Cotlook A Index - Cents/lb (Change from previous day)

23-08-2019 70.30 (-0.90)

22-08-2018 93.05

22-08-2017 77.90

New York Cotton Futures (Cents/lb) As on 28.08.2019 (Change from

previous day)

Oct 2019 58.13 (+0.47)

Dec 2019 57.60 (-0.22)

Mar 2020 58.74 (0)

28th August

2019

Govt to study impact of measures announced: FM Nirmala Sitharaman

Spinning mills wedged between drop in yarn demand, high cotton prices

Cabinet may ease FDI norms in single-brand retail, insurance today

India’s skill development programme goes global

Ministries planning to allow small businesses to enter manufacturing

sector

Cotton and Yarn Futures

ZCE - Daily Data (Change from previous day)

MCX (Change from previous day)

Aug 2019 21120 (+170)

Cotton 12345 (-85) Oct 2019 19770 (+150)

Yarn 20170 (+5) Nov 2019 19090 (-10)

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2 CITI-NEWS LETTER

-------------------------------------------------------------------------------------- Govt to study impact of measures announced: FM Nirmala

Sitharaman

Spinning mills wedged between drop in yarn demand, high cotton

prices

Cabinet may ease FDI norms in single-brand retail, insurance today

No quick turnaround in India's growth momentum likely: Report

India’s skill development programme goes global

Ministries planning to allow small businesses to enter manufacturing

sector

Gadkari's mega plan for small biz: Record 100,000 new MSMEs this

fiscal

How to find the way out of the ongoing economic slowdown

How MSMEs may create more jobs: FICCI suggests govt ways to grow

small businesses

Long-standing issues not ‘resolved’, Jharkhand industry highlights

govt ‘insensitivity’

Government of India should organize India-GRULAC business

conference in Colombia: WTC Medelin & Cali chief

-------------------------------------------------------------------------------

Rare earth mining, textiles and ICT manufacturing seen as areas

Vietnam can benefit from trade war

Women Are Fighting Back Against the ‘Fat Tax’

Pakistan: Refund claims by textile exporters: Escrow account sought

Egyptian cotton boosts exports, preps for BCI pilot

Cannacubed launches Asia Industrial Hemp Association

--------------------------------------------------------- ----------

NATIONAL

---------------------

GLOBAL

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3 CITI-NEWS LETTER

NATIONAL:

Govt to study impact of measures announced: FM Nirmala Sitharaman

(Source: The Hindu Business Line, August 27, 2019)

Finance Minister Nirmala Sitharaman said the government wants to ensure that

entrepreneurs and industries carry out their business without a worry. She said the

government was observing the impact of the slew of measures announced to prop up the

economy before taking further steps. However, Sitharaman remained non-committal on

lowering GST rates.

The Minister was in Pune to hold discussions with trade associations, industry players

and tax officials. Speaking to reporters, she said, “We want entrepreneurs to carry out

their business without a worry. Similarly, we have expressed out keenness to serve

farmers so that everyone carries on with their business which create job and wealth for

the country. Therefore, it was important that tax administrators facilitate them. It is

important that tax administrators do their job of tax collection and enforcement of tax

rules, but necessarily understanding business and facilitating them”.

She said the industry is focusing on GST reforms and simplification of forms in GST. “I

am willing to hear any number of people on GST rates . It is not in my hands. It has to go

to the GST council and it will be discussed there in the law committee. The decision is

made there,” the Minister said.

She said, “I have announced some measures for the automobile sector. I will have to get

inputs from the sector to see what kind of impact the announcement I have made has

had.”

Slams criticism of RBI

Commenting on the Opposition’s criticism on the RBI’s decision to transfer ₹1.76 lakh

crore of the surplus reserve to the government, Sitharaman said, “The Jalan committee

had experts appointed by the RBI and not by the government. They had sittings and have

come out with a formula. Any suggestion about the credibility of the Reserve Bank,

therefore, for me seems a bit outlandish.”

On Rahul Gandhi’s barb, the Minister said, “ Rahul continues with his chor narrative,

even as people have given him a befitting reply. The Congress Party must speak to their

former Finance Ministers and then talk about the RBI”.

Rahul Gandhi had earlier said the government was “stealing money” from the RBI.

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4 CITI-NEWS LETTER

Spinning mills wedged between drop in yarn demand, high cotton prices

(Source: Vatsala Kamat, Live Mint, August 28, 2019)

Looks like yarn mills are caught in a web of weakening demand and high raw material

prices. For a country that exports nearly one-third of the yarn it spins, the 34.6% year-on-

year drop in exports between April and June does not bode well for mills. The domestic

market was not encouraging either. Although there was positive offtake in April and May,

prices in June fell 4% year-on-year.

To the dismay of industry and analysts,

the robust demand trend seen in the

first three months of 2019 did not

sustain. According to rating

agency Icra Ltd, several factors explain

the fall in India’s cotton yarn exports.

This includes high price of cotton and

yarn from Indian mills, duty-free

access provided by China to Pakistan

for import of yarn, continued

competitive pressures from nations, such as Vietnam, and higher raw cotton fibre imports

by China, which is keeping its cotton availability situation comfortable for yarn mills.

At the root of the problem is high cotton prices. International cotton price has plunged

28.3% in the past one year. In contrast, domestic prices have been firm during the period.

Cotton futures have been steadily rising in the last seven trading sessions on speculation

of lower output and productivity in the cotton season (2018-19).

It is not surprising that spinning mills are weighed down by high raw cotton prices.

Adding to this is the impact of tight liquidity faced by small and medium mills, which

make up for a major portion of installed capacity.

