Indian Prime Minister’s ‘Make in India’ concept could bring about sea change in the country’s manufacturing landscape. A recent article published by Hong Kong Trade Development Corporation (HKTDC) ‘Make in India: An Alternative Production Base with a Huge Local Market’, highlights how India could emerge as global powerhouse in manufacturing. It gives an overview of labor cost, supply and quality, along with logistics performance and land costs, followed by an examination of some government initiatives and reforms.
The article says, India is on the rise, not only as a new choice of relocating labor-intensive industries from China, but also as a retail market. The country has the third largest GDP in Asia, after China and Japan, with both heavy and light manufacturing activities spread across the country. Heavy industries, including automobile and machinery, are typically found in organized factories. This contrasts with light manufacturing, which comprises a good deal of home-based, cottage industry activity and work subcontracted from factories, as in the case of garment manufacturing.
While China is the world leader in exporting textiles and garment products, many have overlooked India’s position as the world’s second biggest exporter of textile and garment products in 2014, selling a total of $36 billion, during the year, far behind China’s $399 billion. In textile exports alone, India was second after China in 2014, with 5.8 per cent share of the global market, compared to China’s enormous 35.6 per cent share. India stands out to be a substantial exporter in both garments and textiles. In 2014, India imported textiles worth only $3.8 billion, lagging much behind Vietnam’s $12 billion, Bangladesh’s $6.8 billion, and just ahead of Cambodia’s $3 billion. HKTDC’s research is based on field trips Indian factories, interviews with garment manufacturers’. Their study noted invariably that the majority of Indian garment producers were focused on the domestic market, as their product quality was generally lower than the standards required by overseas importers. Nonetheless, many big Indian exporters have successfully lined up with international buyers, including department stores, retail chains and brands. In the four years to 2014, India’s garment exports increased at an average annual rate of 12 per cent surpassing China’s 9 per cent, in line with Bangladesh’s 13 per cent and eclipsed by Vietnam’s 17 per cent.
With advantages of raw materials and prospects of vertical integration, India is a place worth considering for factory relocation in relation to labor-intensive manufacturing, such as garment-making. India has been an active player in Asia, securing free trade agreements (FTAs) inside and outside the region, including engaging in an FTA talk with the EU. The article goes on to state India has been making progress in improving its business environment. The World Bank’s 2016 ‘Ease of Doing Business Survey’ ranked India 130 out of 189, a sizeable leap from 142 in the 2015 survey, with biggest improvements in starting business and getting electricity. Nonetheless, India still needs to further improve its business environment in order to catch up with other Southeast Asian competitors in overseas factory relocation, such as Vietnam (90) and Indonesia (109).
United States commits US$317 Million for advanced textiles development
Private-public collaboration will invest US $317 million towards developing next generation textile industry in the United States. According to a just released statement from the U.S. Department of Defense, a consortium of 89 universities, industry and non-profits organized Cambridge, MA-based Massachusetts Institute of Technology (MIT) will form the “New Revolutionary Fibers and Textiles Manufacturing Innovation Hub.” A non-profit vehicle Advanced Functional Fabrics of America Alliance that has the consortium members involving Universities like MIT, Cornell, University of Tennessee-Knoxville and leading industry partners will be leading the charge of the innovation work and will be managed by the U.S. Army.
U.S. Department of Defense will invest US$75 million and there will be huge contributions from non-federal entities that is about 3 times the size of U.S. government’s investment in the next generation fiber-textile chain research. The total effort is estimated to be worth about an investment of US$ 317 million. Leading technology giants such as Bose, Intel and many textile innovative companies are involved in this effort. The new revolutionary fiber institute is the sixth manufacturing innovation hub initiative by President Obama administered through the U.S. Department of Defense. These institutes are aimed at developing high-tech sectors in the U.S. to enable to be competitive, especially in the manufacturing sector.
German retailers are supporting sustainable development of Myanmar’s textile
German retailers are supporting sustainable development of Myanmar’s textile industry. The partnership will initially run for three years. The core of the project is the creation of structures which enable a sustainable textile production with fair working conditions. Through training and seminars local textile producers will be encouraged to improve their standards, productivity and product quality.
Economic and development cooperation will work together to improve the supply chain’s social standards. The ultimate aim is to help Myanmar’s garment industry compete in the global market.
Myanmar has not only ambitious growth targets for its textile industry but wants to make this growth sustainable. By 2024, the textile industry in Myanmar is targeting a revenue of $10 billion. Currently exports of the textile industry are at about $1.8 billion.
Germany is Myanmar’s principal trading partner in the European Union. Germany’s main imports from Myanmar are garments and its principal exports to Myanmar are machinery, data processing equipment, electrical and optical goods, chemical products, motor vehicles and vehicle parts and pharmaceutical products. Of Myanmar’s garment exports, woven garments have driven the growth of exports while exports of knit products have been flat over the years.
