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MERCREDI 31 OCTOBRE 2012
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EDITION 102
CAPITAL
POST SCRIPTUM
TEXTILE INDUSTRY
ADAPT OR PERISH The Maurtian Textile Industry registered a significant decline of nearly 18.7% over the period spanning June 2011 to June 2012. Noticeably, the export oriented manufacturing is poised to a decline this coming year on account of a remarkable decline in the textile industry with further contractions being forecast. This article explains how the textile industry has contributed to the economy of Mauritius and what is the future of the industry in the light of newer challenges | VIRENDRA POLODOO HISTORY OF THE MAURITIAN TEXTILE SECTOR Export promotion began in Mauritius in the early 1970’s following the enactment of the Export Processing Zone (EPZ) Act and we saw the first Export Processing Zone to be created in 1971. The EPZ Act was intended to provide various economic incentives and concessions to companies involved in exports. The government intervened massively to grow the export sector through various measures adopted, viz: there were five successive stand-by arrangements and two SAPs( Structural Adjustment programmes between 1980 and 1986); the Mauritius Export Development and Investment Authority was set up to help promote exports; given that the Mauritian rupee was deemed to be an obstacle for export competitiveness, the rupee was devalued twice- in 1979 and 1981 respectively. Mauritius also had a reservoir of educated labour force and was deemed to be cheap compared to other countries. They were however unskilled but could easily adapt to the demand of the textile sector. The success of the textile and clothing sector is partly attributed to factors besides the control of Mauritian authority. Some of the factors which have contributed positively to the Mauritian economy, in particular the textile and clothing sector are: The Multi-Fibre Agreement signed in 1982, which constrained several countries in their exports. It is in this context that investors from Hong Kong came toset up their firms in Mauritius. A combination of lower and falling oil prices together with a lower debt servicing arising due to the depreciation of the overvalued US dollar in 1984. An appreciation of the Taiwanese Dollar
and thereby a fall in Taiwan’s competitiveness on the world market led to Taiwanese investment in Mauritius. After 1984, the appreciation of the European currencies in relation to the Mauritian rupee resulted in Mauritian goods becoming more competitive. During the 1990s, political uncertainty over the future of Hong Kong’s reintegration into China encouraged investors to look for a safe haven and thus relocated to Mauritius bringing capital, marketing networks and technological know-how. Favourable terms of trade combined with
ready markets attracted more foreign investors to set up their textile and garments firms in Mauritius. Investors, both domestic and foreign, successfully exploited all the preferential market access granted by the developed countries. The two main markets, which Mauritius could access through preferential trade agreements, were the EU and the US under the Lomé Convention and the GSP (now AGOA) respectively PRESENT CHALLENGES During the almost 40 years of existence, the Mauritian tex-
In general, the Mauritian Government has been criticised for its lack of vision and for waiting too much before restructuring the textile and clothing sector
tile industry benefited from a plethora of advantages, which helped Mauritius to produce one of the most solid textile industry contributing to high level of employment ( with Mauritius reaching full employment in 1991) and the industry contributing above 10% of GDP in many years. However, today, the textile sector is facing the following challenges and its future is being questioned: ◗ Cut-throat competition from emerging low cost producing economies of the like of China, Pakistan, India, Bangladesh and Asian