki, EABC executive director. “However two countries, Rwanda and Burundi, prefer the 30 per cent band while the rest prefer 35 per cent. As EABC we propose that the countries come to 32.5 per cent band. We are in discussions and hope that eventually we will come up with a solution,” he added. Researchers at the UKAid funded International Growth Centre argue that the first step in the review of the CET should be to phase out the “sensitive” items list followed by reclassification of the existing tariff bands to avoid unwarranted lobbying by affected countries for preferential tax treatment.
HIGHER RATES
At a meeting in Zanzibar last month, EAC member states submitted 1,294 products for consideration to pay above the rate of 25 per cent. Of these, there was consensus on 327 tariff lines and an agreement to retain 566 products at their current rate. However, there was no agreement on 401 tariff lines, which remain under consideration. “The tariff lines that were not agreed on are mainly from the textiles, iron and steel, agro-processing, and wood and wood products sectors,” said Phyllis Wakiaga, chief executive of Kenya Association of Manufacturers. At the meeting, Kenya, Uganda and Tanzania proposed 174 additional tariff lines for consideration to attract a rate higher than 25 per cent; these are up for consideration in the next meeting. In March 2016, EAC Heads of State expressed their intent to progressively eliminate importation of used clothing as a means to support the region’s textile and apparel industry. On June 30, 2016, the EAC, through Legal Notice No. EAC/32/2016, increased the specific duty rate on worn clothing and other worn articles from $0.20/kg to $0.40/kg to the applicable rate of 35 per cent or $0.40/kg, whichever is higher. At the time, Rwanda was granted a stay of application of the CET to apply an even higher duty of $2.5/kg for worn clothing, and $5/kg for worn shoes or 35 per cent, whichever is higher. In 2018, Kenya suspended the EAC’s 25 per cent CET on imported clothes and introduced a specific rate of import duty of Ksh500($5) per unit or 35 per cent whichever is higher, terming the textile sector critical to the country’s job creation under President Uhuru Kenyatta’s big four agenda.
USED CLOTHING
The US supplies approximately 20 per cent of total direct exports of used clothing to the EAC, while Chinese exports of cheap, ready-made clothes to East Africa is estimated at $1.2 billion per annum according to a study by the US Agency for International Development. In April 2014, EAC ministers for finance removed stays of applications, and directed that a phase out proposal be developed, which was adopted by the sectoral council of the ministers of trade, industry, finance and investment in May 2014. But the directive is yet to be implemented as most EAC countries still pursue this window for stays of applications and tax exemptions on various sensitive goods. According to the EAC Council of Ministers, the stability of the EAC CET has been affected by the frequent stays of applications by partner states, creating distortion and eroding the harmonisation of the tariff regime.
Source: East African
While parts of Asia’s clothing industry suffer closures and layoffs, Indonesian textile companies are seeing a windfall by filling orders caused by a delay in shipments from China due to the coronavirus outbreak, company executives said. Garment factories in some parts of Asia have been forced to send home workers and close factories as quarantines and travel restrictions due to coronavirus disrupt supply chains linked to China. However new domestic and export orders to Indonesia’s textile industry have risen by around 10% this year as factories seek to substitute material from China, said Anne Patricia Sutanto of the association of textile and textile products makers. Tangerang-based PT Pan Brothers has seen demand rising 20% more than expected for the second and third quarter, said Sutanto, who is also the company’s vice chief executive. The textile-to-garment company had initially forecast a 15% rise in sales this year. “Our textile industry is benefitting from the coronavirus outbreak. This has created opportunities and also created our own local supply chain,” said Sherlina Kawilarang, president commissioner of yarn maker PT Excellence Qualities Yarn. PT Sri Rejeki Isman, among the biggest integrated textile manufacturers in Southeast Asia, had also recorded an additional 15% increase in orders, chief executive Iwan Lukminto told Reuters. Most of the new orders had come from local clothing factories manufacturing for global brands, he said. Lukminto did not say how much sales had been expected to grow this year before the virus outbreak. Indonesia’s textile industry employs about 2 million people and relies largely on domestic supply chains that had not been disrupted by the outbreak so far. Imported fibres and dye chemicals represent only a small portion of raw materials used by the sector, Lukminto said, while companies also import cotton from Australia and the United States, where shipments have not been affected. Indonesia exported nearly $13 billion of textile products last year, chiefly to the United States and Middle East. In addition to the coronavirus windfall, textile sales may also rise after the ratification of an Indonesia-Australia free trade agreement this year, under which Australia will remove a 5% import duty on textile products, Sutanto said. The coronavirus has killed nearly 3,000 worldwide. Over 86,500 have been infected in China, where the virus originated, but it has also spread to more than 50 other countries, including Indonesia, which confirmed its first cases on Monday.
Source: Reuters
