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Cotlook A Index - Cents/lb (Change from previous day)
13-12-2018 88.25 (-0.05)
11-12-2017 84.20
12-12-2016 79.45
New York Cotton Futures (Cents/lb) As on 17.12.2018 (Change from
previous day)
December 2018 77.16 (+0.52)
March 2019 78.84 (+0.16)
May 2019 79.85 (+0.10)
17th December
2018
Countries agree rules for implementing Paris climate
treaty at UN summit
Textile managers urged to focus on skill development
N-E varsity researchers patent process to treat industrial waste
Bangladesh: Health insurance brings smile to RMG
workers
Cotton and Yarn Futures
ZCE - Daily Data (Change from previous day)
MCX (Change from previous day)
Dec 2018 21960 (+140)
Cotton 14595 (-20) Jan 2019 22210 (+140)
Yarn 24100 (100) Feb 2019 22440 (+120)
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2 CITI-NEWS LETTER
-------------------------------------------------------------------------------------- Countries agree rules for implementing Paris climate treaty at
UN summit
Textile managers urged to focus on skill development
India again postpones levying retaliatory tariffs on US goods to
Jan 3
House of chaos a cause for worry
N-E varsity researchers patent process to treat industrial waste
Call for museum to keep ‘dyeing’ Sungudi art alive
Welspun group targets Rs 1,000 cr sales from new flooring biz
SV Pittie Sohar Textiles to Commence Yarn Production In
Record Time
India finds a new way to tax Google, Facebook
------------------------------------------------------------------------------------------------- Bangladesh: Health insurance brings smile to RMG
workers
Indonesia, EFTA sign long delayed free trade deal
Shipment falls for anti-export policy
Pakistan: Govt finalises 5-year tariff policy
Sri Lanka’s economy at crossroads: The ignored export
sector for creating prosperity
------------------------------------------------------------------------------------------------
NATIONAL
----------------------
GLOBAL
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NATIONAL:
Countries agree rules for implementing Paris climate treaty at UN summit
(Source: Live Mint, December 16, 2018)
Delegates from nearly 200 states finalised a
common rule book designed to deliver the Paris
goals of limiting global temperature rises to well
below two degrees Celsius
Nations on Sunday struck a deal to implement the
landmark 2015 Paris climate treaty after
marathon UN talks that failed to match the
ambition the world’s most vulnerable countries
need to avert dangerous global warming. Delegates from nearly 200 states finalised a
common rule book designed to deliver the Paris goals of limiting global temperature rises
to well below two degrees Celsius (3.6 Fahrenheit). “Putting together the Paris agreement
work programme is a big responsibility,” said COP24 president Michal Kurtyka as he
gavelled through the manual following the talks in Poland that ran deep into overtime.
“It has been a long road. We did our best to leave no-one behind.” But environmental
groups said the package agreed in the Polish mining city of Katowice lacked the bold
ambition needed to protect states already dealing with devastating floods, droughts and
extreme weather made worse by climate change.
“We continue to witness an irresponsible divide between the vulnerable island states and
impoverished countries pitted against those who would block climate action or who are
immorally failing to act fast enough,” executive director of Greenpeace Jennifer Morgan
said.
The final decision text was repeatedly delayed as negotiators sought guidelines that are
effective in warding off the worst threats posed by our heating planet while protecting the
economies of rich and poor nations alike.
“Without a clear rulebook, we won’t see how countries are tracking, whether they are
actually doing what they say they are doing,” Canada’s Environment Minister Catherine
McKenna told AFP.
At their heart, negotiations were about how each nation funds action to mitigate and
adapt to climate change, as well as how those actions are reported.
Developing nations wanted more clarity from richer ones over how the future climate
fight will be funded and pushed for so-called “loss and damage” measures.
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This would see richer countries giving money now to help deal with the effects of climate
change many vulnerable states are already experiencing.
Another contentious issue was the integrity of carbon markets, looking ahead to the day
when the patchwork of distinct exchanges -- in China, the Europe Union, parts of the
United States -- may be joined up in a global system.
“To tap that potential, you have to get the rules right,” said Alex Hanafi, lead counsel for
the Environmental Defense Fund in the United States.
“One of those key rules -- which is the bedrock of carbon markets -- is no double counting
of emissions reductions.” The Paris Agreement calls for setting up a mechanism to guard
against practices that could undermine such a market, but finding a solution has proved
so problematic that the debate has been kicked down the road to next year.
One veteran observer told AFP Poland’s presidency at COP24 had left many countries out
of the process and presented at-risk nations with a “take it or leave it” deal.
Progress had “been held up by Brazil, when it should have been held up by the small
islands. It’s tragic.” One of the largest disappointments for countries of all wealths and
sizes was the lack of ambition to reduce emissions shown in the final COP24 text.
Most nations wanted the findings of the Intergovernmental Panel on Climate Change
(IPCC) to form a key part of future planning.
It highlighted the need for carbon pollution to be slashed to nearly half by 2030 in order
to hit the 1.5C target.
But the US, Saudi Arabia, Russia and Kuwait objected, leading to watered-down wording.
The final statement from the Polish COP24 presidency welcomed “the timely conclusion”
of the report and invited “parties to make use of it” -- hardly the ringing endorsement
many nations had called for.
“There’s been a shocking lack of response to the 1.5 report,” Morgan told AFP. “You can’t
come together and say you can’t do more!” With UN talks well into their third decade
sputtering on as emissions rise remorselessly, activists have stepped up grassroots
campaigns of civil disobedience to speed up action on climate.
“We are not a one-off protest, we are a rebellion,” a spokesman for the Extinction
Rebellion movement, which disrupted at least one ministerial event at the COP, told AFP.
“We are organising for repeated disruption, and we are targeting our governments, calling
for the system change needed to deal with the crisis that we are facing.”
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Textile managers urged to focus on skill development
(Source: The Hindu, December 15, 2018)
The textile industry needs to focus on training its young managers and technicians, T.
Kannan, Managing Director of Thiagarajar Mills, said here on Saturday.
