Cotlook A Index - Cents/lb (Change from previous day)

21-05-2019 78.80 (+2.20)

16-05-2018 92.05

16-05-2017 94.90

New York Cotton Futures (Cents/lb) As on 23.05.2019 (Change from

previous day)

July 2019 66.51 (-0.24)

Oct 2019 67.02 (-1.18)

Dec 2019 66.09 (-0.81)

23rd May

2019

Cotton likely to remain range-bound till June-end

FinMin prepares 100-day agenda for new govt; focus on

boosting economy, investment

US tariff hike on China may increase textile export by 25%

India leading among developing nations in circular

economy investments: Chatham House

Cotton and Yarn Futures

ZCE - Daily Data (Change from previous day)

MCX (Change from previous day)

May 2019 21090 (-160)

Cotton 14180 (-300) June 2019 21350 (-150)

Yarn 22135 (-250) July 2019 21530 (-150)

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2 CITI-NEWS LETTER

-------------------------------------------------------------------------------------- Cotton likely to remain range-bound till June-end

FinMin prepares 100-day agenda for new govt; focus on

boosting economy, investment

US tariff hike on China may increase textile export by

25%

Trade war: Ready for further trade talks with the US,

says China’s top diplomat

Trade war harming 75% of US firms in China: Survey

India leading among developing nations in circular

economy investments: Chatham House

Niti Aayog's economic agenda for new govt likely to

focus on boosting private investment: Vice Chairman

Rajiv Kumar

How managers can boost a firm’s productivity

----------------------------------------------------------------------------------

Tariffs could cause massive store closures in U.S.: UBS

Big plans for Ukrainian technical textiles sector

Over 400 textile, garment factories in Bangladesh prone

to labor unrest

Fabrics poised to become the new software

Pakistan: Industrial development

--------------------------------------------------------------------------------

NATIONAL

---------------------

GLOBAL

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3 CITI-NEWS LETTER

NATIONAL:

Cotton likely to remain range-bound till June-end

(Source: Jayashree Bhosale, Economic Times, May 22, 2019)

Cotton prices are expected to remain range-bound in India till June-end, even as

concerns about cheaper imports owing to China-US tariff war have capped the bullish

trend in the domestic market.

“Although cotton prices have softened a bit in May, there is no buying interest in the

market,” said Pradeep Jain, president, Khandesh Ginning and Pressing Association.

On May 13, the US increased tariff on $200 billion worth of Chinese imports 10 per

cent, escalating the trade war between the two countries. As a result, international

cotton prices came under pressure, making imports feasible for Indian buyers who were

worried by physical shortage of the fibre crop.

“There is very less buying and selling of cotton at present as everyone is in wait-and-

watch mode,” said RS Rajpal, director, Manjeet Cotton. According to the central

government’s fourth advance estimate, India’s cotton production in 2017-18 was 34.89

million bales of 170 kg each. For 2018-19, the Cotton Advisory Board, a government

body, has estimated production of 36.1 million bales in November 2018. However, it has

not yet revised its November estimate, while the Cotton Association of India, which

represents traders, has revised the 2018-19 cotton production estimate to 31.5 million

bales, down 9.7 per cent from the previous year’s figure.

As domestic production of the fibre crop declined in 2018-19 owing to drought, cotton

prices increased to Rs 46,300 per candy (of 356 kg each) on May 2 from Rs 41,700 per

candy on March 1. Traders were expecting cotton prices to touch Rs 50,000 per candy

soon. However, prices have fallen to Rs 44,500 per candy in the spot trade.

Home

FinMin prepares 100-day agenda for new govt; focus on boosting economy,

investment

(Source: Economic Times, May 22, 2019)

With the Lok Sabha election process coming to an end, the finance ministry has

prepared 100-day agenda for the new government with an aim to push the economy

which has slipped to 6.6 per cent in the third quarter of 2018-19. Among other things,

the agenda is likely to focus on increasing private investment, employment generation

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4 CITI-NEWS LETTER

and giving relief to the farm sector, sources said. Besides, the agenda also include

improving direct and indirect tax collection. Simplification of tax procedure especially

with regards to the goods and services tax is also on the cards. As announced in the

interim Budget, the decision with regard to changes in tax slab or tax rate as far as

income tax is concerned could be taken in the final Budget for 2019-20 probably in July.

The Prime Minister's Office had asked all ministries and departments to prepare 100-

day agenda for the new government which is likely to take office in the next few days.