Data from Capitaline on 39 spinning mills shows that net revenue in the June quarter

contracted by about 7.4% from the year-ago period. The average Ebitda (earnings before

interest, tax, depreciation and amortization) as a percentage of sales also contracted by

about 50 basis points, though many mills have been struggling.

With several global tensions persisting, especially between the two strong contenders in

cotton textiles—the US and China—the outlook for India’s yarn exports in FY20 looks

bleak. Reports from textile associations in India suggest stock pile-ups and production

cuts by spinning mills in recent months.

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5 CITI-NEWS LETTER

This may have a cascading effect on the financial health of domestic mills, more so, if the

problem persists. Jayanta Roy, senior vice-president and group head (corporate sector

ratings) at Icra, said: “Based on the emerging trends, we have revised the credit outlook

on the Indian cotton spinning industry to ‘negative,’ as the profitability and debt coverage

metrics are expected to moderate from the current levels. The impact is likely to be more

pronounced for leveraged companies."

Given the tight liquidity scenario, a sudden change in yarn outlook is unlikely. One can

only hope for a drop in domestic cotton prices with the onset of the new season. This could

ease the pressure on spinning mills in the near term.

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Cabinet may ease FDI norms in single-brand retail, insurance today

(Source: Subhayan Chakraborty, Business Standard, August 28, 2019)

In the Budget, the government had made clear its intent to further relax FDI norms in

several sectors

The government is likely to further ease foreign direct investment (FDI) norms, with the

Cabinet on Wednesday expected to give its approval to relaxed norms in single-brand

retail trade and insurance sectors.

In the Budget, the government had made clear its intent to further relax FDI norms in

several sectors.

Earlier this year, Commerce and Industry Minister Piyush Goyal had said that the

government was exploring ways to allow foreign investors in single-brand retail to meet

their 30 per cent mandatory local sourcing requirement through other ways.

This includes counting the sourcing they do in India for exporters to other markets as part

of the 30 per cent norm, apart from the goods they sell in their stores in the country.

Currently, 100 per cent investment is allowed in the sector under the automatic route.

But the current rules stipulate that products should be sold under the same brand

internationally, meaning products should be sold under the same brand in one or more

countries other than India. Single-brand product retail trading also only covers products

branded during manufacturing.

The procurement requirement has been opposed by major foreign retailers. Apart from

the easier norms, the Department for Promotion of Industry and Internal Trade, the nodal

body for investment-related policy, may also now count local sourcing in phases. For

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6 CITI-NEWS LETTER

instance, it may be counted as an average of five years, the total value of the goods

purchased, after which, it needs to be met on an annual basis, persons in the know said.

In the Budget, Finance Minister Nirmala Sitharaman had also signalled that FDI reforms

in aviation as well as multimedia sectors like animation, gaming, digital media, and

information utilities, may be taken up.

Sources say the insurance sector could be opened up to 74 per cent FDI under the approval

route to bring parity with the banking sector, according to proposals under consideration.

However, officials say the current 49 per cent foreign investment limit through the

automatic route in insurance is likely to be maintained.

For insurance intermediaries like brokers, insurance repositories, and third-party

administrators, 100 per cent FDI may be permitted.

Announcements in the contract manufacturing sector are also expected. In the existing

foreign investment policy, 100 per cent FDI is permitted in the manufacturing sector

under the automatic route. A manufacturer is also allowed to sell products manufactured

in India through wholesale and retail channels, including through e-commerce, without

the government’s approval.

But the current policy does not talk about contract manufacturing separately and the lack

of a clear definition in the current policy is an area the government is aiming to rectify,

sources said.

This comes in the wake of FDI equity inflows declining for the first time in six years in

2018-19, down 1 per cent to $44.4 billion, from $44.8 billion in the previous fiscal year.

Home

No quick turnaround in India's growth momentum likely: Report

(Source: Economic Times, August 27, 2019)

India's economic growth momentum is expected to slip further as there is no quick fix

solution for the structural issues that the economy is facing, says a report.

India's economic growth momentum is expected to slip further as there is no quick fix

solution for the structural issues that the economy is facing, says a report. According to

D&B Economy Observer, the lackluster growth in the Index of Industrial Production (IIP)

is expected to prevail as the manufacturing sector is facing multiple challenges which will

take time to get resolved.

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7 CITI-NEWS LETTER

D&B expects IIP to have remained subdued and grown by 2.5-3 per cent during July this

year. The report noted that fiscal stimulus by government and the policy rate cuts by the

Reserve Bank of India along with other initiatives are likely to offer some respite to

corporates. However, a comprehensive/wide-ranging reform package will be required to

address the various issues at the sectoral level, it noted. "The ongoing multiple issues in

the global and domestic economy are expected to drag down India's growth further. There

is no quick fix solution for the structural issues at the sectoral level and, therefore, it is

highly unlikely that there will be quick turnaround of the growth momentum," said Arun

Singh, Chief Economist Dun & Bradstreet India. Singh further said, the government's

comprehensive measures and suitable interventions for different segments of the

economy was much needed. Most importantly, it would help in reviving the overall

sentiment immediately for the consumer and should support and encourage private

investment.

