citi-news letter...zce - daily data (change from previous day) mcx (change from previous day) dec...
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Cotlook A Index - Cents/lb (Change from previous day)
11-12-2018 88.25 (-0.25)
11-12-2017 84.20
12-12-2016 79.45
New York Cotton Futures (Cents/lb) As on 13.12.2018 (Change from
previous day)
December 2018 77.16 (+0.52)
March 2019 78.84 (+0.16)
May 2019 79.85 (+0.10)
13th December
2018
IIP rises to 11-month high in October
Centre sanctions multi crore rupees apparel and garmenting centre in NE
GST evasion worth Rs 12,000 cr detected between Apr-Nov
India’s FTAs with ASEAN, Japan and Korea have widened trade deficit:
Study
EU parliament approves Japan trade deal in what is being called the
world’s biggest
Cotton and Yarn Futures
ZCE - Daily Data (Change from previous day)
MCX (Change from previous day)
Dec 2018 22060 (-160)
Cotton 14715 (+30) Jan 2019 22310 (-150)
Yarn 24135 (+45) Feb 2019 22550 (-160)
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2 CITI-NEWS LETTER
-------------------------------------------------------------------------------------- India aims to grow its manufacturing GVA to $1 trillion by 2025-26
IIP rises to 11-month high in October
Centre sanctions multi crore rupees apparel and garmenting centre in
NE
TEA upset over reduction in duty drawback rates on apparel
GST evasion worth Rs 12,000 cr detected between Apr-Nov
India’s FTAs with ASEAN, Japan and Korea have widened trade deficit:
Study
ADB retains India’s growth forecast at 7.3% for FY19
CAIT slams CII report favouring 100% FDI in multi-brand retail
India-US-EU Combine Halts China's Belt and Road Initiative at the UN
Raghuram Rajan on what India needs to do to get a $5-trn economy
IIFT to conduct research conference on international trade, finance
------------------------------------------------------------------------------------------------- EU parliament approves Japan trade deal in what is being called the
world’s biggest
Bangladeshi apparel to draw bigger FDI
Amid US-China trade war, Vietnam wields a slew of benefits over its
rivals
Vietnam runs biggest trade surplus with US, EU in 11 months
Acting minister of textile industry appointed in Turkmenistan
------------------------------------------------------------------------------------------------
NATIONAL
----------------------
GLOBAL
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3 CITI-NEWS LETTER
NATIONAL:
India aims to grow its manufacturing GVA to $1 trillion by 2025-26
(Source: Rahul Jain, Financial Express, December 13, 2018)
Achieving accelerated and sustainable growth in India’s manufacturing sector, driven by
rising global and domestic demand, active policy support and a shift towards Industry 4.0
technologies.
India aims to grow its manufacturing gross value added (GVA)
by about 3 times to reach $1 trillion by 2025-26. This implies a
compounded annual growth rate of about 12%, which is a
significant leap from the current growth rate of 7-8%. Achieving
this target calls for a multipronged growth strategy for India’s
manufacturing sectors—increasing their share of global exports
and growing the capability to actively substitute imports with
local production while continuing to cater to rising domestic
consumption. Due to the recent turn of events, several industry
houses prefer the services sector for investment over the
manufacturing sector. This is owing to the diminishing returns and relative risk profile in
manufacturing. A concerted effort is required both from industry and government. On
one hand, industry needs to step up its game by leveraging technology and driving
productivity and, on the other hand, the government needs to enable competitiveness by
reducing the cost of doing business and providing policy support till necessary scale is
achieved.
Across key industry sectors, India’s import dependence ranges between 30-40%. While
in some selective cases, duty and tariff structures need review, one key aspect to focus on
for the Indian manufacturing sector is technology depth and the ability to produce a range
of products that cater to user industry requirements. Process and control equipment, such
as power generation, steel and other metal production, high-precision machining
stations, etc., represent a small sample of many such technology gaps. Bridging this
technology gap is imperative for Indian manufacturers to be competitive and serve
demand centres globally. Adherence to evolved quality and design standards and
innovation are critical for success in some high-volume export markets. Additionally, a
shift towards a more efficient, cost-competitive and sustainable manufacturing ecosystem
is not attainable without parallel upskilling of the human resources involved.
Globally, and across the value chain, digital-induced disruption is imperative and early
signs are visible. To maintain and improve global competitiveness, Indian manufacturing
needs to accelerate the adoption of Industry 4.0. The business case for adoption will need
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4 CITI-NEWS LETTER
to include improvement in quality and customer service level beyond cost optimisation.
It is important to take into account specific nuances while we focus on Industry 4.0
adoption—brownfield acquisitions that have grown over time and become complex with
respect to layout, material and process flow, the need for low-cost technology, etc.
Leveraging the strength of India’s IT services sector and tapping the effusive
entrepreneurial spirit evident throughout the burgeoning start-up sector potentially
presents opportunities to provide the much needed boost for Industry 4.0 in India.
Multiple initiatives have been conceptualised and developed over the last 4-5 years to
attract investment, encourage innovation, enhance skill development and build
infrastructure to transform the Indian manufacturing sector. ‘Make in India’, ‘Skill India’
and ‘Digital India’ are all directed towards developing the right enabling ecosystem and a
start has been made.
While policy and regulatory support are a must to set the foundation, it is imperative that,
in parallel, industry drives operating efficiency to become more competitive such as in
resource consumption-related parameters like specific energy consumption and labour
productivity. Further, factors such as low power quality, logistics and freight expenses
and poor transportation infrastructure, that have remained a challenge, require long-
term engagement focusing on modal mix for freight movement, investing in updated
transmission systems, strengthening roadways and exploring inland waterways as
alternative modes of transport.
Global trade dynamics have had interesting developments over the last 3-4 years, actively
and intricately linked with geopolitics. The rise of increased protectionism across key
economies presents yet another challenge for Indian manufacturers looking to grow
through the export route. India’s corporate taxes, land acquisition policies, border
compliance regulation and cost of capital also continue to be key challenges, which add to
the cost of doing business or often inhibit the ease of doing business. With a large number
of schemes launched to encourage the opening of businesses and facilitation of their
operations in India, it is important that the industry facilitates and aids the government
through enhanced participation and ownership.
