International competition has become brutal in the garment industry, mostly on account of low-cost Chinese and other Asian producers. The once-thriving local industry has seen overseas contracts cut drastically or simply cancelled.
This comes after several years when manufacturers were taking advantage of enhanced access to the United States as part of attaining parity with the North American Free Trade Agreement. The original 807A programme allowed for duty-free access for some garments assembled in one of the 24 Caribbean Basin countries as long as they contained 75% US material. The fabric had to be cut into patterns in the US and then shipped down simply to be stitched up. The enhanced access provided by the U.S. Caribbean Basin Partnership Trade Act (CBPTA), while expanding the list of products now eligible for duty-free entry, allowed for manufacturers to cut from cloth. This essentially gave Caribbean Basin countries the same benefits as their competitors in Mexico.
Still this was not enough to compete with Asian producers which in the case of China has appeared to keep its currency low as part of a massive export drive. The United States, for domestic reasons has since decided to impose quotas on three types of Chinese textile products in an effort to give its textile industry temporary breathing room from a flood of Chinese imports. The decision will affect Chinese imports of knit fabric, dressing gowns and robes and bras.
But it is unclear whether this will have any effect on the local industry which judging by talks with manufacturers seems to be in a parlous state.
Le Ressouvenir Garment Manufacturing, also referred to as 807 by industry insiders, employed 150 persons up to four years ago. Today they have 50 workers and according to Karanchan Jaikaran who is attached to 807, the decline "can be connected with overseas competition. The people (overseas contractors) prefer to send their goods to Haiti or Guatemala."
Claude Miller, Chief Executive Officer of Troy's Garment Factory was philosophical saying, "I had no difficulty with the contractors they simply took the work where they could get a better price."
Miller told Stabroek Business that he used to ship 50,000 pieces of clothing out of the country each week and received $8,000 - $12,000. He was contracted to supply Superior Surgical with pyjamas, shirts, dust coats, robes and overalls. However, at the end of last month this major contract came to an end.
He had invested some $3.4M in a factory and equipment seven years ago. Where he had a staff of 85 persons, he has sent three quarters of them home.
Rick Sookraj, Finance Controller of Sooksons Garment Manufacturing said, "the increasing cost of utilities and shipping plays a large role in the continuing decline of the garment industry. High rates of interest and the increased rate of exchange ensure that Guyana's products cannot compete with the superior factories and equipment of the eastern block countries." According to Sookraj, cheap imports affected some 50% of their market share. On the local and foreign market their orders have also decreased and the time span for repeat orders takes a longer time.
He added that they were at one time exporting to Grenada, St. Lucia, Dominica, Trinidad & Tobago, Barbados and St. Vincent. They are now supplying the local market.
Chang Hong Zou, Marketing Manager of G&C Sanata, observed that while manufacturers receive fabrics from the U.S. and Canada to assemble for export, Sanata imports gray fabric and exports pre-treated fabrics to the Caribbean areas like Suriname, Trinidad & Tobago, Jamaica and Cuba.
Zou said, "presently the market is not good, so we have temporarily ceased production." He also indicated that contrary to a recent report all their loans, $8M in total, were accessed from China.
"China," he said, "is presently the largest textile-producing country worldwide while Indonesia, Vietnam, Pakistan, Turkey and India are very competitive in textiles as well. Their prices and their rich human resources keep them ahead of the competition."
Dennis Morgan, Managing Director of Denmor Garment Manufacturing said world economic conditions were hurting the garment industry. In 2001 Denmor would produce anywhere from 15,000 to 18,000 dozen pieces per week - an annual turnover of US$5m. Morgan has done work for Victoria Secret, JC Penny, Russell Athletic and Walmart and though his orders have now been cut by 50%, he said he produced diversified lines of clothing and is booked up to mid-2004.
Morgan agreed with Zou that the world market was slow. "We are living in a changing world environment with regard to garment industry competition, and in these parts we always thought about price, not looking for efficiency and quality. Also we have become accustomed to special treatment on the world market, that has made us lazy."
Like Miller, Morgan said he had to layoff some workers about two months ago and is now running on a skeleton staff.
He said this resulted from the seasonal nature of the industry where, "the big buyers wanted to lessen their inventory, and when they did make up their minds we had to lay off."
In an effort to combat this situation he said, "overhead costs must be cut down to the bone." He said that since the later part of 2002 the world situation had become increasingly complex with production prices achieving very low levels. Although they have been producing good quality and delivering on time, prices have continued to slide.
Morgan said his company played a vital developmental role and they intend to target the local market by next year. He noted that, "Guyanese manufacturers must understand that government can not stop imports and they must compete. If flaws are in the system those affected should deal with such issues on a case by case basis."
Globally the competition in the apparel industry is most affected by hourly base wages. A look at the figures shows United States at $8.42 per hour, Canada $6.70, Philippines $0.62, El Salvador $0.60, Mexico $0.54, Honduras $0.43, China $0.30, Nicaragua $0.25, Indonesia $0.22, India $0.20 and Bangladesh $0.17. In Guyana the hourly base wage stands at some $0.40 - $0.60.