REQUEST FOR INFORMATION ON TEXTILES AND APPAREL PRODUCTION

UNCLAS ANTANANARIVO 000920 SIPDIS SIPDIS STATE FOR AF/EPS AND AF/E - MBEYZEROV AND RMEYERS STATE FOR EEB/TPP/ABT - GARY A. CLEMENTS STATE PASS TO USTR FOR CAROYL MILLER USDOC FOR DESK OFFICER - BECKY ERKUL USDOC FOR ITA/OTEXA - MARIA D'ANDREA E.O. 12958: N/A TAGS: ECON ETRD KTEX MA SUBJECT: REQUEST FOR INFORMATION ON TEXTILES AND APPAREL PRODUCTION - MADAGASCAR REF: A) STATE 114799 B) ANTAN 0160 C) ANTAN 0227 D) ANTAN 0691 E) ANTAN 0848 ¶1. Post provides responses to paragraph four of REF A, sourced from the Ministry of Trade, the National Statistical Agency (INSTAT),the Association of Exporting Companies (GEFP),and industry associations: -- Estimate of 2006 total industrial production: USD 1.4 billion -- Estimate of 2006 total textile and apparel production: USD 500 million -- 2006 textile/apparel share of imports: 4 per cent -- 2006 textile/apparel share of exports: 40 per cent -- 2006 exports in textile and apparel to the U.S.: USD 238.6 million. For January - June 2007, they were USD 102.6 million (Source USITC) -- Estimate of total manufacturing employment in 2006: 320,000 -- Total textile and apparel employment in 2006: 90,000 ¶2. Responses to REF A para 5: -- In 2006, Madagascar's exports of apparel declined compared to 2005 due to the delay in the extension of the third country fabric provision (TCFP). Eight factories belonging to Asian investors closed in 2006, generating the loss of at least 10,000 jobs. -- The December, 2006 extension of the TCFP provided a boost the Madagascar's apparel exporters to the U.S with an increase of 20 percent in the first half of 2007 compared to 2006. If not for the real appreciation of the Ariary due to major mining investments, the increase in production would have been greater. -- U.S. and EU restrictions on certain exports of textiles and apparel from China have not affected export prospects for local manufacturers and the government is not considering implementing safeguards or other measures to reduce growth of imports of Chinese textile and apparel products into the country. -- The Government of Madagascar (GOM) has no specific policy or program in place to deal with any dislocated workers in the sector resulting from increased competition. -- Global competition has not yet affected local labor conditions by causing employers to reduce wages, seek flexibility from government required minimum wages, or adversely affected union organizing. When relative costs or exchange rate pressures increase, buyers source garments from other countries and Madagascar's producers scale down production. In 2006, many factories used temporary lay-off provisions to scale down their work force when orders were well below capacity. -- To promote foreign investment and to increase the country's competitiveness, the GOM created in December 2006 the EDBM (Economic Development Board of Madagascar). To date, the EDBM has not undertaken actions to attract foreign investment in the textile and apparel sector. Beginning November 2007, the University of Antananarivo, in partnership with the University of Mauritius, the GEFP and the World Bank project will train 40 students per year to become engineers in textile and apparel. A proposal is being circulated to host a regional textile and apparel conference in Antananarivo in late 2007 or early 2008. -- Madagascar's eligibility to AGOA has strongly contributed to the success story of the country as being among the leading countries exporters of apparel to the U.S. within AGOA. Compared to other Sub-Saharan countries, Madagascar has a long experience of apparel industries, within the EPZ regime and thanks to its skilled and cheap labor. Half of apparel exports go to the United States under AGOA; the other half are exported to Europe under similar trade preferences. On a regional basis, Madagascar is a member of the COMESA since 1993 and of SADC in 2004. However, its membership within these organizations has no measurable impact yet on local sector industry competitiveness. -- An expected revision of Madagascar's Investment Law and improvements in infrastructure including roads, ports, electricity, and telecommunications should facilitate Madagascar's apparel sector approaching its potential. Incremental improvements in competitiveness, assuming a stable currency and consistent world markets, could double or triple the sector over five years. NEUBERT