If Indian manufacturing is to achieve success on the final frontier, a concerted
collaborative effort is required to be made by both the industry and government. This
would include identifying specific, time-bound, actionable and measurable initiatives
across the range of action areas that not only create the right enabling ecosystem but also
ensure implementation and uptake by industry. Looking ahead, to meet the $1-trillion
manufacturing GVA target, industry and the government need to work in perfect
synchronisation with each other to unleash the true potential of India’s manufacturing
sector.
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5 CITI-NEWS LETTER
Jain leads the industrial goods practice, Datta has expertise in operations and Gupta
works across industrial goods clients at BCG India
Home
IIP rises to 11-month high in October
(Source: The Hindu Business Line, December 12, 2018)
Industrial production activity rose at almost a one-year high in
October led by strong growth in the manufacturing and mining
sectors even as retail inflation for November slowed to a 17-
month low on cooling food prices, according to official data
released on Wednesday.
Growth in the Index of Industrial Production ((IIP) came in at
8.08% in October, up from 4.47% in the previous month, and
1.83% in October of last year. This was primarily led by the 7.04%
growth in the mining sector and the 7.92% growth in the
manufacturing sector, both of which grew 0.11% and 4.62% in the
previous month, respectively.
“Industrial production displayed a stellar performance in
October, coming in at a multi-month high with most sectors showing a markedly better
performance, albeit aided somewhat by a favourable base,” said B. Prasanna, head, global
markets group at ICICI Bank. “This is welcome after manufacturing growth slowed
notably in Q2 FY2019.”
“Electricity volume growth has re-entered double-digit territory after a gap of over two
years and the consumer goods segment also gained from the favourable base, with both
durables and non-durables on a healthy uptrend,” Mr. Prasanna further noted.
Growth in the electricity sector touched 10.8% in October, up from the 8.24% in
September. The last time growth in the sector hit double-digits was in April 2016. Growth
in the consumer goods segment also hit double-digits, coming in at 12.1% in October from
5.68% in the previous month. Within this, growth in the consumer durables segment
zoomed to 17.56%, up from 5.16% in September.
Growth in the capital goods sector was at 16.8% in October, up from 6.51% in September.
“The boost in IIP is from infrastructure which is primarily government-led spending,”
said Ranen Banerjee, leader, public finance and economics, PwC India.
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6 CITI-NEWS LETTER
“We hope private sector investments will pick up soon, else the burden on the government
and the risk of fiscal slippages will be higher,” he added.
Moderating inflation
Growth in the Consumer Price Index (CPI), the measure of retail inflation, slowed sharply
to 2.33% in November from 3.38% in the previous month. It was 4.88% in November of
last year.
“Macro data got a boost from a very benign CPI print aided by low food prices
characterised by continued deflation in pulses and vegetables,” Mr. Prasanna said. “There
is also substantial moderation in core inflation sequentially. We expect CPI to remain
below 4% till Q1 FY2020.
“We also expect a change in monetary policy stance to “neutral” from “calibrated
tightening” in the February policy and expectations of a rate cut will now start building,”
added Mr. Prasanna.
Inflation in the food category remained in the negative territory, contracting 1.69% in
November compared with a contraction of 0.14% in the previous month. The housing
sector also saw a significant easing of inflation, to 5.99% from 6.55% over the same period.
The fuel and light segment also witnessed slowing inflation to 7.39% from 8.55%.
“The inflation print will lead to calls for aggressive monetary policy and reversal in stance
by the Reserve Bank of India on the interest rates,” Mr. Banerjee said. “Falling food prices
will put pressure on farmers’ income, leading to pressure for more farm loan waivers.”
Home
Centre sanctions multi crore rupees apparel and garmenting centre in NE
(Source: Rajiv Roy, North East Now, December 13, 2018)
Construction and installation of machinery in 21 units in seven States (Assam, Arunachal
Pradesh, Manipur, Meghalaya, Mizoram, Nagaland and Tripura) were completed
The Ministry of Textiles has sanctioned a project to set up one each apparel and
garmenting centre consisting of three units in all of the northeastern states at a cost of Rs.
18.18 crore per centre.
Disclosing this in the Rajya Sabha on Wednesday Minister of State of Textiles Ajay Tamta
said that the project was sanctioned under the North East Region Textile Promotion
Scheme (NERTPS).
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7 CITI-NEWS LETTER
“Construction and installation of machinery in 21 units in seven States (Assam, Arunachal
Pradesh, Manipur, Meghalaya, Mizoram, Nagaland and Tripura) were completed and the
facilities have since been handed over to the Project Implementing Agencies of respective
State Governments. Project Implementing Agencies are in the process of operationalizing
the units through entrepreneurs,” he said.
Silk production in the country has been increasing during recent years and no
manufacturing unit is losing the Indian silk market to China in recent times. As the
consumption of silk is more than the domestic production, India is importing raw silk
from China and other countries. India mainly imports Bivoltine raw silk from China.
“With the significant increase in the Bivoltine raw silk production in the country, the share
of Bivoltine silk in the total silk production has gone up from 8.38 percent in 2012-13 to
18.41 percent in 2017-18.
As a result, the share of imported raw silk has reduced drastically from 17.32 percent in
2012-13 to 10.42 percent in 2017-18. There is thrust for increasing the Bivoltine and
Vanya silk production in the country with a goal to become self-reliant in silk production
by 2022.
Home
TEA upset over reduction in duty drawback rates on apparel
(Source: Fibre2Fashion, December 12, 2018)
The Tiruppur Exporters’ Association (TEA) is dismayed on the reduction of duty
drawback rates on apparel items. In this revised list, government has reduced rates for
value added readymade garments while improving rates for raw materials like cotton,
yarn and fabrics. The rates have been lowered from 2 to 1.8 per cent for few and 1.9 per
cent for others.
The new list has totally disappointed the knitwear garment sector in Tiruppur when they
were expecting hike in the rates, said TEA in a representation made to the prime minister.
