FW
"Prime Minister’s ‘Make in India’ concept could bring about sea change in the country’s manufacturing landscape. A recent article published by Hong Kong Trade Development Corporation (HKTDC) ‘Make in India: An Alternative Production Base with a Huge Local Market’, highlights how India could emerge as global powerhouse in manufacturing. It gives an overview of labor cost, supply and quality, along with logistics performance and land costs, followed by an examination of some government initiatives and reforms."
Prime Minister’s ‘Make in India’ concept could bring about sea change in the country’s manufacturing landscape. A recent article published by Hong Kong Trade Development Corporation (HKTDC) ‘Make in India: An Alternative Production Base with a Huge Local Market’, highlights how India could emerge as global powerhouse in manufacturing. It gives an overview of labor cost, supply and quality, along with logistics performance and land costs, followed by an examination of some government initiatives and reforms.
Advantage India
The article says, India is on the rise, not only as a new choice of relocatinglabor- intensive industries from China, but also as a retail market. The country has the third largest GDP in Asia, after China and Japan, with both heavy and light manufacturing activities spread across the country. Heavy industries, including automobile and machinery, are typically found in organized factories. This contrasts with light manufacturing, which comprises a good deal of home-based, cottage industry activity and work subcontracted from factories, as in the case of garment manufacturing.
While China is the world leader in exporting textiles and garment products, many have overlooked India’s position as the world’s second biggest exporter of textile and garment products in 2014, selling a total of $36 billion, during the year, far behind China’s $399 billion. In textile exports alone, India was second after China in 2014, with 5.8 per cent share of the global market, compared to China’s enormous 35.6 per cent share. India stands out to be a substantial exporter in both garments and textiles. In 2014, India imported textiles worth only $3.8 billion, lagging much behind Vietnam’s $12 billion, Bangladesh’s $6.8 billion, and just ahead of Cambodia’s $3 billion.
HKTDC’s research is based on field trips Indian factories, interviews with garment manufacturers et al. Their study noted invariably that the majority of Indian garment producers were focused on the domestic market, as their product quality was generally lower than the standards required by overseas importers. Nonetheless, many big Indian exporters have successfully lined up with international buyers, including department stores, retail chains and brands. In the four years to 2014, India’s garment exports increased at an average annual rate of 12 per cent surpassing China’s 9 per cent, in line with Bangladesh’s 13 per cent and eclipsed by Vietnam’s 17 per cent.
With advantages of raw materials and prospects of vertical integration, India is a place worth considering for factory relocation in relation to labor-intensive manufacturing, such as garment-making. India has been an active player in Asia, securing free trade agreements (FTAs) inside and outside the region, including engaging in an FTA talk with the EU.
While a population of 1.25 billion comparable to that of China, the Indian median age of 27 is way below China’s 37, ensuring a good supply of young workers for many years to come. Labor cost is significantly lower than that of China. In terms of minimum wage, unskilled workers in Haryana and Gujarat are given a monthly basic pay of about $110 (based on respective daily wages of Rs 276 and Rs 292 for 25 working days, excluding any allowance. An abundant supply of low-cost labour in India fulfils the basic condition for conducting labour-intensive manufacturing activities for the sake of factory relocation from Southern China.
India has an added advantage in terms of language. A British colony for a long time, India declared English to be one of the official languages shortly after its independence in 1947, and is now widely spoken across India
HKTDC’s field trip in India covered many special economic zones (SEZs), industrial estates and ports. And goes on to say, India has a highway system that is being upgraded by the government. Besides other government policies aimed at creating a more favorable business environment include the introduction of a unified Goods and Service Tax (GST) expected in April 2016, replacing the existing multiple tax structures of Central and State taxes. Also, attempts have been made to merge and reform a host of labor regulations to streamline the hire-and-fire processes, as well as reducing the costs for business owners.’
The article goes on to state India has been making progress in improving its business environment. The World Bank’s 2016 ‘Ease of Doing Business Survey’ ranked India 130 out of 189, a sizeable leap from 142 in the 2015 survey, with biggest improvements in starting business and getting electricity. Nonetheless, India still needs to further improve its business environment in order to catch up with other Southeast Asian competitors in overseas factory relocation, such as Vietnam (90) and Indonesia (109).
