FW
The Union government has undertaken a study that would examine issues related to problems faced by the job working units in the Tirupur knitwear cluster to avail duty benefits under Export Promotion Capital Goods (EPCG) scheme for machinery import. The problems for the garment industry started after an amendment in the Foreign Trade Policy that mandates the job working units in printing, dyeing and knitting and other segments to establish a direct link between machinery imported and the finished goods exported came into effect from July 1 last year.
In apparel clusters such as Tirupur, vertical integration of production capacities was not much and the units were spread out across the cluster, doing job work. In his petition to the Government, S Dhananjayan, a consultant and chartered accountant had pointed out that the amendment had mandated the EPCG licence holders to show documents such as copy of agreement entered between the license holder and the ultimate exporter undertaking to export the goods manufactured, proof of dispatching goods from the licence holder’s factory to the exporter’s firm and lorry receipt to show logistical movement, among others, to get the zero duty benefits for machinery import.
With the signing of the Trans Pacific Partnership trade agreement between 12 Pacific Rim countries of which China is not a part of, the textile industry of China is undergoing palpable change as many countries see a threat of a power shift in the world’s textile industry. Despite the slowdown in Trans-Pacific Partnership due to the United States presidential and congressional elections, the impact has already been felt by China as companies are trying to move out, The Woolmark Company key account manager for Hong Kong, Daniel Chan has reportedly said.
With the elimination of tariffs set to promote competitiveness of textile industry, Chan was of the view that the reaction has been immediate, bringing trade momentum from China to Vietnam. Since the profit margin is low, manufacturers, mostly from China and Hong Kong have migrated to Southeast Asia and are trying to save money by setting up factories there. According to Woolmark Company Hong Kong, country manager Alex Lai, manufacturing is moving from China to Southeast Asia into Bangladesh, Vietnam, Cambodia, Burma and Indonesia because of labour costs. He is of the view that in the future, the Tangible Personal Property TPP tax benefits to export to Europe and US would be attractive.(Tangible personal property is a tax term describing personal property that can be physically relocated, such as furniture and office equipment).
Big businesses in the supply chain are already building their businesses in TPP partner countries. The TPP is anticipated to set widespread new rules for trade, investment, intellectual property, labour, data storage, state-owned enterprises and the environment across 40 per cent of the world's economy in countries like Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, US and Vietnam.
The British vote to leave the European Union will not immediately affect Pakistan’s exports under the Generalised System of Preferences Plus scheme. However, Pakistan might lose a supporting voice in Brussels for continuation of the preferential package in the wake of Britain’s permanent exit from the EU.
Both Britain and Germany are major destinations for Pakistani exports under the GSP Plus scheme, which became effective on January 1, 2014, and will remain available for the next 10 years. Pakistan’s exports to the United Kingdom under the scheme are not going to be affected immediately. Moreover, Article 50 gives an existing country two years to negotiate terms — on issues like trade and migration for example — for its relationship with the EU. This suggests that Pakistani exporters will continue to enjoy the duty-free export status to Britain for the next two years.
Under the GSP Plus status Pakistani exports to the EU fell by 12 per cent in July to December 2015 from a year ago. It was only in the first year of the preferential tariff scheme, 2014, when Pakistan’s exports increased by 22 per cent year-on-year. Pakistan is now looking for new supporters from within northern Europe and France and Germany to enjoy the same privileges in the wake of Britain’s formal withdrawal from the EU. Countries in northern Europe are traditionally in favor of trade liberalisation.
Industry and trade association Assocham has warned that the risks to global economy and its spin off to India from Brexit are emerging out to be much larger than initially perceived. In a status paper, Assocham said, the risks make it imperative for the government to heighten watch on unfolding political-economic scenario in Europe, by setting up a high level monitoring group comprising inter-ministerial and agency representatives. Given the increased global risks, it would be quite prudent for the government to announce successor to Raghuram Rajan as the RBI Governor sooner than later, it added.
Assocham has come out with a status paper, suggesting much greater watch on the situation, than just being complacent , taking solace from strong fundamentals of the Indian economy, after a brain-storming assessment by its leadership based on the fast moving developments in EU headquarters in Brussels, UK, Germany, France and Italy after the Brexit.
The association has suggested formation of a high level monitoring group comprising senior officials of the ministries of Finance, Commerce, Information Technology and the Reserve Bank of India. Active involvement of Indian High Commission in London and missions in several European capitals is sought in getting the real time information with a proper perspective from ground zero. Constant inputs should be sought from the Indian firms with bases in Britain and across Europe.
Prestigious HGH India 2016, the annual trade show for Home Textiles, Home Décor, Gifts & Houseware is all set to bring Indian and international brands, manufacturers and distribution partners together this July for its 5th edition at the Bombay Exhibition Centre. Rashmi Verma, Textile Secretary, will be the chief guest at the inaugural ceremony. The trade show provides a focused marketing platform for designer, branded and mass produced goods, enabling the sellers reach out to retailers, distributors and institutional buyers across India. The sourcing options and innovations in home textiles, home décor, houseware and gifts category will continue to grow at the HGH India 2016.