Mr. Kannan was speaking at the inaugural of the 74th All India Textile Conference of The
Textile Association (India), organised by its South India Unit. The theme for the two-day
conference is “Global Textiles - The Way Forward”.
“We need to do much more to train the managers and young technicians,” he said. There
are many ingredients for the success of a textile unit. The most important is the manager
or the chief executive officer. The industry faces challenges in this area as most of the
textile units are small and medium-scale enterprises that are family-owned and family-
run. Explaining the requirements of the an efficient manager, he said the candidate
should have the right information about developments in the industry. In the changing
market, most of the companies go through the cycle of ups and downs. Managers should
understand the risks and manage these, he said.
T. Rajkumar, deputy chairman of Confederation of Indian Textile Industry, said the
industry was giving thrust to innovation. It was going through changes in all its segments.
The stakeholders should work towards sustaining export and domestic growth of textiles
and clothing.
Raja M. Shanmugam, president of Tirupur Exporters’ Association, said the total annual
turnover of the knitwear units in Tirupur is about ₹45,000 crore. The aim was to achieve
₹1 lakh crore by 2020. However, macro economic changes slowed down growth for the
last two years. The knitwear town is hopeful of achieving the target by 2022.
T.K. Sengupta, president of The Textile Association (India), said the vision of the
Association is to promote technological knowledge. The next world textile conference
would be held in Dhaka next year.
T.R. Dinakaran, Chairman of Shri Ramalinga Group of Mills, presented “Life Time
Achievement Award” to R. Jagadish Chandran, Chairman of Premier Mills, and Mr.
Kannan presented “Industrial Excellence Award” to Sanjay Jayavarthanavelu, Chairman
and Managing Director of Lakshmi Machine Works.
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India again postpones levying retaliatory tariffs on US goods to Jan 3
(Source: Kritika Suneja, Economic Times, December 16, 2018)
India has deferred imposing higher duties worth $235 million on 29 American goods to
January 31, 2019.
The retaliatory tariffs were scheduled to come into effect on December 17 and have been
postponed for the fourth time.
“…the central government, being satisfied that it is necessary in the public interest to do
so,” the government said in a notification on Saturday.
The new deadline comes just before US Commerce Secretary Wilbur Ross’ India visit in
February for the US-India Commercial Dialogue and the US-India CEO forum.
The extension coincides with the US and China’s 90-day truce as the two try to find a
solution to the escalating trade dispute.
In June, India decided to impose higher tariffs on these American imports from August
4, in retaliation to the March 9 decision of US President Donald Trump to impose heavy
tariffs on imported steel and aluminium items.
The government later delayed the levies to September 18 and then again until November.
With the new tariffs, the import duty on walnut would be hiked to 120% from 30% while
that on chickpeas, Bengal gram (chana) and masur dal would become 70% from 30% now.
Similarly, the levy on lentils will be hiked to 40% from 30%.
The two sides have sparred over a variety of issues and are in the process of resolving
them part of a ‘trade package’.
The key issues include the US levying higher tariffs on Indian steel and aluminium, and
reviewing Indian exports' eligibility for preferential duties. While India has demanded
greater market access for its products from sectors, including agriculture, automobile,
auto components and engineering, the US is sought greater market access for its farm and
manufacturing products, including medical devices.
Home
House of chaos a cause for worry
(Source: N J Nair, The Hindu, December 16, 2018)
Better conduct of members imperative to maintaining quality of Assembly proceedings:
Speaker
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Frequent disruption of proceedings and passage of Bill without discussion are feared to
take a toll on the quality of business of the Assembly that has many records to its credit.
The 13th session that concluded on Thursday is being cited as a case in point when
important legislations were pushed through, denying members of both sides and
Ministers any chance of creative intervention. The focus of the 13-day session was on
legislation, mainly to replace 13 ordinances, but the House could clear only nine.
The protests by the United Democratic Front (UDF) demanding lifting of ban orders in
Sabarimala, satyagraha by three members in the foyer of the Assembly and the slanging
match between the ruling and Opposition members on the closing day has come in for
criticism.
Cleared in haste
The session had taken up many important bills, including the amendment to
the Kerala Shops and Commercial Establishments Bill, which sought to give women
employed in textile shops and other establishments the right to sit while on duty.
Similarly, the Kerala State Fishermen’s Debt Relief Commission Amendment Bill, Kerala
Metropolitan Transport Authority Bill and the one that delegates powers to the
government to collect and process waste directly or through any agency from two or more
local self-governments were all cleared in haste.
Mr. Sreeramakrishnan told The Hindu that he was keen on taking up several issues of
public importance, but crucial Bills were cleared without any scrutiny.
“We hold the record of having the maximum number of days in session, 150 days, in the
past two years and had attempted many path-breaking legislations. The functioning of
our subject committees had won encomiums. In this context, better conduct of members
is imperative to maintaining the quality of the House,” he said.
Amendments proposed by members on satyagraha too were accepted by Ministers and
moved as official amendments itself. One instance was the amendments proposed by V.S.
Sivakumar to the Travancore Cochin Hindu Religious Institutions Act and was accepted
by Devaswom Minister Kadakampally Surendran, Mr. Sreeramakrishnan said.
He also feels that youngsters on both sides should be more serious and get more deeply
involved in the legislative business. Also accusing the Speaker of partiality would only
deprive members the leeway to negotiate with the government, he said. But he is
confident of the talent of the members and feels that a minor course correction would do
a world of good to take things forward.
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N-E varsity researchers patent process to treat industrial waste
(Source: Rahul Karmakar, The Hindu, December 16, 2018)
‘Green process 25% faster, 40% more energy-efficient than existing technology’
Three researchers from the North-Eastern Hill University (NEHU) based in Meghalaya
capital Shillong have patented a fast, energy-efficient and low-cost process for treatment
and bio-detoxification of industrial effluents contaminated with harmful azo-dye.
Non-toxic discharge
The ‘green process’ developed by Mihir K. Sahoo, Bhauk Sinha and Rajesh N. Sharan for
treating waste-water from industries such as textile, leather and paint is 25% faster, 40%
more energy-efficient and more sustainable than the existing technology.
Their process has also been found to leave the discharge environmentally benign and thus
likely to be equally non-toxic to other bio-flora and fauna.