And what works for India is that besides being a production hug, it also offers a huge consumer base with increasing discretionary spending amid robust economic growth. India’s retail market, currently estimated at about $600 billion, and projected to grow at an average annual growth rate of 12 per cent to reach $1,000 billion by 2020. Retail market is currently dominated by unorganised trade. Yet, the retail landscape is fast evolving, with organised retail expected to keep expanding alongside the surge of Indian middle-class consumers, who are more willing and able to spend for better quality goods and services, and tend to develop stronger brand loyalty.
Power loom clusters in Coimbatore and Tirupur have been facing difficulties with fluctuations in demand, problems in implementation of revised wages for job-working and increase in power costs. Instead power looms are coming up across Sultanpet and Annur blocks because of the additional benefits. Therefore, Coimbatore and Tirupur power loom clusters need to focus on better technology and diversify into varieties of fabrics to get better prices. Small-scale power loom units need to look at upgrading technology. About 10 per cent of the units in Coimbatore and Tirupur have gone in for semi-automation.
While Coimbatore and Tirupur had 1.5 lakh power looms four years ago, it is two lakh looms now. The basic product manufactured here is grey gada fabric. And most of these are basic power looms. There are very few large-scale units in Tamil Nadu. And 75 per cent of the fabric is from basic power looms.
About Rs 102 crores have been disbursed in 2015-16 to power loom units under the in-situ scheme. Most of the beneficiaries are in the south, in the Coimbatore region. Under the in-situ upgradation of power looms, units get Rs 15,000 as subsidy for semi-automation. If the semi-automatic looms are to be upgraded into rapier looms, the subsidy is Rs 25,000. In the case of upgrading a basic power loom into a rapier loom, the subsidy is Rs 40,000.
Bangladesh’s RMG industry wants the reintroduction of the 10 per cent special corporate tax rate and a reduction of tax at source to 0.30 per cent from the existing 0.60 per cent. It also wants a special tax rate for the next five years.
Garment factory owners have included a proposal for duty-free imports of fire equipment, machinery, tube lights, bulbs, fire-proof paint for pre-fabricated building materials and industrial lighting protection equipments. Garment exporters have suggested a five per cent special cash incentive for exports to new markets and two per cent cash support for exports to the European Union for the next three years.
These proposals have been forwarded in the hope they are incorporated in the country’s forthcoming budget. Factory owners say they are investing a huge amount of money in carrying out remediation work and retrofitting according to the prescription of Accord, Alliance and the National Action Plan to ensure workplace safety.
Bangladesh’s currency has appreciated by 8.43 per cent against the dollar. And the cost of doing business, say factory owners, has increased by 12 per cent in recent times due to the wage hike and transportation costs. On the other hand, buyers want a reduction in prices of apparel items.
Though the garment industry continues to flourish globally, bad working conditions, low wages and long hours are some of the issues the industry is confronting in many countries. Now trade unions, civil-society organizations and the Dutch government are supporting an agreement which includes taking steps to improve working conditions in garment and textile production units in countries such as Bangladesh, India, Pakistan and Turkey.
The agreement has been drafted under the guidance of the Social and Economic Council of Netherland (SER). The coalition includes industry organizations VGT, Modint and Inretail, trade unions FNV and CNV, the Dutch government and the civil-society organizations Solidaridad, UNICEF Nederland, India Committee of the Netherlands, the Dutch Stop Child Labor Coalition and Four Paws Netherlands.
The coalition has agreed to tackle issues such as discrimination, child labor and forced labor, T will be done by having a healthy dialogue with independent employee representatives. It will also work towards achieving better wages, safe conditions and a healthier environment for employees. Also, the aim is to reduce adverse environmental impact, energy and chemical usage and waste, and the prevention of animal suffering.
SER said the coalition would enable the parties to work together on objectives that would be difficult to achieve individually, such as living wages, stronger trade unions and the reduction of excessively long working days. Participating unions will identify issues that affect their suppliers at all stages of the chain and will draw up an annual improvement plan. Trade unions and civil-society organizations will support the plans with their expertise and will involve their local partners their implementation. The Dutch government will try to reach agreements with governments in production countries to reinforce their health and safety inspectorate.
