Interview with A. Saktivel, chairman of the Apparel Export Promotion Council.in New Delhi
WHEN the multi-fibre agreement (MFA) was dismantled years ago, hope ran high that the Indian textile industry would cash in on the quota-free regime to make a mark in the global markets through its aggressive market and product diversifications. But owing to the high costs of the economy, with transaction costs alone lapping up 8 per cent in the form of obstacles to the movement of goods across the country for want of sound infrastructure, and with inordinate paperwork and documentation, Indian textile exports in general and garment exports in particular did not make any salutary stride into the high-end global apparel business. Moreover, low-cost and least developed country (LDC) exporters such as Bangladesh cocked a snook at traditional exporters like India, which is finding cost and time overruns difficult to overcome.
In fact, after India opened up its garment markets to Bangladesh for duty-free imports, the battle is now raging on in its own backyard, leave aside fierce competition in the overseas markets. Industry sources said some of the domestic textile manufacturers were moving their production base to Dhaka to take advantage of the reduced transaction cost it offered and also the added facility of making goods there and importing to India to sell without any duty. Investment analysts contend that Indian companies have invested $600 million in Bangladesh. The latest bilateral trade data bear out the fear of the rising tide of imports from Bangladesh which shot up by 85 per cent during the first half of the current fiscal to nearly $300 million. The export credit cost is another staggering problem plaguing exporters as the interest rate differential between the Indian garment industry and its counterpart in Dhaka is 5 per cent, while the transaction cost difference is another 3-4 per cent, rendering Indian exporters utterly uncompetitive.
Whether the decision to offer duty-free access to Bangladesh because of its LDC status is justified or not, the domestic textile industry has been crying hoarse over the fact that the level playing field for the indigenous industry is bristling with uneven spots. In order to get a grasp of how the domestic apparel industry is going to ride out the crisis, Frontline spoke to A. Saktivel, the chairman of the Apparel Export Promotion Council (AEPC). Excerpts from the interview:
Now that you have assumed the office of the AEPC chairmanship for the third time, what do you envisage to rev up the fortunes of the garment industry, particularly at a time when overseas demand is tepid?
I assumed office of the AEPC Chairman for the third time, on January 7, 2012, when the industry is expected to end up this fiscal with an export of $14 billion against $11.57 billion in the 2010-11 fiscal. The higher achievement is boosted value-wise in view of the depreciation of the Indian rupee vis-a-vis the dollar and not volume-wise, which is less. The big challenge is how to improve our export performance, especially through the diversification of markets and products in tune with the Commerce Ministry's strategy embedded in the 2009-14 Trade Policy.
For market-wise diversification we have signed a free trade agreement (FTA) with Japan, which is a new market which we can try and get a considerable share of, especially when 99 per cent of Japanese clothing goods come from China. If we get proactive, we can definitely get into this major developed market. Russia, where Indian apparel goods can be shipped out, too, is showing signs of growth. Besides, the thrust is on South American countries such as Argentina, Brazil, Chile, Paraguay and Uruguay. Traditionally, Australia imports from China, and we can make a foray into this market too.
The AEPC has proposed a series of buyer-seller meetings in South American and African countries. We are organising such an event in Japan in June this year.
For product diversification, we are doing strong in cotton garments where the demand is at its high for just three months during summer in the Western markets. For nine months we don't cater to this major segment, and if we have to find a product for the rest of the seasons, we can step up exports substantially. Hence we have to go in for synthetic-blended garments. Once we shift from cotton to synthetic-blended cotton, we can cater to round-the-year business. This will help in boosting the volume too.
How do you propose to leverage India's traditional advantages in cotton and apparel exports?
We have formed two committees. One is on the Knitwear Technology Mission to identify how to diversify into markets and products and another is on the Innovative Garment Technology Mission. In the latter category, a series of garments such as sportswear are being churned out using synthetic garments. The two committees will identify new products to try and popularise in new markets as medium- and long-term objectives. In the short term, the United States remains the biggest market as India's textile exports fetched $4,946 million in 2010.
A delegation of 60 exporters will put up stalls there. This will be complemented by buyer-seller meets in identified South American countries. The focus market and focus product schemes of the Commerce Ministry in the trade policy would help us in exploring these countries, despite the daunting geographical distance. More than this, in the buyer-seller meet, we will meet big stores/retail chains to try and promote our products.
Has not India's competitiveness in apparel been relatively weak compared with countries like Bangladesh in recent years?
As retaining competitiveness in the overseas market is the name of the game, I have set up a committee to study and give a report within six months as to how our competitors are performing well abroad as compared to India. What we are lacking in government policy, labour reforms, logistics support, product development and also marketing efforts will be examined.
We will specifically study three or four countries such as Vietnam and Cambodia. Bangladesh is coming up globally in a big way because of its duty-free status to most of the Western markets and more recently to India too.
Once a thorough study is done on the strategies and policies followed by our competitors, we will approach the government and also the CCI [Competitive Commission of India] to help us meet the growing challenge from low-cost producers that also enjoy the least developed countries [status] in most of the apparel products they export to India.
There is a general feeling that skill upgradation of the Indian apparel industry is not in tune with the fashion demands of the market. What is your take on this?
The AEPC started a Smart Project last year with the support of the Ministry of Textiles. We have already got 87 centres and we are going to train 18,000 people. Next year we will train 34,000 people and we want to increase the centres by 125. In some areas we were not able to get workers, and we have to identify catchment areas. We also plan a mobile centre to attract more people for the training programme.
What specific flexibility is the industry seeking in labour laws?
Every government talks about labour reforms, but when we want it to touch them, it is not ready to do it. We don't want any big changes in labour laws. For the garment industry, we give work for eight hours a day and workers want overtime every day.
As for labour laws, the maximum we can give is for 60 hours. Instead of 48 hours plus overtime, we are asking for 60 hours of work as per labour laws.
We want compliance of 60 hours as per labour laws and we have taken this issue in a strong way with the government. We have launched a project called DISHA Driving Industry Towards Sustainable Human Capital Advancement. This programme is designed to encourage members to follow better social practices, which would give them a competitive edge in the global market where social compliance is emerging as a big issue in buyers' decision.
The AEPC had targeted 740 factories under this programme, which would help the manufacturers comply with the global social standards and norms. Once these garment factories get the compliance code, they would [be able to] win more businesses overseas.