Saturday, January 12, 2019

Pakistan Garment Industry Becoming More Cost Competitive With Bangladesh's?

Low wages and trade preferential deals with Western nations have helped Bangladesh, currently designated "Least Developed Country" (LDC),  build a $30 billion ready-made garments (RMG) industry that accounts for 80% of country's exports. Bangladesh is the world's second largest RMG exporter after China. With its designation as LDC (Least Developed Country), garments made in Bangladesh get preferential duty-free access to Europe and America. Rising monthly wages of Bangladesh garment worker in terms of US dollars are now catching up with the minimum wage in Pakistan, especially after recent Pakistani rupee devaluation. Minimum monthly wage in Pakistan has declined from $136 last year to $107 now while Bangladesh has seen it increase from $64 last year to $95 today.  Western garment buyers, known for their relentless pursuit of the lowest labor costs, will likely diversify their sources by directing new investments to Pakistan and other nations. Competing on low cost alone may prove to be a poor long term exports strategy for both countries.  Greater value addition with diverse products and services will be necessary to remain competitive as wages rise in both countries.


Minimum Monthly Wages in US$ Market Exchange Rate


Wage Hike in Bangladesh:

The government in Dhaka announced in September that the minimum wage for garment workers would increase by up to 51% this year to 8,000 taka ($95) a month, up from $64 a year ago, according to Renaissance Capital. But garment workers union leaders say that increase will benefit only a small percentage of workers in the sector, which employs 4 million in the country of 165 million people, according to Reuters.  Bangladesh government promised this week it would consider demands for an increase in the minimum wage, after clashes between police and protesters killed one worker and wounded dozens.

Monthly Minimum Wages in US$. Source: Renaissance Capital

Pakistan Wage Decline:

Pakistani currency has seen about 25% decline in value against the US dollar since January 2018. As a result of this devaluation, the minimum monthly wage in Pakistan has dropped from $136 last year to $107 now while Bangladesh has seen it increase from $64 last year to $95 today. Renaissance Capital projects a further 10% depreciation in Pakistani rupee this year.

Race to the Bottom? 

Competing on cost alone is like engaging in the race to the bottom. Neither Pakistan nor Bangladesh can count on being lowest cost producers in the long run. What must they do to grow their exports in the future? The only viable option for both is to diversify their products and services and add greater value to justify higher prices.

Pakistan's Export Performance:

The bulk of Pakistan's exports consist of low value commodities like chadar, chawal and chamra (textiles, rice and leather). These exports have declined from about 15% to about 8% of GDP since 2003. Pakistan's trade deficits are growing at an alarming rate as the imports continue to far outstrip exports. This situation is not sustainable.  What must Pakistan do to improve it? What can Pakistan do to avoid recurring balance of payments crises?  How can Pakistan diversify and grow its exports to reduce the gaping trade gap? How can Pakistan's closest ally China help? Can China invest in export oriented industries and open up its huge market for exports from Pakistan? Let's explore answers to these question. 

Exports as Percentage of GDP. Source: World Bank
East Asia's Experience:

East Asian nations have greatly benefited from major investments made by the United States and Europe in export-oriented industries and increased access to western markets over the last several decades. Asian Tigers started with textiles and then switched to manufacturing higher value added consumer electronics and high tech products. Access to North American and European markets boosted their export earnings and helped them accumulate large foreign exchange reserves that freed them from dependence on the IMF and other international financial institutions. China, too, has been a major beneficiary of these western policies. All have significantly enhanced their living standards.

Top 10 Textile Exporters. Source: WTO


Chinese Investment and Trade:

Pakistan needs similar investments in export-oriented industries and greater access to major markets. Given the end of the Cold War and changing US alliances, it seems unlikely that the United States would help Pakistan deal with the difficulties it faces today.

China sees Pakistan as a close strategic ally. It is investing heavily in the Belt and Road Initiative (BRI) which includes China-Pakistan Economic Corridor (CPEC). A recent opinion piece by Yao Jing, the Chinese Ambassador in Pakistan, published  in the state-owned China Daily, appears to suggest that China is prepared to offer such help. Here are two key excerpts from the opinion piece titled "A community of shared future with Pakistan":

1. China will actively promote investment in Pakistan. The Chinese government will firmly promote industrial cooperation, expand China's direct investment in Pakistan, and encourage Chinese enterprises to actively participate in the construction of special economic zones. Its focus of cooperation will be upgrading Pakistan's manufacturing capacity and expanding export-oriented industries.

2. China will also actively expand its imports from Pakistan. In November, China will hold the first China International Import Expo in Shanghai, where, as one of the "Chief Guest" countries, Pakistan has been invited to send a large delegation of exporters and set up exhibitions at both the national and export levels. It is hoped that Pakistan will make full use of this opportunity to promote its superior products to China. The Chinese side will also promote cooperation between the customs and quarantine authorities of both countries to facilitate the further opening-up of China's agricultural product market to Pakistan. China will, under the framework of free trade cooperation between the two countries, provide a larger market share for Pakistani goods, and strengthen cooperation and facilitate local trade between Gilgit-Baltistan and China's Xinjiang Uygur autonomous region. And China will take further visa facilitation measures to encourage more Pakistani businesspeople to visit China.

Top 10 Garment Exporters. Source: WTO

Pakistan's Role:

Pakistan needs to take the Chinese Ambassador Yao Jing's offer to increase Chinese investments and open up China's market for imports from Pakistan.  Pakistan's new government led by Prime Minister Imran Khan should take immediate steps to pursue the Chinese offer. Finance Minister Asad Umar needs to form a high-powered team of top bureaucrats and leading businessmen to develop a comprehensive plan to attract investments in export-oriented industries and diversify and grow exports to China and other countries. Pakistan must make full use of its vast network of overseas diplomatic missions to promote investment and trade. 

Summary:

Pakistani currency has seen about 25% decline in value against the US dollar since January 2018. As a result of this devaluation, the minimum monthly wage in Pakistan has dropped from $136 last year to $107 now while in Bangladesh has seen it increased from $64 last year to $95 today. Renaissance Capital projects a further 10% depreciation this year.  While this can help Pakistan's RMG exports in the short term, it is not good long term strategy. Competing on cost alone  is a race to the bottom. Pakistan's manufactured exports per capita have declined in the last decade. Pakistan's exports have declined from about 15% of GDP to about 8% since 2003. The nation's trade deficits are growing at an alarming rate as the imports continue to far outstrip exports. This situation is not sustainable. Chinese Ambassador Yao Jing has offered a helping hand to increase Chinese investment and trade in Pakistan.   Pakistan's new government led by Prime Minister Imran Khan should take the Chinese Ambassador's plan seriously. Finance Minister Asad Umar needs to form a high-powered team of top bureaucrats and leading businessmen on a comprehensive plan to attract investments in export-oriented industries and diversify and grow high-value exports to China and other countries.

PS: More recent data on wages and electricity rates from Business Recorder:







39 comments:

Riaz Haq said...

Bangladesh workers' wages rise in 6 grades
RMG workers' pay structure revised after PM's directive amid unrest for eight days

https://www.thedailystar.net/business/bangladesh-garment-workers-salary-structure-be-revised-1686979

After eight days of labour unrest, the government yesterday announced a revised pay structure, with a slight increase in both basic and gross wages in six of the seven grades in the RMG sector.

In the new pay scale, which comes after years, the yearly increment has been fixed at 5 percent.

Workers had been demanding pay raise in three grades in particular -- grade 3, 4 and 5.

The decision came following directives of the prime minister after an event-packed day, on which workers continued their protests, factory owners threatened to shut down their units and a tripartite committee held almost a daylong meeting to reach a consensus on the hike.

The meeting of the 20-member committee, which has representation of the workers, owners and the government, approved wage increase in grade 1-6. The hike ranges from a token Tk 15 to a modest Tk 747.

The raise is effective from December last year and will be adjusted from February.

The gross pay in grade 7 remains unchanged at Tk 8,000, which was Tk 5,300 in the previous pay structure announced in 2013.

The government will publish a new gazette of the revised wage in the next three to four days, said Labour and Employment Secretary Afroza Khan, who heads the tripartite committee.

The committee was considering pay hikes in the three “most problematic” grades -- 3, 4 and 5.

But at a meeting at Gono Bhaban on Saturday night, Sheikh Hasina instructed officials to revise the latest pay structure, originally announced in September last year, for all grades, sources said.

The workers will receive the arrear with their pay for February, Commerce Minister Tipu Munshi told reporters after the meeting.

“We were mainly concerned about the pay in grade 3, 4 and 5. But we eventually revised the wages six grades so workers get a little more,” he said, announcing the decision at a press conference at the ministry.

Amirul Haque Amin, president of the National Garment Workers Federation, said, “We welcome the revision and the new wage structure.”


He was speaking on behalf of the trade union leaders who are on the tripartite committee.

Reaction among the workers were mixed.

Alamgir Kabir, who works at a Ha-Meem Group factory, said he was happy and that he would join work today.

Another worker, however, said he was not satisfied. But still he would go back to work, if his colleagues did so.

Incidents of labour unrest over the pay structure made headlines in early December, just two months after the pay package was announced.

That protest died down ahead of the general election.

Ashraful said...

Without a CPEC, Bangladesh has progressed and now is ahead of Pakistan on many economic and social indicators. It was less than 50 years ago, Bangladesh was ignored and discriminated by their Punjabi countrymen on the west side. Even today, there is lack of recognition on it's birthing which came from within the Bangla. The nefarious self fulfilling rhetoric of the Pak Army serves Pakistan well by putting nearly all of the "blame" on India while ignoring the indigenous nature of Bangla's birth.


It is sweet revenge to see my Bangla a challenge for my once martial and superior Punjabi masters.

Riaz Haq said...

Ashraful: "Bangladesh has progressed and now is ahead of Pakistan on many economic and social indicators."

Being cost competitive on the basis of low wages is not a sustainable advantage.

The fact is that Bangladesh economy is a one-trick pony.

It's heavily dependent on RMG manufacturing and lagging in other major industries.

Harvard Kennedy School's economic complexity index measures the economic diversity of countries.

Bangladesh ranks 100 while Pakistan ranks 92 on MIT Atlas's economic complexity index (ECI).


http://atlas.cid.harvard.edu/rankings/


Based on ECI, Harvard Kennedy School economists forecast Pakistan to grow at 5.97% and Bangladesh at 2.82% over the next decade.

https://www.riazhaq.com/2017/07/harvard-kennedy-school-cid-projects.html

Take a look at the FT story below:

Bangladesh garment-making success prompts fears for wider economy

Warning dominance of sector hampers diversification and depresses wages

https://www.ft.com/content/5cd0d9ea-d316-11e6-9341-7393bb2e1b51?mhq5j=e3

Bangladesh’s garment-making sector has rebounded so strongly following the Rana Plaza disaster that economists and labour leaders are warning it risks holding back the country’s economy as a whole.

Nearly four years after the collapse of a factory in Dhaka, the country’s capital, in which more than 1,100 garment workers were killed, western clothing companies are buying more from Bangladeshi factories than ever before.

