The Finance Ministry on Tuesday extended the validity of all lower withholding tax orders by three months till June 30 in view of hardships caused due to COVID-19 pandemic. The Central Board of Direct Taxes (CBDT) in its order gave a major relief to taxpayers whose application for lower or nil deduction of TDS/TCS is pending for disposal saying that cases where the application is pending and where such certificates were issued for fiscal 2019-20, the validity of the certificates would get extended to June 30, 2020. In cases where assessees have not been able to apply for such lower/nil deduction certificate for fiscal 2020-21 but were issued such certificates for 2019-20, such certificates will be valid till June 30, 2020. In cases where the assessee has not applied for issuer of lower or nil deduction of TDS/TCS and does not have any certificate for 2019-20, the CBDT has prescribed a modified procedure for application and consequent handling by the assessing officer. The order also prescribes a 10 per cent withholding tax rate on payments to NonResidents (including foreign companies) having Permanent Establishment in India and not covered by the above scenarios) till June 30 or disposal of application, whichever is earlier. The CBDT said due to the outbreak of COVID-19 there is severe disruption in the normal working of almost all sectors, including functioning of the Income Tax Department. "In such a scenario, the application fuled by the payees u/s 195 and 197 of the Act for lower or nil rate of deduction of TDS and applications by buyers/licensees/lessees u/s 206C(9) of the Act for lower or nil rate of collection of TCS for fiscal 2020-21, have not been attended in a timely manner by the TDS/TCS-assessing officers, causing hardship to taxpayers," it said. The CBDT further said that considering the constraints of the field officers in disposing of the applications and to mitigate hardships of payees and buyers, the I-T department has extended the validity of lower withholding orders till June 30, 2020, from March 31, 2020. Nangia Andersen Consulting Chairman Rakesh Nangia said this will ensure continuity of payments to contractors/ servicee providers, both resident as well as non-resident, where for specific reasons such as character of income, tax treaty benefits, estimated losses, etc, respective taxpayers were authorised to receive payments, either without deduction of taxes or deduction at a lower rates. "Such orders are very important for cash flow management of both resident as well as non-resident taxpayers, and in present circumstances, where taxpayers and businesses are already facing severe liquidity and cash flow issues, such extension is a much welcome step by Government," Nangia added.
Source: Economic Times
ECGC extends timelines, reduces fees to help exporters cope with lockdown. Offering some relief to exporters struggling to cope with the effects of the lockdown, the Centre has decided to extend the IGST (Integrated Goods and Service Tax) and compensation cess exemptions for goods procurement under two popular export promotion schemes by a year, till March 31, 2021. The Export Credit Guarantee Corporation of India (ECGC), the government-owned company providing insurance cover to exporters, is also adopting measures to aid exporters such as extending the time limit for returns, extension requests, default notifications and filing claims, apart from reducing fees, a government official told BusinessLine. “We understand that exporters are not in a position right now to adhere to timelines or pay additional taxes. The Centre is trying to give them as much policy flexibility as possible to ease the pains of the lockdown,” the official said. Exporters have been hit hard this month with the pandemic disrupting their production, shipments, orders and payments. Following the Centre’s latest decision, exemptions on payment of IGST and compensation cess for goods procurement under the Export Promotion Capital Goods (EPCG) scheme and Advance Authorisation scheme have been extended by a year to March 31, 2021.
Extended deadline
Also, the ECGC has extended the deadline for all returns, extension requests and default notifications till May 31, 2020, as per a communication from the insurance company to stakeholders. The time for filing claim, reply to claim queries and representations has been extended to June 30, 2020. The specific shipment policy expiring in March 2020 has also been extended to June 30, 2020.
Moreover, the ECGC has reduced by 50 per cent its policy proposal fee for policies due to be renewed or issued between March 1 and June 30, 2020. Discretion has also been extended to exporters, within RBI guidelines, to extend the due date for payment by buyers for shipments accepted earlier and to decide about the release, re-import or abandonment of shipments that reached their destination but have not been cleared by overseas buyers, said the note.
