FW
Pakistan will do away with the value added tax (VAT) for textiles. Pakistani readymade garment exports are currently gaining momentum in the international market. Hence the move to abolish VAT is expected to support this development further. In addition there will be a reduction of the power tariff.
A reduction of VAT on textiles from 15 per cent to zero should give Pakistan a competitive edge over other readymade garment-producing countries; in comparison, VAT on textiles is 15 per cent in Bangladesh, 12.5 per cent in India, 10 per cent in Cambodia and 17 per cent in China.
The textile and garment industry is Pakistan’s largest manufacturing industry and, after agriculture, employs the second largest number of skilled and unskilled workers, about 15 million people or roughly 30 per cent of Pakistan's overall workforce. In Asia, the country is the eighth largest exporter of textiles and garments.
Textile Asia was held in Pakistan, March 9 to 11, 2016. It attracted participants from more than 45 countries, among them Austria, China, Czech Republic, France, Germany, India, Italy, Korea, Taiwan, Turkey, UK and USA. The fair’s focus was on textiles, garments, embroidery, digital printing machinery and chemical and allied services.
India’s merchandise exports have been contracting for the last 15 months. Merchandise exports, the top 20 categories account for four-fifth of the total exports. Even in top export categories like textiles, India is exporting low value commodities such as cotton yarn or apparel rather than technical textiles.
India's trade pacts have exacerbated inverted duty structures – high import duties on raw materials and intermediates, and lower duties on finished goods – that discourage the production and export of value-added items. Several trade pacts have been signed, more for geo-political reasons than commercial reasons. Bangladesh and other countries have free access to European markets but India’s exports are 10 to 12 per cent costlier than theirs.
Textile exporters feel India’s trade agreements are not helping them much in competing globally. They say lower internal transaction costs and port charges will make them competitive. Vietnam has become India’s competitor now. About 40 per cent of India’s total exports are handled by the medium and small scale sector.
The South Asian Free Trade Agreement (SAFTA) has not resulted in any significant export gains. India’s trade deficit has widened with Asean. Further, most of India's preferential trade agreements are shallow in terms of product coverage.
International cotton prices have advanced in the past month, influenced by upward movements in New York, and has returned to the lower end of the previously well-established trading range, which had prevailed for several months.
International business activity has remained much the same as in the past several months, with spinners generally unwilling to extend demand beyond hand-to-mouth requirements. Mills have remained concentrated mainly on cotton for nearby delivery. The steady pace of business during the past few months has resulted in a fairly well-sold position for many trade sellers, with the result that the volume of cotton available from certain origins during the remaining months of the season appears to be becoming tight. However, little demand for cotton further forward has been in evidence, with the exception of some Brazilian new crop into Far Eastern markets.
US export sales reports released during March have painted a rather mixed picture, with strong numbers in the first half of the month and a less robust pace in the succeeding weeks.
Turkey continues to feature quite heavily as a destination for US exports. An overall decrease of around ten per cent, meanwhile, is foreseen in China. India has instructed farmers to adhere to a sowing window as one measure that might help in the effort to prevent a repeat of last year’s insect damage.
The Bangladesh Garment Manufacturers and Exporters Association has propsed certain tax reforms in its budget proposal for the fiscal year 2016-17. Apparel manufacturers say they want 0.3 per cent tax at source in the next fiscal year’s budget to remain competitive in the global market and uphold export growth as the production cost has increased due to safety standards improvement work.
Currently, the largest export sector of Bangladesh is paying 0.6 per cent tax at source, which was 0.3 per cent earlier. The proposal will be placed to the National Board of Revenue (NBR) next week. The apex body of ready-made garment industry also sought a five-year extension for reduced tax benefit for the country’s apparel makers.
Prices of apparel products continued to slide in the global markets including the US and the European Union while production cost has risen by 12 per cent, according to BGMEA Vice-President Mahmud Has an Khan Babu. As a result, RMG sector is going through a huge pressure to remain competitive with the global competitors, he added.
This is the reason why the industry wants to reduce the tax cut at source to 0.30 per cent. According to the BGMEA, the price of Bangladeshi RMG products has been cut by 2.45 per cent in the US market and 0.87 per cent in the EU market during January-July period last year. Euro was devalued by 11.87 per cent against US dollar in the last one year.
Many in Bangladesh are of the opinion that to help the export-oriented RMG sector, the government should reduce tax benefit for the import of LED lights and other related products. Another expert said the government has provided a lot of incentives for the sector, but due to slowdown in global economy, the sector needs policy support.
