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News Clips 26 June, 2013

[ Key initiatives of textile policy in limbo ]
[ SBP extends LTTF for fiscal year 2014 ]
[ Bangladesh: Falling Rupee, rising Taka: We must protect our exports ]
[ Australia: Consumers demand end to secrecy ]

Key initiatives of textile policy in limbo   [ top ]

BUSINESS RECORDER, Tahir Amin, June 26, 2013
Key initiatives of the textile policy (2009-14) are in limbo, as the government has earmarked Rs 7.5 billion in the budget 2013-14 against the required Rs 25 billion, textile ministry official revealed to Business Recorder. Expressing serious concerns over the meager allocation in the budget for next fiscal year, the ministry has reportedly decided to raise the issue with finance ministry, to urge the latter to review the allocation.

Textile policy envisaging $25 billion export was announced in 2009, and is going to expire next year. However it failed to achieve the desired results due to multiple reasons including government's failure to implement the textile policy in letter and in spirit, lack of power/gas utilities and the global perception about the country's low production capacity, officials maintained. Sources revealed that due to meager allocation by the government during last four years, most of the initiatives announced in the textile policy have not been implemented.

The government has earmarked Rs 7.5 billion against the demand of Rs 30 billion for implementation of different initiatives of textile policy in the budget for 2013-14. Besides, the government has approved grant of Rs 363 million under the head of demands for grants and appropriation to meet current expenditure in next fiscal year.

For the outgoing fiscal year, Rs 7.5 billion was earmarked in the budget against the demand of Rs 30 billion, however due to financial crisis till date the ministry has received Rs 3 billion. According to the sources, different schemes under the textile policy including textile investment support fund, duty drawback on local taxes (DLTL), refund of past Research and Development (R&D) claims and magnetization of Purified Terephthalic Acid (PTA) were initiated but due to paucity of sufficient funds, all these schemes are in doldrums.

Due to financial constraints, textile sector's pending liabilities against the government under different schemes announced in the policy have swelled to over Rs 14 billion. This includes Rs 10 billion as Drawback on Local Taxes and Levies (DLTL), which is causing resentment among the industrialists. Asghar Ali Chairman and Muhammad Asif, Vice Chairman of Pakistan Textile Exporters Association (PTEA) said that as large number of value-added textile exporters are stuck in sales tax, local tax drawbacks, customs rebate, and federal excise duty refund regimes creating severe financial crunch.

SBP extends LTTF for fiscal year 2014   [ top ]

BUSINESS RECORDER, Recorder Report, June 25, 2013
The State Bank of Pakistan (SBP) Monday announced extension in Long Term Financing Facility (LTFF) for the next fiscal year (2013-14). According to a Circular No 07 of 2013, issued by SBP, LTFF limits sanctioned in favour of banks/DFIs for the year 2012-13 are due to expire as on June 30, 2013. However, in order to ensure that financing facilities are available to borrowers till finalisation of new limits under LTFF for the financial year 2013-14, it has been decided to continue with the existing limit until fresh limits for FY 2013-14 are notified.

Further, SBP has advised banks and DFIs to furnish information of limit requirements for FY 2013-14 under LTFF and borrower-wise details of cases being sanctioned, application(s) in process/pipeline under LTFF along with details of LCs established and their expected date(s) of retirement, latest by June 28, 2013, to finalise limits under LTFF for FY 2013-14.

Bangladesh: Falling Rupee, rising Taka: We must protect our exports   [ top ]

FINANCIAL EXPRESS, Mamun Rashid, June 24, 2013
The Indian Rupee has dropped to its lowest in history in last Thursday's trading against US dollar. Though Rupee closed at Rs 59.57 to a greenback, the market saw it at Rs 59.93 against a unit of US dollar. Analysts have opined that Rupee is not likely to bounce back significantly due to possible withdrawal of the stimulus by the United States government as well as some of the foreign institutional investors continuously withdrawing from Indian investments.

On the other hand, Bangladesh Taka is continuously gaining strength against the US currency. While it saw its lowest at almost Taka 84 to a US dollar, it is now trading at approximately Taka 77 against a unit of the greenback. Analysts are of the opinion that with reduction of imports, almost stable exports and inward remittances, Taka is likely to see a new level of 70 against a unit of US currency if the US dollar is not continuously supported by the central bank.

India, in view of growing disturbances in our apparel plants, is trying its best to boost their apparel or clothing exports and eyeing reduction of the huge difference with Bangladesh, if not with China too. The Indian government is quite active to meet their performance gap on apparel exports and ready to consider further incentives for their relevant exporters. A falling Rupee is likely to work as a booster here. Even in the near and distant past, we have seen the Reserve Bank of India (RBI) coming up with various incentive packages to 'pull up' its various industry segments to remain afloat or prosper amid various global market threats.