Source: The Hindu Business Line
The ministry of corporate affairs has clarified that company’s contributions to the PM CARES Fund over and above the minimum prescribed corporate social responsibility (CSR) spends can be offset against their CSR obligations of subsequent years. “Even if you have contributed the prescribed amount towards CSR, I would like to urge you to contribute over and above the minimum prescribed amount, which can later be offset against the CSR obligation arising in subsequent years, if you so desire,” said corporate affairs secretary Injeti Srinivas in an online appeal to company chiefs. Firms with a net worth of Rs 500 crore or revenue of Rs 1,000 crore or a net profit of Rs 5 crore should spend at least 2% of profit on CSR as per the Companies Act, 2013 Further, any contribution made to the PM CARES Fund before March 31 would qualify for 80G exemption under the Income Tax Act, 1961 (I-T Act), the ministry said. Section 80G of the I-T Act allows donations made to specified relief funds and charitable institutions as a deduction from gross total income before arriving at taxable income. The Prime Minister's Citizen Assistance and Relief in Emergency Situations Fund (PM CARES) was created by Prime Minister Narendra Modi on March 28 to enable citizens to contribute to government’s containment and relief efforts against the Covid-19 outbreak. The next day, the corporate affairs ministry issued a statement that companies could contribute to the fund and these will be counted towards their CSR obligations. For contributions made from April 1 onward, only those companies that have chosen to stay within the old tax structure would be eligible for this benefit, the note said. Last year, while announcing the corporate tax cut amounting to Rs 1.76 lakh crore, finance minister Nirmala Sitharaman had said that companies can either choose to forgo their various exemptions and move to the lower and simplified tax structure or stay within the old framework.
Source: Economic Times
The world economy will go into recession this year with a predicted loss of trillions of dollars of global income due to the coronavirus pandemic, spelling serious trouble for developing countries with the likely exception of India and China, according to a latest UN trade report. With two-thirds of the world's population living in developing countries facing unprecedented economic damage from the coronavirus crisis, the UN is calling for a USD 2.5 trillion rescue package for these nations. According to the new analysis from United Nations Conference on Trade and Development (UNCTAD), the UN trade and development body titled 'The COVID-19 Shock to Developing Countries: Towards a 'whatever it takes' programme for the twothirds of the world's population being left behind', commodity-rich exporting countries will face a USD 2 trillion to USD 3 trillion drop in investments from overseas in the next two years. The UNCTAD said that in recent days, advanced economies and China have put together massive government packages which, according to the Group of 20 leading economies (G20), will extend a USD 5 trillion lifeline to their economies. "This represents an unprecedented response to an unprecedented crisis, which will attenuate the extent of the shock physically, economically and psychologically," it said. It added that while the full details of these stimulus packages are yet to be unpacked, an initial assessment by the UNCTAD estimates that they will translate to a USD 1 trillion to USD 2 trillion injection of demand into the major G20 economies and a two percentage point turnaround in global output. "Even so, the world economy will go into recession this year with a predicted loss of global income in trillions of dollars. This will spell serious trouble for developing countries, with the likely exception of China and the possible exception of India," the UNCTAD said. The report, however, did not give a detailed explanation as to why and how India and China will be the exceptions as the world faces a recession and loss in global income that will impact developing countries. Further, given the deteriorating global conditions, fiscal and foreign exchange constraints are bound to tighten further over the course of the year. The UNCTAD estimates a USD 2 trillion to USD 3 trillion financing gap facing developing countries over the next two years. In the face of a looming financial tsunami this year, the UNCTAD proposes a four-pronged strategy that could begin to translate expressions of international solidarity into concrete action. This includes a USD 1 trillion liquidity injection for those being left behind through reallocating existing special drawing rights at the International Monetary Fund; a debt jubilee for distressed economies under which another one trillion dollars of debts owed by developing countries should be cancelled this year and a 500 billion dollars Marshall Plan for a health recovery funded from some of the missing official development assistance (ODA) long promised but not delivered by development partners. The speed at which the economic shockwaves from the pandemic has hit developing countries is dramatic, even in comparison to the 2008 global financial crisis, the UNCTAD said. "The economic fallout from the shock is ongoing and increasingly difficult to predict, but there are clear indications that things will get much worse for developing economies before they get better," UNCTAD Secretary-General Mukhisa Kituyi said. The report shows that in two months since the virus began spreading beyond China, developing countries have taken an enormous hit in terms of capital outflows, growing bond spreads, currency depreciations and lost export earnings, including from falling commodity prices and declining tourist revenues. Lacking the monetary, fiscal and administrative capacity to respond to this crisis, the consequences of a combined health pandemic and a global recession will be catastrophic for many developing countries and halt their progress towards the Sustainable Development Goals. Even as advanced economies are discovering the challenges of dealing with a growing informal workforce, this remains the norm for developing countries, amplifying their difficulties in responding to the crisis. "Advanced economies have promised to do 'whatever it takes' to stop their firms and households from taking a heavy loss of income," said Richard Kozul-Wright, UNCTAD's director of globalisation and development strategies. He added: "But if G20 leaders are to stick to their commitment of 'a global response in the spirit of solidarity', there must be commensurate action for the six billion people living outside the core G20 economies". According to reports, the death toll from the coronavirus pandemic has soared past 35,000 while the number of confirmed cases topped 750,000 globally.
