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India's exports still have a ray of hope with the possibility of a rebound in coming months despite a negative growth trajectory for nine months, from December 2014 to August 2015. Indian exports registered negative growth in 68 of the top 100 export destinations ranging from 10 per cent to 50 per cent.
All top 10 export destinations of posted negative growth: Saudi Arabia (minus 49.7 per cent), Singapore (minus 30.70 per cent), China (minus 20 per cent), Bangladesh (minus 16.4 per cent), Germany (minus 10.3 per cent), Hong Kong (minus 6.4 per cent), UAE (minus 4.8 per cent), Sri Lanka (minus 4.73 per cent), Britain (minus 3.83 per cent) and US (minus 3.82 per cent).
However, 32 of the top 100 destinations: Australia, Canada, Norway, Bahrain, Iraq, Czech Republic, Chile, Ghana and Afghanistan, among others, witnessed growth ranging between two per cent to 50 per cent. Exports constituting labour intensive products demonstrated positive growth. These included handicrafts, jute, ceramic products, carpets, tea, readymade garments and spices.
Experts say that the government should focus on encouraging exporters to venture into new countries and should launch information portals for providing comprehensive information about export opportunities in various markets.
Organised by Japan Sewing Machinery Manufactures Association (JASMA), JIAM 2016 Osaka will be held from April 6 to 9, 2016 at INTEXX Osaka. The 11th edition, under the theme ‘Innovative Solutions and Advanced Processing Technologies’, will run as Japan International Apparel Machinery & Textile Industry Trade Show to offer wider business solutions.
About 87 per cent of the fairground is occupied already, though there are seven months for the event. Also, it is likely that the coming show will increase its exhibition size as JIAM 2016 Executive Committee at JASMA is continuously receiving applications. The total exhibition size has grown by 15 per cent and amongst JASSMA, the show has witnessed a significant growth of 26.7 per cent in addition to a 17 per cent rise in the booth size amongst overseas exhibitors.
Overseas exhibitors from 13 countries /regions would be welcomed at the event. Several companies and organisations are seeking business opportunities at the show, together with first-time exhibitor from Bangladesh. Participation from the Asian region is receiving great attention.
The highlight of the event is the symposium and special presentations. The vitalisation of Japanese textile industry and the underlying strength of ‘Made in Japan’ manufacturing is one of the topics at the symposium.
India has beaten China to become the world’s largest cotton producer in 2014/15. And the gap in production is set to widen considerably. Despite a projected two per cent decline in India’s output in 20151-6 from a year earlier, thanks to a deficient monsoon, the country’s share in global cotton production is set to rise to 27 per cent from almost 25 per cent in 2014-15. However, higher output doesn’t mask the stark reality that India’s cotton yield is just above a third of China’s and much lower than the global average.
Experts fear the surplus local production in 2015-16 could worsen a domestic glut and further dent local prices, as exports have plunged. Exports of cotton may remain negligible in 2015-16 owing to a massive fall in purchases by China, which typically accounted for over 70 per cent of India’s outbound shipments of the fiber.
China, the world’s largest cotton consumer as well as importer, has been attempting to move away from labor-intensive sectors like garments to more capital-intensive ones. The country has been offloading stocks from its huge reserves and also trimming subsidy support to cotton farmers for over a year now as wage costs have been soaring.
A study released recently by the Clean Clothes Campaign, in collaboration with several labour groups, the single largest buyer of garments from Bangladesh, H&M is still behind schedule in improving the factories it sources from. H&M’s ‘Platinum’ and ‘Gold’ suppliers, the only ones looked into by the report, apparently have the highest standards in labour and environmental protections and comprise of 56 out of the 229 factories that H&M uses in Bangladesh.
The Rana Plaza tragedy in 2013 prompted over 200 clothing brands from around the world to sign a binding commitment to create a Bangladeshi garment industry ‘in which no worker needs to fear fires, building collapses, or other accidents that could be prevented with reasonable health and safety measures.’