But while the booming garment industry is contributing to an overall growth rate of 7 per cent, economists say it is suppressing wages and crowding out higher value sectors.

“There is no diversity in the economy,” warned Rashed al Mahmud Titumir, economics professor at Dhaka University. “Bangladesh has not been able to produce more lucrative products — there are barely any exports except ready-made garments.”

In the 1983-4 fiscal year, Bangladesh garment sales abroad made up 3.9 per cent of its total exports and were worth $31.6m, according to data from the Bangladesh Garment Manufacturers and Exporters Association. By 1989-1990 that had risen to 32 per cent, worth $624.2m. At the time of the Rana Plaza collapse — the country’s worst industrial disaster — garment exports had reached 80 per cent or $21.5bn.

Despite the tragedy, the sector has continued to grow, hitting $28.1bn in the last financial year and accounting for 82 per cent of total exports.

Industry representatives say the continued growth is the result of the unprecedented action it took in the aftermath of the disaster, agreeing to independent safety checks and including workers and unions on inspection teams.

Riaz Haq said...

World Bank's Poverty and Shared Poverty Report 2018 compares the annual income growth rate of the bottom 40% of the population with the average income growth of the entire population for 91 countries for years 2010-2015. Here's the data for a few selected countries:

Country Bottom 40% income growth vs Average Income Growth

Pakistan 2.7% vs 4.3%

Bangladesh 1.4% vs 1.5%

Iran 1.3% vs -1.3%

Indonesia 4.8% vs 4.8%

Sri Lanka 4.8% vs 5.3%

Vietnam 5.2% vs 3.8%

Thailand 5.0% vs 3.0%

Malaysia 8.3% vs 6.0%

China 9.1% vs 7.4%


http://www.worldbank.org/en/publication/poverty-and-shared-prosperity


People experience poverty differently even within the same household. Traditional measures haven’t been able to capture variations because the surveys stop at the household level. Measuring poverty as experienced by individuals requires considering how resources are shared among family members. While data are limited, there is evidence that women and children are disproportionately affected by poverty in many — but not all — countries. Sex differences in poverty are largest during the reproductive years, when, because of social norms, women face strong trade-offs between reproductive care and domestic responsibilities on the one hand and income-earning activities on the other hand. Worldwide, 104 women live in poor households for every 100 men. However, in South Asia, 109 women live in poor households for every 100 men. Children are twice as likely as adults to live in poor households. This primarily reflects the fact that the poor tend to live in large households with more children.

There is evidence from studies in several countries that resources are not shared equally within poor households, especially when it comes to more prized consumption items. There is also evidence of complex dynamics at work within households that go beyond gender and age divides. More surveys are needed to capture consumption patterns of individuals so that governments can implement policies to bridge the inequalities within households.

Anonymous said...

Ashraful, first of all congratulations to Bangladesh for the achievement. Second, I am not quite sure why if BD is making such progress somewhere between 1 to 3 million Bangladeshis are still living illegally in Karachi. If you visit any house of Karachi's posh locality of Defense or Clifton, chances are that you will see a Bangladeshi cook. Obviously BD’s progress is limited to the upper and middle classes and is not tickling down to the poor.

Regarding your comment “The nefarious self fulfilling rhetoric of the Pak Army serves Pakistan well by putting nearly all of the "blame" on India while ignoring the indigenous nature of Bangla's birth.”
I am not sure what history you have been read. No on in Pakistan puts total blame on India. Not a month passes by when some politician doesn’t say that East Pakistan like situation is being created in XYZ area. We all blame ourselves for the situation where the majority of our countrymen felt alienated. That India played a role in creating, arming and training Mukti Bahini is on the record and is undeniable. By the way, when Muktis were busy killing innocent non-Bengalis, they didn’t claim to kill Pakistanis or Punjabis, they always claimed that they were killing Beharis.

Zamir

Riaz Haq said...

1000s of #Bangladesh #garment workers clash with police. Min #wages rose by a little over 50% this month to 8,000 taka ($95) a month. But mid-level tailors said their rise was paltry and failed to reflect the rising costs of living, especially in housing. https://www.theguardian.com/world/2019/jan/14/bangladesh-strikes-thousands-of-garment-workers-clash-with-police-over-poor-pay?CMP=share_btn_tw

Thousands of garment workers in Bangladesh who make clothes for top global brands have clashed with police as strike action over low wages entered a second week.

Police said water cannon and tear gas were fired on Sunday to disperse huge crowds of striking factory workers in Savar, a garment hub just outside the capital, Dhaka.

“The workers barricaded the highway. We had to drive them away to ease traffic conditions,” said police director Sana Shaminur Rahman. “So far 52 factories, including some big ones, have shut down operations due to the protests.”

On Tuesday, one worker was killed when police fired rubber bullets and tear gas at 5,000 protesting workers.

Bangladesh is dependent on garments stitched by millions of low-paid tailors on factory floors across the emerging south Asia economy of 165 million people.

Roughly 80% of its export earnings come from clothing sales abroad, with global retailers H&M, Primark, Walmart, Tesco and Aldi among the main buyers.

Union leader Aminul Islam blamed factory owners for resorting to violence to control striking workers. “But they are more united than ever,” he told AFP. “It doesn’t seem like they will leave the streets, until their demands are met.”

The protests are the first major test for prime minister Sheikh Hasina since winning a fourth term in last month’s elections, which were marred by violence, thousands of arrests and allegations of vote rigging and intimidation.

Late on Sunday, the government announced a pay rise for mid-level factory workers after meeting manufacturers and unions. Not all unions have signalled they will uphold the agreement.

Babul Akhter, a union leader present at the meeting, said the deal should appease striking workers. “They should not reject it, and peacefully return to work,” he said.

Minimum wages for the lowest-paid garment workers rose by a little over 50% this month to 8,000 taka ($95) a month. But mid-level tailors said their rise was paltry and failed to reflect the rising costs of living, especially in housing.

Bangladesh’s 4,500 textile and clothing factories shipped more than $30bn worth of apparel last year.

The Bangladesh Garment Manufacturers and Exporters’ Association, which wields huge political influence, warned all factories might shut if tailors did not return to work immediately. “We may follow the ‘no work, no pay’ theory, according to the labour law,” association president Siddikur Rahman told reporters.

Last year Bangladesh was the second-largest global apparel exporter after China. It has plans to expand the sector into a $50bn-a-year industry by 2023.

But despite their role in transforming the impoverished nation into a major manufacturing hub, garment workers remain some of the lowest paid in the world.

Riaz Haq said...

#Foreign direct #investment (FDI) in #Pakistan hits six-month high. #FDI increased 17% to $319.2 million in Dec 2018 compared to $272.8 million in Dec, 2017. It's the second consecutive month that the FDI inflow rose in FY2018-19 https://tribune.com.pk/story/1889903/2-foreign-direct-investment-pakistan-hits-six-month-high/

Pakistan achieved a six-month high foreign investment in different productive sectors of the economy in December 2018 after the country finished a year-long exercise of letting the rupee depreciate against the US dollar to create an equilibrium.

Foreign direct investment (FDI) increased 17% to $319.2 million in December 2018 compared to $272.8 million in the same month last year, the State Bank of Pakistan (SBP) reported on Wednesday.

This is also for the second consecutive month that the FDI has continued to surge on a month-on-month basis.
“The pending rupee devaluation was one of the biggest concerns of foreign direct investors. Now when Pakistan has addressed the concern, it has regained foreign investors’ trust on the country,” Overseas Investors Chamber of Commerce and Industry (OICCI) Secretary General M Abdul Aleem told The Express Tribune.

Despite heavy inflow from China, FDI fails to pick up in FY18

The SBP has devalued the rupee by a whopping 32% in the last 13 months to Rs138.90 to the US dollar on Wednesday.

Besides, the political uncertainty linked to the July 2018 general elections has come to an end and investors have gradually built trust on the recently installed government in the country as well, he added.

In the recent months, the foreigners squeezed investment in wait for clarity on economic policies of the new government. “The government has taken tough decisions over rupee devaluation and (key) interest rate hike. The initiatives have apparently won the investors’ confidence,” he said.

Unlink the previous five months when China remained the only healthy foreign investor in Pakistan, Netherlands and Norway also appeared as significant foreign direct investors in December 2018, according to SBP.

China alone has invested net FDI worth $120.6 million in December, while Norway and Netherlands have appeared as the second and third largest investor with $65.2 million and $47.6 million, respectively.

Sector-wise, it was financial business which attracted the single highest investment worth $137.3 million in the month. This was followed by chemicals with $50.9 million and construction $45.1 million.

Cumulatively in the first six months (July-December) of the current fiscal year, FDIs have dropped 19% to $1.31 billion compared to $1.63 billion in the same period last year.

“The investment attracted in the six months is not bad keeping in view the then political uncertainty and investors waited for clarity on the government economic policies,” Aleem said.

“However, the much-awaited jump in FDIs is yet to come,” he said.

Clarity and confidence on the new government are gradually increasing. “The full-year FDIs should be much higher than $2.8 billion achieved in the previous fiscal year (ended June 30, 2018),” he said.

“The country may attract more foreign investment in oil and gas exploration, telecom, consumer goods, and CPEC-related new investment,” said the official, adding that CPEC-related investments had slowed down over the last seven-eight months.

The total foreign investment, including portfolio investment and public and private external debt, has dropped by a whopping 77% to $899.5 million in the six months compared to $3.95 billion in the same period last year.

The massive drop is seen due to adjustment of the debt Pakistan raised through sale of Sukuk and Eurobond worth $2.5 billion November 2017. The government has not raised debt during July-December 2018 period.

Riaz Haq said...

#Pakistan wriggles out of #IMF clutches. As a result, in geopolitical terms, #Washington’s capacity to leverage Pakistani policies is significantly diminishing. #Saudi-Pak ties are moving on to new level of dynamism.

https://indianpunchline.com/pakistan-wriggles-out-of-imf-clutches/


The visit by Saudi Arabia’s Energy Minister Khalid A Al-Falih on Saturday to Gwadar to inspect the site allocated for a multibillion oil refinery in the port city suggest that Riyadh and Islamabad are giving the final touch to reaching agreement for a Saudi Aramco Oil Refinery in Pakistan. Reports say that Saudi Arabia will be investing $10 billion in the proposed project.


Without doubt, this is a major development in the region. The Saudi-Pakistan relationship, which has been traditionally close and fraternal, is moving on to a new level of dynamism. The Saudi investment decision can be taken as signifying a vote of confidence in the Pakistani economy as well as in Prime Minister Imran Khan’s leadership. It comes on top of the $6 billion package that Saudi Arabia had pledged last year (which included help to finance crude imports) to help Pakistan tide over the current economic difficulties.

The visiting Saudi minister Khalid al-Falih told reporters in Gwadar, “Saudi Arabia wants to make Pakistan’s economic development stable through establishing an oil refinery and partnership with Pakistan in the China Pakistan Economic Corridor.” This remark highlights that Saudi Arabia is openly linking up with the China-Pakistan Economic Corridor (CPEC). China has welcomed this development, but countries that oppose the CPEC such as the US and India will feel disappointed.

