CITI-NEWS LETTER€¦ · August 2019 MSME loans: FM Nirmala Sitharaman to address delay in...
Transcript of CITI-NEWS LETTER€¦ · August 2019 MSME loans: FM Nirmala Sitharaman to address delay in...
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07th August
2019
MSME loans: FM Nirmala Sitharaman to address delay in disbursal
5th National Handloom Day celebrations on August 7
Apparel exporters want Centre to continue with support scheme
Gujarat High Court ruling gives relief to fabric manufacturers
IIP base, methodology review in the works
Maharashtra may ask for imposing import duty on raw cotton to control domestic
prices
Cotton and Yarn Futures
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Aug 2019 19950 (+220)
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2 CITI-NEWS LETTER
-------------------------------------------------------------------------------------- MSME loans: FM Nirmala Sitharaman to address delay in disbursal
Handlooms take the technology leap
5th National Handloom Day celebrations on August 7
India to continue engaging bilaterally with RCEP members for favourable
deal
Apparel exporters want Centre to continue with support scheme
Gujarat High Court ruling gives relief to fabric manufacturers
IIP base, methodology review in the works
Maharashtra may ask for imposing import duty on raw cotton to control
domestic prices
GST on discounts puts retailers in a spot
EU-Vietnam FTA: Big deal
Pratibha Syntex bags Woolworths Supplier Excellence Award
------------------------------------------------------------------------------ Vietnam: Garment, textile industry sees decline in orders
Zimbabwe to legalise growing of industrial hemp
Industrial sector contributes 19.52 percent to economic growth
African markets seek higher quality used clothing
The Next Generation Of Solar Cells Could Come From Fabric
---------------------------------------------------------- ----------
NATIONAL
---------------------
GLOBAL
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3 CITI-NEWS LETTER
NATIONAL:
MSME loans: FM Nirmala Sitharaman to address delay in disbursal
(Source: Financial Express, August 07, 2019)
The minister’s meeting was part of a series of such sessions lined up with
representatives of various sectors till August 11
Lack of credit disbursal by banks even after sanctions and long delays in settlement of
dues by the government departments and PSUs have undermined the MSMEs’ ability to
sustain their business cycles, liquidity-starved micro, small and medium enterprises
(MSMEs) told finance minister Nirmala Sitharaman on Tuesday.
The minister’s meeting with MSME representatives was part of a series of such sessions
lined up by her with important stakeholders up to August 11 to devise plans for critical
sectors amid fears that the economy might be slipping into a protracted slowdown.
The minister promised to study the issue of delay in release of dues by the government
departments and promised remedial steps to alleviate the difficulties of MSMEs.
“As against sanctioned, only 10% is being disbursed by banks under 59-minute scheme,”
said Ashok Saigal, co-chair of CII MSME Committee. Under the scheme, MSMEs
registered under the GST are eligible for loan up to `1 crore in just 59 minutes through
‘psbloansin59minutes.com’ portal. The MSMEs also complained that despite 70%
guarantee from the Credit Guarantee Fund Trust for Micro and Small Enterprises
(CGTMSE), the firms have not been able to secure loans from banks in many cases.
Another demand was to revise the the turnover/investment-related definition of
MSMEs upwards. The definitions were brought in 2006 and have since become dated
due to inflation. “Currently a firm with `5 crore investment is classified as ‘small’ while
investment over `5 crore are ‘medium’. But machine that cost `5 lakh in 2006 is not
valued at `15 lakh,” said Rajive Chawla,Integrated Association of Micro, Small and
Medium Enterprises of India (I am SME of India). Sitharaman was positive and she
would look into the issue.
The minister asked all the industry bodies to give in writing their suggestions for the
sector in 3-4 days to prepare an action plan for the MSME sector.
Other issues raised by MSMEs included a demand to exempt from capital gains tax for
the sector if gains are reinvested in business. Among others, they sought rationalisation
of penalty for late filing on MCA as it is same for large and small companies. They also
raised the issue of VAT refunds not being transferred to GST regime by states.
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MSMEs are the backbone of the Indian economy, contributing nearly 30% of the gross
domestic product and 49% of country’s exports. MSMEs are also the largest employers,
next only to agriculture. Over six crore such units provided employment to about 11
crore people (NSSO, 2016).
Home
Handlooms take the technology leap
(Source: M Soundariya Preetha, The Hindu, August 06, 2019)
New designs and concepts raise the income of weavers; they also get awards
At Kalikkavalasu, near Chennimalai in Erode district, as many as 580 looms are in
operation for eight to 10 hours a day, making fabrics that go into making bed sheets,
bags, stoles, quilts, etc.
The Kalikkavalasu Industrial Weaver Co-operative Society, which was started in 1985
with 100 handloom weavers, was initially making bed sheets. Now, with 1,400 members,
the society makes a wide range of products that are sold across the Co-optex outlets.
K.N. Subramaniam, manager of the society, says there are about 12,000 handloom
weavers in Chennimalai area. Most of them are attached to co-operative societies.
At the Kalikkavalasu society, the weavers used to make fabrics with designs. Then came
the use of jacquards. Now, the society is gearing up for use of electronic jacquards.
“Almost 90 % of the goods are sold to Co-optex for domestic and export markets. They
develop new products regularly and give us the design and product concept a year in
advance. Complicated products get better price and demand,” he says.
As the weaving society adopts new technologies, it also trains its weavers. They undergo
15 to 20 days training with stipend, Mr. Subramaniam says.
For the weavers, new designs and concepts also mean higher income. A weaver used to
earn ₹150 to ₹300 a day four years ago. Now, the earning goes up to ₹700 for a
skilled weaver.
Forty-seven-year-old R. Subramani started weaving at the age of 17. He works from
morning to evening at the Kalikkavalasu society and says that jacquard designs have led
to higher wages. With his experience in weaving, it is easy to adopt the new concepts
and designs, he says.
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N. Nagaraj, who was initially into agriculture, is weaving for the last two decades. He
was working for a private master weaver who made bed sheets.
Five years ago, he joined the society and now makes value-added products. More
youngsters will be attracted to weaving if there are training programmes, says 50-year-
old Mr. Nagaraj.
