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News Clips 11 November, 2013

[ Transporters' strike: exporters fear losses worth billions ]
[ Reaping GSP Plus benefits: Energy, law & order vital prerequisites: PRGMEA ]
[ Govt asked not to remain complacent on GSP Plus ]
[ GSP Plus needs EU parliament’s stamp ]
[ Insufficient capacity: GSP Plus status for Pakistan ]
[ Fake deals: Textile tycoon arrested for Rs110 million tax fraud ]
[ Textile export plan could unravel on currency swings ]
[ Bangladesh Urges Raise in Garment Industry’s Minimum Wage ]

Transporters' strike: exporters fear losses worth billions   [ top ]

Business Recorder, 11 November 2013
Exports orders worth billions of rupees are at stake due the ongoing strike of goods' transporters, said Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) Co-ordinator Ijaz A Khokhar.

Talking to Business Recorder here on Sunday, he said it was unfortunate that no attempt had so far been made by the government for negotiation with the transporters to resolve the issue. "Pakistan will face serious economic setback if the situation remained the same. The exporters will face huge losses in case the export orders are cancelled," he warned.

Ijaz said that the textile sector was already facing multiple problems and the transporters' strike had added to its woes.

He urged the government to take immediate steps to resolve the issue in order to avoid serious economic disaster.

He also asked the Sindh Chief Minister and other concerned authorities to intervene and persuade the transporters to call off their strike in the larger national interest.

Reaping GSP Plus benefits: Energy, law & order vital prerequisites: PRGMEA   [ top ]

Business Recorder, 10 November 2013
LAHORE: Pakistan Ready-made Garments Manufacturers and Exporters Association (PRGMEA) has lauded the government for achieving favourable support from the International Trade Committee of EU, which has approved the duty-free status for Pakistan leading to boost the exports of the value-added textile sector and create job opportunities.

PRGMEA (NZ) Senior Vice Chairman Jawwad A Chaudhry appreciated the efforts of PM Nawaz Sharif, Punjab CM Shahbaz Sharif, Governor Ch Sarwar, State Minister for Commerce and Textile Industry Khurram Dastgir and Commerce Secretary Qasim Niaz for effective and successful diplomatic initiatives.

Jawwad urged the government to fulfil energy needs of the textile industry, besides controlling law and order, as the two issues had been hitting hard the Punjab-based value-added industry and GSP Plus status would be of no use in present circumstances.

Besides improving law and order, controlling terrorism and providing non-stop gas and electricity supply, the government would have to relax import policy to empower value-added textile industry to get the maximum benefit of GSP Plus Status, as the country had no raw material except cotton, he noted.

Jawwad Ch lamented that Pakistan could utilise only three textile categories out of total 73 types relaxed by the EU countries for duty-free import from Pakistan in 2013.

With strict import policies in Pakistan, the local garment industry was not fully prepared to take advantage of duty-free access to the EU market under GSP Plus status mainly due to shortage of raw material, he added.

PRGMEA leader urged the European Parliament's plenary session meeting during second week of December, 2013 to finally pass the resolution in favour of Pakistan which is a frontline state and ally of the US and EU in its fight against terrorism.

He said exporters from various industries in Pakistan were expecting the GSP Plus access to European markets, which promised huge potential for multiplying the country's current exports and appealed to the authorities to comply with all the requirements of GSP Plus.

He also pointed out the condition that the export market share of any product should not exceed the six percent ceiling of import of European Union. He disclosed that most of the textile items included in the list of GSP plus items have already crossed the six percent ceiling set by the GSP plus condition.

Jawwad expressed his disappointment over the FBR delaying tactics, as no company had get refund for two percent sales tax on purchases of raw material for export since February 2013, while refund claims of billions of rupees of 2010 were also pending yet. He said that revenue generation through taxes was not a good approach by keeping the value-added textile industry hostage.

Govt asked not to remain complacent on GSP Plus   [ top ]

The News, November 10, 2013
LAHORE: Market experts have asked the government not to remain complacent on the expected GSP plus status as the country failed to add the projected $500 million in exports on duty free concession granted by the European Union (EU) to Pakistan for 2013 on 75 items.

