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Fashion Design TechniquesByApparel Resourceswhich act as a bridge between the manufacturer and the retailer.

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Deepak Mohindra Editor-in-ChiefRead and comment on my blog at JULY 2016 StitchWorld 7The month of June has been like a roller coaster ride with some good news punctuatedin-between the events that are disturbing and reason for concern. But the best news first... Apparel Resources launched its flagship brand Apparel Online in Vietnam this month. It was a proud moment for the team and the warm response that the magazine received from the local industry, the textile and garment association and the Indian expat community in the country was an icing on the cake.There are many Indian expatriates working in Vietnam garment industry, leading both buying offices and factories. The feedback I got from them only makes my resolve firmer to explore Vietnam and present it to the world as the next big sourcing hub of Asia.The other news that makes me very happy is the appointment of Smriti Irani as the Union Textiles Minister of India. Coming very close on the heels of the Special Package announced by the Union Cabinet for the apparel industry, I sincerely hope that the industry willfinally get its due recognition through a combination of firebrand leadership and timely policy interventions including some relaxations in labour laws that have been a long standing demand from the industry... However, I do hope that she is not diverted to look after UP politics.The announcement indicates that finally two things have been clearly understood by the Government the enormous capability of this sector to generate employment, and the other is that the apparel export sector is not to be clubbed together with handloom.But among these reasons to rejoice, the exit of Britain from the EU is a matter of deep concern for many exporters as the Pound fell 15 per cent in just a few days riding on negative business sentiments. Exporters whose payments are yet to come will be hit hard, unless they had anticipated and hedged the risk in advance or negotiated payments in Euro, which I doubt many have done!Brexit also means that the negotiations with the EU for FTA will have to start afresh... Many also believe that with the UK out of the EU, the FTA would not be as impactful. Of the US$ 16-17 billion apparel exports from India, Europe accounts for 45 per cent, within which the UK holds the largest share of 40 per cent. For made-ups, the share of Europe is 20-25 per cent, of which the UK forms 15-20 per cent.The most worrying development however has been the eruption of terrorist activities in neighbouring Bangladesh. After the terror attack on a cafe in the elite locality of Gulshan in Dhaka that left 20 hostages dead, most of whom were foreigners working in the country, put us all under shock... But the firing and blast at Eid prayers have left the country as well as its well-wishers numb. This will certainly put fear into everyone and buyers may start working with factories closer home or at safer destinations.Is Bangladesh going the Pakistan way...? Will an industry that is roaring to grow be killed by anti-human forces...? I hope not. I have always propagated that the Indian sub-continent is a thriving hub for garment sourcing with each country having its own strength making forone comprehensive region..., but if the terror attacks in Bangladesh are not nipped out soon, we could be getting into an era of business boycotts that would impact the whole region.

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20 StitchWorld JULY 2016 www.apparelresources.comEthiopia & Myanmar

The sourcing options for apparel retailers have never been so diverse. Even as the fraternity makes peace with Chinas mounting wages, the pace at which Bangladesh has developed and Vietnam is being developed is enthralling. The wage bomb is ticking anyway at these locations as well, and since the economy in both the countries is improving, the opportunities in other sectors will soon start weaning away the workforce from apparel factories to other emerging sectors. Simultaneously, Ethiopia and Myanmar have emerged as the next two hot and actively pursued manufacturing destinations.Ethiopia is said to be a place where one cango for fibre to factory, and cheap plentifullabour at US $ 52 a month, inexpensivepower, and a Free Trade Agreement with US augment the countrys business case. Top it up with vast land ripe for cultivation of cotton which will serve as a source of raw material. The biggest challenges that remain however are the production inefficiencies and lack of a competent local sourcing network rather than the widespread perception of being a corrupt nation and not being as dexterous as Asians.Though the export is a mere US $ 60million at present, the companies that have