The government on Friday announced a raft of measures, including rollback of enhanced

super-rich tax on foreign and domestic equity investors, exemption of startups from

'angel tax', a package to address distress in the auto sector and upfront infusion of Rs

70,000 crore to public sector banks, in efforts to boost economic growth from a five-year

low. To bolster consumption, the government also said that banks have decided to cut

interest rates, a move that would lead to lower monthly installments for home, auto and

other loans. Singh noted that "without gainful employment opportunities, skewed

distribution of income and dependence of majority of the population on the vagaries of

the monsoon, it would not help much in pushing the consumption bandwagon". On the

price front, the report said that lower economic activity along with subdued demand

conditions and low commodity prices globally are likely to keep inflation benign. D&B

expects the consumer price index (CPI) inflation to be lower than the previous month and

remain in the range of 3.2-3.4 per cent and wholesale price index (WPI) inflation to be in

the range of 1.1-1.3 per cent during August this year, respectively.

Home

India’s skill development programme goes global

(Source: Zee Business, August 27, 2019)

India’s flagship skill development programme goes global as three young interns fly to the

Japanese city of Nagoya tonight for a three-year programme.

India’s flagship skill development programme goes global as three young interns fly to the

Japanese city of Nagoya tonight for a three-year programme under the aegis of

ASSOCHAM, National Skill Development Corporation (NSDC) and NEC Japanese

Language Academy (NJLA).

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8 CITI-NEWS LETTER

Kannan Sangeeth Krishna and Sivanpillai Shyju from Kerala, and Nage Vijay Rameshwar

from Maharashtra were chosen under the Indo-Japan Technical Intern Training Program

(TITP). The trio were felicitated at the ASSOCHAM headquarters in New Delhi today in

the presence of senior officials of the chamber, NSDC and NJLA.

These interns would be joining a leading Japanese firm in the city of Nagoya, a

manufacturing and shipping hub for three a three-year programme, the business chamber

said in a statement.

“It is a matter of great satisfaction for us to have partnered in this programme of skill

upgradation, taking it truly to a global scale. The excitement is palpable on the faces of

these youngsters who would prove to be a great human resource both for India and

Japan,” said Saurabh Sanyal, ASSOCHAM deputy secretary general.

Even before their departure for Japan, the candidates received training for Japanese

language for six months and were additionally oriented towards the customs and tradition

of Japanese.

TITP is a 3-5 years internship programme for providing skill training in different fields

including agriculture, fishery, construction, food manufacturing, textiles, machinery and

metals, care workers (Nursing), etc.

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Ministries planning to allow small businesses to enter manufacturing sector

(Source: Subhayan Chakraborty, Business Standard, August 28, 2019)

The MSME sector accounts for 30 per cent of the country's gross domestic product,

anchoring 45 per cent of total industrial production

The micro, small and medium enterprises (MSMEs) and commerce ministries are

discussing a broad range of moves to allow small businesses to foray into manufacturing

sectors in which imports remain high.

Both ministries are identifying the industry sub-sectors such as medical devices,

pharmaceuticals, plastics, and low-end engineering goods where small businesses can be

encouraged — through specific subsidies or policy intervention — to make indigenously,

a senior MSME ministry official said. “Our officials have met their counterparts from the

commerce department to ...

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9 CITI-NEWS LETTER

Gadkari's mega plan for small biz: Record 100,000 new MSMEs this fiscal

(Source: Subhayan Chakraborty, Business Standard, August 27, 2019)

Ministry also targets 66% rise in credit, setting up of 400 clusters and Rs 50,000 cr in

procurement from sector

Spending on micro, small and medium enterprises (MSMEs) by the government is set to

shoot up as the Nitin Gadkari-led ministry prepares a plan to boost the number of new

ones being registered to an unprecedented 100,000 this fiscal year. The additional

financial infusion is expected to provide a lifeline to the sector.

It has seen massive layoffs over a year, due to a continuing liquidity crisis even as

industrial demand reduces. According to the ministry, their plan includes step-wise

expansion of a crucial credit guarantee net, establishment of an unprecedented number

of ...

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How to find the way out of the ongoing economic slowdown

(Source: Shubhada Rao, Live Mint, August 27, 2019)

India’s economic growth momentum has been slipping for the last three-to-four quarters.

Not only did gross domestic product (GDP) growth fall to a 20-quarter low of 5.8% in the

fourth quarter of FY19, leading indicators point towards further weakening of growth

momentum towards 5.5% in the first quarter of FY20. Given this subdued backdrop, the

finance minister’s recent announcement of a comprehensive set of steps for economic

revival, is a welcome step.

This timely policy intervention should start breaking the vicious circle of subdued

sentiment leading to weak economic growth, and vice versa.

However, disparate signs of weakness seen in pockets in late 2018, especially in the rural

parts of the country, coupled with tightening of financial conditions for non-banking

financial companies (NBFCs) and housing finance companies (HFCs), have become

pervasive and, more worryingly, sectors such as automobiles, real estate and fast moving

consumer goods (FMCG) are showing telltale signs of distress.

Trying to stimulate the economy without compromising on the medium-term objective of

fiscal consolidation and inflation targeting ought to be seen as a courageous and

commendable move. The best way out under the current circumstance would be to opt

for a coordinated and calibrated policy approach to ease flow of funds, while redefining

priorities and composition.

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10 CITI-NEWS LETTER

To start off, the immediate impact on sentiment and domestic demand can be had

through monetary easing. While the Reserve bank of India (RBI) has delivered a

cumulative of 110 basis points (bps)of rate cuts since February 2019, persistence of

negative gap in both output and inflation provides room for up to 40 bps of additional

monetary easing in the near future.

This ought to be accompanied by enhanced transmission. While surplus liquidity has

started to aid monetary transmission, the RBI could enhance the same by explicitly

promising to keep liquidity in a surplus state at 0.5-1% of NDTL (net demand and time

liabilities) as long as there is a negative inflation gap. Faster recalibration of loans to the

repo rate/external benchmark by the banking system could further propel monetary

policy transmission.