Reinvigorating industrial growth, increasing credit growth, consolidation in the banking

sector and funding the unfunded would also be part of the 100-day agenda, the sources

said. There would be emphasis on raising corporate governance in the banking sector

including a more diversified board structure. The finance ministry in the process of

further improving its EASE (Enhanced Access and Service Excellence) focusing on six

themes of customer responsiveness, responsible banking, credit off take, PSBs as

Udyami Mitra, deepening financial inclusion and digitalisation and developing

personnel for brand of public sector banks. It is to be noted industrial output growth

slowed to a 20-month low of 0.1 per cent in February, mainly due to contraction in the

manufacturing sector. Factory output, as measured in terms of the Index of Industrial

Production (IIP), had grown by 6.9 per cent in February 2018, according to data

released by the Central Statistics Office (CSO). During April-February 2018-19,

industrial output grew at 4 per cent as against 4.3 per cent in the corresponding period

of the previous fiscal. At the same time, passenger vehicle sales in India dropped 17.07

per cent in April, the steepest fall since October 2011, as weak customer sentiment led by

liquidity crunch, uncertainty revolving elections and high product prices hit sales. The

domestic sales declined for sixth straight month in April to 2,47,541 units against

2,98,504 units in the year-ago month. It is the worst dip in passenger vehicle sales since

October 2011 when sales had dropped by 19.87 per cent. All major segments, including

two-wheelers and commercial vehicles, witnessed a decline in sales in April, according

to data released by the Society of Indian Automobile Manufacturers (SIAM). Various

experts have pointed out the new government should take on the challenge of

introducing reforms in areas including land and labour in order to push economic

growth. Macroeconomic stability will guide India's high growth trajectory. According to

the interim Budget 2019-20, the government has pegged fiscal deficit target of 3.4 per

cent for the current fiscaly

Deviating from the path laid down in the Fiscal Responsibility and Budget Management

(FRBM) Act, the government has pegged the fiscal deficit for the next financial year at

3.4 per cent of GDP, as against the original target of 3.1 per cent.

Home

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5 CITI-NEWS LETTER

US tariff hike on China may increase textile export by 25%

(Source: Times of India, May 23, 2019)

Textile exporters in Surat, the country’s largest manmade fabric (MMF) sector, are

upbeat over the ongoing trade war between the US and China, as they forsee a major

advantage of increase in fabric and readymade garment exports to the US following

imposition of import duty by America on Chinese products. The Synthetic and Rayon

Export Promotion Council (SRTEPC) has even predicted around 25% growth in the

textile exports in 2019-20 from this political turn. Chairman of SRTEPC, Narain

Agarwal told TOI “There is an ample opportunity for the Indian textile companies to

grow and increase the share of textile exports to the US in the next year.”

The US has hiked tariff on $200 billion imports from China to 25 per cent with effect

from May 10, 2019, including on textile related chapters 50-60. An analysis reveals that

this hike will put India at an advantageous position. “India is the largest exporter of

MMF textiles to US. In comparison to China, the imports of textile products from India

stood at $1.71 billion in 2018. In 2018, it is expected to cross $2.2 billion,” Agarwal

added.

Amid the enthusiasm, exporters are worried that in order to offset loss, the Chinese

textile manufacturers may dump cheap goods in India creating problems for the

indigenous manufacturers. They believe that the hike is likely to create a reverse impact

on local Indian businesses.

Textile exporter and chairman of Pratibha Textile group, Pramod Agarwal told TOI that

he apprehends a reverse impact from the tariff hike on China. “It’s going to affect both

ways — rise in export of fabrics and garments from India to US, but also India becoming

a Chinese manufacturers’ dumping yard.”

The new government in the Centre must frame a policy to safeguard the Indian textile

manufacturers against the Chinese onslaught, asserted the SRTEPC chairman, adding

that it should also introduce major hike in the anti-dumping duties to protect

indigenous manufacturers.

Home

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6 CITI-NEWS LETTER

Trade war: Ready for further trade talks with the US, says China’s top

diplomat

(Source: The Hindu Business Line, May 22, 2019)

It’s quite clear it is the US side that more than once changed its mind overnight and

broke the tentative deal already reached, said Chinese Ambassador to Washington Cui

Tiankai

Beijing is ready to resume trade talks with Washington, China's Ambassador to the

United States Cui Tiankai said, as a top US business lobby in China said nearly half its

members are seeing non-tariff barrier retaliation in China due to the trade war.

No further trade talks between top Chinese and US negotiators have been scheduled

since the last round ended in a stalemate on May 10, the same day US President Donald

Trump sharply increased tariffs on $200 billion worth of Chinese goods and took steps

to levy duties on all remaining Chinese imports.

Acrimony has intensified since Washington last week blacklisted Chinese telecom

equipment company Huawei Technologies Co Ltd, a potentially devastating blow for the

company that has rattled technology supply chains and investors.

Another big Chinese tech firm, video surveillance equipment maker Hikvision Digital

Technology Co Ltd, could also face limits on its ability to buy US technology, the New

York Times reported, citing people familiar with the matter, sending the firm's

Shenzhen-listed shares 10 per cent lower at the opening on Wednesday.

Negotiations between the United States and China have soured dramatically since early

May, when Chinese officials sought major changes to the text of a proposed deal that the

Trump administration says had been largely agreed.

US ‘broke’ the deal

Speaking to Fox News Channel, Chinese Ambassador to Washington Cui Tiankai said

Beijing was still open for talks. “China remains ready to continue our talks with our

American colleagues to reach a conclusion. Our door is still open,” Cui said on Tuesday.

He blamed the US side for frequently “changing its mind” on tentative deals to end US-

China trade disputes.

