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| Issue date:08/12/2009 |
| ATA Journal for Asia on Textile & Apparel - Dec 2009 Issue |
| Source:Journal for Asia on Textile & Apparel |
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| East Asia |
China
Jiangsu textile and apparel exports decline
In the first nine months of 2009, textile and apparel exports from the Chinese province of Jiangsu valued at US$19.8 billion, down 10.7% from the same period of the previous year, according to Jiangsu's Department of Commerce. Of which, exports of textiles accounted for US$7.61 billion, representing a drop of 16.8%; those of apparel were US$12.2 billion, down 6.3%.
Market-wise, the United States was the biggest buyer for Jiangsu textile and apparel exports between January and September 2009, purchasing US$4.43 billion, down 0.8% from the previous year. The European Union and Japan were the second and third biggest buyers of these goods with an import value of US$4.16 billion (-12.4%) and US$4.01 billion (-1.5%) respectively. Textile and apparel exports to the ASEAN and Hong Kong also declined by 16.1% and 18.9% respectively in the period under review.
Chinese textile firm turns to Egypt for production
Cheap labour, investment incentives and unrestricted exports have attracted a Chinese textile company to manufacture ready-made garments in Egypt. The Chinese-owned Nile Textile Group was set up in the Port Said free zone by November 2009, employing 600 workers; 80% of the workers were Egyptians. Wage of local workers ranges between 700 and 800 Egyptian pounds (or US$130-150) a month. Garments made at the Egyptian factory are mainly export-oriented to the US markets with no restriction, and the firm is able to import 60% of its basic materials tax-free.
Around 950 Chinese companies have set up operations in Egyptian free zones. Direct Chinese investment in Africa rose from US$491 million in 2003 to US$7.8 billion in 2008.
South East Asia
Vietnam
Apparel exports to US continue expanding
Vietnam exported US$7.5 billion in apparel and textiles to mainly the United States and Europe between January and October 2009, according to the Vietnamese General Statistics Office.
The Vietnamese government estimated the apparel export market to reach US$9.3 billion in 2009, up 3% from the previous year. Vietnam's apparel exports to the US increased quickly as the US government in early 2009 stopped monitoring Vietnamese apparel coming into the country.
After the monitoring ended, more US apparel companies felt comfortable about sourcing in Vietnam. Vietnam is the second largest supplier of apparel to the United States, following China.
The US imported US$5.4 billion in apparel and textiles from Vietnam during the one-year period ending August 31, 2009, up 3.7% over the same period of the previous year. China shipped apparel valued at US$32 billion to the United States for the 12 months ending August 2009.
South Asia
India
Signs of rebound observed
India's US$10-billion textile and apparel industry (as estimated by India's Apparel Export Promotion Council, AEPC) registered a growth in August 2009 after nine months of decline.
Indian textile and apparel industry were tied to traditional markets like the US and Europe, where 70% of the textile and apparel products are exported. However, they began to enter the China market more recently, according to Rakesh Vaid, AEPC's Chairman.
"We have been entering new markets over the last two years." He continued: "After nine months of consecutive losses and slowdown (since December 2008), the industry logged growth in August (2009). Exports to Europe have gathered pace, retail chains there are buffering up inventories for spring-summer (2010). I am just back from Europe. I expect the market to pick up early next year (2010)."
Exports to the US rose 1.39% in August 2009 over that in July, however, when compared to that in the corresponding month in the previous year, exports to America still dropped 6.09%. With reference to figures of AEPC, apparel exports fell 15.4% in the first quarter this fiscal year (i.e. April-June 2009), prompting the Indian government to announce a subsidy of Rs 2,546 crore (US$535 million) for the crisis-hit sector .
In the US$373-billion global clothing industry, India's share fell from 3.3% in 2005 to the current 2.6%, or US$9.69 billion, AEPC estimated. To maintain the current share of 2.6%, India will need to export US$18 billion worth of apparel by 2015, requiring 2.7 million additional manpower and investments of US$30 billion, based on the projection of AEPC. The sector employs over 33 million people, and contributes about 4% to the country's gross domestic product (GDP) and 14% to its industrial production.
Foreign investors welcomed
India planned to attract more foreign direct investment (FDI) to boost the country's textile and apparel sector.
