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The Woolmark Company, the Australian Wool Innovation (AWI)’s marketing subsidiary, has set an ambitious target to absorb three per cent of Vietnam’s $27 billion textile export market in a matter of four years. While the fibre only made inroads in the emerging market in 2012, the 2014-15 financial year saw the Vietnamese textile market acquire 800,000 kilograms of Australian wool, predominantly via early stage processing mills in China.
After an unsuccessful dabble in the market, more than a decade earlier, the research and development organisation has spent nearly $1 million annually on supply chain diversification in Bangladesh, Russia, Belorussia, Ukraine with a major focus on Vietnam. It is said that more than 30 Australian woolgrowers toured Vietnam and Hong Kong this month to witness the growth in the use of wool and to hear about the effectiveness of their levy-funded marketing. After a visit of one of 40 Vietnam-based factories using wool for the first time this year, AWI Vietnam consultant Tran Van Quyen felt that it was a realistic goal for Australian wool to penetrate 3 per cent or $810 million of the Vietnamese textiles and garment exports market by 2020.
Biting-off a larger slice of the textile market will be achieved through education, according to Dr Quyen, who is currently teaching 12 traditionally acrylic spinners how to manufacture wool and wool blended yarns. He said several of the 12 companies now trained in the dyeing, knitting and finishing processes had already started with commercial orders.
Dr Quyen divulged that his next goal would be to encourage early stage processing of top making and scouring in Vietnam’s garment-focused industry. According to him, this would act as an alternative to Australia’s heavy reliance on China as the major buyer of greasy wool.
This was behind AWI’s entrance into the Vietnamese market in the early 2000s following their Free Trade Agreement with the United States. However, political challenges stymied this attempt.
According to Consultant Gary Robinson, in 2014, in an effort to increase competition with China for Australian wool, AWI reignited the market with Russia and had another bid at generating a new market in Vietnam. Last year, Dr Robinson facilitated a trial with Nasilkmex near Hanoi, to use wool/acrylic blends in sweaters.
Despite only “fair success”, Nasilkmex adopted 90pc of AWI’s recommendations and last week began the commercial processing of wool which was witness by Australian woolgrowers.
“There are a range of things you encounter when you do these trials which aren’t just wool or market related - they’re politically related, culturally related and quality related,” Dr Robinson is said to have remarked.
"Some saw Brexit as an opportunity to rethink the EU style laws that are taking hold in South Africa, especially around health and safety. Some of South Africa’s largest companies that are dual listed in Johannesburg and London are feeling the pain of Brexit. Over the years firms with Johannesburg listings have also signed up for greater exposure to the London capital market."
Some saw Brexit as an opportunity to rethink the EU style laws that are taking hold in South Africa, especially around health and safety.
Some of South Africa’s largest companies that are dual listed in Johannesburg and London are feeling the pain of Brexit. Over the years firms with Johannesburg listings have also signed up for greater exposure to the London capital market.
African central banks are bracing for Brexit fallout that could further damage already shaky economies hurt by a collapse in commodity prices.
South Africa, the worst affected
South Africa’s already battered economy may be the worst affected by Britain’s exit. As it became clear that the UK vote had swung toward leaving, the rand plunged during early morning trading, becoming the worst performing currency after the British pound. As of mid-morning the rand had fallen more than 7 per cent, its steepest single-day decline since the 2008 financial crisis.
Along with their peers on the London Stock Exchange, major South African companies dual-listed in London and Johannesburg are being hammered. South Africa’s close financial ties to the UK could be a problem - British banks’ claims on South African entities account for178 per cent of South Africa’s foreign currency reserves, according to analysts from UniCredit.
Economists also worry that trade between Africa’s most industrialised economy and the UK will suffer. Economists at the South African university, North-West, have said Brexit could take 0.1 percentage points off of the country’s annual economic growth, which already contracted 1.2 per cent in the first quarter of this year.
Bad timing for Nigeria
Brexit have come at a worse time for Nigeria, Africa’s largest economy. At a time when the government is trying to fix an economy on the brink of a recession by removing strict currency controls and also liberalising oil prices, the immediate effect of Brexit will test the nerves of Nigeria’s economic managers as global markets plummet.
Bilateral trade between Nigeria and the UK, currently valued at £6 billion (about $8.3 billion) and projected to reach £20 billion by 2020, will be disrupted as trade agreements made under the auspices of the EU have to be renegotiated.
Data from the National Bureau of Statistics shows that the UK was Nigeria’s largest source of foreign investment in 2015. A slowing British economy and its reverberating effects could signal a drop in investment, trade, and also remittances from the Nigerian diaspora who sent home $21 billion in 2015.
Reduced trade and investment from Britain will not necessarily be plugged by the rest of the EU, say Lagos-based economist Tunji Andrews. The EU will be looking to strengthen its internal ties, plus there’s cheaper oil from Iran, cheaper labor from China and the eastern block. There’s really nothing we have as a competitive advantage to them right now.
