Interview with Mr Ashok Sawlani

The role of TEXMAS (Textile Merchants Association) is very active in Dubai’s Wholesale Textile Trade. TEXMAS is not involved directly with the garments trade/industry segment. This is an umbrella group of the traders, which is working as a bridge between the Government and Semi Govt organizations.

The garment industry flourished in the U.A.E. due to the quota system, despite the country lacked facilities like raw materials such as textile yarn and fabrics (Data from the Dubai Chamber of Commerce and Industry shows that about 91.5% of raw materials are imported, with just 8.5% sourced from the local market), cheap labour and a captive or bulk market that normally support the manufacturers. The system that had nurtured the industry by guaranteeing small nations access to the US and Europe was scrapped two years back to provide consumers in the West with cheap imported products. With the abolition of the quota system, many of the garment units that operated in the U.A.E have diversified their business into segments like construction materials, timber and steel. New labour welfare measures introduced by the governmental authorities in the country, like increased salaries and benefits to workers, accelerated the process of diversification. Runaway rentals and other operating costs contributed to the decline of the industry. There were hundreds of garment units in the U.A.E that were started by investors from India, Pakistan and southeast Asia. The U.A.E had more than 100 garment factories before 2003, now there are just less than 10 left. Most of the investors have either diversified their business or shifted their operations to countries like India, Egypt and Jordan to take advantage of the free trade agreement with the US. The scenario is such that scope for revival of the industry in the U.A.E is bleak at best.

Dubai may have lost its status as a garment producer, but it has gained name as a hub for textile imports as well as re exports. According to an Emirates Industrial Bank study, Dubai’s imports of textile and allied materials grew at an average of 11% between 2002 and 2006, while re exports registered an average growth of 13.3% during the same period. In 2006, Dubai’s Textile imports touched AED13.79 billion and re exports valued AED 6.87 billion. Imports of fabrics are mainly from South Korea, Japan, China, India, Indonesia and Thailand. Top destinations for re-exports are Iran, Iraq, Saudi Arabia, East Africa, Russia and former Soviet Union countries.

Dubai's textile trade was expected to get a boost with the Dubai Textile City becoming operational early 2007. Nevertheless, the market has witnessed a slump in recent times, mainly due to the tendency among buyers to outsource the product directly from the country of origin. A survey by Emirates Industrial bank revealed that expansion of the local textile market has been "relatively modest" in recent years compared to growth seen in other sectors. "Growth in domestic demand is close to the rate of population growth, so there has not been any spectacular development in the trade," it noted. The significant growth in tourism has not made the expected impact on shopping of clothes by visitors. Earlier tourists from South Asia spent more on clothes but of late there have been tremendous changes in the market conditions in those countries. Liberalization of imports coupled with increased domestic production has provided more choices for consumers in countries like India; this had a negative impact on the local market. Indeed, demand from Western tourists for textile products has never been very high.

The garment industry came up in the UAE because of the quota system in the USA and Europe. The cost of running a garment industry was much higher than those in India, China, Sri Lanka or Bangladesh. With the WTO coming into effect and the quota regime scrapped, Dubai’s role was no more important. In the recent period, the operating cost has gone up much higher due to work permit and visa charges, rentals, salaries etc. So, to run a garment industry is not that easy.

Dubai has a long history of being a Textile Trading hub. Initially it was Iran, the biggest buyer across the Gulf and later the entire region and all other Arab countries. Today, over 55 countries. The reason of the success can be attributed to two factors:

There is no direct sub-prime crisis effect on UAE’s trade. In fact, due to the crisis, the value of the US Dollar has fallen against the Euro and Sterling. This has encouraged people from Europe/UK to come and spend their money in Dubai as tourists or even to buy properties. The City is full of construction activities.

Dubai Textile City (DTC): This is an iconic project, built with the direct support from Hon’ble Ruler of Dubai. The City is spread over 140 acres of land. The entire development, including the roads, infrastructure, underground services, warehouses showrooms/offices, the gateway building is built with the finance from the merchants. The DTC is answer to the ever-growing traffic problem and escalating operating costs. This is the first ever project in the Middle East, where the selling point and the warehousing is in the same place. There are 284 warehouses in DTC. These are broadly classified as A, B & C types with an area of 3070sq.ft, 5781sq.ft and 11581sq.ft respectively.