From the Indian perspective, the Saudi investment in Gwadar becomes a game changer for the port city, which was struggling to gain habitation and a name. Inevitably, comparisons will be drawn with Chabahar. India has an added reason to feel worried that its Ratnagiri Refinery project, which has been described as the “world’s largest refinery-cum-petrochemical project” is spluttering due to the agitation by farmers against land acquisition. The Saudi Aramco was considering an investment in the project on the same scale as in Gwadar. Will Gwadar get precedence over Ratnagiri in the Saudi priorities? That should be the question worrying India.

The Saudi energy minister disclosed that Crown Prince Mohammed bin Salman will be visiting Pakistan in February and the agreement on the Gwadar project is expected to be signed at that time. Of course, it signifies that Saudi Arabia is prioritizing the relations with Pakistan. The fact remains that Saudi Arabia has come under immense pressure of isolation following the killing of Jamal Khashoggi.

There is much uncertainty about the dependability of the US as an ally and security provider. Riyadh is diversifying its external relations and a pivot to Asia is under way. Suffice to say, under the circumstances, a China-Pakistan-Saudi axis should not look too far-fetched. There is also some history behind it.

To be sure, Iran will be watching the surge in Saudi-Pakistani alliance with growing trepidation. The Saudi presence in Pakistan’s border region with Iran (such as Gwadar) has security implications for Tehran. Iran has been facing cross-border terrorism.

Riaz Haq said...

#American #agribusiness giant Cargill to grow #Pakistan business with US$200 million investment for expansion across its #agriculture trading and supply chain, edible #oils, #dairy, #meat and animal feed businesses while ensuring safety, food traceability. https://www.thenews.com.pk/latest/420270-cargill-to-grow-pakistan-business-with-us200-million-investment

Cargill renewed its long standing commitment to Pakistan by announcing plans to invest more than US$200 million in the next three-to-five years.

The announcement was made soon after Cargill’s global executive team, led by Marcel Smits, head of Global Strategy and Chairman, Cargill Asia Pacific region, and Gert-Jan van den Akker, president, Cargill Agricultural Supply Chain, met with the Prime Minister Imran Khan and other senior government officials to discuss the company’s future investment plans.

Being a global food and agriculture producer with a strong focus on Asia, Cargill aims to partner on Pakistan’s growth by bringing its global expertise and investment into the country.


The company’s strategy includes expansion across its agricultural trading and supply chain, edible oils, dairy, meat and animal feed businesses while ensuring safety and food traceability.

Cargill will bring world class innovations to support the flourishing dairy industry in Pakistan, which is already moving toward modernization, as well as the rising demand for edible oils backed by evolving consumption patterns and a growing market for animal feed driven by sustained progress made by the poultry industry in Pakistan.

Cargill’s proposed investments will support Pakistan’s overall economic development and contribute to local employment.

The visiting delegation informed the Prime Minister that M/s Cargill intended to invest in Pakistan as back as 2012 but were discouraged by mismanagement, corruption and non-availability of level playing field during the previous governments. However, investor’s confidence has restored after the incumbent Government and the policies being pursued by it.

The prime minister welcomed investment plans of M/s Cargill in the area of agriculture development, import substitution and enhancement of agricultural products.

He highlighted the efforts of the government towards ensuring transparency, providing the business community with level playing field and improving ease of doing business in the country.

The PM assured the delegation full support from the government.

Riaz Haq said...

#Egyptian billionaire Naguib Sawiris offers to build 100,000 housing units in #Pakistan as part of #PMImranKhan’s Naya Pakistan #housing initiative. http://www.arabnews.pk/node/1437706/pakistan


Egyptian billionaire Naguib Sawiris has offered to build 100,000 housing units in Pakistan to help realize Prime Minister Imran Khan’s dream of an ‘ambitious’ housing project, officials said on Friday.
“Naguib Sawiris has expressed his will to invest in 100,000 units of affordable housing to help prime minister (Imran Khan) in his vision toward Pakistan,” Tarek Hamdy, Chief Executive officer of Elite Estates — a partnership between Ora Developer and Saif Holding — told Arab News in an exclusive interview.
Owned by Sawiris, Ora Developers is already engaged in the construction of a multibillion-dollar housing scheme named ‘Eighteen’ which was launched in 2017 in Islamabad with local partners, Saif Group and Kohistan Builders.
Sawiris’ first investment in Pakistan was in Mobilink, a cellular operator.
PM Khan in October 2018 had launched ‘Naya’ (New) Pakistan Housing Project in line with his party’s election manifesto, which promised fivr million houses for the poor.
Hamdy says they have “set rules or guidelines of the way of doing things” that apply to every real estate projects — whether they are affordable or high value units.
“We will use our experience and knowhow to deliver this properly to the people of Pakistan,” he added.
Since the announcement of the low-cost housing project for the poor, the scheme has been at the heart of all political and economic discourses with several calling it too ambitious.
“This scheme is very ambitious yet very promising for the people of Pakistan. I think all the developers should help in this scheme. You cannot solely rely on the government to build five million houses,” Hamdy said.
Recently, the governor of Pakistan’s central bank had said that the massive housing project would require financing of upto Rs 17 trillion.
Hamdy believes that the promise of building five million affordable housing units cannot be realized in a short span of time. “I think the plan is right but it has to be in stages, has to be in steps. It could be achievable obviously that is not the project (to be achieved) in one or two years... may take few good years, may be couple of decades to be achieved,” he said.
In the Islamabad project the Ora Developers own a 60 percent stake in the project comprising a five-star hotel, 1,068 housing units, 921 residential apartments, business parks, hospitals, schools and other educational facilities and 13 office buildings, and a golf course. The networth of the project is $2 billion.
The next cities on the radar for real estate projects are Lahore, Karachi, and Faisalabad. “We intend to do more, we intend to invest more. I think that our portfolio of real estate could come to $10 billion worth of investments in the next five to 10 years including all the projects that we intent to do,” Hamdy said.
Pakistan’s housing sector is marred by frauds, scams and unfinished schemes which has been discouraging many potential investors from venturing into the sector. However, Hamdy says he is confident of delivering the promise by 2021.
Analysts say that Pakistan’s housing sector offers great opportunities for investment due to increasing demand. “According to estimates, the current real estate market value is around Rs900 billion which is three times that of the GDP,” Saad Hashmey, an analyst at Topline Securities, told Arab News, adding that the PM’s housing project is the need of the hour.
Pakistan faces a shortage of nearly 12 million housing units that may require a massive investment of around $180 billion, according to the former Chairman of the Association of Builders and Developers, Arif Yousuf Jeewa.

Anonymous said...

Pakistan and Egypt are brotherly countries. Such mutual investments are very welcome. Another Malaysian billionaire is expected to make such commitment shortly. Turkish businessmen are also being actively coaxed by team PTI and our forces.

Anonymous said...

You do realize most of these fdi will result in further outflow of fx reserves once the assets are operationalized?

None of these are being developed to export from Pakistan..

Also things like low cost housing is something that Pakistani conglomerates can undertake with rupee funds I.e zero forex risk..

Riaz Haq said...

Anon: "Also things like low cost housing is something that Pakistani conglomerates can undertake with rupee funds I.e zero forex risk.."


Imran Khan's housing plans call for 5 million new homes in 5 years---a very ambitious target.

Assuming a modest $10,000+ cost to build each home, the total tab will exceed $50 billion.

Most of these homes will be built by domestic builders. But Pakistan can definitely use foreign investments to achieve this target.

Benefits of housing far outweigh any exports concerns. Housing construction creates lots of jobs and drives economic growth by increasing demand for everything from building materials like cement and steel to furniture, home appliances, and lots of other household items. It raises people's standards of living.

Nayyer Ali said...

The rupee devaluation has brought the domestic cost structure down, but we have yet to see this either dampen imports of consumer goods or raise exports, but it is perhaps too early. I know you have been basically supportive of the new government's policies, but so far have they done much in the way of substantive reforms? Bringing to an end expensive subisdies of loss making state owned companies, and ending subsidized petroleum that benefits the middle class and rich at the expense of the poor while pushing up oil imports, have yet to be done. The IMF deal needs to be finalized. Pakistan has great potential, but bad policy for the last 10 years kept GDP growth under 5% per year, the worst in South Asia. What prospect is there for the current government to raise and sustain that rate at 7%? I assume you read the Economist piece that was quite critical of the army and of the IK government so far. What was your reaction to that? The article argued that CPEC was the cause of the overvalued rupee and was harmful to Pakistan. I think that is nonsense, it was the government that deliberately chose to keep the PKR overvalued. In addition, the problem is not excessive FDI, but the very high remittance flow that was pushing up the PKR while the funds were basically used for consumption instead of investment. What has allowed Pakistan to double imports in the last decade while not raising exports at all was the room created by the massive remittance flow. Pakistan would have been forced to follow a more rational and balanced policy without the remittances.

Riaz Haq said...

NA: "What was your reaction to that?"

Pankaj Mishra in a recent NY Times Op Ed described the Economist as "an organ of the British elite". I'd broaden "British elite" to include western elite which has always had nothing but disdain for the people in their former colonies. It's essentially an Orientalist view. And IMF is a tool for pushing the West's neoliberal agenda that has kept the former colonies poor and backward.

I think you've hit the nail on the ahead when you blame Pakistan's current crisis to lack of focus on trade with exports declining and the imports climbing over the last 5 years under Sharif's government. The PMLN government and Ishaq Dar borrowed excessively in US$ to deal with ballooning current account deficit. It'll take focus and time to correct this situation. I'm willing to give more time to PTI/Imran to fix this structural issue by create a more export oriented industry and economy.

Riaz Haq said...

#Pakistan plans reforms for #IMF. “We need to bring a balance in revenue and expenditure as it is vital for growth.Our imports are touching a dangerous point. We have to increase exports and bring reforms in agriculture and other sectors”. https://www.ft.com/content/9588f5ae-1f24-11e9-b126-46fc3ad87c65 @financialtimes


In a speech in the lower house of parliament, Asad Umar unveiled a cut in import duty on industrial raw materials to raise industrial productivity and help ease a chronic energy crisis that has caused repeated power outages and gas supply interruptions.

He also proposed a series of tax measures for investors in the stock market, as well as proposals to cut red tape and lower taxes for small and medium-sized businesses.

“We need to bring a balance in revenue and expenditure as it is vital for growth,” Mr Umar said. “Our imports are touching a dangerous point. We have to increase exports and bring reforms in agriculture and other sectors”.

Since he was elected in August, Mr Khan has focused on staving off a balance of payments crisis. In the year before Mr Khan’s election, liquid foreign currency reserves fell to the equivalent of about eight to nine weeks of imports,down from more than 12 weeks, mainly due to a widening current account deficit.