“The progress on GSP Plus status from the EU is an encouraging development,” said a senior market analyst Dr Shahid Zia.

He said Pakistan’s failure to capitalise on the EU granted onetime special zero-rated concession on 75 Pakistani products, including some lucrative textile categories is a matter of concern.

He said most probably the industry was not prepared for that opportunity; and the government failed to act as a facilitator for industries that were capable of benefitting from that chance. He said these industries should have been facilitated by ensuring better energy supplies and reasonable access to finance.

He said the potential increase in exports after GSP plus is many times higher and the government should not let this opportunity go waste by remaining aloof from problems that the exporters face.

He said first thing would be to ensure the compliance with the 27 conventions Pakistan ratified to qualify for the concession. It will have to ensure that flaws in the regulations that impact global supply chains are removed.

He said any delay in clearance of goods on minor violation of duty and tax remission for exports (DTRE) scheme should not delay the clearance of essential inputs needed for manufacturing export goods.

He said goods may be quickly released on bank guarantees or assurances so that the production is not delayed. He said power and energy supplies to exporting industries should be given priority.

Group leader All Pakistan Textile Mills Association (Aptma) Gohar Ejaz said Pakistan is competitive globally in cotton textiles and clothing, but operates at huge disadvantage on textiles clothing produced from manmade fibers (MMF).

He said drawbacks faced by the industry on MMF should be immediately removed. He said global textile and clothing trade for cotton products is limited to 30 percent of total textile trade while MMF products command 70 percent market.

Moreover, he added duties on MMF made textiles in EU are very high; and zero-rated concession on Pakistani products would carry much higher advantage.

Ejaz said the total GSP Plus EU trade is 275 billion Euro, or $641 billion. He said Pakistan’s current share in this trade is only 4.07 billion Euro ($9.8 billion) – which is 1.48 percent of the total trade.

He said under GSP Plus regime a country can go up to maximum two percent of total trade under the GSP Plus. This, he added, means that Pakistan can increase its exports to the EU by up to 1.43 Euro, or $3.33 billion.

He said to reach the threshold level of two percent Pakistan will have to increase its EU exports to 5.50 Euro, or $12.83.

He said Pakistan could achieve this export potential only if the industry is prudently facilitated. “We do not want subsidies or concessions but only a level-playing field, he added.

Chairman Aptma Punjab S M Tanveer said in the clothing exports Pakistan would get edge over its competitors in denim and cotton gent’s bottom wear.

He said bed wear by far is the most lucrative category where Pakistan already enjoys a huge advantage.

He said bed wear up till now has been subject to high import duty in EU. He said Pakistani bed wear has been periodically slapped with anti-dumping duties.

GSP Plus needs EU parliament’s stamp   [ top ]

The News, November 8, 2013
ISLAMABAD: The Pakistan government’s understanding of the decision of the International Trade Committee of the European Parliament (INTA) on duty free exports under the GSP Plus is flawed as the European Union has clarified that “there is still the possibility that a negative resolution could be presented before the European Parliament’s plenary session to be held in the second week of December.”

Pakistan will also have to strictly abide by the 27 conventions on human rights, labour standards, environment and good governance if it is to benefit from the GSP Plus.

Earlier, the government appeared overjoyed that the INTA Committee had already paved the way for the entry of Pakistan into the GSP Plus programme. While Brussels was puzzled by the announcement here, diplomatically they did not intervene to correct the reality on the ground.

However on Thursday, the EU Ambassador to Pakistan, Lars-Gunnar Wigemark, clarified: “But before the decision to grant GSP Plus to Pakistan can be considered as final, we still need to wait and see if there will be a vote in the plenary session of the European Parliament in December.”

Insufficient capacity: GSP Plus status for Pakistan   [ top ]

Dawn, November 8, 2013
OPPORTUNITY is for those who are ready to grab it. Unfortunately, few in Pakistan are prepared to handle the huge opportunity provided by the European Union under its GSP Plus scheme, comprising generous trade concessions. The approval on Tuesday of GSP Plus status for Pakistan and nine other countries by the EU Committee on International Trade has brought us very close to preferential trade with the 27-nation bloc from January next year. The formal approval of the EU Parliament next month will allow almost 20pc of Pakistani exports to enter the EU market at zero tariff and 70pc at preferential rates.