The revision will not only affect the exports but will also strengthen the business of
competing nations.
Highlighting the plight of the apparel industry, TEA has asked the prime minister to
initiate a consultative process with all stakeholders in the apparel manufacturing segment
and arrive at means to compensate the exporters by increasing the drawback and ROSL
rates so as to arrest the further fall in exports.
It may be noted that the industry has been crying for an increase in the duty drawback
rates because of the continuous negative growth being encountered post implementation
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8 CITI-NEWS LETTER
of GST, said the letter urging the prime minister to look into the issue and help to revise
the drawback rates upwards.
"When the raw material cotton and subsequent processed item cotton yarn drawback
rates were enhanced, how can the value added garment sector and employment generator
be neglected?" pointed out TEA president Raja M Shanmugham.
India is already at a disadvantage with all its competing nations like Bangladesh,
Cambodia, Myanmar, Ethiopia and Vietnam that enjoy tariff benefits with the western
countries. Till July 2017, a portion of this competitiveness gap was being offset by the
cushion made available through duty drawback and ROSL benefits. The elimination of
this additional cushion has immediately shown its result whereby there is an
unprecedented month on month fall in apparel exports for the past one year.
"Your intervention in this regard will go a long way in not only preventing huge job losses
in one of the biggest employing industry of the country but also realise its true potential
of becoming the global leader in textile manufacturing," stated the letter.
Home
GST evasion worth Rs 12,000 cr detected between Apr-Nov
(Source: Times of India, December 12, 2018)
The government has detected GST evasion worth Rs 12,000 crore in 8 months till
November, a senior tax official said Wednesday.
Central Board of Indirect Taxes and Customs (CBIC) member John Joseph said despite
the electronic way or Eway bill mechanism there has been rampant evasion and there is a
need to increase compliance. "We started anti-evasion measures from April onwards, and
from April-November we have detected Rs 12,000 crore of GST evasion. This is huge
compared to what happened in central excise or service tax side. There is huge evasion.
There are smarter guys outside who knows how to pocket the money," Joseph said
addressing an Assocham event
Joseph, who looks after investigation in the CBIC, said almost Rs 8,000 crore worth GST
evasion has been recovered by the tax officials.
Goods and Services Tax (GST), which subsumed 17 local taxes, including excise duty and
service tax, was introduced on July 1, 2017. Since it was a new tax, the government had
decided to go slow on enforcement action in the initial months of its implementation.
Joseph said only 5-10 per cent of the 1.2 crore assessees are evading GST and bringing a
bad name to the industry. "We need to improve compliance mechanism."
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9 CITI-NEWS LETTER
On industry concerns as to whether a change in government might lead to an overhaul of
the GST process, Joseph said: "With all the apprehensions that you have, whether the
election results are going to be bad for the GST or not, I can tell you very clearly that the
same politicians whether in opposition or ruling party, they all came together to conceive
this.
"There may be some changes in law, some procedural changes can definitely happen, but
it will not be lock, stock, and barrel as in the case of Malaysia." He said the GST Council,
comprising the Centre and states, had taken all decision relating to the new indirect tax
regime.
The CBIC member also said the new GST return forms will have a beta version initially,
so that industry has enough time to suggest what could be done to improve the quality of
returns.
In July, the CBIC had put up in public domain draft GST return forms 'Sahaj' and 'Sugam'
and sought public comments. These forms will replace GSTR-3B (summary sales return
form) and GSTR-1 (final sales returns form)
The new forms are slated to be launched in April 2019.
With regard to industry concerns over varied orders passed by the Authority for Advance
Ruling (AAR), Joseph said the Centre was pushing for a national bench for AAR but it hit
the roadblock as the bench was required to have about 40 members with representations
from every state.
"I do agree, there is a real serious issue in that (Advance Ruling). The Centre is trying to
push that there has to be a single advance ruling authority but unfortunately think about
a situation where every state says I have equal right as the Centre. So, think about a
situation where a national bench is constituted with 39/40 people sitting, how do you
think it will work. That is where the problem is coming in," Joseph said.
He said even for setting up regional benches there is a huge disagreement between the
states. Currently, what the government is doing is they are going through the entire thing,
studying the issue and then issuing a clarification, the member noted.
"Once the clarification is issued, the entire advance ruling thing becomes null and void.
For some time, you have to adjust to that situation till a trust is developed between the
Centre and states," Joseph added. As per the law, all states are required to set up at least
one AAR for seeking advance ruling over GST levy and one appellate authority to hear
appeals against the AAR order.
In March, the New Delhi bench of the AAR had held that duty-free shops at airports are
liable to deduct GST from passengers. However, these shops were exempt from service
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10 CITI-NEWS LETTER
tax, and Central Sales Tax in the earlier regime. Further, the solar industry too was left in
a vexed situation when the Maharashtra AAR said that 18 per cent GST rate would be
levied for installation works, but the Karnataka-bench of AAR passed an order levying 5
per cent GST on the same.
On concerns over availing input-tax credit, Joseph asked the industry to submit their
representations, backed by data, along with suggestions.
Home
India’s FTAs with ASEAN, Japan and Korea have widened trade deficit: Study
(Source: The Hindu Business Line, December 11, 2018)
The three pacts resulted in rising imports and a progressive slowdown of exports
India’s three free trade agreements with the ASEAN, Japan and South Korea have not
turned out to be favourable for the country as these resulted in growing deficits in
merchandise trade, according to a study published by think-tank Third World Network.
“When the analysis of the three existing Comprehensive Economic Partnership
Agreements (CEPA) show that the balance sheet is heavily loaded against India, there is
no reason to hope that the Regional Comprehensive Economic Partnership (RCEP),
which includes 16 countries, will be any different for the country,” said Biswajit Dhar,
author of the report titled ‘India’s CEPAs with ASEAN, Japan and Korea’, at a discussion
on Tuesday.
The study is important as the government is at present focussed on how to make India’s
free trade agreements deliver more for all stakeholders and has also employed three
think-tanks to analyse the on-going RCEP negotiations. India is especially anxious about
RCEP as China, which is one of the bloc partners, holds the threat of flooding the domestic
market with cheap Chinese goods.