Under Mr Khan’s leadership, the country has secured at least $11bn in combined loans from Saudi Arabi a, the United Arab Emirates and China to meet its foreign payments in the financial year to June this year. But it has also drawn up plans to seek a bailout from the IMF.

Economists said an IMF loan was the only way for Pakistan to rebuild confidence and persuade multilateral lenders such as the World Bank and the Asian Development Bank to extend loans to the country.

With overall economic growth during this financial year set to fall to 4 per cent of GDP down, from 5.8 per cent in the last financial year, Mr Khan was risking popular anger, they said.

“Across Pakistan, there is a lot of bitterness among businesses and generally people feel that there is a definite slowdown,” one senior western economist said. “As Pakistan heads into an IMF programme, the slowdown will continue.”

Mr Umar announced cuts in import duty for five years on imported equipment for renewable energy generation as well as machinery for manufacturing in special economic zones.

He also said taxes on imported luxury cars would be raised.

But analysts warned that the outlook for the economy depended on how far Mr Khan’s government could successfully tackle areas in need of reform.

“As we go forward, much depends on how far the government can deal with long-term issues central to the economy,” said Abid Sulehri, member of a government economic advisory council.

Pakistan has one of the world’s worst systems of tax collection where less than 1 per cent of the population pays an income tax.

Riaz Haq said...

#Pakistan Central Bank expects slowdown in #economic growth to 4-4.5%. Corrective measures by #PTI government taken so far to fix the fundamentals have taken a toll mainly on two leading sectors – large-scale #manufacturing (LSM) and #agriculture. https://tribune.com.pk/story/1899685/2-sbp-expects-slowdown-economic-growth-4-4-5/

“The 6.2% target for real GDP (gross domestic product) growth seems unachievable (in FY19),” the central bank said in its first-quarter report on the state of Pakistan’s economy for fiscal year 2018-19 issued on Tuesday.

The country hit a 13-year high economic growth of 5.8% in the previous fiscal year, but “at the cost of widening macroeconomic imbalances as manifested in the five-year high fiscal deficit and a record high current account deficit,” the central bank said earlier.

The LSM sector dropped 1.7% in the first quarter (July-September 2018) of the current fiscal year compared to 9.9% growth in the same quarter last year due to interest rate hikes, massive rupee depreciation against the US dollar and reduction in the government’s development budget.

Such measures were taken to fix the macroeconomic imbalances like the twin deficit. Simultaneously, they negatively impacted LSM and the agronomy.

“In fact, the large-scale manufacturing contracted for the first time in over seven years during Q1-FY19,” the SBP said in its first-quarter report. Furthermore, important budgetary measures such as the imposition of ban on high-value property and new car purchases by non-filers of tax returns restricted activity in these sectors. The government in the recent second mini-budget has, however, allowed the non-filers purchase of new cars up to 1,300cc.

Within the agriculture sector, preliminary estimates indicate that production of all major Kharif crops has remained lower compared to the last season.

“This decline can be attributed primarily to an alarming water availability situation, particularly in Sindh, which led to a 7.7% decline in the total area under production. Furthermore, crop yields also suffered due to subdued fertiliser offtake amidst rising prices of both urea and DAP,” the central bank said. The uptrend in international oil prices during the first quarter remained a big challenge for the economy as that resulted in an unwanted growth in the oil import bill. Pakistan meets around 70-80% of energy needs through imports.

Immediate challenges

Although the economy is responding to the stabilisation measures taken over the past few months, boosting foreign currency reserves and controlling inflation would remain the two near-term challenges to the economy, it said.

“Average inflation during Q1-FY19 increased to 5.6% – the highest quarterly growth since Q1-FY15,” it said. The SBP projected the inflation (Consumer Price Index) at 6.5-7.5% for the full fiscal year against the target of 6%.

Besides, narrowing down the continuously widening fiscal account deficit would remain a tough challenge for the economic managers. The fiscal deficit widened to Rs541.7 billion in the first quarter compared to Rs440.8 billion in the corresponding period of last year. “This was mainly because revenue collection could not keep pace with growing current expenditures.

“This increase came on the back of a steep rise in current spending (mainly debt servicing and defence), which more than offset marginal gains in the revenue collection,” the SBP said. The central bank projected the fiscal deficit at 5.5-6.5% in FY19 compared to the target of 4.9%.

Silver lining

The downturn in international oil prices has emerged as a blessing for the domestic economy. This is expected to help narrow down the current account deficit.

“The most important development has been the bearish spell in the global crude market that began in early October and ran through the rest of Q2-FY19. Oil prices have fallen by a quarter during this period and reached a year’s low level of $54 per barrel. This will lift some pressure from Pakistan’s oil import bill in at least the second quarter of the year,” the SBP said.

Riaz Haq said...

Faisalabad based Interloop, world’s biggest socks maker and supplier to Adidas and Nike, raised Rs 5 billion in an IPO at Karachi stock exchange today

https://www.thenews.com.pk/print/443994-interloop-ipo-raises-rs5-025bln

Interloop Limited has successfully raised Rs5.025 billion through the largest private sector Initial Public Offering (IPO), placing itself among the top 50 companies listed on the Pakistan Stock Exchange (PSX) by market capitalisation, the company said on Thursday.


The company that supplies foot-hosiery to global sportswear giants like Nike and Adidas said, the two-day book building process was oversubscribed by 1.37 times with the price closing at Rs46.10/share.

The total demand received was Rs6,727 million against total issue size of Rs 4,905 million, oversubscribed by Rs1,822 million or 1.37 times.

Arif Habib Limited is the consultant to issue for the IPO, while Ismail Iqbal Securities has been the book runners.

The Interloop offer has surpassed the previous record for a private company, when Pakistan Stock Exchange Ltd raised Rs4.5 billion two years ago. There have been larger sales by state-controlled companies in Pakistan.

Interloop is one of the world’s largest hosiery manufacturers and has an annual turnover in excess of Rs30 billion.

The company in a statement said one of the main objectives for the IPO was to expand hosiery production by opening a new plant and simultaneously and entry into the apparel business by opening a denim plant in Lahore, for which land had already been acquired.

Interloop Ltd., which makes socks for Nike and Adidas, is planning Pakistan’s biggest ever initial public offering by a private firm.

The company plans to raise as much as 6.8 billion rupees ($51 million) to expand its sock manufacturing capacity by around 20 percent and enter the denim business, said Chairman and Co-Founder Musadaq Zulqarnain. It will offer 12.5 percent of the business in the sale, likely to take place in January, and is aiming to lift revenue by 77 percent over five years, he said.

“Our capacity is already full,” Zulqarnain said in an interview at the company’s head office in Faisalabad. Interloop can see more growth, so will “take that risk” to expand, he said.

The listing comes as Prime Minister Imran Khan tries to spark an export revival to make up ground that Pakistan has lost to low-cost manufacturing destinations like Vietnam and Bangladesh. The new government has announced plans to cut gas and electricity prices to support companies selling abroad, although the push has been criticized for relying too much on subsidies.


The Interloop offer will surpass the previous record for a private company, when Pakistan Stock Exchange Ltd. raised 4.5 billion rupees two years ago. There have been larger sales by state-controlled companies in Pakistan.


https://www.bloomberg.com/news/articles/2018-11-09/sock-supplier-for-nike-plans-biggest-pakistan-private-sector-ipo

Riaz Haq said...

#Bangladesh #garment makers ask government to extend export subsidy after wage hike in Dec to sustain $30 billion #RMG #exports. Prices of readymade garments in 2018 were 7.4% lower in the U.S. market and 3.64% less in the European market than in 2012. https://reut.rs/2IpHCiG

Bangladesh’s garment makers have asked the government to extend a 5 percent export subsidy for the industry, saying they are being squeezed between low international prices for clothing and rising production costs.

The country’s garment industry, the world’s second biggest producer, currently receives a 5 percent cash incentive for exports but that is due to end on June 30.

Siddiqur Rahman, the president of the Bangladesh Garment Manufacturers and Exporters Association, told reporters on Wednesday that without the subsidy, more garment makers would go out of business. The association says that 1,200 garment factories have closed down in Bangladesh in the past five years.

Siddiqur said another 5 percent cash incentive on exports would cost the government $1.67 billion.

Commerce Minister Tipu Munshi told Reuters that he would talk to the finance minister about including the proposal in the budget for the fiscal year beginning July 1.

“After the enhancement of wages since December last year there is a pressure to the owners and if they get some cash incentive that would be a relief,” said Tipu.

Siddiqur said that the prices of readymade garments in 2018 were 7.4 percent lower in the U.S. market and 3.64 percent less in the European market than they had been in 2012.

At the same time the manufacturers’ costs have been climbing, mainly driven by labour costs.

Last year, there was a big increase in the minimum wage for Bangladesh garment makers and that drove the costs of production higher.

Bangladesh earns about $30 billion annually by exporting readymade garments.

Riaz Haq said...

Pakistan’s textile exports stagnant; RMG marks 3.2% growth
by Apparel Resources News-Desk
21-May-2019

https://apparelresources.com/business-news/trade/pakistans-textile-exports-stagnant-rmg-marks-3-2-growth/

Mainstay of Pakistan’s economy, the textile industry of the country is in a sticky situation lately.

As per reports, in the first 10 months of the current fiscal year of 2018/19, textile exports from Pakistan remained flat at US $ 11.1 billion, as compared to the corresponding period of the previous year. And this despite Government’s various measures to boost exports.

However, on the positive side, export of readymade garments, bedwear and knitwear registered growth in the period under review.

As per data from Pakistan Bureau of Statistics (PBS), export of RMG improved 3.2 per cent to US $ 2.1 billion, while export of knitwear exports increased by 7 per cent year-on-year to US $ 2.3 billion and, export of bedwear marked an increase of 2.4 per cent to US $ 1.9 billion.

Further, in this period, export of raw cotton declined drastically by 67.2 per cent to US $ 18.5 million while export of cotton yarn fell 15.7 per cent to US $ 941.3 million.

Exports of cotton cloth also reportedly fell 2.7 per cent to US $ 1.7 billion (in the July-April period of the current fiscal year).

It may be mentioned here that due to continuous devaluation of rupee (fell by around 20 per cent in last year alone), exporters are able to improve on their margins on exports but on the flipside cost of doing business has gone up significantly.

Riaz Haq said...

Asia labor costs and China manufacturing relocation impact considerations

https://www.ventureoutsource.com/contract-manufacturing/asia-labor-costs-china-manufacturing-relocation-impact-considerations/
Below, the annual cost (average) per manufacturer worker in China, Thailand, Malaysia, Indonesia, Pakistan, Philippines, India, Vietnam per Japan external trade organization (JETRO).

Average annual cost of a manufacturing worker (US$, 2017)

China: $10,131
Thailand: $6,997
Malaysia: $5,900
Indonesia: $5,421
Pakistan: $4,379
Philippines: $4,102
India: $3,982
Vietnam: $3,673

Riaz Haq said...

