CITI-NEWS LETTER · Bangladesh have also slowed as the EU is one of its major export destinations,...
Transcript of CITI-NEWS LETTER · Bangladesh have also slowed as the EU is one of its major export destinations,...
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22nd
May
2019
UN lowers India’s FY20 GDP growth forecast
RCEP deal may hurt India's export competitiveness:
TPCI
Monsanto abused dominant position in India: CCI
probe
Indian and VN enhance co-operation in silk sector
Cotton and Yarn Futures
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MCX (Change from previous day)
May 2019 21210 (-100)
Cotton 14480 (-45) June 2019 21480 (-70)
Yarn 22385 (-360) July 2019 21630 (-100)
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2 CITI-NEWS LETTER
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UN lowers India’s FY20 GDP growth forecast
RCEP deal may hurt India's export
competitiveness: TPCI
Monsanto abused dominant position in India: CCI
probe
Japan, India, Sri Lanka to sign MoU for container
terminal at Colombo Port : Reports
From Jewellery To Handicraft, India’s Labour-
Intensive Exports Are Struggling
New Indian government faces crucial foreign policy
decisions, say US experts
Reliance Retail Set to Disrupt Amazon, Walmart-
Flipkart: Forrester
US opens new frontier in trade war with India
----------------------------------------------------------------------------------
Việt Nam-Russia economic, trade relations thrive
Indian and VN enhance co-operation in silk sector
US CPSC considering changes to flammability
standards
BGMEA chief to worker leaders: Don’t complain to
foreigners
CPEC and industry relocation
--------------------------------------------------------------------------------
NATIONAL
---------------------
GLOBAL
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3 CITI-NEWS LETTER
NATIONAL:
UN lowers India’s FY20 GDP growth forecast
(Source: The Hindu, May 21, 2019)
Says it will be 7.1% instead of 7.5%
The United Nations (UN) has lowered its forecast for India’s GDP growth in 2019-20 to
7.1% from its estimate in January of 7.5%, citing an overall slowdown in global growth.
The UN World Economic Situation and Prospects as of mid-2019 report said that the
global economy is experiencing a broad-based growth slowdown led by slowing
industrial production coupled with the weakening of international trade activity due in
large part to the unresolved trade disputes between the U.S. and China.
“Across both developed and developing countries, growth projections for 2019 have
been downgraded,” the report said. “Alongside a slowdown in international trade,
business sentiments have deteriorated, casting a cloud on investment prospects. “The
Indian economy, which generates two-thirds of the regional output, expanded by 7.2%
in 2018,” the report added. “Strong domestic consumption and investment will continue
to support growth, which is projected at 7% in 2019 and 7.1% in 2020.”
While the slowdown in European Union has meant exports from nations such as
Bangladesh have also slowed as the EU is one of its major export destinations, India is
on a stronger footing because of the nature of its export destinations.
“India’s exports remain more robust, as around half of exports are destined for faster-
growing Asian markets,” the report said.
Overall, the UN lowered its growth forecast for South Asia marginally to 5.8% in 2020
from the 5.9% estimated for the year in January.
Home
RCEP deal may hurt India's export competitiveness: TPCI
(Source: Economic Times, May 21, 2019)
The council's Chairman Mohit Singla said India needs to move with optimism and
caution on this mega trade agreement.
The proposed Regional Comprehensive Economic Partnership (RCEP) agreement may
hurt India's export competitiveness as the trade balance is already skewed, TPCI said
Tuesday
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4 CITI-NEWS LETTER
Trade Promotion Council of India (TPCI) said that the proposed RCEP, which is a mega
free trade agreement, could lead to flooding of goods in the Indian market from the
member countries; and due to this, Indian negotiators need to move with caution on
this. The RCEP bloc comprises 10 Association of South East Asian Nations (Asean)
group members (Brunei, Cambodia, Indonesia, Malaysia, Myanmar, Singapore,
Thailand, the Philippines, Laos and Vietnam) and their six FTA partners - India, China,
Japan, South Korea, Australia and New Zealand.
TPCI said in a statement that it is "apprehensive that the RCEP deal is expected to hurt
India's export competitiveness as the trade balance is already skewed and there will be
flood of goods imports in the Indian market, with relatively little gains on the export
front"
The council's Chairman Mohit Singla said India needs to move with optimism and
caution on this mega trade agreement.
"For India, issues of tariff rate (import duty) are as important as other areas under
negotiations, mainly because India does not have trade agreements into effect with all
countries involved in RCEP," he said.
For instance, he said India does not have a trade agreement with China, and the
negotiations with Australia and New Zealand have not come into effect.
He added that RCEP could have a "negative impact" on sectors like steel, pharma,
ecommerce, and food processing.