Rising trade imbalance
Over the past decade, India’s trade imbalance vis-à-vis its existing CEPA partners has
steadily increased, the study observed. After the initial spurt in the middle of the previous
decade, trade imbalances saw a sizeable increase immediately after the three CEPAs with
the ASEAN, Japan and Korea came into effect. Trade deficit with the three countries,
which stood at $4.5 billion in 2004 and $16.4 billion in 2010, shot up to $29.7 billion in
2015 before cooling down a bit to $26.6 billion in 2016.
“What is of additional concern is the fact that India’s exports have lagged behind at a time
when its CEPA partners have been providing additional market access,” Dhar said.
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11 CITI-NEWS LETTER
The three CEPAs not only resulted in rising imports but also a progressive slowdown of
exports. “These trends provide a clear indication that while India’s FTA/CEPA partners
were well positioned to taken advantage of an open Indian economy, Indian entities have
been unable to exploit the market access opportunities offered by the partner countries,”
the study said.
Available trends in both exports and imports point to a hollowing out of the
manufacturing base, which has prompted the present government to initiate measures
for the revival of the manufacturing sector, the report added. The Society of Indian
Automobile Manufacturers (SIAM), in its white paper on India’s FTAs, has stated that the
negative fallout of the pacts will seriously compromise investments, manufacturing value
add and employment at no obvious gain in trade or economic expansion.
While the study could not throw much light on services trade in the absence of comparable
bilateral data, it observed that none of the pacts resulted in significant liberalisation in
the movement of skilled professionals.
Home
ADB retains India’s growth forecast at 7.3% for FY19
(Source: The Hindu Business Line, December 12, 2018)
Asian Development Bank has retained its India’s growth forecast at 7.3 per cent for the
current fiscal and 7.6 per cent in the following financial year. India is maintaining growth
momentum on rebounding exports and higher industrial and agricultural output, ADB
said today in its Asian Development Bank Outlook Supplement.
“India saw GDP growth moderate to 7.1 per cent in Q2 of FY2018 (ending March 31, 2019)
from 8.2 per cent in Q1,” ADB said.
The slowdown came mainly from food prices, lower rural consumption, rising oil prices
delivering a negative shock in terms of trade, and rising costs for raw materials.
“Nonetheless, growth forecasts of 7.3 per cent for 2018-19 and 7.6 per cent for 2019-20
are retained from the update despite some downside risks,” ADB said in the supplement.
Home CAIT slams CII report favouring 100% FDI in multi-brand retail
(Source: Times of India, December 12, 2018)
Traders' body CAIT Wednesday slammed industry chamber CII for favouring 100 per cent
foreign direct investment in multibrand retail and said any such move would affect
livelihoods of crores of people.
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12 CITI-NEWS LETTER
In a joint report released Tuesday, the Confederation of Indian Industry (CII) and global
management consultancy firm AT Kearney said the government should consider
permitting 100 per cent foreign direct investment in multi-brand retail and further
improve ease of doing business for the sector to promote growth in the segment.
Reacting to the CII report, the Confederation of All India Traders (CAIT) issued a
statement alleging "the CII is a mouth-piece of MNCs and corporates who are destined to
capture and monopolise the retail trade of India. Its demand for allowing FDI in multi-
brand retail is to keep such companies in good humour as they are funding CII".
The industry chamber's report said that to overcome the barriers and enable a smooth
growth and harmonious coexistence of traditional and modern retail, the government
needs to adopt a single cohesive national retail policy, which adequately addresses all the
concern areas.
However, Chairman of CII's Retail Committee Shashwat Goenka said: "The report talks
about creating a common law for all formats of retail. So either we do 100 per cent FDI in
all formats of retail or in none."
"It is interesting to note that the report is prepared in association with a foreign company
AT Kearney which obviously will forward and advocate the agenda of MNCs. It is none of
the business of CII to speak for retail trade and it will be better if it keeps itself to the issue
of corporates," the traders' body asserted.
The traders' body said foreign direct investment in multi-brand retail is a crucial issue
affecting livelihood of crores of people in the country
Home
India-US-EU Combine Halts China's Belt and Road Initiative at the UN
(Source: Seema Sirohi, The Wire, December 13, 2018)
The last vestige of BRI propaganda was deleted from a resolution on Afghanistan on
December 6.
Washington: In a significant expression of international will, references to China’s Belt
Road Initiative (BRI) have been deleted from all UN resolutions, bringing an end to
Beijing’s “wordplay diplomacy” and dealing a blow to its biggest strategic gambit.
The spread of “Xi Jinping thought” via subterfuge came to a complete halt, at least at the
UN, thanks to some diplomatic due diligence by India, the US and the EU. China’s little
helper Pakistan could do nothing but watch.
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13 CITI-NEWS LETTER
The last vestige of BRI propaganda was deleted from a resolution on Afghanistan on
December 6 in a final act of cleansing that started last year when India took a strong stand
against BRI and rained on Xi’s parade by raising questions about transparency,
environmental standards, predatory economics and violations of sovereignty.
Just as last year, when the coalition of India, US and EU worked to remove references to
BRI from two other resolutions, the three-pillar resistance was led by the young Indian
diplomats at India’s permanent mission who negotiated with other delegations and
gathered widespread support.
The latest victory was achieved when references to BRI contained in the 2017 and 2016
resolutions on Afghanistan, which had the UN General Assembly welcoming “regional
economic cooperation through regional initiatives, such as the Silk Road Economic Belt
and the 21st-century Maritime Silk Road (the Belt and Road) Initiative and other regional
projects,” were deleted. The 2018 resolution on Afghanistan was rid of BRI baggage.
“BRI at the UN is going, going, gone…” a UN observer told this columnist. The belt had
fallen and the road was blocked.
Interestingly, references to all other regional initiatives such as the Turkmenistan-
Afghanistan-Pakistan-India or the TAPI gas pipeline project and the Chabahar agreement
between India, Afghanistan and Iran were retained, making the deletion of BRI reference
even more noticeable.