EU trade concessions will benefit the country’s largest manufacturer and exporter, the textile and clothing industry, the most by enabling its products to compete with those of regional rivals like Bangladesh and Sri Lanka, which already have duty-free access to the bloc’s market. At present, our textile and clothing exports to the EU constitute more than half of the country’s total exports of almost $9.5bn to the bloc. These have the potential to more than double in a few years. Though the scheme caps annual growth in the textile and clothing imports from Pakistan at 14.5pc, the industry expects to boost its earnings from the EU by up to $1bn annually. But can it?

For many years now, the industry hasn’t invested in capacity expansion due to various reasons — growing energy shortages, high credit cost, poor security conditions, etc. A substantial part of its capacity in Punjab is inoperative because of severe gas and electricity shortages. By the time the EU trade concessions become effective, more capacity will be closed down, though temporarily, as the government plans to cut off gas supply to the industry for three months to facilitate domestic users. Indeed, a few large manufacturers have invested money in value-added textiles despite all these problems with a view to take full advantage of the GSP Plus scheme. But even they have invested in traditional, cotton-based products. The government’s skewed policies that have discouraged the use of manmade fibre and diversification of textile exports will restrict the industry’s ability to reap the full benefits of the newly acquired status. If the government wants the industry to gain maximum advantage from the concessions, it must help the manufacturers revive capacity by ensuring uninterrupted gas and electricity supply as well as cheap credit for new projects and by easing restrictions on the import of fabric and other raw materials not produced domestically, in order to encourage product diversification.

Fake deals: Textile tycoon arrested for Rs110 million tax fraud   [ top ]

The Express Tribune, November 7th, 2013
A reputed textile tycoon was arrested in connection with a tax fraud and later released on bail after he agreed to pay Rs110 million, which was believed to be only the tip of the iceberg as the racket was going on in major cities causing huge losses to the national exchequer.

The Karachi-based textile mill owner was arrested on Friday last week following a major breakthrough achieved by the intelligence arm of the Federal Board of Revenue (FBR) that uncovered a racket pertaining to bogus transactions to evade sales tax.

The racket was going on unchecked in both Karachi and Lahore involving reputed textile sector importers of raw material and manufacturers, according to official documents.

The tycoon was released on bail on Tuesday by the Special Judge of Customs and Taxation after he agreed to deposit a pay order of Rs27.8 million, which is 25% of the embezzled amount, and also gave post-dated cheques for the remaining amount of Rs82.5 million, confirmed an official of the FBR’s Intelligence and Investigation wing.

The intelligence wing had unearthed the Rs400 million fraud, of which the tycoon’s share was Rs110 million. The name of the tycoon, who exports 70% of his manufactured products, and his company, has been withheld due to possible adverse impact of the disclosure on the limited company, which is listed on the stock market.

The Intelligence and Investigation wing is under-staffed and currently its directorate is undergoing changes. The wing has been ignored in the past, allowing tax dodgers, who are operating in all major industrial cities, particularly Karachi, Lahore and Faisalabad, to get off scot-free.

Its present Director General Ijaz Hussain Shah was posted in April this year, but he is still struggling to get the required staff strength to expand the directorate’s activities.

The intelligence arm started investigations into the tax fraud after it got a lead that a number of people, engaged in the business of manufacturing and import of raw material for producing textile products, were misusing a concessionary Statutory Regulatory Order of 2011 aimed at avoiding 5% tax.

A supplier, registered with the Regional Tax Office Karachi, was facilitating the big tycoons. He was arrested by the tax authorities, who gave evidence against the textile tycoon.

The supplier was not a genuine taxpayer and not doing any business in the textile industry but showing just paper transactions to facilitate the textile manufacturing units to evade tax by declaring zero-rated supplies which are otherwise taxed at the rate of 5%, according to the findings of the intelligence wing.

He was involved in declaring fictitious purchases of zero-rated goods from the supply chain of textile industry and the importers, according to the official documents. The bogus buyers of the supplier declared purchases of more than Rs1 billion each time during the period July 2011 to December 2012.