Mr. Subramaniam adds that apart from awareness among consumers, awareness among
weavers about handloom has also improved.
The societies nominate the works of the weavers for awards given by the government
every year.
The National Handloom Day is observed on August 7 every year to honour handloom
weavers and to highlight the handloom industry, says a press release from the Union
Ministry of Textiles. “It seeks to focus on the contribution of handloom to the socio
economic development of the country and increase the income of the weavers,” the
release said.
Home
5th National Handloom Day celebrations on August 7
(Source: Press Information Bureau, August 06, 2019)
The 5th National Handloom Day will be celebrated tomorrow across the country. Union
Minister of Textiles and Women and Child Development, SmritiZubinIrani, will preside
over a function at VigyanBhawan in New Delhi to mark the occasion.
Minister of Petroleum & Natural Gas, Dharmendra Pradhan, and Minister of State for
Animal Husbandry, Dairying & Fisheries and Micro, Small & Medium Enterprises,
Pratap Chandra Sarangi, will also be present on this occasion.
The main event will be held in Bhubaneswar, Odisha. Bhubaneswar has been chosen as
the venue for the main event due to its rich tradition of Handlooms. More thanfifty
percent of total weavers population of India resides in Eastern and North Eastern
Regions and most of them are women. The prime objective of holding the National
Handloom Day in Bhubaneswar is to empower women and girls.
The following activities will be undertaken all across the country
Distribution of Pehchan Cards and Yarn Passbooks
Distribution of MUDRA loan
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Distribution of lighting units and certificates for construction of work sheds.
National Handloom Day to be observed at Weavers’ Service Centres in different
States.
At 16 NIFT Campuses and Handloom Mela and exhibition, workshops, panel
discussions, special stalls for handloom products at Gandhinagar and Kolkata
NIFT campuses.
Live broadcast of discussion on Twitter from digital studio of IMG Reliance,
involving young designers and prominent personalities from the handloom
sector.
Symposium at Crafts Museum in New Delhi by Fashion Design Council of India
with participants from Ministry of Textiles, master weavers, textile designers,
fashion designers and textile experts.
Workshop through IGNOU/NIOS to impart information about educational
opportunities to weave and their wards.
The National Handloom Day is observed annually on 7th August to honour the
handloom weavers in the country and also highlight India’s handloom industry.
National Handloom Day seeks to focus on the contribution of handloom to the socio
economic development of the country and also increase the income of weavers.
The Union Government had declared 7th of August as the National Handloom Day in
July 2015 with the objective of generating awareness about the importance of the
handloom industry to the socio economic development of the country. August 7 was
chosen as the National Handloom Day to commemorate the Swadeshi Movement which
was launched on this day in 1905 in Calcutta Town Hall to protest against the partition
of Bengal by the British Government. The movement had aimed at reviving domestic
products and production processes.
The first National Handloom Day was inaugurated on 7th August 2015 by the Prime
Minister, Narendra Modi, at the centenary of Madras University in Chennai.
Home
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India to continue engaging bilaterally with RCEP members for favourable
deal
(Source: Amiti Sen, The Hindu Business Line, August 06, 2019)
RCEP Trade Ministers reiterate keenness on meeting year-end deadline for talks
India will continue to hold bilateral discussions with the 15 countries it is negotiating
the mega Regional Comprehensive Economic Partnership (RCEP) agreement with,
including China and the 10-country ASEAN, to try and ensure that the pact, if
implemented, would result in substantial market access for its goods and services.
“Indian officials had a number of intensive discussions with RCEP countries such as
China, Thailand, South Korea, New Zealand, Australia, Singapore, Indonesia, Japan and
ASEAN Economic Ministers at the sidelines of the Trade Ministers’ meet in Beijing.
“It was made clear to all partners that India cannot be part of an agreement that would
give its industry and farmers a raw deal. The discussions on what India wants from its
partners and what it can give will continue,” a government official said. The 16-member
RCEP is keen on meeting the year-end deadline for wrapping up the negotiations for the
mega trade pact, but New Delhi has said that it would go for it only if its own demands,
in goods as well as services, are met.
“The Ministers highlighted that as growth outlook remains overcast by rising
uncertainties, it is in the region’s collective interest and highest priority to conclude a
modern, comprehensive, high quality, and mutually beneficial RCEP in 2019, as
mandated by the 16 RCEP Leaders,” according to the joint communiqué issued at the
end of the two-day RCEP Ministerial meet on Saturday.
India decided to adopt an aggressive posture at the RCEP negotiations following a series
of meetings that Commerce and Industry Minister Piyush Goyal and senior officials of
the Commerce Ministry had with industry representatives numbering more than 500.
Chinese imports threat
“Almost all industrial sectors that were consulted, be it steel, engineering goods,
pharmaceuticals, textiles, marine goods or automobiles, did not want to be part of the
RCEP as they feared that competition from China could hurt them badly if tariffs were
to be eliminated or slashed.
“It became very clear then that India should become part of the RCEP only if it is getting
a lot of actual market access for its goods and services to compensate for the losses in
the domestic market,” the official said.
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In his interaction with China’s Vice-Minister of Commerce Wang Shouwen, India’s
Commerce Secretary Anup Wadhawan sought market access in both goods and services,
including larger exports of drugs, sugar, rice, dairy, soybean, IT and other services.
During the meeting with ASEAN Economic Ministers, the Commerce Secretary stressed
on the importance of services trade that supported both trade in goods and investment.
“Since services is an area where the ASEAN is reluctant to make substantial offers under
RCEP, India highlighted the importance of higher ambition in the area,” the official said.
As per the joint press statement, annexes on Telecommunication Services, Financial
Services, and Professional Services, have been completed, bringing a total number of
seven concluded chapters and three concluded annexes, and noted that some of the
remaining chapters or annexes are nearing conclusion.
“... Determined to keep the momentum towards achieving the leaders’ mandate to
conclude the RCEP negotiations by the end of the year, the Ministers called on all RPCs
to find pragmatic and solution oriented approaches to narrow divergence on the various
remaining issues,” the statement said.