Source: Economic Times
The lack of digitisation in global trade is set to hit Indian exporters that are seeking state intervention for payments without providing physical evidence of delivery documents. Physical documents, essential for banks to honour letters of credit, are currently unavailable, with the logistics industry virtually shutting down across large swathes of the planet. Some banks are resorting to a practice of sending scanned documents to their overseas counterparts to help a few of their known MSME exporting clients. But this is risky as scanned documents are not legally tenable internationally, a bank official familiar with the development said. The situation has led exporters to seek government intervention in relaxing these norms. “We have approached the government authorities on this matter. As it requires certain changes in international norms, we are seeking intervention from the local authorities," said Sanjay Jain, ICC National Textile Committee chairman. “A move on time will help protect thousands of local manufacturers from incurring huge losses.” When a local manufacturer ships consignments to its overseas client, it is supposed to produce shipment related documents including invoice, and bill of lading to the local bank in India. This local bank in turn is supposed to send physical copies to the consignee’s bank account overseas that provides the letter of credit. On shipment, sellers get a bill of lading (BL), which they submit to the local lender along with physical copy of bill of exchange, letter of credit and insurance certificate. Local banks send them to their overseas counterparts. With the suspension of international courier services, a local bank is unable to deliver the documents to an overseas bank. In the entire chain, the LC opening bank declines payment as exporter's bank has not complied with the condition of sending documents. Shipping companies then deny releasing goods to the buyer in the absence of documents, leading to abandonment of cargo.
Source: Economic Times
India’s $108-billion textiles industry, which helps the likes of Gap and Macy’s stock their store shelves, is seeking a bailout package on their foreign exchange liabilities after the lockdown prompted cancellation of orders that were to fetch payments in dollars. Losses in forex contracts could run into crores of rupees for the exporters that had used anticipated dollar receivables to enter into contracts with banks. To cover the hedging liabilities, the industry is seeking benefits similar to the moratorium extended to borrowers, who now have a three-month grace period on repayments. “Export assignments are either getting cancelled or delayed, bringing financial troubles for local manufacturers,” said Sanjay Jain, ICC National Textile Committee chairman. “We have approached the government and the central bank seeking relief measures. Otherwise, it will trigger job losses. We cannot blame banks, which will abide by the guidelines laid out for currency covers.” Textile exporters book forward contracts against overseas receivables to protect their cost or to earn premiums. On shipment, they provide documents to banks booking the contracts. Due to cancellation and delays, they are unable to provide the bill of lading and other documents. If exporters are not able to ship, they do not receive the money from overseas buyers. In such cases, they have to unwind those forwards deals booked up to six months in advance at a loss of 2-4 rupees/unit of dollar, dealers said. “Textile exporters should be given some flexibility to manage their dollar delivery in the form of some extensions so they do not have immediate cash flow problems considering (that the lockdown is) no fault of theirs,” said Abhishek Goenka, CEO, IFA Global. If an exporter booked a contract at 72 and in the absence of dollars delivery in March when the rate is 76, he may have to book a loss at 76 despite the fact that his bookings were based on confirmed orders. “If the rupee maintains its bearish bias due to dollar shortage and heads another 4-5% south, it could accelerate problems for them,” Goenka said. The rupee lost about a percentage point Monday to close at 75.59 per dollar, reflecting the weakness in equities and bonds. The local unit was at 74.85 last Friday. India’s textiles industry provides direct employment to about 50 million people, and indirect jobs to another 60 million people.
