Production promises set unrealistic sourcing goals
Promises to expand the textile and clothing industries in India, Pakistan and Bangladesh have been repeatedly thwarted by government miscalculation and delay. So anyone who thinks they can predict essential new garment producing capacity in a few years' time is likely to be wrong, points out Mike Flanagan.
India's apparel and textile exports, we are told, will grow massively over the next few years. To achieve this the country needs more manufacturing capacity, and better use of the capacity it's got. And right now, it's struggling to do either.
More capacity and better productivity are essential: the country accounts for 4.9% of all garments sold into the US, EU and Japan - only a touch above the 7.9% share Bangladesh has. It's behind Turkey's 6.2% and in a totally different league from China's 30.8%. And India's export-capable apparel factories are working close to capacity.
One way of making more is to squeeze more out of the capacity the country already has installed. And more flexible labour laws are essential to doing that. Or at any rate, that's what the country's Textile Minster said in August last year - promising his government would decide by the end of 2006 how the laws would be changed.
Well, it's been 2007 for two months now, there's no word from Mr Vaghela and he said the decision was important.
Why no word? Well, his party's coalition partners are a lot less enthusiastic about more flexible labour laws than Mr Vaghela. And in a democracy, they're not going to agree to his point of view just because he's made a timetable commitment.
So what about more capacity? Well, that's easy. India has lots of large businesses queuing up to invest in huge new apparel/textile complexes, all with special administrative and tax advantages. By the end of 2006, at least 174 new Special Economic Zones (SEZs), 27 of them with significant apparel or textile capacity, had been approved.
But it turns out they haven't quite been approved. In a country as densely populated as India, any new factory complex covering a few hundred acres is going to displace a lot of sitting tenants.
And it now turns out that the country forever reminding us all it's the world's largest democracy, forgot to check how the sitting tenants would react to being turfed off land their ancestors have farmed for centuries.
If they'd asked me, I'd have told them: we can't repaint the front door of Clothesource Towers without neighbours from miles around thinking they've got a right to have their views taken into consideration.
And India's small farmers are no less vocal when it comes to having their way of life interfered with. But there are millions more of them, and they're a lot more worried about losing their livelihood than our neighbours are about our taste in paint.
So no fewer than 81 SEZ proposals were put on hold in mid-January, while India's Prime Minister got his Cabinet to think through a way of avoiding riots throughout the country. They're still thinking.
Not surprisingly, some of the businesses who've spent real money building and equipping these zones are furious. Like Sri Lanka's Brandix, for example, which has set up an advance factory and has proposed over a billion dollars in investments.
The company has written to the Commerce Ministry saying: "The government action has come as a total surprise. It derails our entire investment plan to set up an Integrated Apparel Park. We have already committed to our overseas shareholders and investors. It will tarnish our image to be a reliable destination for textile and apparel exporters in an already highly competitive global market."
But not nearly as much as it tarnishes the image of the Indian government.
With two degrees from Punjab University, an MA from Cambridge and a DPhil from Oxford, you really would have thought the country's Prime Minster - probably the world's most educated head of government, ever - would be aware things don't happen in a democracy unless you've planned how to cope with dissent.
It's been predictable for years that the Communists in India's ruling coalition will take a great deal of persuasion to accept more flexible labour laws. Even more self-evident that India simply hadn't thought about the people who were going to be displaced by 174 whopping great factory complexes.
It's not the dissent that's worrying; it's the rank amateurism of a government failing to predict it.
But that's what happens when governments get involved. In Pakistan, for example, Karachi Textile City - a 3,000 acre development in the country's chief port of textile, finishing and apparel plants, with proper infrastructure, employing 80,000 people - was announced in 2005. In 2006, the government told us work was due to start by the end of the year.
In fact, the 3,000 acres don't exist. Or rather they do, but they belong to a nearly infinite number of federal, state and municipal authorities (including the Navy), who can't agree among themselves who's going to give up what.
And until someone's decided which 3,000 acres the project's going to be built on, Pakistan's citizens can't even begin to start thinking about the impact the scheme's going to have on their lives.
And that's something the government must have known when it proudly announced building work was due to start in a couple of months on a project its population hadn't even seen.
But at least in Pakistan they've got their sums right. In Bangladesh, the government proudly announced it was going to move 3,000 apparel factories out of the capital, Dhaka, between now and 2009 for $45mn - or $15,000 per factory.
They won't, and they haven't even begun to work out where the land for 2,700 of the 3,000 factories is going to come from - never mind who's actually going to pay for 3,000 new factories and how many of those 3,000 will be in business if they're forced into higher ground rent and depreciation than they are now.
And it's not just the Indian subcontinent, or democracies, where governments consistently overestimate their ability to make things happen.
Back in 2001, for example, we were told Dubai Textile City was going to open in 2003. Then in 2004, then in 2005. Indeed, in March 2006, the US Trade Representative (USTR: the American government agency responsible for issues concerning trade-related investment) announced the City had been open for the previous year. It's now due to open at the end of March 2007. I wonder what the USTR will say about that.
In fact, democracies are just forced to be more honest about this kind of thing. In 2005, Vietnam's state-controlled media announced that Malaysia's Pamatex was going to open a $100m factory complex in Quang Nam province. But other bits of the state-controlled media are now, 18 months later, issuing releases boasting that Pamatex has just been given approval to develop. Who knows when the factory will actually come on stream?
And who has the faintest idea what China's labour laws are going to be by the end of this year?
In 2005, a Draft Labour Law was published - and has gathered no fewer than 200,000 comments from Chinese and from a host of foreign organisations operating in China.
A further draft of the law was reviewed by the country's National People's Congress in December 2006, and interested parties are submitting a further round of comments. But there seems no prospect of any timetable for when the law will be finally passed.
If anything, predicting what the employment laws in China are going to be at the end of this year is even tougher than in India; at least in India there's a transparent, timetabled, parliamentary system.
Does this make it impossible even to predict when essential new capacity will be available? No, not everywhere. Turkmenistan and Uzbekistan have ambitious programmes to develop spinning, weaving and sewing capacity to complement their considerable cotton-growing resources. And those programmes are coming on stream pretty much to schedule.
Only trouble is, both countries have such disgraceful records in human rights and such erratic histories of legislative consistency, that few buyers would want clothes from them - even if it didn't take longer to deliver to Western customers than from practically anywhere else on earth.
It's the unpredictability of the world in general that makes it folly to try to forecast how the world's markets will evolve.
In 2005, reputable (though in our view seriously deluded) consultancies were predicting Brazil would be able to use quota abolition to become an important supplier of apparel and textiles to the rest of the world. In January 2007, Brazil had a negative trade balance in clothing and textiles, buying more from abroad than it sold. Its clothing exports fell 78% from the (frankly derisory) levels it achieved the previous year.
At the risk of sounding like a broken record, it's worth saying again. Anyone who thinks they can predict a good place to buy garments from in a few years' time is just confused. All predictions are likely to be wrong.
It's not smart guesswork that counts: it's flexibility, constant attention to how the world's changing and the ability to select suppliers that can share risk. Leave the predictions to fortune tellers.
Or failing that, governments. At least you know they'll be wrong.
Mike Flanagan is chief executive of Clothesource Sourcing Intelligence, a UK-based consultancy that provides the western apparel buying community with objective information on apparel production, trade, price competitiveness, and apparel producers in over 100 countries.
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