A coalition of European organisations advocates garment workers’ rights, a part of which is the Clean Clothes Campaign. It collaborated with the International Labour Rights Forum, Maquila Solidarity Network, and Worker Rights Consortium, with research assistance from Fordham University’s School of Law for this report. A spokesperson for the campaign, H&M was the focus of the report as it was the largest buyer from Bangladesh, and thus had significant leverage in the country.
In a press release issued by H&M, it said that every factory H&M sources from meets the Accord’s minimum requirements for operation. Factories in which H&M was the lead brand, almost 60 per cent of the remediation work was complete with good progress in sight, the release added. The company spokesperson, in a statement said that technical and structural issues in factories that ‘require more time and access to technology not available in Bangladesh was the reason for the delay, apart from a huge workload for the inspection experts.
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Mexico’s government was recently recommended to comply with an ILO request for reforms to the country’s Federal Labour Law, by eight major apparel brands via a joint letter. Compliance would ensure greater respect for workers right to freedom of association and collective bargaining. The letter specifically points to the issue of protection of contracts as it allows registration of collective agreements by trade unions that cannot demonstrate the support of majority of workers they intend to represent, by means of a democratic election process.
Many Mexican workers still don’t have access to copies of these agreements mentions the letter. An initiative of the multi-stakeholder Mexico Committee, the letter comprises of IndustriALL Global Union.
Fernando Lopes, Assistant General Secretary, IndustriALL says Mexico is under pressure from governments, democratic unions and the ILO to implement concrete measure to guarantee workers right to be represented by a union of their choice and bargain collectively. He further applauds the brands for supporting the call for freedom of association in Mexico.
The Committee also includes a number of US and European apparel and sportswear brands, the Fair Labor Association, and the Maquila Solidarity Network (MSN), apart from IndustriALL. Mexico will take concrete steps to ensure that positive reforms made to the country’s Federal Labour Law in 2012 are fully implemented at the local level, expresses the joint letter.
Requirements for greater transparency of collective bargaining agreements (CBAs) and union registrations and bylaws, urgent revision of clauses in CBAs that permitted the firing of workers who are expelled from or voluntarily resign from an unrepresentative union are included in the reforms cited.
Bangladesh has called for a relaxation of stringent rules of origin so that more products from least developed countries can enjoy duty benefits. Rules of origin are used at the port of entry to determine the national source of a product for duty purposes and easing them has been a longstanding demand of less developed countries.
Due to strict rules, many products originating from less developed countries are subject to entry barriers or high duty. Bangladesh became a victim of rigid rules on exports of clothing items to Japan. The apparel items were manufactured from imported cotton or yarn, so they were not considered products originating from Bangladesh. But in April this year, Japan relaxed its rules of origin, as of result of which Bangladesh is now enjoying duty benefits on export of knitwear items.
Bangladesh also wants extension of the duration of TRIPs (Trade Related Intellectual Property rights) agreement such that essential products of less developed countries can enjoy flexible patent rights. For example, Bangladesh is exempt from the implementation of the TRIPS agreement until 2016 for pharmaceutical products. This allows Bangladeshi consumers to benefit from cheap medicines.
Less developed countries also seek duty-free and quota-free market access for their products to developed countries.
During February 2015, India exported 53.3 million kg of spun yarn to China and 14.9 million kg to Bangladesh. Of these, 53.2 million kg and 13.2 million kg respectively were cotton yarn. Among the 73 countries to which cotton yarn was exported in February 2015, Jordan paid the least and Japan paid the highest price.
However, such a wide variation may have occurred due to size of the volume, quality differentials, deliverability, and other technical aspects. But for China and Bangladesh, these qualifications are assumed to be neutral since the cargo-mix could be the same on an average.
Although China was the largest importer of Indian spun yarns, especially cotton yarn, it paid much lower than the second largest importer, Bangladesh. China was the largest importer of 32/1 cotton yarn. Export of 30/1 yarn to Bangladesh stood at 3.15 million kg and the same to China was 1.80 million kg.