Source: Economic Times
The World Bank has offered $1 billion to the Indian government for a proposed India Covid-19 emergency response and health systems preparedness project. This fouryear project aims to develop the preparedness of India’s health care systems in the time of the pandemic. The idea of the project will be to respond and mitigate the Covid-19 threat and strengthen national systems for public health preparedness in India, as per the project document. The World Bank funding is from its Covid-19 fast-track facility where both the entities (World Bank and the government of India) will work on following the best international practice. The project, according to the document seen by ET, will measure progress on key indicators such as proportion of laboratory-confirmed cases of Covid-19 who responded within 48 hours and the proportion of specimens submitted for SARS-COV-2 laboratory testing confirmed within WHOstipulated standard time. According to the project document, the government assessment seems to be that outbreaks like Covid-19 will continue in the coming years, and hence there needs to be a long-term strategy to tackle the next wave of the disease. For example, one of the focus areas of this partnership is on India's emergency response system to the disease — the aim of this component of the project is to slow down and limit the spread of Covid-19, the joint document says. This, both the parties say, will be achieved through providing immediate support to enhance disease detection capacities through increasing surveillance capacities, port health screening, etc.
Source: Economic Times
The government is working to increase the production of personal protective equipment (PPE) with the textiles ministry roping in domestic companies to ramp up supply of coveralls and N95 masks, crucial for healthcare workers against Covid-19, a official said on Wednesday. The ministry, under its technical textiles arm, is now working with 16 companies, a second official added. “Orders of 3.3 million coveralls and five million N95 masks have been placed with these manufacturers. While 1.9 million masks have come in, the supply of overalls have been slow as it needs more specifications,” the second official said. “Supply of coveralls have just started this week, and less than 500,000 have come in,” the official added. In a release on March 30, the government said the textiles and health ministry have been able to ensure the supplying 6,000-7,000 coveralls per day. “this is expected to go up to 15,000 per day within the next week,” read the release. The Hindustan latex Limited, under the health ministry, is looking at the procurement of all PPEs including medical equipment like ventilators, while the textile ministry is supplying PPE with textile material. This involves masks, both of N95 and surgical 2/3-ply ones, and coveralls with meltblown material, which is a special kind of polymer. The manufactured product is sent by the ministry to the Coimbatore-based South India Textile Research Association (SITRA) for test specifications. SITRA chairman Prakash Vasudevan told HT that the scarcity of meltblown fabric producers was one of the key reasons for the PPE shortage. “Meltblown material has a general shortage of supply around the world, and the pandemic has made matters worse,” he said.
Source: Hindustan Times
A Science and Technology Empowered Committee for COVID-19 response has been constituted chaired by Prof. Vinod Paul, member, NITI Aayog and Prof. K Vijay Raghavan, Principal Scientific adviser to the government, said a release issued by the Health Ministry on Tuesday. It said this committee would coordinate among science agencies, scientists, industries and regulatory bodies. The Committee will work with the Department of Science & Technology (DST), Department of Biotechnology (DBT), Council of Scientific and Industrial Research (CSIR), Defence Research and Development Organisation (DRDO) and Indian Institute for Science (IISC) to take speedy decisions on research and development keeping in view of the critical need to increase the testing facilities for COVID-19 disease,’’ noted the release. It said the Health Ministry, in collaboration with the Ministry of Textiles, Pharmaceuticals and the States, is monitoring the requirement of personal protection equipment, masks and ventilators, factories producing essential items and is also coordinating with all the States in rigorously tracing of all contacts to ensure no cases are missed as per our containment strategy. “We have uploaded training resources on the website for ANMs, ASHAs, Anganwadi workers, AYUSH practitioners, doctors, nurses and other health professionals for field surveillance, supervision, lab testing, clinical management, isolation facility management, intensive care, infection control management, and quarantine facility for the COVID-19 management.“Two webinars were conducted by the Ministry of Health on March 30 in which 15,000 nurses were trained online,’’ the Ministry added.
