The Synthetic & Rayon Textiles Export Promotion Council

MARKET WATCH 13 APRIL, 2020

MARKET WATCH 13 APRIL, 2020

National

INTERNATIONAL

Covid-19: Synthetic textile companies seek financial package to pay wages

The demand comes in the wake of closure of factories, wholesale and retail outlets due to the nationwide lockdown announced by the government on March 25. Synthetic textile players have urged the Centre to compensate the expenses being incurred during the 21-day lockdown for paying salaries and wages to employees and costs relating to cancellation or deferment of export orders. The demand comes in the wake of closure of factories, wholesale and retail outlets due to the coronavirus (Covid-19) outbreak. The lockdown has brought the entire business into a standstill and resulted in massive losses for the entire industry. “Extend support to the industry for payment of salaries and wages to workers during the lockdown period similar to that provided by the government of Bangladesh to its textile units. Also, compensate the full expenses being incurred by exporters due to cancellation and deferred orders,” said Ronak Rughani, chairman, the Synthetic and Rayon Textiles Export Promotion Council (SRTEPC), in a meeting held with officials of the textile ministry.

The Bangladesh government is transferring three months salaries directly to employees/workers through its commercial banks. It said the amount has to be repaid at 2 per cent interest in 18 instalments within a period of two years by employers to the commercial banks. “The immediate requirement is to allow manufacturing facilities to function at 50 per cent capacity at least and gradually lift the restrictions. There is also a need for creating an environment to export the produce without any hassles from different departments involved in the system. Ensure good support from the banking system by providing moratoriums and enhanced working capital facilities. Another requirement is to ensure duty refunds from the government with immediate effect and provide extra export incentives,” said Madhu Sudan Bhageria, chairman and MD, Filatex India. The manmade fibre (MMF) textile segment is one of the worst hit in this epidemic. Huge losses have incurred and there is shortage of funds due to the cancellation and deferred orders.

This has put the industry under a ventilator, said SRTEPC. There is an urgent need for a special corona-relief package to the textile industry, including entire value chain of the MMF textile segment, to tide over the prevailing coronavirus crisis, it added. To address the problems emerging after the outbreak, the government requires to grant special export incentive of 3 per cent on fibre and yarn, 4 per cent on fabric and 5 per cent on made ups. This has to be for at least six months or till the impact of coronavirus subsides and global markets stabilise. Also, a separate package for MMF textiles has been sought as this segment has been reeling from an inverted duty structure under the goods and services tax (GST). Additionally, there is a need to enhance working capital limit and advances for exports on a case-to-case basis without any collateral. The industry needs to be provided 30 per cent additional working capital at 7.25 per cent interest for both exports and domestic production. This has to be without any collateral and margin money to meet the working capital needs, pay salaries and wages to employees and comply with standing charges.

Source: Business Standard

Back to top

Department of commerce asks home ministry to allow exporting units restart work

The department of commerce has asked home ministry to allow exporting units to restart work with partial workforce maintaining required precautions such as hygiene and social distancing. Commerce secretary Anup Wadhawan has written to his counterpart in the home ministry asking if some manufacturers, who are keen to resume exports to fulfill orders to be delivered by the end of the month, can be allowed to resume operations, said people familiar with the development. Commerce and industry minister Piyush Goyal held a meeting with export promotion councils on Wednesday to take stock of the sector, which has been hit hard by Covid-19 outbreak and the subsequent lockdown. Exporters, who have orders that need to be fulfilled quickly, have taken up the issue with the government. “The department has proposed that industry can begin exports with reduced labour force, but with prescribed precautions,” said another official, who attended the meeting.

As per yet another person who attended the meeting, a letter has been sent to the home ministry with suggestions on ways to ensure production begins while maintaining safety of workers, so units can operate at half capacity. Global merchandise trade is expected to see a steep decline of anywhere between 13% to 32% in 2020 due to Covid-19 spread in some of India's key markets. "The exports sector is facing over 50% cancellation. The worst hit are the life style product like leather, carpets, handicrafts, apparels which are having over 75% cancellations," said . Sharad Kumar Saraf, president, Federation of Indian Export Organisations (FIEO) in a letter to Prime Minister Narendra Modi on Thursday. Exporters have asked the government to allow them re-start their operation with 50% labour force. This, they said, will help businesses pay rent, wages will keep migrant labourers from going to their hometowns as also prevent losing market to China. “

The problem is that whatever little orders are there are getting stuck because we’re unable to export. If we don’t allow it now, we will not be able to supply the ready-to-ship products, which are to be delivered by the end of this month,” said one industry representative who attended the meeting. Industry sources said that Punjab and Rajasthan are keen to allow exporting units to resume operations and Maharashtra too has written to union home ministry for the same. WTO director-general Roberto Azevêdo on Wednesday said keeping markets open and predictable would be critical to spurring renewed investment as the world confronts one of its deepest economic recessions. FIEO has asked the government to immediately provide Rs 30,000 crore worth of interest-free working capital term loan to exporting companies to ease their working capital liquidity issues and prevent large- scale unemployment that could follow postlockdown, especially in the labour intensive sectors. In its proposal for interest-free working capital loan for exporters, it said that the burden on the government would only be Rs 1,974 crore while the benefits to exporters would be immense and help their operations. The exporters body has also sought EPF and ESIC waiver for three months to support labour intensive sectors.