In fact, the resolution made a special mention of the delivery of the first consignment from
India to Afghanistan from Chabahar Port and the establishment of the Afghanistan-India
direct air freight corridor.
The last bit will especially irk Pakistan because its attempts to squeeze Afghanistan
economically by denying India land transit rights for trade are failing. Last week, the UN
recognised the importance of other routes devised by India to help Afghanistan.
The Chinese representative accepted defeat, registering mild unhappiness and noting
only that the final text of the latest resolution had failed to mention the “consensus”
reached in the past. He did not mention BRI, probably to avoid focus on the failure.
Diplomatic sources in New York said India, with support from the US and the EU,
emphasised that all connectivity efforts in the region must be based on the principles of
economic viability and financial responsibility – something that the BRI has spectacularly
failed to do.
They argued that all transnational projects must follow “universally recognised
international norms, rule of law, transparency and environmental standards” – basically
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14 CITI-NEWS LETTER
the criticisms first made by India as Xi was showcasing BRI at a summit in Beijing in front
of eager heads of state.
Those criticisms are now almost universally accepted and have become the backbone of
the resistance. They have been used by the US, Japan, Australia in their Quadrilateral
Security Dialogue to arrive at a counter-narrative of “sustainable infrastructure” (BRI
promotes indebtedness) and “skill and technology transfer” (China brings its own workers
for projects, giving no jobs to locals).
“Connectivity initiatives must respect the sovereignty and territorial integrity of nations,”
a senior diplomatic source said. “They should promote trade, not tension.”
Countries from Sri Lanka to Pakistan, from Malaysia to Myanmar are already having
second thoughts about BRI as the shadow of debt darkens their door and local
populations gain almost nothing in terms of skills transfer or even basic employment.
This battle royale at the UN between China and the US-India-EU combine may seem
esoteric but it is significant nonetheless. It was important to wage this war over words
because the tradition of precedent allows countries to build on previous resolutions and
augment their narrative.
Language buried in resolutions can be resurrected later at an opportune moment to one’s
advantage and before you know it, bad ideas are being endorsed by the General Assembly.
But once something is deleted by consensual agreement, getting the same language back
in the same resolution or others becomes difficult.
The Chinese, in the great power tradition, see the UN as a vehicle to further their agenda.
They have been working meticulously over the past few years to spread their word and
thought through various UN organisations.
In their vision, BRI is the perfect expression of the “very purposes and principles of the
UN Charter,” and pretty much an incarnation of the UN’s Sustainable Development
Goals.
Well, not so fast, said the troika of India-US-EU.
Seema Sirohi is a Washington DC-based commentator.
Home
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15 CITI-NEWS LETTER
Raghuram Rajan on what India needs to do to get a $5-trn economy
(Source: Economic Times, December 12, 2018)
Focus on the fundamentals, get them right and we will suffer the least damage in a highly
leveraged world , Raghuram Rajan, Former Governor, RBI, tells Supriya Shrinate of ET
Now at the India Economic Conclave
You have the advantage of being a global insider of sorts. You have been in policy making
in India. Are we future ready and what do we need to do to get to a $5 trillion economy.
First, we must pat ourselves on the back a little for what we have done so far. I think 25
years of 7% of growth is a good thing and we have come some distance. However, we are
approaching middle income country level and that means we have to focus much more on
getting our growth path straightened out. There are some problems that are emerging
that we have to be wary of.
One, of course is that we actually need more equitable growth than today. For example,
one must worry about the extent of job creation in India. Reports of 25 million people
applying for 90,000 railway jobs is something that suggests there is not enough supply of
jobs in the market.
We also have to worry about the path of growth in terms of pollution, emissions and so
on. We are choking our cities and if we are doing that at our level of growth, think of what
happens when we double our GDP to $5 trillion as you suggest! So we need to do a lot
more on having cleaner growth. Of course, that leads to the issue of institutions. The
factor that helps us grow in a healthy way is strong institutions, whether it is the pollution
regulator, the emissions regulator or whether it is the financial regulator. These are
structures that we must strengthen They have to stand as independent bodies to ensure
our growth is healthy and stable.
Everybody seems to laud each other on the 7% growth and I know you say
that we have grown at 7% for 25 years. Is it really phenomenal or is this the
new Hindu rate of growth up from the Asian 3.5% that we have seen? Is this
going to lift these people out of poverty, create jobs, create the necessary
gainful employment that is required or are we stuck in the range of 7% to
7.5%?
I wish this was the new famous Hindu rate of growth. I am not sure. It is a healthy rate of
growth but it is insufficient in terms of creating the jobs that we need. We either need to
shift some of the growth to job creating sectors and we have not done that well in the past.
I am not sure we know quite how to do it or increase the pace of growth more generally
by a couple of percentage points to absorb the people coming into the labour force.
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16 CITI-NEWS LETTER
A key to stronger growth will have to be areas like construction where building the
infrastructure that India needs, will employ a lot more people and create jobs for people
leaving agriculture as well as for modestly educated people from urban areas. We need to
think about what we can do to create these jobs because otherwise we have problems
ahead.
India’s physical infrastructure will be key to a development and yet it
hinges on two issues – land acquisition and environmental clearances.
These are both politically and socially sensitive. Can there be a balance?
We do it the right way. The temptation will be to cut corners, to have draconian powers
on land acquisition or to eliminate the need for environmental regulation. But that would
be a mistake both for our long-term growth as well as a mistake given our democracy. The
more draconian you get, the more opposition builds up.
Instead, we have to find clever ways of trying to achieve the objectives that we want with
these measures while at the same time respecting the intent of environmental regulation
or careful land acquisition. We need to take people along. For example, in land
acquisition, could we improve the pace of the process first by making land rights much
clearer?
Right now, there are a lot of states where it is quite opaque who owns land wiht a decent
price as well as some kind of long-term incentive for the person who parts with the land.
For example, a land sharing mechanism like the one we had with the Andhra capital
acquisition. Let us look for best practices in India and see how that would work.
