Honduras: Textile and Apparel Statistics; Both

UNCLAS SECTION 01 OF 03 TEGUCIGALPA 002276

SIPDIS

STATE FOR EB/TPP/ABT:EHEARTNEY, WHA/CEN AND WHA/EPSC
COMMERCE FOR ITA/OTEXA/MD'ANDREA
STATE PLEASE PASS USTR
DOL FOR ILAB

E.O. 12958: N/A
TAGS: KTEX ECON ETRD ELAB BEXP HO
SUBJECT: Honduras: Textile and Apparel Statistics; Both
Employment and Fear of China Growing

REF: State 184238


1. Post provides the following information in response to
reftel.

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The Limits of the Statistics
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2. The two primary sources of information on the Honduran
textile and apparel sector are the Central Bank, which
collects statistics on the entire economy, and the Honduran
Manufacturers' Association (AHM),which collects statistics
on the maquila sector only. Unfortunately, neither of these
institutions collects its information in sufficient detail
to allow the separation of textile and apparel statistics
from other maquila sector or manufacturing statistics.


3. The only breakdown of the maquila sector available is
that provided below, in which the Central Bank counts all
"maquila businesses" as belonging to one of four categories:

Category # of Companies Percent
-------------- -------------- --------------
Textile Industry 162 59.3%
Suppliers 46 16.9%
Services to
Other Businesses 17 6.2%
Other Manufacturing
Activities 48 17.6%

TOTAL 273 100.0%


4. From this breakdown, it is clear that the majority of
maquila sector activity in Honduras is related to textile
and apparel production: nearly 60 percent of businesses are
directly involved, and presumably a similar share of
suppliers and service companies are as well. However, there
is still no way to translate this headcount of companies
into an accurate accounting of the textile and apparel
industry per se when it comes to production, value added, or
employment. As a result, it is not possible to provide
precise responses to many of the specific questions posed in
paragraphs 5 and 6 of reftel. Where the specific
information requested is not available, we have provided
below the closest information possible, with an explanation
of exactly what is being measured.

--------------
Responses to Questions
--------------


5. Total industrial production in USD value:

-- 1.27 billion in 2003, according to the Central Bank.


6. Total textiles and apparel production in USD value:

-- Not available, as such. According to the Central Bank,
the value added by the maquila sector in 2003 was USD 705
million, or 56 percent of the country's total industrial
production. However, the Central Bank considers the maquila
sector as a service industry (in which value is added to
imported materials for re-export) and not as a group of
manufacturing industries. It therefore provides annual
figures for "value added by the maquila sector", but does
not disaggregate textile and apparel production from other
maquila activities.

-- The AHM also provides an annual figure for value added by
the maquila sector, which uses a different methodology than
the Central Bank, and as a result is almost always higher
than the Central Bank's figure. Post regards the Central
Bank figure to be the more reliable of the two, as it
follows standard international practices for collecting
national accounts. However, the AHM's figures are more
frequently quoted in the Honduran press, and even, at times,
used in official GOH publications. For sake of comparison,
below are the two series of estimates for the last ten
years.

Value Added by Maquila Sector, USD million
--------------

According to According to AHM (Honduran
Year Central Bank Manufacturers' Association)

1994 125 186
1995 163 242
1996 204 284
1997 313 390
1998 455 455
1999 539 552
2000 575 662
2001 561 716
2002 613 819
2003 705 881


7. Textiles and apparel's share of the host country's
imports and exports:

-- The closest approximation available is the value added of
the entire maquila sector as a share of imports and exports
of goods and services. In the statistics below, maquila
value added is itself included as a service export, and
maquila-related imports are excluded from import figures.

in USD million 2001 2002 2003
-------------- -------------- -------------- --------------
Maquila Value Added 561 613 705
Imports 3,742 3,758 4,061
Exports 2,511 2,571 2,711
Maquila/(Im + Ex) 9.0% 9.7% 10.4%

Source: Central Bank.


8. Total manufacturing employment; Total textiles and total
apparel employment:

-- Total manufacturing employment was 337,317 in September
2002, and 381,160 in September 2003 was 385,506, according
to the National Statistical Institute, which is the GOH
agency with primary responsibility for collecting employment
data. Data is collected by means of a household survey
conducted in May and September of each year. However,
employment data is broken down into only ten broad
categories, with the textile and apparel sector included in
the "manufacturing employment" number given above. Starting
next year, INE plans to disaggregate its data further to
include a figure for textile and apparel sector.

-- The Central Bank and the Honduran Manufacturers'
Association each provide annual data for employment in the
"maquila sector," defined as those companies which are
incorporated under either the Industrial Processing Zones
legislation or Free Zones legislation. For the reasons
explained above, "maquila sector" employment statistics
would overstate employment specific to the textile and
apparel sector. Again, figures from the Central Bank and
the AHM differ slightly, as follows.

Employment in "Maquila Sector"
--------------
According to According to AHM (Honduran
Year Central Bank Manufacturers' Association)

2001 94,416 110,000
2002 105,556 107,000
2003 114,237 123,000


9. A brief description of the relative importance of
textiles and apparel in overall production and employment:

-- In 2003, value added by the maquila sector accounted for
26% of Honduras' exports of goods and services (USD 705
million out of total exports worth USD 2,711 million). Long
dependent on traditional exports, such as coffee and
bananas, the Honduran economy now earns more than twice as
much from the maquila sector as it does from coffee and
bananas combined. As explained above, most maquila activity
is in the textile and apparel sector, though there have been
some maquilas established recently which are engaged in
other activities: for example, assembly of wire harnesses
for automobiles, other automotive parts, or electrical
components. While the hope is that the sector will continue
to diversify into other forms of light manufacturing,
textile and apparel production still dominate. Within the
textile and apparel sector, the move is increasingly toward
a full-package model in which businesses import thread from
the United States and then export a finished product ready
for market, taking care of the knitting, dyeing, cutting,
assembly, and printing processes in country.


10. How frequently does the industry or government collect
and report textile and apparel employment data, i.e.,
monthly, quarterly, annually?

-- The National Statistical Institute (INE) collects and
publishes national employment data twice a year. The AHM
collects data for the maquila sector only and publishes it
annually. Neither group collects information on employment
in the textile and apparel sector specifically.

11. If monthly employment is unavailable, what is Post's
assessment of the institutional capacity of the host country
to collect such data:

-- INE could not move to monthly collection of employment
data without a complete restructuring of their current
system for administering national household surveys. The
AHM, which gathers its data by means of an annual survey,
could move to monthly data collection, but at the moment has
no plans to do so.


12. Comment: Despite the strength and continued growth of
the Honduran textile and apparel sector in recent years,
producers here, whether Honduran or American, view the
expiration of worldwide quotas as a serious threat to the
viability of the industry. One American maquila-owner
recently reported to EconOff that he has already lost
several of his regular customers to China, is having
difficulty getting new orders, and does not know if he will
be able to hold on until early 2005 when, it is hoped, the
more flexible sourcing rules of CAFTA-DR come to the rescue.
Meanwhile, with a nervous eye on Asian competition,
especially the lower labor costs and higher volumes that
China will soon bring to the world market, textile and
apparel producers in Honduras see speed-to-market and
responsiveness, especially for more complicated orders
requiring printing or other specialized work, as key to
sustained future competitiveness. End comment.

Pierce