Retail Sourcing Report

Transcription

1 Q Retail Sourcing Report Facts & Insight

2 1 FORWARD RETAIL SOURCING REPORT CBX Software s Retail Sourcing Report provides research and analysis aimed at informing global sourcing and buying decisions for retailers, brands and other sourcing professionals. Each issue includes a snapshot of key information impacting global sourcing, such as economic conditions in sourcing countries, container shipping prices, currency exchange rates and commodity costs. We also cover hot topics ourselves and include insight from analysts and other experts. If you like this content, please share: LinkedIn, Facebook, Twitter Americas Asia EMEA Statement of Indemnity: CBX Software recommends that any information provided in this report be weighed against other sources and experts on the individual topics covered. As such, CBX Software bears no legal or financial responsibility for any potential harm or outcome which may result directly or indirectly from information provided in this report Copyright by CBX Software. All rights reserved.

3 2 Content RETAIL SOURCING REPORT... 0 FORWARD... 1 PURCHASING MANAGER S INDEX... 3 MAJOR ECONOMIC INDICATORS... 4 GLOBAL COMPETITIVENESS INDEX... 5 CHINA WAGE TREND SNAPSHOT... 6 GLOBAL LOW COST SOURCING COUNTRY WAGE SNAPSHOT... 7 CONTAINER FREIGHT RATES FOR MAJOR ROUTES... 8 CURRENCY EXCHANGE RATES... 9 GLOBAL COMMODITY RATES CRUDE OIL RUBBER METAL WOOD WOOL, HIDES, COTTON PLASTICS AND FIBERS GLOBAL FREE TRADE AGREEMENTS ASEAN ECONOMIC COMMUNITY (AEC) TRANS-PACIFIC PARTNERSHIP (TPP) TRANSATLANTIC TRADE AND INVESTMENT PARTNERSHIP (TTIP) WTO INFORMATION TECHNOLOGY AGREEMENT WTO TRADE FACILITATION AGREEMENT SPECIAL FOCUS TOPIC CHINA S 13 TH FIVE YEAR PLAN ABOUT CBX SOFTWARE Q Retail Sourcing Report

4 3 Purchasing Manager s Index To help understand industry and economic conditions in a country, the PMI Index tracks variables such as output, new orders, stock levels, employment and prices across private companies in the manufacturing, construction, retail and service sectors. A reading below 50 indicates contraction from the previous month, while a reading above 50 indicates growth. Currently 22 countries and regions conduct the PMI survey and compilation, based on an internationally standardized methodology. This update looks at a selection of emerging economies and key sourcing countries, providing indicators for recent months (based on data provided by Markit). Analysis: Q4 spelled uncertainty for manufacturing with an overall reduction in exports, new orders and purchasing activity, indicating a general weakening in global demand going into the New Year. China, always the big one to watch, experienced continued contraction despite stimulus measures and monetary easing from Beijing at the start of a new five year economic plan. Exceptions among emerging markets include those near-shore markets in Eastern Europe, Turkey and Mexico who continued to see moderate growth as companies look for cost savings and speed to market on sourcing closer to home. While the Eurozone economy saw a strong end to, US economic figures heading into the New Year signaled a potential slowdown in manufacturing and the general economy. We head into 2016 with a mix of caution and uncertainty for global manufacturing and in turn for purchasing and sourcing. Country Sep Oct Nov Summary of Indicators Brazil China Czech Republic Egypt India Indonesia Mexico Poland Russia South Africa South Korea Turkey Vietnam Contraction in the Brazilian manufacturing economy accelerated into the close of Q4, with factories cutting jobs, tax hikes and a weak currency. China s manufacturing sector saw a marginal improvement at the close of Q4 - a 3 year quarterly low - despite Beijing s economic stimulus measures. Czech manufacturing continued to expand in December, but lost some momentum in Q4 as new orders declined and inventory levels rose. The downturn in Egypt s non-oil private sector continued into the close of the year on declines in output and currency weakness. Indian manufacturing declined slightly in the final quarter at the close of the year on falling export orders and output, expected to continue into Indonesia s manufacturing sector continued to contract in Q4 on declines in output and new orders both domestically and on the export side. Q4 saw a rebound across Mexico s manufacturing sector on expansion in output, new business and employment, with some level of caution for Poland saw a slight contraction in their exports, but new orders and output were positive, indicating optimistic signs for the sector heading into Russian manufacturing companies reported deterioration in operating conditions, based on weak demand from exports and falling production. Manufacturing in South Africa continued to slide in Q4, with contracting orders, reduced buying and cuts to the workforce continuing into Conditions remained stable in South Korea at the close of Q4, with a steady decline in production through resulting in reduced buying activity. Turkey s PMI rose to a one year high at the close of the quarter, with increased output, new orders and purchasing, a good sign for PMI contracted in Vietnam in Q4 for the first time in 2 years, on reduced export demand, which is also impacting buying and employment in Sources: Markit Economics Copyright by CBX Software. All rights reserved.