Pakistan will give the value-added textile sector top priority
With a view to enhancing the country’s exports, Pakistan will give the value-added textile sector top priority. Pakistan is also considering restoring the tax-free facility for five zero-rated sectors, including textiles, from the next fiscal year. In terms of quantity, exports of some textile products from Pakistan have increased. However, in value terms, these have showed negative growth due to the declining price trend globally.
Power tariffs have been cut to support the textile industry and further benefits are likely. Exporters have been urged to produce high value-added products for better growth of the country’s textile exports. In Pakistan’s textile sector, readymade garments are the only products whose exports are growing.
The country’s cotton production declined last year due to climate changes. With steps now being taken toward enhancing cotton production, some positive results are expected in future. Efforts are being made to clear refund claims of the textile sector. Meanwhile Textile Asia is being held in Pakistan, March 9 to 11, 2016. This is meant to promote value-added machinery in the textile sector. Some 550 delegates from 27 countries are participating.
Korean clothing companies are setting up base in China
Chinese consumers view Korean clothes as fashionable and of good quality. A free trade agreement between the two nations that went into effect in December last year offers further incentives. China’s clothing market grew 12 per cent last year and is expected to grow an average of 9.5 per cent over the next five years.
Some 16 million babies are born in China every year, about 1.6 times the total population of Seoul. So doing business in China is a necessity rather than an option for Korean brands. The Korea-China free trade agreement has made the Chinese market far more accessible for Korean businesses and vice versa. The 14 to 25 per cent tariff on clothes imports will be gradually abolished over a 10-year period.
Besides South Korean fashion brands benefit from the popularity of Korean dramas and music in China. But success is by no means guaranteed. Competition between online shops is fierce and squeezing margins. As incomes rise in China, consumer tastes are becoming more sophisticated, so clothing makers will have to improve their designs and tap into provincial markets.
For the moment, Korean clothing companies are rushing to China to compensate for a rapidly waning fashion market at home. In China, despite slowing growth, the fashion market is still burgeoning.
China’s exports witnessed their heaviest fall
China’s exports witnessed their heaviest fall in nearly seven years in February diving more than a quarter as feeble global trades offset the weaker Yuan and raised pressure on Beijing to ramp up domestic demand as a driver of expansion. While promising reforms and higher spending to boost the world’s number two economy, the below-forecast reading is the latest data raised fears of a ‘hard landing’ in China and comes days after Beijing cut its growth target for this year.
Last month, customs figures showed exports sank 25.4 per cent on-year to $126.1 billion, sharper than the 14.5 per cent economists predicted and the worst performance since May 2009 at the height of the global financial crisis. China is the world’s biggest trader in goods and a key driver of international growth but its firms have been battered by weak demand from major markets as the global economy stutters. In turn, its slowing expansion has sent commodities prices plunging, battering producer economies such as Australia.
China’s imports fell for the 16th consecutive month, plunging 13.8 per cent to $93.6 billion. Analysts at ANZ Research cited ‘weakening global trade’ and ‘sluggish domestic demand’ as factors driving the ‘disappointing’ export and import results.
Chinese are investing in the cotton industry in the US
The Chinese are investing in the cotton industry in the US. Input costs of cotton production derive mainly from raw materials and energy, both of which are cheaper in the US than in China. China has actively encouraged vertical integration in the food sector as a part of its ‘Go Out’ strategy of overseas capital investment.
Since 2011, China has built up a significant stockpile of cotton as part of its price support operations for its agricultural sector. This has led to higher input costs in China’s cotton processing industry, and with no barriers to the import of yarn (processed cotton) Chinese cotton companies have taken the hint and set up shop where they can access cheaper raw materials, moving plant and machinery out of China.
If China eventually stops price support operations for cotton, then cotton production will inevitably migrate to where it is most efficient and productive. Since 2000, China’s agricultural production – despite solid productivity gains – has not kept pace with domestic demand, meaning that China has gone from a position of approximate net food security to being the largest food importer in the world, with the US becoming the largest single agricultural exporter to China.
Textiles from the UK has dropped significantly
According to a new report from the Waste & Resources Action Programme (WRAP), demand from overseas reuse and recycling market for used textiles from the UK has dropped significantly. The report said that the market for used textiles (clothing and non-clothing excluding carpets and mattresses) has experienced an apparent turning point. The last few years saw substantial growth in exports, accompanied by large price rises and reports of an influx of new entrants into the market.
