ALGERIA WRITES OFF TEXTILE INDUSTRY

UNCLAS ALGIERS 001475

SIPDIS

SIPDIS

DEPARTMENT FOR EEB/TPP/ABT (G. CLEMENTS)
COMMERCE FOR ITA/OTEXA (M. D'ANDREA)
STATE PLEASE PASS USTR (C. MILLER)

E.O. 12958: N/A
TAGS: ECON ETRD KTEX AG

SUBJECT: ALGERIA WRITES OFF TEXTILE INDUSTRY

REF: A. 06 ALGIERS 01112

B. SECSTATE 114799


1. SUMMARY: An estimated 95 percent of apparel in Algeria is
imported and the remaining few home-grown firms in this sector are
nearing extinction in the face of cheaper imports, both legitimate
and counterfeit. As Algerians' cost of living rises faster than
wages, consumers have flocked to inexpensive imported apparel to the
detriment of domestic producers, who have witnessed the closure of
70 percent of privately held textile firms in recent years. Niche
markets, such as carpets and reasonably priced quality apparel that
appeal to Algerian aesthetics, have been able to escape the wave of
cheap imports, but the Algerian government appears to have all but
given up on preserving its textile sector as it presses on with its
economic reform program. END SUMMARY.

OFFICIAL STATISTICS
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2. Over 95 percent of Algeria's textile consumption is imported,
according the Algerian Office of National Statistics (ONS). ONS
estimates that the textile sector accounts for 4.42 percent of
Algeria's non-hydrocarbon industrial production. Algeria's
industrial sector employs 1.26 million workers, including roughly
55,000 workers in textile-related industries. Algeria's apparel
imports reached USD 321 million in the first half of 2007, while
2006 imports were USD 924 million. Concrete numbers regarding the
origin of imports are difficult to obtain given the informal nature
of much of this trade, but the ONS estimates that about 40 percent
of the imports come from China, 40 percent from Syria, and 20
percent from Turkey. With the exception of some rugs and
handicrafts sold in Algeria's niche tourism sector, the country
effectively has no textile exports.

CHINESE TEXTILES ABOUND
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3. Since 2000, Algeria has witnessed a flood of inexpensive,
low-quality Chinese textiles that local consumers have been unable
to resist given a rising cost of living that continues to outpace
wage and job growth (Ref A). At the sprawling Premier Mai market in
central Algiers, Chinese-made T-shirts cost as little as 200 dinars
(about $3) and sneakers go for 700 ($10.50). In a market known as
the Dubai Bazaar, hundreds of stalls sell Chinese-made textiles at a
fraction of what consumers once paid for locally produced items.
While official price statistics are not available, embassy FSN staff
noted that on average prices have dropped 20 to 40 percent since the
influx of imported goods began. The greatest price drops have been
seen in men's clothing, particularly blue jeans.

POST-SOCIALIST INDUSTRIAL DECLINE
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4. Under Algeria's post-independence socialist experiment, the
country supported limited textile production until the first wave of
economic reforms in the late 1980s and early 1990s rendered Algerian
production obsolete. Algeria produced some "downstream" textile
items by importing raw materials and assembling clothes for the
local market. Such local production, under the aegis of state-run
companies Districh and Ecotext, accounted for approximately 60
percent of the Algerian apparel market through the 1980s. Beginning
in the late 1980s and early 1990s, the combination of economic
liberalization and a new wave of predominantly Taiwanese imports
drastically cut the share of textile products finished within
Algeria and, to a greater extent, the role of Algerian state-run
industries. Local Algerian production now stands at just 5 percent
of the market. Of this paltry domestic production, the public
sector share in the market dropped from 64 percent in 1999 to 16
percent in 2001, according to the Office of National Statistics.
Public sector textile manufacturing accounts for less than 10
percent of the local market today.

SOME NICHES SURVIVE
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5. The few "downstream" clothing manufacturers that have endured
have done so by appealing to Algerian demands for style and quality
at a price more reasonable than European imports. Reda Hamiani, the
leader of a major business association and the owner of the Algerian
clothing brand "Redman," has carved a popular niche in the Algerian
market. Redman clothing appeals to the Algerian aesthetic but is
higher quality than Chinese products and more affordable than French
or Italian imports. So too have Algeria's carpet makers, who hail
mostly from southern cities such as Ghardaia and Msila, been able to
survive by selling their wares to predominantly European tourists.

COMMENT: INDUSTRIAL STRATEGY ABANDONS TEXTILES
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6. Privatization and Industry Minister Abdelhamid Temmar released
in July 2006 an industrial strategy program that notably neglected
to mention textile production, in effect relegating the sector to
the dustbin of Algerian development policy along with
import-substitution, state-run electronics manufacturing and
five-year development plans. For the roughly 3500 domestic textile
outlets that have closed in the last decade, the government has
developed no program for retraining their workers. While the
effects of this strategy may be muted because of the small scale of
Algeria's textile sector, this lack of long-term planning does not
bode well for future disruptions that will likely be unleashed
during the privatization of other more labor intensive sectors.

FORD