Buyers in China are negotiating aggressively taking advantage of volume, which appears lacking in buyers from Bangladesh. Overall, higher volumes do have the advantage of getting equilibrium in cotton yarn pricing. In February 2015, China imported cotton yarn at 48 cents lower than Bangladesh.
The newly elected central chairman of All Pakistan Textile Mills Association (APTMA), Tariq Saud has sworn to restore the viability of textile industry to ensure growth and sustainability. Saud said that the country’s textile industry was set to invest $1 billion per year in case the government ensures a congenial environment to double exports in the next five years. He added that the government is expected to restore the confidence level of textile millers by announcing a textile package soon.
He assured the members that he and his team would do everything possible to take forward the agenda of growth and sustainability of the textile industry while ensuring regional competitiveness. He gave this assurance on the occasion of the 57th Annual General Meeting of APTMA during his maiden speech. Saud added that APTMA would be represented in the same fashion as it had been earlier on by previous management and stressed upon harmony and unity amongst APTMA members to resolve issues amicably.
Saud said it was unfortunate that the textile industry, which is mainstay of the economy, leading foreign exchange earner and employment provider through backward and forward linkages, was currently passing through unprecedented crisis. Thus, the capacity to produce $3.3 billion worth of exports was already closed. Saud is confident that the Prime Minister would announce a textile package for restoration of competitiveness in the international market and safeguard the textile industry in domestic commerce. This according to Saud, would drive industrialisation and economic growth. The much awaited textile package covers the entire textile value chain, he added.
In Europe, many technical textiles companies are facing takeovers. Why?
Takeovers are driven by two main reasons. One, large global players for example, US-based Polymer Group Inc (PGI), which is the largest producer of non-wovens has taken over non-woven producers like Fibertechs, and TEX and others. This is because on their customer side, they have global brands such as Procter & Gamble, Kimberley Clarke, Johnson & Johnson who ask suppliers to have a global presence. That’s a change driver. In the auto industry too customers are asking for global suppliers. And for many suppliers it is faster for them to become global if they make an acquisition.
The other driver is business. There many technical textiles companies in the world that report good results. EBIDTA, is a professional measure that financial investors talk about. In technical textiles we talk about EBIDTA levels between 12 and 25 per cent of sales, which is way above traditional textiles. And that attracts investors and family hoardings. So, the largest transaction that we’ve seen this year is Henkel in Germany, which is a large family hoarding, with a couple of billions in equity capital. They bought Bekaert, in Belgium. It is headquartered in Belgium, but is a global player in metra sticking. It is one of the the largest producer of metra sticking in the world. Then there are a lot of smaller transactions like, Innova, they buy smaller companies. The margins are so good that investors are attracted. Therefore, it’s either strategy driven, where one has to become global, and to expand they buy a company because it’s faster than building up a business yourself, or it’s financial reasoning.
Asia is in the forefront of technical textiles. Besides Vietnam and China, which other countries are emerging strong?
China is well-known. They have the advantage of being a centralised state, where the government decides and regions and private industries execute. They had an easy time to implement norms for the Olympic Games, to implement new textiles for the road, because it’s just a government decree. They also monopolised the world in certain raw materials, so, for eg, polyester yarn, which is one of the core raw materials for technical textiles is completely in their hands. However, they have reached their limit. In future, this can’t go on.
Korea is already doing well because of hi-tech fibres, a lot hi-tech companies, etc. However, Korea has only 40 million people. It’s half of Germany, which is a tiny country. They have done a good job of penetrating hi-tech or hi-end technical textiles, but with such a small domestic market, they cannot become a global player. Therefore, the only country that can become a global player is India because there are more than 1 billion people with at least 300 billion middle-class. And all these people will start buying cars and diapers for their babies, and visit private hospitals for treatment and surgery, which is by itself a huge market.