5 Major Economic Indicators 4 This section looks at major economic indicators from key low-cost sourcing destinations, also pulling out highlights and sourcing trends in these countries. Overall, heading into the 2016 New Year, we are seeing a reduction in exports, along with fewer imports of raw materials and domestically consumed products. Selected highlights: Bangladesh Exports rose 0.83% yoy to US$7.76 billion in Q3 the slowest quarter in 5 years Cambodia Passage of a draft Trade Union Law was delayed by both unions and employers until 2016 India India moved up 16 places to position 55 - in the WEF Global Competitiveness Report (-16) Indonesia Exports fell 17.6% yoy to US$11.2 billion in Nov (US is the biggest export market) Pakistan Added 10% regulatory duty on imports of cotton/fabrics from India brings the duty to 15% Philippines Exports dropped by 10.8% yoy to US $4.6 billion in Oct an ongoing decline Thailand Exports fell 8.1% yoy to US$18.6 billion in Oct. on weak demand, low oil prices and currency Turkey Election results put an end to political uncertainty, as the ruling AKP party regained power Vietnam FDI increased 16.7% to US$20.22 billion big investors were South Korea and Malaysia CPI (% yoy growth) Jun Jul Aug Sep Oct Bangladesh Cambodia India Indonesia Pakistan Philippines Thailand Turkey Vietnam Exports (% yoy growth) Jun Jul Aug Sep Oct Nov Nov Bangladesh Cambodia India Indonesia Pakistan Philippines Thailand Turkey Vietnam Imports (% yoy growth) Jun Jul Aug Sep Oct Nov Bangladesh Cambodia India Indonesia Pakistan Philippines Thailand Turkey Vietnam Sources: Fung Group, Various Statistical Bureaus Q Retail Sourcing Report