Special Economic Zones (#SEZs) in #Faisalabad alone would help #Pakistan grow its #exports by $1billion to $1.5 billion per year in the short span of time by ensuring effective and comprehensive planning, Says (FIEDMC) Chief Mian Kashif #economy https://nation.com.pk/15-Sep-2019/sezs-to-boost-exports-to-1-5b-per-annum-fiedmc

Appreciating economic vision of Prime Minister Imran Khan, he said the premier has directed all the concerned departments to remove hurdles in the way of development of SEZs and establish them on priority basis.

Fortunately, he said almost hundred percent plots in M-3 Industrial Estate have already been sold out while hundreds of units have become operational and were playing their role in providing exportable surplus in addition to accommodating thousands of workers.

Mian Kashif said that the industrial city would house more than 400 textile, steel, pharmaceutical, engineering, chemical, food processing, plastic and agriculture appliances units in addition to providing jobs to 250 thousand workers.

He claimed that the city was also expected to attract Rs400 billion local and foreign direct investment which would help Pakistan to stabilise its economy. He further said that Faisalabad was strategically located in the heart of Pakistan with two motorways passing from its eastern and western sides.

He said that this city has a unique privilege to contribute 60 percent towards textile exports and 45 percent towards total exports of the country.

He further said that it was not only restricted to textile which was its iconic identification but hundreds of SMEs hailing from chemicals, steel, food processing and others were also playing their role in the overall economy of Pakistan.

FIEDMC Chairman further said investors from China, Turkey, Korea and Britain have pumped $ 1.10 billion and their confidence in Pakistan have been restored as they are also bringing more investors from their respective country to invest in SEZs.

He said these investors expressed their eagerness to explore the possibility of investment in diverse sectors of Pakistan especially in ceramics, chemicals, steel, food processing and automobiles.

He said Prime Minister Imran Khan clearly directed them to focus on developing such industry in SEZs which is based on export and import substitution to restrict the import bill.

He said the good thing is that a number of Chinese industries have started pumping investment in SEZs and apparently the reason behind this is the production cost in China has increased which is making Pakistan one of the beneficiaries of on-going US China trade war.

He emphasised that consistent policies were imperative to attract foreign investment into the country, which could lead the economy towards sustainable growth.

He said industries operating in the FIEDMC will have an immediate access to high-quality infrastructure, un-interrupted power supply, public facilities and support services along with simpler ease of doing business.

Chief Operating Officer Muhammad Aamer Saleemi also briefed the delegation and said FIEDMC in collaboration with Industrial Police Liaison Committee has established police post at M-3 Industrial City and the industrial community will work under safe environment.

“The whole industrial estate will be monitored by high resolution surveillance cameras and 24 hours police patrolling will be provided in the estate,” adding he said this would make FIEDMC the safest industrial estate in the country.

He said CPEC will attract $40 billion worth of investment which will directly raise investment-to-GDP ratio by 2.8 percentage points besides some indirect investment addition.

“The investment in hard currency will also support exchange rate stability in the country and stabilise balance of payments situation in the country,” he added.

Riaz Haq said...

#Pakistan exported $1,156 million worth of readymade #garments (#RMG) in five months, showing an increase of 36% in quantity and 13.19% in value. #exports
https://www.brecorder.com/2019/12/21/555315/pakistan-exports-increase-by-4-8pc-in-five-months-finance-advisor/

Pakistan exports increase by 4.8pc in five months: Finance advisor
By Ali Ahmed on December 21, 2019
Sheikh said that from July-Nov 2019, exports increased by 4.8pc as compared to same period last year.
Value added exports like readymade garments, knitwear and other major exports are showing strong pick up in both quantity & value, he said.

Adviser to the Prime Minister of Pakistan on Finance and Revenue Abdul Hafeez Sheikh said that strong export growth is essential for the industrial expansion and job creation in an economy, as Pakistan posted 4.8pc export growth.

In a tweet, the advisor said that in five months (July-Nov 2019) exports increased by 4.8 percent as compared to same period last year. “Value added exports like readymade garments, knitwear & other major exports are showing strong pick up in both quantity & value," he said.

As per the data of Major Exports of Pakistan in 2019-20 (July-November) shared by Hafeez, knitwear items worth $1,320 million were exported in the five months, showing a quantity increase of 6 percent and value increase of 8.69pc.

Whereas, Pakistan exported $1,156mn worth of readymade garments in five months, showing an increase of 36pc in quantity and 13.19pc in value. Meanwhile bedwear was third on the list with $1.013bn worth of exports, an increase of 14.37pc in quantity and 4.69pc in value.

Riaz Haq said...

#Pakistan #textile sector at full production capacity. “If all goes well, the developments in textile industry support…the government to achieve the set export target of $24-25 billion this fiscal year” #exports #trade The Express Tribune

https://tribune.com.pk/story/2162491/2-textile-sector-jumps-full-capacity-production/


The textile manufacturing sector – the single largest export-oriented sector of Pakistan – has spiked to full-capacity production after the government withdrew duties and taxes on import of the raw cotton in January.

Besides, Islamabad is getting higher export orders for textiles since China, the single largest textile exporter at world across, is lying closed to fight against the deadly coronavirus for the past couple of months.

“Pakistan (textile sector) is working on full capacity,” All Pakistan Textile Mills Association (Aptma) former chairman Asif Inam told The Express Tribune on Saturday.

“If all goes well, the developments in textile industry support…the government to achieve the set export target of $24-25 billion this fiscal year (July-2019 to June 2020),” he said.

“We don’t have the capacity to take additional export orders these days. We have entered into the capacity constraint zone,” he said.

He said there is a 26% volumetric growth in textiles export. “This (26%) was the capacity in surplus till recent months. The government has fully utilised that,” Inam same.

State Bank of Pakistan Governor Reza Baqir said the other day there was up to 40% volumetric growth in textile exports. Besides, the export of finished goods is on the rise, while export of raw material, including cotton and yarn are on a downward trend, which are positive developments for Pakistan’s economy.

Pakistan has continued to receive good export orders, including in the downstream industry. “The world textile buyers have diverted their purchasing orders to Pakistan since China (70-80% production) is closed to fight against spread of the coronavirus,” Inam said.

The virus has disrupted the world. A significant number of countries have been affected by the virus, as over 2,300 people have died and over 75,000 people got infected.

The official claimed that the textile exports could be doubled over the next five year if the government overcomes the high energy pricing, gas connection and tax refund issues. The Aptma has demanded a long-term five-year textile policy from the government. “Once the government announces the policy, the textile exports will start growing at 10-15% per annum over the next five years,” he added.

Cotton import

He said Pakistan is estimated to import around 7.5-8 million bales (of 170 kilogram each) this fiscal year after local production came almost half of the required 15 million bales in FY20.

They will be record high import in Pakistan. Pakistan has produced around 7.5-8 million bales so far, which comes to around half of the domestic requirement.

“We have so far imported around one-third of the total required quantity of imported cotton at 7.5-8 million bales. We will import around 70% of that over the next two-three months and remaining in the rest of the period of FY20,” he said.

High energy, water costs may push Pakistan’s apparel industry towards crisis

The import of cotton paced up following the government withdrew 3% regulatory duty, 2% additional customs duty and 5% sales tax on import of cotton from January 15, 2020.

The imposition of the duty and taxes on cotton import by the previous government in the centre had put the textile industry in danger.

“The withdrawal of duty and taxes has fully mitigated the risk of decline in cotton consumption in Pakistan.

USAID has recently anticipated increase in consumption of cotton at textile industries in Pakistan. We will use at least 15 million bales this year (FY20),” Aptma former chairman said.

Riaz Haq said...

#China #Pakistan FTA-2: #Pakistan textile #exports to rise to $25 billion in new regional hub. As #coronavirus outbreak puts the globalisation into reverse and challenges existing global value chains, new supply chains continue to form behind the scenes.


https://www.outlookindia.com/website/story/news-analysis-china-pakistan-fta-2-a-new-regional-hub-for-cotton-garments-in-the-offing/348942

With the second phase of the CPFTA, there is a possibility of relocating the production of international brands, many of which have facilities in China that import cotton fabric from Pakistan as raw material—to Pakistan itself. The inflow of Chinese investment in machinery and technology in order to set up production bases in Pakistan will drive innovation and economies of scale, thereby making Pakistan regionally competitive in cotton-based garments. In addition, Pakistan will garner a favourable position for exporting to other markets that have so far been trading primarily with China as well as potentially to other Regional Comprehensive Economic Partnership (RCEP) members.

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

In January 2020, Pakistan and China entered into the second phase of China-Pakistan Free Trade Agreement (CPFTA2), under which China has eliminated tariffs on 313 priority tariff lines of Pakistan’s export interest. In return, Pakistan has offered China market access to raw materials, intermediate goods, and machinery.

Of the 313 high-priority products that Pakistan can now export without duty payments to China, 130 are from textiles and clothing sector. Reduced tariffs, an expected surge in Chinese investment into Pakistan and the potential shift of production base from China to Pakistan, may change the regional dynamics of textiles trade. The numbers explain how.

Under the CPFTA2, many Pakistani textile products will now enjoy duty-free access to China, which has extended similar tariff reductions to other trading partners - Bangladesh, Thailand and Vietnam among others - under the ASEAN-China FTA. Tariffs on readymade cotton garments (HS codes 61, 62 and 63), have been massively reduced. For example, men’s ensembles of cotton (HS code – 62032200), Pakistan’s top world export, was traded with China at 17.5 per cent (MFN rate) which reduced to 12 per cent under Phase-I of FTA and has dropped to 0 per cent in the Phase-II of FTA. This places Pakistan at a more than equal footing with Bangladesh, and ahead of India which faces a tariff rate of 8 per cent on the export of this product to China.

---

Pakistan is likely to be preferred over Bangladesh given the former country’s comparative advantage in producing cotton fabric (nearly 25 per cent of Pakistan’s total cotton exports in 2018 were to China); ease of doing business (Pakistan ranks at 108 compared to Bangladesh at 168 and India at 63 under the World Bank’s Doing Business 2020 study); ease of trading across borders (Pakistan ranks at 111 compared to Bangladesh at 176 and India at 68) and ease of starting a new business (Pakistan ranks at 72 compared to Bangladesh at 131 and India at 136).

Pakistan’s government targets raising the country’s textile and clothing exports from USD 13.5 billion in 2018 to USD 25 billion by 2025. As China has the world’s largest textile industry—in terms of both production and export—it is an inevitable trading partner for Pakistan to meet this 2025 target.

For Pakistan, to fully reap the benefits of the CPFTA2, access to cheaper imported inputs will be crucial to its export competitiveness for cotton-based readymade garments.

While Pakistan grows cotton domestically, 37 percent of its cotton imports came from India. After the trade ban between India and Pakistan in 2019, Pakistan began sourcing cotton/yarn from the US and Vietnam, thereby witnessing a rise in cotton prices, amid low production and higher import tariffs (11% from the US and Vietnam, compared to 5 per cent from India for cotton yarn (HS Code 520524), one of Pakistan’s major imports from India).

Riaz Haq said...