“We received the patent for biologically detoxifying industrial waste-water apart from
chemical detoxification, which we feel is quite revolutionary. My expertise in molecular
biology and my colleagues’ expertise in chemistry combined to develop the technology,”
Prof. Sharan of NEHU’s Department of Biochemistry told The Hindu on Sunday.
He worked with Dr. Sahoo and Mr. Sinha of NEHU’s Department of Chemistry for four
years. The trio perfected the technology and applied for a patent in July 2013. The patent
was received in October this year.
According to the trio, the traditional treatment of environmentally damaging waste-water
effluents with appropriate chemicals processes such as chemical precipitation,
coagulation and electrocoagulation only transfers the contaminating chemical entities
and chemical groups of the waste-water to other media, thereby producing secondary
wastes.
Secondary wastes
“In some cases, these secondary wastes, intermediates and by-products formed by the
second process of chemical remediation or detoxification may produce equally or more
toxic chemical entities than the original toxicants and pollutants,” Prof. Sharan said.
It was thus important to ascertain if the treated effluent was also benign to the biosphere
(flora and fauna). Although theoretically, modern chemical remediation processes
completely eliminate the pollutants from waste-water, the trio’s bio-toxicity evaluation of
such effluents using Escherichia coli, or E. coli based bio-toxicity assay showed that it still
continued to be highly bio-toxic.
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Most strains of E. coli, a common kind of bacteria that lives in the intestines of animals
and people, are harmless. Their survival is crucial for bio-flora and fauna, the researchers
said.
Therefore, the release of such effluents into the environment could adversely affect the
survival of aquatic micro-organisms, flora and fauna, thereby disturbing the entire
ecosystem and ecological balance.
“The so-called waste-water is not really suitable for release directly into streams, rivers
and other water bodies. We recognised this serious shortcoming of the existing
technologies in the domain, and came up with the innovative technology,” Prof. Sharan
said.
Home
Call for museum to keep ‘dyeing’ Sungudi art alive
(Source: The New Indian Express, December 17, 2018)
It was a day of celebration for Madurai Sungudi Textile Manufacturers and Traders
Association that completed 75 years since its inception.
It was a day of celebration for Madurai Sungudi Textile Manufacturers and Traders
Association that completed 75 years since its inception.
Speaking during the function on Sunday, noted textile researcher K Sreemathy said that
a sungudi museum should be set up to document the heritage of sungudi for the
generations to come.
Made from soft cotton fabric using the tie-and-dye method, the traditional sungudi sarees
are hand-woven with authentic sungudi knots and are dyed with natural dyes.
Sourashtrians who migrated to Madurai introduced the art form of traditional sungudi
dot patterns, under the patronage of King Thirumalai Naicker.
In 2005, ‘Madurai Sungudi’ became the first product from the city to be conferred the
Geographical Indication (GI) mark by the Geographical Indications Registry.
On Sunday, the platinum jubilee celebration of the association was organised during
which Collector S Natarajan said that the district administration would initiate steps to
revive the annual commemoration of Sungudi Day to popularise the art, especially among
the youth.
Meanwhile, Madurai South MLA S S Saravanan felicitated veteran sungudi weavers who
have had kept the dying art alive for more than seven decades.
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Addressing the gathering, Sreemathy said that the authentic manually tied and dyed
sungudi art form was long gone with the gradual entry of sungudi variations like wax-
printed and screen-printed sungudi textiles and that the traditional sungudi dots were no
longer finer.
She further said, “Finer sungudi dots should be revived and it can be best done by teaching
the art to school children who can easily master the knack of achieving finer dots with
their tender fingers than when done by adults. A museum of sungudi must be set up to
document the rich heritage of the art form and to carry it forward for generations to
come.”
Also, the youth must indulge in sugundi textile making with a sense of pride and
commercialism, she insisted.
Home
Welspun group targets Rs 1,000 cr sales from new flooring biz
(Source: Economic Times, December 16, 2018)
Home textiles major Welspun is bullish on its new flooring venture to clock a turnover of
Rs 1,000 crore in the next 3-4 years on the back of its new modular solutions, according
to a senior company official.
Welspun Flooring, an integrated and independent flooring vertical of the USD 2.3 billion
Welspun Group, is looking to tap the potential of the renovation segment of the Rs
35,000-crore overall Indian tiles market.
"Our target is to achieve a turnover of Rs 1,000 crore in the next three to four years,"
Welspun Flooring CEO Mukesh Savlani told PTI here.
Commenting on distribution network plans, Savlani said:"We will have presence in 30
cities, from metros up to tier III, by March 2019. Currently we are in the process of
appointing distributors."
Further, he said from the middle of next year, Welspun Flooring will start exports to the
US, Europe, Australia and southeast Asian countries.
Bullish on the potential of the business, Savlani said:"The overall Indian tiles market is
around Rs 35,000 crore per annum, of which 90 per cent is for new construction and 10
per cent is renovation. Our belief is that the renovation segment will grow significantly."
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Explaining why the segment will grow, he said while many aspects of home decor such as
wall painting, curtains and interiors have changed over the years making it easier and less
time consuming, flooring hasn't changed.
"It is still considered as part of construction. What we are trying to do is change it with
the concept of modular flooring. With our solutions we can do flooring in 5-8 hours or
just one hour in cases of small offices," he added.
Welspun Flooring will offer stone polymer composite luxury performance tiles, carpet
tiles, wall to wall carpets and artificial grass to begin with.
The company is in the process of setting up its Rs 1,150 crore manufacturing facility
spread over 600 acre in Hyderabad, where it will produce items for residential, hospitality
and commercial applications.
"The plant will be operational by March next year," he said adding at present the company
is in the pilot stage of marketing its products.
The facility will have an initial capacity of 10 million square feet in the phase I and can be
further upgraded as per requirement, he added.
Home
SV Pittie Sohar Textiles to Commence Yarn Production In Record Time
(Source: Muscat daily.com, December 16, 2018)
SV Pittie Sohar Textiles launched their textile cluster in Sohar with the inauguration of
the company’s cotton yarn production unit No 1 by H H Sayyid Taimur bin Asad bin Tariq
al Said on Thursday.