India is already facing challenges from Singapore, Australia and New Zealand in
agriculture and dairy sector, Singla said.
Further he said that on the services front, India should strongly negotiate its proposals
such as greater mobility for professionals through measures like visa fee waivers.
Citing a report, he said according to the World Integrated Trade Solution (WITS)
Simulator, India's imports may increase by USD 29 billion annually during the post-
RCEP period, implying a revenue loss by as much as 1.3 per cent of GDP.
India has registered trade deficit in 2018-19 with as many as 11 RCEP member countries
- including China, South Korea and Australia - out of the grouping of 16 nations that are
negotiating the mega trade pact since November 2012.
RCEP negotiations, which started in Cambodian capital Phnom Penh, aims to cover
goods, services, investments, economic and technical cooperation, competition and
intellectual property rights.
Pressure is mounting on India for early conclusion of the proposed trade pact.
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Member countries are looking to conclude the talks by end of this year, but many issues,
including the number of products over which duties will be eliminated, are yet to be
finalized.
Domestic steel and other metal industries want these sectors to be kept out of the deal.
India already has a free trade pact with Asean, Japan and South Korea. It is also
negotiating a similar agreement with Australia and New Zealand, but has no such plans
for China.
Home
Monsanto abused dominant position in India: CCI probe
(Source: Madhvi Sally, Economic Times, May 22, 2019)
The investigation arm of the competition watchdog has found Mahyco Monsanto NSE -
0.69 % Biotech Ltd (MMBL) has abused its dominant position in the market for Bt
Cotton technology by charging unfair licence fee and entering into pricing agreements
directly aimed at overcharging farmers who use Bt Cotton seeds.
MMBL is an equal joint venture of Maharashtra-based seed company Mahyco and
Monsanto Holding Pvt Ltd which has been acquired by German drugmaker Bayer. It
sells genetically modified seeds to many Indian companies and charges a licensing fee
called ‘trait fee’, or technology fee.
The Competition Commission of India (CCI) has asked the company and the
complainants, including government of India, Telangana government, All India Kisan
Sabha and Nuziveedu, to file their replies. The commission will consider the report of
the investigation arm as well as the response of various parties before taking a view on
the matter.
Complaint Filed in 2015
In 2015, the agriculture ministry and Nuziveedu group filed a complaint with the CCI
against Monsanto Group alleging abuse of its dominant position in the Bt Cotton
technology market, after which the investigation was started. Challenging the role of
CCI, Monsanto had filed cases in the Delhi High Court.
“It has been shown that trait fee was linked with the maximum retail price of seed
packets by MMBL just to extract surplus as much as possible from the end consumer of
Bt Cotton.
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6 CITI-NEWS LETTER
seeds i.e. farmers,” said the report by the director general (DG) of CCI, which has been
reviewed by ET.
CCI and Monsanto India did not respond to emailed queries at the time of going to
press.
The report also says there are multiple instances where MMBL abused its dominant
position in this market, most notably by charging higher trait fees from seed producers
in Haryana, Punjab and Rajasthan compared with others as there was no price
regulation in these states.
“Charging different prices in different geographic locations in the light of local
conditions especially when such variation is not related to costs can distort competition
and is in the nature of third degree price discrimination exercised by a monopolist.
There is no evidence of welfare enhancement of consumers on account of the price
discrimination,” it said. Further, MMBL also charged a higher trait fee in states such as
Maharashtra and Andhra Pradesh where the government had fixed trait fees “on the
pretext of pendency of litigation”.
The investigation also found that the trait fees charged by MMBL were not based on
high costs incurred by MMBL as it is “merely a licensing entity with very limited fixed
costs”. It noted that MMBL also does not undertake any research and development
activity which could push up its costs.
MMBL abused its dominant position to prevent the entry of competition by mandating
that producers using its technology and provide notice to MMBL before entering into
agreements with any provider of competing technologies, according to the report.
Further, the report notes that Monsanto sought to deliberately exclude certain seed
companies which fulfilled all requirements prescribed by Monsanto from time to time
and expressed willingness to meet further requirements.
DG CCI also found that MMBL’s requirement that sub licensees dispose of all inventory
within two years of the termination of their licensing agreement was in contravention to
the Competition Act. Further, the report states that this clause was not applied
uniformly which “put many seed companies in a disadvantageous situation as compared
to the competitors”.
The reports also said restriction imposed by MMBL that seed companies only use
proprietary germplasm for production has affected the development of innovation and
increased cost of seeds for farmers.
“MMBL, which holds patents for Bt Cotton, insisted that partner organisations use
proprietary hybrids and not public (government) released varieties. By doing so, the
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company tried to hold control not only on their technology but also the plants so that
farmers cannot reuse them. This made farmers and the local companies perpetually
dependent on them,” said GV Ramanjaneyulu, executive director, Centre for Sustainable
Agriculture.