From the NBFC perspective, efforts to unlock growth capital can get broad-based further

via: (i) rating-based eligibility of NBFC securities at a somewhat higher haircut to provide

incremental liquidity coverage ratio comfort to banks to enhance their lending capacity;

and (ii) broadening of commercial paper market by allowing all foreign portfolio investors

to invest in the same.

On the tax front, the government could look at rolling out the recommendations of the

Direct Tax Code committee (which recently submitted its report) to boost disposable

income of households and corporates. In addition, the Goods and Services Tax (GST)

Council could look at further simplifying the indirect tax architecture by moving to a

three-tier slab of 6%, 12% and 18%, while expanding its ambit to cover all goods and

services. India’s exports-to-GDP ratio fell to 12.4% in March 2019 from 17.2% in March

2014. Foreign trade policy needs to focus on products having high comparative advantage,

such as gems, textiles, footwear, chemicals and metals. This needs to get accompanied by

promoting ease of exporting via active use of digitization and streamlining of

documentary process, while maintaining a fairly valued currency.

Thrust on consumption and exports is bound to create incentives for investment revival.

In the meanwhile, structural reforms in factor markets of land and labour could get

pushed to reinvigorate sentiment and uplift long-term growth.

Shubhada Rao is chief economist at Yes Bank

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11 CITI-NEWS LETTER

How MSMEs may create more jobs: FICCI suggests govt ways to grow

small businesses

(Source: Sandeep Soni, Financial Express, August 27, 2019)

FICCI's economic outlook survey, which pegged India’s potential GDP growth rate for

FY20 settling at the higher end at about 7.5 per cent, stressed on strengthening MSMEs to

be among the key areas that require urgent attention.

In order to boost job creation in India’s micro, small and medium enterprise (MSME)

sector — the second largest employer in India after agriculture, there is a need to adopt a

cluster development approach by the government, according to economists. “Smaller

enterprises working in a cluster will develop economies of scale and become cost-efficient,

thereby improving their productivity and competitiveness,” industry body FICCI said in

its latest economic outlook survey among economists, since “a majority of employment

opportunities are created by SME.” The survey, which pegged India’s potential GDP

growth rate for FY20 settling at the higher end at about 7.5 per cent, stressed on

strengthening MSMEs to be among the key areas that require urgent attention. The other

areas of focus, according to surveyed economists, are boosting agriculture, undertaking

factor market reforms, and improving avenues for infrastructure financing.

Developing clusters gain significance as MSMEs are expected to generate around 1 crore

jobs in the coming four-five years, as per a report by Nomura Research Institute.

Moreover, strengthening MSMEs in clusters of artificial Jewellery, sports goods, scientific

instruments, metal utensils, machine equipment like textile machinery, electric fans,

rubber, plastic, leather & related products, bicycle parts and auto components, textile,

wood, paper, food, minerals etc. can create an additional 75 lakh – 1 crore jobs in the next

four-five years through partial substitution of imports.

Economists highlighted the need for the government to ensure “strong and stable

policies” to help Indian SMEs integrate with global value chains. The industry body had

earlier suggested setting up of “an exclusive Export Facilitation Centre for MSMEs” to

boost their exports. Also, economists sought expansion of technology and incubation

centres for MSMEs across India. Further, to boost employment in the manufacturing and

services sector, economists identified easing or reducing the cost of doing business and

regulatory reforms for businesses along with labour reforms and sector-specific special

packages. Employment generation by MSMEs over the past four years grew 13.9 per cent,

according to a CII survey, wherein micro-businesses created the highest number of jobs

are likely to continue to be on top in the next three years. The net job additions in four

years among more than 1 lakh MSMEs stood at 3,32,394 — a 3.3 per cent increase per

annum in these four years.

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12 CITI-NEWS LETTER

Long-standing issues not ‘resolved’, Jharkhand industry highlights govt

‘insensitivity’

(Source: Abhishek Angad, Indian Express, August 28, 2019)

On July 19, FJCCI wrote to the industries secretary that they were “pained to highlight the

non-seriousness shown by Industries Department” in handling some of the long pending

issues of MSMEs in the state.

Last week, the Federation of Jharkhand Chamber of Commerce and Industries (FJCCI)

put up several hoardings in parts of Ranchi targeted at the state government’s

“insensitivity” towards businesses, with the words: ‘Vyapariyon ki maarmik pukaar, ab to

sudh lo sarkaar’ (moving call from business people, hear us now, government).

FJCCI, which has over 80 trade and industries associations affiliated to it, said this was

done to remind the government of the problems faced by businesses in the last few years,

which include failure of single window clearances for businesses, red tapism, electricity

shortages among others.

“In the last 11 months, we had several correspondence with the government on various

issues concerning us. Things were delayed due to elections. However, there was no resolve

to solve the issues even after elections and we had to resort to putting our views in the

hoardings … We are not in confrontation with the government, but we just want them to

listen,” Deepak Maroo, president, FJCCI told The Indian Express.

He added that the claims of hassle-free business after the ‘Momentum Jharkhand’

summit “is a farce”. “The policy declaration followed by Momentum Jharkhand was to

promote investment in the state, especially through promotion of local entrepreneurship.

This was the whole idea … a contributing factor in Make in India call of PM. However, the

sense one is getting on the ground is entirely different.”

According to a FJCCI correspondence sent to Jharkhand industries secretary K Ravi

Kumar, dated June 29, one Ravi Kumar Burnwal of Arindam Fashion, who had set up

garment unit and had successfully bid for another plot, is being “harassed”, although he

had proposed to invest Rs 3 crore.