A joint report on activities will be issued each year for the first three years, and organizations. The coalition will secure funding for the agreement and aim to have it signed in June by at least 35 companies in the sector, who together represent at least 30 per cent of sales in the Netherlands.
"Cotton production in the United States is touted to recover in 2016/17. While consumption remains stable cotton planting in Northern Hemisphere countries commences this month. In 2016/17, world cotton area is expected to expand by 1 per cent to 31.3 million hectares. From December 2015 through February 2016, international cotton prices as measured by the Cotlook A Index averaged 69 cents"
Cotton production in the United States is touted to recover in 2016/17. While consumption remains stable cotton planting in Northern Hemisphere countries commences this month. In 2016/17, world cotton area is expected to expand by 1 per cent to 31.3 million hectares. From December 2015 through February 2016, international cotton prices as measured by the Cotlook A Index averaged 69 cents/lb.
Cotton an attractive proposition
However, prices for competing crops during the same period have fallen, making cotton more competitive this year compared to last. World cotton production in 2016/17 is projected to increase by 4 per cent to just under 23 million tons, as the world average yield is anticipated to improve by 4 per cent to 732 kg/ha. In 2016/17, India’s area is forecast up 4 per cent to 12.4 million hectares due to improved domestic cotton prices in 2015/16. Assuming yield is similar
Assuming yield is similar to the 4-year average of 522 kg/ha, production could reach 6.5 million tons in 2016/17. In March, the Chinese government announced a reduced target price for Xinjiang of 18600 yuan/ton.
As a result, area is likely to contract by 10 per cent to 3.1 million hectares and production to decrease to 4.6 million tons. Cotton area in the United States is projected to increase by 2 per cent to 3.3 million hectares and production by 9 per cent to 3.1 million tons. After production plummeted in 2015/16, cotton production in Pakistan is expected to jump 35 per cent to 2.1 million tons as yields recover.
After declining by 2 per cent in 2015/16, world cotton consumption is anticipated to remain stable at 23.9 million tons. Consumption in China is projected to decrease by 5 per cent to 6.8 million tons due to increasing wages, high domestic cotton prices, and low polyester prices. In 2016/17,
Vietnam’s cotton consumption is forecast to rise 16 per cent to 1.3 million tons, making it the fifth largest consumer. Consumption in Bangladesh, the sixth largest, could increase by 10 per cent to 1.2 million tons. After several seasons of growth, cotton mill use in India and Pakistan contracted in 2015/16 due to weaker demand. However, India’s consumption is projected to rise by 4 per cent to 5.5 million tons, and in Pakistan by 1 per cent to 2.2 million tons. After declining by 3 per cent in 2015/16, world cotton trade is expected to recover by 1per cent to 7.5 million tons in 2016/17, as consumption grows in import dependent countries. Vietnam and Bangladesh are likely to be
The two largest importers of cotton in 2016/17, with import volumes expected to rise by 25 per cent to 1.4 million tons and by 5 per cent to 1.1 million tons, respectively. China could see imports fall by 13 per cent to 936,000 tons. Exports from the United States are projected to increase by 1 per cent to 2.2 million tons while exports from India are forecast to decline by 13% to 1 million tons.
A few cloth remains found in Nepal have shed light on history of ancient textile industry in the sub-continent. A dye analyses was conducted by Ina Vanden Berghe at the Royal Institute for Cultural Heritage. The results of textile and dye analyses of cloth dated 400-650 AD and recovered from Samdzong 5, in Upper Mustang, Nepal were released by Margarita Gleba of the McDonald Institute for Archaeological Research, University of Cambridge.
Identification of degummed silk fibers and munjeet along with Indian lac dyes in the textile finds suggests that imported materials from China and India were used in combination with local produce. According to Gleba, there is no evidence for local silk production suggesting that Samdzong was a part of the long-distance trade network of the Silk Road.
The data reinforce the notion that instead of being isolated and remote, Upper Mustang was once a small, but important node of a much larger network of people and places. These textiles can further our understanding of the local textile materials and techniques, as well as the mechanisms through which various communities developed and adapted new textile technologies to fit local cultural and economical needs.
