BASELINE UAE TEXTILES AND APPAREL STATISTICS

UNCLAS SECTION 01 OF 02 ABU DHABI 003427

SIPDIS

SENSITIVE

DEPT FOR NEA, NEA/ARP, EB/TPP/ABT FOR EHEARTNEY
DEPT PASS TO USTR FOR JBUNTIN AND DBELL
COMMERCE FOR ITA/OTEXA FOR MD'ANDREA

E.O. 12958: DECL NA
TAGS: ECON ETRD KTEX TC
SUBJECT: BASELINE UAE TEXTILES AND APPAREL STATISTICS
PRIOR TO ELIMINATION OF QUOTAS

REFS: A. STATE 184238

B. STATE 2205 AND PREVIOUS


1. (U) Summary and comment: Baseline statistics are
provided regarding the UAE textile and apparel industry in
response to ref A. In advance of the elimination of the
worldwide textiles and apparel quotas in January 2005, UAE
officials are very concerned that an absence of quotas on
China will essentially eliminate the UAE's ability to
compete; however, if some requirements are placed on China,
UAEG officials believe the UAE textiles and apparel sectors
will thrive and expand. Officials are anxious to learn the
new requirements for importing into the United States, and
whether there will be any quotas placed on low-cost textile
producing countries (specifically China and Vietnam). End
summary and comment.

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Baseline Textiles and Apparel Statistics
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2. (U) Responses are keyed to ref A.


3. (U) In 2002, the total industrial production in the UAE
was $10 billion, and in 2003, it was $10.9 billion. Data
was not available regarding the total textile and apparel
production.


4. (U) In 2002, textiles and apparel comprised 7.44% of
the UAE's imports, 5.9% of its non-oil exports, and 4.95%
of the country's re-exports. In 2003, textiles and apparel
comprised 7.79% of the UAE's imports, 6.26% of its non-oil
exports, and 5.07% of its re-exports, according to Central
Bank statistics.


5. (U) In 2002, there were 273,000 individuals employed in
the manufacturing sector, which comprised 13.06% of the
total workforce. Of the manufacturing employees, 2.12%
were employed in textiles (3,976 individuals),and 15.8%
were employed in the apparel industry (28,401 individuals),
according statistics produced by the Department of Ministry
and Finance.


6. (U) In 2003, there were 297,800 individuals employed in
the manufacturing sector, which comprised 13.6% of the
total workforce. Of the manufacturing employees, 2% were
employed in textiles (4,187 individuals),and 14.53% were
employed in the apparel industry (28,568 individuals).

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Sectors Contribute to Economic Diversification
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7. (U) Ministry of Economy officials tell us that the
textile and apparel sectors are a key element to the UAE's
efforts to diversify its oil-dependent economy. Currently,
there are 180 garment factories in the country. The bulk
of their production is exported to the U.S. and the EU.
One ministry official noted that in addition to revenue
generation, the number of workers in country due to the
textile industry contributes to the overall health of the
economy because they live, work, and spend money on the
economy.

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Factory Relocation Not a Concern in a Quota-Free World
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8. (SBU) As reported in ref B, the number of textile
manufactures in the UAE has tripled since the mid-1990's,
due in large part to the establishment of free zones in
Dubai and the northern emirates. Indian, Chinese and other
traditional textile manufactures moved to the free zones to
take advantage of the UAE's existing textile quota with the
United States. We anticipate that some of these
manufactures will return to their homelands once the quota
system is eliminated because of the lower production costs
in those countries. UAEG officials recognize that some
companies may decide to relocate based solely on cheaper
production costs, but they are confident that many
companies would remain in even return to e UAE because
the UAE is able to offer better infrastructure, services,
and security.

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Anxiety Regarding China
--------------


8. (SBU) Ministry of Economy officials are concerned about
the future of the textile and apparel sector in the UAE
after the elimination of quotas due to increased Chinese
competition. One official indicated that the UAE's ability
to compete in a post-quota environment is dependent on what
regulations are imposed regarding fees and duties, and
whether quotas remain for countries like China and Vietnam.
He bluntly stated that if there were no barriers for China,
"the UAE will have a tiny piece of the pie, and China will
have the rest."


9. (SBU) Ministry officials are optimistic that if there
is some regulation on China, UAE textile manufactures will
be able to thrive and compete in the global market. One
official stated that local manufactures have been obligated
to produce at lower levels because of the quotas, but that
UAE production capabilities are actually much greater. He
emphasized that if China still had quotas but the UAE did
not, the UAE could produce and export more products. He
also candidly told econoff that if the UAE entered into an
FTA with the United States and textiles entered the U.S.
duty free, the UAE textile sector would not only survive,
it would expand.


10. (U) POC for textile and apparel issues will be ECONOFF
Amanda Curtis. Email: curtisae@state.gov. Phone: +971 02
414 2542

Sison