FW
The EU-Vietnam FTA is expected to be activated in early 2018.
In anticipation of this, European companies have started to explore the Vietnamese market in fashion and various other categories.
Machinery and appliances account for just over half of Vietnam’s exports to the EU. Telecommunications equipment comprise 33.5 per cent of exports. Footwear and hats account for 12.1 per cent and textiles and textile articles 10.4 per cent. Vietnam’s imports from the EU include machinery and appliances (27.4 per cent of the total), chemicals (17.8 per cent) and manufactured goods (11.3 per cent).
Vietnam’s trade with the EU during the first 11 months of 2016 totaled 40.76 billion dollars. The bloc was Vietnam’s second-biggest export market valued at 30.72 billion dollars (up nine per cent over the same period of 2015 and accounting for 19.2 per cent of the total) and is its fourth-biggest source of imports.
The FTA will cut down the import tariff currently imposed by the EU on Vietnamese garments, which is now 12 per cent, to zero. The zero tariff will substantially enhance the competitiveness of Vietnamese garment exports and is likely to enhance sales by 20 per cent annually.
Vietnam’s exports of textile, clothing and footwear to the EU are expected to more than double in 2020 as a result of the FTA.
The Textile, Garment and Leather Employees Union (TGLEU) has rejected the stimulus package being offered by the government to textile companies to help revive the industry. In line with the government’s promise in the 2017 budget, the Chief Director at the Trade and Industry Ministry, Dawarnoba Baeka, sent a circular to industry stakeholders on 3rd May 2017 asking them to submit a ‘request for expression of interest (EoI)’ to enable them to benefit from a bailout package.
The memo stated In line with its commitment to transform the industrial sector in Ghana, the government is introducing a stimulus package to support existing local industries to enhance their competitiveness and create jobs. In this regard, the Ministry first thank you for showing interest in this programme and secondly invites your company to submit an EoI by completing the attached diagnostic tool kit.
The General Secretary of the Ghana Federation of Labour who is also chairman of TGLEU Abraham Koomson was reported to have said that Joy news, a stimulus package for the textiles industry, will go to waste unless loopholes in the systems are thoroughly plugged.
Koomson prefers that the government stop pirating of local textiles as one method of reviving the textile industry. It will not yield any positive results, he fumed and evaluated that at the end of the day, because of smuggling and counterfeiting, the industry cannot compete. He feels that the government should first address the smuggling issue.
The textile industry has over the years been struggling which resulted in the loss of thousands of jobs. It employed over 25,000 workers in the 1970s but currently provides employment to only about 1500 people.
The influx of counterfeited versions of local designs from China has been blamed for the situation. In 2010, the government set up an anti-textile piracy task force to deal with traders of counterfeit textiles as one method to keep the industry afloat.
TGLEU has meanwhile written to the police announcing their plans to picket the premises of the Trade and Industry Ministry on 29th and 30th May to demand revival of the taskforce.
Grasim’s revenue was up by six per cent for the fourth quarter.
Grasim has four lines of business, Viscose Staple Fiber (VSF), cement, chemicals and textiles. Their Earnings Before Interest,Taxes, Depreciation and Amortization (EBITDA) was up by four per cent.
The company’s strong sales volume supported by firm international prices have helped drive their excellent performance in the VSF business despite the fact that their captive pulp plant at Harihar remained shut since February 2017 due to water shortage, however their production of VSF remained unaffected due to the fact that their business ensured running of operations using external pulp supplies.
Grasim is in the process of debottlenecking its plants to meet growing demand. Their chemicals business recorded a volume degrowth of six per cent year-on-year due to the fact that lower chlorine offtake in the industry restricted caustic soda production. This, coupled with a sharp increase in power costs, reduced profitability.
The VSF business will continue to focus on expanding the market in India by partnering with textile value chain to achieve better customer connect through the brand Liva and enriching the product mix through a larger share of specialty fibers.
Their Brownfield expansion project at Gujarat is right on track. Civil works have begun and the commissioning is expected by the fourth quarter of fiscal 2018.
Grasim Industries is the flagship company of the Aditya Birla Group.
The Goods and Services Tax (GST) rate for textile machinery has been decided at 18 per cent.
GST for goods have been fixed at nil rate and 5, 12, 18 and 28 per cent; however, rates for textiles and footwear are yet to be decided.