On information provided by the arrested supplier, the tax authorities arrested two more accused from Lahore. They deposited Rs3.2 million and gave post-dated cheques for Rs10 million to get bail from the Special Judge Customs and Taxation. They have also given a statement, highlighting fraudulent activities of the racket.

These arrests eventually led to the arrest of the textile tycoon from Cochinwala Market, Tower Karachi.

Textile export plan could unravel on currency swings   [ top ]

The Financial Express, Nov 07 2013
The government’s ambitious plan to achieve a 30% jump in textile and garment exports to $43 billion this fiscal and partly offset the impact of a domestic slowdown may go haywire. A 9.3% appreciation of the rupee since its lowest in August may restrict the pace of textile and garment export growth to a moderate range of 10-15% this fiscal, especially in the absence of any major policy intervention and the withdrawal of an up to 4% incentive on yarn exports in September, senior industry executives said.

After a marginal drop last fiscal, textile and garment exports logged a 12.5% year-on-year growth in the April-July this fiscal to $9.11 billion on the back of a depreciating domestic currency and a recovery in US demand. In rupee terms, the rise in exports during the period was more substantial, at 17.6% to R51,863.64 crore. Overall textile production gained 3.2% between April and August, showed the Index Of Industrial Production data, suggesting that exports contributed much to the textile sector expansion this fiscal while domestic demand remained muted. So any threat to exports this fiscal may curb the entire sector’s growth.

“The rupee dropping to the 68 level against the dollar was more of an aberration and the current level of the domestic currency seems to be a reasonable one. However, any further appreciation or wild swings from this point would hurt export prospects as the sector can absorb currency risks to a limited extent only,” said DK Nair, the secretary general of the Confederation Of the Indian Textile Industry.

Senior industry executives said textile and garment firms usually hedge 30-40% of their revenue in the currency market to beat risks, although some heavily export-oriented ones like Welspun hedge more.

Dipali Goenka, managing director, Welspun Global Brands, said: “We hedge around 60% of our revenue while the remaining 40% is kept open as a risk-mitigation strategy. Hence, we are not much affected when the rupee appreciates and, similarly, we do not gain much when the rupee depreciates... This ensures that we have predictable revenues to a significant extent.”

Welspun, Asia’s largest home textile company, draws more

Bangladesh Urges Raise in Garment Industry’s Minimum Wage   [ top ]

By Syed Zain Al-Mahmood, Nov 05 2013
DHAKA, Bangladesh—A government-appointed panel recommended raising the minimum wage in Bangladesh’s garment industry, which has struggled amid a string of fatal factory accidents and labor unrest, by close to 80%.

A six-member committee of government officials, garment manufacturers and union leaders on Monday proposed an increase in the minimum pay in the South Asian country’s biggest industry to 5,300 taka ($67) a month, up from the current 3,000 taka.

Unions had demanded the minimum wage, which was raised in 2010, be more than doubled to 8,000 taka a month. Some union leaders, however, said workers would likely accept Monday’s proposal.

“I’m happy that we were able to come up with a figure,” said Sirajul Islam Rony, president of the Bangladesh National Garment Workers Employees League and representative of the workers on the wage board. “It’s the minimum the workers will accept.”

The wage board’s proposal now heads to Bangladesh’s Labor Ministry, which must approve it before an increase takes effect. Mikail Shiper, Bangladesh’s secretary of labor, said there was room for further discussion between factory owners and factory workers.

“The owners say this is beyond their means,” he said. “But we will talk to everyone and find an acceptable solution.”

Representatives of the Bangladesh Garment Manufacturers and Exporters Association on the committee voted against the increase, and left the meeting without signing the draft agreement after they were outvoted, said two people who were at the meeting.

Atiqul Islam, president of the manufacturers’ association, said his organization was studying the proposal. “Factory owners have not agreed” with the proposed figure, he said. “We acknowledge the need for an increase but we would like to see a final [wage] solution that the industry can [support].”

The factory-owners’ association had proposed a 50% raise in the minimum wage, saying anything higher could hobble the industry as costs of other elements of clothing production are increasing even as demand from many Western markets weakens.