Home
Japan, India, Sri Lanka to sign MoU for container terminal at Colombo Port
: Reports
(Source: The Hindu Businessline, May 21, 2019)
This is part of China’s Belt and Road initiative, an ambitious plan announced in 2013 by
President Xi Jinping
The governments of Japan, India and Sri Lanka have agreed to develop a container
terminal at the Port of Colombo, which has attracted major investment from China
under its Belt and Road initiative.
According to media reports, the three nations will sign a memorandum of
understanding (MoU) in the coming months for the east container terminal. This is
located at the newly expanded south part of the Port of Colombo. The MoU will enable
the concerned parties to develop a facility to allow large container ships to enter.
Japan’s foreign ministry was not immediately available for comment. Japan has also
pushed its plans to be a player in the region under its Free and Open Indo-Pacific
Strategy.
Sri Lanka has been one of the countries drawn to China’s Belt and Road Initiative, an
ambitious plan announced in 2013 by President Xi Jinping to build an estimated $1
trillion of infrastructure to support increased trade and economic ties and further
Chinas interests around the globe.
One project in the country includes Port City Colombo being built by China
Communications Construction Co, or CCCC. The plan envisions a financial district --
pitched as a new hub between Singapore and Dubai -- with a marina, a hospital,
shopping malls, and 21,000 apartments and homes.
State-owned CCCC, one of the world’s largest companies with annual revenue greater
than Procter & Gamble Co or FedEx Corp, says its portfolio of 700 projects in more than
100 countries outside China has a value of more than $100 billion. It is also one of the
most vexed. CCCC and its subsidiaries have left a trail of controversy in many of the
countries where they operate, with many of its projects criticized as debt traps.
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The nine-year-old Hambantota port in southern Sri Lanka -- with almost no container
traffic and trampled fences that elephants traverse with ease -- has become a prime
example of what can go wrong for countries involved in Belt and Road. Sri Lanka
borrowed heavily to build the port, couldnt repay the loans, and then gave China a 99-
year lease for debt relief.
Home
From Jewellery To Handicraft, India’s Labour-Intensive Exports Are
Struggling
(Source: Pallavi Nahata, Bloomberg Quint, May 21, 2019)
India’s exports of labour-intensive items, from textiles and handicraft to leather and
gems and jewellery, continue to be under pressure, delivering a double-blow to the
economy.
A drop in outbound shipments from these sectors not only impacts the country’s export
earnings but also jobs provided by small and medium scale units in these industries.
Labour-intensive exports contracted for the third straight year in FY19 in dollar terms,
according to data from the Ministry of Commerce compiled by BloombergQuint. For the
analysis, gems and jewellery, textiles, handloom products, leather, handicraft and
carpets were classified as labour-intensive industries.
In FY19, exports from these six sectors fell to $75.8 billion compared to $77.1 billion in
the previous financial year and $78.5 billion in FY17. In comparison, total merchandise
exports rose to $331 billion in FY19 from $304.2 billion in FY18 and $274.5 billion in
FY17.
As a result, the share of exports from labour-intensive industries fell to 22.9 percent in
FY19 from 28.6 percent in FY17.
Each individual segment is under pressure for different reasons. For instance, gems and
jewellery, which is the largest segment among labour-intensive exports, has struggled
with financing options. This has reduced their ability to import gem stones for use in
export products. Gems and jewellery exports have fallen from $43.2 billion in FY17 to
$41.5 billion in FY18 and $40 billion in FY19.
Even as costs continue to rise, stagnating exports have brought down profitability, said
Colin Shah, vice chairman at the Gem and Jewellery Export Promotion Council.
However, the depreciating rupee helped cushion exporters last year, he added.
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9 CITI-NEWS LETTER
Ready-made garments, which constitute the second-largest subset of labour-intensive
exports, has seen outbound shipments decline from $17.4 billion in FY17 to $16.7 billion
in FY18 and $16.1 billion in FY19. Countries like Bangladesh and Vietnam have gained
share in the textiles and garments segment, putting Indian units at a disadvantage.
Both segments together account for three-fourths of all labour-intensive exports.
Among the other segments, exports of leather goods, handicraft and carpets remained
flat or saw marginal declines. Handloom was the only segment which saw an increase in
exports over the three-year period.
The weakness persisted in the first month of the new financial year. Exports from
labour-intensive industries fell to $5.7 billion in April 2019 from $6.2 billion in the same
month the previous year and $7.2 billion in April 2017. Trade data for April 2019 isn’t
encouraging as almost all the labour-intensive sectors and various other segments of
exports dominated by small and medium enterprises are in negative territory, said
Ganesh Kumar Gupta, president of the Federation of Indian Export Organisation.
