The Synthetic & Rayon Textiles Export Promotion Council

MARKET WATCH 25 AUGUST, 2020

NATIONAL

INTERNATIONAL

Textile Ministry to commission study on GST rates, inverted duty structure

Consultants to be asked to take into account industry woes, suggest changes in existing rates if needed The Textiles Ministry is planning to commission a study to analyse whether the Goods and Services Tax (GST) on textiles and apparels was creating an inverted duty structure hurting domestic production and if some changes were required. “There have been complaints from the industry about GST rates for synthetic fibres giving rise to an inverted duty structure that made imports cheaper than domestic manufacture. The government has thus decided to appoint consultants to assess GST on the entire value chain of textile including peripheral activities,” a government official told BusinessLine. At present, synthetic fibre is taxed at 18 per cent, yarn at 12 per cent and final output including garments at 5 per cent, which creates an inverted tax structure where rate on inputs is higher than that on output. “The inverted duty structure is creating unfair competition between imports and domestic players and also hurts exporters. The government needs to do something soon to keep the industry from sinking as there is already a liquidity crunch in the market and the blockage of capital due to the inverted duty structure is leading to huge losses,” pointed out Sanjay Jain, former Chairman, Confederation of Indian Textiles Industries (CITI).

Task cut out

The consultants would be asked to map various GST rates on products covering entire value chain, understand existing incentives under GST and Customs and gather industry representations and demands made till date, as per the Request for Proposal (RFP) circulated by the Ministry of Textiles. They would also have to study such taxes of other countries where in some cases some products are clubbed together while some others are exempted for making finished product competitive. The consultants would also be required to make suggestions with respect to changes in existing rates, suggest new rates, find out if the taxes have affected the prices and thereby affected affordability for the buyer. Recommendations regarding any change to the present tax and duty structure (including fiber neutrality), with proper justifications, that can be extended within the ambit of international norms and laws such as WTO have to be made, the RFP stated.

Inverted duty structure

Explaining how the inverted duty structure hurt domestic players, Jain explained that if people imported fabric, they only paid 5 per cent GST on it but if the same fabric is manufactured domestically, yarn has to be bought by paying 12 per cent and when fabric is made and sold, the GST is 5 per cent. So, the difference of 7 per cent is what pinches the domestic manufacturers. Even for exports, if a manufacturer buys yarn at a GST of 12 per cent and sells garments at 5 per cent GST, then the refund is only of the 5 per cent, Jain said. One can get refund of the inverted duty amount but it is a difficult process and the rules are such that they don’t allow refund of GST paid on services including job-work, he added.

Source: The Hindu Business Line

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GST reduced tax rates, doubled taxpayer base to 12.4 million: FinMin

The finance ministry on Monday said the goods and services tax (GST) had reduced the rate at which people have to pay tax, helped increase compliance, and doubled taxpayer base to 12.4 million. In a series of tweets, on the first death anniversary of former finance minister Arun Jaitley, the ministry said before GST, the combination of va­lue-added tax, excise, sales tax, and their cascading effect resulted in high standard rate of tax up to 31 per cent. “It is widely acknowledged that GST is both consumer- and taxpayer-friendly,” it said. The number of assessees covered by the GST at the time of its inception were about 6.5 million. Now the assessee base exceeds 12.4 million. GST, which subsumed about 17 local levies, was rolled out on July 1, 2017. Jaitley held the finance portfolio in the first term of the Modi government since 2014.“As we remember Arun Jaitley, let us acknowledge the key role he played in the implementation of GST, which will go down in history as one of the most fundamental landmark reforms in Indian taxation,” the ministry tweeted.

