Ref. No.MR/cir/1038 20.03.2015
Dear Sir,
Sub: Executing US$ 300 million Line of Credit(LOC) by setting up Textile Investment Park in Vietnam for enhancing Trade & Investment of MMF textiles between India and Vietnam.
Pl. also ref. our earlier circular on the same subject dated 25.02.2015
Background
Vietnam’s textiles sector has been growing at high rate and with the conclusion of the Trans-Pacific Partnership Agreement (TPP) which is in the final stage of negotiation, the growth in textiles could manifold.
The Trans-Pacific Partnership Agreement (TPP) is a free trade agreement currently being negotiated by 12 strong economies/countries which account for 40% of global trade. However, the “yarn-forward” rule of origin of Trans-Pacific Partnership Agreement (TPP) will debar exports of Indian textile products to Vietnam. The “yarn-forward” rule under the TPP stipulates that textile products starting from Yarn onwards must be produced in any signatory TPP nations to be eligible for duty-free access.
During the visit of Vietnam’s Prime Minister to India in October 2014 both the Prime Ministers of India and Vietnam have agreed for deeper engagement between India and Vietnam, especially in the strategic textile sector. The Prime Minister of India has offered US$ 300 million Line of Credit to Vietnam for the textile sector development.
Action Plan
During the January 2015 meetings of the recent High Level Indian textile delegation led by Commerce Secretary, MOC and Joint Secretary (Exports), MOT to Vietnam, the broad contours of the utilization of the lines of credit offered by India were discussed. The stand of the Government of India in this regard is that “Consideration of US$ 300 million line of credit to Vietnam for procurement of material and machinery for textiles industry in Vietnam. Discussion on the same to be initiated with Vietnam side by MEA, DEA and EXIM Bank”.
As a follow up Secretary Textiles took a meeting to discuss the implementation of Modalities of Line to Vietnam by India held on 12th March, 2015, which was attended by all key stakeholders, viz. MEA, MoC, DEA, EXIMBANK, SRTEPC and TEXPROCIL.
The Secretary urged the importance of taking immediate action to facilitate the implementation of the Line of Credit (LOC) and suggested that the details of the Road Map can be discussed by the stakeholders. This LOC initiative can be taken as a special case to expedite the Line of Credit execution by the Exim Bank with the approval of MEA and DEA. Further with the help of the Embassy of India in Vietnam this can be taken forward. Further along with the Indian industry and that of the counterparts in Vietnam, viz. VINATEX, VITAS and the Department of Light Industry, Govt. of Vietnam the initiative can be implemented without delay.
Secretary suggested that as per the letter from Embassy of India dt. 27th February, 2015 Para 3&4 it is clear that through this Line of Credit we have to explore how we can create the necessary infrastructure in a Textile investment park in Vietnam to facilitate Indian companies in setting up processing units in Vietnam. This strategic approach could improve the market access and integrate our Textile sector in the global supply chains as suggested by the Ambassador of India in Vietnam. The Secretary suggested that the industry and the Exim Bank should discuss and come out with a map to implement the initiative suggested by the Ambassador in pursuing investment in Textile Investment Parks.
Secretary opined that based on the above and also gathering from the preliminary discussions with the industry and the suggestions received from the Vietnam side, it is now proposed that the Line of Credit can be offered through investments in Textile Park in Vietnam.
Most of the participants have agreed the proposal of Secretary Textiles which was supported by both the Chairmen of SRTEPC & Texprocil. It was then agreed that the details of the investment modalities and the project report etc. will be prepared and given to the Ministry after due discussion with the interested parties on specific areas etc to be included in the proposal of investment in Textile park in view of the emerging TPP agreement. It need to be shared with the Vietnam side and they should be ready to offer tax holidays and other benefits as given by Government of Malaysia to Reliance unit while they had invested there.
In the 12th March 2015 meeting it was decided that Texprocil and SRTEPC shall send a note to the Ministry of textiles on the requirements for setting up of Textile Investment Park in Vietnam for production as well as trade with Vietnam.
Based on the inputs a proposal will be given to the concerned in VINATEX and the Department of Light Industry to understand their views and the concerned organization in Vietnam who will be taking the initiative of setting up a Textile Park in Vietnam.
Chairman, SRTEPC has mentioned that for investment in Vietnam by the Indian companies certain pre-conditions need to be followed and agreement has to be signed with the Govt. or the concerned authority in Vietnam for capital security of investment, full repatriation of profile and a ten year tax holiday. ED, SRTEPC has suggested that investment in Textile Parks is a feasible initiative as the Singapore Government’s initiative of VSIP ( www.vsip.com.vn ) have invested in various locations in developing industrial parks in Vietnam and may approach the VSIP for helping India to set up a Textile Investment Park in Vietnam either in Hanoi or Danang or Hoechin-Min-City where the VSIP industrial parks are located.
Benefit for MMF sector
This will be an excellent opportunity and right time for the Indian Textile companies to invest in Vietnam in order to enhance their export opportunities to all the TPP countries including the US from Vietnam. Indian companies may focus investing especially in manufacturing of yarns and fabrics of which the present market in Vietnam is around US$ 10 billion.
This is an opportunity to be used fully by MMF textile industry. Therefore, it is requested that you may kindly give your suggestions specifically on the initiatives related to Investment interest in the Textile Park in Vietnam, like preferred location, size and structure of investment preference et. You may also share your concern and views etc. to avoid any issues while proceeding the investment.
It is requested that considering the time limitation the inputs may be send to SRTEPC by Monday 23.03.2015 so that we will be able to submit a draft proposal which is to be shared with the Vietnam entities like the VINATEX etc.
You may please send your replies to the Council latest by 23rd March, 2015 to help us inform the Ministry of Textiles for preparing proposal and action plan.
Thanking you.
Yours faithfully
V. ANIL KUMAR
EXECUTIVE DIRECTOR