6 5 Global Competitiveness Index The Global Competitiveness is a ranking of countries based on their competitiveness across different measures such as government regulation, labor market efficiency, education, infrastructure and other measures important to doing business in a country. Below is a selection of emerging economies which are important sourcing locations. As might be expected, countries which made significant gains in the index include Bangladesh, Indonesia, the Philippines and Vietnam, while China remained relatively flat. Note: The /2016 Global Competitiveness Index was recently released by the World Economic Forum (WEF) and will be updated in our next sourcing report. Global Competitiveness Index: Selected Indicators, (Ranking of 148 countries) Rank/148 Bangladesh Cambodia China India Indonesia Pakistan Philippines Thailand Turkey Vietnam Overall competitiveness 110( 8) 88( 3) 29(-) 60( 1) 38( 12) 133( 9) 59( 6) 37( 1) 44( 1) 70( 5) Institutions 131( 4) 91( 18) 47( 3) 72( 2) 67( 5) 123( 8) 79( 15) 78( 1) 56( 8) 98( 9) Intellectual 130( 1) property protection 99( 14) 53( 2) 71( 8) 55( 5) 109( 3) 78( 9) 102( 1) 74( 12) 116( 7) Burden of government regulation 97( 12) 70( 28) 14( 9) 104( 6) 31( 17) 82( 20) 98( 10) 90( 1) 72( 8) 106( 6) Strength of 25( 1) investor protection 69( 4) 84( 4) 41( 2) 41( 2) 31( 2) 107( 3) 13(-) 57( 5) 134( 4) Infrastructure 132( 2) 101( 3) 48(-) 85( 1) 61( 17) 121( 5) 96( 2) 47( 1) 49( 2) 82( 13) Quality of roads 118( 5) 80( 14) 54(-) 84( 2) 78( 12) 72( 1) 87(-) 42( 3) 44( 1) 102( 18) Quality of railroad 78( 5) 91( 10) 20( 2) 19( 8) 44( 7) 75( 9) 89( 5) 72( 7) 52( 1) 58( 10) Quality of port 104( 17) 81( 12) 59(-) 70( 10) 89( 15) 55( 5) 116( 4) 56(-) 63(-) 98( 15) Quality of air transport 125( 5) 90( 15) 65( 5) 61( 7) 68( 21) 88( 10) 113( 1) 34( 1) 33( 3) 92( 2) Quality of electricity supply 133( 3) 112( 7) 67( 8) 111( 1) 89( 4) 135( 9) 93( 5) 58( 14) 77(-) 95( 18) Macroeconomic environment 79( 21) 83( 8) 10( 1) 110( 11) 26( 1) 145( 6) 40( 4) 31( 4) 76( 21) 87( 19) Health & primary 104( 1) education 99( 3) 40( 5) 102( 1) 72( 2) 128( 11) 96( 2) 81( 3) 59( 4) 67( 3) Higher education 127( 1) & training 116( 5) 70( 8) 91( 5) 64( 9) 129( 5) 67( 3) 66( 6) 65( 9) 95( 1) Goods market efficiency 89( 6) 55( 5) 61( 2) 85( 10) 50( 13) 103( 6) 82( 4) 34( 3) 43( 5) 74( 17) Prevalence of trade barriers 62( 19) 80( 8) 76( 3) 61( 17) 71( 4) 92( 22) 60( 16) 50( 21) 97( 1) 104( 24) Trade tariffs, %duty 132( 3) 105( 22) 123( 1) 128( 2) 65( 4) 142( 7) 46( 7) 83( 5) 69(-) 92( 2) Burden of customs 113( 11) procedures 101( 22) 60( 5) 88( 4) 74( 1) 91( 2) 130( 4) 80( 6) 87( 9) 99( 15) Labor market efficiency 124( 7) 27( 1) 34( 7) 99( 17) 103( 17) 138( 8) 100( 3) 62( 14) 130( 6) 56( 5) Cooperation in labor-employer relations 96( 12) 68( 7) 60( 3) 61( 11) 49( 12) 105( 15) 34( 4) 37( 4) 82( 22) 64( 11) Flexibility of wage 95( 10) determination 71(-) 94( 17) 50( 11) 106( 8) 97( 5) 109( 8) 111( 14) 32( 3) 69( 24) Pay and productivity 101( 4) 32( 3) 17( 1) 58( 15) 29( 5) 86( 13) 44( 13) 31( 4) 61( 12) 15( 3) Business sophistication 113( 5) 86( 12) 45(-) 42( 2) 37( 5) 85( 7) 49(-) 40( 6) 43( 4) 98( 2) Local supplier quantity 76( 1) 111(-) 31( 3) 2( 8) 51( 16) 78( 4) 54( 5) 23( 2) 18( 17) 30( 8) Local supplier quality 95( 14) 113( 11) 69( 3) 76( 7) 66( 4) 92( 6) 68(-) 42( 3) 56(-) 89( 10) Site of cluster development 66( 9) 44( 4) 24(1) 16( 13) 29( 4) 62(-) 55( 17) 33( 1) 30( 13) 68( 32) Source: World Economic Forum (WEF) Copyright by CBX Software. All rights reserved.

