FW
As production in spinning mills has come to a grinding halt since demonetisation, sales of yarn in western Tamil Nadu have plummeted. As a consequence, yarn stocks are piled up in city mills most of which rely on migrant labourers who have stopped work.
With shortage of labour, owners of spinning mills are unable to run their units on a daily basis. As a consequence, the number of shifts has come down to two or one per day. With inadequate workforce, mills are unable to carry out production to the capacity. This has resulted in piling up of yarn stocks. On any given time, most big spinning mills have stocks of 15 to 30 days. Now, it has piled up to three or four months.
The loss incurred due to the fall in production has doubled. The textile industry has been facing a dull market in the past two years. Yarn exports have come down as a result of which it has been a loss of anywhere between 15 to 25 per cent as compared to the business two years ago.
The Bangladesh’s garment-making sector has rebounded so strongly following the Rana Plaza disaster that the country’s economists and labour leaders are warning it could hold back the country’s economy as a whole. Nearly four years after the Rana Plaza collapse in Dhaka where more than 1,100 garment workers were killed western clothing companies are seen buying more from Bangladeshi factories like before.
While the booming garment industry is contributing to an overall growth rate of 7 per cent, economists feel it is suppressing wages and crowding out higher value sectors. As economics professor at Dhaka University, Rashed al Mahmud Titumir says there is no diversity in the economy. Bangladesh has not been able to produce more lucrative products and there are barely any exports except readymade garments.
As per Bangladesh Garment Manufacturers and Exporters Association, in fiscal 1983-84 Bangladesh garment sales abroad was around 3.9 per cent of its total exports worth $31.6 m. By 1989-90 it rose to 32 per cent, worth $624.2 m. At the time of the Rana Plaza collapse, the country’s worst industrial disaster garment exports had reached 80 per cent or $21.5 bn. Despite the tragedy, the sector has continued to grow, hitting $28.1 bn in the last financial year and accounting for 82 per cent of total exports.
Industry representatives say continued growth is the result of unprecedented action taken in the aftermath of the disaster. In the year after the Rana Plaza incident, the number of clothing factories in Bangladesh shrank by 1,654 — 615 of which were related to the new safety measures. More than 200 foreign brands have signed up to two different safety schemes, the Bangladesh Accord on Fire and Building Safety and the Alliance for Bangladesh Worker Safety and have promised to spend tens of millions to improve factories.
The Pakistan Textile Exporters Association (PTEA) has strongly condemned the fictitious representatives of the textile industry and said non-stakeholders are ruining the government’s efforts for revival of ailing textile industry by placing unproductive and baseless proposals. Referring to the statement of the Council of All Pakistan Textile Associations chairman, Zubair Motiwala, PTEA Chairman Ajmal Farooq and Vice Chairman Muhammad Naeem termed it highly unfortunate that some outsiders without any link with textile industry are misleading the government with their baseless suggestions and sabotaging the efforts of the revival of the textile sector.
These elements are against the revival of the country’s major export industry and are playing just for their own vested interests, the three added. Industries in Sindh are paying Rs 488 per mmbtu for system gas whereas industries in Punjab are paying Rs900 per mmbtu for RLNG. In such circumstances, how could Punjab industry compete, they asked.
They added the government is moving in the right direction for uplifting exports and consideration of custom rebate and cash subsidies is a positive move which will not only help restore the competitiveness of textile industry in international market but would also revive the substantial capacity to produce exportable surplus they added.
Farooq feels competing countries like Bangladesh, India, China and Vietnam are rapidly multiplying exports because of their edge in cost of doing business and incentives offered by governments. High cost of production and un-competitiveness are major hurdles in export growth and pragmatic incentive schemes need to be announced to reduce the cost of production and create a level playing field, he suggested.
In the wake of Brexit, the Mauritius government will launch the Air Freight Rebate scheme known as the 'Speed-to-Market' Scheme (STMS) for its textile and apparel sector. The launch is taking place after due consultations with various stakeholders. STMS will also allow Mauritian textile and apparel exporters to become more competitive in comparison to other countries exporting via air freight to Europe.
The scheme is expected to enhance competitiveness of Mauritian exports in the European market, especially in speed of delivery while providing support to the textile and apparel enterprises facing difficulties due to Brexit. The STMS which will be applicable to the textile and apparel manufacturing companies only, will among others; provide a 40 per cent refund on air freight cost to exporters to Europe including UK; be time-bound for 2 years; and will be operated and managed by Enterprise Mauritius. The refund will be applicable for exports as from 1st April 2017.
The STMS scheme for textile and apparel was announced in the Budget speech 2016-17 by the minister of finance and economic development of Mauritius. Mauritius is the largest African clothing exporter to America and Europe.
Though local business community still has concerns, Pakistan seems to have placed a lot of faith in the game-changing China-Pakistan Economic Corridor (CPEC). Stakeholders in the textile sector are anticipating a further decline. This because they fear if Chinese companies started relocating their textile units in different tax-free industrial zones in Pakistan, they would go out of business.
According to Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) senior vice president Jawad Choudhry, whenever China enters any country it damages the domestic market. He said the industry is currently facing a decline trend due to the high cost of doing business and productivity, whereas China plays with the price by increasing its production.
