OMAN'S TEXTILE INDUSTRY CONTINUES TO SHRINK

UNCLAS MUSCAT 001484

SIPDIS

SENSITIVE
SIPDIS

STATE FOR NEA/ARP, EB/TPP/ABT TLERSTEN
STATE PASS USTR JBUNTIN AND AHEYLIGER
COMMERCE FOR ITA/OTEXA MDANDREA

E.O. 12958: N/A
TAGS: ECON ETRD KTEX MU
SUBJECT: OMAN'S TEXTILE INDUSTRY CONTINUES TO SHRINK

REF: A. STATE 138090

B. 05 MUSCAT 1463

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SUMMARY
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1. (U) Oman's textile industry continues to whither away in
terms of value and employment, as government statistics
confirm a steep drop in production over the past year. While
the upcoming implementation of the U.S.-Oman Free Trade
Agreement (FTA) may stop further declines in this sector, it
is unlikely that Oman's textile industry will return to
levels prior to the abolition of the quota system. End
Summary.

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GRIM FIGURES
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2. (U) Responding to reftel request, the Ministry of Commerce
and Industry has provided the following statistical
information regarding Oman's textile and apparel industry for
2005:

Gross industrial production (including oil products): $6.5
billion
Export of textiles and apparels: $59.8 million
Ratio of textiles and apparels to total exports (excluding
oil exports): 1.1%
Ratio of textiles and apparels to total imports: .68%
Manufacturing employment: 36,743
Employment in the textile and apparel industry: 1,809


3. (U) These statistics confirm a sharp decline in Oman's
textile industry over the past year. In 2005, textile and
apparel exports shrank approximately 44% from the $137.1
million figure reported in 2004. Employment in the textile
and apparel industry likewise continued its steady decline.
In 2001, we reported that 4,625 were employed by the textile
industry, comprising 13.5% of the manufacturing workforce.
For 2005, that number declined to 1,809, which now
constitutes only 5% of the manufacturing workforce.

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HOPE FOR A RENAISSANCE?
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4. (SBU) In an October 16 speech to the Omani Journalist
Association, Minister of Commerce and Industry Maqbool bin
Ali Sultan noted that the FTA holds out hope in reviving an
industry decimated by the abolition of the quota system,
given that almost all of Oman's garments were exported to the
United States. Omani textile manufacturers are not
optimistic, however, that the upcoming implementation of the
FTA will stop the decline. Tore Petre, Chief Executive
Officer of Oman Textile Holding Company (OTHC),noted that
the industry, which used to have 32 garment factories in Oman
before the quota, now only has four. He remarked that Oman's
textile industry "crash landed after the quota system was
abolished," and the resulting liquidation of these factories
meant that near-term growth of the industry was unlikely,
even with the FTA. He questioned the need for the
restrictions on textile imports under the FTA, remarking that
his company was the only one in Oman that actually produced
fabric. With its capacity of only 5 million square meters
per year, Petre predicted that his company's impact on the
U.S. market would be negligible. OTHC does not currently
export to the United States, given the fierce competition and
high tariff rates, but Petre mentioned that he would consider
niche fabric exports to the U.S. once the FTA takes effect.
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