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The Chinese are investing in Vietnam’s textile and garment industry before TPP comes into play. The garment industry is the strongest magnet for Chinese investors, while textile and dyeing also lure Chinese investment but at a lower level. Vietnamese apparel products would enjoy a zero tariff in the US after Vietnam signs the Trans-Pacific Partnership (TPP) agreement. Vietnam is working on a plan to help local manufacturers improve competitiveness when the TPP takes effect.
Vietnam now achieves an annual growth of seven per cent in exports to the US, and the growth might reach 12 to 13 per cent if TPP is favorable to the local textile and garment sector. Among TPP members, the US is the largest market for Vietnamese textile and garment producers.
A number of Chinese and Hong Kong textile and dyeing projects have got off the ground in Vietnam. A Chinese company, Pacific Textiles, is planning $180 million dollar venture in Vietnam with the Crystal Group of Hong Kong. Crystal will spend an additional 49 million dollars raising the size of the project to 70,000 spindles. By 2025, Vietnamese textile and garment exports to the US may hit $30 billion. The greatest benefit TPP may bring to Vietnamese textile and garment products is a zero tariff.
About 55 per cent of high-priority repairs and 63 per cent of all required repairs of Bangladesh’s garment factories affiliated with the Alliance for Bangladesh Worker Safety have been completed so far. Alliance is a platform of North American apparel buyers and companies.
All Alliance factories are expected to complete their high-priority repairs by July 2018. Alliance has warned of cutting relationships with those factories which fail to make progress on repairs that address safety concerns. Those unwilling or unable to comply will be suspended and removed from the compliant factory list.
Meanwhile Alliance has suspended 104 factories for failure to make progress on repairs that address safety concerns till October 12, 2016. Critical repairs include lightning protection systems on buildings, exit enclosures provided with rated, fire-resistant barriers, easy means of egress, strong structural columns that can support the weight of the factory structure, machinery, and workers, and structural systems free of distress, settlement, shifting, or cracking in columns or walls.
Alliance is working with factories to prioritize the most critical repairs. Some issues including the import and installation of fire doors, the reinforcement of structural beams and columns, and the installation of sprinkler systems are often costly and time-consuming for factories to achieve.
Charisma and confidence are some of the qualities Abercrombie & Fitch (A&F) is widely known for. As an effort to show a new version of itself while staying true to its 125-year history as an American sportswear brand, the company has unveiled a new look. The campaign includes a completely re-designed website and all-new digital advertising across platforms including social media.
In recent seasons, A&F has been in retail limbo. Last year, the company named a new brand president and managed to get its new creative director from J Crew. Their influence was reflected in a sophisticated Fall ’16 collection. Still, the move to connect with the masses in particular the younger consumers has fallen short as the company continues to experience a lukewarm comeback after having shuttered 60 of its stores last month.
With teaser campaigns, the company plans to promote its new look leading up to the holidays. The campaigns hold two messages. The first, ‘People have a lot to say about us. They think they’ve got us figured out.’ It urges consumers to view A&F in a new, more inclusive light. The second message says, ‘This is Abercrombie & Fitch.’
"It seems to be a complex web of global and internal pressures that is plaguing Indian exports growth plans. In 20 out of the last 21 months, India’s merchandise exports registered negative growth. Services exports, which were earlier doing well have also started declining – falling by 4.56 per cent (year on year) in July. With a decline of just 0.3 per cent in August, Indian officials claim that the export decline has bottomed out and hence it should soon pick up."
It seems to be a complex web of global and internal pressures that is plaguing Indian exports growth plans. In 20 out of the last 21 months, India’s merchandise exports registered negative growth. Services exports, which were earlier doing well have also started declining – falling by 4.56 per cent (year on year) in July. With a decline of just 0.3 per cent in August, Indian officials claim that the export decline has bottomed out and hence it should soon pick up. However, that doesn’t seem a possibility because of the complex interplay of global as well as internal factors that will continue to constrain India’s exports, going forward.
External forces and their impact
With a slowdown in China, Japan and EU, along with the great commodity crash, there’s seems to be a long way for the revival of global trade, indicating lower demand for imported goods and services in most parts of the world. Global trade liberalisation is progressing slowly as trade policy now has to deal with contentious non-tariff issues such as labour and environment, tighter WTO-plus rules on protection of intellectual property rights, public procurement and investment.
Going ahead, Brexit seems to be a visible threat to global trade with the EU accounting for nearly a third of global trade even though its share in global GDP is 25 per cent. Trade elasticity (that measures change in world trade as a result of change in global GDP) has reduced from 2 (1980-2011) to 1 (2012-15/16) and the situation is going to remain the same for some time now. According to WTO, world trade is likely to grow at 1.7 per cent in compared to world GDP at 3 per cent this year.