Source: The Hindu
The virus threat is far from over, and there is little to suggest manufacturing won’t send it into another spiral. Given the economic hardship the 21-day corona lockdown is causing, and the plummeting of economic growth, it is not surprising that many are petitioning the government to allow manufacturing to restart with adequate safeguards such as social distancing; while the lockdown will end on April 15, manufacturers are worried the curbs on the sector can extend beyond that. Exporters have talked of how, if they are not allowed to resume manufacturing, China will get a head start since its factories have already resumed manufacturing. Some economists have also weighed in saying the economic costs are so large, the economic consequences could far outweigh the potential tragedy occurring due to the coronavirus. Indeed, one argument is that, should the shutting down of manufacturing carry on for long enough, India’s slowdown could well become a structural one since many of the units that shut down may never be able to come back on stream once the threat of the pandemic is over, in quite the same way that demonetisation dealt a lasting blow to many enterprises. Large parts of these arguments could well be true and, certainly, it is not going to be possible for the central or state governments to provide relief to the crores of people who will lose jobs if the slowdown persists; indeed, if even some of the better-off firms have announced that they will stop purchases from suppliers, it is easy to imagine what the smaller firms in the unorganised sector will be going through. But, using this argument to allow manufacturing to restart is missing the point, of the need to counter a major pandemic that can, models suggest, infect 20-25% of all Indians.
Source: the financial express
“Coronavirus will have a bad impact on the industry as all inventories are stuck. Goods in transit are not being sold. Goods are stuck in warehouses, so there’s total loss. We plan to cut down our winter production depending on how long it goes on. We’ll have to sell more goods on discount. If this ends in April, it will be fine and if it prolongs to June, it will be very difficult for the industry. I think it should end by end of April, as the government has taken some measures for that. The measures announced by the finance minister are not much in favor of the industry. It’s more about regulatory compliances. If she had announced a package whether for interest of GST relief, it would have benefitted the industry more.”- Sandeep Jain, Managing Director, Monte Carlo
Source: DFU
|
Item |
Price |
Unit |
Fluctuation |
Date |
|
PSF |
755.82 |
USD/Ton |
-3.33% |
02-04-2020 |
|
VSF |
1289.05 |
USD/Ton |
0.33% |
02-04-2020 |
|
ASF |
1895.54 |
USD/Ton |
0% |
02-04-2020 |
|
Polyester POY |
662.14 |
USD/Ton |
-1.05% |
02-04-2020 |
|
Nylon FDY |
1775.09 |
USD/Ton |
-3.08% |
02-04-2020 |
|
40D Spandex |
4015.08 |
USD/Ton |
0% |
02-04-2020 |
|
Nylon POY |
2169.55 |
USD/Ton |
0% |
02-04-2020 |
|
Acrylic Top 3D |
817.10 |
USD/Ton |
0% |
02-04-2020 |
|
Polyester FDY |
2056.85 |
USD/Ton |
-1.35% |
02-04-2020 |
|
Nylon DTY |
5212.56 |
USD/Ton |
0% |
02-04-2020 |
|
Viscose Long Filament |
972.07 |
USD/Ton |
0% |
02-04-2020 |
|
Polyester DTY |
1648.30 |
USD/Ton |
-1.68% |
02-04-2020 |
|
30S Spun Rayon Yarn |
1880.75 |
USD/Ton |
-0.37% |
02-04-2020 |
|
32S Polyester Yarn |
1422.89 |
USD/Ton |
-0.98% |
02-04-2020 |
|
45S T/C Yarn |
2211.82 |
USD/Ton |
-0.63% |
02-04-2020 |
|
40S Rayon Yarn |
2042.76 |
USD/Ton |
0% |
02-04-2020 |
|
T/R Yarn 65/35 32S |
1831.44 |
USD/Ton |
0% |
02-04-2020 |
|
45S Polyester Yarn |
1606.03 |
USD/Ton |
-0.87% |
02-04-2020 |
|
T/C Yarn 65/35 32S |
2070.94 |
USD/Ton |
-1.34% |
02-04-2020 |
|
10S Denim Fabric |
1.20 |
USD/Meter |
-0.47% |
02-04-2020 |
|
32S Twill Fabric |
0.66 |
USD/Meter |
-0.43% |
02-04-2020 |
|
40S Combed Poplin |
0.94 |
USD/Meter |
0% |
02-04-2020 |
|
30S Rayon Fabric |
0.51 |
USD/Meter |
0% |
02-04-2020 |
|
45S T/C Fabric |
0.65 |
USD/Meter |
0% |
02-04-2020 |
Source: Global Textiles
Note: The above prices are Chinese Price (1 CNY = 0.14088 USD dtd. 02/04/2020). The prices given above are as quoted from Global Textiles.com. SRTEPC is not responsible for the correctness of the same.
