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News Clips 30 July, 2013


[ Pakistan needs to offer diversified products to benefit from GSP plus ]
[ RTO assures PRGMEA for release of stuck-up ST claims ]
[ Bangladesh struggles to check garment factories are safe ]
[ India: Textile processors hike charges by 10-15% ]
[ India: Textile exports to Iran set for a rupee push ]
[ India pips China, others in cost competitiveness in spinning ]

Pakistan needs to offer diversified products to benefit from GSP plus   [ top ]

THE NATION, Correspondent Report, July 29, 2013
LAHORE - The Pakistan Readymade Garments Manufacturers Association has observed that country needs to offer more diversified products to benefit from the GSP plus and hence the import of raw material specially fabric for re-export must be made easy and bundled with SRO 492 instead of DTRE.

PRGMEA central chairman Sajid Saleem Minhas said that small trims that carry no commercial value should also be made duty-free to avoid delays and problems with customs.

He expected that textile sector exports growth will continue in FY14 on the back of continued textile demand from China and estimated 7% local currency depreciation. He said that Cotton Crop Assessment Committee has estimated that Pakistan’s cotton production stand at 13.25 million bales in FY14, slightly better than 13.0m bales in FY13.

Exports and profits of the sector could also improve due to expected GSP Plus (Generalized System of Preferences) status from EU (European Union) as lower import duties will make our products more competitive. Further operating environment of the sector may get better in low interest rate scenario and if energy situation improves.

Industry experts said that last fiscal year, FY13, was one of the better years for Pakistan Textile Sector in terms of sales and profits though energy crisis kept on negatively affecting the industry (especially in winter). For FY14, they expect similar favorable operating conditions for the sector as witnessed in FY13. Moreover, GSP Plus status from EU and expected improvement in energy situation is also likely to support earnings in FY14.

FY13 remained quite favorable for the textile sector as prices remained stable and floated around US$80/lb. Further, strong yarn and grey cloth demand from China region coupled with 7% Pak rupee depreciation also provided added impetus to profits.

In FY13, Pakistan exported US$13bn (Rs1.2tn) worth of textile products which is up 5.9% in US$ terms while 14.7% in local currency. Considerable growth in exports is mainly attributed to imposition of cotton floor price in China that encouraged Chinese textile manufacturers to import more yarn and grey cloth instead of making them from costly local cotton. Resultantly, Pakistan’s Yarn and grey cloth exports increased by 24% and 10% to US$2.2bn and US$2.7bn, respectively, in FY13.

RTO assures PRGMEA for release of stuck-up ST claims   [ top ]

DAILY TIMES, July 30, 2013
KARACHI: Chief Commissioner Regional Tax Office Rehmat-Ullah Khan Wazir has appointed a staff officer to examine the cases of refund claims against sales tax filed by garments exporters. Khan while talking to a delegation of Pakistan Readymade Manufacturers and Exporters Association (PRGMEA) led by its acting Chairman south zone Irfan Ali assured them the release of their stuck-up claims as soon as possible. The delegation apprised the Chief Commissioner of the difficulties being faced by members with regards to their pending sales tax reimbursement claims. The Chief Commissioner has promised the delegation of full cooperation of RTO office in order to help them recover their outstanding sales tax claims and said he has appointed staff officer to examine all the outstanding claims of PRGMEA members and submit his findings to the Chief Commissioner at the earliest possible. The delegation appreciated the efforts of RTO and hoped it would take necessary actions to remove all the impediments with regards to sales tax on the value-added export sector which was facing extreme hardship to continue with the exports due to their stuck up capital. staff report

Bangladesh struggles to check garment factories are safe   [ top ]

REUTERS, Nandita Bose, July 29, 2013
In the weeks since the Rana Plaza collapse killed more than 1,100 workers, at least five different Bangladesh agencies have sent teams to begin inspecting the estimated 5,600 factories that make up the nation's $20 billion garment industry. But there's little coordination between the agencies, and senior government officials are unable to say just how many factories have been checked. Estimates vary from just 60 to 340.

While U.S. and European retailers which buy the bulk of Bangladesh-made clothing had hoped to complete factory inspections within 9-12 months, inspectors and government officials say this will take at least 5 years.

Bangladesh has fewer than 200 qualified inspectors.

The disconnect among the various agencies conducting what are often cursory visual assessments - Bangladesh has nowhere near enough technical equipment for sophisticated inspections - means some garment factories have been visited several times, while others have had no checks at all.