“He had successfully bid for plot for setting up the MSME category unit … in March 2017.

But to his nightmare, the plot was found to be badly encroached. Despite repeated request

the land has not been made free of illegal occupants so far and handed over to him,” the

letter said.

It added that under the Textile Policy, 2016 and Jharkhand Industrial area guidelines,

any labour intensive textile units providing jobs to at least 75 persons and investment over

and above Rs 2 crore is “eligible for 50 per cent subsidy of land’s reserve price,” along with

the facility to pay the price in 10 EMIs. “Despite fulfilling all the conditions and

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13 CITI-NEWS LETTER

approaching the single window grievance cell … he is being told to pay the quoted bid

price with a certain period of time in full.”

Maroo said there were also discrepancies in allotment of land in Santhal Pargana region

which was done through the online process. He added that the intent of the policy

governing industrial areas of Jharkhand has been to promote homegrown small and

medium scale manufacturing to develop local entrepreneurship, which is missing.

In a letter to Chief Minister Raghubar Das dated June 24, FJCCI said that after examining

a list of 63 entrepreneurs, it was seen that 30 per cent of the plots had been allotted to a

“single unit” and identical enterprises whose names have appeared on “as many as 10

occasions” as applicants.

Maroo added that electricity shortage has affected industries, specifically from small and

medium manufacturing units and food and milk processing industries. He added that

power supply from Jharkhand Bijli Vitran Nigam Limited. the state discom, has been

inefficient.

Jharkhand Milk Products Private Limited, which sells milk under the brand name

MISHKA, wrote a letter to FJCCI — which was later forwarded to Energy Secretary —

stating that power failure was “so frequent” that they could not rely on it at the time of

processing and on average, there are “90 hours” of power failure every month.

On July 19, FJCCI wrote to the industries secretary that they were “pained to highlight

the non-seriousness shown by Industries Department” in handling some of the long

pending issues of MSMEs in the state.

Speaking to The Indian Express, Ravi Kumar said that the situation of industries to

operate in Jharkhand has not “reached an ideal state”, but reforms have been taking place

since 2015. On the claims made by FJCCI, he said, “Arindam Fashion is not eligible for

running that industry and we can’t help. There are some case in which there are no

solutions. He had even abused the bankers.”

On the Santhal Pargana land allotment and interest of MSMEs, Kumar said: “The land

allotment process is through online bidding and any other route would create

discretionary decisions which will lead to allegations among others. 70 per cent of the

industries are comprised of MSMEs and capital is an issue for them, but the state cannot

run only by small industries.” Kumar added that since the announcement of the Rs 1 crore

loan in 59 minutes scheme, 500 loans have been disbursed.

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14 CITI-NEWS LETTER

Government of India should organize India-GRULAC business conference in

Colombia: WTC Medelin & Cali chief

(Source: KNN India, August 27, 2019)

The Government of India should organize India-GRULAC business conference in

Colombia, said Guillermo Acevedo, Executive Director, World Trade Centre (WTC)

Medellin and WTC Cali highlighting the growing importance of Latin American and the

Caribbean (LAC) countries have emerged as important economic partners for India.

GRULAC is a Group of Latin America and Caribbean Countries.

“In an uncertain and challenging global trade scenario, India is actively looking at

diversifying its trade partners. LAC countries have emerged as important economic

partners for India. Among GRULAC countries, Colombia holds key to enhance its

international trade”, said Acevedo, at an interactive discussion organized by WTC

Mumbai. Acevedo urged Government of India to organize an annual / biennial India-

GRULAC conference to promote bilateral trade.

He said fashion, apparel, wellness and healthcare, BPO and technology are some of the

sectors of focus for Indian companies. Acevedo is in Mumbai on an invitation from the

Ministry of Commerce, Government of India for participation in a textile event.

Two MOUs between WTC Mumbai, and WTC Medellin and WTC Cali, respectively were

signed during the programme.

The three WTCs will work towards establishing science and technology parks in India and

Colombia, in addition to undertaking various activities to promote bilateral trade.

Highlighting the importance of the Colombian economy, Acevedo said, “Colombia is the

31st largest economy in the world and the 4th in Latin America. It has a growing middle

class and is the most ideal country in Latin America to do business with as per the ‘Doing

Business 2017’ report. It has the lowest FDI barriers in the Latin American and Caribbean

region.”

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15 CITI-NEWS LETTER

GLOBAL

Rare earth mining, textiles and ICT manufacturing seen as areas Vietnam

can benefit from trade war

(Source: Business Times, August 27, 2019)

Even as the US-China trade war intensifies, analysts at Fitch Solutions Macro Research

said that the rare earth mining, textiles manufacturing and information and

communications technology (ICT) manufacturing sectors of the Vietnamese economy will

benefit from the changes brought on by the US-China trade war, namely the supply chain

shift out of China.

Rare earth minerals are a group of 17 elements that are used in a number of highly

strategic or technologically advanced products such as semiconductors, fibre-optic

telecommunications, batteries and high performance magnets .

China currently holds a near-monopoly on the global supply of rare earth metals, with

over 72 per cent of global market share.

Additionally, reports have emerged suggesting Beijing could consider imposing

restrictions or tariffs as part of the trade war with the US.

Analysts mentioned that even if China decides not to limit the export of rare earth

minerals to put pressure on the US, increased attention and concern by US policymakers

over China’s dominant position is likely to support a diversification of rare earths supplies

.US policymakers have already been seen to propose legislation aimed at encouraging the

domestic production of rare earths, while the US Department of Defense has asked for

additional federal funds to do the same.