World Bank stresses greater export participation by Pakistani firms to boost recovery

https://tribune.com.pk/story/2256815/withering-economic-growth



Although short-term analysis of maritime traffic does not look promising, suggesting that the contraction in global trade is likely to linger, a recently published blog by the World Bank recommending actions to speed up export recovery emphasises greater export participation by Pakistani firms to boost recovery efforts.

The blog recommended the steps necessary to increase exports. These steps include smart promotion of exports, improving compliance and regulatory environment and easing import restrictions to boost productive capabilities. However, it is important to mention that shift towards an export-oriented approach will be unlikely if inward-looking policies are a preferred choice for policymakers during the Covid-19 era.

The trade deficit of Pakistan was more than 150% of total exports from the country in 2018. Exports were valued at 40% of imports. In 2015, the trade deficit was less than the total amount of exports. It is particularly disconcerting that imports of productive investments such as machinery and equipment for export-oriented industries were neglected.

Capital goods

According to the ITC’s Trademap.org, imports of textile machinery peaked in 2005 at $737 million and dropped to $155 million in 2009. They gradually recovered to $498 million in 2017.

In relative terms, imports of textile machinery accounted for 3% of total imports into Pakistan in 2005 but they comprised only 0.9% in 2017.

In comparison, Vietnam imported $280 million worth of textile machinery in 2005 but surpassed the $1-billion mark in 2018. Its textile exports increased from $5.3 billion to $36.7 billion during this period. Imports of textile machinery into Bangladesh also increased from $380 million in 2005 to $888 million in 2015. It too registered a significant growth in textile exports over the past 15 years.

On the other hand, Pakistan’s textile exports have increased from $10.3 billion to $13.7 billion between 2005 and 2019. The slow pace of export growth in the most dominant industry in Pakistan, the textile industry, points to the anti-export bias that has severely discouraged exports from export-oriented sectors of the economy.

Value addition

The value added manufacturing per capita is a useful indicator to determine the level of industrial development across countries. Unido uses the value added manufacturing per capita as a main indicator to assess the level of industrialisation.

Borrowing data on the value added manufacturing and population from the World Bank’s World Development Indicators shows Pakistan has had a rather flat trajectory for value added manufacturing per capita relative to Bangladesh, India and Vietnam in recent years.

Pakistan reported a maximum of $181 and a minimum of $161 per capita between 2011 and 2018. On the other hand, Bangladesh skyrocketed from $138 in 2011 to $361 in 2019. Vietnam too more than doubled its value from $204 in 2011 to $448 in 2019.

It is important to note that it is only until recently that India, Bangladesh and Vietnam have caught up with Pakistan in terms of urbanisation, that is, the percentage of population residing in urban areas. Labour-intensive manufacturing sectors are typically an important source of employment for migrants from rural to urban areas.

In essence, investments to improve productivity and industrialisation levels in Pakistan were limited relative to its counterparts at a time when the latter were investing to boost industrialisation.

Pakistan lags behind Bangladesh, India and Vietnam. Investments in textile machinery were negligible as well as the increase in manufacturing output per capita.

It is essential that policymakers focus on improving industry competitiveness in order to ensure sustainable economic growth and accumulation of much-needed foreign currency reserves.

Riaz Haq said...

Readymade Garments Exports Increase By 18.04%

https://www.urdupoint.com/en/business/readymade-garments-exports-increase-by-1804-1017831.html

The Readymade Garments exports during first month of current financial year increased by 18.04 percent as compared the corresponding period of the last year.

According to Pakistan Bureau of Statistics (PBS), the Readymade garments exports worth US $274,246 thousand in first month of current financial year to US $232,327 thousand of the same period of last financial year.

During the period from July 2020, exports of Art, Silk and Synthetic textile increased by 14.

01%, worth $28,388 thousand as compared the exports valuing $24,900 thousand of same period of last year, it added.

Meanwhile, Madeup Articles exports increased by 26.04%, worth $60,805 thousand as compared the exports of valuing $48,244 thousand of the corresponding period of last year.

During the period under review, buses, Other Textile materials exports increaseed by 66.46%, valuing $48,758 thousand exported as compared the export worth $29,292 thousand of same period of last year.

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Garment orders move to Pakistan, as COVID bites India, Bangladesh
However, the garment sector in the country is facing a severe shortage of yarn due to a shortage of cotton.

https://www.brecorder.com/news/40020319


As the coronavirus pandemic continues to spread unabated in India and Bangladesh, garment orders from international markets are rapidly shifting towards Pakistan.

However, the garment sector in the country is facing a severe shortage of yarn due to a shortage of cotton.

As per reports, the development comes at a time when export orders are declining in Pakistan's neighboring countries due to the COVID pandemic, there is a flurry of export orders for Pakistan's garment sector, as India and Bangladesh, affected by the pandemic, have not yet been able to produce and deliver goods to European and American markets on time.

This has pushed the entire production pressure of the textile industry on Pakistan's textile exports.

However, there exist a major hurdle for the local industrialists to take advantage of this opportunity, as they say, that they are worried about the shortage of raw material, especially yarn, for the orders received by the garment sector.

Industrialists say that the international client gives 35 to 40 days for shipments but the local mill is giving them three months' time.

Exporters say that if the government does not take immediate action, not only will orders from rival countries stop moving to Pakistan, but local industrialists will also lose out to permanent buyers.

Riaz Haq said...

Textile exports decline 15pc YoY in August
Pakistan's textile and clothing exports clocked in at $1bn in Aug 2020, as compared to $1.19bn in Aug 2019



https://profit.pakistantoday.com.pk/2020/09/21/textile-exports-decline-15pc-yoy-in-august/

Pakistan’s textile exports have shown a 15 per cent year-on-year decline in August FY21, as compared to same month of the previous fiscal.

According to data released by Pakistan Bureau of Statistics (PBS) on Monday, Pakistan’s textile and clothing exports declined by over 15 per cent year-on-year in August 2020, from $1.19 billion in Aug last year to $1.007 billion.

The textile industry boasts a significant presence in Pakistan, being the largest manufacturing industry and the largest export earning sector. It contributes 8.5 per cent to the gross domestic product (GDP) of the economy and employs 45 per cent of the labour force in the country.

Exports in the textile sector have dipped in the second month of the current fiscal year after posting a growth in the first month. The Covid-19 has severely hampered the demand for the country’s textile exports during the last five months.

Earlier, it was only in February when the textile and clothing exports jumped nearly 17 per cent YoY. This growth was reported after a long time as the past few years had been marred by single-digit increases.

Details showed readymade garments exports declined by 13.74pc in value and drifted much lower by 51.83pc in quantity during August, while those of knitwear dropped 10.65pc in value and 27.2pc in quantity, and bed wear posted negative growth of 12.29pc in value and 25.52pc in quantity.

Towel exports fell by 10.12pc in value and 15.85pc in quantity, whereas those of cotton cloth dipped 17.91pc in value and dipped by 33.42pc in quantity.

The government lifted the ban on exports of seven products classified as personal protective equipment (PPE) in a bid to allow manufacturers to honour international orders.

Among primary commodities, cotton yarn exports dipped by 51.36pc, while yarn other than cotton by 100pc. Export of made-up articles — excluding towels — declined by 5.82pc, and tents, canvas and tarpaulin increased by a massive 34.07pc during the month under review. The export of raw cotton declined by 94.4pc during the month under review.

The import of textile machinery dropped by 30.27pc during the second month of the current fiscal year — a sign that no expansion or modernisation projects were taken up by the textile industry during the month.

The country’s textile and clothing exports posted a negative growth of over 6pc year-on-year to $12.526bn in the fiscal year 2019-20 compared to $13.327bn in the corresponding period last year.

Riaz Haq said...

#Faisalabad headquartered apparel giant Interloop has begun to divest from #Bangladesh and invest in #Pakistan
https://profit.pakistantoday.com.pk/2020/11/28/interloop-divests-from-bangladesh-operations/

Why is it that if one looks at the tags of clothes bought in Europe, they will invariably say ‘Made in Bangladesh’? Entirely European fast fashion brands like Zara (which is a Spanish retailer) will manufacture their clothes in Bangladesh.

There is a specific reason for this, and not just the usual developing world cliches of ‘cheap labour’ and ‘advantage in cotton’. Technically speaking, Bangladesh has been part of the World Trade Organisation since 1995. But in 2001, it would make a decision that would alter its fortunes for the better. That year, the country signed the ‘EU-Bangladesh Cooperation Agreement’ with the European Union. That agreement provides broad scope for cooperation, extending to trade and economic development, human rights, good governance and the environment.

But the real benefit, of course, was trade. Bangladesh was to receive duty-free access to EU markets under a programme known as the globalised scheme of preferences (GSP), designed to help developing countries grow through trade. The country has the most generous level of GSP, aimed at least-developed countries.

And it worked. For instance, in 2015, the EU accounted for 24% of Bangladesh’s total trade. Over 90% of the EU’s total imports from Bangladesh were in clothing. More impressively, between 2008 and 2015, EU imports from Bangladesh trebled from €5,464 million to €15,145 million, which represented nearly half of Bangladesh’s total exports.

One textile company in Pakistan took notice: the sock moguls, Interloop. The company is one of Pakistan’s fastest-growing and most exciting textile companies, and let us explain why.

Mayraj F. said...

The Duty-free Advantage

Bangladesh has Least Developed Country (LDC) status that qualifies it for duty-free market access or reduced tariff facilities to many developed and developing nations, globally. Bangladesh enjoys duty-free access to around 52 countries, including countries in the EU, the USA, Australia, Switzerland, Japan, Turkey, Russia, Norway, New Zealand, China, South Korea, Thailand, Malaysia, and India, for the trade of many products.

Bangladesh has also signed many trade deals offering Bangladesh exports a preferential treatment, like SAARC Preferential Trading Arrangement, Asia-Pacific Trade Agreement, Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Co-operation, South Asian Free Trade Area, and the Trade Preferential System among the OIC member states.

https://medium.com/@stitchdiary/what-makes-bangladesh-a-hub-of-garment-manufacturing-ce83aa37edfc

Riaz Haq said...

Bangladesh’s monthly minimum wage lowest in Asia-Pacific region: ILO
Neighbouring country Pakistan topped the chart in South Asia with a monthly minimum wage level of $491, while India has the second lowest minimum wage level of $215

https://www.tbsnews.net/economy/bangladeshs-monthly-minimum-wage-lowest-asia-pacific-region-ilo-166438

The monthly minimum wage level in Bangladesh was $48 or around Tk4,070 in 2019 – the lowest among all nations in Asia and the Pacific region, reveals the Global Wage Report 2020–21.

Published by the International Labour Organization (ILO) on Wednesday, the report calculated the "Gross Monthly Minimum Wage Levels in Asia and the Pacific" using the Purchasing Power Parity (PPP) values.

Globally, Bangladesh ranked fifth from the bottom among 136 countries. Neighbouring country Pakistan topped the chart in South Asia with a monthly minimum wage level of $491, while India has the second lowest minimum wage level of $215 in the region, it says.

