Saturday, March 22, 2008

Textiles industry could still save the day

By Erick Toroka

THE collective views among most observers are that Tanzania does have by far great comparative advantage over most of the other countries in the region in the area of textile production.

For example, the country already has in place ample supplies of raw cotton, the possibilities of cheap coal and hydropower, as well as cheap domestic labour with skills already horned through past dabbling in the textile industry. In the 1970s and ’80s, Tanzania was home to at least 32 thriving textile mills.

That was before reforms leading to economic liberalization were undertaken beginning in the late 1980s, resulting in the sidelining of the domestic textile sub-sector in favour of imported substitutes. That is the bad news...

The good news is that this negative trend can be turned round, with the textiles sub-sector being enabled to once again play a major role in propelling the economy up and forward. According to Bernard Kihiyo – an expert in the field of consumerism –

“the cotton and textile sub-sector in Tanzania can leap forward if and when it demonstrates strong capabilities at the firm-level on the supplyside to market products and services worldwide coupled with a high willingness of sophisticated consumers on the demandside to pay for the (domestic) industry's output.” Kihiyo is currently the executive director of the Tanzania Consumer Advocacy Society (TCAS).

Speaking in an exclusive interview with Business Times in Dar es Salaam recently, the man said Tanzania needs to take up “the challenge of global trade seriously for it to survive in the rapidly globalizing situation.

“What is missing in our mix is seriousness in exploiting these potentials for our economic development. If we really want our textile industry to grow, we need to critically analyze the tricks of globalization economics.”

This, he explains, “includes all elements of cost-effectiveness and adherence to standards and consumers choice ...In other words, it means flexibility in the market as the world continues to grow smaller, competition for the consumers money ever becomes fiercer – and choices ever wider!”

In that regard, Kihiyo says, “TCAS is ready to join in a national campaign on sensitizing consumers to buy locally-made textile materials and garments ... as long as the producers adhere to the highest standards of quality and ethical conduct.

At the end of the day, this would result in creating more jobs and alleviating poverty in Tanzania.” Before trade liberalization, the textiles sub-sector in Tanzania was one of the strongest growth sectors in the national economy.

It was one of the largest employers – and the third largest source of Government revenues in the form of taxes and export earnings. In fact, cotton was the second most important export crop for Tanzania.

Following trade liberalization over a little more than two decades, the nation’s textiles sub-sector went under, losing heavily to an influx of imports from Japan, China, Taiwan, Malaysia, Singapore and other South-East Asian countries.

Admittedly, some of the imports were of a better quality. But, more often than not, they were cheap, shoddy affairs, thereby underselling even the few textile goods that were still trickling out of the struggling domestic manufactories.

In effect, Tanzania joined the growing family of countries that were dumping grounds for sub-standard textiles and garments (imported mostly from the Far East) and second-hand clothing, imported from Europe and North America.

In the event, local consumers continued to access a wide range of textile goods that were generally available in the market. One direct effect of this is that these developments hammered the last nail in the coffin of an already moribund domestic industry. Hence the highly unsatisfactory situation which is currently obtaining in Tanzania ...

The ample supplies of cotton in the country, as well as potentially cheap power and labour, do not as yet meaningfully contribute to the national economy in the forms of employment creation and income-generation compared to 1970s and early 1980s.

In recent years, the textiles industry has tried to gather itself together again, compliments of new developments like the Africa Growth & Opportunity Act (AGOA) of the United States. That piece of legislation enacted in 2002 set out to liberalise access to the vast US market for about 7,000 export items from sub-Sahara Africa and other least developed countries (LDCs).

Ditto for a roughly similar trade initiative by the European Union going under the programme-title of Everything But Arms (EBA). As trade programmes, both AGOA and EBA expanded the duty- and quota-free benefits which were previously available to the poorer nations of the world only under the Generalized System of Preferences (GSP).

The two programmes in particular are by no means confined to textile goods. The goods covered range from footwear, chemicals and steel to certain motor vehicle components and varieties of agricultural products, including wines!

But, when all is said and done, countries like Tanzania have not been in a position to exploit such opportunities to the hilt. For instance, according to information from the US Embassy in Dar es Salaam, the value of bi-lateral trade flows between Tanzania and the United States in terms of textiles and apparel tells only part of the story.

The value of US imports from Tanzania dropped from US$4.12 million in 2005 to $3.34 million in 2007. On the other hand, US exports to Tanzania went up from $9.48 million in 2005 to $14.5 million in 2007.

The barriers to entry in the US market of Tanzanian exports include the high sensitivity of the American Government and people to standards of quality – with Tanzania consistently falling under par.

In the event, China has taken full advantage of the situation, whereby it supplies about 45 per cent of the entire garments requirements in Europe and America! In fact, many industries in Europe and America have found it prudent to transferred their production activities to China, thereby effectively exploiting the principle of comparative advantage – including availability of cheap skilled labour, good investment policies, and good infrastructure for businesses to flourish.

It is understood that America and European countries are wary of becoming over-dependent on China in this area of economic activity. In this regard, Kihiyo argues, those countries would conceivably be more than thankful to have other alternative sources that are equally reliable.

“It is, therefore, imperative that the Tanzania Government and other stakeholders in the textiles and other industries take greater advantage of these opportunities by seriously acting upon them,” he urges.

Source The Business Times

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