Home
Apparel exporters want Centre to continue with support scheme
(Source: The Hindu Business Line, August 06, 2019)
Apparel exporters have appealed to the Union Government to continue the Merchandise
Exports from India Scheme (MEIS) for garment exports.
A. Sakthivel, vice-chairman of Apparel Export Promotion Council (AEPC), said there
were reports that the government planned to stop the scheme. The MEIS provided 4 %
support to the exporters.
The Council had written to all the Members of Parliament (MPs) from Tamil Nadu and
requested them to take up the issue with the Prime Minister and the Finance Minister.
The chairman and vice-chairman of AEPC also met 20 MPs, who were from different
parts of the country, in New Delhi on August 5 and explained to them the benefits of
MEIS for garment exports, why it should be continued, and the impact on the exports if
the scheme was withdrawn.
A press release from AEPC said the MPs had assured them that they would take up with
the government the need to continue MEIS.
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9 CITI-NEWS LETTER
Mr. Sakthivel added that apart from MEIS, he had discussed with the MPs the other
issues that were affecting apparel exporters.
Another scheme, the Rebate of State Taxes and Levies, which included the embedded
taxes, was yet to be implemented though the government had announced it before the
elections. This was also taken up with the MPs, he said.
President of Tiruppur Exporters’ Association Raja M. Shanmugham said the Union
Finance and MSME Ministers held a meeting in New Delhi on Tuesday to know from
the stakeholders the issues that affect the industry.
There was no clarity on the MEIS and the guidelines for Rebate of State and Central
Taxes and Levies was yet to be finalised. “I highlighted these issues at the meeting.
Indian apparel exporters are at a disadvantage in the international market. If the MEIS
is removed, the lifeline of the industry will be lost,” he said.
The industry was facing three major challenges - lack of infrastructure, high interest
rates, and delay in India signing Free Trade Agreements.
Till these three issues were sorted out, schemes such as MEIS should be continued.
Further, the main financial problems for the industry were because of compliance to
new banking norms. The MSMEs should be insulated from the Basel III norms, he
added.
Home
Gujarat High Court ruling gives relief to fabric manufacturers
(Source: The Hindu Business Line, August 06, 2019)
‘Input tax credit accumulated up to July 31, 2018 will not lapse’
In what could be seen as a major relief for the textile sector, the Gujarat High Court has
made it clear that input tax credit (ITC) accumulated up to July 31, 2018 will not lapse.
This will facilitate refund of the credit for that period and thus end the working capital
woes for fabric manufacturers.
The core of the issue is the inverted duty structure which results in a situation when
there is a higher duty on raw material/input and higher duty on finished product. In
such a situation, technically speaking, refund is to be provided. In case of the textile
sector, man-made fabric attracts GST (Goods & Services Tax) at the rate of 5 per cent
while inputs for that attract levy at the rate of 12 per cent.
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As power loom and man-made fabric manufacturers were facing problems, the Central
Board of Indirect Taxes (CBIC) issued a circular saying that refund will be possible from
August 2018 but accumulated ITC till July 2018 will lapse. Aggrieved by this, various
companies and association of fabric weavers (power looms) filed petitions in the Gujarat
High Court.
“The impugned Notification dated July 26, 2018 bearing No.20/2018 and Circular dated
August 24, 2018 bearing Circular No.56/30/2018-GST to the extent it provides that the
input tax credit lying unutilised in balance, after payment of tax for and up to the month
of July 2018, on the inward supplies received up to the 31st day of July 2018, shall lapse,
are hereby quashed and set aside and are hereby declared as ultra vires and beyond the
scope of section 54(3)(ii) of the CGST Act, as section 54(3)(ii) of the CGST Act does not
empower to issue such notifications and consequently, it is held that the petitioners and
members of the petitioners are entitled for the credit and it be granted to them,” a
Division Bench of the court said in its ruling.
Earlier, the Revenue Department argued that GST reduction on man made fibre yarn to
12 from 18 per cent gave significant relief to the sector and reduced the accumulation of
ITC . As there were requests for relaxing conditions related with refund of accumulated
credit, the GST Council agreed to remove the condition, however with the prospective
effect.
The Council then decided that the input tax credit lying in balance on the date of the
notification implementing the new provision will lapse. This lapse of accumulated ITC
was in the spirit of earlier rate structure which envisaged that refund of accumulated
credit was not to be allowed and accordingly circular was issued.
However, the Court did not agree with the contentions and said that no inherent power
can be inferred from the provision of GST Law empowering the Centre to provide for the
lapsing of the unutilised ITC accumulated on account of inverted rate structures. The
petitioners have a vested right to unutilised ITC accumulated on account of rate of tax
on inputs being higher than the rate of tax on the output supplies.
According to Anita Rastogi, Indirect Tax Partner with PwC, it is a well settled law as per
Supreme Court ruling in the past that credit is indefeasible and this order of High Court
of Gujarat reaffirms this position.
Home
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11 CITI-NEWS LETTER
IIP base, methodology review in the works
(Source: Kritika Suneja, Economic Times, August 06, 2019)
MoSPI sets up working group to change base to 2017-18 from 2011-12.
India will review the methodology of estimating its factory output – index of industrial
production (IIP) – and identify gaps amid concerns over the credibility of such data in
recent past.
The IIP provides a single representative
figure to measure the general level of
industrial activity in the economy on a
monthly basis. The Ministry of Statistics
and Programme Implementation (Mo-SPI)
has set up a working group to revise the
indicator’s base to 2017-18 from 2011-12
and monitor if global practices are followed
in its estimation, said an official.
“The group will revise the base and relook the methodology. Though the broad
methodology would remain the same, we will have to choose the item basket carefully to
make it coherent with the national accounts,” said the official, who did not wish to be
identified. The IIP, based on the Annual Survey of Industries (ASI), is a crucial input for
compilation of gross value added of manufacturing sector in gross domestic production
(GDP) of the country on a quarterly basis.
Its revision is timely as the government has faced flak for revising the GDP data under a
new series with 2011-12 as the base year. One such case was the sharp revision in GDP
growth for 2016-17, the year of demonetisation, to 8.2% from 7.1%. Moreover, many
economists criticised the government when an estimate of back-series GDP data for the
past decade by a committee appointed by the National Statistical Commission was at
variance with that of the Central Statistical Organisation (CSO). The CSO’s official data
sharply lowered growth estimates for the period from 2005-06 to 2013-14.