Similarly, in terms of environment, we have a lot of regulations but if you look at some of
what is happening for example in Delhi or you look at the growth of a place like Shimla,
you see that we have not achieved the objective of having clean growth. How do we go
about that? We need to spend a lot of time thinking how we manage this process sensibly
without shortcuts.
This government has significantly benefited from a benign oil regime. From the highs of
$140 a barrel, we have seen the lows of sub-30. in In the last policy, RBI called it a
tailwind. It has become a headwind after the OPEC cuts. Why did the tailwind not spur
our growth further?
It is a very legitimate question. Where has the oil windfall gone and how does it hurt us
as it comes back in the form of higher prices? But let us put that behind us. The key issue
is volatility of oil and with geopolitical tensions, volatility is going to increase.
There is a very strong need for oil hedging mechanism for a country like ours which is so
dependent on oil. We have discussed this in the past. Of course, we have started a strategic
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17 CITI-NEWS LETTER
petroleum reserve but overall and beyond that, we have to think about whether it makes
sense to hedge the price of oil, especially when it comes to levels such as these.
The problem is many fear the fallout if oil prices fall even further and you have hedged it.
But that has to be taken as a natural consequence of hedging programme and we must as
But that has to be taken as a natural consequence of hedging programme and we must as
a country think about whether we should start this process.
How crucial will the human capital be for being future ready to emerge as
a $5- trillion economy? Do we run the risk of fewer knowledge workers in
India in future?
It is not just education, it is also healthcare because of the kind of nutrition and healthcare
that our young get at an early age. It may in fact stunt them for the future and make it
much harder for them to benefit from any kind of education system, let alone the
education system that we have.
Now there are some pieces of good news on education. One is that everybody eventually
seems to be entering the classroom. Now whether they continue in the classroom, whether
they learn enough is a very different question and the ASER surveys, the work that
Pratham has done suggests they are not learning enough. A few of them can enumerate
and are able to read in an effective way.
At this point, we have to shift towards improving the quality of education and that means
a lot of remedial education to ensure that children are not left behind. After all, it is the
children who are left behind, who do not understand anything in class and who are prime
candidates for dropping out also. Now that we have got everybody into the system to begin
with, let us keep them there by giving them a much better, much higher quality education
that they are currently getting.
It requires a tremendous work on all sides again.
From human capital, I would like to address intellectual capital
requirements. Are we not investing enough in the future? Are our
companies not investing enough?
This indicates that we have work to do. There are small startups. I have met some people
in Bangalore who are working on artificial intelligence and machine learning but clearly
at this point, our northern neighbour China has stolen a march over us in terms of how
prepared we are.
Again, there is no shortcut here. You cannot produce world class companies in these areas
without having a strong research university system which backs them. China has made
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18 CITI-NEWS LETTER
that leap. If you look at Chinese universities, they have made a tremendous change over
the last 10 to 15 years and now some of them are really world class.
We need to do the same in India also and focus on improving the quality of research or
the quality of our universities and as a by-product our companies will also get better.
We were relying a lot on the companies themselves for doing what was necessary.
Certainly they could do some as well. We had world class companies in the IT area. Now
to some extent, they are falling behind as there is a shift to new areas and we need far
more research teaching in those areas to create the human capital to take us forward. I
think this is a wakeup call for us that we should do far more in the area of education.
What do you make of the debate on growth data in the light of reports that
say that there was a set of data on GDP figures earlier which was not
allowed. The credibility of statistical system is perhaps what is really in
focus. What is going to be the future of the economy based on this data? Are
those waters being muddied really?
This is a current controversy that I do not think I have knowledge or expertise to wade
into. The broader question you are asking is as we go forward and become a five-trillion
economy from the 2.5 trillion plus we are now, what more do we need to do?
Clearly one part of what we need to do is to have a robust and reliable data so that
economic decision makers can take decisions on that basis. This means strengthening of
our whole statistical process. It is not just the quality of data that we have to worry about
it is also the quantity of data. For example, look at the whole area of labour. What are the
unemployment numbers? How do they vary month by month we have no idea.
As far as the overall GDP growth numbers and GDP level numbers go, the reality is
whatever they be, we need to do more because again the proof of the pudding is in the
eating. If 25 million people are applying for 90,000 jobs, it suggests that we are not
supplying enough jobs. That means growth is not strong enough, at least in the job
creating areas.
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IIFT to conduct research conference on international trade, finance
(Source: Dev Discourse, December 12, 2018)
The commerce ministry's IIFT said it is organising a two-day research conference starting
from Thursday to provide a platform for academic debate and knowledge sharing on
issues related to international trade and finance.
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19 CITI-NEWS LETTER
The Indian Institute of Foreign Trade (IIFT), a deemed-to-be-university, is under the
administrative control of the ministry.
The conference, to be inaugurated by Commerce and Industry Minister Suresh Prabhu,
will be attended by renowned academicians from across the globe, policymakers and
economists from various multilateral agencies such as OECD, ILO, and UNESCAP.
The participants will exchange views and knowledge in the different domain of research
in trade and finance.
"The sixth research conference on Empirical Issues in International Trade and Finance
will be organised at its New Delhi campus," IIFT said in a statement Wednesday.
Besides lectures by guests and technical sessions, there will be four policy forums on trade
and employment challenges in South Asia, bilateral investment treaty, emerging issues in
international trade negotiations, and trade, technology and global value chain, it added.
The conference assumes significance as the global trade is at a standstill.
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20 CITI-NEWS LETTER
GLOBAL:
EU parliament approves Japan trade deal in what is being called the world’s
biggest
(Source: Japan Times, December 13, 2018)
The European Parliament on Wednesday approved an accord with Japan that has been
dubbed the world’s biggest trade deal, covering economies that represent a third of the
world’s GDP.
The agreement will go into effect in February and was celebrated as a victory for Europe
as a free trade champion in the face of U.S. President Donald Trump’s protectionism and
Britain’s decision to leave the EU.
“Our economic partnership with Japan — the biggest trade zone ever negotiated — is now
very close to becoming a reality,” EU Trade Commissioner Cecilia Malmstrom said.
Talking to AFP before lawmakers voted by 474 votes to 152 to back the deal, Malmstrom
called it “a symbol, a signal” and added: “We’re showing that for our part, we’re in favor
of open but regulated trade.”
