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24-Aug-2005
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PHNOM PENH/DHAKA: The coming battle for the global textile trade is already all too real for thousands of young Cambodian women like Sok Kun.

“I showed up at the factory this morning, but there was no work for me so I came back home,” Kun said. The reason there was no work is that overseas buyers are shifting their business to bigger, cheaper or higher-quality producers, mainly in China, that will be able to sell as much as they can to North America and Europe once a decades-old system of export quotas is scrapped at the end of the year.

The ensuing competition should slash prices for western consumers by 20-30 percent but could spell economic disaster for countries like Cambodia that have used the guaranteed access that quotas provided to build up huge garment industries.

Cambodia’s garment sector employs 300,000 workers, mostly young women like Kun, who earn about $45 a month.

Garments are the poor southeast Asia country’s biggest earner, accounting for 80 percent of its $1.4 billion in annual exports, and the International Monetary Fund forecasts that the abolition of quotas could reduce its annual economic growth to below 2 percent from above 5 percent in recent years. The picture is just as grim in Bangladesh, where some 3,500 garment factories employ 1.8 million workers, more than 80 percent of them women, and bring in 75 percent of the country’s export earnings.

Annisul Huq, president of the Bangladesh Garment Manufacturers and Exporters Association, fears a third of smaller factories will go bust, throwing 200,000 to 300,000 people out of work. The shadows cast by the end of quotas are more than economic. In conservative Muslim Bangladesh, young women factory workers risk ostracism if they return to their villages.

“Going back to their rural bases would leave many of them without food and shelter again,” said Kutubuddin Ahmed, a leading exporter. “But staying back in the towns could mean they would have to walk the streets for a living.”

Sucking sound: With the clock ticking, Cambodia is appealing to the conscience of western consumers by stressing its compliance with International Labour Organisation standards.

In Bangladesh, bigger firms have been strengthening their finances and shortening their supply lines so they can get their goods to market more quickly and survive in what Huq, the export association chief, calls an “environment of healthy competition”. Many economists fear such bravado will count for little come Jan. 1. The World Trade Organisation expects China will eventually grab half of all U.S. clothing imports, up from 15 percent in 2002.

“When quotas are removed in December, there’ll be this great sucking sound and all the Chinese textiles are going to flood the U.S. market — and if it’s not China, then it’ll be Vietnam or whoever is the most efficient producer,” said Arjuna Mahendran, chief Asia-Pacific economist at Credit Suisse in Singapore.

Fapai Group, one of China’s biggest suit producers, hopes to be one of the winners. The firm, which plans to move into a new factory in 2005 that will have the capacity to turn out two million garments a year, including a million suits, has focused to date on its home market and sales, under others’ labels, to Japan. The firm, based in Wenzhou, an hour’s flight south of Shanghai, is now preparing to compete internationally and improve its brand awareness in Europe and North America. Such a move, said Fapai executive Li Chunhong, “Should dramatically increase our profit margins.”

India, which employs nearly 35 million textile workers, also expects to gain handsomely from the end of quotas. The government is looking to companies such as Welspun India, the world’s fifth-largest terry towel maker, to help it meet its goal of boosting textile exports to $50 billion a year by 2010 from about $11 billion now.

Based in Ahmedabad, Welspun is more than doubling its manufacturing capacity in western India to take advantage of the new market opportunities.

Welspun exports nearly 90 percent of its output. Its biggest market is the United States, where chains such as Wal-Mart and ShopKo Stores stock its towels. The mood is also bullish further south in Tirupur, another big Indian textile town, where new glass and chrome buildings are springing up in anticipation of booming business.

Murthy, a 35-year-old tailor who struggles to find employment for more than six months in a year, says the flood of orders he hears is headed for India is the opportunity of a lifetime. “I will hopefully get assured employment and won’t have to travel from town to town in search of job. I can also think of sending my daughter to school,” said Murthy as he worked on a his rusty pedal sewing machine. —Reuters

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