Industrial output shrank sharply across the world in March in the wake of rising coronavirus pandemic cases and it subsequently upset the global economy as more countries declared lockdowns to contain the virus. On 31 March, a latest UN trade report said that the world economy would go into recession this year with a predicted loss of trillions of dollars of global income due to the coronavirus pandemic, spelling serious trouble for developing countries with the likely exception of India and China. With two-thirds of the world's population living in developing countries facing unprecedented economic damage from the COVID-19 crisis, the UN is calling for a $2.5 trillion rescue package for these nations. Last month, the International Monetary Fund (IMF) had said that COVID-19 led the global economy into recession, reported Reuters. IMF managing director Kristalina Georgieva had said that there was immense pressure on emerging markets suffering from lost commerce, reduced exports and massive capital outflows.Georgieva further said that emerging market countries need at least $2.5 trillion in financial resources to get through the pandemic. Amid reports of slight recovery in China last month, manufacturing activities contracted in the United States and other parts of the world in March, dragged down by economic fallout from the coronavirus outbreak, reported AP. The Institute for Supply Management, an association of purchasing managers, reported Wednesday that its US manufacturing index fell to 49.1 in March after registering 50.1 in February. Any reading below 50 signals a contraction. The index had signalled growth in January and February. Also Wednesday JP Morgan reported that global manufacturing shrank in March. Its worldwide manufacturing index registered 47.6 in March. That was a slight improvement on February's 47.1 — but only because Chinese factories began ramping back up last month after being locked down in February to counter COVID-19. Excluding China, JP Morgan found, global manufacturing dropped to the lowest level last month since May 2009 at the depths of the Great Recession. Economists had expected a bigger drop in the US index. Timothy Fiore, chair of ISM manufacturing index committee, said that “things got worse'' as March dragged on and predicted that the index will signal more weakness in April. New orders and factory employment fell last month to the lowest level since 2009. Production and export orders also fell. The COVID-19 pandemic and the quarantines, travel restrictions and business closings imposed to combat it have hammered global manufacturers, disrupting their access to supplies and crushing demand for their products. But the impact of the outbreak is falling even harder on service businesses such as restaurants and hotels. “Manufacturing is not, for the most part, in the very front line of the virus hit, but nonetheless large swathes of the sector are vulnerable as consumers cut back on spending on goods, especially big-ticket items like cars and trucks," Ian Shephardson, chief economist at Pantheon Macroeconomics, wrote in a research report, adding that “while this headline ISM reading is a pleasant-looking surprise, don't be fooled.'' Ten of 18 US industries surveyed reported growth in March, but six contracted, led by energy companies, coal producers and textile mills. Already weakened by President Donald Trump's trade war with China, manufacturers around the world are reeling from COVID-19 and its economic impact. JP Morgan reported that its manufacturing index for the 19 European countries that share the euro currency dropped last month to the lowest level in nearly eight years. Confidence among eurozone manufacturers fell to a record low. Manufacturing in the Philippines dropped to the lowest level on record as authorities locked down Luzon, the country's biggest and most populous island, to combat COVID-19. JP Morgan also reported that Italy, the Czech Republic and Vietnam registered especially deep manufacturing contractions last month. Last month, IMF officials had said in a blog on the economic impact of the pandemic that China's economy was beginning to show some signs of normalisation after the full-blown shock caused by coronavirus but stark risks remained, reported Reuters. Most larger Chinese firms have reopened and many local staff have returned to work but infections could rise again as national and international travel resumes, the officials said. In February this year, industry body PHDCCI had said that the coronavirus outbreak might negatively impact global growth by 30 basis points or $250 billion. PHDCCI President D K Aggarwal said disruptions in the global supply chains will not only hit China's exports but also the exports of the importing countries as they import a large chunk of raw materials and intermediate goods from China while exporting to other respective destinations.