If all policy supports are met in the next budget, Bangladesh RMG sector will be able to earn $50 billion by 2021,At present, the $25.5 billion RMG sector employs about 4.4 million people, of which 80 per cent are women, mostly from rural areas.
Sheep farmers in Australia follow a controversial practice called mulesing. Mulesing is the removal of strips of wool-bearing skin from around the buttocks of a sheep to prevent flystrike. The wool around the buttocks can retain feces and urine, which attracts flies. Mulesing involves cutting off the skin around the buttocks of merino lambs, often without anaesthetic.
Around three-quarters of merino lambs – prized for their soft fleece – are mulesed when a few weeks old, about 20 million animals. Traditionally, this is conducted without pain relief, though the industry is now introducing local anaesthesia amid fears of a worldwide movement against it.
Major retail chains have over the years condemned the practice as unacceptable and have pledged to seek wool from non-mulesed Australian sheep or from other countries. The Australian wool industry says alternatives to mulesing are not yet viable or are not cost-effective. There are some proposals like skintraction, liquid nitrogen applications and clips but these are yet to win acceptance.
Mulesing was developed in 1927 and since then it has been a routine surgical husbandry procedure for the majority of sheep in Australia. The pain of mulesing is similar to that of castration but it lasts longer, for up to 48 hours.
Chinese apparel manufacturers are getting together to put up a brand new event for the fashion industry. The 30-year-old industry is now entering a new phase and now is the time the industry needs international resources to beef up. LINKINGplus, the new event planned is being jointly organized by China National Garment Association, the Sub-Council of Textile Industry. CCPIT, and China Fashion Association. The maiden event will take place from November 22-23, 2016 in Xiamen, a coastal city in South China.
Chen Dapeng, Executive Vice President, China National Garment Association “we have been thinking of this idea since the last few years. By way of the event, we hope to get together resources in terms of designers, studios, some good manufacturer new products or services. We want such exclusive resource should be available to Chinese manufacturers. “At the networking event, we are looking at around 100-150 such resources and companies. A space of around 2000 sq meter has been targeted; Taiwan has already confirmed a pavilion."
Connecting fashion industry across the value chain
The event will have four parts, namely B2B Space, PromoShow, Forum and Business Tour. B2B Space is the major part of the event. The organizers will invite international companies and organizations from upstream and downstream of the apparel industrial chain. The other three supporting events are designed to foster further communication and cooperation in diversified ways.
The event promises more than writing orders and finding agencies and franchisers. There are more possibilities like brand cooperation, operation management, and design collaboration.
One of the most attractive parts of LINKINGplus is pre-set match-making meetings which will guarantee the best efficient outcome for each participant. Based on the detailed questionnaires and feedback, event organizers will offer a list of companies for each overseas participant to B2B Space to make it time-efficient.
International brands will touch base with the Chinese apparel companies including manufacturers, designers, creative talents, brands, new materials, and fashion education. This will also be a platform for more established foreign companies who are seeking opportunities in China. However, due to asymmetric Information, many of them have not found the right access.
As the leading national organizations of the apparel and fashion industry in China, CNGA, CCPIT TEX and CFA, are some of the leading national organizations trying to build this platform. Many companies have already showed great interest in participation. One hopes over a period of time, LINKINGplus becomes an important platform for international players wanting to enter the Chinese market. After the maiden event in November, LINKINGplus will be held once a year in the most dynamic apparel industry clusters in China with various activities to foster communication and cooperation between China's apparel companies and their counterparts worldwide. In this event, B2B Space is the major part of LlNKINGplus. The organizers will invite 100-150 overseas companies and organizations that could meet the demand of China's apparel industry in its development to from this event and meet with Chinese apparel companies, brands, investors or local officials representing Industry clusters on a pre-set schedule offered by the event.
B2B Space is the major event at LINKINGplus. This will have five sections: Creative ODM, Brands Cooperation,New Materials,Design and Consulting and Education. Here Chinese garment companies, brands can be met with on a pre-set schedule offered by the organizers based on your feedback to a detailed questionnaire. PromoShow (22 All Day Xiamen International Conference Center Hotel) PromoShow as an additional way to introduce one self besides taking part in the B2B Space. This allows the company to show their advantages to a larger audience in a shorter time. Forum is another supporting event of LINKINGplus Under the theme of ‘Fusion - new opportunities and modes of international cooperation for the apparel Industry’, the half-day forum will give its stage to industry experts and corporate leaders to exchange and share ideas and experience in form of presentations and dialogues on topics like education, creative design collaboration, evolution in production driven by consumption and application scenarios of new materials and new technologies. Two one--day Business Tour options will be offered to the overseas applicants on the next day.
"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.