Source: Business Standard

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Rules of origin rejig may raise compliance burden for Indian businesses

NEW DELHI: Indian businesses depending on imports under free trade agreements (FTAs) will now closely look into their supplier’s manufacturing process and ensure that minimum threshold value addition is met as the country unveils new framework for rules of origin. “Trade will need to look at tariff shift and value addition, the two key elements of FTA, which are technical in nature, critically going forward to avail the benefit,” said Rahul Shukla, executive director indirect tax at PwC. All exporters may not have elaborate procedures and standard operating procedures to seek confirmations from their supplier, he added, which may lead to increased compliance burden. India has notified new rules of origin that aim to provide more teeth to revenue authorities to check misuse of trade agreements to route third country goods. India is reviewing its FTA strategy to prevent their abuse. Experts say the modified rules are set to increase dependence of importers on the suppliers. “These rules will increase dependence on exporter who may not share manufacturing or value addition details to keep commercial information confidential,” said Harpreet Singh, partner-indirect tax at KPMG India. “Genuine importers may face difficult interpretation given that the onus to prove the country of origin is on the importer and elaborate documentation may be required in case processing/value addition on the product happens in multiple countries,” said Bipin Sapra, partner-indirect tax at EY India.

Source: Economic Times

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India may impose 10% safeguard duty on Single Mode Optical fibre imports

New Delhi: India is likely to impose a safeguard duty of 10% on imports of Single Mode Optical bre used for signal transmission for one year based on complaints led by Sterlite Technologies Limited and Birla Furukawa Fibre Optics Private Limited. A probe by the commerce and industry ministry revealed that the market share of domestic industry has declined, whereas that of imports has increased, and increased imports of the product have substituted for the market share of domestic industry which was earning prot in 2017-18 which turned into “signicant losses during 2018-19”. The basic customs duty on the product is 15%. “As the imports from the developing countries…other than China PR, do not exceed 3% individually and 9% collectively, the imports of “Single Mode Optical Fibre” originating from such developing countries (other than China PR) will not attract the Safeguard Duty,” the Directorate General of Trade Remedies (DGTR) said in its findings. The DGTR is an investigation arm under the commerce and industry ministry. The Finance ministry takes the final call to impose the duty. In a separate fi, the directorate suggested a provisional anti-dumping duty of $266.37- 275.08 per metric tonne on soda ash imported from the US and Turkey. Impacted the domestic glass manufacturing sector. “Imports are undercutting the prices of the domestic industry, and is preventing increase of price, which otherwise would have occurred in the absence of dumped imports. Imports are causing price suppression in the market,” DGTR said in its findings.Soda Ash is an essential ingredient in the manufacture of detergents, soaps, cleaning compounds, sodium based chemicals, oat glass, container and specialty glasses, silicates and other industrial chemicals. It is also widely used in textiles, paper, metallurgical industries and desalination plants.

Source: Economic Times

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Shipping Corporation to start service linking Kochi, Tuticorin with Maldives

State-run Shipping Corporation of India Ltd will start a direct service linking Kochi and Tuticorin with Male in the third week of September. The service is expected to boost bilateral trade and economic relations between the two countries. The service will deploy a container cum break-bulk vessel that can carry 200 twenty-foot equivalent units (TEUs) and 3,000 metric tonnes of break bulk cargo, with a round voyage of ten days, according to a Shipping Corporation of India (SCI) official.  The ship is expected to carry electrical machinery and equipment, white goods such as televisions and home appliances, pharmaceuticals, medicines, iron and steel, construction material, sand, clothes, fabric and textiles, bathroom fittings and furniture and perishables, including fruits, vegetables, eggs and foodgrains. The direct shipping service follows a trip to Maldives by Prime Minister Narendra Modi in June last year, during which the two nations stressed on the need to improve connectivity between India and Maldives through supporting infrastructure, to give an impetus to bilateral trade and people-to-people contact between the two countries. A memorandum of understanding was signed on June 8, 2019, to start a direct passenger-cum-cargo ferry service between India and the Maldives, to provide an alternative, direct and cheaper means of transport for goods and passengers and to further economic, social and cultural ties between the two nations. The service is expected to add Beypore port at Kozhikode in Kerala and Chennai port to its itinerary later.