Brexit is already fueling other independence campaigns. Within hours of the vote, leaders in France and Holland, Italy and Denmark called for their own referendums on leaving the EU. This sentiment is shared in southeast Nigeria as well, where government forces have spent much of the past year quelling violent protests by activists advocating for the secession and establishment of an independent country called Biafra. Having already called for a referendum earlier in the year, pro-Biafra activists may now be further emboldened.
The end of ‘British Outwardness’
Other countries on the African continent are bound to be affected as well. In Egypt, the main stock index fell 1.3 per cent, with investors worrying about a loss of British investment and demand for Egyptian exports. The central bank of Mauritius issued a statement that it had raised its reserves of gold and US dollars to reduce exposure to the pound. Should the need arise, the bank stands ready to take measures as appropriate to protect the best economic interests of Mauritius in the circumstance, the regulator said.
More broadly, analysts from Brookings Institution worry about how Brexit will affect the UK’s overall engagement with Africa. As head of the G8 last year, the UK pledged to double aid to Africa. The UK has been the largest funder to IDA17, the World Bank’s concessional borrowing programme.
The think tank concluded in a blog post, Perhaps the biggest impact of the Brexit on Africa would be the end of British ‘outwardness’- the country’s concern with and responsiveness to global development issues.
Vietnam’s stock market reacted immediately to Britain's vote to leave the European Union, but industry insiders believe immediate Brexit impacts on the market as well as the bilateral trade ties between the two countries are unlikely.
However, in terms of bilateral trade ties between Vietnam and the UK, industry insiders said the situation will become a little rougher in the immediate term, but there will be no significant impacts from the Brexit.
According to Vu Duc Giang, chairman of the Vietnam Textile and Apparel Association (Vitas), Britain’s vote to leave the EU will have certain impacts on the roadmap to realise the free trade agreement between Vietnam and the EU in the coming time. The affect will not be significant as the UK currently accounts for only 3 per cent of Vietnam’s textile export to the EU, he explained.
Similarly, it is not likely for the Vietnamese footwear sector to be affected by the Brexit, said Nguyen Duc Thanh, chairman of the Vietnam Leather, Footwear and Handbag Association (Lefaso). Compared with other EU countries, the UK also accounts for a modest share of Vietnam’s footwear export, so the impacts, if any, will not be significant, he elaborated.
A weaker ringgit will be the immediate impact to Malaysia from Brexit, which fell steadily against the US dollar at a pace last seen in the Asian financial crisis of 1997/1998 by midday yesterday as investors dumped riskier assets in emerging markets for so-called safe-haven assets such as US treasuries, Japanese government bonds, German bunds and gold.
Malaysian Rating Corp Bhd chief economist Nor Zahidi Alias says the whole issue boils down to uncertainties that will have impact on business decisions and the real economy especially in Europe. Brexit will cause a knee jerk reaction to the financial markets - currencies being the most vulnerable. The volatility in equities and bonds cannot be underestimated in the short term but will eventually subside when a clearer picture emerges.
For now, the pound sterling has weakened against the ringgit but the cross-rate will be up for a lot of volatile trading. Analysts have pointed out before the referendum that the ringgit and the rupiah were the most vulnerable Asean currencies to swings associated to the uncertainties surrounding the aftermath of Brexit.
The direction of commodity prices and crude oil in particular, will be key to the ringgit’s performance. The global crude oil benchmark, Brent, declined by more than 4 per cent in the late morning as British media confirmed that Brexit was imminent. There is every indication that crude oil prices will continue to be volatile because demand may be crimped by Brexit uncertainties stemming from recessions in Britain and the EU, potentially slower US economic growth and the unresolved Chinese debt crisis.
Britain's exit from the European Union, that has led to a 10% drop in the value of the pound, could lead to the leather export industry suffering over 10% reduction in value.
Rafeeque Ahmed, chairman, Council for Leather Exports, reportedly said, “With UK being the second largest exporter from India (after the US), with a 12.5% market share, leather exporters across the country would face losses. We could increase the prices to maintain margins, but no one would be willing to buy, given the economic conditions. Substantial number of exporters across Tamil Nadu, Kanpur, Agra etc, would be affected."
It was felt while the losses are likely to be significant, it is too early to look out for alternatives to keep the business running.
The Indian leather industry, that suffered over 10% reduction in overall exports in FY 2015-16 owing to poor performance of the European market, was showing signs of revival with increase in the number of orders, following increasing cost of
According to experts, Brexit will hit the Pakistan textile sector the most. However, the negative impact emanating from the Brexit will be comparatively less for Pakistan’s economy as it is relatively insulated from global markets. This is because Pakistan’s exports are only 7 per cent of the country’s total Gross Domestic product (GDP). They added that lower commodity prices could result in even lower inflation expectations, which will bode negative for outlook of banking sector.
Brexit has come as a surprise for global markets where Pound Sterling to $ has come off by 7 per cent to 1.35 (lowest since 1985) as compared to yesterday where the Pound Sterling to $ was 1.45. Global markets have also taken a toll with across the board losses.