The IIP rose 3.1% in May, slower than 3.8% in the year-ago period. “We have to look at
ASI data to finalise the basket of commodities in IIP. However, the ASI 2017-18 report is
not yet out,” said the official. Individual items are included in the IIP item basket
according to their minimum contribution to national product. It is compiled and
published monthly by the CSO with a time lag of six weeks from the reference month.
The existing IIP series with base 2011-12, which came into effect from 2017, categorises
use-based sectors as primary goods, capital goods, intermediate, infrastructure/
construction goods, consumer durables and consumer non-durables. However,
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12 CITI-NEWS LETTER
independent economists have expressed apprehension at the selection of 2017-18 as the
new base year.
“The base year is supposed to be a normal year without any major disruptions. However,
2017-18 saw disruptions due to the goods and services tax and may not be ideal as the
base year. In fact, it is difficult to gauge what is a normal year 2011-12 onwards,” said
Madan Sabnavis, chief economist at CARE Ratings NSE 5.15 % . “We expect the new IIP
to bring in new products and remove the mismatch between the new and old series.
However, all variables should have a common base year,” an economist with a private
bank said on condition of anonymity. The base revision exercise is in line with the
review of another key economic indicator – the wholesale price index.
Home
Maharashtra may ask for imposing import duty on raw cotton to control
domestic prices
(Source: Partha Sarathi Biswas, Indian Express, August 07, 2019)
July prices of seed cotton have reported a dip, which trade sources attribute to sluggish
exports and increase in cheap imports.
As cheap imports and sluggish exports loom large over the domestic cotton market,
Pasha Patel, head of Maharashtra government’s committee for agriculture cost and
pricing, said an import duty on cotton could be explored to keep domestic prices steady.
Patel, speaking to The Indian Express, said adequate steps would be taken to ensure
cotton prices remain steady in the new season, set to start post-October.
Domestic prices of kapas (seed cotton ) have been well above the government declared
Minimum Support Price (MSP) of Rs 5,500 per quintal through out the 2018-19 season.
However, July prices have reported a dip, which trade sources attribute to sluggish
exports for both yarn and lint cotton.
In Maharashtra’s wholesale markets, average July price of cotton was Rs 5,850 per
quintal, compared with Rs 6,242.92 per quintal in June. The same trend has been
observed in most of the major cotton producing states in the country.
Traders claim that sluggish exports have dampened cotton sentiments in the markets.
India’s 2018-19 export is expected to be around 46 lakh bales, compared with the 69
lakh bales it exported in the 2017-18 season.
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13 CITI-NEWS LETTER
On the other hand, imports have doubled, with the country recording 31 lakh bales of
import as against the 15 lakh bales it imported in 2017-18 (one bale contains 170 kgs of
cotton).
The downturn in export is mainly due to availability of cheaper cotton in the
international market.
Patel said they are keeping a very close watch on the cotton scenario. “We are exploring
options to boost sentiments, which would keep cotton prices above MSP,” he said. One
of the measures, Patel said, was to stop the dumping of cheap import into the domestic
market and that would be done by imposing higher import duty on raw cotton.
Cotton sowing has been going on at a steady pace, with India reporting a 5 per cent year-
on-year increase in sowing. As of August 2, India has reported 115.5 lakh hectares of
cotton sowing, which last year was 109.79 lakh hectares. India on an average reports
120.93 lakh hectares of cotton sowing during kharif.
Home
GST on discounts puts retailers in a spot
(Source: Gireesh Chandra Prasad, Live Mint, August 07, 2019)
Tax on discounts that manufacturers and wholesalers extend to retailers for passing on
to consumers is becoming an area of confusion and possible litigation, say experts. The
government’s recent decision to tax such discounts has put retailers in a difficult
situation, they say.
The Central Board of Indirect Taxes and Customs (CBIC) had in June clarified that
discounts that dealers get from manufacturers and wholesalers help in boosting sales
and therefore amount to a taxable consideration flowing from the supplier to the
retailer. Such discounts are to be added to the transaction value between retailer and
consumer for payment of Goods and Services Tax (GST). Industry watchers say this is
leading to confusion at the time of sales and disputes between retailer and consumer as
the former is unable to pass this additional burden to the latter who is often willing to
pay tax only on the sale price after discount. It is hard for dealers to explain to
consumers they have to pay GST on the amount of discount they receive, they said.
The 28 June circular from CBIC was an effort to clarify the applicability of taxes on what
is called secondary or post-sale discounts. It suggested that wherever suppliers give
discounts to retailers without any obligation by the latter to render services like
advertisement campaign or special sales drive, such discounts are not to be subject to
GST. However, if discounts from the manufacturer or supplier are linked to such
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14 CITI-NEWS LETTER
obligations by the retailer, it should be taxed. The tax authority sought to distinguish
discounts in such cases as a separate transaction between the manufacturer and the
retailer from the sale of goods made by the retailer to the end consumer.
"The clarification on discounts with an obligation of passing it to the recipient, forming
a part of the value on which GST is leviable (even while the said is not commercially
payable by the recipient) opens a Pandora's box for most industry players; essentially
because companies had always viewed these discounts as price reductions and not
included them for payment of GST," said Abhishek Jain, tax partner, EY.
Tax on discounts has been an area of dispute in the pre-GST era too. The Supreme Court
had in 2012 ruled in a dispute between central excise commissioner, Mumbai, and Fiat
India (P) Ltd. that the wholesale price declared by the company, which was lower than
the cost of production, cannot be treated as a normal price for levy of excise duty as it
would result in short payment of tax. The reasoning was that discounts given to
consumers for gaining market penetration was also a taxable 'consideration'.
Home
EU-Vietnam FTA: Big deal
(Source: Subir Ghosh, Fibre2Fashion, August 06, 2019)
The European Union has inked a landmark free trade deal with Vietnam, paving the way
for tariff reductions on 99% of goods between the 28-member bloc and the Southeast
Asian country.