The share of services in global GDP is increasing sharply but the increase in services GDP is not adding much to the global trade. And former RBI governor Raghuram Rajan rightly points out aptly as countries become richer, non-traded services constitute a greater share of output causing GDP to grow faster than trade. Thus, a significant portion of global GDP growth is simply bypassing global trade.
Implications for India
The above pressures would significantly impact exports of India in the near future. Slowdown in China would dramatically reduce export growth for India. China, by limiting the growth of commodity exporting nations as well as Asean, Japan and Korea, will limit the overall demand for Indian exports. OPEC, along with Brazil and Russia together, accounts for roughly one-fourth of India’s merchandised exports.
Moreover, it remains to be seen how India will fight global giant ‘China’ in the wake of ‘Make in India’ movement and its low cost labour advantages. Labour reforms is a major challenge because India will be under tremendous pressure to increase minimum wages despite having lower labour productivity compared to countries such as Bangladesh and Vietnam in key manufacturing industries. Further, the EU accounted for 17 per cent ($45 billion) of India’s merchandise exports in FY 2016 and 20 per cent of that shipped to UK. Similarly, UK accounted for half of $24 billion IT exports to the EU. These exports are likely to hit by Brexit and its after-effects.
India’s exports are still a significant contributor in the global trade. The top 20 product categories account for 80 per cent of India’s total goods exports. The export of services is even more skewed than goods. Services sector accounts for roughly 60 per cent of its GDP. Over 62 per cent of India’s IT export goes to the US alone, and one vertical, BFSI accounts for 40 per cent of total IT export. It’s the reliance on one particular sub-set that may signal problem for Indian exports. India has to truly work on its tourism potential to up its capabilities.
Economist say reforms like keeping rupee undervalued won’t help India’s exports. Rupee depreciation usually leads to demand for steeper discounts from buyers in a sluggish global demand scenario. Thus, we end up supplying more goods for the same amount of dollars. It’s important to realise that faster global GDP growth rather than discounts lifts India’s exports as India’s export basket is now more income elastic than price elastic. Trade ties with the countries need to be carefully designed and materialised to their fullest to reap maximum benefits.
The Taipei Innovative Textile Application Show (TITAS) is being held in Taiwan, October 17 to 19, 2016. Representatives of about 100 international brands from 21 countries are attending. The United States accounts for one-quarter of the foreign brands. More than 1,000 one-on-one meetings between Taiwanese vendors and potential foreign buyers have been arranged to promote trade growth. The show has a focus on environmentally friendly and functional products. About 400 exhibitors from Taiwan and abroad are displaying their products in 800 booths. Sweden’s Polygiene, Germany’s Emtec Electronic, Switzerland’s Archroma Management, Japan’s Toyobo and South Kroea’s Ducksan are among the foreign exhibitors at the trade show.
China, Hong Kong and India have also sent delegations to the exhibition. Functional fabrics are being showcased at this year’s show, reflecting efforts by Taiwanese textile vendors to work closely with the high-tech sector to introduce smart clothing that takes health care, home living, exercise and personal protection into consideration.
Taiwan’s textile sector is determined to support the global trend toward eco-friendly practices by exhibiting green products. The supply chain of Taiwan’s textile sector has developed fabrics using recycled materials. Major overseas buyers in the global textile industry are particularly keen to purchase products that are not harming the environment, creating good opportunities for Taiwanese textile exporters.
Spinning mills in Madhya Pradesh have significantly reduced buying raw cotton from the market. They are holding back purchases anticipating a drop in prices of raw cotton with the arrival of fresh and superior crops in the market from November. There are about 40 spinning units in the state. Each unit has a capacity of one lakh spindles that require around 450 to 500 bales of cotton a day.
The moisture content in current supplies is over 30 per cent as against the standard level of 15 per cent. Fresh supplies of cotton have started arriving in the local market but only 10 per cent of the crop has been harvested so far. Cotton arrivals are expected to increase from November. Arrivals of the new season crop have got delayed due to rains in several parts of the region.
Current cotton prices are not viable for spinning mills as yarn prices are ruling low in the market due to poor export and textile demand. Mills are in a wait-and-watch mode as cotton prices may drop with the rise in supply. Spinning units have been using blended cotton since the past few months due to higher cotton prices.
Following a presentation on the clothing and textile sector in Morocco at the Apparel Sourcing last month, a partnership agreement has been signed by Messe Frankfurt France and the Moroccan Association for the Textile and Clothing Industries (AMITH).
The presentation entitled ‘The clothing and textile sector in Morocco: performance, strategies, outlook’ provided an overview of the domestic industry and its potential for future growth, aimed at production managers attending the leading trade fair for sourcing finished products in clothing and fashion accessories. The eighth largest supplier of clothing and textiles to the European Union in 2015 with exports worth EUR 2.54 thousand million, 2.3 billion of which comes from clothing, the clothing and textile industry of Morocco is said to be a key sector for socio-economic equilibrium.