Source: Business Line

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 Opec shares in India's oil imports fall to decade low due to Covid-19

The Covid-19 disruptions have changed the structure of the country's oil and gas sector with the share of OPEC crude in Indian oil imports falling to a decade-low level in July. As per data with industry sources, the oil cartel's share in India's oil imports fell to about 67 per cent in July as against highs of 75-80 per cent maintained earlier. While the share of OPEC crude has been reducing for some time in wake of India expanding its oil import basket to include newer territories in Africa, South and North America, the fall in July has come in wake of Covid-19 which has squeezed demand in the domestic market. In July, India's oil imports had also fallen by 36.6 per cent (YoY) to 12.3 million tonnes, the lowest in a decade. The demand is also low on account of restricted movement of vehicles that is the case during the monsoon months. The lower domestic demand has also pushed Indian refiners to operate their refineries at 70-80 per cent capacity. This means they are using less crude to produce products. This has also impacted imports of crude. Iraq and Saudi Arabia are the two of country's largest oil sourcing markets. Iraq currently enjoys the top position among markets that supply crude to India.

Source: Business Standard

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India waits for US response on mini trade deal of the kind signed with EU

While the US has signed a mini trade deal with the European Union to put to bed multiple contentious trade spats, the Donald Trump administration is yet to respond to India’s suggestion of signing a similar deal. Commerce ministry officials say India has confirmed its position that an early-harvest bilateral trade pact should be signed soon, to be followed up with detailed talks on a comprehensive Free Trade Agreement (FTA). However, talks have slowed as the Americans have not committed to a broad deadline and are yet to respond on key proposals. A number of sudden demands ...

Source: Business Standard

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RBI sends signal to traders that bond yields may head higher in debt sale

Traders of India’s bonds were unnerved after the central bank cued that rising yields are here to stay by offering surprisingly high borrowing costs at a debt sale. The Reserve Bank of India sold a 30-year bond on Friday at a cut-off yield of 6.7596 per cent, versus the 6.65 per cent estimated in a Bloomberg survey. The central bank, which acts on behalf of the government for debt sales, also sold another security at a higher yield to raise 20 billion rupees ($267 million) more than planned. “The RBI’s and bond market’s perceptions of higher yields may differ,” said Arvind Chari, head of fixed income at Quantum Advisors Pvt. “If the central bank doesn’t offer support in the form of purchases in the next two to three weeks, it may be guiding yields higher. “The debt sale followed the publication of the latest RBI minutes, which showed that its rate-setting panel has turned less dovish with higher inflation. Traders are now bracing for a further steepening of the yield curve, while holding out hope that the central bank will introduce other measures to ease pressure on the bond market. Borrowing costs have already been advancing, with the new benchmark 10-year bond yield jumping more than 30 basis points in the past three weeks. The RBI’s debt purchases in the market have tapered in recent weeks. The central bank may be choosing to stay away to make sovereign debt more attractive to investors amid falling real rates. “The market will hope that Friday’s auction results have finally met the threshold for the RBI to signal something,” said Suyash Choudhary, head of fixed income at IDFC Asset Management in Mumbai. “What is clear is that the market’s auto mechanism is broken now, and a light touch approach won’t work from here on.”

Source: Business Standard

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A 65,000cr plan to link up 200 economic zones

 The government has prepared a plan to invest nearly Rs 65,000 crore in more than 200 economic zones in the next five years, according to the proposal made under the National Master Plan for providing multi-modal connectivity to various economic zones. The road, railways, shipping and civil aviation ministries have prepared a detailed connectivity roadmap for these economic zones like food and agro zones, fishing and defence clusters, electronic, textile and pharmaceutical parks. PM Narendra Modi took a review meeting on the preparation of the Master Plan on Monday. The plan aims to ensure that all missing gaps are removed for seamless movement of people, goods and services within a given time frame so far as connectivity is concerned.

Source: Times of India

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The missing ‘large’ in MSMEs: A globally-competitive Indian mittelstand is the need of the hour