The negotiations between Vietnam and the European Union (EU) over a free trade
agreement (FTA) was keenly watched by many other countries and blocs, particularly
India. When the talks eventually led to a deal being signed on the last day of June, it
came somewhat as a double whammy for India-mostly from the textiles-apparel point of
view. First, Vietnam's textiles-apparel industry has decidedly gained an advantage over
India as far as exports to most European countries are concerned. And second, Vietnam
has got the FTA that it badly wanted, stealing a march over India-the former's parleys
with the EU began just as those of the latter ran into a bottleneck.
Of course, it is a big deal that will have a far-reaching effect on global supply chain.
There were two distinct agreements-a Free Trade Agreement (FTA) and an Investment
Protection Agreement (IPA) under the ambit of the Vietnam-EU Comprehensive
Partnership and Cooperation Framework Agreement (PCA) that will together see tariff
reductions on an overwhelming 99 per cent of goods traded between the EU bloc and
Vietnam.
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15 CITI-NEWS LETTER
Technically, however, it is not a done deal yet-it will now have to be presented to
Vietnam's National Assembly for ratification and the European Parliament for its
consent, besides the respective national parliaments of the EU member states in the
case of the IPA. The passage in Europe may not be a cakewalk, given the strident
opposition to the agreement by groups that are critical of Vietnam's human rights
record.
Nevertheless, the agreements, signed in Hanoi by the EU trade commissioner Cecilia
Malmstrom and Vietnam's minister for industry and trade Tran Tuan Anh, remain
intrinsic to the framework established by the EU-Vietnam Partnership and Cooperation
Framework Agreement, which would govern overall bilateral relations in areas,
including development cooperation, peace and security, trade and investment, judicial
cooperation, social affairs, good governance, rule of law and other issues of common
interest. Both sides also agreed on the importance to ensure the implementation of the
obligations under the Trade and Sustainable Development chapter of the trade
agreement.
The Immediate Backdrop
The timing of the EU-Vietnam agreement may not have been remarkable, but the
context certainly was. It came just two days after the EU and South American bloc
Mercosur (an economic and political bloc comprising Argentina, Brazil, Paraguay,
Uruguay and Venezuela) agreed to a free-trade treaty following two long-drawn decades
of intensive talks.
As a result of the agreement, EU companies will now benefit from privileged access to a
market of over 260 million consumers. EU exporters will gain from progressive tariff
cuts that over time will bring these European companies annual savings of more than €4
billion. The agreement will, in a staggered manner, remove duties on 91 per cent of
goods that EU companies currently export to Mercosur. In turn, the Mercosur countries
will remove high duties on industrial products. This includes textiles (taxed up to 35 per
cent) as well as clothing (also taxed up to 35 per cent).
The EU bilateral trade with Mercosur totals €88 billion a year for goods and €34 billion
for services, according to the EU website. Every year, the EU exports to Mercosur
countries goods worth €45 billion and imports products of nearly the same value. As far
as services are concerned, the EU exports more than twice as much as it imports: €23
billion of services supplied by EU firms to clients in Mercosur versus €11 billion in
services delivered to EU clients by firms from Mercosur countries.
The EU has been hyper-active. In Asia, the Union already has trade agreements in place
with South Korea, Japan and Singapore, and is in advanced stage of talks with
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16 CITI-NEWS LETTER
Indonesia, Malaysia, the Philippines and Thailand. The EU-Singapore agreement is
likely to come into force later this year.
Vietnam too has not been sitting idle-it has already signed about a dozen free trade
pacts, including the Comprehensive and Progressive Agreement for Trans-Pacific
Partnership (CPTPP)-an 11-country trade deal that will slash tariffs across much of the
AsiaPacific.
Both the EU trade agreements were watched with some apprehension from India,
especially its textiles and apparel industry which has been given a run for its money by a
spunky Vietnam. Negotiations over a possible FTA between India and the EU were
launched in 2007 and suspended in 2013 when the differences between the two parties
came to a head. India would now want to ink that deal at the soonest possible, and
maybe also look at the Mercosur grouping as well.
The European Front
Bilateral trade and investment negotiations between the EU and Vietnam were launched
in 2012 and concluded last year. The EU's agreements with Vietnam are the second
(following those with Singapore) to have been concluded with a Southeast Asian
country. The trade and investment agreements are governed by the PCA that entered
into force in October 2016. At the moment, Vietnam benefits immensely from the
Generalised Scheme of Preferences (GSP) of the EU.
The EU-Vietnam agreement, once it comes into force, seeks to eliminate 99 per cent of
tariffs, although some will be cut over a 10-year period and other goods, notably
agricultural products, will be limited by quotas. The agreement is also expected to open
up public procurement and services markets, such as for the postal, banking and
maritime sectors in Vietnam.
"The European Commission and the Government of the Socialist Republic of Viet Nam
welcome the signature of the Free Trade Agreement and the Investment Protection
Agreement," Malmstrom and Tuan Anh said in a joint statement in June. "Both sides
share a strong commitment to the effective implementation of both agreements and are
cooperating closely to ensure full compliance with the obligations under these
agreements." The EU said it will "support Vietnam through technical assistance in order
to define and follow up on an implementation plan to facilitate the necessary reforms
and adjustments, including in areas such as non-tariff barriers."
The EU is Vietnam's second-largest export market after the United States (US), with
main exports including apparel and footwear products. In 2018, Vietnam exported
$42.5 billion worth of goods and services to the EU, while the value of imports from the
region was $13.8 billion, according to official data. According to the Vietnamese
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17 CITI-NEWS LETTER
government, the EVFTA would boost EU exports to Vietnam by 15.28 per cent and those
from Vietnam to the EU by 20.0 per cent by next year. The trade deal is expected to
boost Vietnam's gross domestic product (GDP) by 2.18-3.25 per cent annually in
another four years and by 4.57-5.30 per cent annually between 2024-2028, the
government said.
The US-China Angle
Long before US President Donald Trump decided to go hammer and tongs at China,
many firms were already either shifting factories from China to Vietnam or switching
over to apparel suppliers there. China was slowly losing its marked advantage as a cheap
source for products with manufacturing costs going up both in pace and scale. Wages
had increased and an indeterminate number of factories were shut down over
environmental violations over the last two years.