SV Pittie Sohar Textiles is the subsidiary of ShriVallabh Pittie Group - one of the largest
manufacturers of cotton yarn in India and a global leader in this sector.
Alongside the group chairman, Vinod Pittie and managing director, Chirag Pittie; other
prominent guests who graced the occasion were H E Sultan al Habsi, deputy governor of
the Central Bank of Oman; H E Abdul Salam al Murshidi, executive president of the State
General Reserve Fund; H E Yahya al Jabri, chairman of Ithraa, H E Talal al Rahbi, deputy
secretary general of the Supreme Council for Planning;. H E Mahana al Lamki, Governor
of North Batinah; H E Sheikh Ali al Shamesi, Wali of Sohar and H E Sheikh Hammed al
Abri, Wali of Liwa.
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H H Sayyid Taimur also laid the foundation stone of cotton yarn spinning unit No 3. The
invited guests were given a tour of cotton yarn spinning unit No 2, a 500,000 square foot
facility, which will be fully operational by April 2019.
Altogether, there will be four state-of-the-art yarn manufacturing units on SV Pittie Sohar
campus, covering over 2mn square foot area, housing the latest and most efficient
automated technology in the textile industry. With planned completion by November
2019, the units will compose of 300,000 spindles and 7,000 rotors producing over
100,000 metric tonnes of world class compact cotton yarn.
Chirag said, “This endeavour has been challenging but exciting. I am glad we could start
the production in a record time of approximately eight months. This would not have been
possible without the support of our lead engineering, procurement and construction
(EPC) partner Inexco under whose supervision we had almost 500 workers and over 100
engineers working 24x7 at site during this period. I would also like to thank the
government, contractors, and all supplier partners for their efforts in supporting this
mission.”
“Today we feel at home in Oman as we have esteemed stakeholders like Sultan’s Special
Forces Pension Fund backing us. Besides, our bankers Bank Sohar, having complete trust
and confidence in this project, have been with us in every way to ensure we continue to
move forward, unhindered,” he said.
Chirag further said, “It seems like yesterday that we held this vision of creating a full-
fledged textile cluster in this beautiful country. Today is our first step towards realising
this dream, while also igniting what very well could be the next large industry sector for
the sultanate. We have brought in the best-in-class machinery and technology and to work
on them, we will be training and employing a large number of Omani youth. My special
thanks to National Training Fund and its dynamic CEO Sharifa Tahir Aidid, who
understood the employment potential of our vision and have extended their partnership
to enable us in realising it, in minimum possible time.”
Chirag said, “Our goal is to build a strong national workforce and bring stability, comfort
and pride to thousands of Omani families.”
Earlier in November, commemorating Oman’s 48th National Day, SV Pittie Sohar
Textiles signed a partnership agreement with National Training Fund to train 1,000
Omanis for captive employment in the textile cluster. This comprehensive training
programme, followed by guaranteed employment, will have a focus on foundational and
textile technical skills and be especially suitable for Omani youth and women.
The SV Pittie Sohar Textiles Training Center will be a world-class programme by itself,
building on the company’s vast level of operational experience in the textile industry, and
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will be partnered with other local training institutes to help them gain value with a
common goal in mind: empower the next generation of Omanis and their families.
Home
India finds a new way to tax Google, Facebook
(Source: Surbhi Agarwal, Economic Times, December 17, 2018)
India may be pushing Internet firms such as Facebook and Google to store data locally
not just to safeguard critical data of its citizens but also to ensure due taxes are paid by
these digital firms for services including advertisements sold to local clients, a senior
official told ET.
The government’s push for internet companies to host data of Indian users in local servers
is also due to concerns that they deliver services mostly from overseas, outside India’s tax
jurisdiction.
“Who can the government tax? Any entity with presence here.
Today, Facebook can offer all their services here without having a presence. They have
subsidiaries here, but that do limited business,” said a government official.
“When you (Indian user) are signing up for Facebook or Google, your contract is not with
their India office, so in my understanding there are other reasons certainly but location
helps in taxation and revenues for sure.
The official said it is not limited to Facebook but applies to all foreign online companies
that do business here. “One can say that government’s approach to Facebook should not
be to earn money off them but at the same time we can’t deny the fact that they are making
a lot of money,” the official added.
“If any other Indian company would have done the same business — online or offline —
they would have ended up paying a lot of taxes, so why let them go.”
Facebook has 294 million users in India as of October, says data site Statista, while its
messaging platform WhatsApp in February said it had 200 million users in the country,
making it the largest user base for both firms.
Facebook and Google did not respond to email queries from ET on tax concerns raised by
the government.
Analysts say India’s push for internet companies to host data locally would help it have
better supervision over them.
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Amit Maheshwari, partner, Ashok Maheshwary and Associates said once these companies
set up servers in India, then they can be treated as a permanent establishment and
authorities will get the right to tax all income attributable to the country.
Realising the fact that India was losing out on revenue from digital firms billed overseas,
the government in June 2016 introduced a 6% tax in the form of an equalisation levy or
known as Google tax on the amount paid to internet companies by advertisers.
In the Union Budget 2018-19, the government also proposed to amend the Income Tax
Act to tax digital entities with a large user base or significant economic presence in the
country.
Losing out on revenues
Despite initial resistance, the revenue from the equalisation levy is over Rs 1,000 crore
till March 2018, according to news reports, even as the guidelines on the last Budget
proposal is still awaited.
Experts argue that despite the levy, India is still losing out on tax revenues since it is not
valid on services such as annual or monthly subscriptions to streaming websites, or paid
promotions done through platforms such as Facebook.
And data localisation seems to be government’s latest weapon to get its due.
Tax consultant Maheshwari said the chances of losing out on tax revenue is also higher in
case of advertising or promotional deals signed which are global in nature but also run in
India.
“It is easy to shift profits in such scenario, the part which is reflecting in India is clearly
taxable which the Indian government is losing out on the ad revenues since even the
equalisation levy doesn’t apply on it,” said Maheshwari.