Globally, what is the share technical textile in total textile exports?
One of the difficulties in technical textiles is that it is not exported easily, other than, for e.g., if one makes cotton fabric for fabric printing in Indian dress fabric, which is a global commodity, which is easily exported. However, in technical textiles, there are a lot of trade- and non-tariff barriers, which make potential customers become wary of losing their product, but once this is overcome, they are fabulous export successes.
Turkey is going down, and India constantly goes up. There are many reasons for Turkey’s performance. The currency has appreciated and Turkish infrastructure for exports is bad, because from Turkey to go to European markets, one has to go by truck. Trucking costs are higher than shipping a container from Mumbai to Europe or from Mumbai to the US. Therefore, transport costs from and to Turkey, are much higher than India exporting to Europe or US. The other reason is appreciation of the Euro. The third reason is specifically for FIBCs. The world market leader that also owns two largest producers in Turkey has been taken over by US GREIF, and they are now shifting production to Middle East, which has created unrest in the personnel and the market has gone down. India is on the verge of becoming world number one.
Emerging and developed markets are doing well. How does progress in emerging markets affect the developed markets?
One thing is the local market aspect, as the GDP grows, middle-class grows—they want cars, medical treatment in decent hospitals, they want hygiene, proper environment, etc. As middle-class grows, it becomes an important vote share, it has higher disposable incomes, and technical textiles grow. Therefore, there is an almost automatic formula. It is not affecting the markets in Europe and US. On the contrary, lots of people buying Mercedes Benz in India is good for Europe. Exports from emerging countries to developed countries are growing, or imports to US and Europe from Asia are growing.
For example, laminated fabrics for digital prints, a lot of these fabrics come from Asia, especially China. It’s better for everybody because Asian rules demand western technology, so they buy machinery from Europe, US or Japan. Big brands such as Proctor & Gamble and Kimberley Clarke, etc., like it if there are more private hospitals such as the Apollo chain in India and if they have to buy certain staple technical textiles from India and China, it’s alright since it’s an exchange. There is no conflict in this industry as it was in the fashion industry, where textile for fashion has almost vanished in Europe or US. In technical textiles it’s a win-win situation.
What are the challenges and opportunities for technical textiles today?
The prospects are good for large domestic market. As Prime Minister Modi said that car production should go from three million to 10 million three fold growth. A car takes an enormous amount of textiles. Safety, fitting, tyres, etc., there’s textiles all over the car. Therefore, if that aim is achieved, the market will triple. If private hospitals do well, great opportunities open up in the domestic market. Exports, are slower as there is a prejudice and the prejudice has to be overcome in daily life But, some sectors have done it and we have role models, such as Welspun, this shows others we can do it.
The challenge is the need to import key raw materials from China. China has monopolised the world in certain raw materials. So, for a lot of raw materials you have to depend on China and that is not a happy situation. Therefore, it’s important to build competitive raw material bases like Korea.
Sustained efforts are being made to create awareness among stakeholders to improve the image of RMG sector in B’desh, the main export earner, by the garment sector and allied business partners. Md Moshiul Azam Shajal, Director, BGMEA and Managing Director of Posmi Sweaters, points out that recently, training programs on health and safety were carried out in garment factories funded by International Training Centre-International Labour Organization (ITC-ILO) and organised by Bangladesh Employers Association, BGMEA and BKMEA.
However, increasing costs having a negative impact on the sector and to resolve this, it is necessary to decrease interest rates, reduce oil and gas prices. The US has removed Bangladesh from its GSP list of 122 nations. Experts believe the exclusion will hamper the garment sector from reaching its target $50 billion in export by 2021. According to an analysis on RMG sector, export to the US contributed only 0.5 per cent of Bangladesh's export and would not directly affect the overall quantity.
Compliance and safety issues in garment factories, is the main reason for expulsion. BGMEA, the government, and the garment companies have joined hands to find out a solution.