7 China Wage Trend Snapshot 6 At least 10 provinces/regions increased the minimum wage levels in their areas in the last 6 months of, with percentage increases ranging from 7.1% to 40%. In this period local governing bodies in 13 provinces and regions also issued special guidelines on salary increases. This means setting an upper/lower limit and a benchmark or recommended salary increase. Note: As of December, minimum wages in Hebei, Liaoning, Jiangsu and Qinghai have not been adjusted. According to China s National Bureau of Statistics, the average monthly income of migrant workers in China increased 9.1% yoy to 3,052 yuan by Q3,. With less supply and an aging migrant workforce, the wages for this large pool of labour is expected to continue increasing across China. China will also implement their 13 th Five Year Plan starting in 2016 and China s president, Xi Jinping, has committed to annual GDP growth of 6.5%, with the goal of doubling per capita income by In other words despite faltering economic growth, expect to see ongoing wage increases across China. Minimum Wage Updates (official) Asterisk (*) Shows Variance By District City/Region/Province Monthly Min Wage (RMB) Increase % Effective Date Anhui 1, % Nov 1, Beijing 1, % Sept Fujian 1,130 1,640 * 13.6% % July 1, Gansu 1, % Apr 1, Guangxi 1, % Jan 1, Guangdong 1, % May 1, Guizhou 1,400 1,600 * 28% - 40% Oct 1, Hainan 1, % Jan 1, Heilongjiang 1, % Oct 1, Henan 1,300 1,600 * 14.3% % July 1, Hubei 1,100 1,550 * 19.2% % Sept 1, Hunan 1, % Jan Inner Mongolia 1,340 1,640 * 9.3% Jul 1, Jiangxi 1,180 1,530 10% % Oct 1, Jilin 1, % Dec 1, Ningxia 1, % Nov 1, Shaanxi 1, % Mar 1, Shandong 1,200-1,500 * 6.7% Mar Shanghai 2,020 11% Apr 1, Shenzhen 2, % Mar 1, Sichuan 1,500 1,400 * 7.1% -14% Jul Tianjin 1, % Apr 1, Tibet 1, % Jan 1, Xinjiang Uyghur 1,310 1,670 * 9.9% % Jul 1, Yunnan 1,180 1,570 * 10.2% % Sept Zhejiang 1,380 1,860 * 12.7% % Nov 1, Source: Various China Statistical Bureaus Q Retail Sourcing Report