Source: Economic Times

Back to top

SEZs seek govt permission to sell goods in India at discounted import duty

Export Promotion Council for EOUs & SEZs (EPCES) on Sunday urged the commerce ministry to allow units to sell goods at discounted import duty rates in the domestic market as the national lockdown and cancellation of orders may impact jobs. SEZs are treated as a foreign territory in terms of customs laws. They are developed as exclusive export zones. Selling of goods by these manufacturing units in the domestic market or outside these zones is treated as imports and therefore the units have to pay full import duty. "In this crisis time, we have asked the commerce ministry that SEZs may be permitted for sale of their product in the domestic market on the discounted rate of basic customs duty, at least for one year. This will help them to utilise their capacity and required to save their employees and meet break-even," Export Promotion Council for SEZs and EOUs Vice-Chairman Bhuvnesh Seth said. He said that in the lockdown, the council has also urged for permission to resume work with minimum staff to execute export orders as exporters will lose clients to China or other Asian countries. Seth said that due to the lockdown and huge cancellation of export orders, "employment retrenchment will be around 50 per cent". He added that liquidity crunch will not allow the zones to pay salaries for April. The export-oriented units and SEZs are providing direct employment to more than 25 lakh person and has attracted an investments of more than Rs 5.50 lakh crore, he said. "It has contributed Rs 7.87 lakh crore to India's export basket which is one-third of total national exports," he added.

Source: Business Standard

Back to top

Textile exporters stare at losses

COIMBATORE: Export of cotton yarn and fabrics has come down due to the Covid-19 pandemic and the subsequent lockdown, say representatives of a textile export association. Overseas buyers have cancelled 30% of the orders due to the uncertainty unleashed by the pandemic, chairman of the Cotton Textiles Export Promotion Council (TEXPROCIL) K V Srinivasan said. “Manufacturing units and textile retails in the countries that buy cotton yarn and fabrics from India are closed. So, they are cancelling the already placed orders,” he said. “Not only cotton yarn, orders for cotton fabrics and home textiles such as bedsheets and pillow cases have been cancelled.” Exporters are facing problems as buyers are delaying payments against export bills for the shipments already made, Srinivasan said. “Exporters who have entered into forward contracts with banks are now unable to surrender the committed amounts on foreign exchange due to delay in receiving the payments. As a result, they face huge losses as they are forced to either cancel or roll over the forward contracts, which involves penalty and other charges,” he said. Srinivasan said to help the sector tide over the crisis, the Centre should include cotton yarn in the merchandise exports from India scheme (MEIS) and rebate of state and central taxes and levies (RoSCTL) scheme. “Fabrics should be included in the RoSCTL scheme. Cotton yarn currently has no such benefits. Also, to address the issue of liquidity faced by the exporters, all pending claims under the technology upgradation fund (TUF) scheme and the erstwhile rebate of state Levies (ROSL) should be released for made-ups and garments.”

Source: Times of India

Back to top

Textile ministry steps up procurement of PPE

The textile ministry has procured 130,000 coverall suits from Indian producers amid a shortage of the protective gear being used by health care workers while treating coronavirus disease patients. According to officials familiar with the matter, the producers have reached a daily production capacity of 22,000 units. Since domestic production of the PPE suits began last month, 33 Indian producers have passed the quality tests laid down under norms stipulated by the WHO. Earlier, the country relied on international players for the for the suits. “This is a significant achievement considering that we had started from nowhere a month back, and the fabric had to be developed in the country for the first time. We hope to touch 50,000 units daily in the coming week, which will stabilise the supply chain,” said a senior textile ministry official, on condition of anonymity. The daily production capacity for the suits has been steadily growing with new producers making the cut. It was 16,000 units on April 10, as many as 15,700 on April 9 and 11,500 on April 8, said officials. Officials said that an additional two lakh PPE suits have come in from China through Indian donors. South India Textile Research Association officials said that the number of producers writing to them for approvals has risen. However, some of the untested producers were selling the units to private players, prompting the ministry to lay down new norms under which all PPE units will have a Unique Certification Code and tamper-proof stickers in indelible ink, officials said.

Source: Hindustan Times

Back to top

Covid-19 lockdown: Ficci urges easier norms for manufacturing to resume

Industry body wants package for labourers, protection against imports and military support for delivering essentials. While the government assesses the economic fallout of a proposed extension of the current lockdown, the Federation of Indian Chambers of Commerce & Industry (Ficci) has said the country can’t afford prolonged confinement. Arguing in favour of maximum social distancing at all costs, Ficci has called for dynamic policy measures to bringing about a fine balance that normalises economic and social activity in an exit strategy, released on Friday. Prime among these is a demand for a package for migrant labourers as well as effective messaging by central and state governments to ensure their early return. Ficci has said the Department for Promotion of Industry and Internal Trade (DPIIT) may drive the process and instill greater confidence among the labourers. For essential commodities, Ficci has proposed greater relaxation in the number of hands working at the plant and warehouses.

It has also suggested that industry associations be allowed to submit to the Centre the names of companies, their manufacturing/warehousing locations and the number of people at each location by shift. A central administrative manager for each firm would be empowered to issue authorisation letters to employees along with copy of a central letter that must be recognised by the State government. It also wants the government to institute Covid-19 standards for manufacturing, compliance to which will enable even non-essential units to operate. The chamber has released a long list of demands that it says are necessary to support domestic industry in tiding over the economic downturn. It has asked the government to put in place higher import duties for products other than essentials and raw materials for six months, in order to protect the domestic sector. Arguing that India may face a massive wave of Chinese dumping, it has asked the government to introduce strict anti-dumping measures expeditiously. Ficci has also pushed for all pending payments from government buyers to be immediately cleared and paid to companies so that crucial working capital is unlocked.