The Structural Challenges
Exports in some of these segments suffer from structural challenges such as the
relatively higher cost of labour and lack of economies of scale.
“India’s effective cost of labour remains inordinately high both because of strict labour
laws (on the demand side) and educational/health/skill constraints (on the supply
side),” said Sajjid Chinoy, chief India economist at JPMorgan, in a note dated May 3.
This meant that India’s growth has been more capital-intensive than labour-intensive.
The trend has been reflected in the export sector, where the share of labour-intensive
exports has dramatically declined over the last two decades, Chinoy said.
Back in 2000, two-thirds of India’s export basket comprised labour-intensive exports
(agricultural products, textiles, gems and jewellery, and leather). Today 50 percent
comprise capital-intensive auto parts, pharmaceuticals, and capital goods.
The NITI Aayog, in its ‘Three Year Action Agenda’ published in August 2017 had
highlighted the need to push up labour-intensive exports. It had blamed India’s loss of
market share on the lack of economies of scale in these sectors.
“Recognising this critical role of exports in the creation of well paying jobs, India needs
a focused strategy for creating an environment in which export competitive firms can
emerge, especially in labour intensive sectors,” the report said.
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10 CITI-NEWS LETTER
Such a plan, however, is yet to emerge.
So far, according to Shah from GJEPC and Chandrima Chatterjee, director at the
Apparel Export Promotion Council, strong domestic demand has offset the impact of
lower exports in the gems and jewellery sector and ready made garments.
However, any slowdown in the domestic market could hurt the sector further and add to
India’s problem of inadequate job creation.
Home
New Indian government faces crucial foreign policy decisions, say US
experts
(Source: PTI Washington, May 21, 2019)
Eminent Indian experts in the US believe that the next Indian government to be formed
after the declaration of the election results on May 23 faces crucial foreign policy
decisions.“No matter who forms the next government, India faces crucial foreign policy
decisions particularly in the economic realm,” Alyssa Ayres of the Council on Foreign
Relations told PTI.
Author of the book “Our time has come: How India is making its place in the world”,
Ayres, who served in the previous Obama Administration, said although the US-India
relationship has made solid strides across governments in defence and security, there
are increased tensions on the trade and economic front.
“I would also expect to see increased attention in the United States (particularly among
members of Congress) to issues of religious freedom in India, especially given the tenor
of the elections these past few weeks,” Ayres said.
US-India relationship
Associate professor of practice and fellow at Johns Hopkins School of Advanced
International Studies Joshua White asserted that though there are many things the new
government can and should do to move beyond its election-induced foreign policy
“lethargy” of the previous year, economic reforms are arguably the most vital.
A former White House and Pentagon official under the previous Obama Administration,
White believes that with the partial exception of Vice-President Mike Pence, the new
Indian government will find itself lacking — through no fault of its own — effective high-
profile champions in the Trump administration, and will be forced to engage an
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11 CITI-NEWS LETTER
American policy-making apparatus dominated by trade hawks, who see the relationship
in narrow transactional terms.
“While policy experts in Washington have largely assumed that Prime Minister Modi’s
cautious foreign policy turn has been a product of his election imperatives, there is a
growing anxiety that President Trump may have, in more fundamental ways, prompted
New Delhi to question the assumptions that undergird deeper US-India alignment,”
White told PTI.
Whoever comes to power will face a multitude of foreign policy challenges that are only
growing in number and complexity, noted Anish Goel, a senior fellow at the New
America think-tank. “First and foremost is the relationship with the United States.
Given President Trump’s relentless focus on trade issues, the new government will need
to figure out how to put the trade relationship on a positive footing, and at the very least
prevent any disagreements on trade from overwhelming the other more positive aspects
of the strategic partnership,” Goel, a former White House official under the Obama and
Bush administrations, said.
This is complicated by the fact that the relationship will need to be balanced against
India’s ongoing interactions with Russia and Iran. Both countries represent strategic
threats to the United States, yet remain vital trading partners for India, he said.
Challenges in South Asia
Beyond these global power politics, India will face challenges within its own
neighbourhood, Goel said. While tensions with Pakistan are perpetually simmering,
they are even more heightened at the moment because the after-effects of the Pulwama-
Balakot crisis have not been fully resolved and continue to linger, he added.
“As the United States looks for an exit ramp from Afghanistan, India-Pakistan relations
will take on even greater importance. In addition, Sri Lanka has flared up as an
unexpected regional challenge for India. After nearly a decade of relative peace on the
island, the Easter Sunday terrorist bombings highlighted how terrorism can take root in
the region,” Goel said.