Experts believe if China locates its textile units to Pakistan they will have an edge over the existing players due to the benefits, such as tax-free zones, under CPEC. An additional benefit for them would be the energy prices as they are setting up their own power plants to feed their industries in Pakistan.
Yarn coming out of mills in Tamil Nadu has dwindled. Reason: the currency ban. Migrant laborers are unable to come to work because they don't have bank accounts. Opening a bank account is an issue as they do not have identity proofs. Many of them have returned to their hometowns and will come back only when there is sufficient cash flow in the market.
With shortage of labor, owners of spinning mills are unable to run their units on a daily basis. The number of shifts has come down to two or one per day. With inadequate workforce, they are unable to carry out production to capacity. Losses incurred due to fall in production have doubled. Yarn exports have come down.
With a fall in yarn supply, weaving units have also shrunk their output. Most weaving units have temporarily closed. They only function two or three times a week or may be for festivals or important orders.
Also powerloom owners have not been able to provide full wages to their weavers and others in the industry due to demonetisation. As it is the textile industry in Tamil Nadu has been having dull business for two years.
A segment of the upstream textile industry has now asked for 12 per cent GST on textiles and garments. In fact, textiles are essential goods and the lowest GST rate of five per cent looks likely on them. So it’s not that a tax waiver or a low rate of tax is everyone’s choice. The question is why the industry should take a higher tax burden on itself.
A 12 per cent tax incidence under the GST regime for the entire textile and garment industry will benefit only a few large man-made fiber companies with an integrated set-up. Natural fiber-based textile players will be at a disadvantage if the tax rates go up. Natural fibers like cotton fiber are produced out of raw cotton and, since no duty will be paid on the raw material due to the fact that it’s a farm produce, the entire 12 per cent tax burden will fall on the ginners/spinners who produce cotton fiber/yarn. Only an integrated player with weaving, processing and garmenting facilities can offset the input tax costs against output tax liability.
Currently, natural fibers — including cotton — do not attract any excise duty, while a 12.5 per cent excise duty is levied on man-made fibers such as polyester. A four to six per cent value added tax is imposed by states on both man-made and natural fibers.
Toronto-based Fine Cotton Factory has got the Global Organic Textile Standard (GOTS) certification, a stringent, voluntary international standard for processing of organic, fiber-containing products and addresses post-harvest processing stages such as spinning, knitting, weaving, dyeing and manufacturing. This will allow the factory to offer GOTS-certified organic-cotton mattress fabric.
The GOTS certification includes both environmental and social provisions for post-farm to retail-shelf management. Key provisions include a ban on the use of child labour, genetic engineering, heavy metals and highly hazardous chemicals such as formaldehyde, while requiring living wages and strict wastewater treatment practices.
Director of special projects for Fine Cotton Factory, Skip Kann said his company has worked diligently to earn this certification and know that their partners will appreciate the additional assurance the GOTS certification brings. The textile industry is interested in suppliers that offer GOTS-certified fabrics.
The company has organic cotton products line and the GOTS-certified accreditation takes their product line to the next level. There’s a growing lifestyle in all types of organic goods, and they are involving themselves in the demand for certified-organic textiles. Fine Cotton believes in the standard. The GOTS certification received by Fine Cotton Factory must be renewed annually.
The European Apparel and Textile Confederation (EURATEX) has welcomed Klaus Huneke as its next President. He assumes office for a two-year term from Jan 2017 and succeeds Sege Piolat who headed EURATEX for the last two years.
On being elected as EURATEX’ president, Huneke said it was Piolat who achieved impressive results in strengthening the voice of the European textile and clothing industry. He further said that his intention would be to focus on few strategic priorities such as better communication towards policymakers and stakeholders on the excellence of innovation and sustainability that enhances EU competitiveness and greater participation of companies in innovation…..”
On the back of higher shipments of garment, exports from Bangladesh saw a growth of 7.11 per cent in 2016 to $34.93 billion. The amount would have been more if the country's major export destinations had not gone through an uncertain political time last year, according to exporters. Bangladesh typically ships more than $3 billion worth of garment products to the UK in a year.
Garment shipments, typically account for 80 per cent of the export earnings roped in $28.61 billion last year, up 7.89 per cent year-on-year, according to a data of the Export Promotion Bureau. Commenting on this Bangladesh Garment Manufacturers and Exporters Association, vice president Faruque Hassan said the country’s exports grew even amid the volatile condition around the world. That is why the garment sector is hopeful that it will perform even better this year.
In 2016, the unit price of garment items decreased by 2 per cent year-on-year and the depreciation of the pound as a result of the UK's shock decision to withdraw from the European Union on June 23, 2016 affected the receipts. The UK is the third largest export destination for Bangladesh after the US and Germany.
With the uncertainty surrounding Brexit, the election of Donald J Trump as the 45th president of the US and the scheduled polls in Germany and France, the outlook does not look too promising. Hassan said that it was not a major cause of concern as exports to new destinations have been on the rise as a result of relaxation of the Rules of Origin.
The apparel industry must address issues of gas and power shortage, market diversification, access to new markets and political stability for achieving the targeted export growth in 2017, the BGMEA vice-president averred. However, the last year ended on a somewhat dismal note, as exports slid 3.11 per cent in the month of December from a year earlier.