Cui turned the tables and said it was US negotiators that had abruptly backed away from

some previous deals that had been tentatively agreed over the past year. “It’s quite clear

it is the US side that more than once changed its mind overnight and broke the tentative

deal already reached.” Cui said. “So we are still committed to whatever we agree to do,

but it is the US side that changed its mind so often.”

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7 CITI-NEWS LETTER

In June 2018, US Commerce Secretary Wilbur Ross held negotiations with Chinese Vice

Premier Liu He on an offer by China to increase its purchases of US goods by around

$70 billion, US officials said at the time. But US President Donald Trump did not accept

the offer, choosing instead to begin imposing tariffs on Chinese goods. This week,

Chinese President Xi Jinping urged people to prepare for “a new Long March”, evoking

the patriotic spirit of the 1934-36 route march of Communist Party members fleeing a

brutal civil war to a remote rural base, where they re-grouped and eventually took power

in 1949.

Xi did not draw a direct connection to the trade war, but financial market analysts

interpreted his remarks as a sign that Beijing was girding for a protracted dispute with

Washington.

Chinese retaliation

US firms are beginning to face retaliation in China for the trade war.

The American Chamber of Commerce of China and its sister body in Shanghai, citing a

recent survey of members on the impact of tariffs, said on Wednesday that members

said they face increased obstacles such as government inspections, slower customs

clearance and slower approval for licensing and other applications. It also said that 40.7

per cent of respondents were considering or had relocated manufacturing facilities

outside China.

Of the almost 250 respondents to the survey, which was conducted after China and the

United States both raised tariffs on each other's imports earlier this month, almost

three-quarters said the impact of tariffs was hurting their competitiveness.

To cope, around one third of companies said they were increasingly focusing their China

operations on producing for Chinese customers and not for export, while another one-

third said they were delaying and cancelling investment decisions. Long considered a

solid cornerstone in a relationship fraught with geopolitical frictions, the US business

community in China in recent years has advocated a harder line on what it sees as

discriminatory Chinese trade policies. The United States is seeking sweeping changes to

China's trade and economic policies, including an end to forced technology transfers and

theft of US trade secrets. Washington also wants curbs on subsidies for Chinese state-

owned enterprises and increased access to US markets. Cui told Fox News that US

restrictions on Huawei “are without any foundation and evidence” and could undermine

the normal functioning of markets. “Everybody knows Huawei is a privately owned

company. It is just a normal Chinese private company,” Cui said. “So all the action taken

against Huawei are politically motivated.”

Home

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8 CITI-NEWS LETTER

Trade war harming 75% of US firms in China: Survey

(Source: Business Standard, May 22, 2019)

More than seven out of 10 US companies in China (74.9 per cent) are being adversely

affected by the ongoing trade war between China and the US, according to a survey

released on Wednesday by the American Chamber of Commerce in China.

"The negative impact of tariffs is clear and hurting the competitiveness of American

companies in China," according to the report which includes the findings of the survey

of member companies made by AmCham China and AmCham Shanghai.

The survey was carried out from May 16 to 20. About 250 companies participated in it of

which 61.6 per cent were manufacturing-related, 25.5 per cent were service-related, 3.8

per cent retail and distribution-related, while 9.6 per cent belonged to other industries.

The survey was carried out after US President Donald Trump issued a tariff increase

from 10 per cent to 25 per cent on $200 billion worth of Chinese goods on May 10,

escalating the trade war between the two countries.

The survey was carried out after the rise in tensions unleashed by Trump, which in turn

triggered a reaction from the Chinese authorities with new tariffs.

The impact of the tariffs has been felt through lower demand for products (52.1 per

cent), higher manufacturing costs (42.4 per cent) and higher product sales prices (38.2

per cent), Efe news reported.

To address the impact of tariffs, the survey reported that companies are taking measures

such as delaying or cancelling investment decisions (33.2 per cent) or adopting a "China,

for China" strategy (35.3 per cent) which seeks to establish manufacturing and sourcing

within China to mainly serve the Chinese market.

"Such strategy constitutes a rational choice for many companies to insulate themselves

from the effects of tariffs while maintaining their ability to pursue domestic market

opportunities," the report added.

Although over half of the respondents (53.1 per cent) have seen no increase in non-tariff

retaliatory measures by the Chinese government, about one in five has experienced an

increase in inspections (20.1 per cent) and slower customs clearance (19.7 per cent).

They have also felt slower approval for licenses or other applications (14.2 per cent), as

well as complications arising from increased bureaucratic oversight or regulatory

control (14.2 per cent).

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9 CITI-NEWS LETTER

The survey revealed that 40.7 per cent of respondents are considering moving or have

moved their manufacturing facilities outside China, with Southeast Asia (24.7 per cent)

and Mexico (10.5 per cent) being the primary destinations.

Less than 6 per cent of the member companies said that they have considered or are

considering relocating manufacturing to the US.