Though there has been a longstanding debate as to ingenuity of the entrepreneurs versus policy support of the government as the reason for success for our apparel export, the government in the recent days could not come up with any integrated approach, with regard to its support to our garment industry. While `bonded warehouse facility' remains a big policy support until today, we have seen continuous reduction in cash incentives and increase in tax at source since apparel industries are historically paying low taxes. While Pakistan even has come up with extra-ordinary package for its exporters like 'exchange rate gap' support or paying a few extra bucks for each dollar earned through exports, Bangladesh has left it to the market forces for the last several years. Cash incentives also declined in areas other than the cases with 'new product, new market' and the textiles products.

While the government is yet to meet its fiscal 2013 target for exports, it is eyeing almost 12 per cent plus growth in the country's aggregate exports for fiscal 2014, from US$ 28 billion to more than US$ 30 billion. Though our exports are holding up, despite no dramatic upside in the US economy or cloudy European economy, increasing this by more than 12 per cent without any specific stimulus may be a daunting task, specially when India is very supportive of its ready-made garments industry to `do their best' in view of the ailing Bangladesh apparel industry. While jute and jute goods are likely to do well along with more pharmaceuticals and software exports, our apparel exports are not showing very good signs after `Rana Plaza' tragedy. While the country has seen more than US$ 19 billion apparel exports in the fiscal 2012, it may not meet its target of US$ 23 billion in fiscal 2013 unless all the stakeholders, specially the government, do their best.

While the central bank is quite engaged with its policy option to continuously support the US dollar in order to protect export and remittance pie, we have not seen anything mentionable in the Finance Minister's budget speech with regard to helping out the garment sector to withstand the recent and immediate future challenges. Even we have not seen any extra allocation to pay the increased 'factory inspectors', not to talk about any allocation for `factory relocation', 'separate industrial zone development' or worker rationing support. The Finance Minister seemed to be limited to the 'prayers' for the salvation of the departed souls and wishing for no recurrence of the same type of incidents in future. Apparel industry as a whole deserves a 'soft landing pad' and helping hand from the government, no matter whether a section of our garment owners has come out to be 'blood sucker' due to 'continuous squeeze' by the buyers or not. While a new wage board or BGMEA-recommended continuous review of the workers wage in view of market rise or fall is a good idea, their owners deserved some policy support from the government, too. Now with falling Rupee and rising Taka, their life is going to be further tough.

The BB is seen continuously buying US Dollar from the banks to support our exports and inward remittances. However, this may not be enough in view of fast falling imports and increasing inward remittances. We need a few more steps like 'interim package', 'a few extra bucks', 'interest subsidy' or may be tax breaks or tariff reduction for the major export-related imports for our exporting friends. Along with these we must develop a dynamic process to immediately react to any policy changes in our competing countries, specially India, with regard to their ready-made garment exports. More exports mean more employment generation, more employment generation means more poverty reduction.

Australia: Consumers demand end to secrecy   [ top ]

BRISBANE TIMES, Sarah Whyte & Ben Doherty, June 24, 2013
Australian consumers are demanding an end to secrecy by clothing retailers who refuse to reveal whether they source garments from Bangladesh.

Two months after at least 1127 textile workers died in the Rana Plaza factory collapse, Australian consumers' attitudes to foreign-made clothes has considerably shifted, a report from Oxfam Australia reveals.

Figures show that 68 per cent of Australian consumers would pay more for their clothes if they were ethically made and ensured garment workers were paid a decent wage. In the wake of Bangladesh's worst industrial accident, 83 per cent want to know the location of the factories, and whether workers are being treated fairly and working in safe conditions.

''The figures are quite overwhelming,'' said Helen Szoke, Oxfam's chief executive. ''It confirms our view that people actually do care what they are buying.''

Dr Szoke said the horror of the Bangladesh disaster in April had heightened consumers' awareness of how their clothes were made. The survey, conducted in June, interviewed more than 1000 Australians.

Bangladeshi Nadim Zarrar, who supplies clothes for Big W, said it was ''hypocrisy'' for Western companies to demand better conditions and pay for workers in Bangladesh, while consistently pushing down the prices they offered.

Since the Rana Plaza collapse, international companies have rushed to sign the ''Bangladesh Accord'' to improve fire and building safety for workers. But Australian retailers have been slow to commit, causing consumer outrage. Only this month Kmart, Target and Cotton On signed the accord.

Target currently sources garments from 45 factories in Bangladesh but plans to reduce that number, spokesman Jim Cooper said. Big W and Best & Less are yet to formally commit, despite major European clothing chains - H&M, Benetton, Primark, Tommy Hilfiger, Calvin Klein, Zara and Tesco - signing on immediately.