8 7 Global Low Cost Sourcing Country Wage Snapshot Below is a snapshot of minimum wages in selected Asian sourcing locations, with the addition of Egypt and Ethiopia. Wages vary by region or province and indicate either an estimated or actual/official rate. In cases with a distinct variance, we provide an average. With greater visibility into social conditions in low cost countries, currency fluctuations, increasing unrest and union pressure, wages in traditional low cost sourcing countries are on the rise across the board. Currency fluctuations mean that these figures are approximate at the time of finalizing this report. (Figures in USD/month as of January 1, 2016) Most of the emerging markets have either committed to increases or are facing heavy union pressure to increase wages in double digit percentages. In addition to basic wages, workers may receive attendance and production bonuses, transport, subsidized meals, etc. Note: Consult Fair Wage Guide to calculate benchmarks for wages in particular countries on an hourly or piece rate basis and determine a fair wage in those regions. BANGLADESH CAMBODIA CHINA EGYPT ETHIOPIA $68 (Dec 2014) $140/month (? 2016) $137-$639 ( est.) $114 (Mar est.) $35-$40 (Dec 2014) Bangladesh raised the minimum wage for garment workers up by 77%. To 5300 Taka ($68) following a labor dispute that shut factories in the Ashulia industrial zone outside the capital city of Dhaka. Cambodia officials agreed are preparing to raise the minimum wage from current US$128 US per month (for textile workers) to US$140, a 10% increase. Tensions were high as unions were going for $150. Minimum wages in China are set by local governments and vary widely by region and how wages are calculated (with housing, food, overtime etc.) Wages continue to increase +/-10% / year. The basic min wage for the public sector rose from EGP246 to EGP870 in March. Currently there is only one national minimum wage; there are no sectorial rates or occupation-based rates. INDIA INDONESIA LAOS MALAYSIA MYANMAR $40 - $130 ( est.) $92 - $230 (2016 est.) $110 ( proposed) US$ $235 (2016 proposed) Indian min. wages vary between regions and skill levels; however the central Indian labor ministry has proposed fixing minimum wages at 15,000 Rupees/month ($242) as of late a big gap between actual rates. Indonesia min. wages vary widely depending on the region and skill level. Officials have made commitments on increases but Union officials are pushing for more. Wages in Jakarta increase to 3.1 mln Rupiah (US$228.8) per month on Jan 1, Talks are underway in Laos to increase the min. wage, based on rising living costs from a 2011 min. of 626,000 Lao kip ($78) per month to a proposal by labor unions to raise wages to 900,000 Lao kip ($99) in key provinces. PHILLIPPINES SRI LANKA THAILAND VIETNAM Malaysian officials proposed an increase of the min. wage from RM900 ($210) to RM 1,000 - ($232) to offset rising costs. This excludes foreigners who make up 70%-80% of textile workers. Wages vary across the country. $ ( est.) $74 (May est.) $254 (2016) $ (Jan 2016) Wages in the Philippines vary widely by region and skill. Garment sector wages range from $6-8 per day. In 2013 minimum wages were replaced with a twotier system. 1 st tier: Minimum floor wage for new hires/ low skilled. 2 nd tier: productivity based system. Sri Lanka s new government agreed to set a minimum wage in May for the first time. Private sector works will receive an increase of 15-35% to US$74 per month. Public sector workers will receive an increase of $74, bringing their wage to $223 (including benefits and allowances). In November, Thailand s National Wage Committee agreed to keep the current min wage of 300 Baht per day (about US$8.5/day) until June This is the same rate that was implemented in January As of Jan 2016, the monthly min. wage will be million Vietnamese Dong (US$ ) depending on region. This amount is said to cover 80% of a worker s basic needs. This rate was settled in a compromise between various interests. Many government institutions and public enterprises set their own minimum wages which accounts for variations. Public sector employees are on the low end ($23) while the private sector is higher (+/-$40) $67 (Sept 1, ) Myanmar has set a minimum wage of 3,600 kyat ($2.80) for an eight-hour work day, mostly impacting garment workers. The decision follows two years of debate between garment factory owners and labor unions, Sources: WageIndicator.org, SAFSA, Wikipedia, Local News Reports Copyright by CBX Software. All rights reserved.

9 Container Freight Rates for Major Routes 8 The charts below are supplied by Xeneta which relies on crowd sourced data provided by shippers, allowing users to cross-reference prices. All indices are reported in USD per Twenty Foot Container (TEU). The green chart line (top) represents the market average; the blue chart line (bottom) represents the market low. We report on historical and forward looking rates for key Asia-Europe and Asia-U.S. routes. Analysis: Spot rates on Asia-European trade lanes and Asia to North America lanes slid to a yoy low in December below what carriers need to break even financially. On the world s busiest route, Asia- North Europe (covered in the charts below), spot rates were down by almost 40% - hovering around $750 per TEU in December. Asia-North America trade lanes were similarly affected, with rates on Asia to the U.S. West Coast down around 50% compared to December Over-capacity is still a big issue on all East-West trade routes. With large number of vessels sitting idle. The big shippers are responding by merging and building megaships, such as CMA CGM s Benjamin Franklin (a ship which is as long as the height of the Empire State building) which arrived at the Port of Los Angeles in late December. In 2016 we will see similar pressure on container rates on all lanes as the industry works itself out and the global economy continues to cool off. Market Average (20 Container) Dec = US$1,200 Dec 2016 = US$775 Market Average (20 Container) Dec = US$1,175 Dec 2016 = US$800 Market Average (20 Container) Dec = US$1,200 Dec 2016 = US$875 Chart Source: Q Retail Sourcing Report

