TEXTILES AND APPAREL SECTOR: UPDATED STATISTICS

C O N F I D E N T I A L SECTION 01 OF 02 MANAMA 001412

SIPDIS

STATE FOR EB/TPP/ABT EHARTNEY
STATE PASS TO USTR AHEYLINGER
COMMERCE FOR ITA/OTEXA MD'ANDREA

E.O. 12958: DECL: 09/24/2015
TAGS: KTEX ECON ETRD BA
SUBJECT: TEXTILES AND APPAREL SECTOR: UPDATED STATISTICS
AND PROJECTION OF FUTURE COMPETITIVENESS

REF: STATE 146213

Classified By: Deputy Chief of Mission Susan L. Ziadeh, reasons 1.4 (b)
and (d).


1. (U) Bahrain's textile and apparel industry is relatively
small and represents a minimal contribution to GDP. Its
contribution is further reduced by a robust increase in oil
revenues, which increased by 20 percent in 2004. The lifting
of global textile quotas on January 1, 2005 has led to
several textile factory closures and an overall reduction in
textile and apparel production. The largest and most
technologically advanced local textile firm is Manama
Textiles. With GOB encouragement, it has absorbed some of
its failing competitors and has managed to survive thus far.
Manama Textiles exports 70 percent of its production to the
U.S.

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DATA
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2. (U) Data available on textile and apparel production in
Bahrain for 2004, requested reftel, are as follows:

- Total Industrial Production: USD 3,942.5 million (Source:
Bahrain Monetary Agency). This includes manufacturing,
fishing, agriculture, mining, electricity and water
production.

- Total Textiles and Apparel Production: No official
statistics are available. However, a local industry expert
estimates textile production at USD 80 million and apparel
production at USD 246.94 million.

- Textiles and Apparel's Share of Bahrain's Imports: 3.4%

- Textiles and Apparel's Share of Bahrain's Exports: 3.3%

- Total Manufacturing Employment: No official statistics are
available, but Embassy estimates derived from Bahrain
Monetary Agency statistics, in addition to data provided by
the Ministry of Finance, place manufacturing employment at
23,100

- Total Textiles Employment: No official statistics are
available. However, a local industry expert places
employment in 2004 at between 1,200 to 1,700 Bahraini
nationals. (Similar estimates were used in the FTA.)

- Total Apparel Employment: No official statistics are
available. However, industry experts estimate total apparel
employment in 2004 at 8,000 to 11,000 of which approximately
2,500 were Bahraini nationals. (Note: The total number of
apparel factories dropped from 22 at the close of 2003, to
just 15 at the close of 2004.

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ADDITIONAL INFORMATION
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3. (U) Manama Textiles CEO Hamid Nishat told Econoff
September 14 that the relatively small size of the local
textile industry, coupled with its limited growth potential
(due to a limited supply of skilled textile labor and no
domestically available inputs) renders it vulnerable to
international competition. He confirms that competition has
depressed prices and that the overall amount of orders has
decreased. (Note: The downturn in profitability for the
sector has disproportionately affected Bahraini-owned
companies, which tend to have fewer distribution channels
than their foreign-owned counterparts. The majority of
textile companies currently operating in Bahrain represent
Asian investment. End Note.) Economic Development Board
(EDB) Vice President of Manufacturing Project Development and
Lead Textiles Negotiator for the U.S.-Bahrain Free Trade
Agreement (FTA) Dr. Haitham Essa Al Qahtani told Emboffs
September 14 that several foreign investors, including Asian
investors, have closed factories in Bahrain following the
elimination of global textile quotas this year. Companies
lacking international distribution networks have been
particularly hard hit. Other small factories are reported to
be running acutely below capacity.


4. (U) Local industry experts report that neither the seven
U.S.-approved safeguards restricting the growth of Chinese
imports nor the European Union agreement with China to limit
growth of certain textiles and apparel products have had any
visible effect on the local textile sector's export
prospects. Dr. Al Qahtani states that the Government of
Bahrain has not implemented, nor is it considering
implementing, any measures to reduce the growth of imports of
Chinese textiles.

5. (U) Many workers have lost their jobs due to recent
factory closures. The GOB has provided retraining to
displaced Bahraini and expat workers in many cases. Post is
not aware of any instances in which global textile industry
competition has had a negative impact on union organizing.
Interestingly, Mr. Nishat notes that increasing competition
for expat labor is creating pressure on employers to increase
wages. Bahrain has no minimum wage.


6. (U) The GOB has taken measures to improve the overall
investment climate by reducing bureaucracy and improving
transparency. The Ministry of Industry and Commerce
established the Bahrain Investor's Center in a bid to
streamline and simplify the process of opening new
businesses. The EDB seeks to attract new investors to reopen
closed factories and will promote a restructuring of the
local textile industry.


7. (U) Manama Textiles has set up a processing house to
introduce value-added, finished fabrics. Mr. Nishat says his
company is also considering additional investments on the
order of USD 50 million over the next two years to enhance
its vertical market position in anticipation of increased
trade following the implementation of the FTA. The FTA will
allow duty-free import of Bahraini textile and apparel
products. (Note: The FTA has been fully ratified by the GOB.
The U.S. House Ways and Means Committee has formally set
hearings on the FTA for September 29. Senate hearings are
expected to take place shortly thereafter with a view toward
full ratification before year-end. End note.)

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COMMENT
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8. (C) Mr. Nishat expresses optimism that FTA implementation
will spur a recovery in Bahrain's flagging textile sector.
Government officials report being committed to facilitating
recovery of the sector. However, they privately acknowledge
that it may already be too late for Bahrain's small textile
sector to recover against steadily increasing competitive
pressure. Though officials express concern at finding jobs
for laid-off textile workers, alternate employment in the
sector is seen as a decreasingly viable option. It is likely
that the sector will continue to decline, though some
individual firms, such as Manama Textiles, may manage to
prosper. End Comment.




MONROE