The need for three per cent interest subvention on working capital and term loans for small businesses has also been pointed out. The industry body has also sought a rebate on or deferment of electricity bills and tax deferment, including GST without any penalties. On the farm front, Ficci has said that inputs such as seeds and fertilisers are currently not available to farmers and that is hampering the cultivation of summer crops. It has warned that the entire agricultural value chain needs to be reopened fast, otherwise a crisis for farmers and agriculture labour may ensue. Also, farmers should be encouraged to sell their produce through e-NAM directly without needing to take the produce physically to Agricultural Produce Market Committee (APMC) centres. For medical supplies, farm produce and other essential items, the industry body has called for the deployment of army or para-military forces and their vehicles, removing the need of intra-state and inter-state permits.

Source: Business Standard

Back to top

Need economic package and open industry in staggered manner, says CII

The Confederation of Indian Industry (CII) on Sunday demanded that the Centre announce an economic package and give adequate notice before lifting the lockdown. It also lent support to the growing calls of a calibrated and safe exit from the lockdown. The CII has argued in favour of the government providing direct rations to affected populace rather than cash, therefore negating the impact of inflation, if any, on the population and also ensuring that the money is indeed spent on food and basic provisions. In addition, this needs to be combined with provision of shelter and meals for the people, who are in need of this.  It has also backed the notion that credit offtake needs to grow at least 14-15 per cent by the year-end. In an ambitious move, the CII has suggested all banks provide additional working capital to all firms, equivalent to their three-month wage bill at interest rates between 4-5 per cent.  In stressed sectors like construction, aviation or tourism, the additional working capital also needs to cover their interest obligation as well, the chamber has said. With the number of cases continuing to rise at a fast clip, the mapping of the country based on the the incidence of cases is necessary, CII Director General Chandrajit Banerjee said. CII has also called for prioritising and allowing industry to gradually start operating.

 

Source: Business Standard

Back to top

Foreign exchange reserves decline $902 million to $474 billion: RBI data

The gold reserve also declined by $340 million to $30.55 billion in the reporting week, the RBI data showed. India's foreign exchange reserves declined by $902 million to $474.66 billion in the week to April 3 due to a fall in foreign currency assets, said RBI data on Friday. In the previous week, the reserves had surged by $5.65 billion to $475.56 billion, according to the latest data, news agency PTI reported. The reserves had touched a life-time high of $487.23 billion in the week to March 6, after it rose by $5.69 billion. During 2020-21, foreign exchange reserves have risen by almost $62 billion. In the reporting week ended April 3, the foreign currency assets (FCA), a major component of the overall reserves, decreased by $547 million to $439.12 billion. Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves. The gold reserve also declined by $340 million to $30.55 billion in the reporting week, the RBI data showed. The special drawing rights with the International Monetary Fund (IMF) were up by $5 million to $1.43 billion. The country's reserve position with the IMF dipped by $19 million to $3.57 billion, the data showed.

Source: Business Standard

Back to top

Corona blues: April GST could fall by 40%

With the lockdown hitting business activity, GST revenues for April could be down by 30-40% of the annual monthly collections of around Rs 1 lakh crore in FY20. FMCG firms will ensure the dip isn’t more. Currently collections are just a fifth of normal levels.

Source: Financial Express

Back to top

Textiles output expanded by 5.1% in Feb 2020

Among the 23 industries tracked by the Central Statistics Office's Index of Industrial Production, the textiles industry had the eighth highest growth rate. Factory output in the textiles industry expanded 5.1% in Feb 2020 compared to the same month last year, according to new data released by the Central Statistics Office. In comparison, it had expanded at 3.4% in the previous month of Jan 2020. Growth in the textiles industry was more than that in overall industrial output, which grew 4.5%. Textiles made up 3.29% of the overall index of industrial production (IIP), and contributed 0.17% to overall IIP growth. Among the 23 industries tracked by the Central Statistics Office's Index of Industrial Production, the textiles industry had the eighth highest growth rate. Across all industry sectors, the growth rate was highest in manufacture of basic metals, and lowest in manufacture of motor vehicles, trailers and semi-trailers. Factory output is measured by the Index of Industrial Production (IIP), a composite index that measures changes in the volume of production of selected industrial goods.

Source: Live Mint

Back to top

Need balanced exit strategy from lockdown: India Inc

In working out an exit strategy from the current nationwide lockdown, the government should aim towards bringing about a fine balance that on one hand normalises economic and social activity and yet contains Covid-19 from spreading and getting out of control, industry body FICCI suggested on Friday. Though India in the global context, so far has not seen a larger number of cases who would need hospitalization, however, the increase of infected people in the past few days may lead to a situation wherein more and more patients may require respiratory assistance and intensive care. At the same time, for a country like India we also can’t afford to have a prolonged lockdown that lasts for months,” the industry body said in submission to the government. The industry body’s suggestions come ahead of the Prime Minister Narendra Modi's meeting with state Chief ministers on Saturday to take a final call on whether the current lockdown will be extended beyond April 14, as number of positive Covid-19 cases in the country remain on the rise.

