[list_indonesia] [ppiindia] Winners and losers in textile shake-up
- From: rahardjo mustadjab <bapakjewel@xxxxxxxxx>
- To: ppiindia@xxxxxxxxxxxxxxx, harisuwasono@xxxxxxxxx, Wisnu Sindhutrisno <sindhutrisno.w@xxxxxxxxxxx>, ade_963@xxxxxxxxx, Irena Krasnicka <irena_krasnicka@xxxxxxxx>, Nithianandum Katherayson <nithianandum_katherayson@xxxxxxxxxx>
- Date: Thu, 3 Mar 2005 04:16:54 +0000 (GMT)
** Mailing-List Indonesia Nasional Milis PPI-India www.ppi-india.da.ru **
Winners and losers in textile shake-up
By Kaushik Basu
Professor of economics, Cornell University
The end of country quotas on textile exports marks one
of the most major events of the world economy - one
that can cause tectonic shifts in the global business
landscape.
The Multi-Fibre Agreement (MFA), under which these
quotas were organised, was put in place in 1974 to
protect the textile industries in the US and Europe.
The MFA expired in 1994, but the quotas were continued
and managed by the World Trade Organisation with the
understanding that they would be terminated at the
start of 2005.
That has happened now and the winds of change are
palpable.
The US is expected to lose a large number of jobs in
this sector, which has anyway dwindled over the past
decades.
In 1974 there were 2.4m workers in the textile sector
in the US. By 2000, 40% of these jobs were gone.
What is more worrying is that there are many poor
countries that could lose out.
Anticipating the end of quotas, exports from El
Salvador collapsed by 30% last November. It is
expected that the apparel sector of the Dominican
Republic will lose up to 40% of its jobs.
Big gains for India
Currently, global textile and apparel exports are just
short of $500bn a year.
Shifts in shares of the textile industry can lift
entire nations out of poverty and, equally, plunge
regions into joblessness
To put this in perspective, India's national income is
just over $500bn; Bangladesh's and China's close to
$50bn and $1,300bn respectively.
With the quotas gone, total global exports are
expected to cross $1,200bn by 2010.
Shifts in shares of this huge industry can lift entire
nations out of poverty and, equally, plunge regions
into joblessness.
While the gains for China are certain and enormous,
India is also expected to reap substantial benefits.
In the first six weeks of the quota-less world, India
has made big gains.
Sears and Marks & Spencer are setting up operations in
India and Gap Inc is expected to expand its sourcing
from India.
It seems likely that in the first quarter of this year
garment exports will get a spurt of 50%.
What happens over the next few years will depend
critically on government policy.
Currently India exports $14bn worth of textile
products. Even without doing much it should reach an
export of $40bn by 2010.
But, with a proper blend of policies, it is possible
to reach the figure of $80bn. This, apart from the
benefit of bringing in foreign exchange and boosting
growth, could make a visible dent on unemployment.
For Bangladesh and Pakistan, which rely on textiles
for about 70% of their export earnings, it will be
harder struggle but they - especially Bangladesh -
could also benefit from a quota-less world.
All these countries have cheap labour; the additional
advantages that India has are those of size and large
foreign-exchange reserves that can (and, I believe,
should) be used to boost infrastructure.
Last month I met Sudhir Dhingra, chairman of Orient
Craft, one of the largest Indian exporters, and toured
one of his factories in Gurgaon, outside Delhi.
The unit had 3,800 workers, sitting in modern,
assembly-line arrangements in a clean, well-lit
factory.
They were producing little dresses and skirts that
would be sold by Orient Craft at $4 a piece and would
be retailed in the US for $45.
With margins like this it is not surprising that the
global garment manufacture is expected to move
entirely to developing countries over the next few
years.
Improving infrastructure
Orient Craft had a turnover of $118m last year and
this year is expected to cross $160m.
While the Gurgaon factory I visited is one of India's
largest, to take full advantage of scale factories
need to be several times its size.
To achieve this, government has to play an important
coordinating role.
It has to remove its small-scale industry size
restrictions, modernise the ports and have more
flexible labour markets.
For a product to travel from factory in India to
retail outlet in New York takes around 30 days. Most
East Asian countries take half that time.
This is where the ports come in.
Indian ports are small and riddled with bureaucratic
delays. Large liners do not come here.
Most exports have to go out on "feeder vessels" to be
transferred to a "mother vessel" in some other port.
Moreover, goods are required to be delivered at the
port seven days prior to shipment. In most East Asian
ports the cut-off is one day.
The modernisation of ports and transport
infrastructure will need money.
One possibility is to use a small fraction of India's
foreign exchange reserves, say $10bn for this and
other infrastructural investment.