18 per cent GST has been decided for the following textile machinery: Knitting machines; stitch bonding machines and machines for making gimped yarn, tulle, lace, embroidery, trimmings, braid or net and machines for tufting, extruding, drawing, texturing or cutting man-made textile materials. Also machines for preparing textile fibers, spinning, doubling or twisting machines and other machinery for producing textile yarns; textile reeling or winding (including weft-winding) machines and machines for preparing textile yarn.
Another category is machinery for the manufacture or finishing of felt or nonwovens in a piece or in shapes, including machinery for making felt hats and blocks for making hats.
As per the announced GST rate, there is no drastic difference in the existing purchase and sales of machinery. Earlier also, the rate for machinery was 12.5 per cent with 5 per cent VAT which totaled to 17.5 per cent. With 18 per cent GST on machinery, there is neither a loss nor a gain.
Home textile products wholly made of quilted textile materials will attract 12 per cent tax under the new tax regime
"Cotton production has witnessed surge in all major countries, including the US and India, resulting in the highest production outside China in six years. As a result, stocks outside of China will rise to a near-record share of use, the United States department of agriculture (USDA) said in its first detailed forecast for the 2017-18 marketing year. USDA says, 2017-18 would be the second year of production growth (nearly 7 per cent), alongside the strongest consumption growth since 2012-13 (over 2 per cent)."
Cotton production has witnessed surge in all major countries, including the US and India, resulting in the highest production outside China in six years. As a result, stocks outside of China will rise to a near-record share of use, the United States department of agriculture (USDA) said in its first detailed forecast for the 2017-18 marketing year. USDA says, 2017-18 would be the second year of production growth (nearly 7 per cent), alongside the strongest consumption growth since 2012-13 (over 2 per cent). Global consumption is expected to remain above production, yielding the third consecutive year of declining global stocks, albeit with a much smaller reduction than in the previous 2 years, the forecast said.
China’s cotton trends
Stocks in China are forecasted to fall substantially for the third consecutive year, with a decline of about 9 million bales, reflecting continued strong and steady State reserve sales. Despite their aggressive sales and a continuing recovery in consumption, stocks in China will remain high with the ending stocks-to-use ratio above 100 per cent for the 6th consecutive year, the report said. Since China’s policies are aimed at reducing the State reserve, its imports will increase only slightly. However, the situation outside of China will be quite different.
Lower US exports
US cotton will face strong competition in exports as large Southern hemisphere crops will be available before the 2017-18 US crop. The Franc Zone, Central Asia, and India will have both higher carry-in stocks and larger production. As a result, despite higher exportable US supplies and growing world import demand, US exports are forecast to be lower in 2017-18. Compared to 2016-17, larger crops are forecast in 2017-18 for the US, India, Pakistan, China, Turkey, and Australia, with only moderate growth in Brazil, Mexico, Egypt, Central Asia, and West Africa. Meanwhile, production declines are anticipated in much of the Middle East and some African countries, such as Chad and Tanzania.
Global consumption patterns
In terms of consumption, strong growth is forecasted in 2017-18, for Vietnam, Bangladesh, China, and India, compared to their consumption in 2016-17. More moderate consumption growth is expected in Turkey and Indonesia, as well as some Western Hemisphere countries such as Brazil, Mexico, and the US. Consumption declines are forecast in South Korea, Taiwan, and several consuming countries in the Middle East and Europe.
The much anticipated GSP+ concession, which Sri Lanka regained from the European Union, comes into force from today, May 19. The Generalised System of Preferences (GSP) is a preferential tariff system awarded to developing nations such as Sri Lanka, to export goods to European markets at lower tariff rates. Under this tariff system, Sri Lanka has the opportunity to export 6,200 items to the European Union, tax free.
Following the devastating 2004 Boxing Day Tsunami, Sri Lanka was awarded the GSP+ concession for a period of three years, however, the lack of progress by the earlier government in twenty-seven international agreements, including the fields of human rights, labour laws, environment conservation and good governance led to Sri Lanka losing the GSP+ concession on the 15th of August 2010. The GSP+ consession which comes into effect, will be implemented until 2021.The 9.6% duty charged when exporting garments to the EU, will now be removed. Around 33% of Sri Lanka’s exports are directed to the European Union.
A number of exporters held discussion with Prime Minister Ranil Wickremesinghe with regard to the decision made by the EU.
M&S cheered its first rise in clothing and home sales for nearly two years in January but this is maybe a a temporary reprieve as the timing of Easter is set to have impacted its fourth quarter trading.