Source: Economic Times

Back to top

World Bank sees India's GDP growth at 1.5-2.8%, lowest since 1991 crisis

Projection to 1.5-2.8 per cent for the current fiscal year, which would be the lowest economic expansion since the balance of payments crisis of 1991-92, as Covid-19 is dragging down activities in the already slowing economy. It had earlier projected the growth to be 6.1 per cent for 2020-21. In its South Asia Economic Update, the Bank warned that migrant workers and conditions in slum areas would make it challenging to adopt social distancing norms to arrest the spread of deadly coronavirus. The publication, brought before the spring meetings of the IMF and the World Bank later this month, predicted industrial gross value added to be flat in 2020-21, against 1.9 per cent expected for 2019-20. Services were pegged to grow by 4.1 per cent in the current fiscal year, against 6.9 per cent a year ago, and agriculture by 2.7 per cent against 3.5 per cent. IMF is also likely to come out with its report on world economic outlook shortly. The World Bank expected India’s economy to grow by 2.8 per cent in case lock down is not stretched much. In case of a prolonged lockdown, the growth could further slip to 1.5 per cent, it warned. At both these rates, India would be growing at the slowest pace since 1991-92, when the economic expansion fell to 1.1 per cent. Some other agencies predicted far worse scenario for India. For instance, Nomura predicted India’s economy to contract by 0.5 per cent during 2020 calendar year. However, some others predicted bit better scenario. 

Asian Development Bank expected India’s economy to grow four per cent in 2020-21. However, the growth is expected to recover to 4-5 per cent in the next year or in other words almost same or worse than where it stood in 2019-20, according to the World Bank. The Bank predicted GDP growth at 4.8-5 per cent for 2019-20, against the second advance estimate of 5 per cent. “Growth is estimated to have decelerated to 5.0 percent in FY20 and it is expected to slow down again in FY21. Structural and financial-sector weaknesses are compounded by severe disruptions to economic activity caused by the Covid-19 outbreak,” it said. The Bank pegged general fiscal deficit (Centre and states combined) to touch 9 per cent in the current fiscal year as the governments spend more and revenues dwindled. The deficit could widen more depending on the period of lockdown, it said. The crisis may dampen the country’s efforts to reduce poverty. “While poverty declined to an estimated 13.4 per cent in 2015, at the $1.90 a day international poverty line, the slowdown in growth and in the rural economy may have dampened the pace of poverty reduction,” the Bank said. Even in countries at a higher level of GDP per capita in south Asia, such as India and Pakistan, still around 70 per cent suffer from this basic deprivation. “It should not be a surprise that a highly transmissible disease could spread more quickly among those in poorer groups,” it said.

The multi-lateral agency said the Covid-19 outbreak came at a time when India’s economy was already slowing, due to persistent financial sector weaknesses. To contain it, the government imposed a ‘lockdown’ with restrictions on mobility of goods and people. The resulting domestic supply and demand disruptions on the back of weak external demand are expected to result in a sharp growth deceleration in FY21 with the services sector particularly impacted. It said a revival in the domestic investment was likely to be delayed given enhanced risk aversion on a global scale and renewed concerns about financial sector resilience. In such a situation, the only silver lining would be the balance of payments position which is expected to improve on weak domestic demand, low oil prices, and Covid-related disruptions. The current account deficit is expected to narrow to 0.2 per cent in FY21 from expected 1 per cent a year ago. The Bank warned that the high density of households in urban slums further reduces the efficacy of social distancing measures. The lockdown will also have an adverse economic impact on self-employed and casual workers. The closure of shops, hotels and restaurants alone will affect 11 per cent of such workers in these sectors. Domestic migrants scrambling to return to their homes in rural areas and currently stuck in transit are also facing significant vulnerabilities, it said. A welfare package from the government can help poorer households cope with short-term Covid-related losses.

However, it said India set aside just over 1 per cent of GDP for programmes to increase health sector spending and compensate the unemployed, with the bulk of the money going towards cash transfers, free food and gas cylinders, and interest-free loans. In India, some economists doubt that the planned economic stimulus will be enough, it said. The Bank warned that south Asia has some of the highest population densities in the world, particularly in urban areas. This makes contagion easier, especially among the most-vulnerable people — slum dwellers and migrant workers. “In India, Bangladesh and Pakistan, the time between the announcement of suspension of inland passenger transport and its enforcement was less than a day, which created chaos as migrants scrambled to get back to their provinces, exacerbating the crowding and making enforcement of social distancing impossible,” it said. It quoted a non-governmental organisation, Aajeevika Bureau, to say that the total number of migrant workers in India might be as high as 120 million or more. The top three labour sending districts are west Tripura, Solapur in Maharashtra, and Imphal West in Manipur, the Bank said quoting official statistics.

It said if it was not possible to prevent reverse migration to rural districts via urban-centered social protection programmes, the governments in south Asia should consider immediate assistance to migrants to limit suffering and loss of life during the strenuous long-distance journeys, by providing information and food and water to journeying migrants. In India, balance sheet vulnerabilities of listed corporate and their refinancing needs in 2020 were already high before the crisis, the Bank said. With central banks providing much-needed room to extend credit in the region, state-owned banks may be the best vehicle to on-lend funds. For example, governments could create Covid-19 bonds to lend to affected companies and step up through state-owned banks, it said. It said public banks are both a cause and a potential balm for the severe stress financial markets now face. It called for stronger governance and accountability reforms to improve efficiency of these banks.