This would help not just the textile sector but all
traded goods.
The initial investment could be recovered in a few
years in terms of not just money but jobs; and it
could also help the global trade of other South Asian
countries.
To read Kaushik Basu's future columns, bookmark
bbcnews.com/southasia
Here is a selection of readers' views on this column.
This is bad news also for developing countries in
SOUTHERN AFRICA, which are unable to compete with
China and India in their exporting markets in Europe
and USA, as well as in their domestic markets. A lot
of textile industries are struggling or closing in
Southern Africa, and many countries are becoming
IMPORTERS of finished goods that were previously made
in their own countries.
Ramesh J PATEL, ZAMBIA
As always, Prof. Basu writes an optimistic, eloquent,
thought provoking piece. The world is about to take
off on the back of the garment industry and countries
all around the world stand to benefit from it. With
any industry picking up so rapidly, the positive
effects will be felt all over. Wonderful.
Diksha, USA/India
I feel that India should take this advantage and we
should not forget china increased its investment in
textiles technology by some billions of dollars. So
watch out elephant, dragon is crawling faster?
Kuldeep, Canada
Irony abounds. Puts a different perspective on the
scenes in movie Gandhi where Indians are burning their
British-made suits.
Lou Tanner, USA
I would say Indian garment manufacturers should brand
their merchandise and sell across the world. I think
many Indian companies like Raymond, Arvind mills would
be better off to market their brand globally or tie-up
big supermarket stores to sell their brands. This
would mean better margins and revenue for India. Let
us just not be cotton producer and garment maker, i
think time has come for India to sell its brands
worldwide.
Mukundan, Jharkhand, India
A good article with lots of future hope in Indian
textile industry. As we know that Indian bureaucracy
sometimes stand obstacles to export promptly, Indian
companies should seek outside investment in textile
sector, specially in Latin American countries like
Bolivia, Peru, Colombia, and Ecuador. These countries
have signed up a special free trade agreement with the
United States therefore they need more investment in
textile area. India should take advantage of this
trade agreement.
Somnath Naha, Bolivia (Indian Citizen)
When will the ridiculous leftist parties in India
learn? Even China has given up on state barriers to
trade and commerce. Trade in a market economy with a
reformed labour market is the only way forward. In
response to Radhika above: Sure, not all factories in
India are like this one, but that is because most of
those factories faced some sort of state intervention,
or bureaucratic red-tapism (an Indian specialty).
Remove the barriers to trade, and all else will flow
in due time.
A. Jain, USA
One thing that has a big & direct impact on prices is
the labour laws prevalent in a country. If Indian
government puts things in correct perspective
(considering textiles is the second largest job
provider in the country after agriculture), they need
to IMMEDIATELY reform and redefine our labour laws for
textile sector. Textile industry should be treated at
par with any other seasonal business and hence
flexibilities (read hire & fire) should be allowed
along with increasing the minimum weekly working hours
from 48 to, say 60. This shall immediately transform
to price advantage of around 5-7%. The workers also
stand to gain in a larger perspective.
Manish Sareen, Gurgaon, India.
India can and will be a superpower in the textile
sector. The only constraint that India has is lack of
professionalism, approach towards knowledge and
morever using that knowledge. Textile being a
competative trade we have to be more effecient which
will reduce our overheads, increase turnovers and help
the bottom line. Government will and should play a
lead role with low interest investment strategies and
providing basic infrastructure.
Gaurav Sabharwal, India
So when these developing countries profit from this
shift,can we expect the life of the average person(
the laborour) to change.This looks like a paradox
because if the standard of living improves and the
wages go up,they loose their competitive edge.Maybe
the wealth will probably stay with a few at the top.
Haroon Syed, Canada
I think the protection to the cotton and textile
industry and different legal nuances in this industry
is responsible and to be blamed for the lack of the
competitive edge in the textile industry...... while
comparing with China we usually forget that she enjoys
not only large economies of scale but also government
support which have contributed in the mass production.
But here in India the government is solely responsible
for not letting emergencof big manufacture and thus
keep them away from enjoying the fruit of economic of
scale. Moreover this has stopped the industry in
gaining any comparative advantage over other
countries' industry.
OM P.S., india
This is a bad news for country like Bangladesh which
is one of the poorest. Removing quota system may mean
that people will jobs in textile industry much needed
for poorer nation. India is already a fast developing
nation but pooer nation around it are being swamped by
Indian goods which is causing increasing poverty in
these countries. The world ought to adopt a system
which is fare on all and not just few.