"It's a big nuisance for us, and while we're being put through this, nobody's checking all the other factories in the vicinity that haven't had a single inspection," said Emdadul Islam, a director of Babylon Garments, which supplies Wal-Mart Stores Inc, Tesco Plc and Hennes & Mauritz AB's H&M stores. "Our managers are focusing on entertaining inspectors instead of their work because none of these teams are speaking to each other."

Babylon has passed six safety inspections this year. Islam showed Reuters certificates from Bureau Veritas, the firm Wal-Mart has hired to inspect suppliers, and Sedex Members Ethical Trade Audit (SMETA), which inspects Tesco factories. Others to have carried out checks include the Bangladesh textiles ministry and the national garment association, whose 4-person inspection crew spent 3 hours hunting for cracks that could indicate structural flaws like those at Rana Plaza - an illegally built tower where safety warnings were ignored.

A Reuters reporter followed teams of local inspectors touring more than half a dozen factories in and around the capital Dhaka this month, and spoke to factory owners, government officials and engineers to gauge progress in attempts to assure the safety of the garment industry's buildings.

'RELATIVELY COMPLIANT'

During a surprise safety check at Miami Garments, a worker unearthed a fire extinguisher from beneath a pile of shirts to show a government inspector. It was the only one in the 15,000 square foot, 4-storey factory. The building code requires one extinguisher per 550 square feet.

Inspector Abdul Latif Helaly and two colleagues from Dhaka's Capital Development Authority, responsible for urban development, noted it on a list of observations about the factory, which is in a residential building - another building code violation. There was just a single narrow exit staircase, weak floors and structural columns insufficient to support the factory's load, the inspectors found.

"This is a relatively compliant factory and no action needs to be taken here," Helaly said after the 30-minute visual inspection, made without the use of any tools. "We have asked the owners to move their factory to a new building soon and they have agreed to do it in the next 1-2 years."

After signing the factory's clean bill of health, the inspectors were each handed two shirts by the owners.

"PAINSTAKINGLY SLOW"

Bangladesh pledged to boost worker rights and recruit more safety inspectors after the European Union, which gives preferential access to Bangladeshi garments, threatened punitive measures. Last month, U.S. President Barack Obama cut off trade benefits for Bangladesh in a mostly symbolic response to conditions in the garment industry.

Bangladesh's garment exports rose 16 percent in June, showing that retailers have not turned away since the Rana Plaza tragedy. A group of 80 mostly European retailers who signed an accord to carry out coordinated inspections in Bangladesh have started hiring and training inspectors on their own to check the around 1,000 factories that supply their brands.

"This whole process is painstakingly slow," said Jyrki Raina, general secretary of the Switzerland-based IndustriALL union that is overseeing the plan. He said the group would complete only initial safety checks within 9 months, and will take around 5 years to make repairs, conduct final inspections and declare all factories safe.

North American retailers like Wal-Mart and GAP formed their own alliance and are confident of fully checking the 500 factories that supply their members by July 2014. They are hiring third-party agencies to inspect factories and not re-inspect those that have already been passed fit, said Nate Herman, vice president for international trade at the American Apparel and Footwear Association, which is part of the alliance. He said the inspections would begin from November.

WORKING IN ISOLATION

At a building safety conference in Dhaka earlier this month, government agencies, the powerful Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the Bangladesh University of Engineering and Technology (BUET), reached no agreement on how to coordinate safety checks.

Reuters spoke to five officials who attended the meeting and found they had overlapped inspecting some factories and not shared their findings.

"We have to independently verify the buildings and anyway the association cannot be held responsible for the lack of co-ordination. The government needs to look at it," said Shamsul Haque, the BGMEA's additional secretary.

The BGMEA, which has 10 inspectors, said it has checked 400 factories and shut 20 of them. The plan is to complete visual inspections of all 2,500 member factories by December - an ambitious average of 12 inspections a day based on teams of 3-4 inspectors taking at least 3 hours to finish each check.

Results of initial visual inspections that raise a red flag are passed on to BUET, the country's premier engineering university, for closer scrutiny.

PAINTING OVER THE CRACKS

While BUET has the expertise to carry out structural inspections, it lacks both the manpower and the gear.

"We need more sophisticated equipment and if we double our staff strength from 30 we can aim to finish a thorough preliminary assessment on all factories in 18 months," said Mohammad Mujibur Rahman, head of the university's civil engineering department - which is in talks with the government for permission to hire more people.

