FW
Vietnam’s denim exports to the US has risen 16.1 per cent so far this year. Women’s jean exports from Vietnam to the US rose by almost 17 per cent. Although China held its share of total denim imports into the US, Mexico lost 200 basis points of share, while Bangladesh and Vietnam gained 150 and 80 basis points. Pakistan and Nicaragua also gained share, while Egypt lost.
China has maintained its 26.5 per cent share of US denim imports. Unit imports from China dropped by eight per cent, but the average cost per garment rose by four per cent. There was a seven percent increase in men’s jean imports from China but a nine per cent drop in women’s jeans imports.
Imports from Bangladesh, the US’s third largest source of denim apparel, increased by eight per cent, with units up 11.7 per cent and average cost down by more than three per cent, with women’s seeing most of the gains. More than 98 per cent of total denim apparel imports by the US are jeans. Men’s and boys’ are the largest segment, at 52 per cent of the total on a dollar basis, down 100 basis points from the prior year, while women’s and girls’ rose to more than 46 per cent of the total. Denim jackets, skirts, dresses and other garments represent less than two per cent of the total.
The United States is Vietnam’s biggest export market. About 50 per cent of Vietnam’s total textile and garment exports goes to the US. Total exports of textiles and garments from Vietnam to the US gained a 11 per cent year-on-year from January to November 2015. From January to November 2016, Vietnam’s textile and garment shipments to the US edged up 4.7 per cent from the previous year.
The TPP would have eliminated the 17 per cent tariff on US imports of garments from Vietnam and the deal would have given Vietnam-based textile industrialists a great advantage in exporting their products to the US. Even in the absence of TPP, Vietnam’s economy is well positioned to continue growing, with various other trade deals giving it good access to international markets, including the recently negotiated EU free trade deal and other agreements.
Vietnam’s textile, seafood and footwear sectors would remain competitive even without TPP. The country feels its textile and garment exports to the US will increase, with or without TPP. The reason is that while Vietnam’s export turnover has been growing by 12 to 13 per cent each year, revenue from US imports has been growing by just three per cent. Vietnam’s products account for just nine per cent of US’ total textile and garment imports.
Textile dyeing and printing mills in Surat have turned to processing high-end mercerized cotton fabrics. These fabrics are in high demand in the southern and northern parts of the country and have a strong export potential. Surat has a good potential for manufacturing and processing cotton fabrics. It wants to shed its image of being a traditional center for polyester fabrics. Textile processors feel mercerized cotton fabric processing helps them stay relevant and become tuned to market demands and trends and tide over tough days, like a recession. Also, while polyester fabrics see many ups and downs, the demand for cotton fabrics remains steady.
Power loom units in Surat use traditional or water jet looms, which are not compatible with manufacturing of cotton fabrics. So some power loom units, which use high-end rapier looms, have started manufacturing cotton fabrics. Surat has traditionally been a hub of manmade fabrics. Right now cotton fabric processing is at a nascent stage in Surat but it is expected to grow rapidly in the next few years. Surat’s textile mills offer competitive rates for job work and have a range of color choices as well.
More than 20 lakh meters of unfinished cotton fabrics from Bhiwandi and Ahmedabad wind up daily in the textile processing mills of Surat’s industrial areas for mercerization.
Bangladesh will have to address three important factors -- higher productivity, workers' wage hike and profitability -- for sustainability of the apparel sector, say experts. This was the predominant thought in a discussion “Business Policy and Environment: Towards a Better Bangladesh” at Dhaka Apparel Summit 2017 on Saturday. “Frequent changes in policies hurt the viability of business. We need a long-term policy with a period of 10-12 years for making investment plan,” said BGMEA vice-president Mohammed Nasir. In his keynote address Nazneen Ahmed, senior research fellow of Bangladesh Institute of Development Studies (BIDS) said RMG sector is the driving force for growth of Bangladesh’s economy. It contributes 13 per cent to GDP. To achieve $50 billion export target Bangladesh will have to earn $22 billion in the next five year with a 12 per cent growth. He emphasized, Bangladesh RMG sector needs policy support, technological upgradation, skilled labour, market and product diversification. Retailers, suppliers and stakeholders could share the remediation cost of factories to reduce the burden on manufacturers. Apparel makers want to brand Bangladesh as the most compliant supplier. Investment in social dialogue is crucial at this moment.
Manufacturers have been spending millions of dollars on remediation and relocation of factories. Unavailability of workers is a major challenge in the case of relocation of factories. Most factories face multiple challenges in implementing remediation recommendations. Bangladesh will face challenges in becoming a middle income country if workers' wages are not increased. The voice of workers needs to be heard in terms of health and safety.
