SUPPORT FOR CONTINUANCE OF AGOA THIRD COUNTRY

UNCLAS SECTION 01 OF 02 DAKAR 001970

SIPDIS

C O R R E C T E D C O P Y (CORR PLA ADDEE)

SIPDIS

STATE FOR AF/EPS - HASTINGS, AF/W AND EB/TPP/MTA
STATE PLS PASS TO USTR - JEFFREY FERRAH
AID/W FOR AFR/WA AND AFR/SD
USDOC FOR 4510/OA/PMICHELINI/AROBINSON-MORGAN/KBOYD
USDOC FOR 3131/CS/ANESA/OIO/DHARRIS/GLITMAN/MSTAUNTON

E.O. 12958: N/A
TAGS: ETRD AGOA KTEX EINV ECON SG
SUBJECT: SUPPORT FOR CONTINUANCE OF AGOA THIRD COUNTRY
FABRIC PROVISION

REF: STATE 131825

DAKAR 00001970 001.3 OF 002



1. SUMMARY: The Government of Senegal (GOS) has selected
the textile and apparel sector as a strategic growth
sector for its Accelerated Growth Strategy. Although
Senegalese companies continue to have limited, domestic
production of cloth and finished apparel, companies are
making noticeable efforts to modernize in order to export
apparel to the U.S. market under the African Growth and
Opportunity Act (AGOA). Most of these companies import
fabrics from Asia and Europe because they are not produced
in large quantities domestically. Overall, the private
sector supports extension of the third country fabric
provision. END SUMMARY.

APIX EFFORTS TO REVITALIZE THE INDUSTRY
--------------

2. Senegal's Investment Promotion Agency (APIX) reports
that many textile factories in Senegal are dormant. The
agency is currently researching strategies to modernize
some industrial textile facilities, to provide incentives
for foreign direct investment in the sector, and to
organize the artisan level -- apparel/confection sub-
sector. Businesses operating in Senegal report lack of
financing, erratic and costly electricity, unskilled
labor, and low worker productivity as challenges to
expansion. A recent study commissioned by APIX recommends
the establishment of a Textile Promotion Center to
revitalize trade associations, improve technical
information and training, and promote lobbying. This
center does exist but is not operational due to lack of
financing.

BUT PRODUCTION IS STILL LOW
--------------

3. Meanwhile, Senegal's textile companies continue to
have limited domestic production of cloth and finished
apparel. Although some companies still do not operate at
full capacity, some are in the process of expanding their
production lines. Garments manufactured at the industrial
level include work uniforms, scrubs, t-shirts, sportswear
and towels. Senegal also has a thriving fashion sector
with designs being crafted in traditional workshops for
sale in niche Western markets.


4. Almost all fabrics are imported from Asia and higher-
end wax fabric is imported from Europe to be printed and
dyed with traditional, African designs in Senegal for sale
in domestic and regional markets. Sales are estimated at
approximately 30 million meters per year. Textile exports
average less than five billion CFA francs (CFAF) (USD 9
million dollars) per year. Senegal also exports several
hundred tons of thread per year to Europe, and there is
regional demand for additional thread exports. The low
level of exports contrasts with the size of the domestic
market, estimated at 130 billion CFAF (USD 260 million).
A possible explanation for this is the used-clothing
import industry, garment smuggling, and the undervaluation
of apparel imports. In 2005, the GOS reported 6,600 tons
of used clothing valued at three billion CFAF (USD 6
million).


5. Several small to medium-sized firms claim to be
gearing up to take advantage of AGOA trade benefits and
strongly support an extension of AGOA's third country
fabric provision. INDOSEN, a Senegalese company with
Moroccan and Indian investment will receive Ex-ImBank
financing to import digital equipment to improve its
production of work uniforms to meet American demand.
INDOSEN claims to have several orders in the pipeline, but
it has not yet begun production and is currently in the
process of training the local workforce. It expects
production will start in early September 2006. Ets Solu
and EGA Confection have also ordered digital machinery to
increase production of sportswear and scrubs,
respectively, for export to the U.S. Both companies are
working with the West African Trade Hub (WATH) in Accra to
find American buyers.

TEXTILE PRODUCTION FACILITIES
--------------

6. The following is a list of companies involved in the
Senegal's apparel, textile, and yarn industry:


DAKAR 00001970 002.2 OF 002


-- EGA CONFECTION: Manufacturer of uniforms, scrubs, and
men's wear. It has modern, digital equipment with a
production capacity of 600 - 1,200 pieces per day; imports
fabrics from Morocco and Asia; employs 22 full-time and 80
part-time staff.

-- ETS SOLU: Sportswear manufacturer using 75 non-digital
machines and an electric embroidery machine. It claims to
have on order 75 new digital sewing machines but admits to
lack of skilled labor to use and repair them in country;
has production capacity of 30,000 pieces per month;
imports fabrics from Asia; employs 48 full-time and 15
part-time staff.

-- NSTS/FTT "La Nouvelle Societe Textile Senegalaise:"
Partial owner of INDOSEN. It produces large-gauge thread
and unbleached fabric; has 148 Sulzer looms (110 to 130
inch),12,000 spindles, 648 open-end spinning RU 14
rotors.

-- INDOSEN (40 percent owned by NSTS): Indian/Senegalese
joint venture that spins, weaves, knits, dyes, finishes,
prints, and manufactures work wear. It recently secured
approval for Ex-ImBank financing to import 221
specialized, digital sewing machines from the U.S.; other
equipment includes 18,000 spindles,160 rapier looms, 12
circular and 2 flat knitting machines, 190 sewing
machines, 140 specialized sewing machines (non-digital)
and 120 cut sewing machines. It has a production capacity
of 5 million pieces per year; imports poly-cotton blends
from Asia; expects to launch production in September 2006;
and will employ 760 full-time staff.

-- COSETEX: Printing and dying company with two lines of
non-digital machinery producing 1 million meters of "fancy
cloth" per month. It imports cloth from India, Benin,
Nigeria, and Mali for sale domestically and for exports to
West Africa, Europe, and the U.S. (in 2001 and 2002). It
is currently prospecting American market and has 80 staff.

-- SOTIBA: Printing company that employs non-digital,
printing and dying equipment to produce 1 million meters
per month of "fancy cloth." It imports cotton from India
for sale in Senegal and has 250-300 full-time staff.

-- CCV "Cotonnier du Cap Vert:" Merged with the former
SOSEFIL. Activities including ginning, spinning, weaving,
knitting, dying, and manufacturing to produce
approximately 1,200 tons total of thread, dishtowels, and
t-shirts per year; equipment includes 28 non-digital
sewing machines; 5 knitting machines; and 3 cotton
spinning machines. It sources cotton in Senegal, uses its
own cloth for t-shirts and dishtowels, sells in Senegal,
exports to the sub-region, and has 250-300 staff.

-- SODEFITEX "Societe de Developpement des Fibres
Textiles:" ISO 9001 certified ginning/cotton fiber company
with five factories in eastern Senegal, producing a total
of 56,000 tons of cotton fiber per year. It sells in
Senegal and exports to Asia, South America and Europe. It
sources its cotton in Senegal and employs 460 full-time
and 4,000 part-time staff.

JACOBS