Identifier
Created
Classification
Origin
06ABUDHABI3820
2006-10-01 05:43:00
UNCLASSIFIED
Embassy Abu Dhabi
Cable title:
UAE TEXTILES AND APPAREL SECTOR: SLOWDOWN DUE TO INCREASED
how-tonull Diana T Fritz 10/01/2006 11:20:01 AM From DB/Inbox: Diana T Fritz Cable Text: UNCLAS ABU DHABI 03820 SIPDIS CXABU: ACTION: ECON INFO: FCS P/M AMB DCM POL DISSEMINATION: ECON CHARGE: PROG APPROVED: DCM: MQUINN DRAFTED: ECON: HALGHAZOU CLEARED: ECON: OJOHN, ECON: BD, FCS: CR, CGD:PS VZCZCADI374 RR RUEHC RUEHDE RUCPDOC DE RUEHAD #3820/01 2740543 ZNR UUUUU ZZH R 010543Z OCT 06 FM AMEMBASSY ABU DHABI TO RUEHC/SECSTATE WASHDC 7147 INFO RUEHDE/AMCONSUL DUBAI 6479 RUCPDOC/DEPT OF COMMERCE WASHDC
UNCLAS SECTION 01 OF 02 ABU DHABI 003820
SIPDIS
STATE FOR EB/TPP/ABT, THOMAS LERSTEN
STATE PLEASE PASS TO USTR FOR AHEYLIGER
COMMERCE FOR ITA/OTEXA MARIA D'ANDREA
E.O. 12958: DECL N/A
TAGS: KTEX ECON ETRD AE
SUBJECT: UAE TEXTILES AND APPAREL SECTOR: SLOWDOWN DUE TO INCREASED
INTERNATIONAL COMPETITION
REF: A) State 138090
B) Abu Dhabi 2563
UNCLAS SECTION 01 OF 02 ABU DHABI 003820
SIPDIS
STATE FOR EB/TPP/ABT, THOMAS LERSTEN
STATE PLEASE PASS TO USTR FOR AHEYLIGER
COMMERCE FOR ITA/OTEXA MARIA D'ANDREA
E.O. 12958: DECL N/A
TAGS: KTEX ECON ETRD AE
SUBJECT: UAE TEXTILES AND APPAREL SECTOR: SLOWDOWN DUE TO INCREASED
INTERNATIONAL COMPETITION
REF: A) State 138090
B) Abu Dhabi 2563
1. (SBU) Summary: The UAE textile industry continues to decline due
to increased international competition brought on by the elimination
of the worldwide textile quotas. Two textile factories in the Jebel
Ali Free Zone (Emirates Textiles LTD. and Carolina Fabrics LTD.) and
one garment factory in Abu Dhabi (Abu Dhabi Garment Factory) are
anxious about current and future prospects of the UAE textile
industry. There are no direct measures by the UAEG to increase
competition, although the Emirates of Dubai and Sharjah encourage
textile sector growth through exhibitions and new projects. The UAEG
has not implemented safeguards to reduce imports of Chinese
textiles, and the U.S. 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 U.S. 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. (U) Official data for 2005 regarding the UAE's total textile and
apparel production is not available. However, based on analysis of
Central Bank information, the textile and apparel sector comprised
an estimated 5.73 billion USD, which makes up 6 percent of the UAE
non-oil economy. In 2005, the total industrial production in the
UAE was 75.6 billion USD. The total manufacturing industrial
production was 16.6 billion USD, which comprised 21.96 percent of
the total industrial sector, according to the Ministry of Economy's
statistics. In 2005, textiles and apparel comprised 5.6 percent of
the UAE's imports, 5 percent of its non-oil exports, and 7.3 percent
of the country's re-exports, based on estimated data by the UAE
Central Bank. In 2005, the UAE exports in textile and apparel to the
U.S. comprised 67.86 million USD, according to the Dubai Chamber of
Commerce's economic bulletin published in May 2006.
3. (U) Analysis based on time series data for 2001 onward shows
textile and apparel trade's share of total trade declining over the
last five years.
4. (U) According to statistics from Ministry of Finance and
Industry, in 2005 there were 245,707 individuals employed in the
manufacturing sector, which comprised 9.45 percent of total
employees. Thirteen percent of these were employed in textiles and
apparel (32,069 individuals).
--------------
Anxiety Regarding International Competition
--------------
5. (U) Textile and apparel manufacturers have expressed their
concern about international competition as a result of the
elimination in January 2005 of the worldwide textile quota. The main
competitor countries for the UAE textile and apparel sector are
China, India, Egypt, Bangladesh, Jordan and Kenya. Two textile
factories reported that they had lowered the price of their products
to maintain the previous year's orders.
6. (U) Due to international competition, many factories in the UAE
have closed. According to a report by Emirates Industrial Bank,
there were 200 garment establishments in the UAE at the industry's
peak in 1997, 151 factories in 2004 and around 100 establishments in
2006. The report said several companies have relocated their
factories to other countries with lower costs, while maintaining
offices in the UAE. The report also noted that many factories were
relocated to countries receiving preferential treatment from the US.
