There used to be a simple theory.
Poor countries had lots of people desperate for jobs. Move manufacturing there and they'd be queuing outside the factory before it'd even got built. Sooner or later, they'd get a decent wage, or could earn more down the local outsourced telesales operation. So the factory would up sticks and move to somewhere cheaper.
The reality never worked out that way. But in a world as globalised as ours is now, there really is surprisingly little connection between the state of a country's economy and labour force availabilty. The past month has thrown up a raft of examples:
- Just under half the 67,000 workers in Mauritius' surprisingly resilient apparel industry are temporary immigrants - mostly from India and Bangladesh
- When on March 25, Kyung Seung announced it would become the twenty-fiftth apparel factory in Saipan to close since 2005, it threw precisely 13 local residents out of work. The other 141 were all temporary foreign immigrants - almost entirely Chinese
- Bangladeshi temporary emigration is soaring, with 832,000 workers leaving the country for jobs overseas in 2007 against 381,000 in the previous year. A further 159,000 people went abroad in the first two months of the current year compared to 78,000 at the same period in 2007.
- Vietnam's diplomats in the Middle East are still trying to get to the bottom of the strike by over 200 Vietnamese workers at Jordan's W+D Apparel Factory.
- And no-one seems to have sorted out the plight of the 250 Filipina workers stranded in Namibia since Malaysia's Ramatex announced the closure of its Namibian operation.
Not surprisingly, some of the worst accounts of human rights abuses in the past year or two in our industry have cropped up among temporary migrants.
It's very easy to pontificate about human traffickers, and there can be no doubt some very unpleasant people are making money out of mistreating people thousands of miles from home.
But - and I speak as someone whose grandfather had to travel 5,000 miles to get a job, and then had malaria for the rest of his life - shouldn't we be more worried about what's making people leave their homes and cross the world to find jobs most readers of this blog wouldn't touch with a bargepole?
Thursday, 27 March 2008
Tuesday, 18 March 2008
Chinese exports fall: the great tipping point?
The announcement that China's apparel exports actually fell in value during February 2008 had been expected for some time. In fact, the number of garments the US imported from China actually started falling in November 2007, and China's share of the world apparel trade was lower in the fourth quarter of 2007 than it had been in 2006.
The problem isn't just softness in the US market. China's falling share has coincided with a number of new trends:
- Growth in the share of the US market held by Central American countries, as DR-CAFTA has finally started to have an impact
- Vietnam's growth has been spectacular, as a vendor both to the US and EU, bringing Laos along in its wake
- Growth in China's domestic market continues to be stellar. Some time in Spring 2008, China will overtake Japan as the world's second largest clothing market by value- though it's already well ahead in the volume of clothes
And we talk about China's growing importance as a source of capital for other manufacturing centres in another blog.
China will probably continue to be the biggest provider of value clothes to the rich world for several decades yet. But the days of China's inevitably taking share from other countries, and of its businesses uniquely dependent on sales to rich countries are probably now over.
The problem isn't just softness in the US market. China's falling share has coincided with a number of new trends:
- Growth in the share of the US market held by Central American countries, as DR-CAFTA has finally started to have an impact
- Vietnam's growth has been spectacular, as a vendor both to the US and EU, bringing Laos along in its wake
- Growth in China's domestic market continues to be stellar. Some time in Spring 2008, China will overtake Japan as the world's second largest clothing market by value- though it's already well ahead in the volume of clothes
And we talk about China's growing importance as a source of capital for other manufacturing centres in another blog.
China will probably continue to be the biggest provider of value clothes to the rich world for several decades yet. But the days of China's inevitably taking share from other countries, and of its businesses uniquely dependent on sales to rich countries are probably now over.
Monday, 17 March 2008
It's not just the clothes getting globalised
We all think clothing production is about going where there are most workers.
It's amazing how often the workers go to where the clothes are. A few stories from the February 2008 edition of The Source:
- The number of Bangladeshis moving abroad to work - a very large proportion destined for the apparel and textile industries - more than doubled in 2007 over 2006: from 381,000 to 832,000. And the number doubled again in the first two months of 2008, with 159,000 more people going.
- Riots in Jordan as Vietnamese workers protest over the living conditions in the factories they've been recruited for.