India's Union Minister for Textiles, Dayanidhi Maran, said in October 2009 that the Apparel Export Promotion Council (AEPC) would take up the task of attracting FDI. AEPC's General Secretary, Vimal Kirti Singh, said that a more investment-friendly business environment is advantageous to foreign investors in the manufacturing sector. The potentially large domestic consumer market is a highlight as well.
The ministry also organized a first-phase delegation headed by Mr Maran to Switzerland, Italy and Turkey in October 2009. Countries like France, Germany and the US would be planned in the second phase.
Considering that India's share in the world apparel exports in the post-quota regime dipped to 2.6%, Mr Singh from APEC commented that the country requires more investments to remain viable in the export markets. It also needs to increase the capacity along the entire textile and apparel chain, from spinning, weaving, processing to garment-making.
Additionally, the Knitwear Technology Mission set up by APEC in Tirupur helps source advanced technology and related product development of the manmade fiber production. In this way, manufacturers in the Indian textile city can diversify their products in addition to cotton apparel, according to A Sakthivel, President, Tirupur Exporters' Association.
Hoping to import machinery at lower costs
The Indian textile industry asked the commerce ministry not to exclude textile units that had allowed using funds for modernizing their units under the Technology Upgradation Fund Scheme (TUFS) from benefiting from the new scheme for importing capital goods duty-free. The zero-duty Export Promotion Capital Goods (EPCG) Scheme, announced in 2009 foreign trade policy, allows exporters in a number of identified sectors including textiles to import capital goods at zero duty.
In a report submitted to the commerce ministry in September 2009, the Confederation of Indian Textile Industry (CITI) pointed out that the exclusion clause in the foreign trade policy that barred manufacturers subsidized under TUFS from enjoying the zero-duty EPCG scheme, should be removed.
The textile industry's argument is that small- and mid-size manufacturers had suffered the most from the global economic slowdown, and most of them had been benefited under TUFS, the exclusion clause will prevent them from attaining help offered by the government, said R K Dalmia, Chairman of CITI.
The report also opposed the exclusion of TUFS beneficiaries from benefiting from the additional duty-free scrips (1% of the export value) allowed for status holders under the announced foreign trade policy. The scrips are certificates that can be used for importing goods duty free and are transferable.
Under TUFS, textile manufacturers in India can obtain a 5% rebate on the interest payable on loans for modernisation and technological upgradation. The CITI stated that even after TUFS benefits, interest rates for the textile and clothing industry of India is higher than most of its competing countries in Asia. Customs duty on import of machines or duty-free scrips for status holders have nothing to do with interest rates on capital, the CITI concluded.
Pakistan
Pakistan, EU strengthen economic ties
The European Union (EU) decided to develop direct links with Pakistan's textile manufacturers to discuss the possibility of extending the "Generalised System of Preferences" (GSP) plus other incentives.
First direct meeting between the Trade and Commercial Counsellors of the EU countries and All Pakistan Textile Mills Association (APTMA) was held in Islamabad, the capital of Pakistan, in October 2009.
This came after the June 2009 EU-Pakistan Summit held in Brussels, Belgium, when the EU agreed to enhance the bilateral trade relationship in order to support Pakistan's economic development.
APTMA gave a detailed presentation on problems faced by the industry in the EU countries. The Pakistani association requested the EU to declare Pakistan an Adversely Impacted Economy (AIE) due to the negative impact of war on terror on Pakistan's economy.
Chairman of APTMA committee on WTO would also call for "GSP plus" market access, which has been denied because of technical reasons. Pakistan's GSP textile exports to the EU exceeded the limit of 1% of EU GSP imports by 0.48%, disqualifying Pakistan. APTMA hoped the limit of 1% would be raised to 3% for AIE economies.
APTMA also stressed on increased communication between EU trade officials and APTMA, whose members account for 65% of the country's textile output. Increased interaction can help APTMA in its work on compliance issues, better management practices in cotton production, energy conservation and trade remedial measures, the organization said. Moreover, Pakistan and the EU held talks on a free trade agreement (FTA) after the June 2009 Summit.
Looking into cotton price hikes
The Ministry of Textile Industry expressed concerns over the rising cotton and cotton yarn prices and convened an emergency meeting of textile stakeholders in October 2009 to discuss possible remedies.
Textile ministry invited various associations and stakeholders to develop a long-term policy for stable prices of cotton and cotton yarn. They included representatives from the All Pakistan Textile Mills Association (APTMA), the Pakistan Hosiery Manufacturers Association (PHMA), the Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA), the All Pakistan Textile Processing Mills Association (APTPMA), and more organizations representing segments of denim exporters, bedwear exporters, and cotton fashion apparel exporters.