Facebook, however, doesn’t see recent developments where it has come under the
government scanner on multiple issues including data localisation, curbing rumours or
fake news as conflicts. “I don’t think conversations are conflicts or battles. While
governments are doing their bit to ensure public safety, as a company it’s our job to
participate in those conversations…” Ankhi Das, Facebook’s public policy director for
India and South Asia told ET.
Facebook had posted a profit of Rs 40.7 crore on revenue of Rs 341.8 crore in fiscal 2017,
according to regulatory filings in India. Facebook’s FY18 numbers are not available yet.
In September, Reuters citing unnamed sources, had reported that Facebook is expected
to generate revenue of $980 million from India in 2018.
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In November, ET reported that Google India has remitted over $2 billion from the
revenue earned in the country over the last five financial years to the US-based search
giant’s subsidiaries in Singapore and Ireland. The amount, which is categorised as an
expense towards “purchase of advertising space,” could further increase the search giant’s
tax liability in the country, even as a dispute with the Indian tax authorities — over the
tax outlay on earlier transfers — continues to be heard in court.
‘Dangerous game’
In fiscal 2018, Google India reported a 30% increase in revenues to Rs 9,337.7 crore with
profit after tax rising 33% to Rs 407.2 crore. The amount transferred for “purchase of
advertising space”, increased by 36% to Rs 4,949.6 crore, according to regulatory filings.
Facebook has been under government scrutiny over user data breach and spread of fake
news on its platform. The firm has maintained that it is working with the government on
its concerns. It also appointed former Hotstar executive Ajit Mohan as its new India head
from January.
Pratibha Jain, partner at Indian law firm Nishith Desai Associates, said the need of the
Indian government to tax transactions for entities in the country is understandable.
“But in a globalised world, one can’t look at the transactions in isolation.
As a huge exporter of software services, we take advantages of the multilateral and
bilateral tax treaties, so it’s a dangerous game we are getting into through the localisation
debate,” added Jain.
She said that India has double taxation avoidance treaties with many countries and these
companies are paying tax in one jurisdiction or the other. “The big question is, are they
evading tax, the answer is no!”
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GLOBAL:
Bangladesh: Health insurance brings smile to RMG workers
(Source: Shadma Malik, The Daily Star, December 17, 2018)
Garment worker Mira breathed a sigh of relief when she learnt last November that she
would no longer have to bear her healthcare bills.
Paying an annual premium of Tk 100, the worker of Millennium Textiles (Southern) and
Fashion House Ltd in Ashulia became the holder of a healthcare insurance policy.
The policy would cover her inpatient medical bills amounting to Tk 12,000 and outpatient
bills, including medicine, of Tk 3,000 for the year.
Within three months of enlisting in the scheme, she fell ill with abdominal pains and
nausea. Without much fanfare, she headed on over to the company designated hospital -
- Centre for Woman and Child Health in Ashulia -- and was quickly treated by the doctors
and handed over medicine worth Tk 1,000. The scheme took care of the bills.
“I had never heard about an insurance policy before,” she told The Daily Star, sitting with
her co-workers at the factory. “Otherwise, I would have to wait till I got my next month's
wages before I could go see a doctor.”
“I did not ignore my health from then on.”
A total of 10,000 workers from five factories in Savar, Ashulia and Gazipur have enlisted
in the insurance scheme.
Of the yearly premium of Tk 575 per worker, Tk 375 comes from Carrefour Foundation, a
non-profit organisation working against exclusion. The remainder is divided between the
workers and factory owners.
Of the 2,200 employed at Millennium Textiles, 1,600 have already enrolled in the scheme.
It is mostly the women who have enrolled to address their gynaecological issues, said Basu
Dev, its assistant general manager.
According to a study by the Institute of Health Economics, Dhaka University, published
earlier this year, the factories experienced fewer work absenteeism since this scheme was
rolled out.
Workers are less reluctant to switch jobs as well, said Syed Abdul Hamid, the institute's
director.
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17 CITI-NEWS LETTER
Encouraged by the study results, Hamid suggested initiating a life insurance policy for the
workers.
Millennium Textiles adopted the life insurance policy recently, where the workers will
receive Tk 30,000 in the case of death in addition to the health insurance.
“I will be paying Tk 150 this month as annual premium that will include both health and
life insurance,” said Mira.
Under the project 'Working With Women II', the SNV Netherlands Development
Organisation has been providing technical support to cover the cost of health care services
for garment workers and create awareness among them on health insurance.
Farhtheeba Rahat Khan, team leader of Working With Women II, said, “In 2015-16, we
piloted the Health Insurance Plus in three factories and after the initial positive
responses, we are now scaling it up for adoption across the garment sector.”
The Carrefour Foundation will fund the project till 2019. The 'Working With Women II'
will extend financial support till 2021.
Siddiqur Rahman, president of Bangladesh Garment Manufacturers and Exporters
Association, said donations given by the foundation would phase out at a point. It was not
possible to include 40 lakh apparel workers in the health insurance scheme, he added.
The BGMEA and the labour and employment ministry have a welfare fund for the
garment workers. The trade body disburses the fund according to the needs of a worker,
if he/she applies for it, he added.
Moreover, the BGMEA provides group insurance for workplace injuries or death.
Babul Akhter, a labour leader, said if a worker becomes paralysed or suffers from an
injury, he/she can apply to the welfare fund.
However, to receive the funds, the worker has to go through a lot of paper work that passes
through the board meetings, which make it a lengthy process.
The health insurance policy by SNV ensures primary health care, which is an important
part; but it should be made legally binding by the government, he said.
Apparel workers are subject to a variety of diseases due to long working hours, lack of
sanitation and a nutritious diet. Workers mostly suffer from tonsillitis, influenza,
common colds, diarrhoea, headaches, sleep disorders and acute bronchitis, said Col MD
Shahjahan [Rtd], a consultant medicine doctor at the Centre for Woman and Child
Health.
Tuberculosis is also an epidemic among the garment workers, he added.
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18 CITI-NEWS LETTER
According to the Labour Act (amended), 2006, it is compulsory to have 'group insurance'
for workers if an establishment has more than 100 permanent employees.