While the analysts do not believe that new facilities will be able to ramp up production in

the next one-to-two years, they said that the increased focus on the source of rare earth

elements will likely see greater investment for those countries with sizeable reserves

deposits such Vietnam.

In the area of textiles, Vietnam stands out as the most immediate beneficiary of

multinational firms’ efforts to diversify and maintain access to US markets

In recent years , the country has attracted significant investment into its low-value added

manufacturing, with investors finding its combination of low wages , relative political

stability, rapidly developing transport and utility infrastructure and improving regulatory

environment to be particularly attractive.

Analysts believe that continued US-China tensions will likely spur further investment, not

only due to the favourable business environment, but also because they expect

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16 CITI-NEWS LETTER

manufacturers will prefer to ramp up production in locations that they already have

operations, leveraging current networks and existing knowledge. In the case of Vietnam,

it is already the second largest exporter of apparel to the US, only behind China, making

it an obvious diversification option.

Analysts have already seen this playing out to a certain extent, with firms like Brooks

Sports and Asics having announced plans to move part of their shoe manufacturing into

Vietnam in recent months . With the US having announced plans to expand tariffs on

Chinese goods to cover textiles and other final consumer products, analysts see room for

further investment.

The ICT sector has already been significantly impacted by US/China trade war and

analysts expect further shifts in supply chain dynamics in the coming quarters .

Even before the trade war, analysts had already begun to see multinational firms shifting

low-to-mid level ICT manufacturing out of China as as saturated labour market pushed

up costs , but this trend has been accelerated by trade tensions .

ICT exports and investment are likely to remain a major focus for the US government. In

part this is due to the sheer size of US ICT imports from China, though efforts to hamper

Beijing’s Made in China 2025 development agenda play a role as well.

Analysts have already seen supply chain dynamics beginning to shift, driven primarily by

original equipment manufacturers.

In Q1 2018, China accounted for around 56 per cent of total US electronics imports , but

by Q1 this year, this has fallen to around 43 per cent. Part of this likely reflects a re-routing

of products from China through Southeast Asia rather than a shift in productive capacity

and analysts expect China will remain a major player in this market.

However, over the longer term, given the increasing US government focus and risk of

restrictions, analysts believe this will spur a continued diversification and a ramping up

of new productive capacity across Southeast Asia.

So far, Vietnam appears to be a major beneficiary in low-to-mid range ICT product

manufacturing. The country is already a well-established electronics manufacturer and is

currently the second largest smartphone exporter in the world, benefitting from U$17

billion in investment from Samsung alone since 2007.

Similarly, with contract manufacturers such as Foxconn and Pegatron contemplating

shifting more production out of China and into emerging Southeast Asia, the analysts

believe that Vietnam is positioned to benefit from further investment.

Home

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17 CITI-NEWS LETTER

Women Are Fighting Back Against the ‘Fat Tax’

(Source: Janelle Okwodu, Glamour, August 27, 2019)

Shoppers are savvier than ever and increasingly demand that the ethics behind their

clothing meshes with their ideals.

Size is fashion’s ultimate four-letter word.

As the industry pushes toward inclusivity in its marketing and hiring practices, its

relationship with its customer base remains fraught. Campaigns are filled with models of

all shapes, but the majority of stores still cater to a thin clientele. At an estimated 5'3" and

size 16, the average American woman may find herself with few options when it comes to

shopping brick-and-mortar. To make matters worse, she’s in the middle of a pricing

controversy.

Although a growing number of brands are now jockeying to get a piece of the more than

$21.4 billion plus-size market, many of them have approached prospective clients with a

degree of bias. In 2018, British chain New Look was called out for the 15% price increase

it gave to garments over a size 12. Earlier this year, fans of Etsy sensation Lirika

Matoshi were surprised to find that her extended sizes came with a markup of nearly

$100. There have been stories of women undergoing dramatic body changes just to avoid

the premium that comes with plus-size wedding dresses.

Part of a pervasive tradition of charging heavier people for the same experiences—

the airline and spaindustries have also come under fire for their markups—the so-called

fat tax has been justified by claims that additional materials are required to create larger

clothing. The reality of apparel manufacturing is far more complex.

The added cost isn't so much in the product itself, but rather in the steps needed to create

it. Designers pay for textiles, patterns, and sewing—all of which can differ from garment

to garment—and the price for the final product is set based on a sample. To extend its

sizes, they have to cut new patterns, conduct fittings with a range of models, and hold

focus groups, all of which requires more money.

“Every woman’s experience should always be the same regardless of her

size.” —Heidi Zak, cofounder of ThirdLove

In the past, this additional cost was placed directly onto the consumers, with higher prices

for larger sizes. But recently creatives at the forefront of the body-positivity movement

have found inventive ways to offset that difference.

“Yes, it takes more fabric to make a larger garment versus a smaller one, which could be

why some people want to put that back onto the customer, but that doesn’t seem like the

right way to do things,” says Chromat’s Becca McCharen-Tran, adding that designers can

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18 CITI-NEWS LETTER

also make adjustments to wholesale margins based on the largest size they sell, rather

than the smallest, to offset expenses while keeping the price consistent across the board.

“If I were a designer working with leather or an expensive fabric, I would alter the margin

to reflect the most expensive version. It’s offensive to charge it back to the customer.”

In addition to paying higher prices, shoppers above a size 12 might face other unexpected

costs in the shopping process. With the majority of their options found exclusively online

and the sizing varying wildly from one retailer to the next, many have to purchase two

pieces in order to find their accurate size—and they’ll take on costs associated with returns

and exchanges.

