FW
Industrialists in the powerloom weaving sector have accused the Tax Research Unit (TRU) under the Union ministry of finance of denying the utilisation of accumulated input tax credit (ITC). TRU had thus superseded the decision taken by the GST Council to allow refund of ITC on fabrics in its 28th meeting on July 21, 2018. The meeting decided to allow refund of accumulated ITC because of inverted duty structure on the MMF fabrics, which attracts 5 per cent GST. It was also decided that the ITC shall be allowed only with the prospective effect on the purchase made after the issuance of the notification.
Weavers say, a meeting was held under the Chairmanship of Finance Minister Piyush Goyal along with Revenue Secretary Hasmukh Adhia, Textile Minister Smriti Irani and members of the textile industry from Surat on July 20. The meeting unanimously decided not to refund the accumulated credit of the past period, but income tax would be levied on the credit amount up to July 2018. The refund of accumulated ITC would be allowed on the inputs after August 1.
Jack & Jones, which in its last 18 years, has progressed from a premium denim brand to one of the Europe’s leading producers of menswear, is planning to restart manufacturing denims. The brand recently modernised its logo and includes the ampersand formed by two Js – and communication materials emphasise the four brand values: Masculine, Social, Refresh, Craftsmen. The primary color of the logo is blue. The brand conducted extensive consumer research for reviving its identity. It set up an internal taskforce team consisting of people with different skills and competencies. It also hired an agency to implement its ideas.
Other initiatives that the brand include plus-size collections and collections for boys aged 08-16 years. The latter is known as Jack & Jones Junior. It further plans to develop its business on several parameters in the years to come
In Bangladesh’s readymade garment sector, 97.5 per cent of the factories do not have trade unions. Workers’ organisations continue to remain either weak or non-functional in garment factories.
Of the factories, about 50 per cent are found to be small, 42.5 per cent are medium and 7.4 per cent are large. One-third of parliament members are garment owners. Workers are subjected to rough behavior by top management.
The country’s garment sector has done exceptionally well in the post-Rana Plaza period but garment owners have to be pro-active to do better. Among the future challenges is achieving the 50 billion dollar export target by 2021. Factory owners say, they are under pressure in the face of global competition. They say 70 per cent of their profit is taken away by the brands. They say that though trade union activities in the garment sector are discouraged, workers’ welfare committees in factories work to protect the interests of workers. They say, post-Rana Plaza expenses were involved in making factories compliant, while now owners are trying to convert them into green factories. But factory owners concede that workers should be given most credit for the success of the country’s garment sector.
For the first seven months of 2018, Vietnam’s garment and textile exports to South Korea rose by 24.8 per cent year on year. July alone saw a 24.1 per cent increase from earnings made in June. The rise was 24 per cent from what it was in July 2017. The tax benefits from the Vietnam-South Korea FTA have further created a favorable environment for Vietnam to enter the market of South Korea.
South Korea will contribute to Vietnam’s goal of becoming an industrialized economy by lifting bilateral trade to 100 billion dollars by 2020. Trade between Vietnam and South Korea has risen rapidly since a free trade agreement between the two took effect in December 2015. In 2017, South Korea replaced the United States as Vietnam’s second largest trading partner, after China. It is also the largest source of foreign direct investment in the Southeast Asian economy.
Bilateral trade rose 51 per cent last year. Vietnam exports mainly garments, cell phones and seafood to South Korea, while its key imports include electronic components, machinery, fabrics and plastics. The countries will work toward reducing Vietnam’s deficit in bilateral trade.
India’s textile and clothing industry has entered a phase of stress and duress with increasing global competition from peer countries such as Vietnam, Bangladesh, China and Pakistan. India’s export competitiveness has been further eroded by increasing cotton prices and a free fall in the currencies of Turkey and Pakistan versus the dollar.
Countries like Cambodia, Myanmar, Ethiopia and Kenya export apparels to the US and EU riding on benefits like lower industrial wages and nil duty under GSP or AGOA agreements. With no concessions over duty on imports of apparel, India is facing a double whammy, with increasing cotton prices, and thus yarn/fabric costs, which make India’s exports uncompetitive for most international buyers.
The response, increasing the minimum support price for cotton by almost 30 per cent to 35 per cent, made the cost of essential textile inputs such as yarns and fabrics more expensive pro rata. The current slowdown started nearly a year and a half back, with a decline in the productivity of India’s textile and clothing sector.
Demonetisation had far-reaching consequences. The move impacted the already tight cash flow of the textile and clothing industry, especially small and medium units. GST disrupted sectoral balances and made Indian yarn and fabric products uncompetitive with the imports, especially fabrics from China and garments from Sri Lanka and Bangladesh.
India and Singapore are reviewing their free trade agreement. The aim is to promote commercial ties between the countries. The countries had recently signed the second protocol to amend the pact, officially dubbed as the Comprehensive Economic Cooperation Agreement (CECA). This agreement, which has liberalised rules for trade in goods and services, came into force in August 2005 and the first review was concluded in October 2007 and the second one in June this year.