Source: Business Standard

Back to top

Global Textile Raw Material Price 12-04-2020

 

Item

Price

Unit

Fluctuation

Date

PSF

831.29

USD/Ton

0%

12-04-2020

VSF

1293.11

USD/Ton

0%

12-04-2020

ASF

1771.99

USD/Ton

0%

12-04-2020

Polyester    POY

742.47

USD/Ton

0%

12-04-2020

Nylon    FDY

1762.04

USD/Ton

0%

12-04-2020

40D    Spandex

4049.85

USD/Ton

0%

12-04-2020

Nylon    POY

5229.28

USD/Ton

0%

12-04-2020

Acrylic    Top 3D

994.70

USD/Ton

0%

12-04-2020

Polyester    FDY

1698.10

USD/Ton

1.27%

12-04-2020

Nylon    DTY

2188.34

USD/Ton

0%

12-04-2020

Viscose    Long Filament

909.44

USD/Ton

0%

12-04-2020

Polyester    DTY

2131.50

USD/Ton

2.04%

12-04-2020

30S    Spun Rayon Yarn

1854.41

USD/Ton

-0.76%

12-04-2020

32S    Polyester Yarn

1406.79

USD/Ton

-1%

12-04-2020

45S    T/C Yarn

2216.76

USD/Ton

-0.64%

12-04-2020

40S    Rayon Yarn

2074.66

USD/Ton

0%

12-04-2020

T/R    Yarn 65/35 32S

2017.82

USD/Ton

0%

12-04-2020

45S    Polyester Yarn

1776.25

USD/Ton

0.81%

12-04-2020

T/C    Yarn 65/35 32S

1619.94

USD/Ton

0%

12-04-2020

10S    Denim Fabric

1.19

USD/Meter

-0.71%

12-04-2020

32S    Twill Fabric

0.66

USD/Meter

0%

12-04-2020

40S    Combed Poplin

0.95

USD/Meter

0%

12-04-2020

30S    Rayon Fabric

0.51

USD/Meter

-0.83%

12-04-2020

45S    T/C Fabric

0.65

USD/Meter

-0.44%

12-04-2020

Source: Global Textiles

Note: The above prices are Chinese Price (1 CNY = 0.14210 USD dtd. 12/04/2020). The prices given above are as quoted from Global Textiles.com.  SRTEPC is not responsible for the correctness of the same.

Back to top

Bangladesh: PM unveils new stimulus package

Mentioning that the Covid-19 outbreak could cause a slowdown of the country’s economic growth, PM Sheikh Hasina said the government will extend similar funds in future to manage the pandemic impact. Prime Minister Sheikh Hasina yesterday unveiled a set of financial support packages of Tk72,750 crore to shield the economy from the impact of the coronavirus pandemic providing low-cost funds to affected industries. The entire amount which is nearly 2.52 percent of GDP will come from the banking system and the government will provide interest subsidy under the packages. The premier made the announcement in a televised speech from her official Ganabhaban residence in the capital yesterday. "Earlier I declared a Tk5,000 crore (emergency) incentive package for paying salaries and allowances of workers and employees of export-oriented industries and today I am announcing four fresh financial stimulus packages of Tk67,750 crore," she said. Mentioning that the Covid-19 outbreak could cause a slowdown of the country's economic growth, PM Sheikh Hasina said the government will extend similar funds in future to manage the pandemic impact. Bangladesh confirmed its first Covid-19 case on March 8.

As of Sunday, 88 cases including nine fatalities were reported. The government has extended the ongoing shutdown of public transport and general holidays to April 14 to stop the spread of the virus. It had earlier declared a 10-day nationwide general holiday and public transport shutdown effective from March 26. While unveiling her government's work plan to mitigate the economic impact of Covid-19, the premier said the government has taken four programmes which will be implemented in phases categorised as "immediate, short-term and long-term"."The four programmes are increasing public expenditure, introducing fiscal packages, widening social safety net coverage and increasing money supply," she said. Highlighting the key aspects of the four new financial packages, the premier said the first of the four packages would be of Tk30,000 crore that will be made available to affected industries and services sector as working capital through banks as low-interest loans. She said commercial banks would provide the amount as loans from their own funds to industries and enterprises concerned on the basis of bank-client relations. "The interest rate of this lending facility will be 9 percent, and the industries and business organisations concerned will pay 4.50 percent, while the government would pay the re Sheikh Hasina said under the second package, micro, small and medium enterprises (MSMEs) including cottage industries would get Tk20,000 crore as working capital. She said a mechanism would be devised to make the amount available to the MSMEs as low-interest loans through banks which identically will disburse amounts to the MSMEs on the basis of bank-client relations. The government in this case would bear the greater share of the interest amount. "The interest rate for this lending facility will be 9 percent of which 4 percent will be paid by the industries and businesses, while the government will subsidise the remaining 5 percent," the premier said. The fourth package concerns the Bangladesh Bank's Export Development Fund or EDF, which will be increased to $5 billion from $3.5 billion now to facilitate import of raw materials under back-to-back letters of credit (LC).

The prime minister said this last package would add an additional Tk12,750crore, equivalent to $1.5 billion, to the EDF while its interest rate would be brought down to 2 percent. The existing EDF interest rate is 2.73 percent in line with current London Interbank Offered Rate-LIBOR + 1.5 percent. The prime minister said under the fourth package, the central bank will introduce a new credit facility of Tk5,000 crore as "Pre-shipment Credit Refinance Scheme" and its interest rate would be 7 percent. Sheikh Hasina said local products alongside the export-oriented sectors would deserve special attention and support to cope with the possible global and domestic economic crisis caused by the pandemic."In this regard, I call upon all to boost production of local products and increase their consumption," she said.The premier strictly warned all departments involved with the implementation of the stimulus packages against indulging in any type of corruption, irregularity and misuse."I want everybody to work with utmost sincerity and honesty.