10 9 Currency Exchange Rates Following are exchange rates and indicators from 30 day to 2 year historical rates for major currencies commonly factored into global sourcing costing estimations. Major recent news impacting key trading currencies includes: the US Federal Reserve raising interest rates (most likely to happen 4 times in 2016); the European Central Bank is continuing its policy of quantitative easing; the Chinese RMB will become the fifth currency in the International Monetary Fund s basket of reserve currencies. Volatility among trading currencies is expected to continue through 2016, impacting multinational companies in a big way. EURO / USD: EURO / RMB: The EUR recovered modestly towards the end of Q4, a trend that could continue into 2016 with uncertainty over the US economic climate. The recent US Fed interest hikes and US economic slowdown into 2016 might reverse the upward trend of the USD. EUR/USD - % change 2 years % 1 year -9.83% 6 months -1.87% 3 months -2.72% 30 days 1.58% The EUR recovered steadily against the RMB in Q4, a trend expected to continue into The European Central Bank interest rate cuts helped rally the EUR, along with a fairly healthy Eurozone economy. USD / RMB: Sources: Oanda.com, News/Analyst Reports EUR/RMB - % change 2 years % 1 year -4.92% 6 months 4.34% 3 months -0.83% 30 days 2.90% The USD continued gaining against the RMB marginally in Q4, closing off the year at a 2 year high. The RMB is predicted to depreciate to at least RMB7 relative to the USD in Inclusion in the IMF s basket of currencies might also increase demand and volatility for the RMB. USD/RMB - % change 2 years 5.86% 1 year 5.44% 6 months 6.33% 3 months 1.94% 30 days 1.30% Copyright by CBX Software. All rights reserved.

11 10 Global Commodity Rates was the year that oil prices tanked from US$120 a barrel in July 2014 to below US$40 a barrel in December. OPEC countries have continued pumping oil to keep prices down with the hope of hurting the US shale oil industry, but experts predict oil could go below $30 a barrel in As for other commodities, they have continued to slide alongside oil amid weak demand (especially from China). So the prediction by several experts, including economist, John Baffes at the World Bank (lead author of their Commodity Markets Outlook - is that raw material prices (including for metals, natural and synthetic fibers) will stay low for Think Tank pundits at Oxford Economics predict lackluster global economic growth for 2016 which also supports the view towards lower commodity prices. Crude Oil Oil US$ per barrel Dated Brent,light blend 38 API Dubai,medium, fob Dubai Fateh 32 API West Texas Intermedia 40 API, Midland Texas Rubber Rubber, Singapore Commodity Exchange, No. 3 Rubber Smoked Sheets, US cents per pound Rubber prices are predicted to increase slightly into 2016, based on demand for tires from Europe, the US and Japan. Prices have dropped 71% since 2011 on slow demand for natural rubber and expanding supply of both natural and synthetic rubber. Metal Metals Price Index, 2005 = 100, includes Copper, Aluminum, Iron Ore, Tin, Nickel, Zinc, Lead, and Uranium Price Indices Metals US$ per metric ton Zinc Tin Aluminum Lead Iron Copper Nickel Q Retail Sourcing Report