The Emirates Industrial Bank's report cites "the choice of
relocation destinations are Jordan and sub-Saharan Africa, areas
which are receiving preferential treatment from the US in form of
duty-free access to the US market." Business people from the
textile industry mentioned Jordan and Bahrain as locations, due to
their FTA's with the U.S.
7. (SBU) Officials from textile factories noted that they are
pessimistic about the future of the textile industry in the UAE.
They said the UAE textile industry is unable to compete with China,
India and Bangladesh because of a higher cost of inputs in the UAE
in comparison with these countries, particularly the cost of labor,
electricity, water and oil.
--------------
Measures to Face International Competition
--------------
8. (U) There are no direct measures by the UAE government or private
industry to increase competitiveness in international markets.
However, Ministry of Economy officials stated that the Ministry has
encouraged the UAE textile and apparel factories to export more to
the member countries of the Arab Free Trade Zone and Gulf
Cooperation Council (GCC) in order to take advantages of
preferential access to these markets.
9. (U) The Dubai and Sharjah governments are assisting this sector
by sponsoring exhibitions, which attract many international textile
and apparel manufacturers. The Middle East Fashion Textile, Leather
and Accessories Exhibition (MOTEXHA 2006),the Middle East region's
largest trade show for garments, textiles, leather and fashion
accessories was inaugurated in April 2006. Over 250 exhibitors from
30 countries attended the event. Another four-day textile exhibition
"Texpo", will be held at the Expo Center in Sharjah this month. The
exhibition will feature new equipment to improve the textile and
apparel industry in the UAE. The exhibition will attract over 80
exhibitors from many countries. Additionally, Dubai Textile City
was launched in 2004. The first phase of the project had already
been rented out to more than 90 investors.
--------------
Safeguards to restrict imports from China
--------------
10. (SBU) Ministry of Economy officials stated that the UAE
Government has not implemented safeguards or measures to reduce the
growth of imports of Chinese textile products into the UAE, although
one official from Emirates Textile Limited Factory said the UAE
government is proposing to impose taxes on textiles and apparel from
China.
11. (U) Officials from the private sector said that the U.S.
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.
--------------
Impact on Labor
--------------
12. (U) The majority of laborers in the textile sector are
expatriates from India, Pakistan and Bangladesh, and the closure of
textile and apparel factories and businesses requires these workers
to leave the country for a minimum of six months before they can be
re-employed by a new company. Officials from textile factories
stated that there was no reduction in salaries or benefits of their
workers. Officials from Abu Dhabi Garment factory noted that their
U.S. clients conduct regular visits to the factory to ensure that
workers are provided a safe working environment.
--------------
Expected Benefits from a U.S./UAE FTA
--------------
13. (U) Textile and apparel producers believe that an FTA between
the US and UAE will enhance textile exports to U.S. markets by
providing a preferential advantage and lowering tariffs on UAE
textile exports to the U.S. In addition, it will allow cheaper
import of some inputs 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 the UAE textile
and apparel export to the US.
14. (U) Officials from the Abu Dhabi Garment Factory stated that
they are worried that the anticipated US/UAE FTA would restrict
their imports of raw materials of textile and apparel.
--------------
Comment
--------------
15. (U) The Textile industry in UAE is still declining due to
international competition and is pinning its hopes of revival on the
conclusion of a US-UAE FTA.
SISON
SIPDIS
STATE FOR EB/TPP/ABT, THOMAS LERSTEN
STATE PLEASE PASS TO USTR FOR AHEYLIGER
COMMERCE FOR ITA/OTEXA MARIA D'ANDREA
E.O. 12958: DECL N/A
TAGS: KTEX ECON ETRD AE
SUBJECT: UAE TEXTILES AND APPAREL SECTOR: SLOWDOWN DUE TO INCREASED
INTERNATIONAL COMPETITION
REF: A) State 138090
B) Abu Dhabi 2563
1. (SBU) Summary: The UAE textile industry continues to decline due
to increased international competition brought on by the elimination
of the worldwide textile quotas. Two textile factories in the Jebel
Ali Free Zone (Emirates Textiles LTD. and Carolina Fabrics LTD.) and
one garment factory in Abu Dhabi (Abu Dhabi Garment Factory) are
anxious about current and future prospects of the UAE textile
industry. There are no direct measures by the UAEG to increase
competition, although the Emirates of Dubai and Sharjah encourage
textile sector growth through exhibitions and new projects. The UAEG
has not implemented safeguards to reduce imports of Chinese
textiles, and the U.S. 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 U.S. 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. (U) Official data for 2005 regarding the UAE's total textile and
apparel production is not available. However, based on analysis of
Central Bank information, the textile and apparel sector comprised
an estimated 5.73 billion USD, which makes up 6 percent of the UAE
non-oil economy. In 2005, the total industrial production in the
UAE was 75.6 billion USD. The total manufacturing industrial
production was 16.6 billion USD, which comprised 21.96 percent of
the total industrial sector, according to the Ministry of Economy's
statistics. In 2005, textiles and apparel comprised 5.6 percent of
the UAE's imports, 5 percent of its non-oil exports, and 7.3 percent
of the country's re-exports, based on estimated data by the UAE
Central Bank. In 2005, the UAE exports in textile and apparel to the
U.S. comprised 67.86 million USD, according to the Dubai Chamber of
Commerce's economic bulletin published in May 2006.
