Identifier
Created
Classification
Origin
05ABUDHABI3925
2005-09-14 13:52:00
UNCLASSIFIED
Embassy Abu Dhabi
Cable title:  

TROUBLED UAE TEXTILES AND APPAREL SECTOR PINNING

Tags:  KTEX ECON ETRD TC 
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Diana T Fritz 08/28/2006 03:57:47 PM From DB/Inbox: Search Results

Cable 
Text: 
 
 
UNCLAS ABU DHABI 03925

SIPDIS
CXABU:
 ACTION: ECON
 INFO: FCS DCM POL P/M AMB

DISSEMINATION: ECON
CHARGE: PROG

APPROVED: DCM: MQUINN
DRAFTED: ECON: HALGHAZOU
CLEARED: ECON: ACURTIS, ECON: EWILLIAMS, FCS: CREED

VZCZCADI686
RR RUEHC RUEHDE RUCPDOC
DE RUEHAD #3925/01 2571352
ZNR UUUUU ZZH
R 141352Z SEP 05
FM AMEMBASSY ABU DHABI
TO RUEHC/SECSTATE WASHDC 1579
INFO RUEHDE/AMCONSUL DUBAI 5402
RUCPDOC/DEPT OF COMMERCE WASHDC
UNCLAS SECTION 01 OF 03 ABU DHABI 003925 

SIPDIS

STATE FOR EB/TPP/ABT EDWARD HEARNEY, COMMERCE FOR ITA/OTEXA
MARIA D'ANDREA, USTR FOR ABIOLA HEYLIGER

E.O. 12958: DECL N/A
TAGS: KTEX ECON ETRD TC
SUBJECT: TROUBLED UAE TEXTILES AND APPAREL SECTOR PINNING
HOPES ON US-UAE FTA

REF:A. State 146213

B. 04 Abu Dhabi 3427

UNCLAS SECTION 01 OF 03 ABU DHABI 003925

SIPDIS

STATE FOR EB/TPP/ABT EDWARD HEARNEY, COMMERCE FOR ITA/OTEXA
MARIA D'ANDREA, USTR FOR ABIOLA HEYLIGER

E.O. 12958: DECL N/A
TAGS: KTEX ECON ETRD TC
SUBJECT: TROUBLED UAE TEXTILES AND APPAREL SECTOR PINNING
HOPES ON US-UAE FTA

REF:A. State 146213

B. 04 Abu Dhabi 3427


1. SUMMARY: The UAE textile industry is slowing down due to
increased international competition sparked by the
elimination of the worldwide textile quotas. The Ministry of
Economy and Planning and senior officials from five textile
factories in the Jebel Ali Free Zone (AlPine Creation, Fine
Textiles Company, Emirates Textiles LTD., ATRACO Industrial
and Carolina Fabrics LTD.) are anxious about current and
future prospects of the UAE textile industry. There are no
direct measures by the UAEG to increase competition,
although Dubai and Sharjah emirates encourage this sector
through exhibitions and some new projects. The UAEG has not
implemented safeguards to reduce imports of Chinese
textiles, and US safeguards to restrict the growth of
Chinese import growth have no notable effect on the UAE
textile and apparel export prospects. The industry is
counting on benefits from an anticipated FTA between the US
and the UAE to maintain the industry as an important part of
the UAE's manufacturing sector. End Summary.

--------------
Updated Textile and Apparel Statistics
--------------


2. Official data for 2004 is not available regarding the
total textile and apparel production. However, based on
analysis of Central Bank information, the textile and
apparel sector comprised an estimated 10.16 percent of the
UAE non-oil economy. In 2004,the total manufacturing
industrial production in the UAE was 13.5 billion USD, which
comprised 57.90 percent of the total industrial sector,
according to the Ministry of Economy and Planning's
statistics. In 2004, textiles and apparel comprised 7.10
percent of the UAE's imports, 4.82 percent of its non-oil
exports, and 9.59 percent of the country's re-exports, based
on estimated data by the UAE Central Bank.


3. Analysis based on time series data for 2001 onward shows
a negative slope in the trend of the percentage of textile
and apparel's trade compared to total non-oil trade. The UAE
yearbook reports that the UAE textile industry is valued at
2.4 billion USD annually. Textiles are the second largest

component of Dubai's economy, including imports and exports.


4. According to statistics from Ministry of Finance and
Industry and Ministry of Economy and Planning, in 2004,
there were 231,275 individuals employed in the manufacturing
sector, which comprised 9.40 percent of the total UAE work
force. Of the manufacturing employees, 1.85 percent were
employed in textiles (4,286 individuals),and 11.80 percent
were employed in the apparel industry (27,297 individuals).