- Over half the garment industry workers in Mauritius are now temporary immigrants
- Sri Lanka's apparel factories investing $250,000 in a recruitment campaign to plug widespread gaps in their labour force.
All this at a time no-one's still sure how many workers in Vietnam and China actually came back to their factories in China and Vietnam after the lunar new year holiday - and how many found new jobs nearer their homes. And just a few weeks after some parts of Shanghai were reporting fourteen vacant sewing jobs for every applicant.
In much of the world, the old days of putting a factory down and finding a thousand-strong queue asking for jobs have long gone. These days, it's not just getting the right workers: it's finding any workers at all, and possibly having to fly them halfway round the world.
Just another part of the huge surge in inflationary pressures the industry's been hitting
It's amazing how often the workers go to where the clothes are. A few stories from the February 2008 edition of The Source:
- The number of Bangladeshis moving abroad to work - a very large proportion destined for the apparel and textile industries - more than doubled in 2007 over 2006: from 381,000 to 832,000. And the number doubled again in the first two months of 2008, with 159,000 more people going.
- Riots in Jordan as Vietnamese workers protest over the living conditions in the factories they've been recruited for.
- Over half the garment industry workers in Mauritius are now temporary immigrants
- Sri Lanka's apparel factories investing $250,000 in a recruitment campaign to plug widespread gaps in their labour force.
All this at a time no-one's still sure how many workers in Vietnam and China actually came back to their factories in China and Vietnam after the lunar new year holiday - and how many found new jobs nearer their homes. And just a few weeks after some parts of Shanghai were reporting fourteen vacant sewing jobs for every applicant.
In much of the world, the old days of putting a factory down and finding a thousand-strong queue asking for jobs have long gone. These days, it's not just getting the right workers: it's finding any workers at all, and possibly having to fly them halfway round the world.
Just another part of the huge surge in inflationary pressures the industry's been hitting
Tuesday, 4 March 2008
Learning from Others' Mistakes
I’ve probably learned more about our industry from Rachel Louise Snyder’s new book Fugitive Denim (published by WW Norton: 978-0-393-06180-2) than from anything else I’ve read, seen or done in the past year.
Ms Snyder, for the benefit of colleagues who don’t read many recently published new books (and there are far more colleagues in that group than I think is healthy) is a columnist who splits her life between Cambodia and the US. She’s just published an account of the people – from Azerbaijan, through Cambodia, China and Italy, to a New York design studio - who contribute to the development of a pair of jeans from an Azeri cotton bush to life on a stand in a US apparel chain. Far from expert in the intricacies of our industry (as Ms Snyder is just about the first to point out), she gets hopelessly confused about the past few years’ changes in rich countries’ rules restricting and encouraging apparel imports.
But as a human-interest writer, she’s full of unprejudiced insights into the way the apparel industry has transformed (mostly for the better) the lives of its thousands of Cambodian workers – from workers’ unprecedented ability to pour money back into their native village to the hundreds of competing Cambodian trade unions who make it tougher for businesses to develop of for workers to create consistent pressure for better conditions. Her interlinked account of Cambodia’s attempts to lobby for better access to the US market while organising itself to compete better with China gave this reader insights into the way suppliers are organised that make me see the future in an altogether different way.
Snyder’s general approach is based on one fundamental misapprehension about our industry: she massively overestimates the importance of the US to manufacturers overall and as a result misunderstands the impact of American legislators and buyers on the life prospects of emerging-market cotton and garment workers. But – crucially – so do many of the workers, businesses and government officials she talks about.
America’s share of the world apparel market is in decline. While the US market is now beginning to fall back, retail clothing sales in two key emerging markets, Russia and China, are growing at annual rates up to 30%. So too, by the way, are sales in the other two main emerging economies, Brazil and India, but from such a small base they’re still minnows. By some time in the middle of this year, the value of China’s domestic clothing market will overtake Japan’s. And the value of the EU market is already greater than America’s.