Prices of raw cotton increased by 8% in two months to Rs 3,700 per maund in September 2009.
Rising prices of yarn had a serious effect on exports of the textile sector and led to decline in exports of the value-added apparels, making it difficult to achieve the country's export target, according to Pakistani apparel sector exporters.
Bangladesh
Stimulus package given to apparel industry
Commerce Minister Faruk Khan said in October 2009 that the government of Bangladesh would finalise the stimulus package for the apparel sector. Mr Khan made the remark at the opening ceremony of the Centre for Export and Product Development (CEPD).
The government set aside Tk 50 billion (5,000 crore) in its national budget for the current fiscal to stave off the effect of the global economic meltdown. Earlier, the government had announced such packages for the jute, leather and frozen food sectors, as their export growth had been remaining in the red under the current global economic downturn.
The announcement created resentment among the garment manufacturers as they were left out. During the second meeting of the National Task Force, which was formed to identify the industries affected by the global financial gloom, Finance Minister AMA Muhith said that the government decided to provide economic stimulus package for the ready-made garment sector after examining the sector's export position.
However, Mr Khan considered that Bangladesh would need to diversify its products to tap the full export potential.
Building more effluent treatment facilities
A slow progress of setting up effluent treatment plants (ETPs) in the textile and apparel industry was complained by some international apparel buyers, industry insiders said in October 2009.
International apparel buyers commented that apparel factories in Bangladesh had followed social compliance issues like avoiding child labour, but not many of them have set up ETPs. The progress in setting up ETPs at the Bangladeshi factories is slow; however, end consumers have been more environment conscious than years ago.
Bangladesh's government already made it mandatory to set up ETPs in industrial enterprises such as textile and dyeing factories, which involves wet processing. Many local factories, nonetheless, have not yet set up ETPs before the required date of June 30, 2009.
The Bangladesh Textile Mills Association (BTMA) recently informed the parliamentary standing committee on environment and forest ministry in a letter that a total of 205 out of 1,300 members of the BTMA need to set up ETPs.
BTMA also informed the standing committee that 64 factories already set up ETPs, 24 are constructing the plants, three are importing machinery, six are making infrastructure and five have opened letters of credit for importing machinery.
The association in the letter recommended the government to set up four central ETPs in four areas, namely Dhaka, Narsingdi, Savar and Joydevpur for the industry. BTMA also suggested the government allowing duty-free imports of chemicals used in effluent treatment plants to reduce production costs.
Additionally, Bangladesh's central bank in August 2009 ordered all commercial banks to provide loans up to Tk 1 crore (or roughly US$145,000) at a 9% interest rate for setting up an ETP.
Facing insufficient power supply
Over 20 large textile, spinning and denim factories faced production setback due to insufficient gas in Bangladesh.
These factories are mainly situated in the areas of Gazipur, Tongi, Savar, Narayanganj and Manikganj of Bangladesh. The gas pressure they received was about a half, forcing many of them to cut production, as gas is a source of power supply. Factories reported that they faced insufficient gas since March 2009, incurring substantial financial losses.
In Narayanganj, a number of factories faced low gas pressure for six to seven months, according to the Bangladesh Textile Mills Association (BTMA) data. The data showed that factories in Gazipur were the worst affected by low gas pressures.
Titas Gas Transmission and Distribution Company admitted that there were low pressures of gas, and the pressure might improve in the winter season when the gas consumption became low. In April 2008, Titas suggested to ration gas supply following production shortfalls, which was opposed by the textile sector.
Sri Lanka
Preparing for possible GSP+ withdrawal
Sri Lanka prepared to face risks of not attaining Generalised System of Preferences plus (GSP+), according to Sri Lanka's Central Bank.
At an official briefing on " GSP+ Scheme and Sri Lanka from a risk management perspective" at the Central Bank in October 2009, Governor of Sri Lanka's Central Bank, Ajith Nivard Cabraal, said that it is certainly good if the GSP+ is continued, but like the abolition of the Multi Fibre Arrangement (MFA), the country is prepared to move ahead even without GSP+.
The country has to undertake risk management when dealing with the GSP+, Mr Cabraal said. Moreover, there is ample reason to believe that the present risk (of GSP+ withdrawal) could be dealt with and there is enough evidence to indicate that it could be met successfully, he added.
