Southeast Asia Braces for Job Losses as Textile Quotas End
http://enews.voanews.com/t?ctl=A6E0C7:2F72C9DThere are fears that without quotas, large garment exporters in China
and India will expand, forcing factories out of business in smaller
countries An agreement that for more than 30 years allowed wealthy
countries to limit textile imports, particularly from developing
nations, expires in 2005. Free trade advocates hail the end of the
national textile quotas as a step toward a free world market. But
there are fears that without quotas, large garment exporters in China
and India will expand, forcing factories out of business in smaller
countries.
Across Southeast Asia, millions of workers spend their days in factory
sewing lines like this one, producing clothing for export to Europe
and the United States.
The workers are mainly women and unskilled rural residents, and they
generate billions of dollars in earnings for governments in the
region.
But the industry is about to undergo a major shake-up. Rules that
allow wealthy nations to place quotas on textile imports from poor
countries expire at the start of the new year.
An official with the Thailand Garment Manufacturers Association,
Suchart Chantaranakaracha, says that means buyers will be able to
purchase from just one or two countries, instead of using factories in
several nations.
"In the past, buyers have diversified because of the quota issue. But
now since quota is not an issue, the buyers are going to short-list,"
he said.
He says buyers will be able to work closely with a few suppliers to
produce better quality garments at lower prices. This is expected to
favor large companies in China and India. The World Bank estimates
that China's share of the world textile market will triple to 45
percent within a few years.
An economics professor at Bangkok's Chulalongkorn University, Somphob
Manarangsan, says hardest-hit will be factories producing garments for
less expensive markets, such as discount stores. Profits for that
market already are extremely thin.
"For the lower market, I think that they are going to face tougher and
fiercer competition and become much more difficult to survive within
the existing situation," he added.
The garment industry is a major source of jobs, export earnings and
tax revenue for Thailand, Vietnam, Indonesia and Cambodia. In Cambodia
and Laos, it provides up to 90 percent of export earnings.
The Nike sports brand buys from factories in several countries. The
head of Nike in Vietnam, Amanda Tucker, predicts there will be an
adjustment after quotas expire, but says her company will continue to
diversify its sources.
"Countries that have really not invested in their industries may find
that they're losing to players such as China that have economies of
scale," she noted. "But it doesn't necessarily mean that a brand such
as Nike would all of a sudden concentrate everything in one source."
Vietnam faces a particular challenge. Because it is not a member of
the World Trade Organization, its exports will remain restricted by
quotas.
Vietnam hopes to join the WTO by the end of next year, but some
factory operators worry they may not survive until then.
The less developed economies of Cambodia and Laos face other
challenges.
They must import the cloth needed to make garments. And they have high
utility and transportation costs, because of their poor
infrastructure. In many countries, official corruption also inflates
production costs.
Producers know competition will intensify next year and are adopting
new strategies to address it. The general manager of a factory in
Vietnam, Y.Y. Chen, plans to raise productivity by investing in new
equipment, re-training employees and adopting creative management
techniques.
"It depends a lot on how you can plan ahead, or transfer the orders to
another subsidiary country," he said.
Cambodia is lobbying the U.S. government to suspend import tariffs on
its garments to help it survive the transition.
Mr. Suchart at the Thai garment makers association says Thailand's
industry will group factories that make cloth and those that make
garments together to streamline production.
The Thai government also has introduced a campaign to establish Thai
brand names in the high-fashion market.
"At the end of the day, by improving productivity, by giving better
services, and by giving the buyer better goods and novelty items, I
believe Thailand can compete with China," he added.
Nevertheless, the prospect of a major contraction in the industry
costing hundreds of thousands of jobs worries union leaders and social
workers. They say any economic downturn will hurt the most vulnerable
groups in Southeast Asia and fear that a prolonged crisis in the
poorest countries could lead to social and political unrest.