Analysts predict clothing and home sales fell by 3.3 per cent in the three months to the end of March, against a 2.3 per cent hike the previous quarter. Food sales are likely to have fallen by close to 1 per cent in the final quarter. This will see the group's year end on a sour note, with underlying pre-tax profits also set to dive 13 per cent to £593 million from £684 million the previous year.
Chief executive Steve Rowe has already warned that profits would take time to recover as its clothing turnaround beds in, but the third quarter trading gave hope that it is beginning to turn the corner. Analysts at Numis Securities say stripping out the effects of this year's Easter, clothing sales are likely to have been close to flat, while Peel Hunt believe underlying sales rose by 0.5 per cent.
Jonathan Pritchard at Peel Hunt points out sales will have regained their poise" since Easter-affected fourth quarter and they think the immediate changes that management made to the offer, merchandising and service are starting to resonate with customers. M&S has recently poached the chief executive of Halfords Jill McDonald to lead the turnaround in its clothing business.
With the Goods and Services Tax (GST) Council unable to arrive at a consensus on Friday on the textiles sector, the rate announcement has been deferred to June 3. The deferment is understandably due to complexities within the entire textiles value chain, in addition to the industry's anticipation of a fibre neutral taxation across the chain.
According to textile industry representatives, differed rates for different parts of the textile value chain with some being taxed and some being exempt has led to tax evasion and flourishing of the unorganised sector. In addition, India has been a cotton heavy region in terms of fibre as compared to the global trend of a skewed in favour of man-made fibre (MMF).
Tax variation in textiles has been such that, while fabrics do not attract excise duty or sales in most states, branded apparels are subject to both excise duty and sales tax. On the fibre front, natural fibre like cotton is exempt from taxes though man-made fibre draws a 10 per cent excise duty.
Sakthivel, Former Chairman of Apparel Export Promotion Council (AEPC), says they are awaiting clarity on what kind of input credit would be given in case the branded garments vertical attracts a higher rate of 18 per cent. This gains significance amidst unorganised sector forming a large part of the textile industry, creating a gap in flow of input tax credit since the credit is not availed of, in case registered taxpayers procure inputs from unorganised sources.
The textile industry's other concern is compliance issue which may get aggravated in case of a higher rate fixed, especially at the end of the value chain. According to the apprel sector, the definition of 'branded garment' has also been a contentious issue. While, currently a large part of the unorganised sector also goes along in the name of branded garments by placing private labels, it is to be seen how the same would be defined under GST for better compliance across the industry.
Sutlej Textiles and Industries (STIL) has received approval to raise funds up to Rs 500 crores by way of borrowing for long term working capital requirements and growth plan. The board of directors at its meeting held on May 18, 2017 had approved for the same.
STIL, an ISO 9001:2008 certified company is one of the largest integrated textile manufacturing companies and is having strong position in the Indian Textile sector in the manufacturing of value added synthetic, natural and blended yarns, all types of spun yarns, processing of fabrics and home textile furnishing.
Sutlej Textiles and Industries' net profit fell 34.6 per cent to Rs 33.27 crore on 8.9 per cent increase in net sales to Rs 597.67 crore in Q4 March 2017 over Q4 March 2016. Sutlej Textiles and Industries is currently trading at Rs 886.1, up by Rs 4.75 or 0.54per cent from its previous closing of Rs 881.35 on the BSE. Sutlej Textiles and Industries is an integrated textile manufacturing company.
International Apparel Federation (IAF)’ Portuguese association member ATP held a conference on “The rebirth of Portuguese Textiles” at the European Parliament. Hosted by José Manuel Fernandes, Member of European Parliament it highlighted the growing importance of Portugese apparel and textiles industry. The Portuguese fashion and textile industry has undergone significant recovery which is all the more remarkable because it has taken place during the 2011 Portuguese crisis and subsequent bail-out. ATP President Paulo Melo and ATP Director General Paulo Vaz said the success was based on a well-defined and implemented strategy as well as support from EU funding programs.
IAF’s secretary General Matthijs Crietee and Euratex’s director general Francesco Marchi placed the Portuguese in a broader European and global context. They could see the combination of quality and reactivity as the industry’s strongest USP. Crietee said the strategic guidance of ATP, leading to investments in the entire system, including schooling, innovation, productivity, sustainability and international promotion has been an important factor of the Portuguese apparel industry’s success. IAF helps member associations develop their strategic industry plans and the Portuguese example is an important one for all to take a good closer look at.