--------------
Anxiety Regarding International Competition
--------------


5. Textile and apparel manufacturers are very anxious about
international competition as a result of the January 2005
elimination of the worldwide textile quota. The main
competitor countries for the UAE textile and apparel sector
are China, India, Egypt, Bangladesh, Jordan and Kenya. As a
result of international competition from these countries,
local textile and apparel manufacturers have lowered the
price of their products. One official from the Ministry of
Economy stated that the demand by local textile and apparel
manufacturers on certificates of origin has decreased, which
indicates that fewer UAE companies are exporting products.


6. Due to international competition, many factories have
closed their businesses. Between 2003 and 2005, 57 textile
factories closed or relocated from the UAE to countries with
lower costs and which receive preferential treatment from
the US (such as Jordan and Bahrain, in order to take
advantage of their FTAs with the United States) according to
officials from the UAE-based Fine Textile Company.


7. During March 2005 meetings between US FTA textile
negotiators and officials from three textile factories in
the UAE's Jebel Ali Free Zone, company executives noted that
they are pessimistic about the future of the textile
industry in the UAE. They see the UAE textile industry as
unable to compete with China, India and Bangladesh because
of higher costs in the UAE, particularly with regard to
labor and electricity. Officials from Emirates Textiles
Limited said that because of competition in the local market
and low demand for export, the factory produces less than
its full production capacity and sells its products in the
UAE market below cost. Company officials pointed out that
many textile factories in Jebel Ali have closed. Twelve
textile factories recently relocated their business from
Jebel Ali to other countries. The number of textile
factories in Jebel Ali has decreased from 150 to 95 during
the last four years. One company source said that unless the
UAE government takes measures to protect the local textile
industry, their business will close down in the UAE.


--------------
Measures to Face International Competition
--------------


8. There are no direct measures by the UAE government or
private industry to increase textile industry
competitiveness in international markets. The Dubai and
Sharjah governments, however, are assisting this sector by
sponsoring exhibitions, which attract many international
textile and apparel manufacturers. The International Middle
East Exhibition for Textile, Embroidery and Sewing Machinery
and Accessories (ITCE Dubai 2004) was held in September
2004, and coincided with its partner show, Middle East
Fashion Textile, Leather and Accessories Exhibition (MOTEXHA
2004),the Middle East region's largest Fashion and Textile
trade fair. MOTEXHA was held September 12-15, 2004, and
featured more than 500 exhibitors from 36 countries.
Another four-day textile exhibition, "Texpo", was held at
the Expo Center in Sharjah this week. Additionally, in
2004, Dubai Government launched a USD 60 million "Textile
City" to promote this sector. Textile City will be completed
before the end of 2005, and the first phase of the project
had already been rented out to more than 90 investors.
Officials hope that Textile City will make Dubai a textile
industry hub between Asia, Europe and the US.

--------------
Safeguards to restrict imports from China
--------------


9. Ministry of Economy contacts stated that the UAE
Government has not implemented safeguards or measures to
reduce the growth of imports of Chinese textile products
into the UAE. One official said that this issue might be
discussed through the upcoming FTA negotiations between GCC
states and China.


10. Ministry of Economy and private sector reps say that so
far the US safeguards to restrict the growth of Chinese
imports and the European Agreement with China to limit
import growth of certain textile and apparel products have
had no notable effect on the UAE textile and apparel export
prospects, but they agreed that such measures will enhance
future export prospects. Business leaders from across the
garment manufacturing industry in the UAE assembled for the
Texpo exhibition in Sharjah this week to explore and
interact on trade opportunities arising out of the US and
European Union decision to impose restriction on certain
categories of textile and clothing from China, according to
the Emirates News Agency (WAM).


--------------
Impact on Labor
--------------


11. The majority of laborers in the textile sector are
expatriates, and the closure of textile and apparel
factories and businesses required these workers to leave the
country for a minimum of 6 months before they can be re-
employed by a new company. Consequently, many textile
workers have remained illegally in the country. Ministry of
Economy sources report that some companies have retained
employees on the payroll in hopes of re-opening businesses,
but have stopped paying employee salaries.

--------------
Expected Benefits from a US/UAE FTA
--------------


12. Textile and apparel producers believe that an FTA
between the US and UAE will enhance textile exports to US
markets by providing preferential advantages and lowering
tariffs on UAE textile exports to the US. In addition, an
FTA would allow cheaper import of some materials from the
US, such as rolls of yarn. Manufacturers believe that the
anticipated FTA would enhance the UAE textile and apparel
sector by lowering tariffs on UAE textile and apparel
exports to the US. Textile and apparel industry sources
have stated their concern that many factories in the UAE
will close down if US/UAE negotiations are not successful.


13. Textile and apparel industry contacts noted that some
closed factories are renewing their commercial licenses,
awaiting the outcome of the FTA negotiations. Ministry of
Economy officials claim that UAE textile and apparel
producers will develop their infrastructure once the US and
the UAE sign an FTA.


14. Comment: The textile sector in UAE is slowing down due
to international competition, but is pinning its hopes of
revival on the conclusion of a US-UAE FTA.

SISON