2004 will be a turning-point in the textile industry. The major players from Hong Kong are preparing to leave before long. On the other hand, local producers are ready to take the challenge of restructuring to withstand winds of change in international trade. Local economists foresee a respite with an improved international outlook. The government, conscious of the stakes, is coming up with a rescue plan for viable enterprises.

<B>The Hong Kong dilemma </B>

Hong-Kong industrialists have confirmed that they intend to close down in the next five years. Seven such companies account for 25% of the textile workforce and 50 % of textile garment exports to US.

Their main contention is that they cannot survive unless they get the third country fabric waiver (see inset) under AGOA and they have written to the American Congress to ask for it. ?It?s a question of life and death?, maintains Edmund Lau, the CEO of Sinotex of Crystal group. Nevertheless, they would not stay beyond five years.

Edmund Lau argues that production costs are not competitive with Asian contries, where his group is implanted. The ageing workforce is not being renewed and young people are not keen to join.

The other major hurdle is the limited production capacity for raw materials. The few spinning and weaving units produce basic knits when real need is for special fabrics. Edmund Lau adds that his shareholders ?expect return on investments?.

<B>Labour shortage</B>

The paradox is that local groups are finding it hard to get workers in spite of 6000 redundancies. Star Knitwear needs 400 workers. Ciel Group (Flo-real, Ferney, Aquarelle, Tropic, etc.) has 10 000 workers with 10% foreigners. It is recovering and needs 700 workers. Its paid training programme is not proving a success. Visits to schools to attract trainees have been disappointing.

Moreover, workers from closing factories are not interested. They resent salary and working conditions. This is not a new situation considering the foreign labour from Asia.

For the Chairman of the Mauritius Export Processing Zone Association, Mookesh-warsingh Gopal, ?a new labour culture is needed.? Union leaders should cooperate in redeploying workers from closing factories.

He however believes the Textile Emergency Support Team (TEST) plan is bearing fruit. Set up in July 2003, the TEST assesses strengths and weaknesses of companies and helps them get loans. His own company, Southern Textiles, has invested Rs 70 millions in new building and equipment.

Moreover, Sentosa Enterprises, from Singapore, is opening a new garment unit, investing Rs 60 m and creating 300 jobs. Yves-Robert Lamusse of Palmar Group is optimistic: ?We must continue the fight. We must be more efficient. I believe in the future of the textile industry.?

<B>Economic insight </B>

The Economic Intelligence Unit forecasts an economic growth of 5.6% for 2004. ?But as long as salary costs are not competitive, the growth potential in the EPZ will be questioned.? Gilbert Gnany, Chief Economist at the MCB, puts poor performance on the difficult world situation ? but also on structural problems in the EPZ. ?It is now crucial to operate a paradigm shift to increase global competitiveness.?

For the Chairman of the Joint Economic Council, Gilbert Espitalier Noel, the textile industry should benefit from the improvement in the international outlook and the TEST, but companies should do their part. ?2004 will be the year of change. The less structured and performing companies will be eliminated. Those that survive will be stronger than ever and will be there to last.?

<B>The government takes a stand</B>

To sustain the impact of the end of the Multi Fibre Arrangement (MFA) and the threat of Chinese hegemony on the textile world market, the government has reacted. To tackle the major problem of the sector ? financing - the Minister of Industry, Sushil Khushiram, has announced a debt rescheduling for textile enterprises within the TEST plan. This should give the necessary breathing space to viable enterprises that are ready to invest in restructuring and modernisation. He believes the condition for survival of textile industries is a modern management based on competence and advanced technology. Quoting the CMT as an example to follow, he maintains ?there is no longer room for amateurism?.

<B>Facing the storm</B>

The textile and clothing sector is at the crossroads, stuck between rising costs and increased competition, which threaten to undermine its viability. In addition to its support to the TEST and the latest financial boost, it will no doubt continue its offensive on the diplomatic front in international forums. In this era of globalisation, the future of textile producers depends on their ability to meet the challenges of price, quality, response time and product. Competitiveness and the will to survive are the key words.

<B>The way to exemption</B>

The 3rd country fabric waiver is a derogatory clause contained in the Africa Growth and Opportunity Act. It allows Less Developed African countries to import raw materials from countries outside the scope of AGOA and still benefit from quota free and duty free access to the American market. Mauritius cannot take advantage of this clause because of their high per capita GDP.

Marie-Claire LASSEMILLANTE