12 11 Wood Wood US$ per cubic meter Soft logs Hard logs Hard Sawn Soft Sawn Wool, Hides, Cotton Natural fiber and hide prices have trended down to flat over the past quarter, a trend which is not expected to change into 2016, given underlying weakness in global economic growth and an ongoing softening of the Chinese economy and manufacturing sector. While other Asian countries such as Bangladesh, Indonesia, Vietnam and also Turkey are absorbing some demand for cotton, there is still expected to be a supply excess, keeping prices flat. The slowdown in Chinese manufacturing will continue to impact demand for US cotton growth and exports. Wool prices, which suffered in Q3, have trended up in Q4 on solid demand and heading into Q1, 2016 should see marginal growth. Wool, Coarse, Australian Wool Exchange, US cents per kg Wool, fine, Australian Wool Exchange, US cents / kilogram Hides, Heavy native steers, wholesale dealer's price, fob Shipping Point, US cents / pound Cotton 'A Index', Middling 1-3/32 inch staple, CIF Liverpool, US cents / lb Copyright by CBX Software. All rights reserved.

13 12 Plastics and Fibers A selection of plastic related prices is provided below. These are calculated from offer prices in the Plasticker Material Exchange, which provide an indication of trends. Analysis: Most synthetic fibers saw price declines towards the close of. This was influenced by the ongoing slide in oil prices which are expected continue at least into the first half of While demand from the EU and the US was steady, according to PCI Group - a niche consultant in the fibers market - demand for nylon in both the apparel and industrial sectors in Asia was weak, impacting prices. Viscose and acrylic fiber prices were also down. Based on the prediction of slower global growth, currency fluctuations and low commodity prices, synthetic fiber prices should trend flat to down in Plastics & Fibers, Regrind/ Flakes (Euros/kg) Nylon Polyester ABS PVC PP PS Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Sources of above commodity prices: IMF data, Index Mundi, Plasticker Global Free Trade Agreements This section focuses on global trade related regulatory agreements that impact global sourcing. There are hundreds of trade agreements across the globe that impact multinational sourcing. For this issue, we have picked out a few key agreements that have had developments which will be important in ASEAN Economic Community (AEC) The AEC, is a free trade agreement which came into effect in late December, aimed at free trade in goods and services, investment liberalization and the free flow of skilled labour in the Association of Southeast Asian Nations (ASEAN) region. ASEAN is made up of ten member nations: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Together, these countries make up the world s third largest population with 622 million people and a combined $2.6 trillion economy. The agreement is based on four pillars: integrate the region in a single market and production base; turn Southeast Asia into a highly competitive region; ensure equitable development across ASEAN and fully integrate ASEAN into the global economy Q Retail Sourcing Report

14 13 Trans-Pacific Partnership (TPP) The TPP is a highly ambitious agreement governing trade among 12 Pacific Rim countries who s combined GDP is US$28.5 trillion, which is 40 percent of global GDP this makes TPP a significant deal. Countries included in the TPP are: Singapore, Brunei, New Zealand, Chile, United States, Australia, Peru, Vietnam, Malaysia, Mexico, Canada and Japan. The TPP is aimed at deepening economic ties between these nations, cutting tariffs and fostering trade to boost growth. The ideal is to create a new single market similar to the European Union. While most goods and services are covered in the TPP, varying timelines apply to the tariff reductions meaning that it could take years before the agreement has an effect on certain products and services. The deal is not quite concluded as it needs to be ratified in each country s national legislature. Transatlantic Trade and Investment Partnership (TTIP) The TTIP is a proposed free trade agreement between the European Union and the United States aimed at promoting economic growth for both parties. The US government looks at the TTIP as a companion agreement to the Trans-Pacific Partnership (TPP). The agreement is significant since the US and the EU combined make up 60% of global GDP, 33% of world trade in goods and 42% of world trade in services. TTIP includes provisions to remove custom duties on goods and services and make it easier to invest. Some of the potential gains will include a reduction in conflicts of duplication between the EU and US on regulatory issues such as food safety and automobile parts. What makes the agreement complicated is that 28 governments will have to approve or reject the agreement. Eleven rounds of negotiations have taken place since July WTO Information Technology Agreement World Trade organization members representing major exporters of information technology products agreed in late December on a timetable to eliminate tariffs on 201 IT products valued at over US$1.3 trillion per year. WTO members from 53 developing and developed countries are involved in the agreement. All 162 members will benefit by enjoying duty-free access to the markets of the members eliminating tariffs. Products covered include semi-conductors, GPS systems, satellites, touch screens and medical products. WTO Trade Facilitation Agreement The WTO trade facilitation agreement was first adopted in Bali in It provided measures for expediting movement, release and clearance of goods in transit. In December, the WTO launched the Global Alliance for Trade Facilitation, which is a public/private platform aimed at using private sector expertise and resources to support trade facilitation reforms. This initiative, which is still in the process of being ratified by member states, promises to simplify customs procedures to make it cheaper, easier and faster to trade goods across borders. Sources: News Reports and FTA sites Copyright by CBX Software. All rights reserved.