As Snyder shows, though, that doesn’t stop people from investing time and money in activities that make sense only if it’s America you’re targeting. The Cambodian workers whose lives she documents are often forced to change jobs – but almost always to companies concentrating on the US market. The Cambodian government and trade union officials she follows round the world spend years chasing duty-free access to the US market – a status they already enjoy for the EU, though Cambodia’s manufacturers seem to do nothing to exploit it. In 2007, according to Clothesource Tradetrak, Cambodia – still liable to full duty when exporting to the US – accounted for just 0.8% (and falling) of EU clothing imports. But it got 3.1% (and growing) of America’s.
When Snyder follows Gap compliance monitors to a factory in China, it’s clear the factory has made immense investments in the ability to produce on a scale only US customers really need. For, in spite of their size, the retail markets in Japan, China and the EU are spread across a far larger number of different customers than America’s. US customers have been particularly desirable because they give such big orders. Taken together, they spend less on clothes than Europe’s brands and retailers. But their scale seems to offer all kinds of production economies that orders for Europe don’t attract.
“Seems”, though, is the operative world. Because, as India’s Gokaldas Exports have recently explained, if sales to the US stutter, there really aren’t other sales destinations that offer order sizes to match. If a factory’s cost structure is built on orders in the tens of thousands of dozens, even customers like Sweden’s Hennes or the UK’s Marks & Spencer have few SKU’s that generate volume at that level - and average order sizes to the Indian or Chinese markets don't even begin to compare.
Trouble is, of course, that the only people trying to sell in to the Chinese market are other Chinese businesses. Selling to Wal-Mart or Nike, a manufacturer is competing with tens of thousands of other businesses all over the globe. Those big orders come at a price.
Could over-dependence on the US market turn out to be today's fashionable mistake for manufacturers - just as over-dependence on Chinese suppliers is turning out to be for Western customers?
Hard to tell. But it's insightful books like Fugitive Denim that shake your views up and make you review your preconceptions. And if Rachel Louise Snyder picks this blog up - please let me know the next time you publish.
Ms Snyder, for the benefit of colleagues who don’t read many recently published new books (and there are far more colleagues in that group than I think is healthy) is a columnist who splits her life between Cambodia and the US. She’s just published an account of the people – from Azerbaijan, through Cambodia, China and Italy, to a New York design studio - who contribute to the development of a pair of jeans from an Azeri cotton bush to life on a stand in a US apparel chain. Far from expert in the intricacies of our industry (as Ms Snyder is just about the first to point out), she gets hopelessly confused about the past few years’ changes in rich countries’ rules restricting and encouraging apparel imports.
But as a human-interest writer, she’s full of unprejudiced insights into the way the apparel industry has transformed (mostly for the better) the lives of its thousands of Cambodian workers – from workers’ unprecedented ability to pour money back into their native village to the hundreds of competing Cambodian trade unions who make it tougher for businesses to develop of for workers to create consistent pressure for better conditions. Her interlinked account of Cambodia’s attempts to lobby for better access to the US market while organising itself to compete better with China gave this reader insights into the way suppliers are organised that make me see the future in an altogether different way.
Snyder’s general approach is based on one fundamental misapprehension about our industry: she massively overestimates the importance of the US to manufacturers overall and as a result misunderstands the impact of American legislators and buyers on the life prospects of emerging-market cotton and garment workers. But – crucially – so do many of the workers, businesses and government officials she talks about.
America’s share of the world apparel market is in decline. While the US market is now beginning to fall back, retail clothing sales in two key emerging markets, Russia and China, are growing at annual rates up to 30%. So too, by the way, are sales in the other two main emerging economies, Brazil and India, but from such a small base they’re still minnows. By some time in the middle of this year, the value of China’s domestic clothing market will overtake Japan’s. And the value of the EU market is already greater than America’s.
As Snyder shows, though, that doesn’t stop people from investing time and money in activities that make sense only if it’s America you’re targeting. The Cambodian workers whose lives she documents are often forced to change jobs – but almost always to companies concentrating on the US market. The Cambodian government and trade union officials she follows round the world spend years chasing duty-free access to the US market – a status they already enjoy for the EU, though Cambodia’s manufacturers seem to do nothing to exploit it. In 2007, according to Clothesource Tradetrak, Cambodia – still liable to full duty when exporting to the US – accounted for just 0.8% (and falling) of EU clothing imports. But it got 3.1% (and growing) of America’s.