Asset-based classification—only recently relaxed—and a regulatory regime that disincentivises micro-units from scaling up have kept the MSME Sector primarily micro. Micro, Small and Medium Enterprises (MSMEs) have been the favourite ‘step-child’ of the makers of India’s industrial-policy, paradoxical as it may sound. Favourite because they find mention in every discussion on industry and coverage in every budget—they have even had their own ministry since 2007, to address specific needs of the segment. Step-child because it is a sector where we have failed to make bold policy-moves to make it more productive and competitive, despite it contributing 20% of the GDP and employing about 110 million workers. At the core of this lack of competitiveness is a structural issue—quite simply, our MSMEs are not becoming ‘larger’ and more dynamic, with 99% of the estimated 60 million being micro-enterprises with limited aspirations. The ‘step-child’ status has finally begun to change under the present NDA government, with a minister and secretary that are both senior and heavyweight. The need for change was felt acutely as the human and economic costs to MSMEs from COVID-19 become clear. Recognising this, the government included MSMEs as the only industry group (till now) supported directly in the financial package announced to fight the crisis. While it is unfortunate that it took a pandemic to bring this kind of focused attention on the fragility of this sector, it is imperative that we not only keep this focus but also expand the agenda to address the structural challenge posed by 99% of the units being sub-scale, with low productivity. Take, for instance, India’s largest textile cluster vs Bangladesh’s largest. More than 70% of the units in Tirupur are micro-enterprises with less than 10 employees while only 20% of the units in Narayanganj in Bangladesh have less than 10 employees, thereby making the cluster more competitive and helping Bangladesh’s exports grow faster than India’s (I must mention here that Bangladesh has other advantages also, but this structural difference is critical). A rough analysis suggests (it is difficult to be completely accurate as every country measures MSMEs differently) that India has perhaps the highest share of micro-enterprises among MSMEs compared to other large industrial economies. While there is no robust data for India, productivity data from manufacturing MSMEs in OECD show that the productivity of medium firms (50-250 people) could be as much as 80-100% higher than that of micro firms

Source:   Financial Express

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Rupee turns weaker against US dollar in opening session; slides 5 paise

The rupee slid 5 paise to trade at 74.89 against the US dollar in opening deals on Monday due to rise in demand for the American currency from banks and importers. At the interbank forex market, the Indian currency started off on a tepid note and went on to trade in a narrow band of 74.91-74.88 per US dollar. On Friday, the domestic currency had closed at 74.84 against the US dollar. Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was down 0.04 per cent at 93.21. Global crude oil benchmark Brent was trading 0.09 per cent lower at USD 44.89 per barrel. On the domestic equity market front, the BSE Sensex rose about 234 points to 38,669 in morning deals; and the NSE Nifty gained nearly 69 points to trade at 11,440. Exchange data showed that overseas investors bought Rs 410.16 crore shares on a net basis on Friday.

Source: Business Standard

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Covid-19 impact: Andhra Pradesh govt revises Profession Tax structure

The Andhra Pradesh government on Monday revised the Profession Tax structure, enhancing one slab rate from Rs 1,250 to Rs 2,000 and continuing the second slab at Rs 2,500 for different professions, to net an additional revenue of about Rs 161 crore per annum. The state government realised Rs 231.68 crore in the form of Profession Tax in 2019-20 and Rs 221.80 crore the previous year. However, due to the impact of coronavirus, profession tax collection up to July in the current financial year was only Rs 46.85 crore as against Rs 69.60 crore in the corresponding period last year, a fall of 32.70 per cent, according to Special Chief Secretary (Revenue), Rajat Bhargava. "The last revision of profession tax was done back in February 2013. Since then, the economic scenario saw many changes, impacting the incomes of various professionals and warranting an upward revision of tax slabs in certain categories," Bhargava said. Taking various factors into consideration, the government has decided to rationalise the rates of Profession Tax for certain categories, ensuring that the maximum tax payable by any person did not exceed Rs 2,500 per annum, the Special Chief Secretary said. Under the new structure, public telephone operators have been removed from the profession tax payers list, while restaurants, take-away food points, canteens and curry points were added anew, with a tax rate of Rs 2,500. The Revenue Special Chief Secretary also issued an order directing 18 government departments, appointed as profession tax collection agents, to amend the relevant Act or Rules administered by them making payment of profession tax a pre- condition for grant or renewal of licenses and permits. The departments include transport, irrigation, municipal administration, revenue, marketing, endowments, registration and stamps, industries, handlooms and textiles, horticulture, fisheries, education and excise.