In an FTA review, two trading partners look to further relax rules to increase trade. Both India and Singapore are part of the proposed mega trade deal RCEP (Regional Comprehensive Economic Partnership). This is a 16-nation grouping. The group is negotiating a comprehensive free trade agreement since November 2012. RCEP comprises 10 Asean members as well as Japan, Korea, China, India, Australia and New Zealand.
The Asia Pacific is being rated as the most dynamic growth region of the world. Over 8,000 Indian companies are based in Singapore with many having set up regional headquarters with operations across the region. Singapore is a natural springboard for Indian businesses to leap into the Asean and the broader East Asian regions. These professionals are deeply familiar and connected with India. They can act as a great bridge between the two countries.
If Bangladesh were to graduate to the league of a developing nation, it could lose the trade benefits that it had been enjoying so far as a least developed country. This could have a direct bearing on the country’s biggest foreign currency earner, the readymade garment industry.
As such, the country is going full throttle in pushing for free trade agreements with export destinations like the EU, Canada, Japan and China. It already seems to have made headway in garnering GSP status from Japan, which has reportedly assured that it will ensure duty-free facility for imports from Bangladesh, a move being viewed as a big commitment from a country where Bangladesh is eyeing to expand its apparel exports.
Bangladesh’s apparel exports to Japan rose 13.73 per cent compared to the previous year’s earnings. Overall export earnings from Japan have risen 11.73 per cent. Japan is a high-potential market for Bangladesh products and very soon it is expected to be a large export destination for Bangladesh’s goods, especially apparel and leather. The country’s earnings from exports to Japan are expected to reach two billion dollars over the next two to three years.
The European Union too has reiterated its commitment to ensure tariff-free trade benefits for Bangladesh.
Floods have damaged the looms in Kerala. Weavers will need at least Rs 40,000 will be required to repair each loom. It will take at least five to six months to repair the looms. Weavers won’t have any work till the looms are repaired. Unlike other sectors, weavers have been affected the most as all raw material and looms are lost.
There are more than 200 weavers who work on looms at their homes in the Paravoor and Chendamangalam regions. The yarn, thread and dye solutions are provided by various handloom weavers’ cooperative societies. Weavers work at home and provide the finished product to these societies.
There are five such societies functioning in Paravoor. Each society has its own handloom manufacturing units. Of the five, the worst-affected was the Chendamangalam Handloom Weavers’ Cooperative Society. The entire manufacturing unit was submerged during the floods, damaging 45 looms. Aid is required urgently to save the Chendamangalam handloom industry from extinction.
The loss for five societies would amount to approximately Rs 15 crores. The amount is not big, but if the sector is not revived, it would mean the death of this traditional craft, which recently got the GI (Geographical Indication) tag.
The dip in the value of Turkish lira, by 45 per cent this year represents a significant opportunity for Turkish textile manufacturers. This will prompt many manufacturers to focus more on exports, and increase the level of quality and production standards.
This is especially true for labor-intensive sectors such as the textile industry. This happened in the 1980s and 1990s, when the Turkish lira was constantly devaluating and Textile exports boomed.
Turkey is well-positioned due to the evolution in its range of textile products over the past few years. For example, it has introduced more eco-friendly and organic textiles as well as a wider range of high-performance fabrics for sports and outdoor wear, with properties such as chemical-resistant, stain-proof, water-resistant, sturdy, stretchable and dry-touch.
These factors are helping Turkey compete with sourcing destinations in other parts of the world, such as Asia. Another advantage that continues to help Turkey’s textile industry is its geographic location. It is close to key markets such as the EU and Russia. Its young population helps maintain competitive labor costs. It has a predominance of SME manufacturers, who tend to be flexible and quick. And Turkey produces its own raw materials – it is the seventh-largest cotton producer in the world.
For India, jute could be the fabric of the future. Amid a global push to reduce the use of plastic for environmental reasons, India is promoting jute as a material for reusable shopping bags, home furnishings, clothing, even diapers and women’s sanitary pads.
Extracted from the bark of a tall, reedy plant, jute requires less water than cotton and almost no pesticides, absorbs more carbon dioxide for its size than most trees, and is totally biodegradable. The Indian jute industry sees a potentially huge market in countries like the US which have introduced regulations against plastic bags and foam products.
Nearly all of the world’s jute is grown and milled in Kolkata and neighboring Bangladesh, where the climate is right and labor is cheap. The Indian jute industry employs 4,00,000 mill workers and supports an estimated four million families.
Companies are already supplying jute for use as geotextiles — a net-like material used by civil engineers to stabilize loose soil for road construction. The hope is that the growing interest in jute as a consumer product in India and abroad will help stimulate innovation. Scientists have been experimenting with bacteria to quicken the extraction of jute and improve the quality of fibers to yield softer fabrics. A special digital printing technique could allow jute to replace plastic in banners and advertisements.