Taking the opportunity (of the crisis), don't indulge in any type of corruption, irregularity and misuse," Sheikh Hasina said. "I hope our economy will rebound and we could reach close to the desired economic growth, if the stimulus packages, the previous and the fresh ones, could be quickly implemented," she said.Finance Minister AHM Mustafa Kamal, the Senior Secretary of Finance Ministry Abdur Rouf Talukder, and the Bangladesh Bank Governor Fazle Kabir also spoke at the press conference moderated by the PM's Press Secretary Ihsanul Karim. PM's Principal Secretary Dr Ahmad Kaikaus and the Prime Minister's Office (PMO) Secretary Md Tofazzel Hossain Miah, among others, were also present. In her speech, Prime Minister Sheikh Hasina elaborated the four financial support programmes. Increasing public expenditure: Generating employment will be mainly given priority in public expenditure while foreign tours and lavish expenditure will be discouraged. Since the debt to GDP ratio of Bangladesh is very low (34%), the higher public expenditure would not create any pressure on the macro economy of the country. Introducing fiscal packages: Some low-interest credit facilities will be launched through the banking system. The main objective of this programme is to rejuvenate the economic activities by keeping the jobs of workers and employees as well as the competitive edge of entrepreneurs intact. Widening social safety net coverage: The existing social safety net programmes of the government would be further widened to support the basic needs of people living below the poverty line. Increasing Monetary Supply: It is extremely important to increase the monetary supply to overcome the adverse impact of Covid–19 on the economy. PM Sheikh Hasina mentioned that the Bangladesh Bank has already reduced the CRR and REPO rate to boost the money supply which will continue in the future as necessary. "But, in this regard, our goal would be to see that there is no increase in inflation due to monetary supply," she said.

Impact on global economy

The prime minister said the rapid spread of the novel coronavirus, huge pressure on the health sector, unprecedented lockdown, and disrupted communication to curb the pandemic have already started to affect the global economy. "Sectors and areas affected include industries and production; export and trade; services sectors, especially tourism, aviation, and hospitality; small and medium enterprises; and employment," she said. Not only the supply side, she mentioned, the consumption and investment in demand are also witnessing a downward trend. Sheikh Hasina said the International Monetary Fund (IMF) has already declared that a global economic recession has started while stock markets across the globe have witnessed a fall of 28-34 percent over the last few weeks. Citing an estimation of the Organisation for Economic Co-operation and Development (OECD), she said the global economic growth could come down to 1.5 percent if the recession persists for a long period. A huge number of workforces across the globe are feared to lose their jobs, she said. Sheikh Hasina said if the recession persists longer, it is also apprehended that the world will face a great economic depression for the first time after World War II. She said it was not time yet to identify clearly and definitely the impact of the coronavirus pandemic on the Bangladesh economy.

Impact on domestic economy

The prime minister also listed some of the impacts of the Covid-19 on the country's economy which are as follows: Fall in import-export: The import cost and export earnings in this fiscal year have witnessed a 5 percent fall compared to the same period of the last fiscal year. This fall could further stretch at the end of the current fiscal year. Slump in private investment: There is a possibility of not getting private investment at a desired level due to the delay in implementation of the ongoing mega projects, establishment of the economic zones and also delay in implementing the decision to reduce bank interest rates. Virus-hit service sector: The novel coronavirus will leave a negative impact on the services sector, especially hotel-restaurants, transport and the aviation sectors. Shock in capital market: Like in other countries of the world, the capital market in Bangladesh will also suffer adverse impacts due to the novel coronavirus. Impact on remittance inflow: Due to a decline in global demand, oil price in the international market has fallen by over 50 percent for which the inward remittance flow is being affected. Economic loss: The Asian Development Bank (ADB) in its estimation said the economic loss of Bangladesh due to the Covid-19 pandemic could extend up to $3.2 billion. But under the present circumstances, it is assumed that the extent of loss could be much. Impact on demand-supply: The purchasing capacity of low-income people could fall and there could be disruption in the supply chain due to long general holidays, which might affect the production of the SMEs and disrupt the transport services. Shortfall of revenue collection: The overall revenue collection in the current fiscal year (FY20) is less compared to the budgetary target. This could further increase the budget deficit at the end of the current fiscal year.

GDP loss: A strong domestic demand coupled with supportive revenue and monetary policy was the driving force behind the attainment of over 7 percent GDP growth on an average for three years and lastly an 8.15 percent growth in FY19. The GDP growth could decline due to the negative trend of the macroeconomic indicators. Prime Minister Sheikh Hasina once again urged the people to celebrate Pahela Baishakh (Bangla New Year) on April 14 in their homes. "The cultural programmes can be aired through the media," she said. Talking about the upcoming Shab-e-Barat falling on April 9, she called upon Muslims to perform their prayers at their homes. "Please seek blessings staying at your homes so that Almighty Allah saves us all, the people of the country could advance socio-economically and the people from home and abroad get rid of this pandemic," she said. Addressing the Sunday's press conference, Finance Minister AHM Mustafa Kamal said, "If everything goes well and the present situation doesn't linger, our growth will be near 8 percent." Analysing the pre-Covid-19 pandemic situation, the finance minister said, "Our growth rate was satisfactory. Remittance and revenue collection were also good. We were lagging behind in export earnings. Growth in remittance will cover the shortage in export earnings." Senior Secretary of the finance ministry Abdur Rouf Talukder said the loan amount in the declared stimulus packages can be used twice as these are short-term loans, which are payable in four to six months. "If we can use the amount effectively the package amount will eventually turn into Tk1.35 lakh crore," he added. Bangladesh Bank Governor Fazle Kabir highlighted the central bank's initiatives taken up during this period. He said industry workers' wages for April will be disbursed on the last day of the month.