Taking on China
“And finally, India must reckon with China,” the former White House official said in
response to a question. The world’s attention may be focused on US-China relations at
the moment, but this doesn’t mean that India-China issues are not serious and
prevalent.
“China’s increasing assertiveness will continue to cause concern in New Delhi. India has
already expressed its displeasure with the Belt Road Initiative, but the reality is that the
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project is moving forward. The question now becomes what is India going to do in
response,” Goel said.
According to Tellis, at a time when India’s external environment has grown more
precarious because of the weakening liberal international order, China’s continuing
ascendancy and assertiveness, and the prevailing capriciousness in Washington,
continued stumbles in New Delhi will end up being cumulatively costly and will subvert
India’s larger ambitions even more consequentially.
“Today, when India’s claims to exceptionalism will not suffice to either protect its
security or to increase its influence, its missteps within will have outsized impact
abroad,” he warned.
Home
Reliance Retail Set to Disrupt Amazon, Walmart-Flipkart: Forrester
(Source: NDTV, May 21, 2019)
To compete with Amazon and Flipkart, Reliance will have to significantly improve the
customer experience, Forrester noted.
Reliance Retail's upcoming entry into the online retail sector is the biggest challenge for
Amazon and Walmart-Flipkart as the Mukesh Ambani-led behemoth is well positioned
to create massive disruption in the market, a new report has stressed.
According to the global market research firm Forrester, the online retail sales in India
will grow at a five-year CAGR of 25.8 percent to reach $85 billion (roughly Rs. 5,90,000
crores) by 2023, despite the hiccups of demonetisation in 2016, GST in 2017 and the
governmental changes in eCommerce policy announced last December.
The time is ripe for Reliance Retail, which operates 10,415 stores in more than 6,600
cities, with 500 million annual footfalls - giving the company the kind of scale required
to swiftly launch India-based operations.
"One of the things that will trouble Amazon and Flipkart is Reliance's history of
launching operations via massive discounts," Satish Meena, senior forecast analyst at
Forrester Research, said on Tuesday.
Reliance entered the telecom sector in 2003 with the Monsoon Hungama tariff plan,
which brought tariffs for voice calls down to just Rs. 0.40 a minute from the existing
rate of Rs 2 a minute, followed by the launch of Jio 4G plan in 2016 that dropped data
rates from Rs. 250 per GB to Rs. 50 per GB.
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13 CITI-NEWS LETTER
"This kind of discounting can disrupt any market, and we expect something similar to
happen in the grocery space during Reliance Retail launch," Meena added.
Reliance is fast working on creating the world's largest online-to-offline New Commerce
Platform, according to Mukesh Ambani, Chairman and Managing Director, Reliance
Industries.
"Due to the recent changes in eCommerce policy and the restrictions on an inventory-
led model for marketplaces with FDI, Reliance Retail is finding a favourable policy
environment to launch operations where it can use its existing retail infrastructure to
deliver goods to customers," the Forrester report noted.
Reliance launched the food and grocery app among its employees in April 2019 to
prepare for the commercial launch later in the year.
Reliance Retail is the largest retailer in India, with $18.7 billion in revenue during
financial year 2019, and it grew at a CAGR of 55 percent in the last five years.
Reliance Retail had $81 billion in revenue and $9.4 billion in profit during 2019.
"This gives Reliance Retail access to long-term capital from the conglomerate, which has
a presence in energy, petrochemicals, telecom, textiles, retail, and natural resources,"
said Forrester.
Reliance Retail also has a portfolio of over 40 brands, from the midmarket to premium
segments and including Hamleys (which the company has acquired for Rs 620 crore)
and Marks & Spencer.
"These can provide a boost to the fashion and lifestyle segment, which will be the largest
category by online spending in the coming years," said the report.
Reliance launched its mobile business at the end of 2015, and by April 2019, it had over
300 million mobile subscribers a" making it the third-largest player in a short span of
time.
Jio is building on these mobile subscribers by investing in related services to create an
ecosystem that gives customers access to rich content and payments options.
This ecosystem will be available for Reliance Retail to build on.
To compete with Amazon and Flipkart, Reliance will have to significantly improve the
customer experience, both in stores and on its online channel, because discounts and
cashbacks will not generate loyalty for online customers as we saw in the Paytm Mall
case.
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14 CITI-NEWS LETTER
"Removal of discounts may lead to a significant loss of buyers from the platform. The
positioning of the Reliance platform and its fulfilment will play a critical role in the fight
against Amazon and Flipkart," emphasised the Forrester report.
The eCommerce competition in India remains fierce.