Whether a brand chooses to view expenses related to sizing up as a hindrance or an

investment can mean the difference between the final product’s success or failure.

Shoppers are savvier than ever, and they increasingly demand that the ethics behind their

clothing meshes with their ideals. They’ll take to Twitter or Instagram to voice their

displeasure over pricing discrepancies and double standards. A misstep can result

in online outrage and a stream of bad press.

When retail chain Loft sought to expand its full range of women's wear up to a size 26, it

relied on a team of influencers, including The Curvy Con cofounder CeCe Olisa and

Megababe founder Katie Sturino, to gain a greater understanding of the market—and to

ensure that, when it released the collection, the brand did it right.

“Feedback is everything to us,” says Laura Jacobs, Loft’s chief marketing officer. “We are

constantly hearing and implementing feedback to continue improving our product and

the shopping experience.” The message that Loft heard from its ambassadors, focus

groups, and store associates was clear: Price parity made a difference.

“No one person should pay more than the other. It blows my mind that

anyone would think otherwise.” —Lauren Chan, founder of Henning

With its pricing strategy in place long before the clothing hit the shelves, Loft was able to

address the needs of its audience at launch, attracting a new set of customers without

alienating existing shoppers. “Our mission is to provide great fashion to women, period.

It was never a question for us whether we wanted to keep pricing flat across categories, so

it wasn’t something we had to back into,” says Jacobs. “We don’t want anything in any

one category to feel exclusive or siloed.”

As traditional retailers adapt, digitally native brands have emerged to fill holes in the

market and address some of these long-standing consumer frustrations. When lingerie

label ThirdLove arrived on the scene in 2013, its consistent pricing for bras of all sizes was

almost as revolutionary as the half cups it helped popularize. The deliberate choice

became part of ThirdLove’s identity, reflecting its mission beyond creating clothes.

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19 CITI-NEWS LETTER

“The decision to keep our pricing the same across all sizing was an important and

conscious decision for us because we believe every woman’s experience should always be

the same regardless of her size,” says cofounder Heidi Zak. “There is a widely quoted stat

that estimates two thirds of American women wear a size 14 and above, and it’s no secret

that most have been poorly served by the fashion industry.”

While it’s tempting to focus on commerce, the real cost of price discrepancies go beyond

our wallets.

Any policy that penalizes consumers is bound to result in frustration, undermining

already marginalized consumers. For Lauren Chan, a former Glamour editor and founder

of the contemporary label Henning, the tacked-on costs reflect a lack of foresight on the

part of brands: “It’s not an excuse, but if you’re looking at this from a balance sheet point

of view, and you’ve never been in the position of someone who wears a larger size, and

never experienced the emotions that come with that being a part of your fashion

experience, then perhaps it makes sense to charge more for material.”

Chan adds, “Since I’ve always been a plus-size shopper, I’ve never thought of that as okay.

It’s absolute common sense to average all the pricing because no one person should pay

more than the other. It blows my mind that anyone would think otherwise.”

This issue goes back to a lack of inclusion behind the scenes: With only a handful of plus-

size women involved in the decision-making process, there’s no one on hand to represent

the needs of the customer.

“There are so many examples in fashion lately where you can tell that the intention was

there to serve plus-size shoppers, but there was no plus-size person in the room,” Chan

says. “It’s not just a pricing problem. It’s an example of how these things happen, and how

they get through each benchmark, because there’s nobody in the room with an ability to

influence decisions that has been there.”

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Pakistan: Refund claims by textile exporters: Escrow account sought

(Source: Business Recorder, August 27, 2019)

Textile exporters have requested Adviser to Prime Minister on Finance and Revenue, Dr

Abdul Hafeez Shaikh to intervene for revision of sales tax refund policy for export-

oriented sectors and create a dedicated head (escrow account) for refund claims to be

monitored by a committee comprising the Federal Board of Revenue (FBR) officials, audit

firms and textile associations.

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20 CITI-NEWS LETTER

In a communication to Dr Abdul Hafeez Sheikh here on Monday, Shabbir Ahmed,

Chairman Pakistan Bedwear Exporters Association, while strongly criticising FBR's SRO

918 (I)/2019, said that a dedicated head for refund claims, ideally an escrow account,

should be created. If the collected amount goes into the consolidated fund, refund claims

become susceptible to government's ways and means position leading to delays and

denials.

The escrow account should be monitored by a committee consisting of nominees of FBR

and textile exporting associations. If necessary, the government may also include top

audit firms at the expense of the associations.

He said that the association is both surprised and dismayed at the issuance of the

notification. The FBR seems to have chosen to ignore the request of the association to

incorporate its input provided vide its letter No. PBEA/FBR/2019, dated 06/08/2019.

The input had also been shared with the DG Exports by the association on the advice of

the chairman FBR. The association had also requested the DG to share the draft

notification with it and the other concerned associations before its finalisation, as it would

have a strong bearing on the country's export efforts.

The association is afraid that the notification that has now been issued would negate the

government's export policies that promise zero-rating. It simply fails to take into account

the entire supply chain (for instance, it covers a large variety of products/processes like

cartons, poly bags, inlay cards, swing threads, dyeing printing, weaving, etc.). It will

seriously impact cash-flows and threaten several units with closure.

