1 / 27

Textile and Apparel Strategy

Textile and Apparel Strategy. Constraints and Solutions. Overview of Major Constraints. Internal Constraints to Investment and business: Getting goods to market reliably and rapidly ;

cdefalco
Download Presentation

Textile and Apparel Strategy

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Textile and Apparel Strategy Constraints and Solutions

  2. Overview of Major Constraints • Internal Constraints to Investment and business: • Getting goods to market reliably and rapidly; • Putting labor laws on a comparable basis with major producers of textiles and apparel that are growing; • Taxes and incentives in line with industry and global norm; • Shortage of factory shells free of government legacy costs (green field investments); • Targeting the right investors (products and markets) • Market Constraints • Changing market access: • USA, EU, SADC • Current status of global competition in major textile and apparel markets;

  3. Shipping and Delivery Times • Getting goods to market reliably and efficiently: • Reducing the customs and shipping time variability • Rationalizing the supply chain (Maputo Corridor) • Establishing credibility (shipping times) • Textiles and apparel are perishable goods • Global manufactures and buyers are moving to a lean manufacturing model, which means reducing time in the supply chain • Reliability for delivery is as important as cost

  4. Speed of Delivery Asia, Lesotho and Mozambique Compared • The average turn around time for goods ordered and shipped from Asia to Europe or the US is 10-12 weeks from order to delivery • With Asian fabrics, Lesotho averages a turn around time of 10.4 weeks from order to a South African port (Port Elizabeth) and it still requires shipping from there to the market – it is, therefore, uncompetitive to make garments in Lesotho of Asian fabrics but-for the duty preferences provided by AGOA • Mozambique’s turn around time for the same garment made in Lesotho, is, at best, 11.6 weeks

  5. Garment Production with Asian Fabrics Note: Shipping times are from interviews of producers and freight forwarders. Times will vary from shipment to shipment.

  6. Constraint: Uncompetitive Shipping Times to Major Markets (US, EU)

  7. Constraint: Unreliable Shipping Times Importing and Exporting to Mozambique

  8. Textile and Apparel Industry Labor Laws • Labor laws should be on a comparable basis with major producers of textiles and apparel that are growing: • Countries with growing and vibrant textile and apparel industries link worker productivity (performance) and all labor costs • Government ensures four basic human rights to: • Prohibit child labor; • Allow workers to organize; • A work place that is safe and healthy; • A non-discriminatory work environment.

  9. What Do Textile and Apparel Industry Labor Laws Look Like? • Hiring and firing is largely governed between the factory and labor as long as it is in accordance with human rights listed above (organized labor is the most cited complaint) • Typical severance pay is one week pay for each year of service (one week of notice may also be required • The ability to dismiss a workerwithout cause or severance pay in the first four to six months (permanent employees) • The ability to “furlough workers” at half pay for up to 3 months

  10. What Do Textile and Apparel Industry Labor Laws Look Like? • Casual work program for up to 6 months duration (flexible contracts, immediate dismisal) • Apprentice program for 2-3 months for new work force entrants • Night time, weekend, or “shift work” wage premiums are not more than 1.25 – 1.5 times the basic minimum wage • Earn leave as you go, one day for every one month of service, no pay for sports events, weddings etc.

  11. Comparison of Labor LawsMozambique and Major Textile and Apparel Producing Countries Note: Assumes three years on the job.

  12. Dismissal of Worker Current and New Labor Law Three (3) Year Industry Norm

  13. Economic Dismissal of Worker Current and New Labor Law Three (3) Year Industry Norm

  14. Constraint: Labor Law not Competitive with Global Industry Standards

  15. Taxes and Incentives • Reduce corporate tax on industry profits to the industry norm of zero for the first 5 years of operation for firms exporting • Encourage worker training with a matching government industry fund; • Creating a transparent environment for business operations free of corruption, including rapid and efficient ownership and bankruptcy law

  16. Comparison of Corporate Tax for Global Textile and Apparel Industries

  17. Constraint: Incentives are Not Competitive With Global Standards

  18. Market Access • AGOA Rules are Changing • EU-Cotonou to expire at the end of 2008 and be replaced by an EPA • Mozambique will still have access under EU-EBA • SADC is looking into new rule of origin

  19. AGOA and New Third Party Fabric Provision • The Thomas bill will extend AGOA third party fabric benefits through 2008 • New value added rule of origin (50% or more SSA content ) to be put in place after October 1, 2008 • Abundant supply provision will allow fabric producers to give “notice” of their capacity and begin restricting third party access to these imported fabrics two years after notification (most restrictions will go in place October 2008) • Additional restrictions will continue to be rolled out as producers notify the USITC of their capacity

  20. Value Added in Apparel Industry by Product

  21. EU Market Access • The EU is now exploring a value added rule of origin for textile and apparel products covered under their proposed EPA agreements • Allow the “cumulation” of origin within sub-country groups such as SADC-7 (South Africa) • No definition of value added rule • Generally better than Cotonou and EBA rules, which are highly restrictive

  22. US Imports from AGOA Countries (Thousands of Metric Tons) Elimination of Quota 33% drop in volume from peak 2004

  23. US Imports from Lesotho Countries (Thousands of Metric Tons) Elimination of Quota Knits impacted more than wovens

  24. US Imports from China (Thousands of Metric Tons) Elimination of Quota Safeguard Applied

  25. Average Unit Value of US Imports from China 2002- 2006 (Dollars per Kilo) Safeguard Applied Elimination of MFA Quota

  26. Interviews and Resources • Peter Young of Maputo clothing and his accounting office; • IPEX (Joao Macaringue, CTI (Sattii Rohit, and Mrs. Belarmina Capinte, Jorge Sequeira) • Cary Davis, formally of Belita Clothing • Simon Fellingham, of Marcena lines shipping (Dubai Based, but local shipper) • Nelson, USAID—labor law • John Richotte--International Labor Organizatoin, Cambodia) • Mark Bennett--CoMark Trust, Lesotho

  27. Controlling Imported Materials • In the textile and apparel industries, access to imported materials without the burden of domestic taxes is a requirement for export firms to compete • Most countries control imported materials by: • Securing all containers and inspecting them at the factory site before and after shipping; • Weighing materials imported and balancing them with goods exported (including packaging materials) • Allowances for waste must be determined\handled

More Related