Amazon has been the most popular online retailer since it surpassed Flipkart in 2016,
although Flipkart is still the single-largest online retailer, with 31.9 percent market
share in 2018 (38.4 percent if you include Myntra and Jabong), closely followed by
Amazon at 31 percent.
Home
US opens new frontier in trade war with India
(Source: New Delhi Times, May 21, 2019)
Roughly over two months ago, on March 4, the US President Donald Trump had
notified Congress of his intention to terminate the Generalized System of Preferences
(GSP) for two nations—India and Turkey. That commenced a 60-day countdown period,
granting the US President the liberty to initiate action against the two prominent Asian
countries after May 3.
Just a year back, in April 2018, the US had started a review process of the Generalized
System of Preferences program. This was triggered by the complaints of some US
companies who criticised the non-tariff barriers imposed on their exports to India. The
companies alleged that India had failed to provide any assurance of unhindered market
access to their products in the Indian market. The Trump administration promptly
jumped into the bandwagon, perceiving erroneously that Indian action was creating a
negative impact on America’s market access. The US considers that it was offering
equitable and reasonable access to its market while India perceived US rules as
predatory.
The American move precipitated extensive discussions between the US and Indian
officials to work out ways to enable India’s continuous presence in GSP framework.
Modi administration had taken some pro-people initiatives to make medical expenses
an affordable proposition for the masses by vastly reducing the market price of some
life-saving medical devices. That made profiteering American companies complain.
American dissatisfaction extended to dairy sector also.
Under GSP, India exported duty-free goods worth $5.7 billion to the US in 2017
including auto components, industrial valves and textile materials and $48 billion worth
of goods in 2018 with a trade surplus of $21 billion. Perturbed America placed India on
a watch list of the treasury department alleging currency manipulation. But India
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15 CITI-NEWS LETTER
behaved with great restraint, not retaliating even when the US unilaterally increased
duty on a range of Indian products. India comforted itself that the withdrawal of GSP
will have a minimal effect on India’s exports and worked at addressing the issues the US
had raised.
America now grapples with a gigantic issue: hammering out a trade deal with China. But
the ongoing exercise on GSP has indeed opened a can of worms and a new front in the
trade war by acting against India and Turkey.
India right now is preoccupied with the general election continuing in seven phases
from April 11 to May 19. GSP impact on India amounts to hardly $190 million per year
but the announcement would have provided the opposition a handle to torment Modi.
India’s economic growth has not created the jobs and exports have not grown as desired.
As exports create jobs, opposition would call for a tougher stand on trade negotiations
with other countries, including the US. Trump is also making trade negotiations a
rallying point for American elections. These could generate a new round of tensions with
key trading nations. Is the US considering revoking India’s Most Favoured Nation
status? This could be American positioning to pressurize India for more access to US
companies. Saddled with its own domestic concerns India can hardly afford to yield to
US pressures.
By giving notice of its intent to terminate India from its GSP the US has fired the first
salvo to put a lot of pressure on poll-bound India. The new Indian government will have
to grapple with this problem. Things will roll fast after the election results on May 23 to
take the bilateral talks forward for liberalization of economy with the US.
The India- US relationship has acquired salience over years but both sides need to work
for a fair and equitable trade mechanism. As large countries imbued with strong
democratic political systems, both are politically working closely together in many areas,
but a lot of common grounds remain to build a future relationship on. The US must
understand the political and economic compulsions of India to pursue higher growth
rates for a vast populace. After 2017, the US, Japan, India and Australia revived the
Quadrilateral Security Dialogue. That makes the close economic relationships between
these two important partners of the QUAD group a structural imperative. Countering
the imperialistic designs of China in South China Sea is the bigger picture that must not
be lost sight of in skirmishes for petty dollars.
Home
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GLOBAL:
Việt Nam-Russia economic, trade relations thrive
(Source: Vietnam News, May 21, 2019)
Economic and trade relations between Việt Nam and Russia have been growing
consistently, according to the Ministry of Industry and Trade.
The two countries established a strategic partnership in 2001 and upgraded it to the
level of a comprehensive strategic partnership in 2012.
Bilateral trade enjoyed a surge after the Eurasian Economic Union (EAEU)-Việt Nam
Free Trade Agreement took effect in 2016. The effective implementation of the trade
deal is expected to help the two nations achieve their trade target of US$10 billion.
Last year it was worth $4.57 billion after rising 28.6 per cent, Tạ Hoàng Linh, director of
the ministry’s European-American Market Department.
Việt Nam’s exports to Russia topped $2.44 billion, a rise of 12.8, while its imports were
worth $2.1 billion, up 53.4 per cent.
In the first four months of this year, their trade was worth $1.52 billion, up 5.92 per cent
year-on-year.