HGH India 2015 was visited by an enviable 22,750 Indian retailers, distributors, importers and trade buyers from 398 cities and towns from all over India, over 400 leading Indian and International brands showcased their innovations and fresh collections. These top-end decision-making retail professionals come for their annual sourcing requirement, to find new business opportunities, and to understand upcoming fashion, business and market trends in the home category. With a track record of 4 successful editions and a growth of 50% in visitors in 2015, HGH India has firmly established its position as India’s leading trade show for home category with clear focus on the India’s domestic retail market.
HGH India’s 5th edition is the biggest ever edition of the trade show with products from over 450 brands and manufacturers from about 30 countries. Several leading brands would be using HGH India to launch their new products and innovations to the trade. Apart from regular exhibitors HGH India 2016 will witness over 100 new exhibitors at the show this year.As always, visitors will be able to discover forecasted colours, designs and styles for the future at the Trends Pavilion. Presented under the overall theme ‘Cognizance’, Trends for 2016-17 have also been encompassed in a World-class trend book, besides their detailed showcasing at the trends pavilion at HGH India 2016.
"Traditionally, India’s textile sector not only employed millions of people directly but also gave the country the lion’s share in global trade. Things have changed in recent years and India’s apparel industry is in tatters. Many of India’s textiles mills are shutting down, new jobs aren’t being created because exports are not growing. And countries such as Bangladesh and Vietnam have convincingly left India behind in their race to the top."
Traditionally, India’s textile sector not only employed millions of people directly but also gave the country the lion’s share in global trade. Things have changed in recent years and India’s apparel industry is in tatters. Many of India’s textiles mills are shutting down, new jobs aren’t being created because exports are not growing. And countries such as Bangladesh and Vietnam have convincingly left India behind in their race to the top.
The new special package for the sector is expected to create one crore new jobs over the next three years and bring in an additional investment of Rs 74,000 crores. The new measures overhaul labour laws, allowing workers to do overtime of eight hours per week and provide additional subsidy for garment manufacturers to upgrade technology and expand industries.
Industry bodies and experts have hailed the initiative, calling it a ‘comprehensive’ package that addresses the industry's needs. There is optimism that India will be able to regain some lost ground. But, it’s still worth examining how Indian textiles industry ended up where it is now.
Decline of the industry
India’s textile exports declined marginally last year to $36.26 billion from $37.14 billion recorded in the year 2014-'15. In apparel, Bangladesh’s exports to the US grew by a whopping 12 per cent in 2015 while Vietnam did even better as its exports rose by 14 per cent. India, on the other hand, saw its exports grow just by 8 per cent. Even the government has acknowledged this state of affairs. According to the Ministry of Textiles, Bangladesh and Vietnam have surpassed India’s apparel exports and the country is the smallest exporter among these three economies.
Bangladesh’s competitive edge
Both Bangladesh and Vietnam have cut into India’s pie as a preferred manufacturer of clothing, while India’s exports have languished. A recent study attributed this fall to greater competitiveness in factories of Bangladesh. India’s garment factories are too small. They typically have 150 people and about 80 machines while the average factory in Bangladesh has 600 people.
Interestingly while China’s dominance in the trade has been on the wane due to rising labour costs, India has been facing a peculiar problem of trying to expand the scope of its industries. With China’s textile sector slowing down, countries like Russia, which were completely dependent on China have left a vacuum. Indian companies can take advantage of this. However, this is not going to be easy with countries such as Bangladesh offering cheaper alternatives. With the new Textile Policy, the government is trying to give additional incentives to both workers and the businesses to balance the value chain so that the industry can achieve its potential.
The government will provide more money for employees who work at the lowest rung of the ladder through PF accounts, while making the EPF optional to employees who earn less than Rs 15,000 a month to provide them more money to spend. For industries, the government is providing tax incentives and funds through loans and subsidies to speed up the process of industrial expansion.
Loans and subsidies
A key part of it is the additional subsidy provided under the Amended Technological Upgradation Funds Scheme. This scheme provides one-time incentive to owners looking to scale up their ventures by investing in technology or generating employment. Under the new norms, the subsidy has been increased from 10 per cent to 25 per cent and it will only be provided after the ‘expected jobs’ are created. The current scheme will involve an annual expenditure of Rs 400-500 crore according to the ministry estimates and it is expected to generate 12.25 lakh jobs and additional exports of $7 billion.
Problems persist, even as the current package seeks to revive the sector through broad range reforms. Recently, textile mills in Telangana decided to shut down twice a week in protest, taking a cue from Tamil Nadu to highlight their problems. Reportedly, Andhra Pradesh is also set to follow suit as mill owners complain of eroding profits because of raw cotton stocks being allegedly hoarded by large corporations and imports having become expensive because of added duties and taxes.