Despite sluggish European economic climate, the Moroccan clothing and textiles industry is not merely holding its ground but has been back on track for growth for the last three years. In the first half of this year, Morocco’s exports to Europe jumped by 8 per cent. The country owes these excellent results to other European producers (Turkey, Tunisia) that has helped the country to rally the sector, setting clear and ambitious strategic objectives with the support of government bodies.
China is losing market share in global textiles mainly due to higher costs of production and shortage of a skilled workforce. The minimum wage of textile workers in China is growing 10 per cent every year that makes it rather expensive for production compared to some South Asian competitors. With average wage of the 23 million textile workers in China reaching $600 a month, garment factory owners are starting to face great pressure.
As an alternative some Chinese textile manufacturers have started moving to Africa and Southeast Asian countries. They feel they can benefit in terms of costs and market access. Apart from sub Saharan Africa, North Africa is seen as another important destination. In North Africa there is already a developed textile industry, e.g. in Egypt and Morocco.
Of the important textile manufacturing nations, Bangladesh, Pakistan, Vietnam and Indonesia have costs which are significantly lower than those in China. The Chinese are also planning to relocate a number of their industries, particularly garments and textiles, to Bangladesh by setting up factories in a special economic zone. China itself could play a major role in making Bangladesh the number one readymade garment exporter in the world.
However, Bangladesh needs to be smooth in project implementation and remove roadblocks and mistrust that exist with China.
H&M Foundation, the non-profit-making organization, announced the second edition of the Global Change Award on September 1. The open competition has been instituted for encouraging research to shift the fashion industry from linear to a circular one. The foundation, personally funded by the Stefan Persson family, has allocated €1 million grant to five innovations that can re-invent the fashion industry. The last date of submitting application for the award is October 31.
Clothing made of citrus by-products, microbes that digest waste polyester and an online marketplace for textile leftovers are some of the five disruptive ideas that shared the first €1 million Global Change Award grant last year. The first edition of the Global Change Award had received more than 2,700 applications from 112 countries.
Karl-Johan Persson, board member of the H&M Foundation and CEO of H&M said that after having a look at so many fantastic innovations from around the world that had the potential to transform the fashion industry, his company decided to announce the next round of the Global Change Award. Making the fashion industry circular is not just about recycling. To encourage ideas from a broader scope Global Change Award 2016 has three categories open for applications: Circular business models covering ideas on how to reuse, repair, share, digitalize or extend the life of products.
Circular materials looking for ideas on new fibres, recycling techniques, leather substitutes etc. and Circular processes aiming to find new methods around chemicals, water and dyeing, as well as 3D printing, demand-driven manufacturing etc. Annually, an expert panel selects five winners that share a grant of €1 million and gets access to a one-year innovation accelerator provided by the H&M Foundation, Accenture and the KTH Royal Institute of Technology in Stockholm. Global public is then invited to distribute the €1 million grant between the five innovations through an online vote. The result of the vote garnered would be announced at a grand award ceremony in Stockholm in April 2017.
Hit by a rise in cross border tension, the textile industries in both Pakistan and India are in serious dilemma as cotton trade between the two countries has been in animated suspension as no new deals are being thrashed. However, one can see a bit of silver lining with Pakistan’s Cotton Commissioner Khalid Abdullah revealing that a low quantum of trade activity is still taking place.
The government has not asked importers to stop buying cotton from India but many of them are not buying on their own as a gesture of national solidarity. However, Indian exporters are refusing to sell the commodity at their government’s behest, although they know that they would be losers.
Pakistani spinners are the biggest buyers of Indian fibre. Imports of a lesser quantity by Pakistan this year could hurt Indian exports, raise their prices and help rival cotton exporters like Brazil, the United States and some African countries. And for the industry in Pakistan, buying the raw material from other sources may prove costly owing to long distance freight. In fact, the situation is in a wait-and see mode. Cotton trade between the two countries is worth $822m a year.
Suspension in cotton trade comes at a time when Pakistan’s cotton crop has recorded an overall decrease of 15 per cent over that of last year. This has added to the industry’s woes. Though Pakistan begins importing from September, but this time there has been little activity so far.
In fiscal year 2015-16, official trade between India and Pakistan was recorded at $2.6 billion with cotton being a major component. However, in the crop year that ended on September 30, Pakistan was India’s biggest cotton buyer after its own crop was hit by drought and whitefly pest. According to an estimate, Pakistan will need to import at least three million bales in 2016-17. On Oct 7, the Cotton Crop Assessment Committee (CCAC) estimated the output for 2016-17 stood at 11.039 million bales. Lower output was mainly due to effects of climate change on the crop, besides pests like pink bollworm and whitefly.