However, market conditions were said to have now changed, with demand from overseas markets stalling in 2014, and now falling. WRAP also found that prices and revenues from exports have been falling since 2013/14. According to WRAP the textiles and clothing industry is the 5th largest contributor to the UK’s carbon footprint and that simply extending the life of clothes by an extra nine months of active use would reduce the carbon, water and waste impacts by around 20-30 per cent. It was also claimed that providing 1 ton of clothing for direct reuse e.g. donate to a charity shop or sale through eBay can result in a net GHG saving of 11 tons of CO2 equivalent. WRAP’s Textiles Market Situation Report, looked at the market past and present and summarizes key trends and highlights opportunities for creating new sustainable end markets in the UK and abroad.
Primark India has trained 1,251 female in India
Primark, a cotton field in India has trained 1,251 female smallholders through its partnership with Cotton Connect. The initiative, which is being run in partnership with Cotton Connect and the Self-Employed Women’s Association (SEWA), will be extended by a further six years. This extension will make Primark train around 10,000 female smallholder farmers in India. It is designed to support women from traditionally male-dominated farming communities in Gujarat, India, to introduce sustainable farming methods, improve cotton yields and increase incomes.
Primark said the three-year pilot has already trained 1,251 female smallholders. By year two of the trial, female farmers recorded an average profit increase of 211 per cent, an average yield increase of 12.6 per cent, and a reduction of input costs by 5 per cent.
Moreover, the program has encouraged adoption of more sustainable farming methods – including a 13.5 per cent reduction of fertiliser usage, a 53.5 per cent reduction of pesticide usage, and a water usage decrease of 12.9 per cent.
Foreign manufacturers gradually shifting its production bases to Vietnam
It was written in the publications that to take advantage of opportunities from the Trans-Pacific Partnership (TPP), the world’s biggest shoe processor, Pou Chen (Taiwan) has been gradually shifting its production bases to Vietnam since 2012.
Similarly, the textile industry also witnessed the landing of large textile corporations, including the competitor of Pou Chen in Taiwan, Feng Tay and the major manufacturers in the world such as Hanesbrands (US), Onewoo and Panko (Korea). In fact, moving factories to Vietnam where there is cheap labour to wait for the opportunities given by the TPP is the way that many foreign companies are pursuing in order to use Vietnam as a springboard to enter major markets in the TPP.
Some experts are afraid that this phenomenon will affect profit from Vietnam’s key export commodities. Others felt Vietnam should have appropriate policies to ‘borrow’ this source of capital to develop the local economy along with strict commitments on technology transfer. According to the Vietnam’s Ministry of Industry and Trade spokesperson, Deputy Minister Do Thang Hai the increase of foreign investment in this way benefited Vietnam so far. He said exports of the foreign-invested sector were a bright spot in the overall economic picture of Vietnam last year. The part of this sector in Vietnam’s total export revenue has increased in recent years, from US$34 billion (representing 49.4 per cent of total national exports) in 2010 to $110.59 billion (accounting for 68.2 per cent) in 2015.
Cotton acreage in the US dropped from nearly 15 million acres to less than 9 million acres
Times are tough for farmers in the US cotton belt who are caught in the middle of a storm of changing global demand. Cotton acreage in the US has been declining for years, with 2015 hitting the lowest mark in decades. It has dropped from nearly 15 million acres to less than 9 million acres in just the past five years.
According to Jody Campiche, VP of economics and policy analysis at the National Cotton Council, one of the main issues facing the world cotton market is just a sluggish demand. It boils down to one thing, Campiche said – China. It used to be the largest export market for American cotton. A few years ago, more than 40 per cent of US cotton exports ended there. Last year, it was down to 6 per cent.
A lot of American clothes are made in China, but clothing companies there are relying more and more on cheaper man-made fibers, like polyester. According to the US Department of Agriculture, a big reason man-made fibers are on the rise is growing consumer demand for athletic wear, such as Lululemon and Under Armor fitness apparel. U.S. producers are also facing growing competition from countries, like India and Pakistan.
European commission appears to soften stance to strengthen its 40 per cent carbon cut
After an outcry over attempt to rule it out, European commission appears to soften stance on whether it will strengthen its 40 per cent carbon cut. Europe’s chief climate negotiator has said he is open to increasing the EU’s carbon target for 2030, in a back down by the European commission. Recently, the commission ruled out any increase in the bloc’s target of cutting emissions by 40 per cent by 2030 on 1990 levels, sparking an outcry from several countries and green groups. Meanwhile, ministers and environmentalists said that Europe should be increasing its ambition in light of the Paris climate deal agreed in December, where nearly 200 countries pledged to pursue efforts to keep temperature rises to 1.5C. That was a much tougher goal than the existing 2C goal which Europe’s 40 per cent cut is based on.
The EU director of climate strategy, Artur Runge-Metzger, responded to the criticism that the question of the level of ambition for 2030 is open, as long as it is a binding EU target of at least 40 per cent domestic reduction in greenhouse gas emissions by 2030 compared to 1990.
BTT International Desk