The deal was confirmed even as British Prime Minister Theresa May defended her
faltering attempt to negotiate Britain’s orderly departure from the European Union before
a boisterous House of Commons.
But, ironically, some EU leaders see the wide-ranging deal they have agreed with far-off
Japan as a possible model for future commercial relations with the United Kingdom, once
it formally quits the bloc.
“Everything is uncertain with the United Kingdom for the moment, but one day or
another we’ll have to negotiate something,” Malmstrom said, predicting a British deal
would “go even further” than Japan’s.
Covering more than 630 million people and economies that add up to around a third of
global output, the EU-Japan Economic Partnership Agreement has been under discussion
since 2013.
When it goes into effect it will regulate almost all commerce between the Asian giant and
the 27 remaining EU economies and, according to Malmstrom, will benefit in particular
European farmers.
The pro-business lobby welcomed the deal.
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21 CITI-NEWS LETTER
“Approving the EU-Japan EPA, the European Parliament delivers on what business and
citizens need in a time of political and economic uncertainty,” said BusinessEurope
Director General Markus Beyrer.
“This agreement is projected to increase exports between the two economies by 34 percent
for the EU and 29 percent for Japan, liberalizing up to 99 percent of bilateral trade,” he
argued.
“The elimination of tariffs will save consumers and importers 1 billion euro per year in
the EU and will support a substantial increase of jobs, maximizing benefits for both
companies and citizens.”
Once the is fully implemented, some 85 percent of EU farm products will be eligible for
tariff free export to Japan, although in some cases this will come after a period of
transition.
Customs duties on beef, for example, will be progressively reduced, and rice, a source of
national pride in Japan, will be excluded from the deal.
Tokyo has also agreed to recognize more than 200 “geographic signifiers,” allowing iconic
European products like Roquefort cheese, Tirolean speck and Polish “Wodka” to protect
their brand value.
For their part, the Japanese will win free access to the European automobile market after
a multiyear transition period.
In a nod to the environmental and anti-globalist groups who have lobbied against this and
other EU trade agreements, it includes chapters on sustainable development and the Paris
climate change accord.
This was not enough to appease at least three NGOs — the Foundation for Man and
Nature (FNH) the Veblen Institute and Foodwatch — who denounced a deal they said was
“negotiated in the shadows.”
“The European Parliament agreed to a trade agreement that damages European
democracy,” Lena Blanken of Foodwatch said.
The deal “restricts the legislative authority of the EU and its member states, jeopardizes
the European precautionary principle and establishes committees without sufficient
democratic control.”
But Malmstrom was unrepentant.
“With or without a deal, we do trade with far off countries. That’s commerce,” she said.
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22 CITI-NEWS LETTER
“In the end, it’s consumers who decide,” she said, adding that, while many might prefer
to buy locally, Europe would work with Japan to reduce the environmental impact of long-
distance shipments.
With the deal, the EU is seeking access to one of the world’s richest markets, while Japan
hopes to jump-start an economy that has struggled to find solid growth for more than a
decade.
Home
Bangladeshi apparel to draw bigger FDI
(Source: Refayet Ullah Mirdha, The Daily Star, December 13, 2018)
UN body assesses impact of US-China trade war
The ongoing trade war between China and the US will bring
more work orders and more foreign direct investment for the
garment sector of Bangladesh, according to the United Nations
Economic and Social Commission for Asia and the Pacific (UN
ESCAP).
“Major players in the garment industry in the Asia-Pacific
region, such as Bangladesh and Vietnam, are expected to benefit
by acquiring a larger share in exports to the US, and thus
attracting more investment,” it said in its flagship annual report.
The report, the Asia-Pacific Trade and Investment Report (Aptir), was unveiled yesterday
at the UN ESCAP office in Bangkok.
Developing countries in the region continue to attract investment in labour-intensive
sectors, particularly the garment industry.
Bangladesh's textile and apparel sector received $422 million in FDI in 2017, which is 1
percent higher than a year earlier, the Aptir report said.
“The upward trend was recorded despite lingering concerns about the sustainability of
the country's garment sector.”
The Aptir also apprehends bad impact on the Asia Pacific economy if the trade war
prolongs. “The US-China trade tensions have also begun to disrupt existing supply chains
and dampen investor confidence, as evidenced by the deceleration in trade growth after
the first half of 2018.”
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23 CITI-NEWS LETTER
If the trade tensions remain, export growth may slow to 2.3 percent in 2019, compared to
a nearly 4 percent growth in export volume in 2018.
The FDI inflows to the region are also expected to continue in their downward trend next
year, following a 4 percent drop in 2018.
Tariff hikes that have already taken place are expected to cut global GDP by $150 billion
and regional GDP by a little over $40 billion if they remain. Since many of the main export
industries in the region are relatively labour-intensive, a contraction of export could spell
at least temporary hardship for many workers.
At a minimum, Asia and the Pacific will see a net loss of 2.7 million jobs due to the trade
war, with unskilled workers, often women, shouldering more severe impact.
If the tariff war further escalates in 2019 and investor and consumer confidence drop,
global GDP could ultimately be cut by nearly $400 billion, also driving regional GDP
down by $117 billion.
Almost 9 million people could be put out of work in the region, with many more workers
also moving to new jobs in different sectors.
“As production shifts take place and resources are reallocated across sectors and borders
due to the trade conflicts, tens of millions of workers may see their jobs displaced and be
forced to seek new employment,” said Mia Mikic, director of the Trade, Investment and
Innovation Division at ESCAP.
Regional integration will be important to create new economic opportunities.
But other complementary policies, such as labour, education and retraining policies plus
social protection measures to support people negatively affected must also be placed high
on the policymakers' agenda if the region is to continue making progress towards the
Sustainable Development Goals, she added.
Home
Amid US-China trade war, Vietnam wields a slew of benefits over its rivals
(Source: Nguyen Dieu Tu Uyen, Bloomberg, December 13, 2018)
Vietnam manufacturing wages are among the lowest in the region
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24 CITI-NEWS LETTER
In the race to lure companies looking for alternative
sites amid the U.S.-China trade war, Vietnam wields a
slew of advantages over its rivals.