Shutting down mills further accentuates the extent of the rot facing the mill owners as the official data shows that close to 600 textile mills shut down permanently during the last year itself. That’s about two mills closing down every day – and the number of mills shutting down has been rising for the last decade. The government is yet to find out how it impacts the industry.
Tukatech, Inc. has announced the appointment of Marta Maiandi as Director of Tukatech Europe. The 24-year-old is an accomplished engineer with a degree in Information and Industrial Systems from the Polytechnic University of Milan, Italy. Based in Curno (BG), Italy, she will be responsible for engineering, sales and support for the Tukatech users throughout Europe.
Marta has been trained on Tukatech's software solutions at the World Headquarter office in Los Angeles, CA, USA. The company’s USA team will be working closely with Marta to help Tukatech users in Europe to engineer their processes.
Since Tukatech was founded in 1995, they have been known for disrupting the product development processes in the apparel industry. The new generation has proved to have a thorough understanding of the importance of technology in the apparel industry. Marta is a perfect addition to show traditionalists how to get more productivity with fewer people, commented Ram Sareen, Founder and CEO, Tukatech, Inc.
German textile suppliers 3Freunde, Shirts for Life and Melawear are the first textile manufacturers to sign up for the new Fairtrade Textile Standard. Launched in March 2016, the Fairtrade Textile Standard enables factory workers to improve their working conditions collectively and is the first standard in the industry to require living wages to be paid within a set time period. The Fairtrade approach is the first of its kind to cover people working throughout the supply chain from seed cotton to finished textile products. In addition, the Textile Program helps factories and workers improve their social and environmental impacts.
3Freunde have already been producing T-shirts made from Fairtrade cotton for several years. Now it wants to take the next step and go from certifying our raw materials to also certifying its supply chains against Fairtrade standards. Melawear, another long-term Fairtrade cotton partner, is planning to implement the Textile Program and has conducted a first assessment of a production site in India. The detected issues mostly relate to wages, participation and contract workers.
Factories participating in the Fairtrade Textile Program will receive onsite support by local experts and the Fairtrade producer networks to meet the standard’s requirements. An independent certification body for Fairtrade will audit the textile companies.
Cotton imports by Pakistan are expected to be high this year up to July 2017, as erratic weather is bound to force farmers in the world's fourth-biggest cotton producing country to cut down on the area under the crop. A supply crunch in Pakistan, at a time when back-to-back droughts have taken a toll on output in India could boost global cotton prices from their current near 11-month high. The two countries have already taken turns this year to buy from each other to fill shortages at home.
Saleem Saleh, Acting Secretary General of All Pakistan Textile Mills Association (APTMA) says cotton area in Pakistan is down around 15 per cent. Despite the government and industry's efforts, farmers in top-producing Punjab have reduced area. Unpredictable weather, such as floods late last year as well as poor rainfall in recent months and the resultant uncertainty about yields has forced many farmers from cotton seed sowing, stymieing Pakistan's efforts to boost local output.
The country's cotton output fell by a third to 9.7 million bales in 2015/16, forcing it to import a record 4 million bales in the year, up from 1.2 million a year ago. The country consumes around 15 million bales annually. Even for the season starting August 1, weather has not been supportive and the crop in Punjab has already been hurt by poor rains in May and June, it has been revealed. Cotton sowing in Pakistan starts from April and harvesting begins in July. While the country has set a production target of 14.1 million bales for the new season, industry officials say output will fall short and that rainfall over the next few weeks will be crucial in determining yields. Typically lower output in Pakistan gives an importing opportunity from India. In fact, the latter shipped out about 6.5 million bales this season with Pakistan taking nearly 2 million of it.
INDA, the Association of the Nonwovens Fabrics Industry, has come out with its third annual North American Nonwovens Supply Report for members. The 51-page report offers 12 tables and 25 figures. The report provides a view of North American supply, including the key metrics of capacity, production and operating rates, in addition to regional trade. Dave Rousse, INDA President feels this report is the benchmark for North American capacity, production, and supply information. It brings the clearest view available of the all-important supply/demand balance in the major nonwoven process categories. An essential element for members’ strategic planning and business decision making.
The new findings reveals from 1990 to 2015, North American nonwovens capacity has increased an average of 5.4 per cent per year, outpacing US real GDP, which grew at 2.4 per cent per year over the same period. During this time, the industry has more than quadrupled in size, adding over two million tons. In 2015, North America’s nonwoven capacity increased to 2.98 million tonnes (2.7 per cent annual growth compared to the previous year’s growth of 1.2 per cent). Suppressed investments due to the Great Recession, (2007 through 2009), subdued capacity growth through the end of 2014, producing a minimal additional 110,000 tons in North America, at an annual increase of 1.3 per cent.
Imports and exports are an important consideration in supply. North America receives imports (294,000 tonnes) comparable to 10 per cent of the region’s capacity; while exporting 163,000 tonnes. Contrary to industry assumptions, imports from overseas into North America are not substantial, accounting for on a net/net basis just 4 per cent of the regions nonwoven capacity.