Steve, UK
Mr Basu points to India be able to gain about $40bb in
exports without too much of sweat. The irony of course
is $80bb possible with a bit of sweat. $40bb of income
shared among 100mm odd textile workers amounts to
about $400 per worker. This is close to double India's
average income. Indeed, the political parties
(Congress and Communists) who profess to look after
the poor's interest seem to be their worst enemies!
Ashesh, USA
Well thought out by Mr. Basu. But given the huge gap
in the labour wage and profits derived from these
exports, real benifits/development cannot be gained
with solid labour reforms and laws and their stricter
implementation. There is only one factory he saw, in
one of the well accessed regions of the country.
Radhika, India
One big challenge is going to be ongoing quality
control from vendors in India/Pakistan/Bangladesh.
Having worked in retail purchasing, I have to note the
considerable effort the importers have to make to
ensure that the manufacturer is maintaining quality
and meeting specifications. I have sourced garments
from China as compared to India in past even if they
were more expensive purely because of consistency and
quality as well as ease in resolving business
disputes. It is a good time for countries like India,
Pakistan and Bangladesh to promote better quality
control practices.
Adam Taylor, Uk/US
I think that the most important thing India should do
is to improve the quality of the garments. As Kaushik
mentioned some brands have their unit in India but
they also sell garments made in Singapore, Taiwan,
Thailand, Vietnam and need not to mention that quality
of Indian clothes is not very good than even small
Asian countries. In this quota free world if India
loses customer once it will be very difficult to get
them back. India need to work a lot on quality not
just quantity.
Cecil, France
Most countries involved in textile production have
been preparing for this change in their terms of trade
for several years. But it is understandable that not
all have fully prepared for the bonanza that is about
to arrive. In the UK we're fortunate to have largely
restructured our economy away from textile production.
But what is not mentioned in Kaushik Basu's article is
the bonanza that is about to arrive in the major
textile consuming countries: we shall be able to buy
much better value garments and that will both raise
our textile consumption and free-up cash for other
spending. With such advantages we should be willing to
help those countries who are not able to benefit. More
aid should be provided.
Andrew Dundas, UK
A nice article by Mr Basu. I believe the Indian
governments (both past and present) have been caught
napping. They knew very well that this MFA regime was
coming to an end. The reforms in the ports should have
started long back. The reduction in time and cost of
transport and shipping means a lot to exporters.
Labour reforms are also long overdue. It calls for
some hard decisions by the political parties and the
leftist parties will oppose them. But India has to
push forward.
Giri, India
The main reason India comes after China is its need to
take concrete steps to change its infrastructure and
for strong political will.
Devinder Singh, Canada
Developing countries like India will benefit immensely
through having a low cost-base, higher productivity,
efficient infrastructure and better working
conditions.If carefully nurtured, this could create
thousands of jobs and lift people from poverty.
Swapan, UK/USA
If you would like to send a comment about this story
you can use the form below.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/south_asia/4294679.stm
Published: 2005/03/02 10:02:14 GMT
© BBC MMV
------------------------ Yahoo! Groups Sponsor --------------------~-->
Give the gift of life to a sick child.
Support St. Jude Children's Research Hospital's 'Thanks & Giving.'
http://us.click.yahoo.com/lGEjbB/6WnJAA/E2hLAA/BRUplB/TM
--------------------------------------------------------------------~->
***************************************************************************
Berdikusi dg Santun & Elegan, dg Semangat Persahabatan. Menuju Indonesia yg
Lebih Baik, in Commonality & Shared Destiny. www.ppi-india.uni.cc
***************************************************************************
__________________________________________________________________________
Mohon Perhatian:
1. Harap tdk. memposting/reply yg menyinggung SARA (kecuali sbg otokritik)
2. Pesan yg akan direply harap dihapus, kecuali yg akan dikomentari.
3. Lihat arsip sebelumnya, www.ppi-india.da.ru;
4. Satu email perhari: ppiindia-digest@xxxxxxxxxxxxxxx
5. No-email/web only: ppiindia-nomail@xxxxxxxxxxxxxxx
6. kembali menerima email: ppiindia-normal@xxxxxxxxxxxxxxx
Yahoo! Groups Links
<*> To visit your group on the web, go to:
http://groups.yahoo.com/group/ppiindia/
<*> To unsubscribe from this group, send an email to:
ppiindia-unsubscribe@xxxxxxxxxxxxxxx
<*> Your use of Yahoo! Groups is subject to:
http://docs.yahoo.com/info/terms/
** Mailing-List Indonesia Nasional Milis PPI-India www.ppi-india.uni.cc **
Other related posts:
- » [list_indonesia] [ppiindia] Winners and losers in textile shake-up