Source: The News

Back to top

New Data Shows U.S. Companies Are Definitely Leaving China

U.S. companies are leaving China thanks to the trade war. They’ll leave even more thanks to the pandemic. Sorry, Davos Man. Your China-led globalization is going out of style like bell bottoms. Global manufacturing consulting firm Kearney released its seventh annual Reshoring Index on Tuesday, showing what it called a “dramatic reversal” of a five-year trend as domestic U.S. manufacturing in 2019 commanded a significantly greater share versus 14 Asian exporters tracked in the study. Manufacturing imports from China were the hardest hit. Last year saw companies actively rethinking their supply chain, either convincing their Chinese partners to relocate to southeast Asia to avoid tariffs, or by opting out of sourcing from China altogether. “Three decades ago, U.S. producers began manufacturing and sourcing in China for one reason: costs. The trade war brought a second dimension more fully into the equation―risk―as tariffs and the threat of disrupted China imports prompted companies to weigh surety of supply more fully alongside costs. COVID-19 brings a third dimension more fully into the mix, and arguably to the fore: resilience―the ability to foresee and adapt to unforeseen systemic shocks,” says Patrick Van den Bossche, Kearney partner and co-author of the 19-page report. The main beneficiaries of this are the smaller southeast Asian nations, led by Vietnam. And thanks to the passing of the U.S. Mexico Canada Agreement, Mexico, for all its problems with drug cartels, has become a favorite spot for sourcing.

Source: Forbes

Back to top

Europe could fall, Italy warns as EU tries again for rescue deal

European finance ministers are again trying to hammer out a deal to minimise the expected recession. The European Union faces an existential threat if it cannot come together to combat the coronavirus crisis, Italy said on Thursday as the divided bloc sought to salvage talks on a rescue package to aid battered economies.A deal has so far proved elusive amid fraught discussions between the more fiscally conservative north and the indebted south, which has been hit hard by the pandemic and is pushing for unprecedented measures like issuing joint EU debt. Sixteen hours of talks between EU finance ministers on a half-a-trillion-euro ($546bn) package collapsed on Wednesday. They resumed on Thursday to push for a deal to help governments, companies and individuals through a deep recession the pandemic is expected to cause in Europe this year. "It's a big challenge to the existence of Europe," Italy's Prime Minister Giuseppe Conte told the BBC. "If Europe fails to come up with a monetary and financial policy adequate for the biggest challenge since World War II, not only Italians but European citizens will be deeply disappointed." For weeks, the EU has struggled to show a united front in the face of the pandemic, with the 27 member states squabbling over economic rescue plans, medical supplies and border curbs. France and Germany are pushing for a compromise to break the deadlock, but budget hawk Austria said that, while it was willing to make concessions, the contentious "euro bonds" remained a no-go for Vienna. "That is out of the question for us," said Austrian Finance Minister Gernot Bluemel. A deal may still be possible on Thursday, said German Finance Minister Olaf Scholz. "It looks like an agreement is possible," he said, signalling that the Netherlands, seemingly alone in demanding tough conditions for countries like Italy and Spain if they draw aid funds, had softened its stance. A senior EU diplomat said the risk was growing that the finance ministers would just patch up divisions for the sake of announcing a deal, but would leave the key unresolved issues to national leaders. "There is a lot of pressure for an agreement today," said the diplomat. "Germany and France are pushing for it. But it's not easy ... we may be heading for a formal agreement that doesn't really solve much in practice."

Sticking points

The package under discussion would bring the EU's total fiscal response to the epidemic to 3.2 trillion euros ($3.5 trillion), the biggest in the world. But it includes contentious elements that expose deep divisions among countries on sharing the financial burden of crises, bringing back bitter disputes and mistrust from the sovereign debt crisis of 2010-2012. Another problem is agreeing on conditions under which eurozone governments could access cheap credit from the eurozone bailout fund, the European Stability Mechanism. Italy and most other countries are ready to accept very light conditions, but the Netherlands wants stricter rules, including country-specific economic criteria, which is politically unacceptable for Rome. "It's important that we take this decision today on the 500 billion euros that is in discussion - that's an incredibly large sum of money that we could use to help a lot of people, especially in the hardest-hit countries, Spain and Italy," German Economy Minister Peter Altmaier said. Other elements of the package being discussed are more guarantees for the European Investment Bank to back up companies and a scheme to help subsidise wages across the bloc so that companies can cut work hours instead of jobs. But a separate plan to finance the recovery, after the epidemic, raises more questions. France and the southerners want the money - possibly up to three percent of EU gross domestic product, or more than 400 billion euros ($437bn) - to be borrowed jointly on the market by all EU states. This is a red line for Germany, the Netherlands, Finland and Austria, which strongly oppose joint debt issuance, even in such an emergency as the coronavirus pandemic. The ministers might end up sidestepping the problem by just mentioning the need for a recovery fund and asking the 27 national leaders of the bloc to decide on how to finance it.