In the Asia and the Pacific region, the median (average) minimum wage is $381, which is $333 or around Tk18,250 higher than that of Bangladesh. However, the ILO report excluded agriculture and domestic workers while calculating Bangladesh's monthly minimum wage level.

Commenting on the matter, Policy Research Institute's Executive Director Dr Ahsan H Mansur said, "Actually, minimum wage is only applicable to Bangladesh's garments sector, and it has no application in any other ones. Elsewhere, the minimum wage is even lower.

"So, the report is not a real reflection of the true picture, and if the minimum wage is increased artificially, it would not be very beneficial at all. If we increase the minimum wage level only in a particular segment and exclude the whole economy, there will not be any positive."

He added that Bangladesh does not have a minimum wage level in every sector and for every job, so the comparison made by the ILO is not appropriate.

Additionally, the report mentions that Bangladesh's actual monthly minimum wage was only $18 last year.

In the region, Australia has the highest monthly minimum wage of $2,166 in terms of PPP, followed by New Zealand with $2,126 and South Korea with $2,096.

What is the situation in South Asia?

Nepal is following the chart-topper Pakistan with a minimum wage level of $396 in this region, and Afghanistan is just behind Nepal with $306.

At the bottom end, Bangladesh and India is followed by Sri Lanka, which has the third lowest minimum wage level of $247 in the South Asia region.

Bangladesh revises the minimum wage every five years and last did it in December 2018. The report mentions that out of 149 countries, only Bangladesh and Angola have not yet made any schedule for the next adjustment of the minimum wage.

About the issue, Dr Mansur said, "Amid this Covid-19 crisis and the ongoing export situation, if the minimum wage is increased now, unemployment may rise further. Instead, we should focus on increasing our labour productivity.

"Productive workers can get an annual pay rise automatically."

Globally, the median value of gross minimum wages for 2019 is $486 per month, indicating that half of the countries across the globe have minimum wages set lower than this value, and half have minimum wages set higher.

Largest decrease in real minimum wage

Bangladesh has seen 5.9% decrease in real minimum wage growth annually, from the period between 2010 and 2019. This was the largest decrease in Asia and the Pacific region.

Meanwhile, the neck and neck RMG export competitor Vietnam (11.3%) observed the highest increase of real minimum wage growth.

Addressing the issue, Dr Mansur said, "This is not desirable and a matter of deep concern too."

On a separate note, the annual labour productivity growth increased by 5.8% in Bangladesh, compared to 5.1% of Viet Nam for the same period.


Riaz Haq said...

Textile manufacturers seem to have gotten their way securing gas supply for captive power generation. The note of thanks that followed had one name missing, that of the Minister that was not entirely sold on the idea. Regardless of the merits of the decision, this should soothe some nerves for Pakistan’s largest dollar earners.

https://www.brecorder.com/news/40143546

The arguments goes that “textile units in Pakistan are incurring power and energy costs 2.4 percentage points more than India and 7.8 percentage points higher than Bangladesh…ideal regionally competitive electricity tariff would be around 7.4 cents/kWh”. There is no denying that textile is an intensely competitive market when it comes to export, and regionally competitive electricity tariff is only a fair demand.

Only that a look at electricity tariffs for industries in the region tells the textile players in Pakistan are not worse off. If anything, they get better power tariffs than both India and Bangladesh, where only Vietnam offers electricity at cheaper rates – even at 9 cents per unit. The research being quoted by the textile lobbyists may well be outdated, as the very sources mentioned in the research indicate that electricity tariff for industries in Bangladesh are close to 11 cents, whereas those in India are north of 10 cents per unit.

In terms of natural gas, there is a clear advantage that competitors have over Pakistani textile players, based on PIDE’s research titled “Regionally Competitive Energy Tariffs and Textile Sector’s Competitiveness” from 2020. BR Research has not been able to independently verify the same. That said the overall picture in terms of regionally competitive tariffs is not as bleak as some representative bodies of the textile sector would paint. Surely, the power tariffs are nowhere close to 7.4 cents, which is being termed as “ideal”.

The second most significant element in conversion cost is labor, which accounts for roughly 29 percent as compared to 35 percent of power and fuel, as per PIDE’s aforementioned research. Pakistan’s labor rates are 80 percent lower than that of India and only 12 percent cheaper than that of Bangladesh. Given the massive currency depreciation in the past two years, the labor wages in dollar terms have only tilted more in favor of Pakistan - as no other currency in the region has seen such a hammering.

As per data provided by the Punjab Bureau of Statistics, wages in textile sector have grown at an average of 2 percent every quarter in rupee terms, since 1QFY19. The data presented in the “Monthly Survey of Industrial Production & Employment in the Punjab” puts the average monthly wage at Rs18,608 per worker in the industry.

The disregard to minimum wage law is best left for another day, but even if one assumes wage rate to have outgrown historic average of 8 quarters, growing by 4 percent quarter-on-quarter instead, the wage rate in dollar terms comes at $115. This is still lower than what it was 12 quarters ago, having seen the lows of $102 during the journey. Granted that the LSM approach will have shortcomings in terms of inclusion, but it is difficult to see the ground reality deviating any significantly from the trend.

One can safely say that Pakistan’s textile is getting electricity at better rates than India and Bangladesh, even though gas is still pricier – which may or may not put Pakistan at par in terms of regionally competitive energy tariffs. One can say with a greater degree of certainty that the rupee hammering has given a head start to Pakistan in terms of labor costs. Let’s not even go into the concessional financing schemes out there. But surely, based on these numbers, this is as competitive as it gets for Pakistan. It is now up to the industry to prove the mettle and show the growth.

Riaz Haq said...

Is #Bangladesh heading toward a #SriLanka-like #economic crisis? #Imports surging to reach $85 billion this year, #exports $50 billion. $35 billion trade deficit, leaving $10 billion current account deficit after #remittances. #energy #food #inflation https://www.dw.com/en/is-bangladesh-heading-toward-a-sri-lanka-like-crisis/a-61838597

Like Colombo, Dhaka has also taken on massive foreign loans to embark on what critics call "white elephant" projects. The economic turmoil in Sri Lanka should serve as a cautionary tale, say experts.

Sri Lanka has been mired in economic turmoil over the past few months, with the country battling severe shortages of essential items and running out of petrol, medicines and foreign reserves amid an acute balance of payments crisis.

The resulting public fury targeting the government triggered mass street protests and political upheaval, forcing the resignation of Prime Minister Mahinda Rajapaksa and his Cabinet, and the appointment of a new prime minister.

Many in Bangladesh fear that their country could face a similar situation, given the rising trade deficit and foreign debt burden.

Bangladesh imported goods worth $61.52 billion (€58.48 billion) in the first nine months of the 2021-2022 fiscal year, a rise of 43.9% compared to the same period last year.

Exports, however, rose at a slower pace of 32.9% while remittances from Bangladeshis living abroad — a key source of foreign exchange — dropped about 20% in the first four months of 2022 from the year before, to $7 billion.

'Foreign reserves will go down to a dangerous level'
Muinul Islam, a Bangladeshi economist and former professor at Chittagong University, fears that the trade deficit could grow in the coming years as imports are increasing at a faster pace than exports.

"Our imports are set to reach $85 billion by this year, while exports won't be more than $50 billion. And, the trade deficit of $35 billion can't be bridged by remittances alone," Islam told DW, adding: "We will have to live with around a $10 billion shortfall this year."

The expert also pointed out that Bangladesh's foreign exchange reserves have fallen from $48 billion to $42 billion over the past eight months. He is worried that they may drop further in the coming months, likely down another $4 billion.

"If the trend of more imports against exports continues and we fail to minimize the gap with the remittances, our foreign reserves will go down to a dangerous level in the next three to four years," he stressed, underlining that this would lead to a significant devaluation of the nation's currency against the US dollar.

Massive loans for 'white elephant' projects?
Bangladesh, like Sri Lanka, has also taken on foreign loans in recent years to fund what critics call "white elephant" projects, which are expensive but totally unprofitable.

These "unnecessary projects" could cause trouble when the time comes to repay the debts, Islam said.

"We have taken a loan of $12 billion from Russia for a nuclear power plant which has a production capacity of just 2,400 megawatts. We can repay the debt in 20 years but the installments will be $565 million per year from 2025," he pointed out. "It's the worst kind of a white elephant project."

In total, the country will likely have to repay $4 billion per year from 2024, as installments for foreign loans, Islam estimated.

"I fear Bangladesh won't be able to repay those loans at that time because of the shortage of income from the mega projects," he stressed.

Riaz Haq said...

The ground under Sheikh Hasina’s feet is shifting

By Avinash Paliwal

https://www.hindustantimes.com/opinion/the-ground-under-sheikh-hasina-s-feet-is-shifting-101657725078715.html

Bangladesh's foreign minister
AK Abdul Momen arrived in
India last month to fight polit-
ical fires. But he found himself
dealing with massive floods
that hit Sylhet and Assam.
Nature has its ways to convey
that not all is well in India's
near-east. Far from the glitz
about Bangladesh's economic
success, on display during the
recent inauguration of the
Padma Bridge, clampdown on
Islamists, and shrewd man-
agement of big power rivalries,
is a parallel potent reality of
Prime Minister Sheikh Has-
ina's authoritarianism,
heightened polarisation, and
economic distress. As an
Indian official mentioned to
me, and a Bangladeshi official
echoed. Hasina "has built a
house of cards"
The economic, social, and
political ground under Has-
ina's feet is shifting in real
time. It is slow enough to be
dismissed as non-urgent, but
sure enough to become press-
ing, if not dealt with urgently.
With general elections due in
2023, and external debt repay-
ment schedules kicking in
from 2024, it is a matter of
time for the veneer of (forced)
stability to lose its sheen. The
risk of dislocation, if not col-
lapse, of this so-called house
of cards has increased in
recent years, and it could
undermine whatever is left of
India's connectivity aspira-
tions in its near east.
Domestically, the Hasina gov-
ernment has exacerbated two
contradictions in a tradition-
ally polarised polity. One, she
is in power, but with little to
no electoral legitimacy. The
Awami League's (AL) manipu-
lation of the 2014 and 20118
elections (a practice not just
reserved for national elections
and against opponents),
unceasing harassment of its
key opponent, the Bangladesh
Nationalist Party (BNP), gag-
ging of media, social media
monitoring using advanced
digital surveillance, and a
forced tilt towards the conser-
vative Islamic Right as a bal-
ancing move after targeting
these formations using force,
has created wide pockets of
intense frustration.
Unlike her father, Sheikh
Mujibur Rahman, who created
a one-party State, but failed to
contain a famine in 1974, Has-
ina has placed her bets on eco-
nomic development. The argu-
ment runs that good economic
performance coupled with lib
eral use of force will make a
one-party State under Has-
ina's leadership sustainable.
But this is where the second
contradiction kicks in.
Bangladesh's external debt to
Gross Domestic Product ratio
has increased to 21.8%, import
spending has shot up by nearly
44%, forex reserves of $42
billion are falling and can
cover about five months'
worth of imports, and the rev-
enue from readymade gar-
ments export and remittances
is not keeping pace with the
fast rising costs to the
exchequer.