Home

India leading among developing nations in circular economy investments:

Chatham House

(Source: ET Energy World, May 22, 2019)

India can save $218 billion – around Rs 14 lakh crore or 11 per cent of its GDP –

annually by 2030 by promoting circular economy

India is leading the developing nations in circular economy investments that are aimed

at pursuing a sustainable and climate-resilient growth and has an opportunity to save as

much as $218 billion – around Rs 14 lakh crore or 11 per cent of its GDP – annually by

2030, according to a new report released today by Chatham House, the London-based

Royal Institute of International Affairs.

According to the study An Inclusive Circular Economy: Priorities for Developing

Countries, India is one of a number of developing countries set to unlock climate-

resilient growth and the national policymakers are investing in the circular economy –

an economic model based on recycling, reusing and repairing raw materials and

products.

“It is estimated that this could open up opportunities to the value of $218 billion per

year by 2030 in India” the report said, quoting a study by the Ellen MacArthur

Foundation. It added the concept of circular economy is fast gaining traction amongst

business leaders and policymakers in Europe, China and other developed economies but

its potential for developing countries has so far been overlooked.

The report is the first to look at the opportunities circular economy offers in the

developing world, and the current barriers to progress. It highlights how India’s thriving

reuse and repair sectors provide a strong base for policymakers and businesses to

replicate sustainable, circular production models across the economy.

“The circular economy can be a win-win for sustainable growth in emerging countries –

meeting consumer demand, creating jobs and protecting the environment. India is

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10 CITI-NEWS LETTER

leading the pack, but the present policy vacuum means opportunities for scaling up this

approach are being missed,” said Laura Wellesley, research fellow at Chatham House.

“International policy makers and investors must urgently find ways to foster greater

coordination before a critical window of opportunity passes,” she said.

The reports says India’s efforts emphasise the broader potential of the circular economy

to create more jobs and resilient industries, limit environmental impacts and “leapfrog”

to more sustainable development patterns. This has enabled the government to progress

multiple policy goals at once.

“The country boasts one of the highest plastic recycling rates in the world – it recycles or

reuses over 90 per cent of all the PET that is manufactured in the country. India has also

made strides in improving electronics recycling. More than 700 electronics producers

have signed up for e-waste ‘extended producer responsibility’ authorisation. Car-sharing

firms have helped generate thousands of new jobs and reduce congestion in major

cities,” the report said.

The report calls for national policy makers to weave circular economy approaches into

existing policy programmes. It also recommends that international policy and financial

institutions like the OECD, World Bank, UNDP and EU should

prioritise sustainability when making financial investments and developing regional

trade and processing hubs.

Home

Niti Aayog's economic agenda for new govt likely to focus on boosting

private investment: Vice Chairman Rajiv Kumar

(Source: Economic Times, May 22, 2019)

Niti Aayog is working on the economic agenda for the new government where the focus

will be on achieving long term sustainable growth and boosting private investments in

the country, the think tank's Vice Chairman Rajiv Kumar said on Wednesday.

Lok Sabha election results would be announced on Thursday and the new government

would be in place in the coming weeks.

In an interview to PTI, Kumar said Niti Aayog would submit an action plan to the new

government. "Niti Aayog is preparing something (economic agenda) and that will be

submitted to the new government. "The basic thing is that we need to take steps to

increase private investments in the economy. That's a real issue and to increase the

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11 CITI-NEWS LETTER

private investment, it requires greater access to credit for small and medium enterprises

(SMEs)," Kumar said.

According to him, the economic agenda might also pitch for extending labour subsidies

to textile and leather sectors to reduce cost of production.

Cost of capital in India is quite high, which needs to be brought down, and there is also a

need to create a land bank owned by public sector undertakings so that private

investment can be attracted, Kumar said.

On whether he sees a case for fiscal stimulus as the economy is slowing down, Kumar

said there is always a case for fiscal stimulus provided the fiscal balance is maintained.

"So there is no case at all of busting all fiscal norms. I think, we can create fiscal space

through non-tax revenues being increased. "And also including tax compliance, there is

a need for expanding public capital expenditure while maintaining fiscal balance," the

eminent economist opined. Emphasising that India can achieve double-digit growth by

2022, Kumar said a good foundation for such a trajectory has already been laid in the

last five years. During this period, there has been unprecedented macro stability as well

as an average annual growth of 7 per cent growth.

"And also including tax compliance, there is a need for expanding public capital

expenditure while maintaining fiscal balance," the eminent economist opined.

Emphasising that India can achieve double-digit growth by 2022, Kumar said a good

foundation for such a trajectory has already been laid in the last five years. During this

period, there has been unprecedented macro stability as well as an average annual

growth of 7 per cent growth. "So there is also a social basis now for ramping up our

growth," he said. Noting that the government has done enough in last five years to be

now ready to take that few steps to ramp up growth to 9 per cent, Kumar said, "I think,

that by fiscal 2022, we should be able to get there (double digit growth)." For the current

fiscal ending March 2020, Kumar expects Indian economy to record a growth of around

7 per cent. In February, the Central Statistics Office (CSO) revised downwards the

growth estimate for 2018-19 fiscal from 7.2 per cent to 7 per cent, the lowest in five

years.