The best move for many multinationals was to shift base, but only by a notch, to
neighbouring Southeast Asian countries like Vietnam and Cambodia. And with the
flaring up of the US-China trade war, ASEAN has been the new preferred sourcing
region. As things stand, African countries lag far behind their Southeast Asian rivals
both in quality and efficiency. To repeat for emphasis: as things stand. It could be only a
matter of time before African economies ramp up matters.
However, as things also stand, Vietnam is said to have gained the most from US-China
trade war. According to a study titled Exploring US and China trade diversion conducted
by Nomura Holdings Inc economists Rob Subbaraman, Sonal Varma and Michael Loo,
Vietnam has been a clear winner with US importers looking to divert their orders to
bypass higher tariffs.
Vietnam gained orders from trade diversion on tariffed goods equal to 7.9 per cent of
gross domestic product (GDP) in the year through the first quarter of 2019. The findings
were based on the study of world's 50 biggest economies from the first quarter of 2018
(Q1CY18) till the first quarter of CY19 (Q1CY19). The study covered US tariffs on $250
billion worth of imports from China and Chinese tariffs on $110 billion worth of imports
from the US. The Nomura researchers saw evidence of US and China import
substitution in 52 per cent of the 1,981 tariffed products.
Taiwan was a distant second with gains equivalent to 2.1 per cent of GDP. According to
the study, both economies gained far more from US tariffs on China than from Chinese
duties on the US. "American and Chinese orders for more than half of the 1,981 tariffed
products in the US-China trade dispute thus far have been re-routed, upending the
winners and losers in the global supply chain," it remarked. Incidentally, Taiwan's total
direct investment capital in Vietnam is to the tune of $31 billion, focusing mainly on
production and processing, and also contributing to the country's exports, particularly
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18 CITI-NEWS LETTER
in the textiles-apparel and footwear sectors. The Vietnam Textile and Apparel
Association (VITAS) wants to soon set up an information exchange channel with
Taiwanese textiles-apparel firms in Vietnam in order to connect sources of materials.
Besides the two, Chile, Malaysia, Argentina, Hong Kong, Mexico, Korea, Singapore and
Brazil are the other countries / economies among the top 10 that, according to the
researchers, will benefit the most. Canada, Thailand, South Africa, Saudi Arabia,
Portugal, Australia, France, India, Egypt and Colombia are the next ten. For India, the
benefit was pegged at 0.2 per cent of 2019 GDP.
There have been other appraisals that have come up with similar indicators. According
to a survey conducted by the Vietnam Chamber of Commerce and Industry and a US
industry association, out of 566 firms surveyed, 31 per cent respondents said they had
expanded output, and another 31 per cent anticipated rising sales in the years ahead.
The survey drew responses from 200 local firms, 81 from South Korea, 66 from Japan,
35 from Europe, 22 from China and 14 from the United States as well as from other
countries and regions. By industry, 26 per cent were textile firms.
Meanwhile, US Census Bureau statistics in early June showed that even though US
tariffs were driving some manufacturing out of China, much of it still remained outside
of the US. US imports from Vietnam were up 38 per cent during the first four months of
2019, compared to last year. Imports also increased by 22 per cent from Taiwan, 17 per
cent from South Korea, and 13 per cent from Bangladesh. The numbers vindicate the
Nomura findings.
Domestic Issues
There is also that proverbial "other side" of the story. Media reports, shortly after the
EU-Vietnam agreement, pointed to the possible increase in labour costs in the coming
days. "For many of these companies-who supply to some of the biggest brands in the
world, including Nike, Adidas, Uniqlo and H&M- Vietnam is their biggest
manufacturing base. But as Apple, Dell, Google and Amazon suppliers seek new
production locations to avoid US tariffs on China, competition for land and local talent
is expected to heat up," a news report indicated.
It went on to lay matters bare, "The minimum wage in Vietnam has risen over the last 10
years from 1 million Vietnamese dong ($43) a month to 4.18 million dong per month in
2019, according to the government, although this is still lower than China. The
Vietnamese government also requires all manufacturers to raise wages by more than 10
per cent each year. Most foreign companies already offer much higher than the base pay,
while the total compensation package should also include insurance as well as other
employee benefits and bonuses."
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19 CITI-NEWS LETTER
A Fitch Group report earlier in May had asserted that Vietnam's low labour cost allure
for foreign investors has been on a decline, in spite of reaping benefits from the US-
China stand-off. It noticed that "Vietnam was among three countries with the largest
minimum wage growth in East Asia, with an average year-on-year growth rate of 8.8 per
cent between 2015 and 2019. Ahead of Vietnam were Laos and China, where the
minimum wages rose 14.6 and 9.8 percent each year respectively."
Similar forebodings came from a World Bank report in December 2018. It found that
Vietnam's labour costs, which it defines as the cost of all payments to all workers in a
firm divided equally, was the highest among comparator countries in Southeast Asia. It
said wage costs of about $2,739 per worker for the median Vietnamese firm was about
twice as high as in Laos, Myanmar and Malaysia, and about 30- 45 per cent higher than
in Cambodia, Thailand and the Philippines.
Home
Pratibha Syntex bags Woolworths Supplier Excellence Award
(Source: Fibre2Fashion, August 07, 2019)
Woolworths has feted Pratibha Syntex Ltd (PSL) with 'Supplier Excellence Award' for
'Supplier of the Year Sustainability 2019' during their annual FBH Supplier Conference
held recently. Around top 40 Woolworth suppliers and stakeholders had participated in
the event where they were recognised for their performance and contribution to
Woolworth's business.
Ratika Kotwale, marketing manager of PSL, had received the award on behalf of the
company. During the programme, Woolworths also outlined to partners on its
performance and key strategic shifts.
"Sustainability is at the core of PSL's business strategy. All our endeavours are towards
maximising social impact and minimising environmental impact. PSL has introduced
Women Empowered Initiative, wherein women from far flung areas are brought to the
campus and imparted textile manufacturing skills like spinning and sewing. After
training they are inducted into the company's manufacturing processes. The trainees are
provided free lodging and boarding facility and to give them a home away from home,
PSL organises festival celebrations, sports events, health sessions, health check-up
camps etc. Under Vasudha Swaraj initiative of PSL, we are working on holistic
development of farming communities. The farmers, associated with PSL, are imparted
organic cultivation training and techniques to develop quality organic seeds and
manure," said Atul Mittal, executive director of PSL in a company press release.