Couple this with the global
inflation created by the Rus-
sia-ukraine war and United
Statesled sanctions, and it
becomes clear why Momen is
asking India to remove anti-
dumping duties on Banglade-
shi jute exports. Further com-
plicating this situation is
Dhaka's propensity to accept
external loans for infrastruc-
tural projects at highly inflated
costs, making repayment dif-
ficult. One of the cases in point
is the 2015 Rooppur Nuclear
Power Plant deal with Russia
for which Dhaka is to repay
$13.5 billion. India paid $3 bil-
lion for a similar plant in
Kudankulam.
Why does Dhaka accept such
deals? Because external fin-
ance fuels (limited) infra-
structural growth, chronic
corruption, and keeps the
political illusion of economic
development alive. To be clear
and fair, Bangladesh's eco-
nomic journey has been more
than commendable. But to
expect an economic miracle,
which is bound to dwindle due
to internal or external shocks,
to sustain a corrupt system
pretending to be a democracy
is a tall ask. Herein, Hasina has
ensured that neither the
Islamists nor the BNP
which enjovs public sympathy,
even if it may not get a fair
election - pose a serious
challenge to her.

Riaz Haq said...

The ground under Sheikh Hasina’s feet is shifting

By Avinash Paliwal

https://www.hindustantimes.com/opinion/the-ground-under-sheikh-hasina-s-feet-is-shifting-101657725078715.html

But her real challenge doesn't
come from known opponents.
It comes from opaque factions
within a securitised State (and
the party) that has made so
much illicit profit that being
out of power is not an option
for them. This leaves Hasina
with an unenviable dilemma.
Either she allows free elections
and risks being ousted or
manipulates them and invites
international opprobrium that
could unleash mass protests
and violence. Bereft of a clear
succession plan, both these
scenarios could tempt oppor-
tunistic adversaries to force a
regime change, of which there
is an unfortunately rich his-
tory in Bangladesh.
Hasina's internal problems are
linked to external dependen-
cies. Politically reliant on New
Delhi, she is finding it increas-
ingly difficult to manage the
ramifications of India's turn
towards Hindu nationalism
that misuses migration from
Bangladesh and the Rohingya
crisis for domestic electoral
gain. Similarly, accepting of
Chinese finance that may not
translate into political sup-
port, Dhaka is struggling to
keep targeted US sanctions
against the Rapid Action Bat-
talion, an anticrime and anti-
terrorism unit of the
Bangladesh Police, for serious
human rights violations, at
bay. Dhaka's replacement of
its ambassador in Washington
DC after a visit by a team of AL
parliamentarians from the
standing committee on foreign
affairs will make little differ-
ence in how the US deals with
Bangladesh.
Add to this, an uptick in
demand for repatriating
Rohingya migrants - some of
whom have been silently
resettled in the Chittagong Hill
Tracts to the locals' displeas-
ure - to Myanmar, including
within Bangladesh's military
establishment, and the situ-
ation becomes even more
volatile. Hasina requires a
political off-ramp to prevent a
foreseeable crisis that can turn
violent. The last thing the sub-
continent needs is turmoil in
Bangladesh

Riaz Haq said...

Workplace safety accord extended to Pakistan

https://www.dawn.com/news/1726412/workplace-safety-accord-extended-to-pakistan

KARACHI: A comprehensive Workplace Safety Programme (WSP) is being launched in Pakistan by the signatories to the International Accord for Health and Safety in the Textile and Garment Industry, a move that will support the country to boost its textile sector.

The programme will cover Pakistan’s garments and textile suppliers, helping the country improve the industry like that of Bangladesh and other signatories to the accord.

The decision to expand the programme to Pakistan was announced during a signatory brand caucus meeting held on Wednesday in Amsterdam. Brands will receive an information package on the Pakistan Accord and will be invited to sign it on Jan 16, 2023, said a press release issued here on Wednesday.

“I am pleased to see the International Accord signatories reach an agreement to establish a WSP covering the signatories’ garment and textile suppliers in Pakistan. We are committed to working closely with Pakistani stakeholders to ensure our collective efforts are beneficial to the industry and its workers,” said Joris Oldenziel, Executive Director of International Accord Foundation.

The programme aims to incrementally cover more than 500 factories producing for over 100 accord signatory companies throughout Sindh and Punjab, where most of Pakistan’s $20 billion in garment and textile exports are manufactured annually.

The International Accord has undertaken extensive engagement in Pakistan with federal ministries and provincial governments, industry associations, suppliers, trade unions and civil society organisations.

The Pakistan Accord covers Cut-Make-Trim (CMT) facilities cover ready-made garment (RMG), home textile, fabric and knit accessories suppliers (including vertically integrated facilities). Fabric mills within the supply chains of the signatories are also covered, with implementation scheduled for a later stage in the programme.

The successful experience in Bangladesh prompted the signatories to expand the workplace safety programme to at least one other textile and garment-producing country. Through signatory surveys, extensive research, and local stakeholder consultations, the Accord Secretariat assessed the feasibility of expanding based on key factors. Pakistan emerged as a priority country, in part because of its importance as a garment and textile sourcing country for the accord brands.

The Pakistan Accord programmes will be implemented in phases, in close collaboration with these key stakeholders and through the establishment of a national governance body.

The new Pakistan Accord on Health and Safety in the Textile and Garment Industry is a legally binding agreement between global unions, IndustriALL and UNI Global Union, and garment brands and retailers for an interim term of three years starting from 2023.

Building on widespread safety improvements in Bangladesh, the Pakistan Accord includes all key International Accord features — independent safety inspections to address identified fire, electrical, structural and boiler hazards, monitoring and supporting remediation, safety comm­ittee training and worker safety awareness programme, an independent complaints mechanism, a commitment to broad transparency, and local capacity-building to enhance a culture of health and safety in the industry.

Riaz Haq said...

America Pays a High Price for Low Wages

https://www.wsj.com/articles/america-pays-a-high-price-for-low-wages-d706894d

For decades the U.S. has used wage subsidies to support the country’s lowest-paid workers—a welfare system that keeps the poor down, primarily benefits the wealthy and undermines technological innovation.

In “The Wealth of Nations,” the founding text of free-market economics, Adam Smith took it for granted that workers should be paid enough to cover the living costs of themselves and their dependents. “A man must always live by his work, and his wages must at least be sufficient to maintain him,” wrote Smith. “They must even upon most occasions be somewhat more, otherwise it would be impossible for him to bring up a family, and the race of such workmen could not last beyond the first generation.”

In the last half-century, policy makers of both parties in the U.S. have successfully refuted Adam Smith. It turns out that it is indeed possible to pay wages to workers that are too low for their own maintenance, much less that of their families. This depends on using means-tested welfare programs like the earned-income tax credit (EITC), food stamps and housing vouchers, all of which compensate for wages that are too low for workers to live on.

Since its creation in 1975, the EITC, a federal wage subsidy for low-income workers and their children, has been expanded repeatedly under Democratic and Republican presidents alike. Many states also have their own versions of the EITC. Liberals like the EITC because it reduces absolute poverty, and conservatives like it because it attaches a work requirement to welfare.

But it is a myth that wage subsidies like the EITC “make work pay.” On the contrary, they make taxpayers pay to rescue workers whose work does not pay enough. Nor are such wage subsidies an alternative to welfare. They are welfare in the form of cash rather than in-kind benefits like food stamps or housing vouchers. The term “refundable tax credit” is just a euphemism for redistributing income.

Wage subsidies also entangle eligible workers in the operations of the welfare state and its complex paperwork. It is puzzling that many critics of big government support the EITC, a costly federal welfare program that partly socializes the incomes of millions of American workers and makes their employers reliant on government spending.

We can call the current American labor market system the low-wage/high-welfare model. It is a success from the perspective of employers who get to pay lower wages. It is also a success for some consumers, since lower wages mean lower prices. The losers include taxpayers, the working poor themselves and workers who are not poor but fear poverty. The low-wage model also saps the incentives for technological innovation, because cheap labor so often substitutes for labor-saving machinery.

Riaz Haq said...

Fashion cycles are moving faster than ever. A Quartz article in December revealed how fashion brands like Zara, Gap and Adidas are churning out new styles more frequently, a trend dubbed "fast fashion" by many in the industry. The clothes that are mass-produced also become more affordable, thus attracting consumers to buy more.

"It used to be four seasons in a year; now it may be up to 11 or 15 or more," says Tasha Lewis, a professor at Cornell University's Department of Fiber Science and Apparel Design.

The top fast fashion retailers grew 9.7 percent per year over the last five years, topping the 6.8 percent of growth of traditional apparel companies, according to financial holding company CIT.

Fashion is big business. Estimates vary, but one report puts the global industry at $1.2 trillion, with more than $250 billion spent in the U.S. alone. In 2014, the average household spent an average $1,786 on apparel and related services.

https://www.npr.org/2016/04/08/473513620/what-happens-when-fashion-becomes-fast-disposable-and-cheap

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

See the World's Unsold Clothing in a Huge Desert Pileup


A satellite image shows where tons of fast-fashion items are heaped in a clothing graveyard in the Atacama Desert

https://gizmodo.com/clothing-pile-chile-atacama-desert-satellite-image-1850443019

The world’s fast-fashion addiction is wrecking the planet. It’s also contributing to an enormous and growing pile of clothing that is sitting in Chile’s Atacama Desert.

SkyFi, a company that provides access to satellite imagery, recently shared a striking view of the Atacama Desert. The company explained in a blog post last week that members of its Discord channel had helped find the coordinates for the growing graveyard of trashed garments.

Riaz Haq said...

Bangladesh's government announced a higher minimum wage for garment workers on Tuesday, raising it 56% to about $113 per month.

https://www.voanews.com/a/bangladesh-increases-garment-workers-minimum-wage-/7345476.html#:~:text=Bangladesh's%20government%20announced%20a%20higher,dead%20and%20several%20more%20injured.

The new wage comes after weeks of violent protests by workers demanding higher salaries, which left two workers dead and several more injured.


The wage increase, which was agreed upon by a panel of factory owners, union leaders and officials, has been criticized as too small, with inflation in Bangladesh running at about 9.5%, increasing the price of basic needs.

Protesting workers have demanded a wage of $208 per month. Demonstrators have clashed with authorities and attacked factories.

The demonstrations were sparked when the Bangladesh Garment Manufacturers and Exporters Association offered to increase wages 25% to only $90 per month.

Low wages in Bangladesh factories have led to the growth in the country's garment industry as garment production and exports account for nearly 16% of Bangladesh's GDP.

Bangladesh employs 4 million workers across 3,500 factories and is currently the second-largest garment-producing nation behind China. The country's factories supply many large clothing brands such as H&M and Gap.

Factory owners have hit back at the protesters' demands, saying that production costs are higher because of rising energy and transportation costs, and that Western brands are offering to pay less for production.

Bangladesh, having primarily focused on exporting to Europe and the United States, is looking to find markets in China, India and Japan.