3. (U) Analysis based on time series data for 2001 onward shows
textile and apparel trade's share of total trade declining over the
last five years.
4. (U) According to statistics from Ministry of Finance and
Industry, in 2005 there were 245,707 individuals employed in the
manufacturing sector, which comprised 9.45 percent of total
employees. Thirteen percent of these were employed in textiles and
apparel (32,069 individuals).
--------------
Anxiety Regarding International Competition
--------------
5. (U) Textile and apparel manufacturers have expressed their
concern about international competition as a result of the
elimination in January 2005 of the worldwide textile quota. The main
competitor countries for the UAE textile and apparel sector are
China, India, Egypt, Bangladesh, Jordan and Kenya. Two textile
factories reported that they had lowered the price of their products
to maintain the previous year's orders.
6. (U) Due to international competition, many factories in the UAE
have closed. According to a report by Emirates Industrial Bank,
there were 200 garment establishments in the UAE at the industry's
peak in 1997, 151 factories in 2004 and around 100 establishments in
2006. The report said several companies have relocated their
factories to other countries with lower costs, while maintaining
offices in the UAE. The report also noted that many factories were
relocated to countries receiving preferential treatment from the US.
The Emirates Industrial Bank's report cites "the choice of
relocation destinations are Jordan and sub-Saharan Africa, areas
which are receiving preferential treatment from the US in form of
duty-free access to the US market." Business people from the
textile industry mentioned Jordan and Bahrain as locations, due to
their FTA's with the U.S.
7. (SBU) Officials from textile factories noted that they are
pessimistic about the future of the textile industry in the UAE.
They said the UAE textile industry is unable to compete with China,
India and Bangladesh because of a higher cost of inputs in the UAE
in comparison with these countries, particularly the cost of labor,
electricity, water and oil.
--------------
Measures to Face International Competition
--------------
8. (U) There are no direct measures by the UAE government or private
industry to increase competitiveness in international markets.
However, Ministry of Economy officials stated that the Ministry has
encouraged the UAE textile and apparel factories to export more to
the member countries of the Arab Free Trade Zone and Gulf
Cooperation Council (GCC) in order to take advantages of
preferential access to these markets.
9. (U) The Dubai and Sharjah governments are assisting this sector
by sponsoring exhibitions, which attract many international textile
and apparel manufacturers. The Middle East Fashion Textile, Leather
and Accessories Exhibition (MOTEXHA 2006),the Middle East region's
largest trade show for garments, textiles, leather and fashion
accessories was inaugurated in April 2006. Over 250 exhibitors from
30 countries attended the event. Another four-day textile exhibition
"Texpo", will be held at the Expo Center in Sharjah this month. The
exhibition will feature new equipment to improve the textile and
apparel industry in the UAE. The exhibition will attract over 80
exhibitors from many countries. Additionally, Dubai Textile City
was launched in 2004. The first phase of the project had already
been rented out to more than 90 investors.
--------------
Safeguards to restrict imports from China
--------------
10. (SBU) Ministry of Economy officials stated that the UAE
Government has not implemented safeguards or measures to reduce the
growth of imports of Chinese textile products into the UAE, although
one official from Emirates Textile Limited Factory said the UAE
government is proposing to impose taxes on textiles and apparel from
China.
11. (U) Officials from the private sector said that the U.S.
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.
--------------
Impact on Labor
--------------
12. (U) The majority of laborers in the textile sector are
expatriates from India, Pakistan and Bangladesh, and the closure of
textile and apparel factories and businesses requires these workers
to leave the country for a minimum of six months before they can be
re-employed by a new company. Officials from textile factories
stated that there was no reduction in salaries or benefits of their
workers. Officials from Abu Dhabi Garment factory noted that their
U.S. clients conduct regular visits to the factory to ensure that
workers are provided a safe working environment.
--------------
Expected Benefits from a U.S./UAE FTA
--------------
13. (U) Textile and apparel producers believe that an FTA between
the US and UAE will enhance textile exports to U.S. markets by
providing a preferential advantage and lowering tariffs on UAE
textile exports to the U.S. In addition, it will allow cheaper
import of some inputs 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 the UAE textile
and apparel export to the US.
14. (U) Officials from the Abu Dhabi Garment Factory stated that
they are worried that the anticipated US/UAE FTA would restrict
their imports of raw materials of textile and apparel.
--------------
Comment
--------------
15. (U) The Textile industry in UAE is still declining due to
international competition and is pinning its hopes of revival on the
conclusion of a US-UAE FTA.
SISON