Source: First Post
Textiles and clothing are archetypal industries through which Asean member states achieve and integration into the global economy, according to Global Value Chains in Asean: Textiles and Clothing published by the Asean-Japan Centre. According to a statement, it is essential to recognise the significant intra-industry variation in terms of technological attributes and factor intensity. For Asean, the most vibrant is clothing, which is often a major exporter, generating significant employment. Cambodia, Indonesia, Myanmar and Viet Nam are the world’s major exporters of clothing. Textiles, in contrast, play a less salient role in its overall export structure because of their technology and capital intensity. In the clothing industry, the lower-income Asean countries tend to sindustrialisation pecialise in labour-intensive activities such as cut, make and trim operations, while knowledge-intensive processes such as design and marketing are concentrated in the more advanced economies of the region. Process and product upgrading occur primarily through technological transfer from lead firms (buyers) in global value chains. However, functional upgrading is typically achieved through local and regional markets. In 2017, the domestic value added in exports of textiles, clothing and leather in Asean was about US$51 billion (RM220 billion) or 68 per cent of the total exports, which became part of the Asean GDP, while the foreign value added was the remaining balance of about US$24 billion or 32 per cent.
Source: Malay Mail
Indonesia’s manufacturing sector has historically played a key role in the country’s economic development and now contributes to 20 percent of GDP. The government has ambitious plans to propel the country into the top ten biggest economies in the world by 2030, with manufacturing at the heart of this goal. The main areas of production include textiles and garments, food and beverages (F&B), electronics, automotive, and chemicals, with the majority of manufacturers in this sector comprising of micro, small, or medium-sized enterprises. The sector has posted a consistent four percent growth year-on-year since 2016 and registered 147 trillion rupiah (US$8.9 billion) in investments from January to September 2019. However, labor productivity within this sector remains low compared with other ASEAN peers and this can be seen by the low-tech contribution of manufacturing to exports. The government is aiming to increase employment in this sector to 20 percent of the total workforce by 2024 through the export of more high-value and complex manufacturing products, particularly in electronics, chemical products, and new high-tech technologies. This new initiative is part of the ‘Making Indonesia 4.0’ roadmap. As such, both domestic and international investments will be crucial to this strategy. This article will provide some practical tips for manufacturers looking to expand or invest in the country.
A Java-centric sector
Investors should note that the majority of businesses in the manufacturing sector are mostly located on the island of Java. The island accounts for 60 percent of the population and 58 percent of GDP; it is also where the capital is situated. Logistics and infrastructure are also more developed here than on the other islands with major land and seaports easily accessible to manufacturers. Additionally, more than half of the 100 or so industrial estates are located on the island. The main manufacturing hubs on the island are in the provinces of West Java, Central Java province, East Java, and Banten.
West Java
Some 60 percent of Indonesia’s manufacturing activities are located in West Java province, ranging from textiles, F&B, automotive, aviation, and electronics. Its top-three exports were machinery, electronics, and electric equipment with automotive, F&B, and industrial estates receiving the most direct domestic (DDI) and foreign direct investment (FDI). FDI into the province reached US$2.2 billion in 2019.
The region presents huge potential for investments in livestock, plantations, and agriculture since the province’s fertile volcanic soil produces 70 percent of national tea production and around 20 percent of total rice production.