While more than 90 per cent of the factories in Vietnam and Cambodia are owned by foreign investors, in Bangladesh more than 90 per cent of the factories are owned by local entrepreneurs. For some reason buyers do not pay higher prices for garment products from Bangladesh, although they offer higher rates in China, India, Vietnam and Pakistan. The garment sector in Bangladesh has had to face major challenges, including the shock of a quota-free era, child labor, fallouts from the global financial meltdown, and finally, the Rana Plaza building collapse in 2013.
Smart textiles use technology to recycle and reuse textile fibers. They can monitor health and can measure movements. Advances in specialized materials and fabrication technologies offer exciting opportunities to create seamless garments as sensors and actuators for biomedical applications.
Designers, scientists and doctors are producing new biomedical textiles and the resulting smart clothes are not only fashionably functional but could also be life savers. RFID technology is being integrated into belly bands for women with high-risk pregnancies. The band continuously tracks data and alerts the doctor’s office via the net should the woman start contractions. A smaller version is being created for babies at risk for sleep apnea.
An intersection of engineering, medicine and design, these examples of new human-centered service technology show vast potential to improve health care. Textile innovations improve people’s lives and benefit the industry, the health care sector and the environment.
The global smart textiles market is growing at a CAGR of 33.58 per cent from 2015 and 2020. China and India are two of the major manufacturers of smart textiles in the Asia Pacific market, and are the largest producers of manufactured fibers, and are expected to dominate the global smart textile market in the near future.
Knitting technology has gained a great deal of attention in the field of wearable electronics and could become a widespread method of construction for smart textiles in future.
Exports of the value-added textile sector in Pakistan rose in the first seven months of the fiscal year 2016-17. Exports of bed wear were up 5.07 per cent and exports of readymade garments rose 4.17 per cent in the July-January period of 2016-17.
Knitwear exports remained almost flat. Overall textile sector export revenues were down 1.54 per cent over the previous fiscal year. In January, textile exports increased 2.73 per cent over the preceding month but decreased 1.3 per cent over the same month a year earlier.
An incentive package worth Rs180 billion was offered export-oriented sectors, mainly the textile industry, which accounts for more than half of the annual exports from the country. The package comprises withdrawal and concessions on customs duty and sales tax on import of cotton and machinery.
Machinery imports soared 42.36 per cent in the period under review. Power generation machinery imports rose 90 per cent over the previous year. Imports of electric machinery and appliances also rose 16.14 per cent. In January, machinery imports increased 50.17 per cent over the same month a year ago and rose 14.24 per cent over December 2016. In July-January, import bill of machinery was the heaviest, accounting for almost a quarter of gross imports during the seven months.
The negative outlook on global lingerie giant Victoria’s Secret for this year is unlikely to have a major impact on Sri Lanka’s apparel industry, a major supplier to the high end lingerie brand. Sri Lanka is the largest supplier of products on Victoria’s Secret’s supply chain.
A negative guidance has been announced for Victoria’s Secret for 2017 and the first quarter of 2017, coupled with a mid-teen year-on-year fall in sales from its stores in February, due to a restructuring effort where the lingerie brand will focus on core products, while shedding swimwear, footwear and other apparel.
In 2016, the lingerie giant posted net sales of $12.57 billion, with cost of sales, buying and occupancy of $7.45 billion. Sri Lanka supplies around 800 million dollars out of its $4.7 billion total apparel exports to Victoria’s Secret annually. However, pressure isn’t just coming from Victoria’s Secret. Marks & Spencer’s is converting its clothing and household units into more profitable food units due to competition from online and budget retailers.
Many other traditional retailers are also facing stiff competition. Sri Lanka’s exports to the world declined slightly from September to December 2016, with exports to the US and the EU—which account for 85 per cent of Sri Lankan apparel exports—falling or remaining flat.
The footwear industry hopes that the Goods and Services Tax (GST) will help it come on an equal footing with the apparel industry. While basic customs duty remains the same value added tax for footwear averages at about 14 per cent across the country, and at about five per cent for apparel. Excise on MRP is much higher for footwear.
With glaring dissimilarities in the tax structure, the footwear industry is at a disadvantage compared with the apparel industry. Having a higher excise on footwear makes it harder for the industry to compete with apparel brands, when it comes to consumer wallet share.
The differential in VAT not only escalates the price of footwear but also adds to the cost of compliance, which in turn is ploughed back into the cost. Consequently footwear price becomes non-competitive compared with garments’ price. Footwear is subject to about 12.5 per cent excise duty, which is marked on MRP. The impact of this becomes huge because MRP is usually four times the cost of the product. Apparel on the other hand does not face such high duties.
The footwear industry in India hopes that with GST, multiple levels of taxation, including CST, VAT, excise and octroi, will be eliminated, which will ease the whole tax process to a huge extent and add to bottom lines.