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20 CITI-NEWS LETTER
Mittal also added that PSL played pivotal role in developing C2C Gold certification
range. Besides, it has introduced various sustainable blends in yarn, fabric and garment
production.
Committed to reducing the environmental impact, PSL has been recycling 100 per cent
of water through its state-of-the-art Effluent Treatment Plant (ETP) and four stage RO
(capacity of 2MLD), thus recovering 97 per cent of water, which is infused back into the
manufacturing processes. Remaining 3 per cent of water gets evaporated by three stage
multi-stage evaporators. In the process of recycling of water, PSL has reduced its fresh-
water consumption from 1400 kilolitres per day in 2010-11 to 500 kilolitres per day as
on date, confirmed Amrit Pal Singh Chhabra, engineering head of PSL. Besides, water
and energy efficient technologies are incorporated in processes to conserve environment
for coming generations.
Home
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GLOBAL
Vietnam: Garment, textile industry sees decline in orders
(Source: Saigon Online, August 06, 2019)
With plentiful orders right at the beginning of this year, garment and textile industry set
export target of US$40 billion for this year. However, recently, orders have suddenly
dropped drastically, concerning garment and textile enterprises.
A drop in the number of orders spread from small enterprises to large-scale ones.
Mr. Nguyen Van Nam, director of Thanh Binh Garment Company, said that his
company has three production lines of spandex products with more than 100 workers.
Lately, his partner – a local company - unexpectedly cut orders, urging him to seek for
new sources with low prices or even without profits to get job for his workers.
Other large garment enterprises, including May 10, Viet Tien and Nha Be also
experienced the same situation. According to Mr. Truong Van Cam, general secretary of
the Vietnam Textile and Apparel Association (Vitas), scarcity of orders is quite popular
so export turnover will not be as optimistic as it was expected at the beginning of this
year. The number of orders of several garment and textile enterprises merely accounted
for 70 percent of that in the same period last year. This makes it impossible for garment
and textile industry to achieve export target of this year.
Representative of Vitas said that the main reason of the decline in orders is the ongoing
trade war, showing most clearly via a sharp drop in export volume of fiber of Vietnam.
Previously, Vietnam produced an average 2.2 million tons of fiber annually, of which 1.5
million tons was for export, accounting for 68 percent of total production. However,
since the end of last year, export of fiber has seen uncertainties. This year, fiber
consumption has encountered difficulties. In the first six months of this year, fiber
export has merely grown 1.1 percent.
Moreover, some countries devaluated their currencies so as to create advantages for
export whereas the Vietnamese dong remained stable, causing export products of
Vietnam to have higher cost prices, putting export of garment and textile industry at a
disadvantage. The industry expected that recently-signed free trade agreements, such as
the EU-Vietnam Free Trade Agreement, will strongly promote export.
Nevertheless, up to now, although free trade agreements were signed, they are merely
potential markets and have not showed actual effectiveness, leading to the situation that
export products are still imposed import tariffs. This might be the reason that importers
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22 CITI-NEWS LETTER
shifted orders to other countries, causing a shortage of orders for Vietnamese garment
and textile firms.
In addition, since the beginning of this year, both firms and experts in garment an
textile industry expected that the trade war will help to increase orders for Vietnam.
However, in reality, the difficult situation of global economy has caused purchasing
power to decline while a shift of orders has not been clear so far.
According to Mr. Pham Xuan Hong, chairman of the Ho Chi Minh City Textile and
Garment - Embroidery Association, a shortage of orders has happened but only at some
enterprises, especially in the northern region, instead of the whole industry. In Ho Chi
Minh City, members of the association still have received orders as normal.
‘Although a decline of orders occurred at some enterprises, overall growth rate of the
industry was still higher than the same period last year. Export turnover of the garment
and textile industry still might reach $40 billion as although Vietnamese firms are
unable to increase export, FDI enterprises are capable of increasing export and making
up for the whole industry,’ Mr. Hong said optimistically.
Vitas suggested that firms should put more efforts in order to achieve export target of
this year. Especially, in the last half of this year, the industry must gain a growth rate
from 11 percent upwards in order for export turnover of this year to reach the $40-
billion mark. Of which, firms should try their best to look for orders and maintain
production from now to the end of this year. As for large enterprises which are able to
sign big contracts, they should share their orders with small enterprises. Domestic
enterprises collaborate with customers to establish production chain, meeting rules of
origin in accordance with commitments of free trade agreements.
In long term, in order to stabilize orders, domestic enterprises must comply with
requirements of brands for sustainable development, hereby they will be recognized by
brands for transparency and will attract orders in the future. Besides, enterprises in the
industry need to improve their competitiveness as well as apply solutions, such as
reducing input costs, standardizing production procedure and management procedure
in accordance with their actual situation.
Only by managing production and human in the spirit of the fourth industrial
revolution, aiming to turn regular factories into smart factories and not wasting any
resource, enterprises are able to survive in the current inconsistent market, said Mr. Cao
Huu Hieu, director of the Vietnam National Textile and Garment Group.
According to Vitas, in the first half of this year, garment and textile exports reached
$17.97 billion, up 8.61 percent over the same period last year. Of which, ready-made
garments touched $14.02 billion, up 8.71 percent; fabric hit $1.02 billion, up 29.9
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23 CITI-NEWS LETTER
percent; fiber reached $2.01 billion, up 1.1 percent; and geotextile fabric rose 16.9
percent.
The US remained the largest export market of the industry with turnover of $7.22
billion, up 12.84 percent over the same period last year, accounting for 46.9 percent.
Exports to countries in the Comprehensive and Progressive Agreement for Trans-Pacific
Partnership hit $2.57 billion, up 11.13 percent, accounting for 16.71 percent. Exports to
the EU reached $2.05 billion, up 10.46 percent, accounting for 13.36 percent.