On a recent tour of the Bengal Indigo factory, cracks on the walls had been covered with fresh paint and plaster before BUET Professors Mehedi Ahmed Ansary and Raquib Ahsan arrived. "It looks like the owners have tried to cover the cracks, but it's still visible," said Ahsan, who like other professors conducts inspections in addition to his full-time teaching job.

The two professors raised concerns about the weight of machines and clothing on the top floor, and noted the building deviated from design blueprints. They asked the company to submit to a voluntary secondary assessment, which will take more than two months as engineers check the plant's column strength and study steel, concrete and cement samples.

Full inspections on all factories will take up to 7 years, and plans for that are being discussed with the government and the International Labour Organisation, said BUET's Rahman.

"The post-collapse impetus to inspect factories has slowed and it's definitely proving to be a challenge to make sure this whole effort doesn't fizzle out," he said.

India: Textile processors hike charges by 10-15%   [ top ]

TIMES OF INDIA, Vimukt Dave, July 29, 2013
Owing to increases in input costs of fuel and raw materials, textile processing units in southern Gujarat have decided to increase their processing charges by 10-15 per cent effective from August 1.

A decision in this regard has been taken by the South Gujarat Textile Processors Association (SGTPA). SGTPA is an association of textile processing units of South Gujarat - mainly in and around the Surat area. The hike in processing charges may be reflected in the price of cloth, resulting in an increase of almost Rs 1.5-2 per metre.

According to industry sources, prices of fuel, chemicals and colours have constantly gone up over the past year, but the processing industry has not hiked its processing charges for over one-and-a-half years now.

Due to higher input costs, more than 40 textile processing units have closed down, the industry players claimed.

"It is now mandatory for us to increase the processing charges for survival, especially for small units. During the past one year, the fuel cost of gas and coal has increased. Moreover, labour costs have also increased, which has put an additional burden on the units," said Jitendra Vakharia, president of the SGTPA. "New charges will also be applicable on our previous orders," he added.

According to the SGTPA, the price of commercial gas had gone up from Rs 11 per cubic meter to Rs 30 during the past two-and-a-half years, while in the last six months the power tariff has increased by Rs 1.50 per unit. Labour charges too have increased by 30-40 per cent in the past two years.

"Due to higher input costs, nearly 40 units have closed in the past one-and-a-half years. And if we do not increase job charges now, it will become difficult to survive," Vakharia said.

Textiles processors had been demanding a hike in the range of 8-12 per cent. However, in a decision taken by SGTPA last week, processing charges have been hiked in the range of 10-15 per cent.

There are around 400 processing units in this area, of which about 350 are active presently. The industry has an annual turnover of around Rs 10,000 crore and it provides employment to more than 150,000 people.

India: Textile exports to Iran set for a rupee push   [ top ]

THE HINDU, M. Soundariya Preetha, July 29, 2013
Textile exporters have spotted an opportunity in the crisis in India-Iran trade caused by sanctions on the latter by the West. The textile industry is eyeing the rupee settlement mechanism between the two countries to push textile exports to Iran. D. K. Nair, Secretary General of the Confederation of Indian Textile Industry, says India’s payments to Iran for oil imports are kept in India in the rupee fund administered through UCO Bank (45 per cent of the payments for oil are made to the rupee account). Textile and clothing buyers in Iran can open Letters of Credit against this fund after obtaining the required clearances from their government. Indian exporters will get the payment in Indian rupees from the bank account. And, there is no dearth of funds in this account, he says. In fact, rice exporters are already using the system.

In an initiative by the Union Ministry of Textiles, a delegation visited Iran in January-February this year, and a trade show was organised in Iran in May. The response to the trade show was encouraging and India’s textile exports to Iran are all set to increase. Nearly 60 textile and clothing exporters participated and are expected to realise business worth $22.5 million. “The impact of deeper engagement with Iran can translate into more than $100 million Indian textile exports to Iran,” says an official of the Ministry. The demand is more for cotton and manmade fibres and textile machinery.

Last financial year, India’s textile and clothing exports to Iran were nearly $108 million. However, Iran should reduce the import duty so that Indian products are competitive, Mr. Nair says.

Iran’s total annual exports to India are $11.5 billion, and India’s exports to Iran are worth about $3.3 billion. The official said that the adverse trade balance between India and Iran was one of the reasons for the special focus on Indian textiles exports to Iran.