International oil prices have come off as a result of global uncertainty and concerns over a recession in UK with a knock off effect in EU. Oil prices are down 4 per cent today with WTI trading at $47. This has led to weakness in local oil Exploration and Production (E&P) companies. Yen has appreciated as a result of Brexit and is trading at 101.9 to US$, up by 3 per cent as of yesterday. This will be negative for local auto sector as portion of their costs are denominated in Yen.
Members of the fashion industry took to social media to voice their opinions on the outcome of Brexit - overwhelmingly, disappointment. I’ve never been so unproud to be British, Katie Grand, the editor in chief of Love magazine, wrote on Instagram.
Fear has been the common motivator on both sides of the issue, the New York Times wrote. That underlying xenophobia was a large part of fashion players’ frustration with the outcome. As Jonathan Anderson of Loewe and J.W. Anderson said on Instagram, ‘Fear is just a virus.’ But the Brexit, as the departure from the E.U. is known, could create challenges for their businesses, too, and even for shoppers.
Many British luxury brands, like Burberry, buy fabrics and produce clothing in Europe. A weaker pound could send manufacturing prices soaring. Either the brand absorbs that, or it passes the cost on to consumers. On the flip side, that might create an opportunity for French and Italian fashion brands, which already make up half of the global luxury market, to gain further market share.
For foreigners who happen to be in London this weekend, however, it might not be a bad idea to take a shopping trip. A pair of heeled Gucci loafers, currently available on Net-a-Porter, currently cost £420 - $580 at current exchange rates. A month ago, they would have cost you about $613. A metallic jacquard Mary Katrantzou dress from Selfridges, which goes for £1,785, translates to $2,468 at the moment — down from roughly $2,606 last month.
Even though the Government of India and economists are saying that India is all prepared to deal with the short term and medium term impacts of Britain’s exit from European Union (EU), the exporters such as textile and handicrafts, are deeply concerned about the impact on the export orders already placed.
According to the President of the Textile Association of India, Arvind Sinha, the major impact of Brexit will be on booked export orders of textile and handicrafts because both the currencies will be affected due to Brexit. Both the currencies - Euro and Pound - will be affected and business will be affected as realisation is going down, he observed.
Sinha added that the situation would be good as industrialisation will take place in Britain and employment has to be created. The flexibility of EU will go and for textile sector, it is a good thing.
Sinha further explained that, whatever business we are doing now that is generally in Euro but the large companies which trade in pound will be affected whether the pound will crash as it is already going down. Pound will go down by at least 15-20 per cent.
Whereas, the Vice Chairman of Export Promotion Council of India (EPCH) Rajesh Kumar Jain opined that handicraft sector has to face the direct loss of around 10 per cent now and same would increase to 15 per cent if euro and pound to go down. Handicraft and textile would be affected majorly due to this certain change.
Meanwhile, Finance Minister Arun Jaitley said that India is well prepared to deal with short and medium-term consequences of Brexit.
In the wake of Britain’s exit from the European Union {EU}, Sri Lanka would face negative consequences across the board in many areas, according to the country’s economists and exporters.
Said Head of the Department of Economics, Faculty of Arts of the University of Colombo, Prof. Ven Bellanvila Wimalaratana, the Brexit, which he deemed was a divorce of sorts, which would cause an initial shock in the markets in the short term (one year to one and a half years to a maximum of two years), would locally directly adversely impact the currency market, trade including exports (including textiles), economic growth performance, investments including foreign direct investments (FDIs), tourism, and international aid and other support received by the country, thereby causing mostly negative implications.
Wimalaratana highlighted that while there were a number of Sri Lankans working in Britain and the countries of the EU and some were permanently settled there, their remittances too would be affected. While we are at present not receiving much in the way of FDIs, we may not be able to expect FDIs as much as we hoped we would, he remarked.
Meanwhile, Secretary General of the Joint Apparel Association Forum (JAAF), Tully Cooray said that there would not be immediate changes but added that they were adopting a wait-and-watch approach. He said that they would have to request the UK for a fresh preferential system in the event the country decides to deviate from the current customary practices.
As Britons voted to leave the European Union, Bangladesh runs the risk of losing duty benefits on its annual exports of more than $3 billion to the UK.
Apart from exports to the UK, remittance income from the European country may come under strain as an impact of its departure from the EU. In the long run, Bangladesh's economy might take a hit if the current uncertainty in the global economy persists further.
According to Zahid, lead economist of the World Bank in Dhaka, the devaluation of the pound may have an immediate impact on Bangladesh's exports and remittance. However, the devaluation resulted from an overreaction which would cool down soon.
The UK is Bangladesh's third largest export destination after the US and Germany, and the second largest in Europe.
Bangladesh exported goods worth $3.23 billion to the UK in 2014-15, registering a 21.28 percent growth from the previous year, according to the Export Promotion Bureau (EPB). Garments make up nearly 90 per cent of the export figure.
As Britain chose to leave the EU, economists and exporters said it would be a major challenge for Bangladesh to retain duty-free trade privilege of its goods to the UK.
Because of Brexit, the whole EU as well as the UK would face an economic crisis. As a result, people would buy less and the exporting countries would feel the pinch, said Faruque Hassan, vice president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
