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. -------------- The Limits of the Statistics -------------- ¶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