According to a report released by the United Nations on Tuesday, India is projected to

grow at 7 per cent in 2019 and 7.1 per cent in 2020. Most exit polls have predicted a

sweeping victory for the BJP-led National Democratic Alliance (NDA)

Home

How managers can boost a firm’s productivity

(Source: Live Mint, May 22, 2019)

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12 CITI-NEWS LETTER

Skills, personality traits and practices of management may be the most important

determinant of a firm’s productivity, suggests a new study

Skills, personality traits and practices of management may be the most important

determinant of a firm’s productivity, suggests a new National Bureau of Economic

Research study by Achyuta Adhvaryu of the Ross School of Business, and others.

The authors show, based on a study of production line supervisors in Indian ready-made

garment factories, that managerial quality plays a key role in production efficiency and

the growth of a firm.

They argue that it is the differences in the managerial practices of firms that explain a

substantial portion of the large productivity gap between rich and poor countries. The

authors single out middle managers, such as line supervisors, as especially important for

more efficient production.

They argue that in many low-income countries, the quality of these middle managers is

particularly low.

The researchers match granular production data from several garment factories in India

to results from a survey conducted on line supervisors employed in those factories to

ascertain which managerial skills contribute the most to productivity.

They find that the tenure of the supervisor, their autonomy, who they controlled and the

attention to their work had substantial effects on productivity.

However, as many of these skills are intangible and hard to gauge in a managerial

candidate, the job market fails to reward these skills through higher wages and salaries.

The authors find evidence that more easily observable characteristics, such as industry

tenure, are better rewarded, while less observable characteristics, such as attention to

work, are rewarded less commensurately, despite their importance in productivity. As a

result, the authors argue that good managers typically tend to be underpaid.

Home

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13 CITI-NEWS LETTER

GLOBAL:

Tariffs could cause massive store closures in U.S.: UBS

(Source: Xinhua, May 22, 2019)

Imposing further tariffs in the escalating trade disputes between the United States and

China would lead to widespread closures of softline stores and cause substantial

disruption across the industry, according to a report by Swiss investment bank UBS.

The UBS warned that over 12,000 U.S. brick and mortar stores of apparels and textiles,

which have about 40 billion U.S. dollars of annual revenue but only less than 3 percent

of earnings before interest and tax (EBIT) profit margin, would be at risk because of the

possible new tariffs.

After increasing tariffs on 250 billion dollars' worth of Chinese imports to 25 percent,

the White House then threatened to levy extra tariffs on more Chinese goods including

clothing and footwear.

U.S. unilateral acts have triggered countermeasures from China, which said it "will fight

to the end" if someone brings the war to its doorstep.

"We think potential 25 percent tariffs on Chinese imports could accelerate pressure on

these companies' profit margins to the point where major store closures become a real

possibility," said UBS analyst Jay Sole.

The U.S. retail industry lost 3,125 stores, or more than 5 percent in the first quarter of

2019, marking the highest rate of year-on-year decline in at least a decade, Sole said.

According to the report, a big wave of store closures would be highly negative and create

intense inventory dislocations and discounting in addition to impacts on jobs and the

economy.

UBS tracks 524 public and private softlines retailers operating 116,364 stores as of the

end of March in comparison with a peak of 132,860 in 2012.

Home

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14 CITI-NEWS LETTER

Big plans for Ukrainian technical textiles sector

(Source: Innovation in Textiles, May 22, 2019)

Ukraine plans to attract up to US$ 300 million of investments in the development of the

domestic technical textiles and nonwovens industry in the next several years, according

to the Ukrainian Cabinet of Ministers.

This is seen as a response to the recent plans of the Russian government to make heavy

investments in the development of technical textiles, mainly to be supplied for the ever-

growing needs of the Russian defence sector.

According to Vladimir Groysman, Ukraine’s Prime-Minister, the majority of funds for

the implementation of these plans will be provided by private domestic and foreign

investors, while the remaining will be allocated from the state sources.

Measures and strategy

The news has been confirmed by the Ukrainian Presidential Administration. The

Ukrainian authorities are counting on support from the US businesses, which in recent

years have significantly increased the volume of investments in different sectors of the

Ukrainian economy, including technical textiles.

Several days ago, the Ukrainian government delegation concluded its visit to the US,

where it discussed the funding opportunities.

In addition, the national government and a former Ukraine’s President Petr Poroshenko

have recently started developing a special agreement with the US in the area of technical

textiles. It is expected that Ukraine’s newly elected President Vladimir Zelensky will

continue this work. Such an agreement would help the US business to better protect its

investments and interests within Ukraine.

The Ukrainian government also completed a roadmap aimed at making the Ukrainian

technical textiles and nonwovens industry more attractive to investors. The

implementation of this strategy will be evaluated by the US government and the

country’s business sector already by the end of the first quarter of this year.

New production facilities

According to the Ukrainian Ministry of Industry and Infrastructure, a state agency

responsible for attracting investments in Ukrainian technical textiles industry, the

majority of allocated funds will be used for the establishment of production facilities,

specialising in the production of technical textiles and end-products, to be located in

different parts of the country.