Exporters also point out that the taka has gained against the U.S. dollar—it is currently trading at 77 to the dollar, up from 84 in January—weakening Bangladesh’s competitive advantage compared with rivals such as India, where the rupee has fallen sharply.

Many Western retailers have been cautious about taking a public stance on Bangladesh’s minimum wage amid security concerns and ahead of national elections in January.

Hennes & Mauritz AB, the Swedish chain that is the biggest buyer of made-in-Bangladesh clothes, was reserved in its reaction to the recommended wage increase. “A final decision is still to be taken by the government,” said an H&M spokeswoman.

H&M has been a vocal supporter of a higher minimum wage. The company’s chief executive, Karl-Johan Persson met with Prime Minister Sheikh Hasina last year to raise the issue. The company would like to see a “quick decision” about the minimum-wage revision, the spokeswoman added.

“Revised higher minimum wages is a step in the right direction,” the spokeswoman said on Monday. “What is important now is that the new minimum wages be implemented as soon as possible, and that wages from now on be revised regularly.”

Wal-Mart Stores Inc., the second-largest buyer of clothes made in Bangladesh, said it is watching the issue closely and supports efforts to promote better working conditions in Bangladesh.

“Wal-Mart continues to work with other stakeholders in encouraging the Bangladesh government to review minimum wages for workers in the garment industry to ensure worker needs are met,” said spokesman Kevin Gardner.

Analysts say the government of Ms. Hasina, already facing mass opposition rallies and strikes, can ill afford further protests before elections.

Amirul Haque Amin, the head of the National Garment Workers Federation, an umbrella group representing 37 unions, warned the country risked a repeat of the waves of sometimes-violent labor protests seen over the past month if a new minimum wage wasn’t approved.

Bangladesh’s garment industry exported more than $20 billion of clothes in the year ended June 30 and employs roughly four million workers. Women make up about 80% of the people in the industry and most of them are from poor, rural areas.

In June, the U.S. stopped giving Bangladesh duty-free access to its markets, saying the country hadn’t done enough to improve workers’ rights.

Bangladesh’s largest apparel importer, the European Union, has also threatened to revoke its preferential treatment of imports from the country if factory working conditions aren’t improved.

Factory owners, who oppose the increase, say they can’t afford to pay significantly more to workers because Western consumers have become accustomed to cheap clothing.

Several manufacturers told The Wall Street Journal that they would need to pass on some of the costs to international retailers who have flocked to Bangladesh in recent years, attracted by its low wages and large workforce.

Rubana Huq, managing director of Mohammadi Group, a large garment exporter that counts H&M, Wal-Mart and Inditex SA’s Zara among its clients, estimated that wages account for only about 40 U.S. cents per shirt for a basic T-shirt that might retail for $6.75 in a U.S. store. Inditex didn’t respond to a request to comment.

“Raising wages by 80% would add only about 25 cents per T-shirt,” she said. “As manufacturers, we can only hope for the retailers to accommodate this increase.”

Western retailers have intervened in Bangladesh’s minimum-wage dispute in the past.

In January 2010, a dozen retailers including Gap Inc., Nike Inc., Wal-Mart, and H&M sent Prime Minister Hasina a letter asking her government to raise the minimum wage in order to quell worker unrest.

“It is a discomforting fact that the current minimum-wage level in Bangladesh is below the poverty line calculated by the World Bank and thus does not meet the basic needs of the workers and their families,” the letter said. “Unrest among the workers in this sector is seen as a risk among our companies and could cause damage to the reputation of Bangladesh as a reliable sourcing market.”

Six months later, the Bangladesh government nearly doubled the minimum monthly wage to 3,000 taka, from 1,662 taka.

In June 2012, retailers including Gap and H&M sent another letter to the prime minister asking for another wage review, noting that “the industry disruptions and worker grievances are now impacting our ability to direct business to Bangladesh,” the letter said. “At a minimum, the Bangladeshi government should consider an annual review of the local minimum wage that takes into consideration the national inflation and the consumer-price index.”

Wal-Mart and Nike weren’t signatories of the 2012 letter.

Gap on Monday said it is investing significant resources to improve working and safety conditions in the Bangladesh garment industry and supports the wage reviews.