Source: Business Standard

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‘Virtual Indian Carpet Expo’ Day 2: 321 overseas buyers registered in two days

There is huge demand of hand-knotted high end, tufted Carpets in major importing countries--Exhibitors The Day 2 of the first Virtual Edition of 40th India Carpet Expo, an exclusive trade fair for handmade carpets and other floor-coverings, today witnessed encouraging response with almost every participant having substantial online meetings with overseas buyers and buying representatives. The expo has received overwhelming response from around 321 overseas buyers from 61 countries and 145 Buying Representatives from across the world in two days of the event. Pertinently, the event being organized by Carpet Export Promotion Council (CEPC) was e-inaugurated on 21st August, 2020 by Smriti Zubin Irani, Union Minister of Textiles and Women and Child Development in presence of Shantmanu, Development Commissioner (Handicrafts). The 5 day Expo will remain open for business till 25th August, 2020. As per the feedback received from the Exhibitors, there is huge demand of Hand-knotted high end carpets as well as tufted Carpets from the major importing countries i.e. Japan, USA, Australia, U.K., Canada and Turkey. Chairman, CEPC Siddh Nath Singh mentioned that the Council is putting all efforts to promote innovations for product development in the Handmade Carpet Sector and encouraging the young especially women entrepreneurs in a big way.

Source: Kashmir Images

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Pakistan: Ministry seeks more time to present new trade policy

Ministry of Commerce on Sunday again sought time until the first week of September to present new Strategic Trade Policy Framework (STPF). The Prime Minister s Office was assured to present the policy in the federal cabinet early next month. Sources said that Prime Minister Imran Khan had taken notice of the delay in trade policy and directed to submit it for approval by the end of June, however, the Ministry of Commerce failed to submit the policy for approval by June 30. Advisor for Commerce, Textile, Industry and Production, and Investment of Pakistan Abdul Razzaq Dawood requested the prime minister to give him time till July 10, which was allowed by the premier, but even then the trade policy could not be finalized. Later, the ministry of commerce kept asking for time on the delay in the policy and the policy has not been finalized yet. The government has set an export target of Rs22.71 billion for the current financial year, while the country s exports have fallen to a four-year low. According to sources, under the trade policy, the plan was to increase exports to Rs46 billion by 2025, however, the new plan proposed to reduce the export target. PM Imran Khan had asked the Commerce Division for early finalisation of five-year STPF and Textile Policy in consultation with stakeholders to make it more inclusive for boosting exports. PM Khan had directed the Commerce Division to finalise the draft five-year plan with a deadline of Dec 31, 2018 to accelerate exports. However, the division failed to prepare a plan within the said time, missing the deadline by almost one-and-a-half year. Under the proposed STPF 2020-25, special focus has been directed to increase exports of textile, leather, surgical and sports goods, carpet, rice and cutlery were included along with non-formal and development sectors like engineering goods, pharmaceuticals, auto parts, process food and beverages, footwear, gem and jewelry, chemicals, meat and poultry, seafood, marble and granite.

Source: Dunya News

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China to absorb Pakistan’s textile yield significantly

 The market in China will absorb Pakistan’s textile yield significantly and support textile sector for its further rehabilitation in wake of COVID-19. Gwadar Pro on Sunday quoting Monthly Report of China Cotton Market released by China Cotton Net stated that the global economic recovery has been slow and gradual, while the Chinese economy has recovered steadily. The textile imports volume of China rose 6.5% year-on-year in July, well ahead of market expectations. Subsequently, China’s textile demand has continued to pick up significantly in August. As the orders of autumn and winter season fabric increasing, the related demands of textile have improved. In July, Pakistan exported 36,600 tons of cotton yarn (up 19.33% yearon-year). Meanwhile, Pakistan exported 959 million dollars of textile and clothing, only a year-onyear decrease of 5.44%. This followed a 36.72% year-on-year fall in May and a 64.51% year-on-year fall in April. According to a report released here this week, at present Pakistan’s domestic textile industry has fully recovered. Meanwhile, textile market in China has appeared strong demand. Pakistan cotton price has continued to rise in the latest week as demand from downstream businesses increased. Pakistani cotton price continued to rise to 72 cents per pound. Affected by the recovery in cotton price, yarn price has continued to rise in the past two weeks as well. Meanwhile, textile and clothing factories have been resumed to full capacity production. Comparing with the same period in last year, the textile and garment exports have rose 14.4% in July.