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15 CITI-NEWS LETTER

Most of these facilities are initially expected to be established in central part of the

country, as well as in Western Ukraine, a region not traditionally well-known for textiles

production.

Historically, most of the Ukrainian technical textiles and chemical production has been

concentrated in the eastern part of the country, and in particular, the Donbass region.

However, due to the current control of the area by pro-Russian rebels, the majority of

the existing production facilities were lost.

According to the government, from 2019-2021, up to US$ 300 million will be invested

in the establishment of at least five-six large and medium size enterprises. To support

the investments strategy, the Ukrainian government also announced its intention to

provide investors with significant stakes in the newly established enterprises.

Home

Over 400 textile, garment factories in Bangladesh prone to labor unrest

(Source: Global Times, May 22, 2019)

Some 436 textile and readymade garment (RMG) factories across Bangladesh are

'vulnerable' to labor unrest over payment of wages and festival allowance, officials in the

country said.

Sources said non-payment of dues, varying amounts of festival allowance, workload

ahead of Eid and sudden closure of factories are among the reasons that might fuel

unrest.

Out of the 436 factories, some 328 are the members of Bangladesh Garment

Manufacturers and Exporters Association (BGMEA) while 89 are registered with

Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) and 19 are

affiliated with Bangladesh Textile Mills Association (BTMA), according to Industrial

Police (IP) who shared the details in a recent meeting held at the home ministry.

IP has also categorised the factories as A, B and C, ranging the possible risks to labour

unrest ahead of Eid-ul-Fitr.

It put some 120, 29 and 03 factories of BGMEA, BKMEA and BTMA members into A

category where the majority of units are subcontracting their work and most vulnerable

to labor unrest, according to its officials.

The factories which fall into B category included 87 from BGMEA members while 25

from BKMEA and 10 from BTMA, they added.

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16 CITI-NEWS LETTER

Some 121 BGMEA, 35 BKMEA and 06 BTMA member factories have fallen into C

category.

The units are located in Ashulia, Gazipur, Chattogram, Narayanganj, Mymensingh and

Khulna areas.

Intelligence agencies, however, identified some factors for possible labor unrest that

include absence of fixed festival allowance in garment factories, and non-payment of

wages and allowance (including festival) seven to eight days before Eid vacation starts.

Besides, not getting Eid holidays timely and as demanded, sudden lay-off or closure of

factories in Ramadan or ahead of Eid, workers' termination, heavy workload at night

during Ramadan, and no provision of fixed working hours in the fasting month are also

among the factors.

IP also identified a good number of factories, located in the export processing zones

(EPZs), as vulnerable to labor unrest, the officials said.

There are some other factories that are not the members either of BGMEA or BKMEA.

There is also jute, plastic, chemical and re-rolling mills and the number of non-RMG

and non-textile factories, according to IP, is 238.

They all run the risk of witnessing labour unrest anytime, the officials added.

When contacted, Abdus Salam, additional inspector general of the IP, said this time they

have categorised the factories according to possible level of their risk to unrest based on

a wide range of issues.

"We've sent the lists to BGMEA, BKMEA and BTMA so that they can take necessary

steps to avert any untoward incidents in industrial units ahead of Eid," he told the FE.

The IP is in contact with the units identified as vulnerable to labour unrest, he said,

adding that they have kept them under close surveillance too.

The authorities of the units have assured them of paying wages and festival allowance

along with other dues to their workers before Eid vacation starts, he added.

Rights organizations, on the other hand, alleged that uncertainty and confusion have

been created among the workers as the labor ministry is yet to fix any deadline for

making payment of wages and festival allowance.

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17 CITI-NEWS LETTER

A meeting of the crisis management core committee under the labor ministry on May 13

failed to fix any deadline for paying monthly wages and festival allowance to the

country's garment workers.

Besides, leaders from the apparel sector at the meeting demanded payment of wages for

15 days of May before Eid.

The committee has been fixing deadlines for paying wages and festival allowance since

2013.

Labor leaders warned that factory owners would be held responsible for any unstable

situation over non-payment of wages and allowance.

National Garment Workers-Employees League (NGWEL) President Sirajul Islam Rony

said the number of untoward incidents over non-payment of wages has declined in

recent years.

But in absence of any clear instruction from the government related to wages for the

month of May and festival allowance, there are still a good number of factories where

the workers are worried over getting their monthly wages and festival allowance in time,

he added.

"We demand that both monthly wages and festival allowance be paid before Eid so that

workers can buy tickets to go home and do some shopping," he stated.

He also urged the government to fix an amount equal to the basic pay as festival

allowance.

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Fabrics poised to become the new software

(Source: MIT News, May 22, 2019)

Basic research advance leads to production of more than 250,000 chips embedded

within fibers in less than a year.

In the summer of 2018, a team led by MIT researchers reported in the

journal Nature that they had successfully embedded electronic devices into fibers that

could be used in fabrics or composite products like clothing, airplane wings, or even

wound dressings. The advance could allow fabrics or composites to sense their

environment, communicate, store and convert energy, and more.

