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Introduction of textile quota for the US

The UAE government should be credited for pushing the industry hard so that they established themselves well and secure a good name overseas. The 28th part of a series describing the unknown triumphs and travails of doing international business
 

Some six weeks or so after the surprise visit of the American Textile Delegation, we were all subject to various rumours in the market. For one thing, the closed-door discussions in the Free Zone as well as various chambers of commerce and industry in all the Emirates continued.

 

In fact, the first major move was made by the Dubai Chamber. Our director general Abdul Rehman had called for a brief talk over the phone, after which I alerted all the JAGTA members to attend. A lot of manufacturers outside the JAGTA were also associated with it, because they had registered for getting regular reports from our lobbyist in Washington DC, which JAGTA had arranged. Their reports were regularly transmitted by fax to all registered manufacturers in the country and this service was done from Finetex office, as I was operating from here. The Dubai Chamber meeting, attended by manufacturers from every Emirate was the first major get-together of its kind, where they were assured that the government was fully aware of the growth of the industry, and every possible support will be given to strengthen the same.

All the chambers of commerce, ministry for industry and the Free Zone had a fairly good idea of the machinery capacity of all the plants in operation. They also had the full human resources data of the number of visas issued to each of the plant. Additionally, they had compiled the statistical data of the type of finished garments that was being exported out of the country. Because of the meticulous record kept in the Free Zone, they had a good idea about the quantum of import of fabrics and accessories; besides, when their inspectors regularly visited various plants, they had acquired a good knowledge of plant capacities. Records were kept of every fabric received in-house, in the Free Zone, and when this was transported to another plant in the country for conversion. This was done to arrive accurately an estimated production capacity of the each plant and the type of garments they would be able to make, visa-a-vis what they were actually shipping.

This was a formidable task but the staff of the zone and the ministry was fully up to the mark and kept pace with the developments. So, when the overall quota was received by the UAE, we did not know how this was divided among the Emirates or by the established production capacity of the plants, in the manner described above. The distribution was fair and equitable.

For example, both Palmon and Atraco were fully-equipped and organized to make all kinds of shirts; so, if they had the need, they would be able to switch over to make basic ladies blouses, though, they would rather make shirts, which they knew best. Wellworth, made a lot of children’s garments, though, they did make other products also. Finetex made both shirts and blouses, though a large capacity was assigned for the production of jackets, trousers and shorts.  They made different kinds of T-shirts too. Singleton specialized in shirts too.

Yet, when the notification came, all of us had a fair distribution in terms of quota allocation, based on what we had produced and exported in the past two years and our own installed machinery capacity. Naturally, the tendency was to ‘buy’ the quota from another manufacturer of the items one was interested in and ‘sell’ what they preferred not to make. If Palmon or Atraco sold their shorts quota, it was done in such a fashion to acquire their shirts quota, and so on. At the end of the day, I do not think anyone was upset about the quota distribution made by the government. Many swapped their quotas.

On the top of it, we later on discovered that we were able to approach the ministry for special or additional allocations, if we had exhausted our allocated quota and had to complete our orders. Also, as the ministry was keeping a very close watch on the quota situation; they were also effectively following up with manufacturers to consume the quota. They knew full well that at least a lead time of four months was required, if one had to secure an order, place the fabric requirements, acquire the accessories and manufacture for the shipment.

In every way, I would credit the government authorities for pushing the industry hard so that they established themselves well and secure a good name overseas.

As we were struggling with this situation, we had the surprise visit from the Canadian government, who too wanted to verify the existence of the textile industry in the UAE, and establish a similar quota procedure for their country.

Having gained the confidence of our well established relations with the US market, we were able to convince the Canadian team as well that the industry has come to stay and are in fact helping to employ a large number of people from the Asian countries, classified as LDCs.

Enterprising manufacturers, meanwhile, had made some headway in establishing beach-heads in UK, France and Germany; it was not practical to break into the East European Block, but a beginning was also made in Australia.

All the manufacturers in the Free Zone, who were procuring overseas orders directly for a variety of garments, were left over with excess production in varying numbers from each order. I think, it was around this juncture, when the UAE Industrial Exhibition was organized in Dubai. I think it was inaugurated by the then defence minister, HRH Sheikh Mohammed (who is the ruler of Dubai now), and was well received. All the manufacturers were permitted to offer their excess production to the local market and this was an unexpected bonanza for the industry.

It must be remembered that such a large working population for this industry alone was making a sizeable contribution to the UAE economy and the government gave full support in every way possible.

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts. From being the advisor to exporters, he took over the mantle of a trader, travelled far and wide, and switched over to setting up garment factories and then worked in the US. He can be contacted at [email protected].)

 

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ICICI, 2 other banks on Moody’s notice for possible downgrade

Moody’s Investors Service said it has placed on review for downgrade three banks in India (ICICI Bank, HDFC Bank and Axis Bank), whose standalone credit assessments are currently positioned above India’s sovereign debt rating

New Delhi: Global ratings agency Moody’s on Monday placed credit ratings of leading private sector banks, ICICI Bank, HDFC Bank and Axis Bank, on watch for a possible downgrade within three months, reports PTI.