The cloth remains are of further significance as very few contemporary textile finds are known from Nepal. The dry climate and high altitude of the Samdzong tomb complex, at an elevation of 4000 m, favored the exceptional preservation of the organic materials. One of the cloth recovered is composed of wool to which copper, glass and cloth beads are attached. It was found near a coffin of an adult along with a spectacular gold/silver funerary mask
Samdzong 5 is one of 10 shaft tombs excavated by Mark Aldenderfer, (University of California Merced and Visiting Scholar of the McDonald Institute). The tombs were only exposed to view in 2009 following a seismic event that calved off the façade of the cliff, having been originally carved out in prehistory from the soft conglomerate rock of a massive cliff face.
Ludhiana yarn manufacturers have got some relief in VAT rates as there has been a reduction in VAT rates on all kinds of yarn, except polyester filament, from 6.5 per cent to 3.63 per cent.
This VAT reduction comes as a relief for spinning mills. Punjab has 165 spinning mills with 4.25 million active spindles, and consumes seven lakh bales annually. Fabric and garmenting units in Ludhiana preferred to buy cotton yarn from units located in other states. This hit yarn units located in Punjab. Due to the high value added tax, buying yarn from spinners in the state was costlier than bringing it from elsewhere.
Punjab is a major consumer of cotton yarn in the north and due to higher tariffs on local manufacturing entities an estimated Rs 9,000 crores worth of yarn is being imported annually from other states.
The modified tax structure will be a bulwark against dumping from other states. It will provide protection to Punjab based spinning units against cheap imports from other states which have a lower cost of production. Most spinning mills in Punjab had been underutilising their capacities for the last few years as there were no takers for the yarn produced at a higher price.
The Pentagon has teamed with the Massachusetts Institute of Technology for the creation of an institute which will develop high-tech fibers and textiles. The Revolutionary Fibers and Textiles Manufacturing Innovation Institute will be based in Cambridge, Massachusetts, and bring together a consortium of 89 universities, manufacturers and non-profit organisations.
By bringing together high-tech firms and textile makers, the institute aims to create fabrics that can see, hear, sense, communicate, store energy, regulate temperature, monitor health, change color, and more. The non-profit institute will seek to enable new defense and commercial applications such as shelters with power generation and storage capacity built into the fabric, and uniforms that can regulate temperature and detect chemical and radioactive threats.
The institute would pair companies like audio equipment maker Bose, computer chip maker Intel, and nanofiber manufacturer FibeRio with textile manufacturers and users such as Warwick Mills and shoemaker New Balance. In addition to the $75 million from the Defense Department, the institute will be funded with nearly $250 million from non-federal sources.
The Pentagon is the headquarters of the US Department of Defense and, encompassing more than six million square feet of floor space, ranks among the largest office buildings in the world.
"Along with its local advantages like cheap abundant labour and lots of land, Africa has the potential to emerge as a global power house in apparel production with the right government policies. Apparel production constantly shifts. It's often one of the first manufacturing businesses that go into a developing country, also the first to leave as the country grows and develops. And with"
Along with its local advantages like cheap abundant labour and lots of land, Africa has the potential to emerge as a global power house in apparel production with the right government policies. Apparel production constantly shifts. It's often one of the first manufacturing businesses that go into a developing country, also the first to leave as the country grows and develops. And with continued margin pressure, companies are constantly looking at new low cost, reliable sources.
The right mix for apparel industry
Africa has many of the ingredients that can make it a global force in apparel and textile exports. However, it will take some time for all these ingredients to come together and mirror what China, India, Vietnam and others have done over the last 30 years.
It has cheap, abundant labour along with water, power, cotton and lots of land. It has receptive governments and attractive investment conditions. But Africa still needs to build much more capacity coupled with vertical operations so that it can convert its raw material into yarn and fabric.
Many US and EU companies are already doing business here, including H&M, Tesco, Primark, VF Corp, PVH, Kohl's, Wal-Mart, Dillard's, Dollar General, IFG, Jones Apparel, Haggar, Academy, Belk, Dickies, Children's Place, Carter's and Family Dollar. While the value of current apparel exports is, in global terms, very small, Africa does have a history of garment production and exports. In 2014 Sub-Sahara Africa exported almost US$1bn in apparel value.