The notification in its present form will seriously hurt the export industry, Shabbir Ahmed

added. The Annexure H form in the notification should be utilised for post-audit purpose

and not for pre-verification of refund claims. The claim routed to FASTER module under

section 39F of the notification shall be electronically processed. The data in the refund

claim shall be scrutinised and verified by the system and the payable refund amount shall

be determined on the basis of input consumed in exports or supplied. The refund payment

order (RPO) of the amount found admissible shall be generated and the same shall be

electronically communicated direct to the State Bank of Pakistan, within seventy-two

hours of submission of claim, for onward advice to the respective banks, which shall be

made by the State Bank of Pakistan no later than seventy-two hours of electronic receipt

of an RPO, for credit into the notified account of the claimant no later than, Shabbir

Ahmed added.

Home

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21 CITI-NEWS LETTER

Egyptian cotton boosts exports, preps for BCI pilot

(Source: Home Textiles Today, August 27, 2019)

Egyptian cotton production and exports have hit a five-year high following a period of

emphasis on improving sustainability.

The season 2018/2019 saw an increase of 45% in exports, according to The Cotton Egypt

Association (CEA), the independent body responsible for the global brand.

CEA has been supporting the implementation of “The Egyptian Cotton Project,” activities

that include innovative training, education and awareness for stakeholders across the

cotton supply chain. The project is part of the CEA’s collaboration with the United Nations

Industrial Development Organisation and also includes the Cotton for Life and Better

Cotton initiatives, to advance sustainability while reducing contamination.

The cooperation with the Better Cotton Initiative has allowed the deployment of pilot

cotton plantations, supported by cotton traders, manufacturers and brands to pave the

way for a BCI start up program in Egypt envisaged to start for the 2020/2021 cotton

season.

CEA Executive Director Khaled Schuman said “Egyptian Cotton is already the finest in

the world. Our goal and ambition is to make Egyptian Cotton not only the most

sustainable cotton, but one which has a traceable and transparent supply chain with

positive impacts at every step along it – from the farmer to the brand, the retailer and the

consumer.”

In addition to sustainability, the Egyptian Cotton Project is working with farmers and

workers on the issues of health and welfare, gender equality and entrepreneurial

opportunities for youth. Awareness training sessions address topics such as child labour,

the importance of education and qualified employment to serve as a positive alternative

for youth in rural areas.

The Egyptian Cotton Project delivered technical workshops to 392 farmers on field

management, irrigation, IPM and harvesting. It also conducted approximately 50 field

days in both Damietta and Kafr El Sheikh governorates, coupling them with technical

consultation sessions and on-field support.

Cotton cultivation calendars with timeline guidance and best practices were distributed

to cotton farmers and workers, and four observational study tours have been organized at

a seed production unit in Sakha Research Station of the Cotton Research Institute, and at

a nursery producing cotton seedlings in Kafr El Sheikh governorate.

A reworked curriculum on organic cultivation has been extended nationwide by the

Ministry of Education reaching around 150,000 students. The project introduced an

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22 CITI-NEWS LETTER

entrepreneurship curriculum; and additional trainings of teachers in Agricultural schools

have been rolled-out, focussing on sustainable practices and cotton contamination

management.

“Trial areas adopting sustainable practices have seen a 30% increase in cotton yields and

a 25-30% decrease in water consumption according to the project’s data,” said Schuman.

Home

Cannacubed launches Asia Industrial Hemp Association

(Source: Fibre2Fashion, August 27, 2019)

The founders of Asia’s fastest growing hemp firm, Cannacubed, have launched the Asia

Industrial Hemp Association or AIHA with its headquarters in Hong Kong, as the first ‘in-

country’ office in Kunming. The organisation is looking to appoint additional board

members and recruit new country members to support the regions push into the booming

hemp industry.

Rising awareness about the benefits of industrial hemp, increasing legalisation to

cultivate industrial hemp in many countries throughout Asia, and the rising application

of industrial hemp in diverse industries such as textiles, pharmaceutical, food, beverage,

personal care, construction & material, furniture, and paper is driving the market for

industrial hemp in the Asia region.

The launch of AIHA follows a strong global trend around the legalisation and support for

the liberalisation of the Hemp industry. Several countries have already taken the step to

set up similar associations including the European Industrial Hemp Association (EIHA),

the National Hemp Association in the US, & the Canadian Hemp Trade Alliance. Closer

to home, India has the Indian Hemp Association, and the Hokkaido Hemp Association

launched as far back as 2013 in Japan. There are even industry specific bodies such as The

International Hemp Building Association (IHBA) which is a knowledge sharing group

with members in 25 countries, according to a press release by the company.

“AIHA has been set up as an independent, not-for-profit association to support countries

across Asia looking to legalise and industrialise Hemp as a new industry. Our mission &

goal is to work with private companies, industry bodies, government organisations,

NGO’s & institutions to educate, support, and help liberalise the hemp industry in Asia.

Some countries in the region have already set up trade associations to support the sector

such as India, Japan, and Thailand, and we hope many more countries follow suit and

join us on our quest,” AIHA president Glenn Davies said.

“Hemp will play a major role throughout several Asian countries in the coming years. The

region already has a substantial hemp textile industry, and a growing CBD market which

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23 CITI-NEWS LETTER

is poised to explode when consumers become more familiar with the product’s versatility.

Asia’s booming beauty industry is beginning to see hemp CBD-infused cosmetics enter

the market, and once hemp & CBD personal care products establish their niche, they could

become must-have items among billions of consumers across Asia,” Ronny Weisz, a co-

founder of Cannacubed and board director of AIHA said.

“We’ve been rolling out a major hemp project in China for over a year now and we’re

seeing how fast the industry is moving. Governments and private companies are looking

for support, industry data, working models and expertise as they consider regulating and

legalising hemp as a new growth sector, and we see AIHA playing a key role in helping to

educate and provide this information,” AIHA board secretary Mark Roberts said.

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