The global textile market is expected to reach approximately 1,237 billion dollars by 2025, driven by population growth in emerging economies including China, India and Mexico.
Product innovation is also expected to have a positive impact on the industry while a growing number of fashion retail outlets and supermarkets in developing economies, including China and India, is expected to increase the textiles demand in the near future.
The Middle East and Africa is expected to witness volume growth at a CAGR of 3.6 per cent from a period of 2016 to 2025. The rising expenditure by Islamic clothing manufacturers to incorporate new hijab styles in apparel is projected to increase the product use over the next nine years.
There is an increasing importance of Environmental Health and Safety systems in the manufacturing sector, owing to stringent regulations aimed at worker safety and reporting incidents in offshore industries, including oil and gas, which is expected to increase the demand for personal protective equipment (PPE). This trend is projected to play a vital role in increasing the market penetration of textiles in the form of technical fabrics in PPE over the forecast period.
Polyester is expected to witness growth over the forecast period due to its superior properties including lightweight and excellent resistance to shrinking.
"The Indian textile industry must move from being a low cost commodity exporter of fibre and yarn that has facilitated China to increase its share in global export market to 39 per cent. The country needs to be a net exporter of finished goods rather than commodity intermediaries to overcome its share of 5 per cent in the global export market. The industry needs to modernise and scale up capacities that would overcome the low manufacturing inefficiencies and be globally competitive."
The Indian textile industry must move from being a low cost commodity exporter of fibre and yarn that has facilitated China to increase its share in global export market to 39 per cent. The country needs to be a net exporter of finished goods rather than commodity intermediaries to overcome its share of 5 per cent in the global export market. The industry needs to modernise and scale up capacities that would overcome the low manufacturing inefficiencies and be globally competitive.
Maintaining competitive edge
Maintaining a competitive edge with rising costs, among other factors of production is gaining significance. C S Nopany, Chairman, Sutlej Textiles and Industries, recently pointed out there has been a sharp increase in cost of raw materials such as cotton and man-made fibres globally. Currently, cotton fibre, yarn and fabrics account for 32 per cent of India's exports, which are lower in value. Garments at 39 per cent, man-made textiles at 14 per cent, handlooms and handicrafts at 11 per cent and the rest at 4 per cent, account for the balance textile exports from India.
Government estimates, the sector needs $180-200 billion investment for achieving the desired production scale by 2024-25, which remains a formidable challenge. The essential prerequisites for getting investments on the scale required, would be to ensure ready availability of developed land for mega textile parks with adequate infrastructure, skilled manpower and easy connectivity to ports.
Investments also need to be supported by additional productive and skilled manpower; it's the only way to achieve global competitiveness and to derive the full benefit of demographic and wage advantage that India would clearly have over the next decade. So far, investment in improving skills and productivity of the workforce, by both the private sector as well as the government in alliance, is not yet at par.
Encapsulating growth
The objective should be to achieve average per man-hour, per machine output in terms of quality and quantity of levels prevailing in China over the next three to five years with the PM 's vision of Make in India with `Zero Defect, Zero Effect' at each level of the value chain. Dipali Goenka, CEO & Joint MD, Welspun India feels Make in India has been a huge success in attracting investments and augmenting manufacturing that has resulted in job creation across sectors. This has also created a huge requirement for skilled manpower. The government's initiative to impart skills to the youth, making them employable, is bound to have a multiplier effect and will propel India to the top position in the emerging global economic order.
The European Union and US account for 50 per cent of India's exports hence, there is a need to diversify to new geographies of Japan, China, Brazil and Russia. As Ashok Rajani, Chairman, Apparel Export Promotion Council point out India's ready-made garment exports during April-December of 2016 witnessed a decline of 0.2 per cent compared to the same period in the previous financial year. The market sentiments have been affected due to delays in the rollout of the special package, which was announced for the apparel sector in June 2016 and stagnation in the Europe and US markets.
Value adding enablers
To ensure export destinations are not limited to certain countries, there is a need to undertake an extensive study for a product-mix that can be tailor-made for each major market. It can be executed with a country-specific strategy conducted jointly with the ministry of textiles. From a taxation perspective, the entire value chain of textiles and apparel sector so far is under a differential tax regime that has created needless distortions. However, this will be addressed by the implementation of GST, which will likely create a level playing field for the entire value chain, with the tax slab hopefully being at the lowest rate.
The remaining challenges include certification for genuine handloom and khadi products that would facilitate in adding credibility to the respective brands in the domestic and international market. Finally, the credit availability from the banking system should be made available with longer tenures of eight years as compared to the current five year period, as the life of the machinery is over 20 years, putting considerable pressure on the business in the form of higher annual repayment cost.