Manickam Ramaswamy, Chairman, Cotton Textiles Export Promotion Council, says Iran can become an important market for Indian textile exporters. The exporter negotiates the order with the Iranian buyer in dollars, and also seeks the buyer’s consent to make the payment in rupee under the rupee payment mechanism.

According to Anil Rajvanshi, Vice-Chairman, Synthetic and Rayon Textiles Export Promotion Council, “It looks like Iran will be a big market for exporters of acrylic yarn and fibre, synthetic and manmade fibre and jute.” Since the rupee payment mechanism is a new mode of payment, there are initial hassles. But, “we need to look at the potential of the market.” For the Indian exporters, it will be risky to depend on the U.S and European markets, and they need to look at alternatives.

India pips China, others in cost competitiveness in spinning   [ top ]

FINANCIAL EXPRESS, FE Bureau, July 26 2013
India has pipped China and other major textile suppliers in competitiveness in the capital-intensive spinning segment, a latest study said, further bolstering the notion that enhancing the share of the organised sector in textile manufacturing results in lower costs. However, senior industry executives said systemic obstacles in the form of archic labour laws, frequent power outages and other infrastructural bottlenecks outweigh the inherent cost competitiveness and prevents growth in the country’s share in the global trade, senior industry executives said.

Based on an assumption that India’s manufacturing cost in the spinning sector was 100 in 2012, China’s was high as 138, followed by Indonesia (110), Bangladesh (104) and Pakistan (101), according to the study commissioned by the state-run Textiles Export promotion Council (TEXPROCIL). However, in the weaving and processing sector, the manufacturing cost of China stands at 111, followed by Pakistan (110), Bangladesh (87) and Indonesia (99), compared with India’s 100.

This reflects the growing urgency of bringing in more players into the ornaised sector in the weaving and processing segmant through policy intervention, the executives said. Importantly, the share of unorganised manufacturing in the yarn segment, a major beneficiary of the government’s technology upgradation fund schme (TUFS) since the latter’s inception, is barely 10%, compared with 80% for garments and roughly 90% for fabrics.

In 2011, 40% of ring spinning machines installed by the textile industry were less than 10 years old, compared with 29% in 2006 and 26% in 2002. Similarly, the industry achieved 100% shuttle-less weaving capacity with less than 10-year-old machines, compared with 75% in 2002.

Moreover, the report says a weak rupee has driven up India’s cost competitiveness in the export market in recent years, compared with China. Although the rupee appreciated by 5.5% during 2002-2006, it weakened by 24% between 2006 and 2012 (24 per cent), while Chinese currency appreciated against the dollar by 23.8% in the decade through 2012.

However, the report said India has to go a long way in catching up with China in the textile sector, which captured more than 35% share in global trade in 2011. In absolute terms, while China’s textile and garment exports hit $248 billion in 2011, India remains a distant second at $ 29.4 billion.

“Our share in the global trade suffers because of a lack of an effective overall policy framework, which has resulted in periodic restrictions on the shipments of certain raw materials. This has prevented investors to put in their money. Moreover, labour laws and some other infrastrutral obstacles are also to be blamed. So while cost cometitiveness is there, we need an enabling policy environment along with infrastructural support to gain from the inherent cost cometitiness to realise the potential,” said DK Nair, the secretary-general of the Confederation Of Indian Textile Industry.

Industry executives said although the study has factored in the cost of grid power, a lack of adequate availability of electricity, especially in Tamil Nadu and Andhra Pradesh, has forced textile units to seek supplies from alternative sources at a much higher cost. So the cost-competitiveness in power may not accurate, they argued. Moreover, they said although manufacturing costs in China have gone up in recent years, huge subsidies and quality infrastructure there have offset these negatives compared with India. Textile minister KS Rao said on Thursday the government is planning to increase the interest subvention for powerlooms to 6% from the current 5% under the TUFS. He said he would also request Prime Minister Manmohan Singh to be able to use the MGNREGA for the benefit of the textile sector, which will needs a tweaking of the current guidelines.

Thanks to organised manufacturing, spinners have traditionally accounted for around a half of the total committed investments under the TUFS and grabs 50% of the government’s subsidy allocation. The government has catalysed investements worth R111,000 crore in the textile sector in the three years through 2011-12 by offering a subsidy of R9,000 crore under TUFS and expects to attract investments worth R151,000 crore during the current Plan period, with a subsidy allocation of R11,952 crore.

The government mainly provides interest subsidy against loans to units, capital subsidy and limited cushion against exchange rate fluctuation for investing in new technology.