Home
Zimbabwe to legalise growing of industrial hemp
(Source: Reuters, August 06, 2019)
Zimbabwe will change its laws to allow farmers to grow industrial hemp for export,
cabinet ministers said on Tuesday, adding that the government saw the plant as a future
substitute for tobacco, the country's biggest export earning crop.
Industrial hemp is a strain of a cannabis species that is grown specifically for industrial
uses of its derived products. Its fibre is used in textiles and paper, and it also produces
edible seeds.
The southern African nation's laws only allow cultivation of cannabis for medical and
scientific uses.
Authorities said last year in April that Zimbabweans could apply for licences to grow
cannabis for medical and research purposes, but the process has been slow as
authorities try to put in place laws to ensure cannabis farms are secure.
"But with hemp, it's not toxic as cannabis," acting industry and commerce minister July
Moyo told a post-cabinet media conference.
"The minister of justice has been directed to say 'go and make amendments' to the
criminal code in our system so that people who will grow hemp don't have to be
criminalised."
Information Minister Monica Mutsvangwa told the same meeting that "industrial hemp
will widen the country's industrial and export base."
Home
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24 CITI-NEWS LETTER
Industrial sector contributes 19.52 percent to economic growth
(Source: Antara News, August 06, 2019)
The industrial sector contributed the most at 19.52 percent to the national economic
growth of 5.05 percent in the second quarter of 2019.
"Our manufacturing industry is growing positively. The spirit and trust of business
agents to invest and expand their businesses is also high," Industry Minister, Airlangga
Hartarto, said in Jakarta on Tuesday.
According to the Central Statistics Agency (BPS), the manufacturing industry was the
largest contributor to the national economic growth in the May-June 2019 quarter,
contributing 0.74 percent to the growth.
In the meantime, the agricultural sector contributed 0.71 percent to the economic
growth, the trade sector 0.61 percent and the construction sector 0.55 percent.
Three sectors that supported the non-oil/non-gas manufacturing industry in the second
quarter of 2019 were the textile and garment industry which expanded 20.71 percent
and the paper and paper product, printing and recording media reproduction industry
which grew 12.49 percent.
The textile and garment industry grew significantly, driven by the increasing production
in several production centers.
The food and beverage industry grew 7.99 percent, fueled by the rising domestic
demand and exports.
The performance of the manufacturing sectors exceeded the economic growth in the
same quarter. Overall, the non-oil/non-gas manufacturing industry in the second
quarter of 2019 grew 3.98 percent year-on-year (yoy).
The minister said the textile and textile product industry has increasingly become
competitive in the global market because it has a high competitive edge.
The industrial structure of the textile and textile product industry has been integrated
from upstream to downstream industries and its products are well known in the
international market, he said. The Indonesian economy expanded 5.05 percent in the
second quarter of 2019, indicating a downward trend owing to the continued export
contraction and slow investment growth, the BPS stated.
The figure decreased from 5.27 percent during the same period last year and from 5.07
percent in the first quarter of 2019.
Home
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25 CITI-NEWS LETTER
African markets seek higher quality used clothing
(Source: Recycling International, August 06, 2019)
In recent months, we have seen a slight easing of values of original unsorted
used clothing, although some might say that these have not really changed
at all.
Whilst demand in Africa generally is remaining firm, delays in payments are an ever-
present issue as are the seemingly ever-decreasing value of African currencies against
major currencies such as the Euro or US Dollar. However, with Sterling at one of its
lowest-ever values against both the Euro and the dollar, British exporters have been less
exposed to this particular issue. Even so, the low value of the Pound is increasing
pressures on operating costs within the UK.
A number of exporters are also reporting that African customers are continuing to
specify higher-value clothing for their orders. A consequence is that the volume of
clothing going to Pakistan, where they accept a wider range of clothing, is increasing.
With the fast fashion phenomenon still looking as though it will operate at full pelt for
many years to come, we are going to have to get used to these continued and increasing
pressures on quality. A recent report by the UK children’s charity Barnardo’s suggest
that the British public will spend £2.7 billion (EUR 3 billion) this summer on outfits that
they will only wear once.
Home
The Next Generation Of Solar Cells Could Come From Fabric
(Source: Utilities, August 06, 2019)
New textile-based solar cells developed by Fraunhofer researchers, semitrailers could
soon be producing the electricity needed to power cooling systems or other onboard
equipment
New textile-based solar cells developed by Fraunhofer researchers, semitrailers could
soon be producing the electricity needed to power cooling systems or other onboard
equipment. In short, textile-based solar cells could soon be adding a whole new
dimension to photovoltaics, complementing the use of conventional silicon-based solar
cells, reported Power Engineering International.
In the future, we may well see other surfaces being exploited for photovoltaic
generation. Truck tarps, for example, could be used to produce the electricity consumed
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26 CITI-NEWS LETTER
by the driver when underway or parked up for the night, or to power electronic systems
used to locate trailers in shipping terminals.
Similarly, conventional building facades could be covered with photovoltaic textiles in
place of concrete render. Or the blinds used to provide shade in buildings with glass
facades could be used to create hundreds of square meters of additional surface for
producing power.
At the heart of such visions are pliable, textile-based solar cells developed at the
Fraunhofer Institute for Ceramic Technologies and Systems IKTS, in collaboration with
the Fraunhofer Institute for Electronic Nano Systems ENA and Sächsisches
Textilforschungsinstitut e.V.
“There are a number of processes that enable solar cells to be incorporated in coatings
applied to textiles,” explains Dr. Lars Rebenklau, group manager for system integration
and electronic packaging at Fraunhofer IKTS.
In other words, the substrate for the solar cells is a woven fabric rather than the glass or
silicon conventionally used. “That might sound easy, but the machines in the textile
industry are designed to handle huge rolls of fabric – five or six meters wide and up to
1000 meters in length,” explains Dr. Jonas Sundqvist, group manager for thin-film
technology at Fraunhofer IKTS.
“And during the coating process, the textiles have to withstand temperatures of around
200 °Celsius. Other factors play a key role too: the fabric must meet fire regulations,
have a high tensile strength and be cheap to produce. “The consortium therefore opted
for a glass-fiber fabric, which fulfills all of these specifications,” Rebenklau says.
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