established their presence in Ethiopia are building capacities which will translate to exponential growth. Despite the fact that there is no comparison between Ethiopia and Myanmar, Ethiopia is considered the first choice destination to set up a factory.Myanmar, on the other hand, starts witha minimum wage which is lower than that of Bangladesh and thus wins over the buyers. Producing high-tech sportswear, shirts, and formal suits, Myanmarexports 75 per cent of its produce mainly to Japan and Korea as the US and EU withdrew the trade benefits when Myanmar was gripped by military regime. Thus, a country that has worked slowlyand steadily to build a sizable US $ 1.4billion export turnover for the last yearrelying significantly on these markets, is potentially an apparel manufacturingpowerhouse. If the ongoing talks with the EU and the US manifest in Myanmars favour, the status quo will be altered significantly for even higher export figures. The challenge that must not be ignored is the lacklustre banking infrastructure which restricts the loan sanctioing authorities of foreign banks in the country.


The nextpowerhouse(s) of sourcingEven as existing hubs become expensive, the sourcing options for buyers have never been so diverse

22 StitchWorld JULY 2016 www.apparelresources.comexplored the global opportunities agree that today Ethiopia is the place to be. The country is currently the No. 1 sourcing location, according to the apparel sourcing company Duty Free Sourcing Inc. Also the Indian entrepreneur Sidarth Sinha, the Founder and Owner of Vogue and Velocity Group, who is in processto create a garment township in Ethiopia, believes that no other country can presently beat Ethiopia.The principal arguments to move into Ethiopia are well known: the abundant availability (at least theoretically)of cotton and hydro-energy, thefree entrance of Ethiopian textile products to the US-market under AGOA and to the EU-market under the Everything But Arms system, the strong engagement of the Ethiopian Government as formulated in the Second Growth and Transformation Plan (2015-16 to 2019-20) and demonstrated by the establishment of the Ethiopian Textile Industry Development Institute (ETIDI) and the industrial area Bole Lemi, both in Addis Ababa, and of course the very competitive labour cost.The low Ethiopian labour cost (average monthly wages for operatorsreportedly vary from US $ 45 to 60/ month) are, however, significantly offset by low labour productivity and high personnel rotation. The extension of AGOA for 10 years, in June 2015, was of course of crucial importanceas well for foreign textile and garment manufacturing groups as for American buyers to bet on Ethiopia for the long-term.Ethiopia is one of the few countries which is utilizing the duty-free and quota-free export benefits under AGOA to the fullest, and where95 per cent of the garment imports are open to the third country fabric

FACTORS WORKING IN FAVOUR OF ETHIOPIACheap Labour & Educated Workforce: Abundant availability of labour at US $ 45 per month for a skilled labour as well as significant number of educated youth for mid-management positions, which presents an ideal opportunity for labour-intensive garment manufacturing.Bulk interest rate: The minimum capital required for a foreign investment is US $ 200,000 per project; the same is US $ 150,000 per project if the project is in partnership with domestic investor. Up to 70 per cent of the total project cost maybe funded by banks @ 8.5 per cent interest rate and balance is expected to be invested by the investor.Customs Benefits:100 per cent exemption from the payment of customs duties and other taxes levied on imports of all capital goods.Exemption from the payment of customs duties on import of spare parts worth up to 15 per cent of the total value of the imported investment capital goods, provided that the goods are also exempted from the custom duty.Investor granted with a customs duty exemption allowedimporting spare parts duty-free for five years from the date of commissioning of a project.Investor can also buy capital goods or construction materials tax free from local manufacturing industries.Investment in capital goods imported without the payment of custom duties and other taxes can be transferred to another investor enjoying similar privileges.Income Tax Exemptions:All investments in textiles and textile products sector are exempted from income tax for a period of 6 years depending on the geographical region of the setup.Investment in designated regions attracts special exemptionof 30 per cent in income tax for three consecutive years even after the expiry of the income tax exemption.Income tax exemption of 50 per cent is also given in case of factory expansion in vo


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