When Snyder follows Gap compliance monitors to a factory in China, it’s clear the factory has made immense investments in the ability to produce on a scale only US customers really need. For, in spite of their size, the retail markets in Japan, China and the EU are spread across a far larger number of different customers than America’s. US customers have been particularly desirable because they give such big orders. Taken together, they spend less on clothes than Europe’s brands and retailers. But their scale seems to offer all kinds of production economies that orders for Europe don’t attract.
“Seems”, though, is the operative world. Because, as India’s Gokaldas Exports have recently explained, if sales to the US stutter, there really aren’t other sales destinations that offer order sizes to match. If a factory’s cost structure is built on orders in the tens of thousands of dozens, even customers like Sweden’s Hennes or the UK’s Marks & Spencer have few SKU’s that generate volume at that level - and average order sizes to the Indian or Chinese markets don't even begin to compare.
Trouble is, of course, that the only people trying to sell in to the Chinese market are other Chinese businesses. Selling to Wal-Mart or Nike, a manufacturer is competing with tens of thousands of other businesses all over the globe. Those big orders come at a price.
Could over-dependence on the US market turn out to be today's fashionable mistake for manufacturers - just as over-dependence on Chinese suppliers is turning out to be for Western customers?
Hard to tell. But it's insightful books like Fugitive Denim that shake your views up and make you review your preconceptions. And if Rachel Louise Snyder picks this blog up - please let me know the next time you publish.
Monday, 3 March 2008
Chinese inflation. Will it hurt China more than its customers?
China's apparel industry spokespeople are getting louder and louder about how uncompetitive exports of their country's clothes are getting. Du Yuzhou's been telling the world how much money many Chinese apparel and textile clothing factories are losing for a few months now, and the international press has just caught up
Is it just me being a cynic, or is it a total coincidence prominent Chinese are so vocal about all this just as US activists start lobbying against quota elimination at the end of this year and the EU is monitoring many Chinese clothing imports on a daily basis with a view to deciding about anti-dumping duty?
Be that as it may, there's no doubt Chinese clothes are getting dearer for many customers. And, with its domestic clothing sales up nearly 30% at the end of 2008, and sales to the US accounting for only 8% of Chinese clothes production, Chinese manufacturers have real alternatives to selling below cost (if they really are anyway) to Japanese, American or European chains.
But it's not just China where this is happening. Inflation is soaring in most of the developing economies that supply rich countries with clothes: indeed in Vietnam, it's gone from near-insignificance a year ago to twice China's level this January. Add that to the past year's decline of the dollar (and the pound) against most emerging-market currencies, and many Western buyers are facing serious inflation from many of their sources.
China's where the issue's best documented right now. But the message is clear throughout the world. After 15 years of constant clothing price falls, inflation's back.
And buyers will do as great deal better managing their wsay through an inflationary world than trying to find non-existent suppliers who've avoided inflation or bare prepared to work at a loss. In sourcing these days, when China sneezes, the world apparel industry catches a cold.
Is it just me being a cynic, or is it a total coincidence prominent Chinese are so vocal about all this just as US activists start lobbying against quota elimination at the end of this year and the EU is monitoring many Chinese clothing imports on a daily basis with a view to deciding about anti-dumping duty?
Be that as it may, there's no doubt Chinese clothes are getting dearer for many customers. And, with its domestic clothing sales up nearly 30% at the end of 2008, and sales to the US accounting for only 8% of Chinese clothes production, Chinese manufacturers have real alternatives to selling below cost (if they really are anyway) to Japanese, American or European chains.
But it's not just China where this is happening. Inflation is soaring in most of the developing economies that supply rich countries with clothes: indeed in Vietnam, it's gone from near-insignificance a year ago to twice China's level this January. Add that to the past year's decline of the dollar (and the pound) against most emerging-market currencies, and many Western buyers are facing serious inflation from many of their sources.
China's where the issue's best documented right now. But the message is clear throughout the world. After 15 years of constant clothing price falls, inflation's back.
And buyers will do as great deal better managing their wsay through an inflationary world than trying to find non-existent suppliers who've avoided inflation or bare prepared to work at a loss. In sourcing these days, when China sneezes, the world apparel industry catches a cold.
