A textile industry on hinges of survival

03 Jul '08

3 min read

The textile industry has seen a lot of ups and downs in the last few decades, but has managed to be resilient. Presently, the sector is facing a lot of difficulties, some created and others due to changing international economic environment across the globe.

Despite producing good quality products, the manufacturers of textiles and apparels have not been able to compete in the international markets due to their high pricing. The sector has not invested in the latest technology and makes do with obsolete machinery which ultimately leads to higher costs.

Export of apparels and textiles only to the US in 2005 were US $167 million, dipped to $119 million in 2006 and fell to a further $114 million in 2007. The figures are a pointer to the extremely bad condition of the apparel industry in Mauritius.

The depreciation of the Mauritian rupee (MUR) in 2005-2006 led to a favourable environment for the textile industry. It helped in making products price competitive internationally.

However, the down turn began when the MUR started appreciating since late 2007, due to massive influx of foreign investment. This led to the Mauritian textile goods becoming less competitive in the international markets.

At the same time, rampant inflation and rising fuel costs, among other factors, have contributed in making the environment difficult for the industry.

Profits which used to be in the range of 12-15 percent are now reduced to 5-7 percent. Those companies which were surviving on wafer thin margins due to extreme competition are forced to put their shutters down.

Despite low margins, industry morale was high, but, constant decrease in orders in last few months due to looming recession in the US and other factors across the globe altered the entire scenario.

The first alarm bells started ringing in January 2005 with the advent of multi fibre trade agreement and dismantling of quotas. This led to an exodus of companies, who had invested in the sector to take advantage of quotas and left thousands of workers jobless in their wake.

The government has done its bit by coming out no less than 8 different schemes to benefit the ailing sector like the Textile Emergency Support Team (TEST), the Textile Modernization Fund (TMF), National Equity Fund, Working Capital Finance Scheme and finally creation of Enterprise Mauritius to make available an institutional framework for the sector.

Veterans from the industry refuse to accept that this is the beginning of the end of the industry. They suggest that the government should actively intervene to control the march of the rupee.

At the same time they recommend that companies should explore new international markets for their products instead of relying on only a few regions, on the lines of the Bangladesh garment industry which has successfully explored and created new destinations for their goods in Eastern Europe.

They also advocate the adoption of modern technology as that is what will ultimately bring the cost competitiveness desperately needed to stand in the face of onslaught from the Chinese, Indian and Bangladeshi textile and garment industry.

Fibre2fashion News Desk - India

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