He said that Sri Lankan exporters' competitiveness to European Union increased sharply between November 2008 and January 2009, due to the Sri Lankan rupee depreciation. Therefore, the potential loss of the preferential duty margin by around 7% if the GSP+ facility is withdrawn will be within the rupee depreciation range, and hence will not be a blow to the country's exports, he said. The inflation also declined from 14.4% at the end of 2008 (with reference to Sri Lanka's Department of Census and Statistics) to below 1% by the end of September 2009 and is expected to be around an average of 3.5% for the year 2009. It is expected to remain low in 2010 as well.
As a result, there has been a significant reduction of pressure on input costs, Mr Cabraal explained.
The interest cost on borrowings also dropped in all market segments and the State banks' new interest reduction measures introduced in October 2009 will lead to further reductions of interest.
In addition, Sri Lanka's improved rating outlook to stable by the Standard & Poor (S&P). Hence, the Central Bank Governor believed that this will also facilitate external borrowing at a lower cost. With the dramatic improvement of the reserve position of the country, industries can also borrow from offshore banking units at lower foreign currency interest rates, he said. Gross official international reserves of Sri Lanka exceeded US$4.8 billion in November 2009, according to the country's central bank. Improved investor confidence with the dawn of peace has reduced uncertainty and exchange rates have stabilized, he concluded.
To qualify for the GSP+, Sri Lanka has to ratify 27 international conventions on human rights, labour rights and environmental standards.
Europe
Euratex helps promote e-business across Europe
Over 120 participants from 20 countries gathered at the eBIZ-TCF conference in October 2009 in Brussels, Belgium, presenting the results of the first truly European initiative for e-business harmonisation in the fashion industry.
The 30 speakers discussed their experience with eBusiness adoption in the textile, clothing and footwear companies or retail operations and IT providers shared challenges and best practices from e-business implementations with customers. Some exemplary representatives of the 150 pilot companies from across Europe, which have tested the eBIZ solution as part of the project work, expressed satisfaction with the results achieved and their intention to extend the eBIZ adoption towards their supply chain partners.
Luca Sangiovanni from Gruppo Ermenegildo Zegna remarked satisfaction about the pilot results, which are planned to be extended towards other suppliers. Based on the just-concluded eBIZ testing phase (i.e. eBIZ Pilots), the project team provided early exemplary figures on the potential economic benefit for companies.
From January 2008, the two-year eBIZ project collected comprehensive data on the results achieved by the companies involved; develop a hand-on guide for e-business adoption in the fashion industry and set up a permanent interest group to support the eBIZ adoption in the coming years. Information events are also planned in a number of European countries such as Bulgaria, Italy and more.
Country Focus:
Indonesian textile businesses find ways to weather economic downturn
by Asep Setiaharja and Staff Reporters
The textile and apparel industry is the largest export earner among non-oil/gas industries in Indonesia. It is also an important manufacturing industry due to its labour-intensive nature, providing jobs for approximately 1.8 million people in the nation.
Being the fourth most populous country in the world after only China, India, the US, and ahead of Brazil, Indonesia has an estimated total population of 232 million, according to BPS-Statistics Indonesia, a non-departmental government institution. The population growth rate is about 1.3% a year.
With a large population, the country has also a potentially large domestic market, which has partially helped it weather the global economic downturn in face of weaker exports markets since late 2008. Domestic apparel market stood at 1.24 million tons in 2008, or US$7.18 billion in value, according to the Indonesian Textile Association (API) data. The association estimated the domestic market to grow about 10% amounted to 1.362 million tons at US$7.56 billion in 2009.
Apart from the domestic purchasing power, the Indonesian textile and apparel industry also looked upon foreign markets for further development.
Closer economic ties with Japan
Japan is one of major trade partner for Indonesia. On one hand, investment from Japan since the early 1970s have boosted development of the domestic textile industry in Indonesia and continue playing a significant role for the Asian nation's economic growth to-date. Japan has also kept friendly relations with Indonesia in the oil trade.
On the other hand, Japan is an important export destination country for Indonesia's textile and apparel industry.
The European Union combining 27 member countries in a single common market was ranked second biggest importer of Indonesia's textile and apparel goods in 2008, accounting for about 20% of the total. In the same year, Indonesian exports of textiles and apparel to Japan reached US$547 million or 5% of total textile and apparel export from Indonesia. From an individual country perspective, Japan was the second largest single-country buyer of Indonesia's textile and apparel goods after the US (see chart).