Health insurance initiatives will be more successful if all stakeholders -- the government,
owners, international brands, buyers and workers come forward to contribute, said Abdul
Alim, lead trainer of Social Accountability International -- a New York-based not for profit
organisation for human rights at work.
Though health insurance is not compulsory by law, it should be introduced for the
betterment of factories since it boosts productivity, reduces workers' absence and
encourages less migration, said Syful Alam Mallick, regional compliance manager at
Auchan Retail International.
Home
Indonesia, EFTA sign long delayed free trade deal
(Source: Euronews, December 16, 2018)
Indonesia on Sunday signed an economic agreement with the European Free Trade
Association (EFTA) aimed at increasing trade and investment, concluding almost eight
years of negotiations.
Under the deal, tariffs and non-tariff barriers would be eliminated for thousands of
products traded between Indonesia and the EFTA countries - Switzerland, Liechtenstein,
Norway and Iceland, according to government statements.
Among those products, Indonesian palm oil would get full market access in Iceland and
Norway, with an exception of palm products for animal feed other than for fish, according
to Jakarta's statement.
Switzerland would also grant easier access for palm oil, but under certain quotas, its
embassy in Jakarta said in a statement.
Enggartiasto Lukita, Indonesian Trade Minister, said discussion on market access for
palm oil was the sticking point that dragged negotiations on for years. The first round of
talks were held in early 2011.
"They held back our palm," Lukita told reporters after the signing of the agreement.
"I said, we've gone a long way. You will benefit from this and I too. So if you don't open
up for our palm, let's just forget about this," adding that he had threatened to leave
Norwegian salmon out of the deal.
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19 CITI-NEWS LETTER
Swiss Federal Councillor Johann N. Schneider-Ammann said the agreement was based
on sustainable palm oil production.
"As far as palm oil is concerned, believe me, we had intensive discussions in Switzerland
as well and we found a solution with our partners here in Indonesia, a solution to balance
the interests and to stay at the same time very respectful as far as the palm oil concern,"
he said at a news conference.
The world's top palm oil producer and exporter Indonesia has often tried to reassure
buyers that its palm oil is produced sustainably.
Lukita on Sunday repeated the government's argument that palm oil production requires
less land than other vegetable oils, making it unfair to blame deforestation on palm
plantations.
Greenpeace said more than 74 million hectares of Indonesian rainforest - representing an
area twice the size of Germany - have been logged, burned or degraded in the last half
century, which the group blamed on palm oil and pulp and paper industries.
Other main Indonesian export products such as fish, coffee and textiles would also get
preferential treatment under the deal, in exchange for greater access for the main
products of the EFTA countries, such as gold, medicines and dairy products.
In 2017, Indonesia-EFTA trade was worth $2.4 billion (1.9 billion pounds) with Indonesia
having a trade surplus of $212 million. EFTA countries put $621 million of foreign direct
investment into Indonesia in 2017, according to Indonesian records.
Home
Shipment falls for anti-export policy
(Source: Jagaran Chakma, The Daily Star, December 17, 2018)
Despite being a promising export item, shipment of garment scrap,
locally known as jhoot, fell last fiscal year mainly due to the
government's anti-export policy amid rising local consumption and
a Chinese ban on import, industry people said.
Exports fetched $50 million in fiscal 2017-18, down 16 percent year-
on-year, according to Syed Nazrul Islam Faruque, president of
Bangladesh Textile and Garments Waste Processors and Exporters
Association. “This is an indirect reflection of the government's anti-
export tariff policy,” he told The Daily Star.
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20 CITI-NEWS LETTER
He said export slightly came down as China stopped importing the textile waste from
Bangladesh at the end of 2017. In the previous years, Bangladesh used to earn $60 million
to $70 million per year by exporting garment scrap.
Depending on quality, the export price of the apparel waste is $120 to $500 per tonne.
However, Bangladesh Tariff Commission has fixed the minimum export price at $320 a
tonne whereas the price hovers between $120 and $500 in the international market.
“We can't export jhoot at a low price because of the tariff policy although there is a huge
demand of the low-end textile waste in the international market,” Faruque added.
About three lakh tonnes of garment leftovers are produced in Bangladesh every year. Of
them, 95 percent is being exported, mainly to India and European countries. Cotton, yarn
or even clothes are manufactured from the discarded fabrics and yarn through recycling.
Industry people said the export volume would increase if the government does not fix the
tariff.
There are two categories of garment scrap: one is from woven fabric and another from
knit. Woven scrap is cheaper than knit, as it is easy to recycle the knit waste to yarn or
fibre after reprocessing, Faruque said.
According to the chief of the association, they collect woven waste at Tk 25 to Tk 26 per
kg and knit scrap at Tk 40 to Tk 45 a kg and then process them.
About 10 lakh workers are involved in the waste processing industry and there are more
than 1,000 waste processing factories in the garment industrial areas. More than 100
businesses are directly involved in exports.
According to the exporters' platform, a record 192,975 tonnes of scrap were shipped in
2017-2018, 203,130 tonnes in 2016-17, 213,265 tonnes in 2015-16, and 228,902 tonnes in
2014-15.
Separate data on garment scrap export is hard to come by as the National Board of
Revenue considers the shipment as part of the overall garment export. There is no
separate harmonised system (HS) code although the Tariff Commission has fixed the
minimum export price, said Faruque.
He said there is no capable spinning mill in Bangladesh that can recycle garment leftovers
to manufacture yarn and fabric. So, most of the processed waste has to be exported.
There are a maximum 20 millers which manufacture terry towel using garment waste as
raw material, but the quantity is very low.
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21 CITI-NEWS LETTER
About 40 percent of the garment leftover is exported to India, 40 percent to Europe, 15
percent to other countries, and the rest 5 percent is used locally to manufacture terry
towel, according to Vhim Khetan, managing director of RL Trading, an exporter of apparel
scrap.
Bangladesh has huge potential to export the garment leftovers as most of them are not
locally used and a huge amount is generated by garment factories.
“If garment scrap is not exported, it will emerge as an environmental hazard.”