Saturday, 1 March 2008
Bossa's up for sale - and why that's good for the world apparel industry
Turkey's Sabanci Holding is “seeking a strategic partner for Bossa. Our search is continuing", said the company's chairwoman Guler Sabanci on February 27.
Rumours that Sabanci were about to offload Bossa - a $200 mn turnover fabric business, specialising in denim, shirting and fabric for casualwear - have been widespread in Turkey since a local business magazine published them late last year. Significantly, Sabanci issued a statement at the time that failed to deny their growing disillusion with Bossa.
It's the latest episode in a major reconstruction of Turkey's apparel and textile industry - till recently the most successful in the Europe-Mediterranean region. Conglomerates are shedding their textile operations, apparel manufacturers putting their money into design or foreign retail, rather than manufacturing, and manufacturers who want to stay in manufacturing are becoming the largest single group of investors in new Egyptian facilities.
What's interesting, though, is that Sabanci - like several of its peers - seems not to want to get out of textiles altogether. They're looking for a partner, they say - not one of those "reviewing all alternatives" phrases that really mean "we'll give it to anyone who'll take it". There's an AWFUL lot of money in Turkey's apparel/textile industry, and a lot of that money is going into newer and better textile-related activities.
It’s just that not much of it is going into new factories in Turkey - though there are interesting developments outside the traditional Istanbul-Bursa-Izmir corridor, like the 6,000 jobs claimed to have been created at Adiyaman, in the country’s South-East. Turkey’s restructuring is affecting huge swathes of the world’s textile industry, providing money for projects ranging from processing plants in Uzbekistan, through QIZ-based garment factories in Egypt to retail chains in the UK.
This relocation upsets many Turks. There were protests in mid-January when the country’s President, Abdullah Gul, put an official seal of approval on all this relocation by laying the foundation stone of a Turkish-funded apparel park in Egypt’s Sixth of October City. But this group of well-funded, textile-oriented, entrepreneurs (or at any rate second and third generation descendants of entrepreneurs) is going to leave a mark on the global industry few of us have yet fully appreciated.
Will sourcing clothes be different as a result? Who can tell? Butanyoje importing or exporting garments needs to keep an eye on them
Rumours that Sabanci were about to offload Bossa - a $200 mn turnover fabric business, specialising in denim, shirting and fabric for casualwear - have been widespread in Turkey since a local business magazine published them late last year. Significantly, Sabanci issued a statement at the time that failed to deny their growing disillusion with Bossa.
It's the latest episode in a major reconstruction of Turkey's apparel and textile industry - till recently the most successful in the Europe-Mediterranean region. Conglomerates are shedding their textile operations, apparel manufacturers putting their money into design or foreign retail, rather than manufacturing, and manufacturers who want to stay in manufacturing are becoming the largest single group of investors in new Egyptian facilities.
What's interesting, though, is that Sabanci - like several of its peers - seems not to want to get out of textiles altogether. They're looking for a partner, they say - not one of those "reviewing all alternatives" phrases that really mean "we'll give it to anyone who'll take it". There's an AWFUL lot of money in Turkey's apparel/textile industry, and a lot of that money is going into newer and better textile-related activities.
It’s just that not much of it is going into new factories in Turkey - though there are interesting developments outside the traditional Istanbul-Bursa-Izmir corridor, like the 6,000 jobs claimed to have been created at Adiyaman, in the country’s South-East. Turkey’s restructuring is affecting huge swathes of the world’s textile industry, providing money for projects ranging from processing plants in Uzbekistan, through QIZ-based garment factories in Egypt to retail chains in the UK.
This relocation upsets many Turks. There were protests in mid-January when the country’s President, Abdullah Gul, put an official seal of approval on all this relocation by laying the foundation stone of a Turkish-funded apparel park in Egypt’s Sixth of October City. But this group of well-funded, textile-oriented, entrepreneurs (or at any rate second and third generation descendants of entrepreneurs) is going to leave a mark on the global industry few of us have yet fully appreciated.
Will sourcing clothes be different as a result? Who can tell? Butanyoje importing or exporting garments needs to keep an eye on them
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