Moody’s Investors Service said it has placed on review for downgrade three banks in India (ICICI Bank, HDFC Bank and Axis Bank), whose standalone credit assessments are currently positioned above India’s sovereign debt rating.

The announcement reflects Moody’s revised assessment of the linkage between the credit profiles of sovereigns and financial institutions globally.

“Consistent with this guidance, Moody’s expects to position the standalone credit assessments of most banks globally at (or below) the rating of the sovereign where the bank is domiciled,” Moody’s Investors Service said adding “Moody’s expects to conclude the reviews within approximately three months”.

In its reaction, ICICI Bank’s spokesperson said: “The rating action by Moody’s is not a change in the sovereign rating of India and not affect ratings of any instrument issued by ICICI Bank (bonds or deposits).

“Our ALM (Asset Liability Management) is well matched with asset repayments in FY 12-13 broadly covering our bond and loan repayment obligations. We do not need to access bond markets for refinance. We will look at accessing the markets to raise funds for new lending depending on the cost and the rates at which we can deploy the funds,” ICICI said.

Moody’s has also placed the insurance financial strength rating of Life Insurance Corporation of India (LIC) under review for possible downgrade.

The announcements come close on the heels of lowering of rating outlook of 11 financial institutions, including these three private banks, by Standard and Poor’s.

All the three banks have ‘baa2’ foreign currency long-term ratings from Moody’s, which reflects medium-grade investment rating with some speculative elements and moderate credit risk.

Another statement said that “Moody’s has placed the insurance financial strength rating of Life Insurance Corporation of India (LIC) (Baa2/stable) under review for possible downgrade”.

Moody’s said that the review for downgrade reflects LIC’s direct exposure to the Indian sovereign risk in terms of its investment portfolio and business profile.

As of 31 December 2011, government securities and government guaranteed bonds represented 54% (Rs6 lakh crore or about $111 billion) of the insurer’s total cash and invested assets and 764% of adjusted shareholders’ equity, the statement said.

It said almost 100% of its net premiums earned are from India.

“Furthermore, LIC has been increasing its exposure to public sector banks through equity investment, in addition to the purchase of shares in Oil and Natural Gas Corporation which is 69.14% owned by the Indian government in March 2012,” it added.

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Nasscom optimistic on growth despite uncertain eco environment

The global economic uncertainty has led to projected flat or reduction in budgets for outsourcing services by western clients, which has in turn sparked fears about the performance of Indian players, who get almost 80% of their revenues from the US and European markets

New Delhi: Newly appointed Nasscom chairman N Chandrasekaran on Monday expressed confidence that the $100 billion Indian IT-BPO sector will grow at 11%-14%, despite the global economic uncertainties and muted forecast by some member companies, reports PTI.

“Overall, technology has an important role to play whether you look at this year or any other year. It will play an important role in the revival of markets and businesses.

Along with that the emergence of new powerful technologies be it cloud or big data, there are tremendous opportunities globally and nationally,” Mr Chandrasekaran told reporters here.

All these things will play to the strength of the Indian IT industry, he said, adding that the software body is continuing with its 11%-14% growth forecast and will take a re-look at it in October.

The global economic uncertainty has led to projected flat or reduction in budgets for outsourcing services by western clients, which has in turn sparked fears about the performance of Indian players, who get almost 80% of their revenues from the US and European markets.

With Infosys and Wipro giving muted guidance, these fears were further strengthened. However, the performance of others like TCS and HCL Technologies did provide hope that demand still existed, even if on a smaller level.

Mr Chandrasekaran, who is also the CEO of the country’s largest software exporter Tata Consultancy Services (TCS), said there are numerous opportunities available and the focus needs to be on underpenetrated markets like Eastern Europe, Latin America and Japan.

Nasscom has also appointed MindTree CEO Krishnakumar Natarajan as vice chairman of the4 executive council for 2012-13.

Asked about the challenges being faced by the Indian companies, the senior officials said the foremost task was to tide over the current environment.

“A McKinsey estimate is that by 2020, the industry will be between $220-$300 billion and that is a huge opportunity for the Indian IT industry. There could be short term challenges but in the long term, competitiveness of Indian IT industry is strong,” he said.

He added that the industry has changed from taking orders to helping companies transform their business and this will drive the growth further.

Mr Chandrasekaran said the executive council will work on re-inventing and embracing new business models, strengthening innovation capacity and research capabilities of Indian players, strengthening long-term entrepreneurial environment.

On the issue of visa rejections, Mr Chandrasekaran said it continues to be an issue.

“However, companies are now planning to tackle this, be it through local resourcing or applying ahead of time. There is also a better understanding that it is not labour movement but that of highly skilled manpower,” he added.

Nasscom would also work on enhancing skilled talent pool in the country and focus on specialisation.

“One of the key priorities for Nasscom is to build the future companies of the industry and I look forward to take this initiative to greater heights,” Mr Natarajan said.

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