Source: The News

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Zimbabwe: ‘Lockdown restrictions affecting industry’

Industrial capacity utilisation has been badly affected in the past few months due to lockdown restrictions meant to curb the spread of coronavirus, according to latest Government report. Declared a pandemic by the World Health Organisation on 11 March this year, the highly contagious disease, which has so far killed 776 000 people and infected nearly 22 million worldwide, has rattled global economies. Zimbabwe introduced lockdown restrictions at the end of March as part of efforts to limit the spread of Covid19. Other cross cutting challenges noted by the report, undertaken by the Ministry of Industry and Commerce, include foreign currency shortages for the importation of raw materials and spare parts, delays at the borders as clearance process taking long for both imports and exports and depressed demand. The report provides an overview of the state of industry focusing on major companies. It is divided into the various sectors namely food and drink and tobacco, wood and furniture, textiles and clothing, leather, metals and electrical, chemicals, fertiliser, plastics and packaging, cement and the motor industry. It covers all 10 provinces on the performance of industries during the lockdown period that commenced from the 30th of March. The most affected sectors include motor industry, printing and packaging, fertiliser, retail, dairy, baking and textile and clothing. “Generally, the major challenges being faced by all companies are to do with reduced demand as disposable incomes are low,” said the report. “Closed borders have affected imports and exports. Lockdown restrictions including the curfew are affecting the companies in terms of operating hours, which consequently affect the level of industrial production.” In the printing and packaging, there was reduction in employment as casual and contract workers were stopped. Capacity utilisation is at 33 percent and demand is at its lowest in five years due to short working hours and disruptions to employees accessing work stations. Most of the initiatives that had been undertaken on exports halted as the external markets are also locked down. In the fertilisers industry, demand has been low as farmers are not travelling due to restrictions. However, there was high demand for ZimPhos products such as aluminium sulphate as the demand for clean water firmed. Sable Chemicals on the other hand produced only nine percent of its output target. The baking industry is operating at between 35 and 40 percent of its potential. The lockdown regulations have badly affected the informal market, which accounts for 74 percent of bread sales. The dairy industry had overall capacity utilisation of 34 percent in July 2020 and experienced a 4 percent decrease in employment. The motor industry has remained subdued during this lockdown and sales volumes for Completely Built Units were down 70 percent compared to the same period last year. Bus maker AVM Africa had a 90 percent reduction in production due to closure of markets for buses such as schools, intercity and rural buses. On the other hand, Willowvale Motor Industries, has not had any production of new vehicles since the lockdown began.

Source: The Herald

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UAE-Turkmenistan Business Council discusses investment opportunities in various areas

The UAE-Turkmenistan Business Council recently stated that the private sectors of the UAE and Turkmenistan are continuing to work together to achieve progress and launch initiatives aimed at enhancing their economic ties. During the council’s meeting, which was held remotely via video conference, Hameed Mohammed bin Salem, Secretary-General of the Federation of UAE Chambers of Commerce and Industry, and Dowletgeldi Rejepow, Chairman of the Chamber of Commerce and Industry of Turkmenistan, CCIT, highlighted its key role in driving their economic ties towards further development, while expressing their wishes to advance the council’s work, establish practical mechanisms related to its operations and decisions, explore ways of increasing their commercial exchanges and discuss available investment opportunities. Bin Salem noted the strong relations between the two friendly countries, especially in the business sector, in light of the developments witnessed by global economies due to the COVID-19 pandemic. There are promising opportunities for cooperation and investment, especially in the areas of technology, artificial intelligence, agriculture, textiles, tourism and hospitality, he added. Rejepow stated that his country has the same desire to explore new cooperation and investment prospects with the Emirati business sector, while hoping that the meeting will result in joint projects. The council’s meetings will establish the foundations for joint cooperation, especially as it involves a range of prominent investors, businessmen and representatives of major companies from both countries, he added, noting that the commercial exchange between the two countries reached US$223 million in 2019.

Source: Emirtaes News Agency

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