Home
Pakistan: Govt finalises 5-year tariff policy
(Source: The Express Tribune, December 16, 2018)
Adviser to Prime Minister on Commerce, Textile and Industries Abdul Razak Dawood has
announced that the government has finalised a five-year national tariff policy aimed at
restricting duties on raw material and machinery imports for export-based industries.
“We are making efforts to rationalise certain taxes and regulatory and customs duties,”
he said. “At present, there exists roughly 34 different taxes and the government is
planning to reduce them to 12 or eight in the next couple of years.”
It would assist the leadership to remove a key impediment in the way of ease of doing
business, the adviser emphasised, adding that he was well aware of the challenges faced
by the business community regarding tax slabs and tariff lines.
Addressing the ‘Emerging Pakistan’ ceremony organised by the Rawalpindi Chamber of
Commerce and Industry (RCCI) at the Jinnah Convention Centre, Dawood highlighted
that the government, in its first 100 days, had initiated reforms in the Federal Board of
Revenue (FBR) and transformed its functioning.
“We have decided to withdraw policy functions from the FBR,” he said, adding that from
now on, the finance ministry would be formulating the policy in consultation with key
stakeholders including the business community.
He assured the RCCI of complete cooperation in fulfilling its demand of converting the
old airport building into a modern expo centre and installation of a grid station for the
Rawat Industrial Estate.
The adviser voiced hope that people would notice a genuine change on the economic front
in the next 30 days as major changes had been made keeping in view the policy matters
pertaining to taxation, exports, refunds, regulatory and customs duties and incentives to
business community with respect to the ease of doing business.
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22 CITI-NEWS LETTER
“Renowned companies of the world including ExxonMobil, Pepsi and Suzuki have
pledged additional investment in Pakistan,” he pointed out.
Earlier, RCCI President Malik Shahid Saleem, in his address, emphasised that the major
aim of the event was to discuss current economic challenges, decline in exports, taxation
and promoting a positive image of Pakistan.
He was of the view that Pakistan’s economy was taking a leap and hence, the country
needed an environment conducive to investment.
He urged the government to tackle the prevailing uncertainty surrounding the business
corridors and provide maximum assistance and incentives for broadening the tax net.
He termed private sector the backbone of exports, pressing the government to address its
grievances at the earliest. Major issues highlighted were sales tax refunds, rupee
depreciation, rising interest rate and high regulatory duties on raw material.
Home
Sri Lanka’s economy at crossroads: The ignored export sector for creating
prosperity
(Source: Financial Times, December 16, 2018)
The Professor H.A. de S. Gunasekara Memorial Oration 2018 was delivered by Dr. W.A.
Wijewardena on 4 December at the Senate Room of the University of Peradeniya. Today,
Daily FT carries Part 2 of a revised and abridged version of the oration.
In the previous part, we noted that Professor H.A. de S. Gunasekara, the first Ceylonese
Professor of Economics at the University of Ceylon, was a legend in economics teaching
in Sri Lanka. His doctoral thesis to the University of London, ‘From Dependent
Currency to Central Banking in Ceylon,’ was a seminal contribution on the development
of banking, finance and central banking in colonial Ceylon.
The Five-Year Plan of 1972-76 that was produced under his direction when he was the
Secretary to the Ministry of Planning and Employment sought to convert Ceylon,
following the policy of the government in power, to a socialist economy. Yet, the
diagnosis of economic ailments which Ceylon had been suffering at that time and the
prescriptions recommended by him have not been different from what we experience in
Sri Lanka today.
Thus, it was a proof that when it comes to economic analysis, both socialist economics
and free market economics follow the same path. The difference is only in the end
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23 CITI-NEWS LETTER
objectives. The main ailments suffered by Ceylon in the entirety of the post
independence period have been the low economic growth coupled with imbalances in
the budget, savings-investments and the external sector. The external sector crisis has
been compounded by the low priority given to the export sector in national economic
policy making.
We will examine the export sector ailments and the way forward strategy for Sri Lanka
in this part.
Export-led growth policy since 1977
Despite the export-led economic growth policy program pursued by Sri Lanka since the
adoption of an open economy system in 1977, the trade gap has widened creating a
sizeable deficit in the current account of the balance of payments.
In this policy, the export sector was incentivised through exchange rate reforms,
provision of logistical support via modernising port and airport services and
introduction of a targeted export drive by inviting foreign direct investments to export
processing zones. These policies enabled Sri Lanka to dramatically change its export
structure.
In 1976, the export structure was heavily biased toward the three tree crops – tea,
rubber and coconut – with a share of 86% in total export earnings. The industrial
products had a share of only 14%. By 2017, this structure changed to 24% from
agricultural exports and 75% from industrial exports. This change included a host of
new export products – minor agricultural products, textiles and garments,
manufactured rubber products, and machinery and mechanical appliances – which were
non-existent in 1976.
Hence, there were appreciable gains by Sri Lanka after it had gone for the export led
open economy policy in 1977. It indeed helped Sri Lanka to elevate from a low income
country to a lower middle income country. However, when compared with its peers and
from a point of continued economic prosperity, the attainments have not been
sufficient.
Transformation of the export sector
In 1951, Sri Lanka was so heavily reliant on exports that its share in Gross Domestic
Product (GDP) amounted to 42%. This ratio gradually declined over the years falling to
12% by 1972. It however, increased slightly to 16% in 1976 mainly due to the slower
economic growth recorded by Sri Lanka compared to the growth in exports.
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24 CITI-NEWS LETTER
After the introduction of the open economy policy in 1977, the share of exports in GDP
rose to 30% in 1978, but the country could not sustain that high share since then. It
gradually fell to 19% in 1986 before it started to reverse reaching a peak of 33% in 2000.
After that high performance, exports began to fall once again in comparison to GDP.
Finally, it fell to 13% in 2017.
Meanwhile, imports were rising both in volume and as a share of GDP, exerting pressure
for Sri Lanka’s current account to record a significant deficit. It in turn affected the
country’s overall balance of payments which was financed basically by resorting to
external borrowings and the rupee’s ability to maintain a stable value. Accordingly, the
country’s foreign borrowings which amounted to 4% of GDP in 1948 increased
dramatically to 60% in 2017.