Advantage Afrcia
According to Chris Wynne-Potts, CEO at African Merchandising Services Africa has many advantages. It has abundant labour. By 2035, Sub-Saharan Africa will have the highest working age population (15-64) anywhere in the world – with more than 900 million people. Low wages: Kenya US$100 (per month), Lesotho US$90, Tanzania US$90, Madagascar US$65, Ethiopia US$50, Mauritius US$165.
AGOA renewed for 10 years till 2025 gives 45 countries in sub-Saharan Africa duty-free access to the US, with the added advantage of being able to use third-country fabric from anywhere. According to Gail Strickler, Sssistant US trade representative for textiles and apparel, this is a "game changer" and could quadruple its current exports and create another 500,000 jobs.
With the promotion of the apparel and textile industries, particularly in Kenya, Ethiopia and Lesotho; this sector is seen as being a major employer and reducer of poverty. These countries also have training centers and tertiary institutions to promote textile and apparel technical qualifications. Government incentives and tax holidays are offered by many countries to investors.
But Africa also faces some challenges in its growth path. Lack of locally produced, competitively pricesd export quality fabric. Africa grows plenty of cotton but almost all is exported as raw material. Currently, African spinning, knitting, weaving and dyeing represents only about 10 per cent of total improvement in infrastructure along transport routes, port efficiency, government red tape and streamlining export systems need continued work.
Experts opine that there is also a need for a clearly defined government policy on attracting investment, aggressive marketing of this policy in conjunction with potential investors.
The H&M Group’s annual report for fiscal 2015 was recently released. Sales including VAT increased 19 per cent in the 12 months ended November 30 to 209.9 billion Swedish kronor (roughly $28.5 billion) and operating profit was 26.9 billion Swedish kroner ($3.3 billion)—its highest result to date, despite a strong U.S. dollar which made purchasing considerably more expensive.
According to CEO Karl-Johan Persson sales developed well across all group’s brands, including H&M, H&M Home, Cos, & Other Stories, Monki, Weekday and Cheap Monday, helped in part by the 413 new stores that opened throughout the year, mostly in China (83) and the US (59).
The retailer now operates 3,924 locations in 61 markets (including Taiwan, Peru, Macau, India and South Africa, which were added in 2015) and plans to ramp up its number of store openings by 10 to 15 percent annually. For 2016, that will mean around 425 new stores, mostly in existing markets. But the retailer will also enter New Zealand, Cyprus and Puerto Rico for the first time, to bring the total number of markets H&M has a presence in to 64. The report noted that H&M’s 4,000th location will open this spring, meaning the chain’s store count has doubled in six years. In addition to brick-and-mortar openings, e-commerce will be offered in nine more of its namesake brand’s existing markets: Ireland, Japan, Greece, Croatia, Slovenia, Estonia, Latvia, Lithuania and Luxembourg. By the end of the year, customers in 32 countries will be able to shop the brand online.
The main focus of expansion in 2016 will be on Cos, which is now a globally established fashion brand with more than 150 stores in 30 countries. Persson said new markets for the higher priced brand will include the Czech Republic, Romania, Latvia, Malaysia and Saudi Arabia (via franchise). Also pleasing is the fact that our latest addition, & Other Stories, continues to be well received. Efficient logistics flows are essential and the least-polluting method of transport must be used,” the report said. “In 2015 a total of 90 percent of the group’s products were carried from suppliers to the distribution centers by rail or waterway.”
Also notable: 31 percent of cotton used last year was from sustainable sources (meaning either organic cotton, recycled cotton or cotton grown under the Better Cotton Initiative), up from the prior year’s 21 percent. Plus, more than 12,000 tons of clothing was collected in 2015 as part of H&M’s in-store Garment Collecting initiative.
Poor working conditions and low wages are public-relations problems that plague fast-fashion retailers and H&M—which doesn’t own any factories but contracts around 820 independent suppliers mainly in Asia and Europe—has been working to regulate both. Persson concluded, “For 2016 we see many opportunities, but are also well aware of the challenges that exist. We firmly believe that our customer offering and our investments will lead to increased market share, and will strengthen our position even further during the year.”