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18 CITI-NEWS LETTER

Research breakthroughs typically take years to make it into final products — if they

reach that point at all. This particular research, however, is following a dramatically

different path.

By the time the unique fiber advance was unveiled last summer, members of Advanced

Functional Fabrics of America (AFFOA), a not-for-profit near MIT, had already

developed ways to increase the throughput and overall reliability of the process. And,

staff at Inman Mills in South Carolina had established a method to weave the advanced

fibers using a conventional, industrial manufacturing-scale loom to create fabrics that

can use light to both broadcast and receive information.

Today, less than a year after the technology was first introduced to the world, around a

quarter of a million semiconducting devices have been embedded in fibers using the

patented technology, and companies like New Balance, VF, Bose, and 3M are seeking

ways to use the technology in their products.

“AFFOA is helping cutting-edge basic research to reach market-ready scale at

unprecedented velocity,” says Yoel Fink, CEO of AFFOA and a professor of materials

science and electrical engineering at MIT. “Chip-containing fibers, which were just

recently a university research project, are now being produced at an annual rate of half a

million meters. This scale allows AFFOA to engage dozens of companies and accelerate

product and process development across multiple markets simultaneously.”

Fink says that AFFOA’s work is unleashing a “Moore’s Law for fibers,” wherein the basic

functions of fibers will grow exponentially in the coming years, allowing companies to

develop value-added fabric and composite products and services. “Chip-containing

fibers present a real prospect for fabrics to be the next frontier in computation and AI,”

he says.

Sowing the seeds of fabric innovation

In 2015, MIT President L. Rafael Reif called for the formation of public-private

partnerships he named “innovation orchards,” to reduce the time it takes new ideas to

make an impact on society. Specifically, he wanted to make tangible innovations as easy

to deploy and test as digital ones.

Later that year, AFFOA was formed by MIT and other key partners to accept Reif’s

challenge and take advantage of recent breakthroughs in fiber materials and textile-

manufacturing processes.

“The gap between where research ends and product begins is the so-called valley of

death,” Fink says. “President Reif introduced the concept of orchards of innovation as a

way for us, as a university, to organize these collaboration centers for technology to help

bridge basic research to the market entry point.”

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19 CITI-NEWS LETTER

In 2016, AFFOA was selected by the federal government to serve as the new

Revolutionary Fibers and Textiles Manufacturing Innovation Institute, receiving more

than $75 million in government funding and nearly $250 million in private investments

to support U.S. based, high-volume production of these new technologies.

Since then, speed has been paramount at AFFOA. As MIT and other research entities

have advanced the field, AFFOA has helped facilitate pilot production of these

sophisticated textiles and fabrics so companies can engage consumers with small

batches of advanced fabric products, or prototypes, in a manner similar to how software

companies roll out minimally viable products to quickly gather feedback from customers

and consumers.

Fabrics at the speed of software

A key element in the success of software has been the ability to rapidly prototype and

test products with the target customer. Tangible products, on the other hand, experience

a much more difficult path to consumers, and fabrics are no exception. The reason for

this is the absence of efficient prototyping mechansims at scale.

To allow fabric products to move faster to market, AFFOA has created a national

prototyping network with dozens of domestic manufacturers and universities, allowing

it to rapidly test advanced fabric products directly with customers.

The prototyping network is currently actively pursuing more than 30 projects, called

MicroAwards, with industry and academia designed to incorporate the latest advances

in fibers and textiles into mass manufacturing processes. Industry and academic

participants are required to operate within short timeframes, typically 90 days or less

and divided into two week sprints.

For instance, Teufelberger, a manufacturer of ropes located in Fall River,

Massachusetts, is working with AFFOA on integrating advanced fibers into their braided

ropes. The ropes can help climbers or divers communicate or store information on how

the rope was used.

At the end of May, AFFOA will roll out at the Augmented Reality Expo a fabric

augmented-reality experience that will allow conference attendees to connect with each

other using AFFOA’s fabric LOOks system.

The fabric of entrepreneurship and education

AFFOA has also partnered with schools such as the Fashion Institute of Technology in

New York and the Greater Lawrence Technical School, where students are learning how

to design and make an advanced chip-containing fibers, as well as other skills related to

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20 CITI-NEWS LETTER

manufacturing advanced functional fabrics and the products that will emerge from

them.

Additionally, over 30 entrepreneurs have been working on establishing startups around

advanced fabrics as part of the advanced fabric entrepreneurship program managed by

AFFOA in collaboration with the Venture Mentoring Service at MIT.

AFFOA is currently evaluating the prospects of raising an investment fund dedicated to

funding startups in the advanced fabric sector.

For Fink, AFFOA’s work is about turning fabric, an ancient yet largely unchanged

material, into a new platform for innovation.

“Fabrics occupy a very significant real estate, the surface of our bodies, and yet we’re not

doing much with that real estate — it’s underdeveloped,” Fink says. “AFFOA is setting

the stage for a fabric revolution by allowing these ancient forms to become high tech and

deliver value-add services in the years ahead.”