Figure 3 gives the ratios of exports, imports and current account balance to GDP during
1950 to 2017.
Exports lagging the general economic growth
The inadequate performance of the export sector is evident from the faster growth in
GDP in absolute terms compared to the absolute levels of exports and imports.
Accordingly, GDP which amounted to $ 10 billion in 1993 has risen sharply to $ 87
billion in 2017, recording an eight-fold growth during the period. However, exports have
risen in absolute terms more slowly. In 1993, exports amounted to $ 2.7 billion. It has
increased to $ 11.4 billion in 2017, only a four-fold growth.
Figure 4 presents Sri Lanka’s GDP, Exports and Imports in absolute terms during 1950
to 2017.
Domestic economy based economic growth
The slow growth in exports has been the bane of Sri Lanka’s economic performance in
the past. The faster growth in GDP than exports reveals that the economic growth has
basically been attained by concentrating on domestic economy-based economic policies.
They offer the advantage of allowing a country to go through adverse external shocks
with minimum damage to the economy. However, they do not help a country to grow
because of the limitations in the domestic market. Hence, the growth rate to be attained
is slower than the potential growth as well as the growth rates achieved by peers who
have got integrated to the global economy.
Figure 5 shows the per capita income of Sri Lanka, Singapore and South Korea during
1960-2017. All these three countries had started at the same level of per capita income
in 1960.
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25 CITI-NEWS LETTER
Winners of export-led economic growth policies
However, Singapore and South Korea had adopted export-led economic growth policies
since around 1970. As a result, the per capita income of both countries began to break
away from that of Sri Lanka, rising to higher levels at each successive year. Both
Singapore and South Korea have been able to beat successfully the middle income trap
and become rich countries within a generation.
Sri Lanka’s present challenge: Beating the middle income trap
The challenge for Sri Lanka is to beat the middle income trap through a viable export
development policy. This is because Sri Lanka’s domestic economy alone is not
sufficient for the country to produce goods and services in volumes that would push the
country up to the level of a rich country in view of the limitation of the market. Sri
Lanka’s domestic market is limited by both the size and the income. It has a population
of 22 million but its middle class – the segment of population that creates a demand for
products – is estimated to be 3.6 million or 16% of the total population.
In comparison, USA’s middle class numbering 232 million amounts to 74% of the
population. Bigger the middle class, larger the domestic market that enables a country
to rely on the domestic economy based economic policies. The choice for Sri Lanka is,
therefore, to adopt a strategy of selling its outputs across its borders. This is known as
export-oriented economic development policies.
A classic example of how exports would facilitate a product or an industry to grow is
provided by Sri Lanka’s tea sector which produces about 330 million kg of tea annually.
But its domestic consumption is about 30 million kg, making it necessary for the
country to seek external markets to sell the extra production. If these markets are not
found, the country’s GDP will shrink by 1%, export earnings by 12% and employment by
2.5% as per data for 2017. Similarly, if the volume of tea exports can be increased by
25%, it will provide a significant boost to Sri Lanka’s economy.
Apparel sector in hot water
Sri Lanka’s main manufactured export – textiles and garments – face a major challenge
due to two related developments. The textiles and garments sector benefitted from the
wave of globalisation that took place in the global economy in 1980s. Accordingly, the
rich countries in the world taking advantage of the low wage costs in low income
countries began to set up their mass consumption product factories in the latter
category of countries. This process was known as off-shoring.
However, an unintended consequence of this process was the development of the bazaar
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26 CITI-NEWS LETTER
effect, as first revealed by German economist H.W. Sinn, in which the rich countries
simply became trading nations – bazaars in a traditional sense – with manufacturing
off-shored to low income countries. With the consequential decline in manufacturing
jobs in rich countries, there was a wide public outcry against off-shoring which became a
political weapon for leaders to gain popularity among the masses.
Hence, the production model was changed to locate the mass production consumption
goods industries near the final markets – called near-shoring – or on the land itself –
called on-shoring – through product automation. The textile and garments industry has
been the first industry to exploit these new production models.
New production model to replace off-shoring by on-shoring and near-
shoring
A recent survey conducted by McKinsey and Company on the apparel sectors in North
America and Europe has revealed that both near-shoring and on-shoring have become
the most popular production model adopted by a large segment in the final consumer
countries. According to the survey, about 67% of the US apparel executives and 80% of
the global chief procurement officers have indicated that the top-most priorities in the
apparel sector have been the speed at which the final products should be delivered to the
market and how the goods could be procured within the season.
In the past, fashions developed by apparel companies had been forced on consumers.
But, that trend is fast changing and instead, a bottom-up consumer preference system in
which the consumers will inform garment manufacturers to produce the fashions they
desire is developing in the apparel sector. To gain capacity to produce and supply these
products, apparel trading companies need to have manufacturing facilities near the
markets. That is the reason for near-shoring and on-shoring to get established in the
apparel sector value chain. On-shoring has been facilitated by automation of apparel
manufacturing brought in by such technological advancements as 3D print
manufacturing, gluing and bonding instead of stitching and robotic employment. As a
result, the cost advantage enjoyed by low income countries with respect to garment
manufacturing is fast eroding.
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27 CITI-NEWS LETTER
Apparel sector is to return home
McKinsey Survey has predicted that by 2025, a large segment of both the North
American and European markets will be supplied by both on-shoring and near shoring.
Table 1 presents the countries that are located around North America and Europe
standing to benefit by adopting the new value chain model.
Will Sri Lanka lose its markets?
Both North America and Europe are Sri Lanka’s established markets for apparel
products. During the 5 year period from 2013 to 2017, European Union absorbed 43% of
Sri Lanka’s apparel exports, while North America absorbed 46%. Thus, these two
markets had accounted for 89% of the country’s apparel exports. Accordingly, if they are
to near-shore and on-shore apparel supplies, Sri Lanka’s traditional apparel industry
will face a serious risk of maintaining sustainability. It is therefore necessary for Sri
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Lanka to change the focus of its production to new export commodities to avert possible
downside development of its export sector.
In the next part, we will look at the way forward strategy for Sri Lanka.
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