The bilateral trade between the two countries accounts for more than 90 per cent of
EAEU-Việt Nam trade revenues. Việt Nam’s major exports to Russia include electronic
products, garments and textiles, footwear, aquatic products, and coffee.
According to the Việt Nam Textile & Apparel Association, Russia is a promising market
for garment and textiles, but Vietnamese firms need to do thorough market research to
determine the potential and needs of their Russian partners and remain in regular
communication with them.
They should also adopt modern business models, work to ensure product quality, and
build brands and register trademarks in that market, it said.
Russia ranks 24th out of 129 countries and territories investing in Việt Nam with total
registered capital of over $932 million, mainly in the oil and gas and energy sectors.
Vietnamese companies have invested nearly $3 billion in more than 20 projects in
Russia, the most notable being TH Group’s $2.7 billion in dairy farms.
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17 CITI-NEWS LETTER
Indian and VN enhance co-operation in silk sector
(Source: Vietnam News, May 22, 2019)
A delegation of business executives representing 30 Indian companies led by the
chairman of the Indian Silk Export Promotion Council met their Vietnamese
counterparts at the Buyer-Seller meet held in HCM City on Tuesday.
The visitors were from companies producing silk, fabrics, ready-made garments, silk
scarves, stoles, Pareo shawls evening wear, beachwear, fashion accessories, tops,
bottoms, trousers, jackets, kaftans, bags, embroidered shawls, silk blended products,
natural silk carpets and others.
Dr. Bimal Mawandia, chairman of the Indian Silk Export Promotion Council, said:
“India is promoting exports of all textiles. We are presenting the silk sector in India and
as per the guidance of the Government of India, we want to increase exports and we are
exploring different markets worldwide.
“We come here to promote export of not only silk but also other fibers in this market.”
The trip was the first to Việt Nam for all of the participating companies, he said.
Phạm Xuân Hồng, chairman of the HCM City Association of Garment Textile
Embroidery-Knitting, said trade relations between Việt Nam and India in the garment
and textile sector had increased significantly but was still modest compared to the
potential of the two countries.
The event is expected to enhance connection between businesses of the two sides in the
sector, where there is still a lot of potential, he said.
“Vietnamese garment and textile companies want to have stronger co-operation with
Indian counterparts. They have high demand for importing raw materials from India.”
According to the Việt Nam Textile and Apparel Association, there are 7,000 enterprises
in the industry, providing jobs for three million workers in the country.
Việt Nam’s garment and textile exports increased by 12 per cent last year to reach over
US$36 billion and exports is expected to top $40 billion this year.
A similar buyer and seller meet will be held in Hà Nội on May 23.
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18 CITI-NEWS LETTER
US CPSC considering changes to flammability standards
(Source: Fibre2Fashion, May 21, 2019)
The US Consumer Product Safety Commission (CPSC) is requesting information about
possible changes to the Commission's Standard for the Flammability of Clothing
Textiles to expand the list of fabrics that are exempt from testing under the standard.
CPSC is also seeking possible ways to update provisions under the standard to reduce
testing requirements.
"CPSC is particularly interested in receiving information about the possibility of
adding spandex to the list of fabrics that are exempt from the testing requirements.
CPSC also would like information about the equipment and procedures specified in the
standard and possible ways to update those provisions to reduce the burdens associated
with the testing requirements," an official notification states.
CPSC will accept written comments through June 24, 2019.
CPSC said its staff is aware of stakeholder interest in adding spandex fibres to the
Specific Exemptions in 16 CFR 1610.1(d). So, it is seeking relevant information
and data about spandex fibres that would help CPSC determine whether spandex
"consistently yield[s] acceptable results when tested in accordance with the Standard."
With reference to burden and cost associated with testing spandex, CPSC is seeking
specific information as to how much testing is required for fabrics containing spandex
subject to 16 CFR part 1610. It also wants to know the costs associated with the required
testing, and the types of fabrics and garments that require testing.
On June 16, 2017, CPSC requested input from interested parties about ways to reduce
the burdens and costs associated with existing regulations, while still protecting
consumers from risks of death or injuries associated with consumer products. The
commission followed up on this burden reduction goal in its Fiscal Year 2019 Operating
Plan, directing CPSC staff to review possibilities for reducing burdens, including
"expanding exemptions for flammability testing"
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BGMEA chief to worker leaders: Don’t complain to foreigners
(Source: Fibre2Fashion, May 21, 2019)
The BGMEA president also said a lack of unity between garment factory owners and
worker leaders was a barrier to the industry’s development
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19 CITI-NEWS LETTER
Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President
Rubana Huq has urged worker leaders to refrain from complaining about internal
problems to foreigners.