Source: Aljazeera

Back to top

Japan Will Pay Its Firms to Leave China, Relocate Production as Part of Coronavirus Stimulus Package

Japan is willing to fund its companies to shift manufacturing operations out of China, Bloomberg has reported as the disruptions caused to production by the coronavirus pandemic has forced a rethink of supply chains between the major trading partners. As part of its economic stimulus package, Japan has earmarked $2.2 billion to help its manufacturers shift production out of China. Of this amount, 220 billion yen ($2 billion)is for companies shifting production back to Japan and 23.5 billion yen for those seeking to move production to other countries. China is Japan’s biggest trading partner under normal circumstances, but imports from China have slumped by almost half in February due to lockdowns to curb the spread of the virus hitting manufacturing and the supply chain. Shinichi Seki, an economist at the Japan Research Institute, predicted that there would be a shift in the coming days as there already was renewed talk of Japanese firms reducing their reliance on China as a manufacturing base. “Having this in the budget will definitely provide an impetus,” he told Bloomberg. Companies, such as car makers, which are manufacturing for the Chinese domestic market, will likely stay put, he said. The Japanese government’s panel on future investment had last month discussed the need for manufacturing of high-added value products to be shifted back to Japan, and for production of other goods to be diversified across Southeast Asia. More than 37 per cent of the 2,600 companies surveyed by Tokyo Shoko Research Ltd. in February had also said they were diversifying procurement to places other than China amid the coronavirus crisis. The policy, however, could strain ties that had been on the mend lately and affect Prime Minister Shinzo Abe’s years-long effort to restore relations with China. Chinese President Xi Jinping was supposed to be on a state visit to Japan early this month. But what would have been the first visit of its sort in a decade was postponed a month ago amid the spread of the virus and no new date has been set.

Source: News 18

Back to top

Bangladesh seeks IMF lifeline after record stimulus package

Bangladesh is seeking $700 million in financial backing from the International Monetary Fund after rolling out its biggest-ever stimulus package. The government hopes the move will prevent the coronavirus pandemic from ravaging its trademark macroeconomic stability. "We are currently assessing the government's request to the IMF for emergency financing," Ragnar Gudmundsson, the fund's representative in Dhaka, told the Nikkei Asian Review. The plea coincides with Prime Minister Sheikh Hasina's announcement on Sunday of a $9 billion stimulus package, equal to 2.5% of gross domestic product, aimed at cushioning the economic blow from the lockdown induced by the coronavirus outbreak. The rescue package is meant "to keep the economy moving, minimize hardship for the population, especially the more vulnerable, and preserve social stability," said Gudmundsson. Sheikh Fazle Fahim, president of the Federation of Bangladesh Chambers of Commerce and Industry, said the package's targeted measures will revamp economic activities by boosting liquidity, sustaining business operations and slashing unemployment. To maximize the use of funds, he said, the top chamber is working with the finance and commerce ministries and the Prime Minister's Office to make sure smaller companies, many of which have no access to banking finance, can leverage the stimulus outlays. "The idea is to keep economic activities running as much as possible," Fahim told Nikkei. Small and midsize enterprises will receive $2.35 billion as working capital from banks at 9%, of which the government will subsidize 5%. The package also includes around $3.5 billion in subsidized loans to industrial and services sectors, $600 million for the textiles industry, and another $600 million for pre-shipment credit refinancing. In addition, export funding has been lifted from $3.5 billion to $5 billion.But this will fall short of the total needed, which has prompted Bangladesh to turn to the donor community for balance of payments and budget support.

BoP posted a modest surplus of $132 million in the seven months to January, but pressure could build in the coming months, as sagging demand in virus-hit Europe and the U.S. drove March shipments of textiles, the country's key export item, down by 30%.Ahsan H Mansur, executive director at the Policy Research Institute of Bangladesh, a Dhaka-based think-tank, is unconvinced about the success of the relief package, saying the authorities have put too much emphasis on the economic recovery, overlooking the first and second pillars -- containing COVID-19 and food security of 40 million poor people. "You're trying to revive the economy keeping the pandemic active," Mansur told Nikkei. "It's an incoherent strategy." He added, "The first pillar [disease control] is getting the least attention." Furthermore, he is skeptical about financing the package since the banking sector has no additional wherewithal, because banks will not receive deposits in the next six months and their income will take a hit because of the moratorium on loan repayment. The package gave no clear indication of how banks will mobilize money, or whether the central bank will launch refinancing, offer partial risk guarantees or opt for quantitative easing. Mansur of PRI highlighted one downside. He said that, for example, directors of one bank, whom he called "self-serving clients," could eat up most of the rescue cash in collusion with their peers in another. "This is dangerous in the Bangladesh context," he said. "Deserving companies may not get loans." Furthermore, Mansur estimated that as much as $6.12 billion will end up in the pockets of big companies while exporters will enjoy the benefits of $2.6 billion. The package is intended to keep businesses afloat, but its success will hinge on how it is implemented, according to Zahid Hussain, a former lead economist of the World Bank's Dhaka office. Hussain said it the key is whether the package will protect against unemployment and bankruptcy while supporting labor income. Shams Mahmud, president of the Dhaka Chamber of Commerce and Industry, welcomed the package, but said the onus now is on financial institutions so that genuine entrepreneurs, not willful defaulters, can get financial firepower."The economy has slowed down. Exports will shrink in countries like Germany," he said. Nevertheless, he is bullish about the economic recovery in the long run, despite temporary hiccups. Last month, Bangladesh sought budget aid from some multilateral lenders, including the World Bank, the Asian Development Bank and the Asian Infrastructure Investment Bank, said an official of the Economic Relations Division, an arm of the ministry of finance. Together with budgetary assistance, BoP war chest can be "instrumental to preserving a country's growth prospects and macroeconomic stability," said the IMF's Gudmundsson. The South Asian country's macroeconomic success has been built on higher growth (8%-plus), lower inflation (slightly higher than 5%) and manageable fiscal deficit (slightly higher than 5%).Densely-populated Bangladesh reported 112 new confirmed coronavirus cases on Thursday, bringing the tally to 330, including 21 fatalities. The country confirmed its first case on March 8.

The countrywide shutdown will continue until April 25.

Source: NIKKEI ASIAN Review

Back to top