Main destination countries of Indonesian T & C Export |
Economic ties between Indonesia and Japan grew stronger under the Indonesia-Japan Economic Partnership Agreement (IJEPA) effective from July 1, 2008.
The agreement covered 11 fields including trade in goods, rules of origin (RoO), customs procedures, investment, and energy and mineral resources. The Minister of Trade of Indonesia after the signing of the agreement in 2008 expressed optimism that the agreement would improve production efficiency, investment, and brought benefits to Indonesian entrepreneurs and consumers as well.
In the field of manufacturing industry, Indonesia and Japan have developed a joint cooperation in Manufacturing Industry Development Center (MIDEC). The center is a capacity-building program for Indonesian manufacturing industries - including textiles, through joint studies, technical assistance, information exchange, and other activities.
Nonetheless, total trade value of textiles and apparel between Indonesia and Japan declined since the second half of 2008 through June 2009. The decline was mainly due to a drop of Indonesia's textiles and apparel exports to Japan since late 2008, following the global economic downturn, officials from Ministry of Trade said. Moreover, unit prices of textiles and apparel exports also dropped.
Value of Indonesia-Japan trade on textile and apparel goods from 2008 to first half of 2009(in Japanese yen, JPY) (1 million JPY = US$11,000) |
These exports slipped 7.18% in the July-December period of 2008, compared to the previous six months (or first half of 2008), and went further down by 16.71% in the first half of 2009 compared to the previous six months.
An Indonesian yarn exporter to Japan told ATA Journal that yarn exports of his company increased 10% after the implementation of the IJEPA. In addition, a garment exporter reported a 15% increase in export volume of his company shipping to Japan, although the price slid 10%.
Despite the relatively weak export environment at the moment, they were optimistic that the agreement will bring benefits to Indonesian manufacturers in the filed, such as the work of MIDEC has brought technical assistance to the country, which in turn help improve product quality achieved by Indonesian players.
Areas for improvement
Overall, the manufacturing sector of Indonesia was adversely impacted by the global economic downturn. Despite signs of recovery shown in some areas and/or segments, the economic climate has not yet reached the pre-crisis level, the Indonesian authorities observed.
Indonesia's Central Statistics Agency (BPS) announced in November 2009 that large- and medium-scale manufacturing industries in the country grew only 0.02% in the first nine months of 2009 compared to the same period of the previous year. The Indonesian government pledged to revitalize the manufacturing sector starting 2010.
At a recent national summit sponsored by the Indonesian Chamber of Commerce and Industry (Kadin) in late October 2009, more than 1,200 participants from the national and regional government bodies, business sectors, and academia joined together. The government received numerous inputs on key and strategic development issues for the economic policies between 2010 and 2014.
Industry Minister MS Hidayat, also the chairman of the Kadin, commented that to resurrect the manufacturing industry, areas of improvement would include infrastructure, such as gas and electricity. The decisions by state power utility PT PLN to shut off electricity in some areas undermined and delayed industrial output, the country's business sector reported.
More challenges, particularly in the private sector of Indonesia, were mentioned in a June 2009 report from the Federal Ministry for Economic Cooperation and Development of Germany, entitling "The contribution made by German development policy to Indonesia's Private Sector Development".
Improved access to finance and qualified labour force were regarded as crucial factors for Indonesia's investment climate and international competitiveness. The World Bank's Doing Business 2007 Report ranked Indonesia 135th out of 175 economies on ease of doing business. In 2007, the investment ratio to GDP of Indonesia had reached the level of 25%, but was still below the ratio it had achieved before the Asian financial crisis (29.6%) in 1997-98, stated the report of German authorities.
With vast natural resources, Indonesia was found to rely heavily on exports of primary commodities and simple resource-based manufactures, more than value-added manufacturing activities. Economic growth of the country has been driven mainly by consumption rather than investment.
"Indonesia can play a crucial role in the economic and political integration of ASEAN member states. It has the potential to become the leading economy in the ASEAN region if it manages to catch up with the dynamic Asian economies," mentioned the report. It added that prudent macroeconomic management and sound sector policies could exploit Indonesia's comparative advantage, especially in labour-intensive manufacturing and agricultural products |
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Copyright © Adsale Publishing Limited. Credit goes to Adsale Industry Portal when used.
We reserve the right to take legal action against any party who reprint any part of this article without acknowledgement. For enquiries, please contact the Editorial Department. |
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