Central Java
The manufacturing sector contributes to 30 percent of the GDP of Central Java province. It has become particularly popular with investors engaging in textiles and garment manufacturing with 56 percent of inward textile investment going into the province. Other sectors include food and wood processing, and the non-metallic mineral industry.
Some 21 trillion rupiah (US$US$1.2 billion) worth of DDI and FDI was realized in 2019. The province also contains four international airports, 11 seaports, and more than 3,000 km (1,800 miles) of national and provincial roads. The province is also known for its teak wood
East Java
East Java province has a number of large industries, which includes the largest shipbuilding yard in Indonesia. Moreover, the province contains the largest cement factory in the country.
Major manufacturing sectors also encompass the food industry, machinery, leather goods, and furniture. An estimated 12 trillion rupiah (US$732 million) of DDI and FDI was realized in 2019.
Banten
The province is rich in mineral sources, such as gold, coal, phosphate, and opals, among others. State-owned steel manufacturer PT Krakatau Posco produces some three million tons of steel with other major industries in the province covering chemicals, automotive, and F&B. The Merak seaport is a key transport link between the islands of Java and Sumatra. The port also services one of the largest petrochemical facilities. The country’s main international airport is also located in this province. The cities of Tangerang, South Tangerang, and Cilegon, accounts for almost two-thirds of gross regional domestic product (GRDP), because of their export-oriented processing industries. The province also received 12 trillion rupiah (US$732 million) of DDI and FDI in 2019.
Minimum wages
Based on Minister of Labor Regulation No 7 of 2013 (Reg 7, 2013), ‘leading sectors or industries’ in a province, can determine their own minimum wage rate, also known as UMSP.
For a sector to be considered leading, it will need to fulfill the following criteria:
The industries that have been covered by the UMSP have included:
Investors should note that these industries vary from province to province as does the UMSP rate.
Source: Asean Briefing
Saudi oil supply hits record high despite U.S. pressureDUBAI: Saudi Arabia's crude supply rose on Wednesday to a record of more than 12 million barrels per day, two industry sources said, despite a plunge in demand triggered by the coronavirus outbreak and U.S. pressure on the kingdom to stop flooding the market. A producer pact to rein in oil production expired on Tuesday, removing restrictions on output by members of the Organization of the Petroleum Exporting Countries, as well as Russia and other producing nations. Saudi Arabia had said that its oil exports would be about 10 million bpd, but it gave no indication of how much crude would go into storage. One of the sources, speaking on condition of anonymity, said Aramco has increased its production to its maximum capacity of 12 million bpd. Supply to the market, both domestically and for export, may differ from production depending on the volumes taken out of storage. Saudi Arabia has hundreds of millions of barrels of crude in storage inside the kingdom and abroad. The national oil company Saudi Aramco declined to comment. Riyadh's plan to boost its production and supply to the market defies increasing pressure from Washington to end a battle with Russia for market share. U.S. President Donald Trump said on Tuesday he would join Saudi Arabia and Russia, if need be, for talks about the fall in oil prices, which at current levels will squeeze out higher cost production, particularly U.S. shale output, which had surged in recent years. U.S. lawmakers have taken a tough approach - raising the prospect of legislative action if Riyadh does not reduce oil output voluntarily. Crude oil benchmarks ended a volatile first quarter with their biggest losses in history. On Wednesday, oil slid towards $25 a barrel, after touching its lowest level in 18 years. On Tuesday, a Saudi oil industry source told Reuters Aramco has asked energy service companies to support its plans to lift oil production to its maximum capacity of 12 million bpd from April 1 "for the foreseeable future". The state oil giant has also told the service companies to "avail the required resources, including workforce and equipment" to help it raise its capacity to 13 million bpd, the source said. But Saudi oil officials have yet to explain how Saudi Arabia can raise shipments so much when sweeping retractions on movement to contain the coronavirus are destroying demand and surging freight rates are a further deterrent for potential buyers. Saudi Arabia has struggled to find customers for its extra oil, industry sources said, undermining the kingdom's efforts to capture market share.
Source: Economic Times