15 Special Focus Topic 14 China s 13 th Five Year Plan Big news for China in the New Year is the start of its 13 th Five Year Plan ( ). With the current economic slowdown in China being felt in reduced raw material demand and higher product costs, companies with global sourcing interests on both the buy and supplier side- will be interested in the implications of this new Five Year Plan. While the Five Year Plan system is a relic of the Soviet era, it is still very important in the centralized structure that is propelling China into the world s largest economy in coming years. This next five years is a critical period for China where it is looking to break through the middle-income barrier and gain advanced country status meaning income per capita of more than US$13,000. Highlights GDP growth - The bottom line growth target is set at 6.5 percent in order to achieve the goal of doubling income per person by 2020 from This should be achievable despite the current economic slowdown. Services over Products - The new plan stresses the importance of opening up the service economy including finance, insurance, securities and healthcare. Inward Focus - Domestic consumption is a focus for making a higher contribution to GDP; this means providing more household income for spending and more domestic products for purchase. Made in China - It will focus on its Made in China 2025 plan to increase manufacturing efficiency and improve the value-add of products. This includes a focus on growth in IT, robotics, marine equipment and medical devices. Innovation China understands the importance of innovation and has made this a big focus area. A new Mckinsey report suggests that China has an advantage in the customer focus and efficiency driven aspects of innovation but needs to catch up in science and engineering based innovation. Finance - China will keep pushing for more market oriented interest rates and a floating exchange rate with greater openness in the financial sector. Taxes - VAT reform will take place in finance, real estate, construction and consumer services. China will also implement or make changes to environmental, natural resource and property taxes. Capital Investment State owned capital will be invested into areas of national security, power supply, telecommunications, transport, oil and natural gas and municipal infrastructure. Chinese leaders recognize publically that its economy is entering a new normal phase of slower growth. As traditional advantages of cheap labour and intensive resource inputs weaken, new growth drivers are needed. Opinions are mixed as to whether or not China will make their aggressive growth targets for this next five year period. There is also skepticism over China s statistical methods and its artificial measures to stimulate growth. Regardless, the repercussions of China s policies in this Five Year period will be felt not just by manufacturers, but across the globe. Q Retail Sourcing Report

16 15 About CBX Software CBX Software helps retailers and brands to increase profit by simplifying their global sourcing operation, compressing supply chain cycle time and improving team collaboration, all through our cloud based Total Sourcing Management Platform (TSM). CBX Critical Path Management (CPM) eliminates the gaps in the merchandise concept to delivery process and provides our clients with end-to-end visibility on the status of all supply chain activities. CBX Cloud offers one intelligent collaboration solution for an enterprise to plan, spec, source, assure quality, order, make, inspect, ship and pay. Over 20,000 users in more than 30 countries collaborate on CBX Cloud including: Target, Safeway, Kmart, ICA and others. Americas Asia EMEA Click below to learn more about how CBX Software can help! Request a Callback Request a Demonstration Copyright by CBX Software. All rights reserved.