Home

Pakistan: Industrial development

(Source: Foqia Sadiq Khan, The Daily Times, May 22, 2019)

Industrial development is crucial for development and exports promotion. This article

refers to some literature (Ahmed et al. 2015, Sánchez-Triana et al. 2014) in this article to

review issues of industrial development.

The government plans pin high hopes on the industrial development. However, the

industry in Pakistan has not proven to be the driver of economic growth and higher

productivity-oriented employment. The uneven economic growth patterns have had

adverse impact on favourable outcomes for the growth of industry.

Industry adds the highest value addition in the production processes, yet its share of

total employment in Pakistan is lowest at around 20 percent. Less than optimal

industrial growth patterns are linked to the macroeconomic framework that is tilted

towards promoting consumption rather than investment in manufacturing. The

appreciated exchange rate equilibrium further fuels growth based on consumption. It is

illustrated by the fact that in the recent past, the financial institutions in the country

focused on providing personal loans rather than the manufacturing sector loans.

The industrial development is critical to boost exports and to help plug the current

account deficit. Manufacturing contributes 80 percent to total exports of Pakistan. The

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21 CITI-NEWS LETTER

top five manufacturing sectors account for more than 70 percent of exports overall

volume. One of the critical top five sectors, textiles and garments’ share has been

declining in the recent past, whereas the share of small and medium enterprise (SME)

manufacturing and cement exports, amongst others, has gone up. Despite the decline in

the textiles and garments share, it still accounts for more than half of exports of

Pakistan. Therefore, exports growth policy cannot plan for increasing the total exports

of Pakistan in the medium term, unless it provides for a higher growth of the textiles

and garments exports.

One of the challenges is low value addition in the textiles and garments sector. Pakistan

is the second largest cotton yarn exporter in the world for the low and medium count

yarn, yet there is not much value addition during the spinning phase. Initially, spinning

and weaving of cotton were central in driving exports, investment and employment in

the manufacturing sector. However, this initial success became an impediment later on

since it restricted import of manmade fibers (MMF) or a cotton-MMF mixture. Both of

them are required to increase exports in the textiles and garments sector. Due to this

restriction, Pakistani exporters in the textiles and garments only part of a small portion

of the world exports in this sector.

Despite the decline in the textiles and garments share, it still accounts for more than

half of exports of Pakistan. Therefore, exports growth policy cannot plan for

increasing the total exports of Pakistan in the medium term, unless it provides for a

higher growth of the textiles and garments exports

The prevalent government policies also favour low value addition in the textiles and

garments sector. There is a need for an alternative export policy focused on the higher

value addition that would both impose duty on export of low count yarn as well as

remove import barriers for MMF fibers, fabrics and yarns. As a result of this perverse

incentive structure, Pakistan’s share of higher value-added textiles and garments has

decreased and lower value added cotton yarn and fabric has increased. Pakistan’s

exports in the garments sector are overly dependent on medium count cotton yarn and

fabric and therefore produce only limited range of products. The textiles sector and

government bureaucrats’ nexus is strong in perpetuating the vested interests of the

cotton-oriented production lobby and this nexus prevents formulation and

implementation of policies that would diversify to MMF fibers and fabric.

Other than the need to add value to the textiles and garments sector, other medium-

term drivers of exports are SME production, agricultural products such as the cotton

and rice, and other higher value products of the agriculture sector. Other factors that

provide the enabling environment for increasing exports such as infrastructure

development and improving the regulatory system in the country also needs to be

focused on.

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22 CITI-NEWS LETTER

In terms of the regulatory framework (covered in literature other than cited above),

there is also the need to both focus on the need for higher productivity of labour as well

as to ensure their occupational health and safety. In terms of higher labour productivity,

skills development and a focus on human development is crucial. For occupational

health and safety, better regulation of safety standards in agriculture, construction,

garments, ship breaking and coalmines, amongst others, are needed. Shipping can be

hazardous and better freight facilities need to be provided. Similarly, there is need to

promote establishment of industrial clusters as backward and forward linkages of the

industrial clusters to the production processes play a key part in boosting productivity.

A conducive environment for innovation also needs to be promoted to improve

production, quality and designs. Manufacturing in the industrial clusters is intrinsically

linked to offer product innovation. A survey of 400 manufacturing units revealed that a

unit’s presence in the industrial cluster increases the probability of it offering new

production processes and products.

SME sector has major potential as it employs 80 percent of the non-agricultural labour

force, contributes 40 percent to the country’s GDP and accounts for 25 percent of

exports in the manufacturing sector. However, 87 percent of SMEs have five or less than

five employees per unit. Small size of the units poses a challenge in terms of their access

to markets for inputs of raw material and output. SMEs also often lack infrastructure

and skilled workers. Given its immense potential, there is need to enhance productivity

in the SME sector. The literature recommends to restructure the SMEDA for this

purpose. Promotion of industrialization in Pakistan also needs to be viewed through the

prism of social and environmental sustainability. Cleaner and socially compliant

production processes have a higher chance of creating a niche in the market. Social and

environmental standards must be made part of the production processes and the

capacity of relevant government departments and ministries must be strengthened for

this purpose.

The writer is an Islamabad-based social scientist

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