Vietnam was ranked No. 1 among seven emerging
Asian countries as manufacturing destinations by
Natixis SA, which looked at demographics, wages and
electricity costs, rankings in doing business and
logistics, and manufacturing as a share of total foreign
direct investment.
“Vietnam is poised to capture some of China’s global
market share in labor-intensive manufacturing,” said
Trinh Nguyen, a senior economist at Natixis in Hong
Kong. “It’s the clear winner from the trade war.”
Prime Minister Nguyen Xuan Phuc is taking advantage of trade tensions to boost the
nation’s profile as a manufacturing and export powerhouse, selling everything from shoes
to smartphones. Trade amounts to about twice its gross domestic product -- more than
any country in Asia apart from Singapore.
Here’s a look at what makes Vietnam attractive to foreign investors:
Cheap
Production workers in Vietnam are paid an average of $216 a month, less than half what
their peers get in China. Thanks to government subsidies, electricity is also cheaper at 7
US cents per kilowatt hour compared with 10 cents for Indonesia and 19 cents for the
Philippines, according to GlobalPetrolPrices.com’s June data.
Vietnam also has one of the largest labor forces in Southeast Asia, at 57.5 million. That
compared with 15.4 million for Malaysia and 44.6 million for the Philippines, according
to the World Bank.
Deals, Investment
Vietnam’s communist leaders have pursued free trade deals with South Korea and Europe
and joined 10 other nations in March in signing a Trans-Pacific trade pact.
Officials completed a trade deal with the EU in June that will eliminate almost
all tariffs. In Southeast Asia, only Singapore has a similar agreement with the EU.
The government is also making it easier for foreign investors to do business with a
proposed securities law that would allow 100 per cent foreign ownership of public
companies, except those in restricted sectors like banking and telecommunication.
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25 CITI-NEWS LETTER
Foreign direct investment is surging, with the government expecting disbursed FDI to rise
to a record $18 billion this year.
Hon Hai Precision Industry Co., the Taiwan-based manufacturer for companies such as
Apple Inc., is considering shifting some of its production to Vietnam as a hedge against
the trade tensions between the U.S. and China, said Vu Tien Loc, chairman of the Vietnam
Chamber of Commerce and Industry. Representatives of the company have spoken with
Vietnamese officials, though discussions are preliminary, he added.
Geography
Vietnam’s proximity to China also adds to its appeal. The two share a land border,
compared with countries like Indonesia, Philippines and Malaysia which are all much
farther away.
Chinese companies that need raw materials or product components from the U.S. will
find it easier to source these goods via Vietnam. Vietnam is China’s largest trading partner
in Southeast Asia as the two nations become more central in each other’s production
chains.
Stability
Vietnam boasts one of the world’s fastest-growing economies, forecast to expand at about
7 percent this year. The dong has been relatively stable in 2018, compared with other
currencies in Asia like the rupee and rupiah which suffered large declines.
“Strong economic growth and political stability are very important to investors,” said
Tony Foster, the Hanoi-based managing partner in Vietnam for law firm Freshfields
Bruckhaus Deringer LLP.
The dong will remain fairly stable in the near-term, Fitch Solutions Macro Research, a
unit of Fitch Group, said in October, citing support from strong FDI inflows and
manufacturing.
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Vietnam runs biggest trade surplus with US, EU in 11 months
(Source: Nhan Dhan Online, December 12, 2018)
Vietnam enjoyed its largest trade surpluses with the United States and European Union in
the first 11 months of 2018, according to the General Statistics Office.
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26 CITI-NEWS LETTER
Vietnam had a combined trade surplus of US$57.5 billion with the US and the EU, up
7.3% from the same period last year and six times higher than the country’s total figure of
US$6.81 billion.
This figure substantially contributed to the national foreign exchange reserves, which
have grown to a record high of more than US$60 billion so far this year.
Over the period, Vietnam had its largest trade surplus of US$31.9 billion with the US, up
8.1% year on year and 4.7 times higher than the total national trade surplus. The most
growth was recorded in exports of mobile phones and accessories (49.8%), footwear
(14.6%) and garment and textile (12.4%).
Vietnam’s trade surplus with the EU stood at US$25.6 billion, a year-on-year increase of
6.2%. Among EU countries, Vietnam posted the largest trade surplus with the United
Kingdom, which imported more than US$4.73 billion worth of commodities from
Vietnam in the first 10 months of the year while the UK’s exports to the Asian nation hit
US$694 million.
Meanwhile, Vietnam ran trade deficits with 27 foreign markets, of which nine recorded
trade deficits of more than US$1 billion and five others exceeded US$2 billion.
As the Vietnam-Korea Free Trade Agreement entered into force, the Republic of Korea
(RoK) surpassed China to become the foreign market Vietnam posted the largest trade
deficit with. From January to November, Vietnam’s trade deficit with the RoK was worth
US$26.6 billion, down from US$29.2 billion over the corresponding period of 2017, or
8.9%.
Home
Acting minister of textile industry appointed in Turkmenistan
(Source: Azer News, December 12, 2018)
Turkmen Deputy Minister Ogulhajat Ishangulyev has been appointed acting Minister of
Textile Industry of Turkmenistan, Trend reports citing a presidential decree released Dec.
12.
Former minister of textile industry, Nepes Gaylyev, has been dismissed from this position
for serious work-related shortcomings.
More than one million tons of cotton are grown annually in Turkmenistan, and this serves
as a raw material base for the development of the textile industry.
The textile industry of Turkmenistan is represented by a wide range of exported products
- from cotton fiber and yarn to finished garments and knitwear, which are produced by
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27 CITI-NEWS LETTER
the largest textile complexes in Central Asia, located in the capital and in all regions of the
country.
A significant part of the products of Turkmenistan supplied abroad are home textiles,
sportswear and jeans, produced under the world-famous trademarks IKEA, Puma,
Walmart, Lidl, Bershka, Pool & Bear, River Island, Cosco.
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