"Foreign buyers do not increase rates even though our production cost has increased
immensely. If you complain to buyers, then they get a chance to bargain and reduce
prices," she said during a roundtable discussion on the national budget at the National
Press Club on Tuesday.
The BGMEA president also said a lack of unity between garment factory owners and
worker leaders was a barrier to the industry’s development, reports UNB.
“The BGMEA will take all necessary initiatives if workers inform the organization of
their demands before lodging complaints with foreigners,” she added.
"The welfare of the workers reflects the industry's wellbeing. Do not cause any violence.
I am with you," Rubana Huq said.
Centre for Policy Dialogue (CPD) Research Director Dr Khondaker Golam Moazzem
demanded increases to the budget allocation for garment workers.
"It will not require a huge amount. Community based development is needed in the
industry," he said
Moazzem further said: “The time has come to raise our voices together in the demand
for increased prices of products.”
Mahbubur Rahman Ismail, president of the Bangladesh Textile Garments Workers
Federation, placed several proposals, including for starting a ration system for workers.
"We have submitted our demands to the Finance Ministry. We will submit these to
Prime Minister Sheikh Hasina as soon as possible," he said.
ZM Kamrul Anam, president of Bangladesh Textile and Garments Workers League, also
urged the government to increase the budget allocation for garment workers.
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20 CITI-NEWS LETTER
CPEC and industry relocation
(Source: Hasaan Khawar, The Tribune, May 22, 2019)
Should we expect any Chinese industry to relocate to Pakistan under the China-Pakistan
Economic Corridor (CPEC)? And if it happens, which industries are likely to benefit
from such relocation?
Before we answer this question, it is important to understand why companies relocate.
An industry would relocate to another city or country if such relocation entails a
significant regulatory, locational or cost advantage. The locational advantages include
reduced transportation time due to proximity to raw materials or market, market size or
even better living conditions at the destination. The cost advantages, on the other hand,
include lower input costs, better employees or overall lower cost of doing business,
whereas the regulatory advantages may cover tax breaks, policy incentives, less
stringent controls, etc.
Let’s first discuss the location advantages. While CPEC will greatly reduce the travel
time from western China to the Indian Ocean, the shorter distances are mostly relevant
for only those Chinese enterprises which are located in the three western provinces of
Xinjiang, Tibet and Qinghai and are exporting to the Middle East and North Africa. For
others, using the sea route through eastern ports or the overland route to Europe would
make more sense. Moreover, except Xinjiang with exports of more than $13 billion,
exports from other two provinces are almost negligible.
But Pakistan itself is a very lucrative market with a growing middle class. The huge
potential of the local market has generated significant Chinese interest in household
appliances and automotive sectors. In fact, this interest predates CPEC and included
investments by Haier, Gree and Changhong.
It is, therefore, likely that this sector is going to see much more Chinese investment in
the next few years. Early interest and pipeline of potential investments by Changan
Automobile Limited to assemble and sell its cars in Pakistan, Jinbei Auto to build a
completely knocked down assembly and joint ventures by LIFAN and Beijing
Automobile Works further validate this notion.
Similarly, the locational advantages also support the case for agri business and food
processing industry which can form another potential candidate for Chinese investment
to serve the local industry as well to target the massive Chinese food market.
Coming to the cost advantages, the garments and textile industry seems to be a good
choice for relocation. China is already facing a surge in production costs, owing to
appreciation of its currency, inflation, higher cost of raw materials, etc. Moreover, as
Chinese labour is graduating from low-paying to high-paying jobs, along with
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21 CITI-NEWS LETTER
introduction of improved labour laws, the labour costs are also rising sharply. The
average labour cost of an operational hour in the coastal and inland regions of China is
thrice the cost in Vietnam and Pakistan and six times that of Bangladesh.
These pressures are compelling Chinese manufacturers to look elsewhere to relocate.
For now the Chinese focus seems to be on Vietnam, Myanmar, Cambodia, Indonesia
and Bangladesh. But there is room for Pakistan to join the race as well.
Lastly come the regulatory factors. The sunset industries in China are being pushed out
due to overcapacity, rising production costs and environmental factors. These include
copper and aluminum smelting, cement, papermaking, textiles, iron and steel, light
engineering and low-end motors and machines. While smelting would need abundant
availability of inexpensive energy, some of the other sunset industries can very well be
relocated to Pakistan.
No wonder that the initial parleys with China and the earlier version of the long-term
plan mentioned textiles and garments, agri businesses, food processing, mining,
cement, light industrial products and transportation machinery and household
appliances as sectors that could potentially benefit from CPEC.
The focus for Chinese industry relocation is, therefore, quite clear and makes much
commercial sense. Now it’s for our policymakers and industry to make it happen.
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